Santa Barbara City Council
September 10, 2024

CITY FINANCIAL INFORMATION
The City will covenant to annually budget and appropriate sufficient funds to make all Base Rental Payments due under the Lease Agreement. See “SECURITY AND SOURCES OF PAYMENT FOR THE BONDS.” For further information concerning the financial condition of the City, see APPENDIX A – “THE CITY OF SANTA BARBARA: ECONOMIC, DEMOGRAPHIC AND FINANCIAL INFORMATION” and APPENDIX B – “CITY OF SANTA BARBARA ANNUAL COMPREHENSIVE FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2023.”

CONTINUING DISCLOSURE
The City has covenanted for the benefit of the Owners and Beneficial Owners of the Series 2024 Bonds to provide certain financial information and operating data relating to the City by not later than nine months after the end of the City’s Fiscal Year (presently June 30) (the “Annual Report”), commencing with 35 4140-2813-5503.3
the report for the 2023-24 fiscal Year, and to provide notices of the occurrence of certain enumerated events.

The Annual Report will be filed by U.S. Bank Trust Company, National Association, as dissemination agent (the “Dissemination Agent”), on behalf of the City, with the Municipal Securities Rulemaking Board (the “MSRB”). The notices of enumerated events will be filed by the Dissemination Agent on behalf of the City with the MSRB. The specific procedure for filing with the MSRB, the nature of the information to be contained in the Annual Report or the notices of enumerated events is contained in APPENDIX E – “FORM OF CONTINUING DISCLOSURE AGREEMENT.” These covenants have been made in order to assist the underwriter of the Series 2024 Bonds in complying with Securities Exchange Commission Rule 15c2- 12(b)(5) (the “Rule”).
[Within the last five years, the City did not timely provide event notices with respect to two obligations incurred which may constitute Financial Obligations under the Rule: On December 17, 2021, the City entered into certain financing agreements for the acquisition of fire equipment for $3,888,745 at a rate of 1.2977%, with payments through June 2029. The City recently made corrective filings posted to EMMA approximately _____ days following a timely event notice as required with respect to the 2019 Airport Revenue Refunding Bonds.]
[The City has adopted disclosure policies and procedures in an effort to formalize its disclosure practices and implement additional procedures to timely file complete annual reports and event notices in the future.]

TAX MATTERS
In the opinion of Orrick, Herrington & Sutcliffe LLP, Bond Counsel to the Authority (“Bond Counsel”), based upon an analysis of existing laws, regulations, rulings and court decisions, and assuming, among other matters, the accuracy of certain representations and compliance with certain covenants, interest on the Series 2024 Bonds is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986 (the “Code”) and is exempt from State of California personal income taxes. Bond Counsel is of the further opinion that interest on the Series 2024 Bonds is not a specific preference item for purposes of the federal individual alternative minimum tax. Bond Counsel observes that interest on the Series 2024 Bonds included in adjusted financial statement income of certain corporations is not excluded from the federal corporate alternative minimum tax. Bond Counsel expresses no opinion regarding any other tax consequences related to the ownership or disposition of, or the amount, accrual, or receipt of interest on, the Series 2024 Bonds. A complete copy of the proposed form of opinion of Bond Counsel is set forth in Appendix F hereto.

To the extent the issue price of any maturity of the Series 2024 Bonds is less than the amount to be paid at maturity of such Series 2024 Bonds (excluding amounts stated to be interest and payable at least annually over the term of such Series 2024 Bonds), the difference constitutes “original issue discount,” the accrual of which, to the extent properly allocable to each Beneficial Owner thereof, is treated as interest on the Series 2024 Bonds which is excluded from gross income for federal income tax purposes and exempt from State of California personal income taxes. For this purpose, the issue price of a particular maturity of the Series 2024 Bonds is the first price at which a substantial amount of such maturity of the Series 2024 Bonds is sold to the public (excluding bond houses, brokers, or similar persons or organizations acting in the capacity of underwriters, placement agents or wholesalers). The original issue discount with respect to any maturity of the Series 2024 Bonds accrues daily over the term to maturity of such Series 2024 Bonds on the basis of a constant interest rate compounded semiannually (with straight-line interpolations between compounding dates). The accruing original issue discount is added to the adjusted basis of such Series 2024 Bondsto determine taxable gain or loss upon trade or business disposition (including sale, redemption, or payment on maturity) of such Series 2024 Bonds. Beneficial Owners of the Series 2024 Bonds should consult their own tax advisors with respect to the tax consequences of ownership of Series 2024 Bonds with 36 4140-2813-5503.3
original issue discount, including the treatment of Beneficial Owners who do not purchase such Series 2024 Bonds in the original offering to the public at the first price at which a substantial amount of such Series 2024 Bonds is sold to the public.

Series 2024 Bonds purchased, whether at original issuance or otherwise, for an amount higher than their principal amount payable at maturity (or, in some cases, at their earlier call date) (“Premium Bonds”) will be treated as having amortizable bond premium. No deduction is allowable for the amortizable bond premium in the case of bonds, like the Premium Bonds, the interest on which is excluded from gross income for federal income tax purposes. However, the amount of tax-exempt interest received, and a Beneficial Owner’s basis in a Premium Bond, will be reduced by the amount of amortizable bond premium properly allocable to such Beneficial Owner. Beneficial Owners of Premium Bonds should consult their own tax advisors with respect to the proper treatment of amortizable bond premium in their particular circumstances.

The Code imposes various restrictions, conditions and requirements relating to the exclusion from gross income for federal income tax purposes of interest on obligations such as the Series 2024 Bonds. The Authority has made certain representations and covenanted to comply with certain restrictions, conditions and requirements designed to ensure that interest on the Series 2024 Bonds will not be included in federal gross income. Inaccuracy of these representations or failure to comply with these covenants may result in interest on the Series 2024 Bonds being included in gross income for federal income tax purposes, possibly from the date of original issuance of the Series 2024 Bonds. The opinion of Bond Counsel assumes the accuracy of these representations and compliance with these covenants. Bond Counsel has not undertaken to determine (or to inform any person) whether any actions taken (or not taken), or events occurring (or not occurring), or any other matters coming to Bond Counsel’s attention after the date of issuance of the Series 2024 Bonds may adversely affect the value of, or the tax status of interest on, the Series 2024 Bonds.

Accordingly, the opinion of Bond Counsel is not intended to, and may not, be relied upon in connection with any such actions, events, or matters.

Although Bond Counsel is of the opinion that interest on the Series 2024 Bonds is excluded from gross income for federal income tax purposes and is exempt from State of California personal income taxes, the ownership or disposition of, or the accrual or receipt of amounts treated as interest on, the Series 2024 Bonds may otherwise affect a Beneficial Owner’s federal, state, or local tax liability. The nature and extent of these other tax consequences depends upon the particular tax status of the Beneficial Owner or the Beneficial Owner’s other items of income or deduction. Bond Counsel expresses no opinion regarding any such other tax consequences.

Current and future legislative proposals, if enacted into law, clarification of the Code or court decisions may cause interest on the Series 2024 Bonds to be subject, directly or indirectly, in whole or in part, to federal income taxation or to be subject to or exempted from state income taxation, or otherwise prevent Beneficial Owners from realizing the full current benefit of the tax status of such interest. The introduction or enactment of any such legislative proposals or clarification of the Code or court decisions may also affect, perhaps significantly, the market price for, or marketability of, the Series 2024 Bonds.

Prospective purchasers of the Series 2024 Bonds should consult their own tax advisors regarding the potential impact of any pending or proposed federal or state tax legislation, regulations, or litigation, as to which Bond Counsel expresses no opinion.

The opinion of Bond Counsel is based on current legal authority, covers certain matters not directly addressed by such authorities, and represents Bond Counsel’s judgment as to the proper treatment of the Series 2024 Bonds for federal income tax purposes. It is not binding on the Internal Revenue Service (“IRS”) or the courts. Furthermore, Bond Counsel cannot give and has not given any opinion or assurance about the future activities of the Authority or about the effect of future changes in the Code, the applicable 37 4140-2813-5503.3
regulations, the interpretation thereof or the enforcement thereof by the IRS. TheAuthority has covenanted, however, to comply with the requirements of the Code.

Bond Counsel’s engagement with respect to the Series 2024 Bonds ends with the issuance of the Series 2024 Bonds, and, unless separately engaged, Bond Counsel is not obligated to defend the Authority or the Beneficial Owners regarding the tax-exempt status of the Series 2024 Bonds in the event of an audit examination by the IRS. Under current procedures, Beneficial Owners would have little, if any, right to participate in the audit examination process. Moreover, because achieving judicial review in connection with an audit examination of tax-exempt bonds is difficult, obtaining an independent review of IRS positions with which the Authority legitimately disagrees, may not be practicable. Any action of the IRS, including but not limited to selection of the Series 2024 Bonds for audit, or the course or result of such audit, or an audit of bonds presenting similar tax issues may affect the market price for, or the marketability of, the Series 2024 Bonds, and may cause the Authority or the Beneficial Owners to incur significant expense.

Payments on the Series 2024 Bonds generally will be subject to U.S. information reporting and possibly to “backup withholding.” Under Section 3406 of the Code and applicable U.S. Treasury Regulations issued thereunder, a non-corporate Beneficial Owner of Series 2024 Bonds may be subject to backup withholding with respect to “reportable payments,” which include interest paid on the Series 2024 Bonds and the gross proceeds of a sale, exchange, redemption, retirement, or other disposition of the Series 2024 Bonds. The payor will be required to deduct and withhold the prescribed amounts if (i) the payee fails to furnish a U.S. taxpayer identification number (“TIN”) to the payor in the manner required, (ii) the IRS notifies the payor that the TIN furnished by the payee is incorrect, (iii) there has been a “notified payee underreporting” described in Section 3406(c) of the Code or (iv) the payee fails to certify under penalty of perjury that the payee is not subject to withholding under Section 3406(a)(1)(C) of the Code. Amounts withheld under the backup withholding rules may be refunded or credited against a Beneficial Owner’s federal income tax liability, if any, provided that the required information is timely furnished to the IRS.

Certain Beneficial Owners (including among others, corporations and certain tax-exempt organizations) are not subject to backup withholding. The failure to comply with the backup withholding rules may result in the imposition of penalties by the IRS.

LEGAL MATTERS
The validity of the Series 2024 Bonds and certain other legal matters are subject to the approving opinion of Orrick, Herrington & Sutcliffe LLP, Bond Counsel to the Authority. Complete copies of the proposed form of Bond Counsel opinion are contained in Appendix F hereto. Bond Counsel undertakes no responsibility for the accuracy, completeness, or fairness of this Official Statement. Certain legal matters will be passed upon for the Authority and the City by the City Attorney for the City of Santa Barbara.

Certain legal matters will be passed upon for the Authority by Orrick, Herrington & Sutcliffe LLP, as Disclosure Counsel. The fees of Bond Counsel, and Disclosure Counsel are contingent upon issuance of the Series 2024 Bonds.

LITIGATION
There is no controversy or litigation of any nature now pending or, to the knowledge of their respective officers, threatened against the City or the Authority restraining or enjoining the issuance or sale of the Series 2024 Bonds or in any way contesting or affecting the validity of the Series 2024 Bonds, any proceedings of the City or the Authority taken concerning the issuance or sale thereof, the pledge or application of any monies or security provided for the payment of the Series 2024 Bonds, or existence or powers of the City or the Authority relating to the issuance of the Series 2024 Bonds. In addition, there are a number of suits and claims pending against the City, all of which are in the normal course of the City’s 38 4140-2813-5503.3
business. The aggregate amount of the uninsured liabilities of the City which may result from all claims will not, in the opinion of the City, materially affect the City’s finances or impair its ability to make Base Rental Payments.

MUNICIPALADVISOR
KNN Public Finance, Berkeley California (the “Municipal advisor”) has served as municipal advisor to the City in connection with the issuance of the Series 2024 Bonds. The Municipal advisor has not independently verified any of the data contained in this Official Statement or conducted a detailed investigation of the affairs of the City to determine the accuracy or completeness of this Official Statement.

The Municipal advisor assumes no responsibility for the accuracy or completeness of any of the information contained in this Official Statement. The fees of the Municipal Advisor are contingent upon issuance of the Series 2024 Bonds.

RATINGS
S&P Global Ratings, a business unit of Standard & Poor’s Financial Services LLC (“S&P”) and Moody’s Investors Service (“Moody’s”) have assigned their ratings of “___” and “___” respectively, to the Series 2024 Bonds. Such credit ratings reflect only the views of such organizations and any desired explanation of the significance of such credit ratings should be obtained from the rating agency furnishing the same, at the following addresses: Moody’s Investors Service, 7 World Trade Center, 250 Greenwich Street, New York, New York 10007, and Standard & Poor’s, 55 Water Street, New York, New York 10041.

Generally, a rating agency bases its credit rating on the information and materials furnished to it and on investigations, studies and assumptions of its own. Such ratings are not a recommendation to buy, sell or hold the Series 2024 Bonds. There is no assurance that such credit ratings will continue for any given period or that such credit ratings will not be revised downward or withdrawn entirely by the rating agencies, if in the judgment of such rating agencies, circumstances so warrant. Any such downward revision or withdrawal of such credit ratings may have an adverse effect on the market price of the Series 2024 Bonds.

SALE AND REOFFERING
The Series 2024 Bonds were sold at a competitive sale on ______ __, 2024. The Series 2024 Bonds were awarded to __________ (the “Initial Purchaser”) at a purchase price of $__________ (which amount is equal to the aggregate principal amount of the Series 2024 Bonds, plus/minus an original issue premium/discount of $__________). The Initial Purchaser may offer and sell the Series 2024 Bonds to certain dealers and others at prices or yields different from the initial public offering prices or yields stated on the inside cover page of this Official Statement. The public offering prices or yields may be changed from time to time by the Initial Purchaser.

MISCELLANEOUS
Any statement in this Official Statement involving matters of opinion, whether or not expressly so stated, are intended as such and not as representations of fact. This Official Statement is not to be construed as a contract or agreement between the Authority, the City, the Initial Purchaser or other broker-dealer, and the purchasers, Owners, and Beneficial Owners of any of the Series 2024 Bonds. 39 4140-2813-5503.3
The preparation and distribution of this Official Statement have been authorized by the Authority and the City.

FINANCE AUTHORITY OF THE CITY OF

SANTA BARBARA
By: /s/
Executive Director

CITY OF SANTA BARBARA
By: /s/
Finance Director
1 4140-2813-5503.3

APPENDIX A
THE CITY OF SANTA BARBARA:

ECONOMIC, DEMOGRAPHIC, AND FINANCIAL INFORMATION
This Appendix A includes certain financial and demographic information with respect to the City as well as demographic information with respect to the County of Santa Barbara and the State of California.

The Series 2024 Bonds are payable solely from Base Rental Payments to be made by the City. The County of Santa Barbara and the State of California have no obligation to make any payments with respect to the Bonds. See “SECURITY AND SOURCES OF PAYMENT FOR THE BONDS” herein for a description of the security for the Series 2024 Bonds.

General
The City, the county seat of Santa Barbara County (the “County”), is located on Highway 101, a main route connecting Los Angeles and San Francisco, some 100 miles northwest of the Metropolitan Los Angeles area. Incorporated in 1850, the City was reincorporated in 1899. The City is the second-largest city in the County in terms of population, with a present population of approximately 85,679 according to the California Department of Finance. The City encompasses a total of approximately 20 square miles within its corporate limits, including the airport.

The City is a Charter City, with the present Charter adopted in May 1967 and amended over time by vote of the electorate. A seven-member City Council governs the City, with six members elected by district (each district shall elect one member), and an at-large, elected Mayor, each of whom, including the Mayor, shall have the right to vote on all questions coming before the City Council. The Council members serve staggered four-year terms. The current Mayor will continue in office for five years and until his or her successor is elected and qualified following the November 2026 election, with an election of Mayor to be held each fourth year thereafter. General Municipal Elections for the election of officers and for such other purposes as the City Council may prescribe are held in the City on the first Tuesday after the first Monday in November in each even-numbered year.

The City employs a City Administrator, appointed by the full City Council. The City provides police protection, fire protection, animal control, emergency medical aid, building safety regulation and inspection, street lighting, beautification, sanitation, land use planning and zoning, housing and community services, maintenance and improvement of streets and related structures, traffic safety maintenance and improvement and a full range of recreational and cultural programs for citizen participation. The City owns and operates an airport, water and wastewater systems, a waterfront/harbor, downtown parking, and a golf course as enterprise operations of the City. The City contracts with a private company for collection of refuse.
2 4140-2813-5503.3
The following table presents population statistics for the City for the past five years and as of January 1.

CITY OF SANTA BARBARA

POPULATION
FOR CALENDAR YEARS 2020 THROUGH 2024
Year
(as of January 1) City of Santa Barbara
2020 87,566
2021 87,865
2022 85,847
2023 85,382
2024 85,679
Source: State Department of Finance
Personal Income
The following table shows the per capita personal income for the City, the County, the State of California, and the United States for the past ten years.

PER CAPITA PERSONAL INCOME

CITY OF SANTA BARBARA, SANTA BARBARA COUNTY, THE STATE OF CALIFORNIA,

AND THE UNITED STATES
2014 THROUGH 2023
Year
City of
Santa
Barbara
Santa
Barbara
County
State of
California
United
States
2014 $36,164 $51,447 $50,619 $46,287
2015 36,587 54,318 53,817 48,060
2016 36,267 54,873 55,863 48,971
2017 36,508 57,012 58,214 51,004
2018 36,773 59,649 60,984 53,309
2019 40,597 62,306 64,174 55,547
2020 42,911 68,801 70,058 59,151
2021 45,401 76,910 76,987 64,427
2022 52,143 75,720 77,013 65,473
2023 n.a. n.a. 80,423 68,531
(Note: Per capita personal income is the total personal income divided by the total mid-year population estimates of the U.S.

Bureau of the Census. All dollar estimates are in current dollars (not adjusted for inflation).

Source: City data sourced from City of Santa Barbara Annual Comprehensive Financial Report, Fiscal Year ended June 30, 2023, which is sourced to California Department of Finance, Demographic Research Unit; County and United States statistics sourced from U.S Department of Commerce Bureau of Economic Analysis (last updated November 16, 2023 for County and March 29, 2024 for State).

Employment
As of April 2024, the overall number of persons employed within the City was 49,200.

Unemployment in the City was 2.9% as of April 2024 as compared with the County level of unemployment of 4.2% and the State of California level of unemployment is 4.8%. The following table presents annual 3 4140-2813-5503.3
labor force, employment and unemployment data for the City, the County of Santa Barbara, and the State for the years 2019 through 2023.

CITY OF SANTA BARBARA, COUNTY OF SANTA BARBARA

AND STATE OF CALIFORNIA

LABOR FORCE, EMPLOYMENT AND UNEMPLOYMENT
YEARLY AVERAGE FOR CALENDAR YEARS 2019 THROUGH 2023
Year and Area
Civilian
Labor Force Employment Unemployment
Unemployment
Rate
2019
City of Santa Barbara 51,600 50,400 1,200 2.3%
County of Santa Barbara 222,400 214,300 8,100 3.6%
State of California 19,385,300 18,589,600 795,700 4.1%
2020
City of Santa Barbara 50,400 46,800 3,600 7.1%
County of Santa Barbara 218,500 200,700 17,800 8.1%
State of California 18,758,400 17,351,300 1,407,100 7.5% 2021
City of Santa Barbara 50,400 48,200 2,200 4.3%
County of Santa Barbara 219,400 206,700 12,700 5.8%
State of California 18,896,500 17,724,800 1,171,700 6.2% 2022
City of Santa Barbara 49,800 48,700 1,200 2.4%
County of Santa Barbara 216,400 208,500 7,900 3.7%
State of California 19,169,300 18,348,900 820,400 4.3%
2023
City of Santa Barbara 50,300 48,800 1,500 3.0%
County of Santa Barbara 218,200 209,300 9,000 4.1%
State of California 19,308,300 18,388,300 920,000 4.8%
Source: California Employment Development Department
Major Employers
The following table provides a listing of principal employers headquartered or located in south Santa Barbara County and their employment levels.
4 4140-2813-5503.3
TEN LARGEST EMPLOYERS – SOUTH SANTA BARBARA COUNTY
AS OF JUNE 30, 2022
Employer
Number of
Employees
Percentage of Total
City Employment
County of Santa Barbara 4,400 5.12%
University of California, Santa Barbara 4,250 4.95
Cottage Health 3,052 3.55
Mission Linen Supply 2,000 2.33
AppFolio 1,350 1.57
Santa Barbara Unified School District 1,350 1.57
Sansum 1,289 1.50
Raytheon 1,100 1.28
Procore Technologies 900 1.05
Goleta Union School District 700 0.81
Total 20,391 23.74%
Note: [In preparing the fiscal year 2022 principal employers schedule, the number of employees at June 30, 2022, was taken entirely from the “Top 25 Santa Barbara County Employers” schedule in the Pacific Coast Business Times “2022 Book of Lists.”] Sources: City of Santa Barbara Annual Comprehensive Financial Report, Fiscal Year ended June 30, 2023, County of Santa Barbara, City of Santa Barbara, and Pacific Coast Business Times.

Commercial Activity
Commercial activity is an important contributor to the City of Santa Barbara’s economy. The following table estimates the City’s commercial activity between calendar years 2019 and 2023.

CITY OF SANTA BARBARA

TAXABLE TRANSACTIONS BY TYPE OF BUSINESS
FOR CALENDAR YEARS 2019 THROUGH 2023
($000s)
Business 2019 2020 2021 2022 2023
Retail and Food Services
Motor Vehicle and Parts Dealers $ 252,018 $ 251,678 $ 214,460 $ 207,303 $ 195,653 Home Furnishings & Appliance Stores 71,083 68,078 75,604 69,922 63,649 Building Material & Garden Equipment
& Supplies Dealers 123,017 118,168 125,872 138,155 134,691 Food and Beverage Stores 137,309 139,864 147,763 155,989 144,019 Gasoline Stations 148,857 101,560 146,466 174,011 158,211 Clothing & Clothing Accessories Stores 157,123 82,558 118,524 128,729 120,736 General Merchandise Stores 44,638 32,678 45,281 46,635 46,831 Food Services and Drinking Places 449,824 316,013 480,658 556,127 561,902 Other Retail Group 173,563 154,157 201,133 208,242 208,296 Total Retail and Food Services 1,557,435 1,264,755 1,555,760 1,685,113 1,633,986 All Other Outlets 411,211 341,759 534,179 650,901 678,711 Total All Outlets $1,968,656 $1,606,514 $2,089,939 $2,336,014 $2,312,696 Note: Numbers may not sum due to rounding.

Source: California Department of Tax and Fee Administration As described in this Official Statement, the City is a very popular destination resort for tourists from both within California and without. Among the attractions are the beaches within the City and the 5 4140-2813-5503.3
wharf and State Street, a popular shopping and restaurant area, starting from the beach and continuing into the downtown area. Through the course of the COVID-19 pandemic, and immediately following substantial resumption of business, businesses in the City experienced declines in commercial activity, and the City experienced a significant decline in major revenue sources, including sales tax and TOT. By Fiscal Year 2022-23, the City saw stronger economic activity and revenue growth in these tax sources and a leveling of economic activity to a new baseline. As compared to other visitor destination cities in the State, recent quarterly trend reports by major economic sector show that restaurants and food markets have achieved a record level of receipts. Likewise, auto sales have been increasing and continue to be a larger driver of sales tax receiptsfor the City. The City continues to invest in areas primarily responsible for these revenues.

Among other initiatives, the Lower State Street Connectivity Project, and the State Street Promenade Plan and Redesign, each to be funded with Measure C revenues as described below under the caption “Measure C Sales Tax” below, are projected to contribute to the City and its amenities as public attractions.

Assessed Valuation, Property Tax Levies and Collections The table below sets forth a ten-year history of the City’s assessed valuation as included in the City of Santa Barbara Annual Comprehensive Financial Report, Fiscal Year ended June 30, 2023. Real and personal property categories include both secured and unsecured property. Total assessed value has grown by an average annual rate of approximately 5% over this ten-year period.

CITY OF SANTA BARBARA

ASSESSED VALUATIONS OF REALAND PERSONAL PROPERTY
($000s)
Fiscal Year
Secured
Property
Unsecured
Property
SBE
Nonunitary
Net Taxable
Assessed
Value
Total
Direct Tax
Rate
2013 $14,450,300 $897,146 - $15,347,446 1.00%
2014 15,115,761 916,616 - 16,032,377 1.00
2015 15,828,353 950,610 - 16,778,963 1.00
2016 16,893,957 1,000,471 - 17,894,428 1.00
2017 17,897,470 1,002,168 - 18,899,638 1.00
2018 18,999,710 1,046,971 - 20,046,681 1.00
2019 20,146,839 1,058,569 - 21,205,408 1.00
2020 21,207,130 1,074,831 - 22,281,961 1.00
2021 22,473,303 1,125,860 - 23,599,163 1.00
2022 23,186,266 1,200,282 - 24,386,548 1.00
Notes:
(1) In 1978 the voters of the State of California passed Proposition 13 which limited property taxes to a total maximum rate of 1.0% based upon the assessed value of the property being taxed. Each year, the assessed value of property may be increased by an “inflation factor” (limited to a maximum increase of 2.0%). With few exceptions, property is only reassessed at the time that it is sold to a new owner. At that point, the new assessed value is reassessed at the purchase price of the property sold. The assessed valuation data shown above represents the only data currently available with respect to the actual market value of taxable property and is subject to the limitations described above.
(2) Exempt values are not included in total.
(3) In fiscal year 2017-18, the City engaged HDL, Coren & Cone to provide data for the statistical section of the Annual Comprehensive (4) Financial Report. Historical data was updated based upon this information.

Source: City of Santa Barbara Annual Comprehensive Financial Report, Fiscal Year ended June 30, 2023. HDL Coren & Cone Data Source:

Santa Barbara County Assessor 2012-13 to 2021-22 combined tax rolls. 6 4140-2813-5503.3
The table below shows total property tax levies and collections for the ten-year period 2013 through 2022. Data in this table includes the basic and supplemental City property taxes and subventions. Santa Barbara County assesses properties, and it bills, collects, and distributes property taxes to all taxing entities, including the City. Under State law, known as the Teeter Plan (as described below), the County remits the entire amount levied and handles all delinquencies, retaining interest and penalties. Generally, the Teeter Plan provides for a tax distribution procedure in which secured roll taxes are distributed to taxing agencies within the County on the basis of the tax levy, rather than on the basis of actual tax collections. The County has established a Teeter Plan and may determine to discontinue the plan at its discretion, whereupon taxing entities, such as the City, would be paid as taxes are collected. The distribution of secured tax revenues to the City is subject to the County’s Teeter Plan, pursuant to which the County has elected to provide local agencies and taxing areas with full tax and assessment levies instead of actual tax and assessment collections.

CITY OF SANTA BARBARA
PROPERTY TAX LEVIES AND COLLECTIONS:

FISCAL YEAR 2012-13 THROUGH FISCAL YEAR 2021-22
($000s)
Collected within the
Fiscal Year of the Levy
Fiscal Year
Ended
June 30
Total Tax
Levy for
Fiscal Year Amount
Percentage
of Levy
2013 $27,575 $27,575 100%
2014 26,555 26,555 100%
2015 27,691 27,691 100%
2016 29,382 29,382 100%
2017 31,612 31,612 100%
2018 34,928 34,928 100%
2019 35,187 35,187 100%
2020 38,148 38,148 100%
2021 39,862 39,862 100%
2022 42,226 42,226 100%
Source: City of Santa Barbara Annual Comprehensive Financial Report, Fiscal Year ended June 30, 2023.

In 1949, the California Legislature enacted an alternative method for the distribution of secured property taxes to local agencies. This method, known as the Teeter Plan, is now set forth in Sections 4701- 4717 of the California Revenue and Taxation Code. Upon adoption and implementation of the Teeter Plan by a county board of supervisors, local agencies for which the county acts as “bank” and certain other public agencies and taxing areas located in the county receive annually the full amount of their share of property taxes on the secured roll, including delinquent property taxes which have yet to be collected. While a county benefits from the penalties associated with these delinquent taxes when they are paid, the Teeter Plan provides participating local agencies with stable cash flow and the elimination of collection risk.

To implement a Teeter Plan, the board of supervisors of a county generally must elect to do so by July 15 of the fiscal year in which it is to apply. Once adopted, a county’s Teeter Plan will remain in effect in perpetuity unless the board of supervisors orders its discontinuance or unless prior to the commencement of a fiscal year a petition for discontinuance is received and joined in by resolutions of the governing bodies of not less than two-thirds of the participating districts in the county. An electing county may, however, opt to discontinue the Teeter Plan with respect to any levying agency in the county if the board of supervisors, 7 4140-2813-5503.3
by action taken not later than July 15 of a fiscal year, elects to discontinue the procedure with respect to such levying agency and the rate of secured tax delinquencies in that agency in any year exceeds 3% of the total of all taxes and assessments levied on the secured roll by that agency. See “RISK FACTORS – Teeter Plan Termination.” The County has never discontinued the Teeter Plan with respect to any levying agency.

If any tax or assessment which was distributed to a Teeter Plan participant is subsequently changed by correction, cancellation or refund, a pro rata adjustment for the amount of the change is made on the records of the treasurer and auditor of the county. Such adjustment for a decrease in the tax or assessment is treated by the County as an interest-free offset against future advances of tax levies under the Teeter Plan.

To the extent that the County’s Teeter Plan continues in existence and is carried out as adopted, the County’s Teeter Plan may help protect the Owners of the Bonds from the risk of delinquencies in the payment of property taxes allocable to the City.

Principal Property Taxpayers
A table of the ten largest property taxpayers in the City as of June 30, [2022], is set forth below, by order of assessed valuation.

CITY OF SANTA BARBARA

PRINCIPAL PROPERTY TAXPAYERS
AS OF JUNE 30, [2022]
($000s)
Taxpayer
Taxable Net
Assessed Value
Percent of Total
Taxable Net
Assessed Value
Levon Investments LLC $148,501 0.61%
Fess Parker Doubletree Hotel 113,853 0.47
KHP IV Santa Barbara LLC 95,990 0.39
Paseo Nuevo Owner LLC 88,391 0.36
XHR Santa Barbara LLC 87,253 0.36
El Encanto Inc 81,285 0.33
Dario L Pini Trust 71,397 0.29
HC Assetco 69,340 0.28
MCC BB Property LLC 66,227 0.27
Hitchcock Holdings LLC 61,972 0.25
Total $884,209 3.63%
Source: City of Santa Barbara Annual Comprehensive Financial Report, Fiscal Year ended June 30, 2023.

City Budget Process
The City utilizes a biennial budget process, which allows the City to plan ahead and focus on strategic projects and capital budgeting in the second year and has the added benefit of decreasing requested budget increases from one year to the next. This robust forecasting process provides insight into identifying major trends, potential budget imbalances, and a reasonable assessment of General Fund reserves over time.

The City’s budget process begins in October – seven months prior to the first budget public hearing. Staff prepares an initial financial forecast for the General Fund that extends for five fiscal years to better understand the long-term impacts to the City’s major taxes and other revenues, as well as known and 8 4140-2813-5503.3
reasonably anticipated expenditure increases. The City's fiscal year for budgeting and accounting purposes runs from July 1 to June 30.

This multi-year forecast process is particularly important during the budget development process to understand major economic indicators and trends that will likely impact City and department-specific revenue sources. Overall, the multi-year forecast assumes the recovery and continued, modest growth of all major General Fund revenue sources into the foreseeable future. With nearly three quarters of the General Fund allocated to salaries and benefits, the forecast includes known increases to benefits and pension costs, which consume most of the anticipated revenue growth, as well as impacts due to high inflation on goods and services.

During the course of each Fiscal Year, the budget is amended and revised as necessary by the City Council.

Sources of General Fund Revenues
The table below details the principal sources of the City’s General Fund tax revenues. Subsequent tables summarize certain General Fund financial data of the City and have been prepared from the City’s audited financial statements and General Fund budget information. Reference is made to APPENDIX B – “CITY OF SANTA BARBARA ANNUAL COMPREHENSIVE FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2023.”

CITY OF SANTA BARBARA

GENERAL FUND TAX REVENUES BY SOURCE

LAST SIX FISCAL YEARS
($000s)
Fiscal Years Ending
Source 2018 2019 2020 2021 2022 2023
Sales Tax $ 25,203 $ 24,185 $ 21,576 $ 24,350 $ 28,504 $ 26,057 Measure C Sales Tax (1) 4,291 24,418 22,889 25,420 30,824 33,733 Utility Users Tax 14,149 13,888 14,137 14,674 15,610 16,381 Property Tax 34,928 35,187 38,148 39,862 42,226 46,006
Real Property Transfer Tax 795 863 658 1,144 1,353 862
Transient Occupancy Tax 22,650 23,421 18,168 18,807 31,956 31,456 Business License Tax 2,785 2,725 2,765 2,543 2,667 2,683 Transportation Tax 3,954 4,141 4,100 4,438 5,304 []
Cannabis Tax (2) 11 79 1,052 1,920 1,672 1,388
Other (2) -- 15 3 -- 6 []
Total $104,470 $128,922 $123,496 $133,159 $160,122 []
(1) Revenues attributable to the Measure C sales tax commenced in the fourth quarter of Fiscal Year 2017-18. See “Measure C Sales Tax” below. The City received $4.3 million of an estimated $5.5 million in revenue in Fiscal Year 2017-18 due to issues in reporting tax revenues at the State. (2) The Cannabis Tax commenced in Fiscal Year 2017-18 following State ballot measure to legalize cannabis production and retail. [Detail being confirmed for bracketed categories.]
Source: City of Santa Barbara Annual Comprehensive Financial Report, Fiscal Year ended June 30, 2023.

An additional sales tax measure will appear on the November 5, 2024, ballot. If approved by Santa Barbara voters, the measure will generate an estimated $15.6 million annually to support the City’s General Fund. See “Proposed Sales Tax Measure – ‘Essential Local Services Measure’” below. 9 4140-2813-5503.3
Measure C Sales Tax
In November 2017, voters approved an additional 1.0% general sales tax (“Measure C”) which the City initially expected to apply Measure C revenues to fund approximately $22.0 Million a year in infrastructure improvements, particularly to increase funding for streets, sidewalks, public safety facilities, etc. Measure C was effective in April 2018 and has no sunset provision. In Fiscal Year 2022-23, the City transferred $28.4 Million to the Measure C Capital fund for a variety of capital projects throughout the City.

Notable projects included various overlay improvements, costsrelated to the new Police Station, and central library renovations. In addition, Measure C revenues were spent on the State Street Master Plan.

Set forth below is a summary of infrastructure improvements included in the Fiscal Year 2024-25 Adopted Budget to be funded in part in fiscal years 2024-25 and 2025-26 with Measure C revenues. [As described herein, City’s expects Measure C revenues to be a substantial source of General Fund revenues available to pay costs of construction including, without limitation, Base Rental Payments due under the Lease Agreement.]
Measure C Funded Projects
In Fiscal Year 2024-25 Adopted Budget
2024-25 2025-26
Streets and Related Infrastructure
Pavement Maintenance - Annual $19,400,000 $15,000,000
Plaza De la Guerra Revitalization -- 1,200,000
Lower State Street Connectivity 2,500,000 --
State Street Promenade Plan and Redesign 500,000 500,000 De La Vina Street Bridge Replacement Project 1,000,000 -- Business Corridor Improvements 500,000 500,000
Downtown Parking -- 2,350,000
Access Ramps 750,000 750,000
Storm Drains 700,000 700,000
Traffic Signals 620,000 620,000
Street Lights 300,000 --
Streets 1,475,000 1,750,000
Sidewalks 1,250,000 1,250,000
Subtotals: Streets and Related Infrastructure $28,995,000 $24,620,000 Parks – Dwight Murphy Field (construction match) $ 6,000,000 $ -- Parks and Recreation 3,159,370 4,826,327
Police Station 2,000,000 700,000
Police Equipment Replacement 450,000 450,000
Fire Equipment Upgrades and Replacements 566,400 1,220,000 Radio System Upgrade -- 2,000,000
Central Library Construction, Renovation, Equipment 770,000 400,000 Eastside Library Garage Construction 500,000 --
Library Technology Replacement 187,450 263,000
Electric Vehicle Infrastructure – Charging Stations -- 150,000 Homelessness Response 500,000 203,796
Assorted Public Works 1,250,000 2,380,000
Subtotals $15,383,220 $12,593,123
Totals $44,378,220 $[37,213,123]
10 4140-2813-5503.3
Source: City of Santa Barbara
The City expects that Measure C sales tax revenues will be applied to make Base Rental Payments.

Maintaining police, fire, and 911 emergency medical response is a core priority of Measure C funds.

Telecommunication and Video Utility User’s Tax (Measure G) Measure G, the City’s Telecommunication & Video Users Tax Reduction & Modernization Ordinance, was approved by voters at the November 2008 general election. Measure G was submitted to the voters by the unanimous vote of the City Council to update the City’s then existing Utility User’s Tax (UUT) on telecommunications and video services. Measure G amended the City’s 1970s era UUT ordinance with a modern “telecommunication and video services” ordinance, imposing a UUT tax rate

5.75% (reducing the tax rate from 6.0% to 5.75%, but applied the tax to more utilities and services).

Transient Occupancy Tax
The Uniform Transient Occupancy Tax Ordinance was approved by City voters in 1964. It established a 10.0% rent charged by the operator of a hotel for the privilege of occupancy in any hotel located in the City. In 2000, the voters approved of an additional 2.0% transient occupancy tax on occupants for the improvement of waters and creeks. This action resulted in a combined transient occupancy tax rate of 12.0%. This tax is currently collected from 71 hotel businesses in the City as well as more than 200 short-term vacation rental businesses.

The transient occupancy tax islevied at 12 percent of the amount charged for hotel and motel rooms or other dwellings occupied for 30 days or less. The tax is collected by hotel operators, individuals, and short-term rental websites, which are subsequently remitted to the City monthly.

Ten percent of the total 12.0% rate is unrestricted, and those revenues are accounted for in the General Fund. The 2.0% rate restricted and accounted for as a Special Revenue Fund.

As described herein, TOT revenues are very sensitive to changing conditions that affect travel and was significantly impacted by the COVID-19 pandemic. Following significant growth in Fiscal Year 2022- 23, the City assumes more moderate growth for Fiscal Years 2023 24 and 2024-25.

Proposed Transactions and Use Tax Measure
On June 11, 2024, the City Council voted unanimously to place a 0.50% transactions and use (i.e. sales) tax measure on the November 5, 2024, ballot titled the “City of Santa Barbara Essential Local Services Measure.” The ballot question indicates that revenues generated from this measure can be expended to maintaining 9-1-1 emergency/fire/paramedic/police response, keeping neighborhood fire stations open; improving housing affordability; addressing homelessness; keeping public areas/parks safe, clean; maintaining library services; stormwater protection; improving natural disaster preparedness; retaining local businesses/jobs, and for general government use. It is anticipated that the additional tax will generate approximately $15.6 Million annually.

Recent Financial Performance
The tables below summarize certain General Fund financial data of the City and have been prepared from the City’s audited financial statements and General Fund budget information. Reference is made to APPENDIX B – “CITY OF SANTA BARBARA ANNUAL COMPREHENSIVE FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2023.”
11 4140-2813-5503.3

CITY OF SANTA BARBARA

GENERAL FUND BALANCE SHEET
Fiscal Year
2018-19
Fiscal Year
2019-20
Fiscal Year
2020-21
Fiscal Year
2021-22
Fiscal Year
2022-23
ASSETS
Pooled Cash And Investments $16,769,739 $23,652,717 $23,006,184 $37,797,377 $32,596,131 Receivables
Accounts, Net 15,248,857 11,561,101 16,886,310 17,307,342 2,539,931 Loans 742,369 522,113 209,367 118,353 86,814
Interest 919,086 685,504 413,285 624,630 1,499,439
Leases, Current -- -- -- 157,248 4,134,742
Leases, Noncurrent -- -- -- 4,134,741 --
Due from Other Governments 396,463 -- -- 16,248 14,801,427 Prepaid Assets and Deposits 126,457 163,297 98,805 121,676 1,243,476 Interfund Receivables 2,173,498 5,030,886 8,276,750 10,346,824 15,040,564 Advances to Other Funds 8,722,929 567,013 969,006 2,527,707 2,096,996 Total Assets 45,099,398 42,182,631 49,859,707 73,152,146 74,039,520

LIABILITIES, DEFERRED INFLOWS OF

RESOURCES, AND FUND BALANCES
Liabilities
Accounts Payable $ 1,824,137 $ 2,209,912 $ 2,234,404 $ 2,727,252 $ 2,069,116 Salaries and Benefits Payable 4,485,595 4,983,455 5,101,995 4,715,492 3,222,53 Unearned Revenue 2,033,083 2,034,432 3,078,412 9,110,055 7,655,865 Deposits 680,234 366,861 327,554 437,532 563,775
Total Liabilities 9,023,049 9,594,660 10,742,365 16,990,331 13,511,309 Deferred Inflows of Resources:

Leases -- -- -- $4,180,757 $3,948,649
Unavailable Revenues 1,124,000 435,207 383,028 412,923 816,298 Total Deferred Inflows
of Resources 1,124,000 435,207 383,028 4,593,680 4,764,947 Fund Balances:

Nonspendable $ 9,591,755 $ 1,252,423 $ 1,277,178 $ 7,059,725 $ 3,427,286 Restricted 2,367,045 2,140,493 2,298,920 2,503,742 2,601,010 Committed(1) 26,777,415 34,498,530 35,639,152 39,126,117 42,050,737 Unassigned (3,783,866) (5,738,682) (480,936) 2,878,551 7,684,231 Total Fund Balances 34,952,349 32,152,764 38,734,314 51,568,135 55,763,264 Total Liabilities, Deferred Inflows of
Resources and Fund Balances $45,099,398 $42,182,631 $49,859,707 $73,152,146 $74,039,520 (1) Consists primarily of the City’s commitment for “Contingencies” and “Disaster Contingencies.” See Note 11 to the financial statements included as APPENDIX B – “CITY OF SANTA BARBARA ANNUAL COMPREHENSIVE FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2023.” This statement is a summary statement only. The City’s Annual Comprehensive Financial Report, including the notes to the Audited Financial Statements, are an integral part of and necessary to a complete understanding of this summary table. See APPENDIX B – “CITY OF SANTA BARBARA ANNUAL COMPREHENSIVE FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2023.” Source: City of Santa Barbara Annual Comprehensive Financial Report, Fiscal Year ended June 30, 2023. 12 4140-2813-5503.3

CITY OF SANTA BARBARA

GENERAL FUND STATEMENTS OF REVENUES, EXPENDITURES AND

CHANGES IN FUND BALANCE
Fiscal Year
2018-19
Fiscal Year
2019-20
Fiscal Year
2020-21
Fiscal Year
2021-22
Fiscal Year
2022-23
REVENUES:

Taxes $113,933,391 $109,299,618 $118,247,464 $141,665,066 $145,130,220 Franchise fees 3,636,661 3,650,384 3,851,973 4,176,091 4,253,814 Intergovernmental 2,751,450 1,756,257 15,349,744 8,096,808 2,742,141 Charges for services 21,827,800 21,197,408 22,159,205 26,224,289 28,765,424 Use of money and property 1,860,116 1,928,015 360,620 (2,228,391) 1,181,929 Fines and forfeitures 2,560,108 2,135,418 1,475,956 2,334,683 1,322,376 Other revenues 10,388,378 14,830,631 9,328,320 11,783,066 11,446,367 Total revenues 156,957,904 154,797,732 170,773,282 192,051,612 194,842,271 EXPENDITURES:

Current:

Mayor and City Council 3,552,358 3,500,566 3,382,618 3,469,045 3,273,811 City Attorney 4,050,268 4,492,499 3,725,519 5,074,830 4,200,606 City administration 2,409,866 2,410,652 3,351,837 4,262,574 3,609,617 Administrative services 2,620,344 2,728,730 1,557,550 1,937,370 2,574,360 Finance 5,521,672 5,695,386 5,706,046 6,153,633 7,125,980 Public safety 71,469,432 74,229,871 73,851,065 79,737,205 82,610,955 Public works 8,317,930 8,459,128 8,123,082 9,038,773 10,097,007 Community services 21,600,748 21,417,881 20,719,190 23,839,923 27,063,009 Community development 11,599,308 11,755,608 11,403,415 12,676,048 14,111,285 Sustainability and resilience -- -- 38,167 109,765 16,610 Capital Outlay -- -- -- -- 224,197
Debt Service
Principal Retirement -- -- -- 333,713 480,344
Interest and Fiscal Charges -- -- -- 84,186 48,734
Total expenditures 131,141,926 134,690,321 131,858,489 146,717,065 155,436,515

EXCESS OF REVENUES OVER
(UNDER) EXPENDITURES 25,825,978 20,107,411 38,914,793 46,334,547 39,405,756

OTHER FINANCING SOURCES
(USES): (1)
Lease Obligation -- -- -- 1,178,796 --
Subscription Obligation -- -- -- -- 224,197
Transfers in 1,095,154 2,396,256 976,073 1,815,159 667,954 Transfers out (24,779,417) (25,303,252) (33,309,316) (35,494,681) (36,102,778) Total other financing sources (uses) (23,684,263) (23,906,996) (32,333,243) (32,500,726) (35,210,627) Net change in fund balances 2,131,715 (2,799,585) 6,581,550 12,833,821 4,195,129 FUND BALANCES:

Beginning of year $32,820,634 $34,952,349 $32,152,764 $38,734,314 $51,568,135 End of year $34,952,349 $32,152,764 $38,734,314 $51,568,135 $55,763,264 (31 For detail on capital outlay and debt service for capital improvements, see “General Fund Capital Project Funds” below.

This statement is a summary statement only. The City’s Annual Comprehensive Financial Report, including the notes to the Audited Financial Statements, are an integral part of and necessary to a complete understanding of this summary table. See APPENDIX B – “CITY OF SANTA BARBARA ANNUAL COMPREHENSIVE FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2023.” Source: City of Santa Barbara Annual Comprehensive Financial Report, Fiscal Year ended June 30, 2023. 13 4140-2813-5503.3
14 4140-2813-5503.3

CITY OF SANTA BARBARA

GENERAL FUND ADOPTED BUDGETS
Fiscal Year
2020-21
Fiscal Year
2021-22
Fiscal Year
2022-23
Fiscal Year
2023-24
Fiscal Year
2024-25
REVENUES:

Taxes(1) $114,232,340 $128,553,757 $135,562,739 $149,447,295 $157,865,586 Franchise Fees 3,724,896 3,706,830 4,007,090 6,457,869 6,500,000 Intergovernmental 3,082,201 13,653,259 973,198
Charges for Services 27,108,804 25,460,227 29,075,565
Use of Money and Property 1,221,229 897,834 1,129,554
Fines and Forfeitures 2,838,708 2,861,905 2,850,253
Other Revenues 11,638,046 10,275,610 11,041,838
Total Revenues 163,846,224 185,409,422 184,640,237
EXPENDITURES:

Current:

Mayor and City Council 3,422,246 3,612,671 3,369,956
City Attorney 4,599,170 4,664,365 5,670,041
City Administration 3,942,779 5,221,572 4,138,516
Human Resources 1,678,349 3,000,071 3,047,913
Finance 5,915,057 6,688,248 7,272,532
Public Safety 76,663,819 80,776,935 87,468,246
Public Works 9,794,939 10,599,370 11,325,708
Community Services 23,557,139 25,842,318 29,791,450
Community Development 12,882,487 12,102,054 10,792,610
Sustainability and Resilience 186,612 247,535 75,245
Total Expenditures(2) 142,642,597 152,755,139 162,952,217

REVENUES OVER (UNDER)
EXPENDITURES 21,203,627 32,654,283 21,688,020

OTHER FINANCING
SOURCES (USES): (3)
Transfers In 1,049,794 1,815,159 708,684
Transfers Out (35,340,234) (40,500,774) (38,458,267)
Total Other Financing Sources
(Uses) (34,290,440) (38,685,615) (37,749,583)
Excess (Deficiency) of Revenues
and Other Sources Over (Under)
Expenditures and Other Uses (13,086,813) (6,031,332) (16,061,563) FUND BALANCES:

Beginning of Year 32,152,764 38,734,314 51,568,135
End of Year $19,065,951 $32,702,982 $35,506,572
(1) Taxes include revenues attributable to the Measure C sales tax. See “Measure C Sales Tax” above. (2) [Although not reflected in the final budgets, actual expenditures for Fiscal Years 2021-22 and 2022-23 included principal and interest payments and related fiscal charges of $417,899 and $529,078, respectively. See the table below for audited financial results for Fiscal Years ending June 30, 2022, 2023, 2024, and 2025.]
Note: During the course of each Fiscal Year, the budget is amended and revised as necessary by the City Council. The adopted budget for each fiscal year shown below is the final adopted budget as adjusted by the City Council. Numbers may not sum due to rounding. (3) For detail on capital outlay and debt service for capital improvements, see “General Fund Capital Project Funds” below.

Source: City of Santa Barbara
15 4140-2813-5503.3
General Fund Capital Project Funds
The City has a significant General Fund capital program, financed by transfers from the General Fund to two Capital Project Funds: the General Capital Fund and the Measure C Capital Fund. The following table shows the activity in those funds for the past five fiscal years, providing expenditure detail for what might otherwise be shown as capital outlay and debt service in the two tables above. .

CITY OF SANTA BARBARA

GENERAL FUND CAPITAL PROJECT FUNDS
Fiscal Year
2018-19
Fiscal Year
2019-20
Fiscal Year
2020-21
Fiscal Year
2021-22
Fiscal Year
2022-23

GENERAL CAPITAL FUND
Revenues $ 340,418 $ 314,226 $ 840,000 $ 29,798 $ 597,783 Transfers In 843,441 1,311,164 685,321 900,151 1,250,838 Total 1,183,859 1,625,390 1,525,321 929,949 1,848,621
Expenditures 3,322,559 1,182,539 781,626 584,403 2,958,730 Transfers Out -- 1,489,089 40,000 15,585 30,000
Total 3,322,559 2,671,628 821,626 599,988 2,988,730
Fund Balance:

Beginning of Fiscal Year 6,404,707 4,266,007 3,219,769 3,923,464 4,253,425 End of Fiscal Year 4,266,007 3,219,769 3,923,464 4,253,425 3,113,316

MEASURE C CAPITAL FUND
Revenues -- -- -- -- --
Transfers In -- -- 25,420,407 30,824,430 28,399,413
Total -- -- 25,420,407 30,824,430 28,399,413
Expenditures -- -- 15,951,977 17,595,716 20,897,791
Transfers Out -- -- -- -- --
Total -- -- 15,951,977 17,595,716 20,897,791
Fund Balance:

Beginning of Fiscal Year -- -- 8,783,854 18,252,284 31,480,998 End of Fiscal Year -- -- 18,252,284 31,480,998 38,982,620 This statement is a summary statement only. The City’s Annual Comprehensive Financial Report, including the notes to the Audited Financial Statements, are an integral part of and necessary to a complete understanding of this summary table. See APPENDIX B – “CITY OF SANTA BARBARA ANNUAL COMPREHENSIVE FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2023.” Source: City of Santa Barbara Annual Comprehensive Financial Report, Fiscal Year ended June 30, 2023.

Fiscal Year 2022-23 General Fund Overview
In summary, as of June 30, 2023, the General Fund’s fund balance increased by $4.2 Million to $55.7 Million. In addition, the General Fund had $15.0 Million, an increase by $4.7 Million in advances (loans) to other City funds which include the Clean Energy Fund, Golf Fund, and the Energy Management Fund. The most significant committed portion of fund balance is $42.0 Million ($39.1 Million in Fiscal Year 2021-22) consisting of funds set aside, pursuant to City policy, for natural disasters and unexpected events such as significant economic downturns that have a significant impact on the General Fund. The policy requires all operating funds, including the General Fund, to set aside an amount equal to 25.0% of 16 4140-2813-5503.3
its operating budget. The unassigned fund balance in the General Fund is $7.7 Million, an increase of $4.8 Million from Fiscal Year 2021-22.

Prior to COVID-19, the City had been in good financial condition, with reserves at or close to policy recommended balances and able to slightly expand services. These reserves have been strategically leveraged in both Fiscal Year 2019-20 and Fiscal Year 2020-21 to minimize the service delivery impacts to the public, have largely replenished in Fiscal Year 2021-22 and Fiscal Year 2022-23 due to exercising strong fiscal discipline as well as realizing additional expenditure savings from vacant positions, but will likely need to be leveraged in Fiscal Year 2023-24 and beyond.

The General Fund budget in Fiscal Year 2023-24 included a structural budget deficit requiring the use of $7.1 Million of reserves to balance the budget. Due to the anticipated inadequate growth of many General Fund revenues to pay for known increases to expenditures, particularly pension costs, the Fiscal Year 2023-24 results required reliance on reserves and the implementation of on-going budget balancing strategies, including continued expenditure reductions, with very little capacity to replenish General Fund reserves and implement any new programs or initiatives.

On October 10, 2023, the City Council took decisive action to address the budget impacts related to pension costs by approving a revision to the reserve policy that allocates any actual revenues that exceed expenditures to address pension-related expenses and future liabilities instead of being allocated to capital as well as establishing a Pension Section 115 Trust. General Fund reserves stayed relatively flat in Fiscal Year 2022-23 and are projected to decline in Fiscal Year 2023-24 and Fiscal Year 2023-24, with the use of reserves as one of many tools being used to balance the budget. It continues to be the City's priority that recovery efforts include a plan to replenish reserves to achieve the policy target as the economy recovers and the City's budget stabilizes.

Additional information can be found in Notes 1 and 5 to the financial statements included as APPENDIX B – “CITY OF SANTA BARBARA ANNUAL COMPREHENSIVE FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2023” and information under the section entitled Required Supplementary Information.

Fiscal Year 2023-24 and 2024-25 General Fund Budget Overview As a full-service City that provides a broad range of services to the local community and that is also charged with maintaining infrastructure for public safety, recreation, and other critical functions, balancing the City's annual operating and capital budget has become increasingly challenging given the slow growth of tax revenues in comparison to substantial increases in expenses related to staffing, services, contracts, insurance, and many others.

Like many California cities, the increasing cost of maintaining services continues to exceed projected revenues, and despite aggressive efforts to balance the budget, the City is projected to face a structural deficit anticipated to grow to 5.0-7.0% of the General Fund (between $11.0 Million and $15.0 Million annually) within the next three years.

Over the past three years, inflation, changes in travel and purchasing habits substantially impacted local businesses and residents in Santa Barbara. Due primarily to the COVID-19 pandemic, in Fiscal Year 2019-20 and Fiscal Year 2020-21, the City experienced a significant decline in major revenue sources, including sales tax, transient occupancy tax (TOT), and various departmental revenues from reduced or cancelled programs and services. However, the end of Fiscal Year 2021-22 and through Fiscal Year 2022- 23 saw stronger economic activity and revenue growth in the City’s major tax sources. Tax revenues have 17 4140-2813-5503.3
stabilized and grown at a much slower pace into Fiscal Year 2023-24, suggesting a leveling of economic activity to a new baseline.

Over the past five years, it has been necessary to reduce operating expenses, reprioritize major initiatives and capital projects, and redesign and implement new and streamlined ways of serving the public in order to balance the City’s operating budget. The City has also had to tap into reserves to sustain operations and continue providing the same level of services the community expects.

As part of budget deliberations, the City employs a long-term financial model for the General Fund.

The model looks forward five years, rather than ten, because of the volatile nature of tax revenues in a tourist-based economy makes it very difficult to predict revenues with any certainty beyond five years. The financial model is invaluable in the development of the biannual financial plan and annual operating budget.

The financial model has recently been enhanced to incorporate recession and more aggressive economic scenarios to understand the potential additional impact on General Fund reserves. These models will continue to be refined over the coming months leading into the upcoming operating budgets to articulate fiscally pragmatic assumptions for revenues.

As an additional planning tool, the City adopts a two-year financial plan, with the first year representing the adopted annual budget and the second year serving as a financial plan and a starting point for the following year. Two-year financial plans take more time to produce in the first year, but it forces the organization and staff to take a longer-term view of its operations at a more detailed level than a financial model that they might not otherwise do. Even though the City’s Charter requires an annual budget, the City has embraced the concept and additional discipline required to incorporate a second year into its budget/planning document.

Currently, the Fiscal Year 2024-25 budget projects a $7.4 Million General Fund deficit and includes implementing the second year of permanent expenditure reductions and a use of reserves.

Included among budget considerations that resulted in major changes in the Fiscal Year 2024-25 budget compared to the second year of the Fiscal Year 2023-24 and Fiscal Year 2024-25 financial plan that the City Council adopted during the budget process last year. The General Fund deficit has grown slightly in Fiscal Year 2024-25, with the following factors contributing to the change:

Softening Tax Revenues: Although property tax revenues continue to be strong and robust, given the reduced volume of property-related transactions in the City, all other tax revenues have softened. Very modest growth in sales tax, transient occupancy tax (TOT) and all other tax revenues are projected to grow in Fiscal Year 2023-24 and Fiscal Year 2024-25, but at a very low rate and much lower than the annual increases in the cost of continuing to provide the same level of services to the community.

Housing Element Implementation: The Community Development Department will lead the effort to implement the various Housing Element programs, which include an adaptive reuse ordinance, a review of hotel zones, a feasibility study for inclusionary housing, and development of a framework and subsequent ordinance for a short-term rental permit program.

Impacts of Inflation: Post COVID, the city’s operating and capital budget has been impacted by high inflation with rising and higher costs from procuring materials and services for ongoing operations and capital improvement projects. Last year, the inflationary budget assumption assumed resuming to a more typical annual inflation factor; however, costs increases were still realized and assumed to last longer through the end of Fiscal Year 2023-24 and into the beginning of Fiscal Year 2024-25, driving up operating expenses in the Fiscal Year 2024-25 budget.
18 4140-2813-5503.3
Regional Dispatch: Fiscal Year 2024-25 will be the first year that the City will pay its annual contribution for the new Regional Fire Communications Facility (RFCF). Advantages of the new RFCF include one fire dispatch center to serve all municipal fire and EMS units in the County which will allow for the closest, most appropriate fire resource response regardless of jurisdiction. The most appropriate funding source for this cost is the General Fund; however, due to the size of the projected General Fund deficit in Fiscal Year 2024-25, the City expects that Measure C sales tax revenues will fund this contribution in Fiscal Year 2024-25. Maintaining police, fire and 911 emergency medical response is a core priority of Measure C funds. Staff will evaluate transition funding back into the General Fund as part of the Fiscal Year 2025-26 budget process.

Downtown Parking (DTP) Fund Depleting Reserves: DTP operates as an enterprise fund and is required to generate adequate revenue to cover its annual operating expenses as well as its capital maintenance and improvements. Revenue stability was impacted greatly during COVID due to reduced parking volume, and revenues have not recovered to pre-pandemic levels. The fund has been operating in a budget deficit and has been depleting reserves below the City Council reserve policy target. If DTP continues to operate under the current parking rate model, providing required level of service and deferring capital improvement projects to maintain existing infrastructure, all reserves are projected to be depleted in Fiscal Year 2024-25 resulting in a negative fund balance, requiring a General Fund subsidy and a potential impact on the City’s credit rating and ability to issue debt for future initiatives. The Fiscal Year 2024-25 budget includes a $500,000 transfer of General Fund revenues into the Downtown Parking Fund. Staff will be working with the City Council during Fiscal Year 2024-25 to develop revenue generating and operational efficiency options to implement.

Additional steps to balance the City’s General Fund budgets in the near term may be needed, depending upon near term revenues and how quickly the anticipated rebound actually occurs. Future budget balancing considerations include near term options such as a continuation of the hiring freeze and additional service reductions. A half-cent sales tax measure is being proposed for the upcoming November 2024 election as described herein. See “Proposed Sales Tax Measure – ‘Essential Local Services Measure’” below.

Vision 2030 and Fiscal Sustainability Initiative. On June 14, 2022, the City’s Finance Committee received a presentation from staff regarding the Fiscal Sustainability Initiative, including an overview of a number of budgetary and financial challenges that the City has faced in recent years including challenges that were addressed with budget balancing strategies and challenges that are anticipated to continue into future fiscal years. The City’s Vision 2030 is intended as a framework for continuing to provide essential City services and sustainability. Along with implementing process improvements and reducing expenses wherever possible, additional, on-going revenue is required to balance the City's budget and meet the needs of the community going forward.

As part of Vision 2030, staff initiated a Fiscal Sustainability Initiative to develop recommendations and solutions to ensure the City continues to meet the needs of the Santa Barbara community now and for many years to come. The objectives of this initiative are to identify and assess options that will increase revenues, create efficiencies, eliminate redundancies, and make continual process improvements to reduce costs. This work has included an overview of a number of budgetary and financial challenges that the City has faced in recent years including challenges that were addressed with budget balancing strategies and challenges that are anticipated to continue into future fiscal years.

Within Vision 2030, the Revenue Working Group was established to develop and evaluate potential revenue-generating options and policies for the City Council's consideration. Revenue-generating options include those that may require voter approval, and fee and other revenue changes that require Council approval. The working group evaluated 70 individual revenue generating options by considering legal 19 4140-2813-5503.3
requirements, types of funding, longevity of revenue, revenue volatility, approval processes, technological requirements, and staff and other resources to implement and administer.

The Revenue Working Group identified a need for clear cost recovery guidelines to be implemented across the City. On June 13, 2023, the City Council adopted a resolution implementing a Cost Recovery and Revenue Policy, which serves as a guideline for staff and the City Council in establishing the appropriate level of cost recovery and subsidy that may be required for various fees for government services. This policy has been implemented and, over time, additional revenues are projected to be recovered for direct services the public may receive from the City.

General Fund Reserve Policy. As discussed above, on October 10, 2023, the City Council took decisive action to address the budget impacts related to pension costs by approving a revision to the reserve policy that allocates any actual revenues that exceed expenditures to address pension-related expenses and future liabilities instead of being allocated to capital as well as establishing a Pension Section 115 Trust.

General Fund reserves stayed relatively flat in Fiscal Year 2022-23 and are projected to decline in Fiscal Year 2023-24 and Fiscal Year 2023-24, with the use of reserves as one of many tools being used to balance the budget. It continues to be the City's priority that recovery efforts include a plan to replenish reserves to achieve the policy target as the economy recovers and the City's budget stabilizes.

Proposed Sales Tax Measure – “Essential Local Services Measure” On June 11, 2024, the City Council voted unanimously to place the Santa Barbara Essential Local Services Measure on the November 5, 2024, ballot. If approved by a simple majority of voters at the City election, the measure will generate an estimated $15.6 Million annually to support the City’s General Fund, which pays for City services, including public safety, maintenance, libraries, affordable housing, and more.

These services and others are supported by the City’s General Fund. Current forecasts suggest that the General Fund could see deficits of as much as 5.0–7.0% ($11.0-$15.0 Million) within the next three years, despite several years of budget reductions across City departments.

The Santa Barbara Essential Local Services Measure was placed on the ballot after a series of more than 20 community meetings. Acommunity survey found that a majority of respondentsrated the following areas as high priority: maintaining 911 emergency fire, paramedic, and police response; improving housing affordability; preventing thefts and property crime; addressing homelessness; and keeping public areas safe and clean.

If approved, the measure would add a ½-cent tax to applicable purchases in the City (raising the City’s sales tax rate from 8.75% to 9.25% effective April 1, 2025) and includes accountability provisions, including public disclosure of all spending, and annual independent financial audits. The proposed tax increase would be collected in the same manner as the existing City sales and use tax and would be subject to all the same tax exemptions, such as services, rent, groceries, prescription medicine, utilities, diapers, and feminine hygiene products.

If this Measure is not approved, staff will continue to work with the City Council to evaluate and consider alternative revenue measures as well as other budget balancing measures which might include more extreme reductions to City services. As currently projected, General Fund reserves will continue to deplete if additional revenue sources are not identified to continue to fund essential City services. The depletion of General Fund reserves could result in even more impactful outcomes, including a significant decrease in the City's credit rating or impacts to the City's ability to respond to disasters in a manner in which the community expects.
20 4140-2813-5503.3
Santa Barbara Municipal Airport
The City owns, and through its Airport Department (the “Airport Department”), operates the Santa Barbara Municipal Airport. The Airport Department funds airport operations and capital improvements with revenues generated from airport rentals, fees, and charges, and with federal and State grants-in-aid.

The Airport Department maintains its financial records in accordance with generally accepted accounting principles as they apply to governmental entities. The City maintains an Airport Fund an enterprise fund of the City.

As described herein, the City has delivered the 2019 Facility Lease with respect to the 2019 Airport Revenue Refunding Bonds, which financed the construction a new passenger terminal building and related parking and roadway improvements at the airport, the related lease payment obligations of which have to date been offset in full by the Airport Fund. Aggregate principal payments of $24,430,000 at a rate of 5.0% with a final maturity in April 2038 are currently outstanding. See “Outstanding Indebtedness” below.

The Airport occupies approximately 944 acres and is located about 10 miles (approximately 20 minutes driving time) west of downtown Santa Barbara. The Airport also owns 87 acres of land designated for commercial and industrial uses. This area contains 19 buildings, which provide over 85,000 square feet of office space and 54,000 square feet of commercial/industrial space. There are approximately 30 tenants, whose widely diverse enterprises include electronics, honey and beeswax processing, U.S. Department of Energy contractors, carpentry, printer cartridge recycling, undersea cable-laying, and a golf course. About

27.0% of the Airport’s revenue is derived from commercial/industrial tenants.

An established Airport Commission advises the City Council on leasing policy, setting rates and charges, and the hiring of the Airport Director. The Commission consists of seven members, a minimum of four of whom are electors of the City and three of whom may be residents of Santa Barbara County, appointed for 4-year staggered terms by the City Council in accordance with the Santa Barbara Municipal Code. The Airport Commission also oversees the implementation of airport policies through the Airport Department, which has 59 employees.

The airport is the 134th busiest commercial service airport in the United States, and the thirteenth busiest airport in California. Its service region comprises the totality of Santa Barbara County, California, and portions of San Luis Obispo County and Ventura County. This area is approximately (though slightly larger than) the Santa Barbara Metropolitan Statistical Area (MSA), which the U.S. Census Bureau defines as the Santa Barbara-Santa Maria-Goleta MSA. For the purposes of this analysis, Santa Barbara County, the Santa Barbara MSA, and the Airport Service Region are interchangeable. 21 4140-2813-5503.3
Outstanding Indebtedness
The City’s outstanding debt as of June 30, 2023, is shown in detail in the table below. The City has issued debt in the business-type activities to provide funds for the acquisition and construction of major capital facilities. The types of debt include (1) revenue bonds where the City pledges income derived from a business-type activity to pay debt service, (2) certificates of participation and lease revenue bonds that pledge general government revenue to pay base rent payments, initially to the Santa Barbara Public Financing Authority and hereafter to the Authority, for real property and improvements owned by the City, and (3) loans from other governmental agencies. Internal service funds predominantly serve the governmental funds. Accordingly, long-term liabilities for them are included as part of the totals for governmental activities. The claims liability item is generally liquidated by the self-insurance internal service fund.

Governmental activities include obligations payable from general fund revenues, like the Base Rental Payments. Included in the business-type activities are the City’s municipal airport, the waterfront/harbor, downtown parking, and golf course.
22 4140-2813-5503.3

CITY OF SANTA BARBARA
SUMMARY OF OUTSTANDING INDEBTEDNESS AS OF JUNE 30, 2020, 2021, 2022, AND 2023 Ending
Balance June
30, 2020
Ending
Balance June
30, 2021
Ending
Balance June
30, 2022
Ending
Balance June
30, 2023
Governmental Activities (1)
Compensated absences $ 8,852,904 $ 9,906,695 $ 8,999,229 $ 9,708,995 Financing Agreement -- -- 3,793,375 3,275,011
Claims Liability 17,162,911 18,386,428 18,323,786 21,136,000 Governmental activity long-term debt 26,015,815 28,293,123 31,116,390 34,120,006 Business-Type Activities (2)
Loans (3) 138,249,395 130,600,439 122,785,360 114,794,604 Revenue Bonds 43,798,821 41,066,282 38,215,324 35,247,759 Certificates of Participation 12,455,000 10,810,000 9,095,000 7,305,000 Unamortized debt premium 6,340,514 5,801,776 5,263,038 4,724,299 Unamortized debt discount (60,893) (52,193) (43,493) (34,793) 200,782,837 188,226,304 175,315,229 162,036,869
Other Long-Term Liabilities
Compensated Absences 2,200,876 2,629,392 2,908,649 3,273,039 Business-type activities long-term debt 202,983,73 190,855,696 178,223,878 165,309,908 Total
Total Debt Activity $ 228,999,528 $ 219,148,819 $ 209,340,268 $ 199,429,914 (1) Not included in governmental activities is a General Fund obligation under the 2019 Facility Lease (as defined herein) with respect to the 2019 Airport Revenue Refunding Bonds, as described herein. The base rental payments to be made by the City pursuant to the 2019 Facility Lease are payable by the City from its General Fund and any other legally available funds of the City, including its Airport Fund, which have to date been offset in full by the City’s Airport Fund. (2) Included in the business-type activities are the City’s utility operations (water and wastewater), the City’s municipal airport, the waterfront/harbor, downtown parking, and golf course. OnApril 3, 2019, the City executed an installment payment obligation in connection with the outstanding 2019 Airport Revenue Refunding Bonds as described herein, the proceeds of each were applied to finance and refinance capital improvements at the airport, and constructing a joint use rental car facility. Principal payments of $24,430,000 at a rate of 5.00% with a final maturity in April 2038 are currently outstanding. On December 17, 2021, the City entered into a financing agreement for fire equipment for $3,888,745 at a rate of 1.2977% and matures in June of 2029. See discussion immediately below. (3) Loans include certain Airport Fund, Water Fund, Wastewater Fund and Waterfront Fund loans secured for the completion of capital facilities, none of which are General Fund obligations:

Source: City of Santa Barbara Annual Comprehensive Financial Report, Fiscal Year ended June 30, 2023.

The 2019 Airport Revenue Refunding Bonds are limited obligations of the Santa Barbara Financing Authority (a joint powers authority issuer unrelated to the Authority, the “SBFA”) payable solely from, and secured solely by, revenues of the SBFA, consisting primarily of base rental payments to be received by the SBFA from the City under a Facility Lease, dated as of April 1, 2019, by and between the SBFA and the City, and installment payments received by the SBFA from the City under an Installment Payment Contract, dated as of April 1, 2019, (the “Airport Installment Contract”), by and between the SBFA and the City. The obligation of the City to pay such base rental payments and installment payments are independent legal obligations, with each payment obligation designed to be sufficient (in and of itself) to pay the principal of and interest on the 2019 Airport Revenue Refunding Bonds as the same becomes due, however, installment payments made under the Airport Installment Contract will be credited against any base rental payments due from time to time. For this reason, the 2019 Airport Revenue Refunding Bonds are reported as Business-Type Activities – Revenue Bonds in the table above and in the City’s audited financial statements rather than Governmental Activities – Financing Leases. As provided in the 2019 Facility Lease with respect to the 2019 Airport Revenue Refunding Bonds, on any date upon which a base rental payment is 23 4140-2813-5503.3
due, the City’s obligation to pay such base rental payment is deemed satisfied to the extent that the City’s obligation to make installment payments has been satisfied as of such date. The City has covenanted to annually budget and appropriate sufficient funds to make all such base rental payments; provided that such budget may take into account the installment payments paid by the City under the Series 2024 Airport Installment Contract. The 2019 Airport Revenue Refunding Bonds were issued to refund then outstanding bonds which were used to finance the construction a new passenger terminal building and related parking and roadway improvements at the Santa Barbara Municipal Airport. The Annual principal installments range from $1,075,000 to $2,345,000 through April 1, 2038.

Prospective Additional Long-Term Obligations
The City from time to time will consider entering into additional long term lease financings incident to new construction. Accordingly, it is possible that the City may in the future issue lease revenue bonds or certificates of participation backed by General Fund lease financing payments. The City maintains a schedule of capital improvement needs, however, other than the Series 2024 Bonds, the City does not have any current plans for additional General Fund lease finance obligations in the next three years.

Short Term Borrowings
The City has not in recent years issued short term debt for meeting its cash flow needs.

Direct and Overlapping Debt
Contained within the City are overlapping local agencies providing public services which have issued general obligation bond and other types of indebtedness. Set forth below is a direct and overlapping debt report (the “Debt Report”) prepared by California Municipal Statistics, Inc. and dated as of July 1, 2024. The Debt Report is included for general information purposes only and excludes self-supporting revenue bonds, tax allocation bonds and non-bonded capital lease obligations. The Debt Report generally includes long term obligations sold in the public credit markets by public entities whose boundaries overlap City boundaries. Such long-term obligations are not payable from revenues of the City (except as indicted) nor are they necessarily secured by land within the City. In many cases, such obligations are payable from the general fund of the issuing agency. Neither the City nor the Authority has reviewed the Debt Report for completeness or accuracy and makes no representations in connection therewith. 24 4140-2813-5503.3

CITY OF SANTA BARBARA
STATEMENT OF DIRECT AND OVERLAPPING DEBT AS OF JULY 1, 2024 2023-24 Assessed Valuation: $28,091,486,506
%
Applicable(1)
City’s Share
of Debt (7/1/24)
OVERLAPPING TAX AND ASSESSMENT DEBT:

Santa Barbara Community College District 38.042% $18,676,720 Santa Barbara Unified School District 43.233 64,527,414 Santa Barbara Unified School District School Property Improvement District No. 1 95.262 48,383,570 Santa Barbara High School District 43.233 26,291,858
Cold Spring School District 6.296 174,421
Goleta Union School District 1.985 743,680
Hope Elementary School District 34.543 18,036,826
Montecito Union School District 2.132 22,812
Santa Barbara School District 95.262 38,093,945
TOTAL OVERLAPPING TAX AND ASSESSMENT DEBT $214,951,246
DIRECT AND OVERLAPPING GENERAL FUND DEBT:

Santa Barbara County General Fund Obligations 25.695 $30,352,219 Cold Spring School District General Fund Obligations 6.296 35,740 City of Santa Barbara General Fund Obligations 100.00 24,430,000(1) TOTAL GROSS DIRECT AND OVERLAPPING GENERAL FUND DEBT $54,817,959 Less: Santa Barbara County supported obligations 283,930 City of Santa Barbara supported obligations 24,430,000(2) TOTAL NET DIRECT AND OVERLAPPING GENERAL FUND DEBT $30,104,029(3) GROSS COMBINED TOTAL DEBT $269,769,205(3)
NET COMBINED TOTAL DEBT $245,055,275
(1) Excludes issue to be sold.
(2) Obligation shown as net is the City’s payment obligations under the 2019 Facility Lease (as defined herein) with respect to the 2019 Airport Revenue Refunding Bonds, as described herein. The base rental payments to be made by the City pursuant to the 2019 Facility Lease are payable by the City from its General Fund and any other legally available funds of the City, including its Airport Fund, which have to date been offset in full by the City’s Airport Fund.
(3) Excludes tax and revenue anticipation notes, revenue, mortgage revenue and non-bonded capital lease obligations.

Ratios to 2023-24 Assessed Valuation:

Total Overlapping Tax and Assessment Debt............................................. 0.77% Combined Gross Direct Debt ($24,430,000)........................................... 0.09% Combined Net Direct Debt...................................................................... 0.00% Gross Combined Total Debt....................................................................... 0.96% Net Combined Total Debt .......................................................................... 0.87% Source: California Municipal Statistics, Inc.

Risk Management
The City is partially self-insured for workers' compensation and general and automobile liability claims, and fully self-insured for unemployment claims. The City has been partially self-insured for workers' compensation since 1974, and partially self-insured for general and automobile liability since 1978. The City's general and automobile liability program maintains a self-insured retention of $1,000,000.

Settlements have not exceeded coverage in any of the past three fiscal years.

Excess liability coverage is provided through the Authority of California Cities Excess Liability (ACCEL). ACCEL is a joint powers authority created to address various public sector general liability risks through the use of joint purchase and pooling of losses. The City joined ACCEL in May 1986. ACCEL began its 37th year in July 2023 with membership totaling 13 cities. ACCEL was formed under a joint powers agreement and is governed by that agreement, its bylaws, an investment policy, and Memorandum of Coverage, adopted by the ACCEL members. A Memorandum of Coverage acts as the instrument by which member are protected against covered losses above the self-insured retention (SIR). This document 25 4140-2813-5503.3
also serves as the manuscript form for which the commercial carriers provide coverage. Coverage includes comprehensive general and automobile liability protecting against bodily injury, property damage, public officials’ errors and omissions, personal injury, employment practices, as well as damages arising from owned, non-owned, and hired automobiles. See Note 12 in the Notes to the Basic Financial Statements appearing in APPENDIX B – “CITY OF SANTA BARBARA ANNUAL COMPREHENSIVE FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2023.” ACCEL now transfers most of its risk sharing exposures through the purchase of a series of commercial insurance policies underwritten by various carriers. ACCEL members have a $1.0 Million selfinsured retention. ACCEL pools the next $9.0 Million of loss exposures, and commercial insurance carriers provide $44.0 Million in coverage above that level. Thus, the City's participation in ACCEL provides liability coverage of $55.0 Million.

A Board of Directors (Board) consisting of one representative from each member city governs ACCEL. The Board controls all aspects of ACCEL policy including budgeting, finance, underwriting, and claims. ACCEL conducts annual financial, claims, and payroll audits, and an annual actuarial study. A retrospective rating is performed each year on the program ended five years earlier The retrospective rating determines Path member's share of losses and potential deposit return. ACCEL members share pooled losses above their self-insured retention.

Losses are paid from a pool of funds comprised of the member deposits. Deposits are actuarially determined to ensure that funds are available to pay any losses within the pooled layer. ACCEL collects a deposit from every member City for each program year in which the member participates. Separate deposit accounts are set for each member for each year of participation. Deposits are invested into pre-approved vehicles and each member account is credited monthly with investment income at the rate earned by the investment vehicle. ACCEL adopted its investment policy in accordance with existing government code criteria.

Insurable property is covered for all risks by policies with a pooled aggregate limit of $1.0 Billion.

Earthquake and flood coverage have designated limits of $30.0 Million per peril. Unique risks such as airport liability, marine hull protection and indemnity, and boiler and machinery are fully insured. The City also maintains a faithful performance bond, and cyber liability insurance. The City filed three separate claims under the property insurance policy during fiscal year 2023. No other claims were filed during fiscal year 2023.

The City's self-insurance fund is financed through contributions made by the City's General Fund and Enterprise Funds. A cost allocation plan is used to apportion self-insurance fund costs. An actuarial study is performed every two years. Actuarially determined liabilities in the fund include provisions for “incurred but not reported” claims. As of June 30, 2023, the estimated outstanding liabilities are $16,107,000 for workers' compensation and $4,197,000 for general and automobile liability. These liabilities are based on an actuarial valuation as of June 30, 2023. There are no unpaid claims for which annuity contracts have been purchased.
[City management evaluates rates charged to user departments and adjusts them annually to fully accumulate the funds needed in the City’s Self-Insurance Fund to meet catastrophic losses that may potentially arise.]
Employees and Labor Relations
As of June 30, 20__, the City had approximately [1,050] full time equivalent employees. The following table provides a list of employee organizations in the City and their membership. 26 4140-2813-5503.3

CITY OF SANTA BARBARA

EMPLOYEE ORGANIZATIONS
Organization
Number of
Employees
Represented
Current
Contract
Expires
Next Wage
Reopening
Occurs
Scheduled
Wage
Increase
Percentage
Increase
Service Employees’
International Union, Local 620
(General Employees) 442 03/31/2027 01/01/2025
04/06/24: 5.5%
04/01/25: 5.5
04/01/26: 4.0 N/A
Service Employees’
International Union, Local 620
(Treatment and Patrol) 139 12/31/2025 01/01/2025
12/02/23 5.5
10/01/24 3.0
10/01/25 2.0 N/A
Santa Barbara City Firefighters
Association 92 06/30/2025 N/A
07/30/22 1.5
07/01/23 3.0 N/A
Santa Barbara Police Officers
Association 188 06/30/2025 N/A
10/08/22 3.75
07/01/23 3.0 N/A
Santa Barbara City Supervisory
Employees’ Bargaining Unit 75 06/30/2026
07/01/2024-
06/30/2025
10/25/22 3.5
07/01/23 3.0
07/06/24 3.0
07/05/25 3.0 N/A
Santa Barbara City Police
Management Association 9 12/31/2025 N/A
04/08/23 3.75
12/30/23 3.0
12/28/24 3.0 N/A
Santa Barbara City Fire
Management Association 5 06/30/2025 N/A
03/11/23 3.75
07/01/23 3.0
07/13/24 3.0 N/A
Santa Barbara City Service
Employees’ International
Union, Local 620 (Hourly) 420+/- 06/30/2024 N/A
Minimum wage
increases for
affected L/T classes
in January 2022 and
January 2023
3) Other L/T classes

3.5% effective
10/22/23 N/A
Source: City of Santa Barbara Finance Department
[A new unit has been formed for City managers, who were previously unrepresented, to be represented by the American Federation of State, County and Municipal Employees (AFSCME). The agreement is under negotiation, and there is no MOU in place at this time.] Employee Pension Benefits
All qualified permanent and probationary employees are eligible to participate in one of the City's separate Safety (police), Safety (fire), and Miscellaneous(all other) plans(employer defined benefit pension plans), and the City's Safety (fire) plan (a cost-sharing multiple employer defined benefit plans in which the City participates with other public agencies that each have less than 100 active members and share the same benefit formula), each administered by the California Public Employees Retirement System 27 4140-2813-5503.3
(“CalPERS”), a multiple-employer public employee retirement system that acts as a common investment and administrative agent for participating public entities within the State of California.

The plans are part of the Public Agency portion of CalPERS. A menu of benefit provisions as well as other requirements are established by State statutes within the Public Employees’ Retirement Law. The City selects optional benefit provisions from the benefit menu by contract with CalPERS and adopts those benefits through local ordinance. CalPERS issues separate comprehensive annual financial reports. Copies of CalPERS annual financial reports may be obtained from their executive office: 400 Q Street, Sacramento, CA 95814 or on their website: www.calpers.ca.gov. The CalPERS website also contains CalPERS’ most recent actuarial valuation reports and other information concerning benefits and other matters. Neither the City nor the Authority can guarantee the accuracy of such information. Actuarial assessments are “forward looking” statements that reflect the judgment of the fiduciaries of the pension plans, and are based upon a variety of assumptions, one or more of which may not materialize or be changed in the future. Actuarial assessments will change with the future experience of the pension plans. The information on such website is not incorporated herein by such reference or otherwise.

CalPERS provides retirement and disability benefits, annual cost-of living adjustments, and death benefits to plan members and beneficiaries. CalPERS also provides death and disability benefits. CalPERS provides actuarial services on pension plans for state, school, and public agency employers and uses periodic actuarial valuations to disclose funded status and determine employer contribution requirements.

See also APPENDIX B – “CITY OF SANTA BARBARA ANNUAL COMPREHENSIVE FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2023.” One of the most significant changes to the state and local financial landscape is the Public Employees’ Pension Reform Act (“PEPRA”) of 2013. PEPRA was designed to reduce pension costs of virtually all public employers in the long term, with new employees hired after December 31, 2012, enrolled in a plan with substantially lower benefits. In addition, new employees are required to pay at least 50.0% of the pension costs. PEPRA created mandatory benefits tiers for new employees who have not worked for another CalPERS agency hired beginning January 1, 2013, ranging from 2.0% at age 50 to a maximum of

2.7% at age 57 for police safety and fire safety employees and 1.1% at age 50 to a maximum of 2.4% at age 62 for miscellaneous employees. In accordance with PEPRA, the Miscellaneous and Safety (Police and Fire) "Classic" plans were closed to new entrants as of January 1, 2013.

The City has four separate pension plans with CalPERS: a Miscellaneous Plan; a Safety Police Plan; a Safety Fire Plan; and a PEPRA Safety Fire Plan. CalPERS provides retirement and disability benefits, annual cost-of living adjustments, and death benefits to plan members and beneficiaries.

PEPRA (i) increases the retirement age for new State, school, and city and local agency employees depending on job function, (ii) caps the annual CalPERS pension benefit payout, (iii) addresses numerous abuses of the system, and (iv) requires State, school, and certain city and local agency employees to pay at least half of the costs of their CalPERS pension benefits. PEPRA applies to all public employers except the University of California, charter cities and charter counties (except to the extent they contract with CalPERS). Among other things, PEPRA also enacted pension spiking reform for new and existing employees, required three-year averaging of final compensation for new employees, and provided employers with new authority to negotiate cost-sharing agreements with current employees. PEPRA also contained limitations on the use of retired annuitants, generally requiring that an annuitant have a six-month break in service prior to returning to work.

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 shall be effective on the July 1 28 4140-2813-5503.3
following notice of a change in the rate. The total plan contributions are determined through CalPERS's 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.

CalPERS employs an amortization and smoothing policy that will pay for all gains and losses over a fixed 30-year period with the increases or decreases in the rate spread directly over a 5-year period. Prior to this change, CalPERS employed an amortization and smoothing policy that spread investment returns over a 15-year period with experience gains and losses paid for over a rolling 30-year period. After this policy change, CalPERS commenced an amortization and smoothing policy that pays for all gains and losses amortized over a 20-year period with a five-year ramp-up and five-year ramp-down period.

CalPERS’ projected employer contribution rates for the City’s Miscellaneous Plan, Safety Police Plan, Safety Fire Plan, and PEPRA Safety Fire Plan are provided by actuarial reports delivered to the City, which reports establish liability and funding requirements. The latest actuarial valuation of the plans is dated July 2023. There is a two-year lag between the Valuation Date and the Contribution Fiscal Year. The assets, liabilities and funded status of the plans are measured as of the valuation date (most recently June 30, 2022). The employer contribution rate determined by the valuation is for the fiscal year beginning two years after the valuation date (the City’s Fiscal Year 2024-25). This two-year lag is necessary due to the amount of time needed to extract and test the membership and financial data, and due to the need to provide public agencies with their employer contribution rates well in advance of the start of the fiscal year. The required contribution for the fiscal year ended June 30, 2025, was determined as part of the CalPERS actuarial valuation as of June 30, 2022 (the “2022 Valuation”) using the entry age actuarial cost method.

Actuarial valuations of the Public Employees Retirement Fund (“PERF”) are performed annually.

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. Contributions to fund the plans are comprised of two components: Normal Cost, expressed as a percentage of total active payroll; and Amortization of the Unfunded Accrued Liability (UAL), expressed as a dollar amount. The City made contributions to the Miscellaneous, Safety (police) and Safety (fire) during the fiscal year ended June 30, 2023, of $26,711,721, $11,554,507, and $8,944,875, respectively. The City’s annual UAL payment completed in July 2024 was $37,092,241, of which the City made contributionsto the Miscellaneous, Safety (police), Safety (fire), and PEPRA Safety (fire) of $20,724,911, $9,137,357, $7,213,192, and $16,781, respectively.

The tables below show CalPERS projected employer contribution rates for the City’s Miscellaneous Plan, Safety Police Plan, Safety Fire Plan, and PEPRA Safety Fire Plan (before cost sharing) for the six years from Fiscal Year 2024-25 through Fiscal Year 2029-30. The projections assume that all CalPERS actuarial assumptions will be realized and that no further changes to assumptions, contributions, benefits, or funding will occur during the projection period. In particular, the investment return is assumed to be 6.80% per year, net of investment and administrative expenses. The projected normal cost percentages below reflect that the normal cost is expected to continue to decline over time as new employee members as defined by PEPRA are hired into lower cost benefit tiers and “classic” plan employees retire. Future contribution requirements may differ significantly from those shown below. The actual long-term cost of the plan will depend on the actual benefits and expenses paid and the actual investment experience of the fund.
29 4140-2813-5503.3

CITY OF SANTA BARBARA MISCELLANEOUS PLAN

PROJECTED FUTURE PENSION CONTRIBUTION RATES
FISCAL YEARS 2025 THROUGH 2030
Fiscal Year
Ended
(June 30)
Normal Cost
Contribution
Rate
UAL
Payment
Total as a
% of
Projected
Payroll
2025 12.03% $21,417,970 43.44%
2026 11.70 17,679,000 36.9
2027 11.40 19,132,000 38.0
2028 11.20 20,207,000 38.4
2029 10.90 22,694,000 40.7
2030 10.70 23,177,000 40.3
_____________________
Source: 2022 Valuation and City of Santa Barbara Finance Department.

CITY OF SANTA BARBARA SAFETY POLICE PLAN

PROJECTED FUTURE PENSION CONTRIBUTION RATES
FISCAL YEARS 2025 THROUGH 2030
Fiscal Year
Ended
(June 30)
Normal Cost
Contribution
Rate
UAL
Payment
Total as a
% of
Projected
Payroll
2025 23.38% $ 9,442,918 82.25%
2026 22.70 10,093,000 83.9
2027 22.10 10,728,000 85.4
2028 21.60 11,256,000 86.1
2029 21.00 12,365,000 90.0
2030 20.40 12,634,000 89.0
_____________________
Source: 2022 Valuation and City of Santa Barbara Finance Department.

CITY OF SANTA BARBARA SAFETY FIRE PLAN

PROJECTED FUTURE PENSION CONTRIBUTION RATES
FISCAL YEARS 2025 THROUGH 2030
Fiscal Year
Ended
(June 30)
Normal Cost
Contribution
Rate
UAL
Payment
2025 29.30% $7,454,407
2026 29.30 7,910,000
2027 29.30 8,355,000
2028 29.30 8,732,000
2029 29.30 9,454,000
2030 29.30 9,666,000
_____________________
Source: 2022 Valuation and City of Santa Barbara Finance Department. 30 4140-2813-5503.3

CITY OF SANTA BARBARA PEPRA SAFETY FIRE PLAN

PROJECTED FUTURE PENSION CONTRIBUTION RATES
FISCAL YEARS 2025 THROUGH 2030
Fiscal Year
Ended
(June 30)
Normal Cost
Contribution
Rate
UAL
Payment
2025 14.72% $17,342
2026 14.70 29,000
2027 14.70 41,000
2028 14.70 53,000
2029 14.70 65,000
2030 14.70 65,000
_____________________
Source: 2022 Valuation and City of Santa Barbara Finance Department.

Annual pension expenses are projected to continue to rise and represent a significant amount of the City’s operating budget. Generally, based on current CalPERS assumptions, the pension funded status is

67.0% or 5.0% below the Public Employees’ Retirement Fund (PERF). During Fiscal Year 2021-22, the City Council took decisive action, Resolution 22-125, to address future pension-related costs and liabilities;

12.5% of the Fiscal Year 2021-22 year-end savings in the General Fund was set aside to establish a Section 115 Trust to address the growing and volatile pension liabilities. In addition, the City Council resolved to appropriate the transfer of available reserves from enterprise, internal service fundsinto the Pension Section 115 Trust. Most recently, $2.2 million was deposited into the trust. The return projection is set to be at about 5.5%.

As reported in the 2022 Valuation, the funding history below shows the recent history of the actuarial accrued liability, the market value of assets, the funded ratio and the annual covered payroll for the Miscellaneous Plan, Safety Police Plan, Safety Fire Plan, and PEPRA Safety Fire Plan.

CITY OF SANTA BARBARA MISCELLANEOUS PLAN

FUNDED STATUS
FISCAL YEARS 2017 THROUGH 2022
PERS
Valuation
Fiscal Year
Ended
(June 30)
Accrued
Liability
Market Value
of Assets
(MVA)
Unfunded
Accrued
Liability
Funded
Ratio
Applicable
Annual
Covered
Payroll
2017 $569,565,157 $402,328,825 $167,236,332 70.6% $54,809,606 2018 615,769,467 430,081,494 185,687,973 69.8 57,763,431 2019 639,325,707 452,180,323 187,145,384 70.7 58,018,141 2020 664,902,988 466,692,724 198,210,264 70.2 58,753,824 2021 704,729,551 567,545,107 137,184,444 80.5 59,259,091 2022 735,422,900 516,253,103 219,169,798 70.2 62,763,712 _____________________
Source: 2022 Valuation and City of Santa Barbara Finance Department. 31 4140-2813-5503.3

CITY OF SANTA BARBARA SAFETY POLICE PLAN

FUNDED STATUS
FISCAL YEARS 2017 THROUGH 2022
PERS
Valuation
Fiscal Year
Ended
(June 30)
Accrued
Liability
Market Value
of Assets
(MVA)
Unfunded
Accrued
Liability
Funded
Ratio
Applicable
Annual
Covered
Payroll
2017 $263,396,018 $177,323,826 $ 86,072,192 67.3% $15,161,603 2018 282,846,564 187,090,387 95,756,177 66.1 15,703,042 2019 294,383,584 194,401,906 99,981,678 66.0 15,983,213 2020 304,630,107 198,360,058 106,270,049 65.1 16,256,052 2021 320,496,586 238,915,465 81,581,121 74.5 15,325,461 2022 336,060,749 215,367,810 120,692,939 64.1 14,765,953 _____________________
Source: 2022 Valuation and City of Santa Barbara Finance Department.

CITY OF SANTA BARBARA SAFETY FIRE PLAN

FUNDED STATUS
FISCAL YEARS 2017 THROUGH 2022
PERS
Valuation
Fiscal Year
Ended
(June 30)
Accrued
Liability
Share of
Pool’s Market
Value of
Assets (MVA)
Plan’s Share
of Pool’s
Unfunded
Accrued
Liability
Funded
Ratio
Applicable
Annual
Covered
Payroll
2017 $185,239,922 $118,650,012 $66,589,910 64.1% $9,875,427 2018 195,255,258 121,032,314 74,222,944 62.0 9,847,614
2019 202,749,030 125,661,214 77,087,816 62.0 9,790,991
2020 208,650,909 127,192,232 81,458,677 61.0 9,460,882
2021 216,740,006 148,607,743 68,132,263 68.6 8,413,307
2022 223,409,669 132,142,025 91,267,644 59.1 8,425,860
_____________________
Source: 2022 Valuation and City of Santa Barbara Finance Department.

CITY OF SANTA BARBARA PEPRA SAFETY FIRE PLAN

FUNDED STATUS
FISCAL YEARS 2017 THROUGH 2022
PERS
Valuation
Fiscal Year
Ended
(June 30)
Accrued
Liability
Share of
Pool’s Market
Value of
Assets (MVA)
Unfunded
Accrued
Liability
Funded
Ratio
Applicable
Annual
Covered
Payroll
2017 $ 521,978 $ 494,587 $ 27,391 94.8% $ 828,978
2018 822,874 752,670 70,204 91.5 949,211
2019 1,284,357 1,174,686 109,671 91.5 1,424,201
2020 1,845,257 1,672,563 172,694 90.6 2,306,238
2021 2,645,241 2,750,140 (104,899) 104.0 2,425,109
2022 3,598,739 3,112,043 486,696 86.5 2,770,806
_____________________
Source: 2022 Valuation and City of Santa Barbara Finance Department. 32 4140-2813-5503.3
See also Note 9 to the general-purpose financial statements of the City included in APPENDIX B – “CITY OF SANTA BARBARA ANNUAL COMPREHENSIVE FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2023” and the tables therein within the section entitled “Required Supplementary Information.”
The Amortization of UAL cost component is expressed as a dollar amount and invoiced on a monthly basis. There is an option to prepay this amount during July of each fiscal year. The Normal Cost component is expressed as a percentage of active payroll with employer and employee contributions payable as part of the regular payroll reporting process. The determination of both components requires complex actuarial calculations. The calculations are based on a set of actuarial assumptions which can be divided into two categories: demographic assumptions (e.g., mortality rates, retirement rates, employment termination rates, disability rates); and economic assumptions (e.g., future investment earnings, inflation, salary growth rates). These assumptions reflect CalPERS’ best estimate of future experience of the plan and are long term in nature. CalPERS reviews all actuarial assumptions by conducting in-depth experience studies every four years, with the most recent experience study completed in 2021.

Actual gains or losses as well as changes in actuarial assumptions or methods are amortized using a 5-year ramp up, phasing in the impact of unanticipated changes in UAL over a 5-year period and attempting to minimize employer cost volatility from year to year. This method phases in the impact of the change in UAL over a 5-year period in order to reduce employer cost volatility from year to year. As a result of this methodology, dramatic changes in the required employer contributions in any one year are lesslikely. However, required contributions can change gradually and significantly over the next five years.

In years when there is a large investment loss, the relatively small amortization payments during the ramp up period could result in contributions that are less than interest on the UAL (i.e. negative amortization) while the contribution impact of the increase in the UAL is phased in.

The standard actuarial practice at CalPERS is to recognize mandated legislative benefit changes in the first annual valuation following the effective date of the legislation. Voluntary benefit changes by plan amendment are generally included in the first valuation that is prepared after the amendment becomes effective, even if the valuation date is prior to the effective date of the amendment.

Reporting obligations under the Governmental Accounting Standards Board (“GASB”) Statement No. 68 (including as amended by Statement No. 71, “GASB 68”) commenced with financial statements for the fiscal year ended June 30, 2015. The City implemented this Statement in the fiscal year ending June 30, 2015. Under GASB 68, an employer reports the net pension liability, pension expense and deferred outflows/deferred inflows of resources related to pensions in its financial statements as part of its financial position. See APPENDIX B – “CITY OF SANTA BARBARA ANNUAL COMPREHENSIVE FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2023.” Safety Retirement Pension Plan. In addition to the CalPERS expense described above, the City provides an additional single-employer defined benefit pension plan. The Safety Retirement Plan was established to account for the accumulation of resources to be used for retirement benefits for those police and fire employees hired between May 1937 and May 1965, and who were disabled due to job related injuries. No assets are accumulated in a trust that meets the criteria in paragraph 4 of GASB Statement 68.

As of June 30, 2022, measurement date, a total of five retirees (or beneficiaries) are receiving benefits from the Safety Retirement Pension Trust Fund. For the year ended June 30, 2023, the City recognized pension expense of $14,695. As of June 30, 2023, for the Safety Retirement Plan, the City has $26,232 reported as deferred outflows of resources related to employer benefit payments made subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended June 30, 2024.
33 4140-2813-5503.3
Deferred Compensation Plan. The City offers two deferred compensation plans for regular employees and one for hourly employees created in accordance with Internal Revenue Code Section 457.

Under the terms of these plans, employees may defer amounts of income up to a maximum of $17,500 per year or 100% of includable compensation, whichever is less. Amounts so deferred may be withdrawn or directed for future payment at separation of employment. Effective January 1, 1999, Federal legislation (Small Business Job Protection Act of 1996) requires the Section 457 plan assets to be placed in trust for the exclusive use of the plan participants and their beneficiaries. The City's deferred compensation administrator qualifies as the plan trustee to meet Federal requirements and plan assets are no longer reflected in the City’s basic financial statements.

See Note 9 to the general-purpose financial statements of the City included in APPENDIX B – “CITY OF SANTA BARBARA ANNUAL COMPREHENSIVE FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2023.”
Other Post-Employment Benefits
The City provides a retiree medical insurance contribution benefit to retired employees, in accordance with an employee Memorandum of Understanding, under a single employer defined benefits Other Post Employment Benefit (“OPEB”) plan. This benefit is applicable to employees who retire from City service and, have at least 10 or 15 years of classified or unclassified service, depending on bargaining unit; or retire from City with an industrial disability. The City currently administers its retiree medical plan.

The City also provides additional retirement benefits based on unused accumulated sick leave to eligible employees who retire with CalPERS pension benefits immediately upon termination of employment from the City. This is a single employer defined benefits OPEB plan. Under this plan, unused accumulated sick leave balances are converted to credited service that is used to provide additional retirement benefits. Annuity benefits are determined based on credited service, final average compensation, and the CalPERS benefit formulas. Employees are eligible for benefits if they terminate employment at a minimum of age 50-and-5-years’ service. Eligibility is applicable to employees who have accrued at least 500 hours of unused sick leave.

The following is a summary of OPEB liabilities and recognized expenses for the fiscal year ended June 30, 2023:

Total OPEB Liability OPEB Expense
Retiree Medical Care Benefits $ 38,738,539 $ 3,065,478
Sick Leave Retiree Benefits 8,792,763 944,337
Total $ 47,531,302 $ 4,009,815
_____________________
Source: Source: City of Santa Barbara Annual Comprehensive Financial Report, Fiscal Year ended June 30, 2023.

See Note 18 to the general-purpose financial statements of the City included in APPENDIX B – “CITY OF SANTA BARBARA ANNUAL COMPREHENSIVE FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2023” and the tables therein within the section entitled “Required Supplementary Information.”
The City’s OPEB cost (expense) is calculated based upon the Annual Required Contribution of the employer (“ARC”), an amount actuarially determined in accordance with parameters of GASB Statement No. 45 (“GASB 45”), accounting standards for other (than pensions) postemployment benefits (OPEB) The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover the normal 34 4140-2813-5503.3
cost each year and amortize any unfunded actuarial liabilities(or funding excess) over a period not to exceed 30 years.

The following table shows the components of the City’s annual OPEB costs for the measurement period ending June 30, 2022, and changes in the City’s net OPEB obligation.

Changes in Total OPEB Liability
(Measurement Period 7/1/21 to 6/30/22)
Total OPEB Liability
Retiree Medical
Benefit
Sick Leave Retiree
Benefit
Service Cost $ 2,842,600 $ 700,761
Interest on net OPEB obligation 1,008,996 209,205
Changes of Benefit Terms -- --
Actual vs. Expected Experience -- --
Assumption Changes (8,338,795) (676,426)
Benefit Payments (1,288,904) (850,860)
Net Changes (5,776,103) (617,320)
Total OPEB obligation – beginning of year 44,514,642 9,410,083 Total OPEB obligation – end of year $38,738,539 $8,792,763 Source: City of Santa Barbara Annual Comprehensive Financial Report, Fiscal Year ended June 30, 2023.

The City’s total OPEB liability was measured as of June 30, 2022, for the measurement period July 1, 2021, through June 30, 2022. The total OPEB liability used to calculate the total OPEB liability was determined by an actuarial valuation dated June 30, 2021, rolled forward to June 30, 2022. Additional detail, including the actuarial assumptions are included in Note 18 to the general-purpose financial statements of the City included in APPENDIX B – “CITY OF SANTA BARBARA ANNUAL COMPREHENSIVE FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2023” and the tables therein within the section entitled “Required Supplementary Information.” Retiree Medical Insurance Contribution Benefit. The City provides a retiree medical insurance contribution benefit, in accordance with applicable employee Memoranda of Understanding, to retired employees. This is a single employer defined benefits OPEB plan. The benefit is applicable to employees who retire from City service and (i) have 15 or more years of classified or unclassified service (10 or more years for Management and General Unit employees); or (ii) retire from City with an industrial disability.

The City contributes an amount each month towards the purchase of medical insurance for the retiree and his/her spouse or domestic partner registered with the City Clerk or the Secretary of State, if applicable.

The monthly amount is determined by the applicable Memorandum of Agreement of the retired employee.

The payment is based upon the employees’ years of service up to a maximum of 35 years, multiplied by the annual amount for the respective employee unit. The City will continue to make its contribution until the retiree reaches age 65 or dies, whichever occurs first, provided however, that if the retiree dies before reaching the age of 65 and there is a surviving spouse or registered domestic partner, the City’s contribution shall cease when the retiree would have reached age 65. Thereafter, the spouse may remain on the insurance plan, at his/her own cost, subject to the conditions set forth by the insurance company. For the year ended June 30, 2023, the City recognized OPEB expense of $944,337. The City recognized OPEB expense of $944,337.cash benefit payments were $835,557 and the estimated implied subsidy was $502,755 resulting in total payments of $1,338,312.

There is no requirement to contribute any amount beyond the pay-as-you-go contributions. If retirees elect medical insurance coverage through the City, the retiree pays the entire cost of the premiums, less the City’s monthly payment to the retiree. The City is evaluating various options for funding the 35 4140-2813-5503.3
postretirement health benefits liability. The City has not set up a trust for purposes of funding the required retiree medical payments but continues to fund the benefit on a pay-as-you-go basis in the current year.

Implied Subsidy of Retiree Health Insurance Premiums. In addition to the direct City paid contributions, at the discretion of the City Council, retirees covered under the City’s plans receive pre-65 benefits that are subsidized as the cost of their coverage is based on blended (active and retiree) premium rates instead of normally higher retiree only rates. This implicit subsidy is also considered in the valuation for retirees electing City healthcare plan coverage. However, it does not apply to retirees electing coverage in non-City plans. For the fiscal year ended June 30, 2023, the City recognized OPEB expense of $3,065,478.

On June 21, 2004, GASB approved GASB 45, accounting standards for other (than pensions) postemployment benefits (OPEB). Accounting for these benefits – primarily post-retirement medical – can have significant impacts on state and local government financial statements. The City’s annual Other Post Employment Benefit (OPEB) cost (expense) is calculated based upon the employer ARC, an amount actuarially determined in accordance with parameters of GASB 45.

The City currently administers its retiree medical plan. There is no requirement to contribute any amount beyond the pay-as-you-go contributions. If retirees elect medical insurance coverage through the City, the retiree pays the entire cost of the premiums, less the City’s monthly payment to the retiree. The City is evaluating various options for funding the post-retirement health benefits liability. The City has not set up a trust for purposes of funding the required retiree medical payments but continues to fund the benefit on a pay-as-you-go basis in the current year.

See Note 18 to the general-purpose financial statements of the City included in APPENDIX B – “CITY OF SANTA BARBARA ANNUAL COMPREHENSIVE FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2023” and the tables therein within the section entitled “Required Supplementary Information.”
Investment of Funds; City’s Pooled Operating Investment Fund The City Administrator/Treasurer of the City, in accordance with the Charter of the City, is responsible for investing the unexpended cash in the Treasurer’s pooled operating investment fund (the “City Pool”). Responsibility for the daily investment of funds in the City Pool is delegated to the Finance Director and further delegated to the Assistant Finance Director of the City. The City is basically the only participant in the City Pool; the Redevelopment Agency of the City is the only other participant, and its participation is limited to its surplus funds not invested in the State of California Local Agency Investment Fund (LAIF). The primary objectives, in priority order, of the City’s investment activities are safety, liquidity and yield.

Oversight and Reporting Requirements. The Treasurer provides an investment report on a monthly basis to the City Administrative Officer and annually presents a Statement of Investment Policy (the “Investment Guidelines”) to the City Administrative Officer and the City Council. In addition, any purchase or sale of investments by the Assistant Finance Director requires approval from the Finance Director, or in the Finance Director’s absence, the Assistant Finance Director, an investment authorization form to the Finance Director that provides a description of the investment transaction. The Assistant Finance Director signs the Investment Authorization and attests that the trade is in compliance with the City Investment Policy. An Investment Authorization issubmitted to the CityAdministrator/Treasurer who signs the Investment Authorization by the close of business on the business day following the investment purchase or sale.
36 4140-2813-5503.3
On a monthly basis, the safekeeping agent provides to the City credit ratings and an independent market valuation on the City’s holdings. This information is included in the monthly investment report presented to the City Council. Pursuant to the City’s Statement of Investment Policy, which is adopted annually by the City Council, the City Treasurer submits to City Council, within 30 days following the end of the month, an investment report, which is prepared by the Assistant Finance Director, which summarizes all securities in the portfolio and a separate listing of investment transactions occurring during the month.

The report includesissuer, type of investment, date of maturity, coupon, yield, par value, book value, market value and the source of the valuation, current book gains and/or losses, average days to maturity and quality rating of bonds. In addition, a narrative report accompanies the portfolio that addresses noteworthy items, and any call features associated with the bonds in the portfolio.

On a quarterly basis, a comprehensive Investment Management Review is presented to the City Council. The review covers the credit qualities, sector and maturity distribution liquidating information, investment performance against a customized benchmark comprised of three different indices, portfolio recommendations, and information as to compliance with investment policy and State law. Effective July 1, 2024, Chandler Asset Management Inc. will begin serving the City as independent investment advisor.

Authorized Investments. [Investments in the City Pool are governed by State law and further restricted by the City’s Statement of Investment Policy. The City has developed a formal investment policy that is more restrictive than the State of California Government Code. The policy is adopted annually by the City Council. The City has adhered to established policies for all investment activities. All of the City’s deposits, except certain cash balances held by fiscal agents, are entirely insured or collateralized. The California Government Code requires California banks and savings and loans to secure the City’s deposits by pledging government securities as collateral. The fair value of the pledged securities must equal 110.0% of the City’s deposits. California law also allows financial institutions to secure City deposits by pledging first trust deed mortgage notes equal to 150.0% of the City’s deposits. The City may waive collateral requirements for deposits, which are fully insured up to $100,000 by the Federal Deposit Insurance Corporation (FDIC).

Permitted Investments include U.S. Treasury Securities, U.S. Agency Securities, Medium Term Notes having credit ratings of A or better, Banker’s Acceptances eligible for purchase by the Federal Reserve System, Commercial Paper having credit ratings of the highest rank, with maturities of not more than 270 days, issued by companies that are U.S. organized companies and having total assets in excess of $500.0 Million and having long-term credit ratings of A or better, certain classes of Negotiable Certificates of Deposit and Time Deposits issued by banks or savings and loan associations, Repurchase Agreements with certain high-quality counter parties and Reverse Repurchase Agreements or securities lending agreements but only with the specific approval of the City Council, and the Local Agency Investment Fund (the “State Pool”), Reverse Repurchase Agreements are restricted to 25.0% of the base value of the portfolio and are governed by various maturity restrictions as well. (A Reverse Repurchase Agreement is a transaction in which the City Pool sells a security and concurrently agrees to buy it back from the same party at a later date for a price that includes an interest component for the City Pool’s use of the money.) In addition, without the specific approval of the City Council, investments may not have a final maturity of more than five years after its acquisition.

To control risks of illiquidity, a minimum of 10.0 percent of the total portfolio shall be held in highly marketable U.S. Treasury Bills and Notes and/or the State of California Local Agency Investment Fund and/or Money Market Funds and/or securities maturing within 90 days.

Cash temporarily idle during the year was invested in demand deposits, money market funds, certificates of deposit, corporate notes, federal agencies, treasuries, and the State of California’s Local Agency Investment Fund (LAIF). As interest rates change, the market value of investments held was 37 4140-2813-5503.3
modified; accordingly, however, because the City holds all securities to maturity, interim gains and losses are not realized as the securities are redeemed at par upon maturity. The City Pool does not engage in securities lending transactions.]
Investments not approved include shares of investment companies (other than U.S. Government money market funds), mortgage backed securities, collateralized mortgage obligations, asset backed securities, reverse repurchase agreement used as a leveraging vehicle, “exotic” derivative structure such as range notes, dual index notes, first floating-rate notes, leveraged or deleveraged floating-rate notes, interestonly strips that are derived from a pool of mortgages and any security that can result in a zero interest accrual if held to maturity or any other complex, variable or structured within an usually high degree of volatility or risk. All variable rate notes, structured notes, derivatives, or other security involving unusual characteristics as a risk require advance written approval by the City Council, and if approved, identified in a monthly report presented to the Finance Committee in the City Council. [The information below to be taken from that Investment Report nearest to the date of posting this Preliminary Official Statement]
At ______ __, 2024, the City Pool did not hold any securities which were in default, issued by an entity currently in a bankruptcy proceeding or which was not investment grade. The average quality of the City Pool at such date was [AA] (as rated by S&P).

Pool Liquidity and Other Characteristics. As of ______ __, 2024, the City’s Pool had a weighted average maturity of ____ days and its weighted average yield was ____%. For purposes of calculating weighted average maturity, the City Treasurer treats investments in LAIF maturing within one day. The City Pool’s composition is designed with a goal of having sufficient liquid funds available to meet disbursement requirements. The composition and value of investments under management in the City Pool will vary from time to time depending on cash flow needs of the City, maturity or sale of investments, purchase of new securities, and fluctuations in interest rates.] State of California; Budget Information
The City relies on certain State agencies and the County to process and remit to the City a portion of its General Fund revenues (sales and use tax, property tax and the motor vehicle license fee) consisting of payments collected by the State and passed through to local governments or collected by the County and allocated to local governments by State law. In years past, the State has reduced revenues to cities and counties to help solve the State’s budget problems. The City does not otherwise currently rely in substantial part allocations from the State Budget or State appropriations.

The City cannot predict whether the State will encounter budgetary problems in this or in any future fiscal years, and if it were to do so, it is unknown what measures would be taken by the State to balance its budget, as required by law, including reducing the amount of State funds made available to the City. The State Budget will be affected by State and national economic conditions and other factors over which the City will have no control. Each year, the final State Budget, which requires approval by a two-thirds vote of each house of the State Legislature, may differ substantially from the Governor’s original budget proposal. The City cannot predict the final outcome of future State budget negotiations, the impact that such budgets will have on its finances and operations, or what actions will be taken in the future by the State Legislature and Governor to manage changing State revenues and expenditures. Current and future State budgets will be affected by national and State economic conditions and other factors over which the City has no control.
38 4140-2813-5503.3
Information about the State budget is available from the Public Finance Division of the State Treasurer’s Office. In addition, information about the State budget is regularly available at various Statemaintained websites, including www.dof.ca.gov (Department of Finance), www.lao.ca.gov (Office of the Legislative Analyst) and www.treasurer.ca.gov (State Treasurer). The above-mentioned websites are included herein for informational purposes only. The City makes no representations concerning, and do not take any responsibility for, the accuracy or timeliness of information posted on such websites or the continued maintenance of such websites by the respective entities. The information on such website is not incorporated herein by such reference or otherwise.

Utilities
Gas and electricity are provided within the City by Southern California Gas Company and Southern California Edison Company. Frontier Communications supplies telephone service. The City contracts with a private company for collection of refuse. The City owns and operates water and wastewater systems and provides water and sewer services to ratepayers.

Southern California Edison Company customers may elect to purchase Santa Barbara Clean Energy (SBCE) through a Community Choice Aggregation (CCA) program that allows local California governments to purchase or generate electricity for their customers instead of relying on investor-owned utilities. SBCE provides 100.0% carbon free electricity, allowing customers the choice in how much carbon-free and greenhouse gas-free electricity is used, facilitating the City’s efforts to address climate change, and helping to achieve the area’s Together to Zero community goal.

Transportation
Highways. The City is served by a well-developed transportation network which includes road, rail, and bus services. U.S. Highway 101 and numerous State Highways such as 1, 33, 135, 166, 154, 217, and 246 provide convenient access throughout the County and its municipalities.

Railroads. Amtrak railroad crosses through the County with its main line generally following the coastline, with stations in Carpinteria, Santa Barbara and Goleta. Freight transportation is also provided by several intra-state and transcontinental trucking firms.

Airports. The Santa Barbara Municipal Airport, owned and operated by the City, is located approximately 10 miles west of downtown Santa Barbara on approximately 944 acres, adjacent to the Pacific Ocean, with convenient highway access from U.S. Highway 101. The airport is the regional airport for the San Luis-Santa Barbara-Ventura tri-county area. Competing airports include Burbank, San Luis Obispo, Long Beach, and Los Angeles International airports along with other airports with scheduled commercial airline service that are within two hours’ drive time of Santa Barbara. See “Santa Barbara Municipal Airport” in this Appendix A.

Bus Service. [The Santa Barbara Metropolitan Transit District (“MTD”) operates a municipal bus system serving the cities of Goleta, Santa Barbara and Carpinteria, and the unincorporated areas of Ellwood, Isla Vista, Montecito, and Summerland. Limited commuter service linking Solvang and Buellton with Goleta, Santa Barbara and the University of California, Santa Barbara is also available through the MTD.

Bus services is also provided by the Clean Air Express, providing roundtrip weekday service from Santa Maria and Lompoc to Santa Barbara and Goleta; City of Lompoc Transit, providing fixed route service in Lompoc, Vandenberg village and Mission Hills; and Santa Ynez Valley Transit, linking the cities of Buellton, Los Olivos, Santa Ynez, and Solvang.]
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Education
Public instruction in the City is provided by the Santa Barbara Unified School District. There are twelve elementary schools, four middle schools, three high schools, a continuation high school and an alternative high school of choice. Total enrollment for the last ten school years was as follows:

CITY OF SANTA BARBARA

PUBLIC SCHOOL ENROLLMENT
FOR 2014-15 THROUGH 2023-24 SCHOOL YEARS
Year Enrollment
2014-15 15,593
2015-16 15,453
2016-17 15,185
2017-18 15,042
2018-19 14,801
2019-20 14,538
2020-21 14,205
2021-22 13,891
2022-23 13,647
2023-24 13,573
Source: California Department of Education
In addition, the University of California at Santa Barbara has enrollment of approximately 25,034 full time students and offers bachelors, masters, and Ph.D. degrees in a variety of fields. There is also Santa Barbara City College, which offers associate degrees and acts as a feeder for the University of California and California State University systems as well as other four-year institutions.

Recreation and Tourism
The City’s natural, historic, and commercial attractions make it an attractive visiting spot. The area’s natural attractions include its moderate weather, the Pacific Coast with its many beaches and harbor, and the mountains. The City is a very popular destination resort for tourists from both within California and without. Among the attractions are the beaches within the City and the wharf and State Street, a popular shopping and restaurant area, starting from the beach and continuing into the downtown area.

Within the City and in the immediate area, there is an exceptional selection of park and recreational opportunities. The City maintains 60 parks and sports facilities, including 13 open space parks. In addition to City recreational facilities, various golf courses and tennis courts, hiking trails, bike paths, and open spaces are available to the public for use. Among the historical and cultural attractions are the El Presidio, Santa Barbara Botanical Garden, Santa Barbara Historical Museum, Santa Barbara Museum of Art, Santa Barbara Maritime Museum, Santa Barbara Museum of Natural History, Santa Barbara Zoological Gardens, and various other museums and libraries.

The County offers numerous opportunities for recreation. Some popular activities are swimming, climbing, picnicking, boating, surfing, fishing, sailing, whale watching and water skiing at the beaches, lakes, and public parks within the County, camping and wine tasting. The County park system has 24-day use parks, 2 camping parks, 45 open spaces and 12 beach areas for a total of 8,595 acres. The Santa Barbara Harbor and Stearns Wharf, the oldest working wharf in the State dating back to 1872, the Santa Barbara Museum of Natural History Sea Center, Mission Santa Barbara and the Santa Barbara Maritime Museum 40 4140-2813-5503.3
are each located in the City of Santa Barbara, the Natural History Museum and the Motorcycle Museum in Santa Maria, and the Return to Freedom, 300 acre wild horse sanctuary in Lompoc; are popular tourist attractions within the County.

The County is also home of the Guadalupe Beach Festival, the Santa Barbara International Film Festival, the Santa Barbara Harbor and Seafood Festival, the Santa Barbara County Vintners Festival, the Santa Barbara Wine Festival.
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APPENDIX B

CITY OF SANTA BARBARA

ANNUAL COMPREHENSIVE FINANCIAL REPORT FOR
THE FISCAL YEAR ENDED JUNE 30, 2023
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APPENDIX C

DEFINITIONS AND SUMMARY OF PRINCIPAL LEGAL DOCUMENTS
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APPENDIX D

BOOK ENTRY SYSTEM
The following information concerning The Depository Trust Company (“DTC”) and DTC’s bookentry system has been obtained from sources that the Authority and the City believe to be reliable, but neither can take responsibility for the accuracy thereof. Capitalized terms used herein and not otherwise defined herein shall have the meanings set forth in this Official Statement and in APPENDIX C – “DEFINITIONS AND SUMMARY OF PRINCIPAL LEGAL DOCUMENTS.” The Depository Trust Company (“DTC”), New York, NY, will act as securities depository for the Series 2024 Bonds (the “Series 2024 Bonds”). The Series 2024 Bonds will be issued as fully registered securities registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully registered Series 2024 Bond certificate will be issued for each issue of the Series 2024 Bonds, each in the aggregate principal amount of such issue, and will be de posited with DTC.

DTC, the world’s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a “ban king organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). DTC has a Standard & Poor’s rating of AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com, provided that nothing contained in such website is incorporated into this Official Statement.

Purchases of the Series 2024 Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Series 2024 Bonds on DTC’s records. The ownership interest of each actual purchaser of each Series 2024 Bond (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Series 2024 Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Series 2024 Bonds, except in the event that use of the book-entry system for the Series 2024 Bonds is discontinued. 2 4140-2813-5503.3
To facilitate subsequent transfers, all Series 2024 Bonds deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Series 2024 Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not affect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Series 2024 Bonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Series 2024 Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.

Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Series 2024 Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Series 2024 Bonds, such as redemptions, tenders, defaults, and proposed amendments to the Indenture and the Lease Agreement. For example, Beneficial Owners of Series 2024 Bonds may wish to ascertain that the nominee holding the Series 2024 Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them.

Redemption notices shall be sent to DTC. If less than all of the Series 2024 Bonds within an issue are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed.

Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Series 2024 Bonds unless authorized by a Direct Participant in accordance with DTC’s MMI Procedures.

Under its usual procedures, DTC mails an Omnibus Proxy to the Authority as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts Series 2024 Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).

Redemption proceeds, distributions, and dividend payments on the Series 2024 Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from the Authority or the Trustee, on payable date in accordance with their respective holdings shown on DT C’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of such Participant and not of DTC, the Trustee, or the Authority, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Authority or the Trustee, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.

DTC may discontinue providing its services as depository with respect to the Series 2024 Bonds at any time by giving reasonable notice to the Authority or the Trustee. Under such circumstances, in the event that a successor depository is not obtained, Series 2024 Bond certificates are required to be printed and delivered.
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The Authority may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, Series 2024 Bond certificates will be printed and delivered to DTC.

The information in this section concerning DTC and DTC’s book-entry system has been obtained from sources that the Authority and the City each believes to be reliable, but neither the Authority nor the City takes no responsibility for the accuracy thereof.

The Authority may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository). In that event, Series 2024 Bonds will be printed and delivered as described in the Indenture.

The Authority cannot and does not give any assurances that DTC will distribute to Participants, or that Participants or others will distribute to the Beneficial Owners, payments of principal of, interest and premium, if any, on the Series 2024 Bonds paid or any redemption or other notices or that they will do so on a timely basis or will serve and act in the manner described in this Official Statement. Neither the Authority nor the City are responsible or liable for the failure of DTC or any Direct Participant or Indirect Participant to make any payments or give any notice to a Beneficial Owner with respect to the Series 2024 Bonds or any error or delay related thereto.
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APPENDIX E

FORM OF CONTINUING DISCLOSURE AGREEMENT
This Continuing Disclosure Agreement (the “Disclosure Agreement”) is executed and delivered by the City of Santa Barbara (the “City”) and U.S. Bank Trust Company, National Association, as dissemination agent (the “Dissemination Agent”) in connection with the issuance by the Finance Authority of the City of Santa Barbara (the “Authority”) of $__________ aggregate principal amount of its Lease Revenue Bonds (Public Safety and Park Projects), Series 2024 (the “Series 2024 Bonds”). The Series 2024 Bonds are being issued pursuant to an Indenture, dated as of ______ 1, 2024 (the “Indenture”), by and among the Authority, the City and U.S. Bank Trust Company, National Association, as trustee (the “Trustee”). Pursuant to Section 6.11 of the Indenture, the City has covenanted to comply with its obligations hereunder and to assume all obligations for continuing disclosure with respect to the Series 2024 Bonds.

The Series 2024 Bonds and additional Series of Bonds are referred to herein as the “Bonds.” The Series 2024 Bonds are being issued to finance the costs of the design, engineering, construction, improvement, and installation of facilities to comprise a new City Police Station, the design, engineering, construction, and improvement of Dwight Murphy Field, and the construction of related capital facilities (together, the “Series 2024 Project”). The City and the Dissemination Agent covenant and agree as follows:

Section 1. Purpose of the Disclosure Agreement. This Disclosure Agreement is being executed and delivered by the City for the benefit of the Owners and Beneficial Owners of the Series 2024 Bonds and in order to assist the Participating Underwriter in complying with Securities and Exchange Commission Rule 15c2-12(b)(5).

Section 2. Definitions. In addition to the definitions set forth in the Indenture, which apply to any capitalized terms used in this Disclosure Agreement unless otherwise defined in this Section, the following capitalized terms shall have the following meanings:
“Annual Report” shall mean any Annual Report provided by the City pursuant to, and as described in, Sections 3 and 4 of this Disclosure Agreement.
“Beneficial Owner” shall mean any person which has or shares the power, directly or indirectly, to make investment decisions concerning ownership of any Series 2024 Bonds (including persons holding Series 2024 Bonds through nominees, depositories, or other intermediaries). “Disclosure Representative” shall mean the Finance Director of the City or his or her designee, or such other officer or employee as the City shall designate in writing to the Dissemination Agent from time to time.
“Dissemination Agent” shall mean U.S. Bank Trust Company, National Association, or any successor Dissemination Agent designated in writing by the City pursuant to Section 8 of this Disclosure Agreement and which has filed with the City and the Dissemination Agent a written acceptance of such designation. The City hereby designates the U.S. Bank Trust Company, National Association to be the initial Dissemination Agent and U.S. Bank Trust Company, National Association hereby accepts such designation.
“EMMA” shall mean the Electronic Municipal Market Access system information about which may be found at the following Internet address: http://emma.msrb.org/. “Financial Obligation” shall mean (a) a debt obligation of the City, (b) a derivative instrument entered into in connection with, or pledged as security or a source of payment for, an existing or planned 2 4140-2813-5503.3
debt obligation of the City, or (c) a guarantee of (i) a debt obligation of the City, or (ii) a derivative instrument described in clause (b), above; provided, however, that the term “Financial Obligation” shall not include “municipal securities” (as such term is defined in the Securities Exchange Act of 1934, as amended) as to which a “final official statement” (as such term is defined in the Rule) has been provided to the MSRB consistent with the Rule.
“Listed Events” shall mean any of the events listed in subsection (a) or subsection (b) of Section 5 hereof.
“MSRB” shall mean the Municipal Securities Rulemaking Board, or any other entity designated or authorized by the Securities and Exchange Commission to receive reports pursuant to the Rule. Until otherwise designated by the MSRB or the Securities and Exchange Commission, filings with the MSRB are to be made through the Electronic Municipal Market Access (EMMA) website of the MSRB, currently located at http://emma.msrb.org.
“Participating Underwriter” shall mean the original purchaser of the Series 2024 Bonds required to comply with the Rule in connection with offering of the Series 2024 Bonds. “Rule” shall mean Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time. “State” shall mean the State of California.

Section 3. Provision of Annual Reports.
(a) The City shall, or shall cause the Dissemination Agent to, not later than nine months after the end of the City’s fiscal year, commencing with the report for the 2023-24 fiscal year, provide to the MSRB an Annual Report which is consistent with the requirements of Section 4 of this Disclosure Agreement, with a copy to the Dissemination Agent. The Annual Report may be submitted as a single document or as separate documents comprising a package and may cross-reference other information as provided in Section 4 of this Disclosure Agreement; provided that the audited financial statements of the City may be submitted separately from the balance of the Annual Report, and later than the date required above for the filing of the Annual Report if not available by that date. If the City’s fiscal year changes, it shall give notice of such change in the same manner as for a Listed Event under Section 5(c) hereof. The City shall provide a written certification with each Annual Report to the effect that such Annual Report constitutes the Annual Report required to be furnished by it hereunder. The Dissemination Agent may conclusively rely upon such certification of the City and shall have no duty or obligation to review such Annual Report.
(b) Not later than fifteen (15) Business Days prior to said date, the City shall provide the Annual Report to the Dissemination Agent (if other than the City). If the City is unable to provide the MSRB an Annual Report by the date required in subsection (a), the City shall send a notice to each MSRB in substantially the form attached hereto as Exhibit A. (c) The Dissemination Agent, to the extent the City has provided the Annual Report to the Dissemination Agent, shall:
(i) determine each year prior to the date for providing the Annual Report the name and address of the MSRB, and
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(ii) file a report with the City (if the Dissemination Agent is other than the City) certifying that the Annual Report has been provided pursuant to this Disclosure Agreement, stating the date it was provided and listing the MSRB to which it was provided.

Section 4. Content of Annual Reports: The City’s Annual Report shall contain or incorporate by reference the following:
(a) Audited financial statements of the City for the preceding Fiscal Year, prepared in accordance with the generally accepted auditing standards for municipalities in the State of California. If the City’s audited financial statements are not available by the time the Annual Report is required to be provided to the MSRB pursuant to Section 3(a), the Annual Report shall contain unaudited financial statements in a format similar to the financial statements contained in the final Official Statement, and the audited financial statements shall be filed in the same manner as the Annual Report when they become available.
(b) The City’s Annual Report shall include the following items, providing financial and operating data (as of the end of the preceding Fiscal Year) substantially similar to that provided in the corresponding tables and charts in the Official Statement:

1. Principal amount of each Series of Bonds and any Parity Debt outstanding.

2. City Principal Property Taxpayers;

3. City Assessed Valuations, Property Tax Rates, Secured Levies and Collection and Delinquencies;

4. General Fund Tax Revenues by Source;

5. City General Fund Balance Sheet;

6. City General Fund Summary of Revenues and Expenditures;

7. Information in Appendix A of the Official Statement under the captions “ Retirement Systems” and “Other Post-Retirement Benefits”; and

8. Summary of City's current Fiscal Year's investments most recently completed and accepted by City Council, including types and amounts of investments, return on investments, average yield of investments and market value of investments.] (c) Any or all of the items listed above may be included by specific reference to other documents, including official statements of debt issues of the City or related public entities, which have been submitted to each of the MSRB or the Securities and Exchange Commission. If the document included by reference is a final official statement, it must be available from the Municipal Securities Rulemaking Board. The City shall clearly identify each such other document so included by reference.

Section 5. Reporting of Significant Events. (a) Pursuant to the provisions of this Section, the City shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Series 2024 Bonds in a timely manner not later than ten business days after the occurrence of the event:
(i) Principal and interest payment delinquencies.
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(ii) Unscheduled draws on debt service reserves reflecting financial difficulties. (iii) Unscheduled draws on credit enhancements reflecting financial difficulties. (iv) Substitution of credit or liquidity providers, or their failure to perform. (v) Adverse tax opinions or issuance by the Internal Revenue Service of proposed or final determination of taxability or of a Notice of Proposed Issue (IRS Form 5701 TEB). (vi) Tender offers.
(vii) Defeasances.
(viii) Rating changes.
(ix) Bankruptcy, insolvency, receivership or similar event of the City. (x) Default, event of acceleration, termination event, modification of terms, or other similar events under the terms of a Financial Obligation, any of which reflect financial difficulties.

For purposes of the event identified in paragraph (ix), the event is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent or similar officer for an obligated person in a proceeding under the U.S. Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the City, or if such jurisdiction has been assumed by leaving the existing governmental body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the City.
(b) Pursuant to the provisions of this Section, the City shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Bonds, if material, in a timely manner not later than ten business days after the occurrence of the event:
(i) Unless described in paragraph (v) of subsection (a) of this Section, material notices or determinations by the Internal Revenue Service with respect to the tax status of the Bonds or other material events affecting the tax status of the Bonds. (ii) Modifications to rights of holders of the Bonds.
(iii) Optional, unscheduled or contingent Bond calls.
(iv) Release, substitution, or sale of property securing repayment of the Bonds. (v) Non-payment related defaults.
(vi) The consummation of a merger, consolidation, or acquisition involving the City or the sale of all or substantially all of the assets of the City other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms.
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(vii) Appointment of a successor or additional trustee or the change of name of a trustee. (viii) Incurrence of a Financial Obligation, or agreement to covenants, events of default, remedies, priority rights, or other similar terms of a Financial Obligation, any of which affect holders of the Bonds.
(c) The Dissemination Agent shall, within one business day of obtaining actual knowledge of the occurrence of any of the Listed Events, contact the Disclosure Representative and inform such person of the event.
(d) Whenever the City obtains knowledge of the occurrence of a Listed Event described in subsection (b) of this Section, the City shall determine if such event would be material under applicable Federal securities law.
(e) Whenever the City obtains knowledge of the occurrence of a Listed Event described in subsection (a) of this Section, or determines that knowledge of a Listed Event described in subsection (b) of this Section would be material under applicable Federal securities law, the City shall, or shall cause the Dissemination Agent to, file a notice of the occurrence of such Listed Event with the MSRB, within ten business days of such occurrence.
(f) Notwithstanding the foregoing, notice of Listed Events described in paragraph (iii) of subsection (a) of this Section need not be given any earlier than the notice (if any) of the underlying event is given to holders of affected Series 2024 Bonds pursuant to the Indenture.

Section 6. Format for Filings with MSRB. Any report or filing with the MSRB pursuant to this Disclosure Agreement must be submitted in electronic format, accompanied by such identifying information as is prescribed by the MSRB.

Section 7. Termination of Reporting Obligation. The City’s and the Dissemination Agent’s obligations under this Disclosure Agreement shall terminate upon the legal defeasance prior to redemption or payment in full of all of the Series 2024 Bonds. If such termination occurs prior to the final maturity of the Series 2024 Bonds, the City shall give, or cause to be given, notice of such termination in a filing with the MSRB.

Section 8. Dissemination Agent. The City may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Agreement, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent.

The Dissemination Agent shall not be responsible in any manner for the content of any notice or report prepared by the City pursuant to this Disclosure Agreement. The initial Dissemination Agent shall be U.S.

Bank Trust Company, National Association.

Section 9. Amendment; Waiver. Notwithstanding any other provisions of this Disclosure Agreement, the City may amend this Disclosure Agreement, and any provision of this Disclosure Agreement may be waived, provided that the following conditions are satisfied:
(a) if the amendment or waiver relates to the provisions of Section 3(a), 4, 5(a) or 5(b) hereof, it may only be made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature or status of an obligated person with respect to the Series 2024 Bonds or the type of business conducted; 6 4140-2813-5503.3
(b) the undertakings herein, as proposed to be amended or waived, would, in the opinion of nationally recognized bond counsel, have complied with the requirements of the Rule at the time of the primary offering of the Series 2024 Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; and (c) the proposed amendment or waiver (i) is approved by Owners of the Series 2024 Bonds in the manner provided in the Indenture for amendments to the Indenture with the consent of Owners, or (ii) does not, in the opinion of nationally recognized bond counsel, materially impair the interests of Owners or Beneficial Owners of the Series 2024 Bonds.

In the event of any amendment or waiver of a provision of this Disclosure Agreement, the City shall describe such amendment or waiver in the next Annual Report, and shall include, as applicable, a narrative explanation of the reason for the amendment or waiver and its impact on the type (or in the case of a change of accounting principles, on the presentation) of financial information or operating data being presented by the City. In addition, if the amendment relates to the accounting principles to be followed in preparing financial statements (i) notice of such change shall be given in a filing with the MSRB, and (ii) the Annual Report for the year in which the change is made shall present a comparison (in narrative form and also, if feasible, in quantitative form) between the financial statements as prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles.

Section 10. Additional Information. Nothing in this Disclosure Agreement shall be deemed to prevent the City from disseminating any other information, using the means of dissemination set forth in this Disclosure Agreement or any other means of communication, or including any other information in any Annual Report or notice required to be filed pursuant to this Disclosure Agreement, in addition to that which is required by this Disclosure Agreement. If the City chooses to include any information in any Annual Report or notice in addition to that which is specifically required by this Disclosure Agreement, the City shall have no obligation under this Disclosure Agreement to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event or any other event required to be reported.

Section 11. Default. In the event of a failure of the City to comply with any provision of this Disclosure Agreement any Participating Underwriter or the Owners of at least 25.0% aggregate principal amount of the outstanding Series 2024 Bonds shall or any Owner or Beneficial Owner of the Series 2024 Bonds may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the City to comply with its obligations under this Disclosure Agreement. A default under this Disclosure Agreement shall not be deemed an Event of Default under the Indenture, and the sole remedy under this Disclosure Agreement in the event of any failure of the City or the Dissemination Agent to comply with this Disclosure Agreement shall be an action to compel performance.

Section 12. Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Agreement, and the City agrees to indemnify and save the Dissemination Agent, its officers, directors, employees and agents, harmless against any loss, expense and liabilities which it may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the costs and expenses(including attorney’sfees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent’s negligence or willful misconduct. The obligations of the City under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Series 2024 Bonds. If it performs the duties assigned to it hereunder, the Dissemination Agent shall not be responsible to any person for any failure by the City or the Dissemination Agent (if other than U.S. Bank Trust Company, National Association) to perform duties or obligations imposed hereby, or for any decision of the City regarding the reporting of Listed Events. The 7 4140-2813-5503.3
Dissemination Agent, if other than the City, shall not be responsible in any manner for the format or content of any notice or Annual Report prepared by the City pursuant to this Disclosure Agreement. If the Dissemination Agent is other than the City, the City will pay reasonable compensation to, and reimburse the expenses of, the Dissemination Agent.

Section 13. Beneficiaries. The Disclosure Agreement shall inure solely to the benefit of the City and the Dissemination Agent, the Participating Underwriter and Owners and Beneficial owners from time to time of the Series 2024 Bonds and shall create no rights in any other person or entity.

Section 14. Notices. Any notices or communications to or among any of the parties to this Disclosure Agreement may be given as follows:

To the City: City of Santa Barbara
735 Anacapa Street
Santa Barbara, California 93102
Attention: Finance Director
To the initial Dissemination Agent: U.S. Bank Trust Company, National Association 633 West Fifth Street, 24th Floor
Los Angeles, California 90071
Attention: Global Corporate Trust
Section 15. Governing Laws. This Disclosure Agreement shall be governed by and construed in accordance with the laws of the State of California.

Section 16. Electronic Signature. Each of the parties hereto agrees that the transaction consisting of this Disclosure Agreement may be conducted by electronic means. Each party agrees, and acknowledges that it is such party’s intent, that if such party signs this Disclosure Agreement using an electronic signature, it is signing, adopting, and accepting this Disclosure Agreement and that signing this Disclosure Agreement using an electronic signature is the legal equivalent of having placed its handwritten signature on this Disclosure Agreement on paper. Each party acknowledges that it is being provided with an electronic or paper copy of this Disclosure Agreement in a usable format. 8 4140-2813-5503.3
Section 17. Counterparts. This Disclosure Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument.

IN WITNESS WHEREOF, the parties hereto have executed this Disclosure Agreement as of the date first above written.

Date: _____ __, 2024

CITY OF SANTA BARBARA
By:
[Authorized Officer]
U.S. BANK TRUST COMPANY, NATIONAL
ASSOCIATION, as dissemination agent
By:

Authorized Officer
9 4140-2813-5503.3

EXHIBIT A

NOTICE TO MUNICIPAL SECURITIES RULEMAKING BOARD OF

FAILURE TO FILE ANNUAL REPORT
Name of Issuer: Finance Authority of the City of Santa Barbara Name of Bond Issue: Finance Authority of the City of Santa Barbara Lease Revenue Bonds (Public Safety and Park Projects), Series 2024 Name of Obligated Person: City of Santa Barbara
Date of Issuance: _____ __, 2024
NOTICE IS HEREBY GIVEN that the City of Santa Barbara (the “City”) has not provided an Annual Report with respect to the above-named Bonds as required by the Continuing Disclosure Agreement, dated as of _______ 1, 2024, by and between the City and U.S. Bank Trust Company, National Association, as dissemination agent. The City anticipates that the Annual Report will be filed by ____________________.

Dated: ___________________
U.S. BANK TRUST COMPANY, NATIONAL
ASSOCIATION, on behalf of City
By:
1 4140-2813-5503.3

APPENDIX F

PROPOSED FORM OF OPINION OF BOND COUNSEL
Orrick, Herrington & Sutcliffe LLP, Los Angeles, California, Bond Counsel to the Authority, expects to be able to render on the Settlement Date its final approving opinion with respect to the Series 2024 Bonds in substantially the following form:
[Date of Delivery]
Finance Authority of the City of Santa Barbara
Santa Barbara, California
City of Santa Barbara
Santa Barbara, California
Finance Authority of the City of Santa Barbara
Lease Revenue Bonds (Public Safety and Park Projects), Series 2024 (Final Opinion)
Ladies and Gentlemen:

We have acted as bond counsel to the Finance Authority of the City of Santa Barbara (the “Authority”) in connection with the issuance of $________ aggregate principal amount of Finance Authority of the City of Santa Barbara Lease Revenue Bonds (Public Safety and Park Projects), Series 2024 (the “Series 2024 Bonds”), issued pursuant to an Indenture, dated as of _______ 1, 2024, (the “Indenture”), by and among the Authority, the City of Santa Barbara (the “City”) and U.S. Bank Trust Company, National Association, as trustee (the “Trustee”). Capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Indenture.

In such connection, we have reviewed the Indenture, the Ground Lease, dated as of _______ 1, 2024 (the “Ground Lease”), by and between the City and the Authority, the Lease Agreement, dated as of _______ 1, 2024, (the “Lease Agreement”), by and between the Authority and the City, the Tax Certificate of the Authority, dated the date hereof (the “Tax Certificate”), opinions of counsel to the Authority, the City, the Trustee and others, certificates of the Authority, the City, the Trustee and others and such other documents, opinions and matters to the extent we deemed necessary to render the opinions set forth herein.

The opinions expressed herein are based on an analysis of existing laws, regulations, rulings and court decisions and cover certain matters not directly addressed by such authorities. Such opinions may be affected by actions taken or omitted or events occurring after original delivery of the Series 2024 Bonds on the date hereof. We have not undertaken to determine, or to inform any person, whether any such actions are taken or omitted, or events do occur, or any other matters come to our attention after original delivery of the Series 2024 Bonds on the date hereof. Accordingly, this letter speaks only as of its date and is not intended to, and may not, be relied upon or otherwise used in connection with any such actions, events or matters. Our engagement with respect to the Series 2024 Bonds has concluded with their issuance, and we disclaim any obligation to update this letter. We have assumed the genuineness of all documents and signatures provided to us and the due and legal execution and delivery thereof by, and validity against, any parties other than the Authority and the City. We have assumed, without undertaking to verify, the accuracy of the factual matters represented, warranted or certified in the documents, and of the legal conclusions 2 4140-2813-5503.3
contained in the opinions, referred to in the second paragraph hereof. Furthermore, we have assumed compliance with all covenants and agreements contained in the Indenture, the Ground Lease, the Lease Agreement and the Tax Certificate, including, without limitation, covenants and agreements compliance with which is necessary to assure that future actions, omissions or events will not cause interest on the Series 2024 Bonds to be included in gross income for federal income tax purposes.

We call attention to the fact that the rights and obligations under the Series 2024 Bonds, the Indenture, the Ground Lease, the Lease Agreement and the Tax Certificate and their enforceability may be subject to bankruptcy, insolvency, receivership, reorganization, arrangement, fraudulent conveyance, moratorium and other laws relating to or affecting creditors’ rights, to the application of equitable principles, to the exercise of judicial discretion in appropriate cases, and to the limitations on legal remedies against governmental entities such as the Authority and the City in the State of California. We express no opinion with respect to any indemnification, contribution, liquidated damages, penalty (including any remedy deemed to constitute a penalty), right of set-off, arbitration, judicial reference, choice of law, choice of forum, choice of venue, non-exclusivity of remedies, waiver or severability provisions contained in the foregoing documents, nor do we express any opinion with respect to the state or quality of title to or interest in any of the real or personal property described in the Ground Lease and the Lease Agreement or as subject to the lien of the Indenture, or the accuracy or sufficiency of the description contained therein of, or the remedies available to enforce liens on, any such property. Our services did not include financial or other non-legal advice. Finally, we undertake no responsibility for the accuracy, completeness or fairness of the Official Statement or other offering material relating to the Series 2024 Bonds and express no view with respect thereto.

Based on and subject to the foregoing, and in reliance thereon, as of the date hereof, we are of the following opinions:

1. The Series 2024 Bonds constitute the valid and binding special obligations of the Authority.

2. The Indenture has been duly executed and delivered by, and constitutes the valid and binding agreement of, the Authority and the City. The Indenture creates a valid pledge, to secure the payment of the principal of and interest on the Series 2024 Bonds, of the Lease Revenues and the other assets pledged therefor under the Indenture, subject to the provisions of the Indenture permitting the application thereof for the purposes and on the terms and conditions set forth in the Indenture.

3. The Ground Lease and the Lease Agreement have been duly executed and delivered by, and constitute valid and binding agreements of, the Authority and the City.

4. Interest on the Series 2024 Bonds is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986 and is exempt from State of California personal income taxes. Interest on the Series 2024 Bonds is not a specific preference item for purposes of the federal individual alternative minimum tax. We observe that interest on the Series 2024 Bonds included in adjusted financial statement income of certain corporations is not excluded from the federal corporate alternative minimum tax. We express no opinion regarding other tax consequences related to the ownership or disposition of, or the amount, accrual, or receipt of interest on, the Series 2024 Bonds.

Faithfully yours,
4153-5432-0463.5
ORDINANCE NO.

AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF

SANTA BARBARA AUTHORIZING THE EXECUTION AND

DELIVERY BY THE CITY OF A GROUND LEASE, A LEASE

AGREEMENT, AN INDENTURE, AND A CONTINUING

DISCLOSURE AGREEMENT IN CONNECTION WITH THE

ISSUANCE OF FINANCE AUTHORITY OF THE CITY OF

SANTA BARBARA LEASE REVENUE BONDS (PUBLIC
SAFETY AND PARK PROJECTS), SERIES 2024, APPROVING

THE ISSUANCE OF SUCH BONDS IN AN AGGREGATE
PRINCIPAL AMOUNT OF NOT TO EXCEED $135,000,000,

AUTHORIZING THE DISTRIBUTION OF AN OFFICIAL

STATEMENT IN CONNECTION WITH THE OFFERING AND

SALE OF SUCH BONDS AND AUTHORIZING THE

EXECUTION OF NECESSARY DOCUMENTS AND

CERTIFICATES AND RELATED ACTIONS
WHEREAS, the City of Santa Barbara (the “City”) desires to finance costs of the design, engineering, construction, improvement, and installation of facilities to comprise a new City Police Station, the design, engineering, construction, and improvement of Dwight Murphy Field, and the construction of related capital facilities (together, the “Project”); WHEREAS, the Finance Authority of the City of Santa Barbara (the “Authority”) desires to assist the City with such financing;
WHEREAS, in order to finance the Project, the City will lease certain real property designated as the site of the new City Police Station and the improvements thereto (the “Property”), to the Authority pursuant to a Ground Lease (such Ground Lease, in the form presented at the meeting for consideration of this ordinance and on file with the Office of the City Clerk, with such changes, insertions and omissions as are made pursuant to this ordinance, being referred to herein as the “Ground Lease”);
WHEREAS, the City will sublease the Property and the improvements to be completed thereon back from the Authority pursuant to a Lease Agreement (such Lease Agreement, in the form presented at the meeting for consideration of this ordinance and on file with the Office of the City Clerk, with such changes, insertions and omissions as are made pursuant to this ordinance, being referred to herein as the “Lease Agreement”);
WHEREAS, the City and the Authority desire that the Authority issue its Finance Authority of the City of Santa Barbara Lease Revenue Bonds (Public Safety and Park Projects), Series 2024 (the “Bonds”), in an aggregate principal amount not to exceed $135,000,000, payable from the base rental payments (the “Base Rental Payments”) to be made by the City pursuant to the Lease Agreement;
WHEREAS, the Bonds will be issued pursuant to the Marks-Roos Local Bond Pooling Act of 1985, commencing with Section 6584 of the California Government Code (the “Act”); ATTACHMENT 8
2 4153-5432-0463.5
WHEREAS, the Bonds will be issued to (a) finance the Project, (b) finance capitalized interest with respect to the Bonds through May 15, 2027, (c) fund a debt service reserve fund for the Bonds, and (d) pay the costs of issuance of the Bonds; WHEREAS, on the date of this ordinance, the City held a public hearing on the financing of the Project in accordance with Section 6586.5 of the Act, which hearing was held the Council Chamber at City Hall, 735 Anacapa Street, Santa Barbara, California; WHEREAS, in accordance with Section 6586.5 of the Act, notice of such hearing was published once at least five days prior to the hearing in The Santa Barbara Independent, an adjudicated local newspaper of general circulation in the City; WHEREAS, in order to provide for the authentication and delivery of the Bonds, to establish and declare the terms and conditions upon which the Bonds are to be issued and secured and to secure the payment of the principal thereof, premium, if any, and interest thereon, the Authority, the City, and U.S. Bank Trust Company, National Association, as trustee (the “Trustee”), propose to enter into an Indenture (such Indenture, in the form presented at the meeting for consideration of this ordinance and on file with the Office of the City Clerk, with such changes, insertions and omissions as are made pursuant to this ordinance, being referred to herein as the “Indenture”);
WHEREAS, all rights to receive the Base Rental Payments will be assigned without recourse by the Authority to the Trustee pursuant to the Indenture; WHEREAS, the City desires to provide for the public sale of the Bonds; WHEREAS, a form of the Notice of Intention to Sell to be published by the Authority in connection with the public offering and sale of the Bonds has been prepared; WHEREAS, a form of the Official Notice of Sale to be distributed by the Authority in connection with the public offering and sale of the Bonds has been prepared (such Official Notice of Sale, in the form presented at the meeting for consideration of this ordinance and on file with the Office of the City Clerk, with such changes, insertions and omissions as are made pursuant to this ordinance, being referred to herein as the “Official Notice of Sale”); WHEREAS, Rule 15c2-12 promulgated under the Securities Exchange Act of 1934 (“Rule 15c2-12”) requires that, in order to be able to purchase or sell the Bonds, the underwriters thereof must have reasonably determined that the issuer thereof has, or one or more appropriate obligated persons have, undertaken in a written agreement or contract for the benefit of the holders of the Bonds to provide disclosure of certain financial information and certain material events on an ongoing basis;
WHEREAS, in order to cause such requirement to be satisfied, the City desires to execute and deliver a Continuing Disclosure Agreement (such Continuing Disclosure Agreement, in the form presented at the meeting for consideration of this ordinance and on file with the Office of the City Clerk, with such changes, insertions and omissions as are made pursuant to this ordinance, being referred to herein as the “Continuing Disclosure Agreement”); WHEREAS, a form of the Preliminary Official Statement to be distributed in connection with the public offering of the Bonds has been prepared (such Preliminary Official Statement, in the form presented at the meeting for consideration of this ordinance and on file with the Office of 3 4153-5432-0463.5
the City Clerk, with such changes, insertions and omissions as are made pursuant to this ordinance, being referred to herein as the “Preliminary Official Statement”); WHEREAS, on September 19, 2019, the City Council adopted a Debt Management Policy for the City, as amended that complies with Government Code Section 8855(i) (the “Debt Management Policy”), and the execution and delivery of the Lease Agreement as contemplated by this ordinance and sale and issuance by the Authority of the Bonds is in compliance with the Debt Management Policy;
WHEREAS, Government Code Section 5852.1 requires that the City obtain from an underwriter, financial adviser, or private lender and disclose, in a meeting open to the public, prior to authorization of the issuance of the Bonds, good faith estimates of (a) the true interest cost of the Bonds, (b) the sum of all fees and charges paid to third parties with respect to the Bonds, (c) the amount of proceeds of the Bonds expected to be received net of the fees and charges paid to third parties and any reserves or capitalized interest paid or funded with proceeds of the Bonds, and (d) the sum total of all debt service payments on the Bonds calculated to the final maturity of the Bonds, plus the fees and charges paid to third parties not paid with the proceeds of the Bonds; WHEREAS, in compliance with Government Code Section 5852.1, the City has obtained from KNN Public Finance, LLC, as the City’s municipal advisor (the “Municipal Advisor”), the required good faith estimates, and such estimates are disclosed and set forth on Exhibit A attached hereto;
WHEREAS, the City is a member of the Authority and the Project is to be located within the boundaries of the City;
WHEREAS, there have been prepared and submitted in connection with the consideration of this ordinance forms of:
(a) the Ground Lease;
(b) the Lease Agreement;
(c) the Indenture;
(d) the Continuing Disclosure Agreement;
(e) the Preliminary Official Statement; and
(f) the Official Notice of Sale;
WHEREAS, the City desires to authorize the execution of such documents and the performance of such acts as may be necessary or desirable to effect the offering, sale, and issuance of the Bonds; and
WHEREAS, all acts, conditions and things required by the Constitution, laws of the State of California and the Charter and laws of the City of Santa Barbara to exist, to have happened and to have been performed precedent to and in connection with the consummation of the transactions authorized hereby do exist, have happened and have been performed in regular and due time, form and manner as required by law, and the City is now duly authorized and 4 4153-5432-0463.5
empowered, pursuant to each and every requirement of law, to consummate such transactions for the purpose, in the manner and upon the terms herein provided;

NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF SANTA BARBARA DOES ORDAIN AS FOLLOWS:

The foregoing recitals are true and correct.

The use of the Act to assist the City in financing the Project will result in significant public benefits to the citizens of the City because it is expected that such use will provide demonstrable savings in effective interest rate costs.

The form of the Ground Lease, on file with the Office of the City Clerk is hereby approved. Each of the Mayor, the Mayor Pro-Tem, the City Administrator, the Assistant City Administrator, the Finance Director or any officer designated in writing by the City Administrator (each, an “Authorized Officer”) is hereby authorized, and any one of the Authorized Officers is hereby directed, for and in the name of the City, to execute and deliver the Ground Lease in the form submitted to this meeting, with such changes, insertions and omissions as the Authorized Officer executing the same may require or approve and as approved as to form by the City Attorney, such requirement or approval to be conclusively evidenced by the execution of the Ground Lease by such Authorized Officer.

The form of the Lease Agreement, on file with the Office of the City Clerk, is hereby approved. Each of the Authorized Officers is hereby authorized, and any one of the Authorized Officers is hereby directed, for and in the name of the City, to execute and deliver the Lease Agreement in the form submitted to this meeting, with such changes, insertions and omissions as the Authorized Officer executing the same may require or approve and as approved as to form by the City Attorney, such requirement or approval to be conclusively evidenced by the execution of the Lease Agreement by such Authorized Officer; provided, however, that such changes, insertions and omissions shall not result in an aggregate principal amount of the Bonds payable from the Base Rental Payments in excess of $135,000,000, shall not result in the term of the Lease Agreement terminating later than May 15, 2057, (provided that such term may be extended as provided therein) and shall not result in a true interest cost attributable to the Base Rental Payments in excess of 5.50% per annum.

Subject to the provisions of Section 6 hereof, the issuance of the Bonds, in an aggregate principal amount not to exceed $135,000,000, on the terms and conditions set forth in, and subject to the limitations specified in, the Indenture, be and the same is hereby authorized and approved. The Bonds shall be dated, shall bear interest at the rates, shall mature on the dates, shall be subject to call and redemption, shall be issued in the form and shall be as otherwise provided in the Indenture, as the same shall be completed as provided in this ordinance.

The form of the Indenture, on file with the Office of the City Clerk, is hereby approved. Each of the Authorized Officers is hereby authorized, and any one of the Authorized Officers is hereby directed, for and in the name of the City, to execute and deliver the Indenture in the form submitted to this meeting, with such changes, insertions and omissions as the Authorized Officer executing the same may require or approve and as approved as to form by the City Attorney, such requirement or approval to be conclusively evidenced by the execution of the Indenture by such Authorized Officer; provided, however, that such changes, insertions and omissions shall not result in an aggregate principal amount of the Bonds payable from the Base Rental Payments in excess of $135,000,000, shall not result in the term of the Lease Agreement 5 4153-5432-0463.5
terminating later than May 15, 2057, (provided that such term may be extended as provided therein) and shall not result in a true interest cost attributable to the Base Rental Payments in excess of 5.50% per annum.

The form of the Official Notice of Sale, on file with the Office of the City Clerk, is hereby approved. The Official Notice of Sale may be released on one date (or two dates if second bids are required) in connection with the offering and sale of the Bonds is hereby authorized and approved. The terms and conditions of the offering and sale of the Bonds shall be as specified in the Official Notice of Sale. Bids for the purchase of the Bonds shall be received at the time and place set forth in the Official Notice of Sale. The Authorized Officers are each hereby authorized and directed, in consultation with the Authority and for and in the name and on behalf of the Authority, to accept the bids for the Bonds as determined to offer the lowest true interest cost, or to reject bids for the Bonds, in accordance with the terms of the Official Notice of Sale, and proceed to accept bids at a second time and place to be set forth in the Official Notice of Sale.

The form of the Continuing Disclosure Agreement, on file with the Office of the City Clerk, is hereby approved. Each of the Authorized Officers is hereby authorized, and any one of the Authorized Officers is hereby directed, for and in the name of the City, to execute and deliver the Continuing Disclosure Agreement in the form submitted to this meeting, with such changes, insertions and omissions as the Authorized Officer executing the same may require or approve, and as approved as to form by the City Attorney such requirement or approval to be conclusively evidenced by the execution of the Continuing Disclosure Agreement by such Authorized Officer.

The form of the Preliminary Official Statement, on file with the Office of the City Clerk, with such changes, insertions and omissions therein as may be approved by an Authorized Officer, is hereby approved, and the use of the Preliminary Official Statement in connection with the offering and sale of the Bonds is hereby authorized and approved. The Authorized Officers are each hereby authorized to certify on behalf of the City that the Preliminary Official Statement is deemed final as of its date, within the meaning of Rule 15c2-12 (except for the omission of certain final pricing, rating, and related information as permitted by Rule 15c2-12).

The preparation and delivery of a final Official Statement (the “Official Statement”), and its use in connection with the offering and sale of the Bonds, be and the same is hereby authorized and approved. The Official Statement shall be in substantially the form of the Preliminary Official Statement, with such changes, insertions and omissions as may be approved by an Authorized Officer, such approval to be conclusively evidenced by the execution and delivery thereof. Each of the Authorized Officers is hereby authorized, and any one of the Authorized Officers is hereby directed, for and in the name of the City, to execute the final Official Statement and any amendment or supplement thereto.

With the passage of this ordinance, the City hereby certifies that the City’s Debt Management Policy complies with Government Code Section 8855(i), and that the Bonds authorized to be issued pursuant to this ordinance are consistent with such policy.

In accordance with Government Code Section 5852.1, good faith estimates of the following have been obtained from the Municipal Advisor and are set forth on Exhibit A attached hereto: (a) the true interest cost of the Bonds, (b) the sum of all fees and charges paid to third parties with respect to the Bonds, (c) the amount of proceeds of the Bonds expected to be received net of the fees and charges paid to third parties and any reserves or capitalized 6 4153-5432-0463.5
interest paid or funded with proceeds of the Bonds, and (d) the sum total of all debt service payments on the Bonds calculated to the final maturity of the Bonds plus the fees and charges paid to third parties not paid with the proceeds of the Bonds.

The Authorized Officers are hereby authorized to designate, in connection with the transactions contemplated by this ordinance, the firm of KNN Public Finance, LLC, as Municipal Advisor, the firm of Orrick, Herrington & Sutcliffe LLP, as Bond Counsel and Disclosure Counsel. Additionally, the selection of U.S. Bank Trust Company, National Association, as trustee, is hereby confirmed.

The City Council hereby approves the execution and delivery of all agreements, documents, certificates, and instruments referred to herein with electronic signatures as may be permitted under the California Uniform Electronic Transactions Act and digital signatures as may be permitted under Section 16.5 of the California Government Code using DocuSign.

The Authorized Officers and the officers and employees of the City are, and each of them is, hereby authorized and directed, for and in the name of the City to do any and all things and to execute and deliver any and all documents which they or any of them deem necessary or advisable in order to consummate the transactions contemplated by this ordinance, to record or consent to recordation of the Ground Lease and Lease Agreement or any memorandum thereof, and otherwise to carry out, give effect to and comply with the terms and intent of this ordinance.

All actions heretofore taken by the officers and employees of the City with respect to the issuance and sale of the Bonds, or in connection with or related to any of the agreements or documents referred to herein, are hereby approved, confirmed, and ratified.

A-1
4153-5432-0463.5

EXHIBIT A

GOOD FAITH ESTIMATES
The good faith estimates set forth herein are provided with respect to the Bonds in accordance with California Government Code Section 5852.1. Such good faith estimates have been provided to the City by KNN Public Finance, LLC, the City’s municipal advisor (the “Municipal Advisor”).

Principal Amount. The Municipal Advisor has informed the City that, based on the City’s financing plan and current market conditions, its good faith estimate of the aggregate principal amount of the Bonds to be sold is $122,600,000 (the “Estimated Principal Amount”).

True Interest Cost of the Bonds. The Municipal Advisor has informed the City and the Authority that, assuming that the Estimated Principal Amount of the Bonds is sold, and based on market interest rates prevailing at the time of preparation of such estimate, its good faith estimate of the true interest cost of the Bonds, which means the rate necessary to discount the amounts payable on the respective principal and interest payment dates to the purchase price received for the Bonds, is 4.47%.

Finance Charge of the Bonds. The Municipal Advisor has informed the City and the Authority that, assuming that the Estimated Principal Amount of the Bonds is sold and based on market interest rates prevailing at the time of preparation of such estimate, its good faith estimate of the finance charge for the Bonds, which means the sum of all fees and charges paid to third parties (or costs associated with the Bonds), is $1,040,400.

Amount of Proceeds to be Received. The Municipal Advisor has informed the City and the Authority that, assuming that the Estimated Principal Amount of the Bonds is sold, and based on market interest rates prevailing at the time of preparation of such estimate, its good faith estimate of the amount of proceeds expected to be received by the Authority for sale of the Bonds, less the finance charge of the Bonds, as estimated above, and any reserves or capitalized interest paid or funded with proceeds of the Bonds, is $111,000,000.

Total Payment Amount. The Municipal Advisor has informed the City and the Authority that, assuming that the Estimated Principal Amount of the Bonds is sold, and based on market interest rates prevailing at the time of preparation of such estimate, its good faith estimate of the total payment amount, which means the sum total of all payments the Authority will make to pay debt service on the Bonds, plus the finance charge for the Bonds, as described above, not paid with the proceeds of the Bonds, calculated to the final maturity of the Bonds, is $254,800,000, which excludes any reserves or capitalized interest paid or funded with proceeds of the Bonds (which may offset such total payment amount). Such total payment amount, including the debt service reserve fund sized at one-half of maximum annual debt service on the Bonds and capitalized interest on the Bonds through May 15, 2027, is $231,400,000.

The foregoing estimates constitute good faith estimates only and are based on market conditions prevailing at the time of preparation of such estimates. The actual principal amount of the Bonds issued and sold, the true interest cost thereof, the finance charges thereof, the amount of proceeds received therefrom and total payment amount with respect thereto may differ from such good faith estimates due to (a) the actual date of the sale of the Bonds being different than the date assumed for purposes of such estimates, (b) the actual principal amount of Bonds sold being different from the Estimated Principal Amount, (c) the actual amortization of the Bonds A-2
4153-5432-0463.5
being different than the amortization assumed for purposes of such estimates, (d) the actual market interest rates at the time of sale of the Bonds being different than those estimated for purposes of such estimates, (e) other market conditions, or (f) alterations in the City’s financing plan, or a combination of such factors. The actual date of sale of the Bonds and the actual principal amount of Bonds sold will be determined by the City and the Authority based on the timing of the need for proceeds of the Bonds and other factors. The actual interest rates borne by the Bonds will depend on market interest rates at the time of sale thereof. The actual amortization of the Bonds will also depend, in part, on market interest rates at the time of sale thereof. Market interest rates are affected by economic and other factors beyond the control of the City or the Authority. 4153-5432-0463.5
ORDINANCE NO. _______

STATE OF CALIFORNIA )
)
COUNTY OF SANTA BARBARA ) ss
)

CITY OF SANTA BARBARA )
I HEREBY CERTIFY that the foregoing ordinance was introduced on September 10, 2024, and adopted by the City Council of the City of Santa Barbara at a meeting held on September __, 2024, by the following roll call vote:

AYES:

NOES:

ABSENT:

ABSTENTIONS:

IN WITNESS WHEREOF, I have hereto set my hand and affixed the official seal of the City of Santa Barbara on September __, 2024.

Sarah Gorman, MMC
City Clerk Services Manager
I HEREBY APPROVE the foregoing ordinance on September __, 2024.

Randy Rowse
Mayor
4144-4756-4111.4
RESOLUTION NO.

A RESOLUTION OF THE BOARD OF DIRECTORS OF THE

FINANCE AUTHORITY OF THE CITY OF SANTA BARBARA

AUTHORIZING THE EXECUTION AND DELIVERY OF A

GROUND LEASE, A LEASE AGREEMENT, AND AN

INDENTURE IN CONNECTION WITH THE ISSUANCE OF

FINANCE AUTHORITY OF THE CITY OF SANTA BARBARA

LEASE REVENUE BONDS (PUBLIC SAFETY AND PARK
PROJECTS), SERIES 2024, AUTHORIZING THE ISSUANCE

OF SUCH BONDS IN AN AGGREGATE PRINCIPAL AMOUNT
OF NOT TO EXCEED $135,000,000, AUTHORIZING THE

DISTRIBUTION OF AN OFFICIAL STATEMENT IN

CONNECTION THEREWITH AND AUTHORIZING THE

EXECUTION OF NECESSARY DOCUMENTS AND

CERTIFICATES AND RELATED ACTIONS
WHEREAS, the Finance Authority of the City of Santa Barbara (the “Authority”) has been created pursuant to a Joint Exercise of Powers Agreement, dated as of November 1, 2023 (the “Joint Powers Agreement”), between the City of Santa Barbara (the “City”) and the California Statewide Communities Development Authority;
WHEREAS, the City desires to finance costs of the design, engineering, construction, improvement, and installation of facilities to comprise a new City Police Station, the design, engineering, construction, and improvement of Dwight Murphy Field, and the construction of related capital facilities (together, the “Project”);
WHEREAS, the Authority desires to assist the City with such financing; WHEREAS, in order to finance the Project, the City will lease certain real property designated as the site of the new City Police Station and the improvements thereto (the “Property”), to the Authority pursuant to a Ground Lease (such Ground Lease, in the form presented at the meeting for consideration of this resolution and on file with the City Clerk Services Manager (the “City Clerk”) for the Board of Directors of the Authority (“Board of Directors”), with such changes, insertions and omissions as are made pursuant to this resolution, being referred to herein as the “Ground Lease”);
WHEREAS, the City will sublease the Property and the improvements to be completed thereon back from the Authority pursuant to a Lease Agreement (such Lease Agreement, in the form presented at the meeting for consideration of this resolution and on file with the Office of the City Clerk on behalf of the Authority, with such changes, insertions and omissions as are made pursuant to this resolution, being referred to herein as the “Lease Agreement”); WHEREAS, the City and the Authority desire that the Authority issue its Finance Authority of the City of Santa Barbara Lease Revenue Bonds (Public Safety and Park Projects), Series 2024 (the “Bonds”), in an aggregate principal amount not to exceed $135,000,000, payable from the base rental payments (the “Base Rental Payments”) to be made by the City pursuant to the Lease Agreement;
ATTACHMENT 9
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WHEREAS, the Bonds will be issued pursuant to the Marks-Roos Local Bond Pooling Act of 1985, commencing with Section 6584 of the California Government Code (the “Act”); WHEREAS, the Bonds will be issued to (a) finance the Project, (b) finance capitalized interest with respect to the Bonds through May 15, 2027, (c) fund a debt service reserve fund for the Bonds, and (d) pay the costs of issuance of the Bonds; WHEREAS, on September 19, 2019, the City Council of the City adopted a Debt Management Policy for the City, as amended, that complies with Government Code Section 8855(i) (the “Debt Management Policy”). The Debt Management Policy is deemed to apply to the Authority, and the sale and issuance of the Bonds as contemplated by this resolution is in compliance with the Debt Management Policy;
WHEREAS, on the date of this resolution, the City held a public hearing on the financing of the Project in accordance with Section 6586.5 of the Act, which hearing was held the Council Chamber at City Hall, 735 Anacapa Street, Santa Barbara, California; WHEREAS, in accordance with Section 6586.5 of the Act, notice of such hearing was published once at least five days prior to the hearing in The Santa Barbara Independent, an adjudicated local newspaper of general circulation in the City; WHEREAS, to provide for the authentication and delivery of the Bonds, to establish and declare the terms and conditions upon which the Bonds are to be issued and secured and to secure the payment of the principal thereof, premium, if any, and interest thereon, the Authority, the City, and U.S. Bank Trust Company, National Association, as trustee (the “Trustee”), propose to enter into an Indenture (such Indenture, in the form presented at the meeting in connection with this resolution, with such changes, insertions and omissions as are made pursuant to this resolution, being referred to herein as the “Indenture”); WHEREAS, all rights to receive the Base Rental Payments will be assigned without recourse by the Authority to the Trustee pursuant to the Indenture; WHEREAS, the City desires to provide for the public sale of the Bonds; WHEREAS, a form of the Notice of Intention to Sell to be published in connection with the public offering and sale of the Bonds has been prepared (such Notice of Intention to Sell, in the form presented at the meeting for consideration of this resolution and on file with the Office of the City Clerk, with such changes, insertions and omissions as are made pursuant to this resolution, being referred to herein as the “Notice of Intention to Sell”); WHEREAS, a form of the Notice Inviting Bids to be distributed in connection with the public offering and sale of the Bonds has been prepared (such Notice Inviting Bids, in the form presented at the meeting for consideration of this resolution and on file with the Office of the City Clerk, with such changes, insertions and omissions as are made pursuant to this resolution, being referred to herein as the “Notice Inviting Bids”);
WHEREAS, a form of the Preliminary Official Statement to be distributed in connection with the public offering of the Bonds has been prepared (such Preliminary Official Statement, in the form presented at the meeting in connection with this resolution, with such changes, insertions and omissions as are made pursuant to this resolution, being referred to herein as the “Preliminary Official Statement”);
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WHEREAS, the City is a member of the Authority and the Project is to be located within the boundaries of the City;
WHEREAS, there have been prepared and submitted for consideration in connection with adoption of this resolution, and are on file with the Authority, forms of:
(a) the Ground Lease;
(b) the Lease Agreement;
(c) the Indenture;
(d) the Notice of Intention to Sell;
(e) the Official Notice of Sale; and
(f) the Preliminary Official Statement;
WHEREAS, the Authority desires to authorize the execution of such documents and the performance of such acts as may be necessary or desirable to effect the offering, sale, and issuance of the Bonds;
WHEREAS, Government Code Section 5852.1 requires that the Board of Directors obtain from an underwriter, financial adviser, or private lender and disclose, in a meeting open to the public, prior to authorization of the issuance of the Bonds, good faith estimates of (a) the true interest cost of the Bonds, (b) the sum of all fees and charges paid to third parties with respect to the Bonds, (c) the amount of proceeds of the Bonds expected to be received net of the fees and charges paid to third parties and any reserves or capitalized interest paid or funded with proceeds of the Bonds, and (d) the sum total of all debt service payments on the Bonds calculated to the final maturity of the Bonds, plus the fees and charges paid to third parties not paid with the proceeds of the Bonds;
WHEREAS, in compliance with Government Code Section 5852.1, the Board of Directors has obtained from KNN Public Finance, LLC, as the City’s municipal advisor (the “Municipal Advisor”), the required good faith estimates and such estimates are disclosed and set forth on Exhibit A attached hereto; and
WHEREAS, all acts, conditions and things required by the laws of the State of California to exist, to have happened and to have been performed precedent to and in connection with the consummation of the transactions authorized hereby do exist, have happened and have been performed in regular and due time, form and manner as required by law, and the Authority is now duly authorized and empowered, pursuant to each and every requirement of law, to consummate such transactions for the purpose, in the manner and upon the terms herein provided; NOW, THEREFORE, BE IT RESOLVED by the Board of Directors of the Finance Authority of the City of Santa Barbara, as follows:

The foregoing recitals are true and correct, and the Board of Directors so finds and determines.
4 4144-4756-4111.4
The form of the Ground Lease, on file with the Authority, is hereby approved.

Each of the Chair, Vice Chair, Executive Director, Secretary, and Treasurer of the Authority or any officer designated in writing by the Executive Director (each, an “Authorized Officer”) is hereby authorized, and any one of the Authorized Officers is hereby directed, for and in the name of the Authority, to execute and deliver the Ground Lease in the form submitted to this meeting, with such changes, insertions and omissions as the Authorized Officer executing the same may require or approve, such requirement or approval to be conclusively evidenced by the execution of the Ground Lease by such Authorized Officer.

The form of the Lease Agreement, on file with the Authority, is hereby approved. Each of the Authorized Officers is hereby authorized, and any one of the Authorized Officers is hereby directed, for and in the name of the Authority, to execute and deliver the Lease Agreement in the form submitted to this meeting, with such changes, insertions and omissions as the Authorized Officer executing the same may require or approve, such requirement or approval to be conclusively evidenced by the execution of the Lease Agreement by such Authorized Officer; provided, however, that such changes, insertions and omissions shall not result in an aggregate principal amount of the Bonds payable from the Base Rental Payments in excess of $135,000,000, shall not result in the term of the Lease Agreement terminating later than May 15, 2057, (provided that such term may be extended as provided therein) and shall not result in a true interest cost attributable to the Base Rental Payments in excess of 5.5% per annum.

Subject to the provisions of Section 5 hereof, the issuance of the Bonds, in an aggregate principal amount not to exceed $135,000,000, on the terms and conditions set forth in, and subject to the limitations specified in, the Indenture, be and the same is hereby authorized and approved. The Bonds shall be dated, shall bear interest at the rates, shall mature on the dates, shall be subject to call and redemption, shall be issued in the form and shall be as otherwise provided in the Indenture, as the same shall be completed as provided in this resolution.

The form of the Indenture, on file with the Authority, is hereby approved. Each of the Authorized Officers is hereby authorized, and any one of the Authorized Officers is hereby directed, for and in the name of the Authority, to execute and deliver the Indenture in the form submitted to this meeting, with such changes, insertions and omissions as the Authorized Officer executing the same may require or approve, such requirement or approval to be conclusively evidenced by the execution of the Indenture by such Authorized Officer; provided, however, that such changes, insertions and omissions shall not result in an aggregate principal amount of Bonds in excess of $135,000,000, shall not result in a final maturity date of the Bonds later than May 15, 2057, (provided that such term may be extended as provided therein) and shall not result in a true interest cost for the Bonds in excess of 5.5%.

The form of the Notice of Intention to Sell, on file with the Authority, is hereby approved. Each of the Authorized Officers is hereby authorized and directed, for and in the name and on behalf of the Authority, to cause the Notice of Intention to Sell to be published once in The Bond Buyer (and/or in such other financial publication generally circulated throughout the State of California or reasonably expected to be disseminated among prospective bidders for the Bonds as an Authorized Officer shall approve as being in the best interests of the Authority and the City) at least five days prior to the date set for the opening of bids in the Official Notice of Sale, with such changes, insertions and omissions therein as an Authorized Officer may require or approve, such requirement or approval to be conclusively evidenced by such publishing of the Notice of Intention to Sell.
5 4144-4756-4111.4
The form of the Official Notice of Sale, on file with the Authority, is hereby approved. Each of the Authorized Officers is hereby authorized, and any one of the Authorized Officers is hereby directed, for and in the name of the Authority, to execute the Official Notice of Sale in the form submitted to this meeting, with such changes, insertions and omissions as the Authorized Officer executing the same may require or approve, which Official Notice of Sale may be released on one date (or two dates if second bids are required) in connection with the offering and sale of the Bonds. The terms and conditions of the offering and sale of the Bonds shall be as specified in the Official Notice of Sale. Bids for the purchase of the Bonds shall be received at the time and place set forth in the Official Notice of Sale. The Authorized Officers are each hereby authorized and directed, for and in the name and on behalf of the Authority, to accept the bids for the Bonds as determined to offer the lowest true interest cost, or to reject bids for the Bonds, in accordance with the terms of the Official Notice of Sale, and proceed to accept bids at a second time and place to be set forth in the Official Notice of Sale.

The form of the Preliminary Official Statement, on file with the Authority, with such changes, insertions and omissions therein as may be approved by an Authorized Officer, is hereby approved, and the use of the Preliminary Official Statement in connection with the offering and sale of the Bonds is hereby authorized and approved. The Authorized Officers are each hereby authorized to certify on behalf of the Authority that the Preliminary Official Statement is deemed final as of its date, within the meaning of Rule 15c2-12 promulgated under the Securities Exchange Act of 1934 (except for the omission of certain final pricing, rating, and related information as permitted by said Rule).

The preparation and delivery of a final Official Statement (the “Official Statement”), and its use in connection with the offering and sale of the Bonds, be and the same is hereby authorized and approved. The Official Statement shall be in substantially the form of the Preliminary Official Statement, with such changes, insertions and omissions as may be approved by an Authorized Officer, such approval to be conclusively evidenced by the execution and delivery thereof. Each of the Authorized Officers is hereby authorized, and any one of the Authorized Officers is hereby directed, for and in the name of the Authority, to execute the final Official Statement and any amendment or supplement thereto.

With the passage of this resolution, the Authority hereby certifies that the Debt Management Policy complies with Government Code Section 8855(i), and that the Bonds authorized to be issued pursuant to this resolution are consistent with such policy, and instructs Orrick, Herrington & Sutcliffe LLP, as Bond Counsel, on behalf of the Authority, with respect to the Bonds issued pursuant to this resolution, (a) to cause notices of the proposed sale and final sale of the Bonds to be filed in a timely manner with the California Debt and Investment Advisory Commission pursuant to Government Code Section 8855, and (b) to check, on behalf of the Authority, the "Yes" box relating to such certifications in the notice of proposed sale filed pursuant to Government Code Section 8855.

In accordance with Government Code Section 5852.1, good faith estimates of the following have been obtained from the Municipal Advisor and are set forth on Exhibit A attached hereto: (a) the true interest cost of the Bonds, (b) the sum of all fees and charges paid to third parties with respect to the Bonds, (c) the amount of proceeds of the Bonds expected to be received net of the fees and charges paid to third parties and any reserves or capitalized interest paid or funded with proceeds of the Bonds, and (d) the sum total of all debt service payments on the Bonds calculated to the final maturity of the Bonds plus the fees and charges paid to third parties not paid with the proceeds of the Bonds. 6 4144-4756-4111.4
The Board of Directors hereby approves the execution and delivery of all agreements, documents, certificates, and instruments referred to herein with electronic signatures as may be permitted under the California Uniform Electronic Transactions Act and digital signatures as may be permitted under Section 16.5 of the California Government Code using DocuSign.

The officers and agents of the Authority are, and each of them is, hereby authorized and directed, for and in the name of the Authority to do any and all things and to execute and deliver any and all documents which they or any of them deem necessary or advisable in order to consummate the transactions contemplated by this resolution, to record or consent to recordation of the Ground Lease and Lease Agreement or any memorandum thereof, and otherwise to carry out, give effect to and comply with the terms and intent of this resolution.

All actions heretofore taken by the officers and agents of the Authority with respect to the issuance and sale of the Bonds or in connection with or related to any of the agreements or documents referred to herein, are hereby approved, confirmed, and ratified.

The City Clerk shall certify to the adoption of this resolution and thenceforth and thereafter the same shall be in full force and effect.

This resolution shall take effect immediately upon its adoption.

A-1
4144-4756-4111.4

EXHIBIT A

GOOD FAITH ESTIMATES
The good faith estimates set forth herein are provided with respect to the Bonds in accordance with California Government Code Section 5852.1. Such good faith estimates have been provided to the Authority by KNN Public Finance, LLC, the City’s municipal advisor (the “Municipal Advisor”).

Principal Amount. The Municipal Advisor has informed the Authority and the City that, based on the City’s financing plan and current market conditions, its good faith estimate of the aggregate principal amount of the Bonds to be sold is $122,600,000 (the “Estimated Principal Amount”).

True Interest Cost of the Bonds. The Municipal Advisor has informed the Authority and the City that, assuming that the Estimated Principal Amount of the Bonds is sold, and based on market interest rates prevailing at the time of preparation of such estimate, its good faith estimate of the true interest cost of the Bonds, which means the rate necessary to discount the amounts payable on the respective principal and interest payment dates to the purchase price received for the Bonds, is 4.47%.

Finance Charge of the Bonds. The Municipal Advisor has informed the Authority and the City that, assuming that the Estimated Principal Amount of the Bonds is sold and based on market interest rates prevailing at the time of preparation of such estimate, its good faith estimate of the finance charge for the Bonds, which means the sum of all fees and charges paid to third parties (or costs associated with the Bonds), is $1,040,400.

Amount of Proceeds to be Received. The Municipal Advisor has informed the Authority and the City that, assuming that the Estimated Principal Amount of the Bonds is sold, and based on market interest rates prevailing at the time of preparation of such estimate, its good faith estimate of the amount of proceeds expected to be received by the Authority for sale of the Bonds, less the finance charge of the Bonds, as estimated above, and any reserves or capitalized interest paid or funded with proceeds of the Bonds, is $111,000,000.

Total Payment Amount. The Municipal Advisor has informed the Authority and the City that, assuming that the Estimated Principal Amount of the Bonds is sold, and based on market interest rates prevailing at the time of preparation of such estimate, its good faith estimate of the total payment amount, which means the sum total of all payments the Authority will make to pay debt service on the Bonds, plus the finance charge for the Bonds, as described above, not paid with the proceeds of the Bonds, calculated to the final maturity of the Bonds, is $254,800,000, which excludes any reserves or capitalized interest paid or funded with proceeds of the Bonds (which may offset such total payment amount). Such total payment amount, including the debt service reserve fund sized at one-half of maximum annual debt service on the Bonds and capitalized interest on the Bonds through May 15, 2027, is $231,400,000.

The foregoing estimates constitute good faith estimates only and are based on market conditions prevailing at the time of preparation of such estimates. The actual principal amount of the Bonds issued and sold, the true interest cost thereof, the finance charges thereof, the amount of proceeds received therefrom and total payment amount with respect thereto may differ from such good faith estimates due to (a) the actual date of the sale of the Bonds being different than the date assumed for purposes of such estimates, (b) the actual principal amount of Bonds sold A-2
4144-4756-4111.4
being different from the Estimated Principal Amount, (c) the actual amortization of the Bonds being different than the amortization assumed for purposes of such estimates, (d) the actual market interest rates at the time of sale of the Bonds being different than those estimated for purposes of such estimates, (e) other market conditions, or (f) alterations in the City’s financing plan, or a combination of such factors. The actual date of sale of the Bonds and the actual principal amount of Bonds sold will be determined by the Authority and the City based on the timing of the need for proceeds of the Bonds and other factors. The actual interest rates borne by the Bonds will depend on market interest rates at the time of sale thereof. The actual amortization of the Bonds will also depend, in part, on market interest rates at the time of sale thereof. Market interest rates are affected by economic and other factors beyond the control of the City or the Authority. 4144-4756-4111.4
RESOLUTION NO. _______

STATE OF CALIFORNIA )
)
COUNTY OF SANTA BARBARA ) ss
)

CITY OF SANTA BARBARA )
I HEREBY CERTIFY that the foregoing resolution was adopted by the City Council of the City of Santa Barbara as ex officio Board of Directors of the Finance Authority of the City of Santa Barbara, at a meeting held on September 10, 2024, by the following roll call vote:

AYES:

NOES:

ABSENT:

ABSTENTIONS:

IN WITNESS WHEREOF, I have hereto set my hand on September 10, 2024.

Sarah Gorman, MMC
City Clerk Services Manager
I HEREBY APPROVE the foregoing resolution on September 10, 2024.

Randy Rowse
Chair

CITY OF SANTA BARBARA

FINANCE COMMITTEE AGENDA REPORT
AGENDA DATE: September 10, 2024
TO: Finance Committee
FROM: Housing and Human Services Division, Community Development Department
SUBJECT: Authorization to Apply for Matching Funds Totaling $2.9 Million from the State’s Local Housing Trust Fund Program for Affordable Housing Projects
RECOMMENDATION: That Finance Committee consider and recommend that Council:

A. Authorize submittal of an application to the California Department of Housing and Community Development Local Housing Trust Fund (LHTF) program requesting $2,900,000 in matching funds with the City of Santa Barbara Local Housing Trust Fund for eligible projects selected from the City of Santa Barbara’s notice of funding availability, and authorize the Community Development Director to execute such documents, subject to approval as to form by the City Attorney, as necessary; B. Adopt, by reading of title only, a Resolution of the Council of the City of Santa Barbara, Authorized to Act as Manager of the City of Santa Barbara Local Housing Trust Fund, Authorizing Application to the California Department of Housing and Community Development Local Housing Trust Fund Program for Matching Funds of $2,900,000;
C. Adopt, by reading of title only, a Resolution of the Council of the City of Santa Barbara, Authorized to Act as Manager of the City of Santa Barbara Local Housing Trust Fund, Amending Resolution No. 23-076, Adopting the Budget for Fiscal Year 2024, to Approve an Increase in Fiscal Year 2024 Expenditure Appropriations in the Community Development General Fund in the Amount of $500,000 and Approve an Increase in Fiscal Year 2024 Revenue Appropriations in the Local Housing Trust Fund in the Amount of $500,000 Funded by Inclusionary Housing In-Lieu Fees to Provide the Local Housing Trust Fund with Ongoing Revenues Sufficient to Pay for the Trust Fund’s Operating Costs for a Minimum of Five Years after the Date of a Program Award; and
Agenda Item No. 2
File Code No. 120.03
Finance Committee Agenda Report
Authorization to Apply for Matching Funds Totaling $2.9 Million from the State’s Local Housing Trust Fund Program for Affordable Housing Projects September 10, 2024

D. Adopt, by reading of title only, a Resolution of the Council of the City of Santa Barbara, Authorized to Act as Manager of the City of Santa Barbara Local Housing Trust Fund, Adopting the 2017 California Code of Regulations Title 25, Division 1, Chapter 7, Subchapter 19, Commencing with Section 8300 Uniform Multifamily Regulations as the Underwriting Guidelines for the City of Santa Barbara Local Housing Trust Fund.

EXECUTIVE SUMMARY:

On January 23, 2024, City Council adopted Ordinance Number 6138 establishing the City of Santa Barbara Local Housing Trust Fund (SBLHTF) in accordance with the State of California Department of Housing and Community Development (HCD) guidelines (Attachment 1). The purpose of this fund is to utilize and leverage locally generated dollars for the production and preservation of affordable housing units. Leveraging funding is often key to generating large amounts of capital necessary for the provision of affordable housing. HCD offers an opportunity to leverage local dollars through its Local Housing Trust Fund (LHTF) program, which awards applicants with matching funds, dollar-fordollar, to develop affordable housing projects that meet the LHTF requirements. City Council must adopt a resolution to apply for this funding (Attachment 2).

DISCUSSION:

Background
Santa Barbara Local Housing Trust Fund
In order to establish the SBLHTF, the City committed to: a) providing a dedicated source of funding for ongoing revenue for a minimum of five years to support the fund’s operations, and b) making matching funds available at the time of application on a dollarfor-dollar-basis. The adopted Ordinance approved using the City’s inclusionary fund sourced from in-lieu fees to provide for the required ongoing revenue and allocated $2,883,548 in eligible General Funds for the required matching funds. Having earned interest since that time, these matching funds now total approximately $2.9 million. The ongoing revenue required of new Local Housing Trust Funds is an average of $100,000 for a minimum of five years, which is $500,000. If approved, the attached resolution will allow the transfer of $500,000 from the City’s inclusionary fund to the SBLHTF to meet that requirement (Attachment 3).

Notice of Funding Availability
On July 9, 2024, HCD released a Notice of Funding Availability (NOFA) for its 2024 Local Housing Trust Fund (LHTF) program for approximately $53 million in funds, with an application deadline of 4 PM on September 17, 2024. This funding provides dollar-fordollar matching funds to awarded Local Housing Trust Funds established by cities and counties, Native American Tribes, and incorporated 501(c)(3) nonprofit organizations.

Finance Committee Agenda Report
Authorization to Apply for Matching Funds Totaling $2.9 Million from the State’s Local Housing Trust Fund Program for Affordable Housing Projects September 10, 2024

Funding for this NOFA is provided by the Veterans and Affordable Housing Bond Act of 2018 (Proposition 1), adopted by voters on November 6, 2018.

Program funds awarded under this NOFA shall be used to provide construction loans and/or permanent financing loans to pay for predevelopment costs, acquisition, construction or rehabilitation of affordable rental housing projects, emergency shelters, permanent supportive housing, transitional housing and affordable homebuyer/homeowner projects. Program funds may also be used to assist incomeeligible first-time homebuyers purchase homes and to rehabilitate houses owned by income-eligible occupants. Program funds may also be used to construct, convert, reconstruct, rehabilitate, and/or repair Accessory Dwelling Units (ADUs) or Junior Accessory Dwelling Units (JADUs).

Pursuant to LHTF Program Guidelines Section 105(b), if an application is awarded, not more than five percent of the program funds and not more than five percent of the matching funds may be used for administrative costs.

City Request for Proposals
HCD requires LHTF program applicants to follow the public vetting process as required by state law to select eligible projects. In order to adhere to this requirement, the City’s formal process is to issue a Notice of Funding Availability and Request for Proposals.

Applicants are scored on “readiness” in the NOFA, which requires proof of the “extent to which the applicant has completed a first phase funding process for multifamily rental projects and announced on its website the status of each project, including those projects that were approved to submit a final application upon award of Program Funds.” California Health and Safety Code Chapter 50843.5 regulates the state’s LHTF program.

Public hearing requirements are listed under Section (g), which states: “Recipients shall have held, or shall agree to hold, a public hearing or hearings to discuss and describe the project or projects that will be financed with funds provided pursuant to this section.” Therefore, the City Council will be opening this item for a public hearing to provide an opportunity to the public to comment on the proposed projects selected for application to the state’s LHTF program.

On August 2, 2024, the City released a Notice of Funding Availability and Request for Proposals (RFP) inviting the public to submit proposals for eligible projects that meet the guidelines and receive the most competitive ranking. The state’s underwriting guidelines informed a portion of the overall scoring, rating, and ranking process to ensure projects met the state’s underwriting requirements. Staff recommends adopting the state’s underwriting guidelines for any projects requesting funding from the SBHLTF and application to the HCD LHTF program for matching funding (Attachment 4). The deadline for the submittal of proposals was 4:00 P.M. on Friday, August 23, 2024.

Finance Committee Agenda Report
Authorization to Apply for Matching Funds Totaling $2.9 Million from the State’s Local Housing Trust Fund Program for Affordable Housing Projects September 10, 2024

RFP Project(s)
The City received two eligible project proposals in response to the City’s RFP. The Community Development RFP Committee (Committee) has reviewed both proposals submitted by the deadline and has scored the projects according to the rating, ranking, and scoring criteria in both the City’s RFP (Attachment 5) and HCD’s NOFA (Attachment 6) and underwriting guidelines. Both projects have been found to be eligible for the funding and worthy of consideration for application to the state’s LHTF program.

Staff is recommending that City Council approve applying to the state’s LHTF program with both proposed projects and splitting the funding equally between the two proposals.

If awarded, and after five percent of program funds and five percent of matching funds are subtracted for allowable administrative costs, each project would receive $2,755,000 million in funding.

Both projects present exciting opportunities to increase much-needed affordable housing in our community. If awarded by the state, the $2.9 million Council set aside in the SBLHTF will leverage the funding available for these two projects, with combined estimated costs totaling approximately $100 million. More importantly, this funding will help develop close to 100 new affordable housing units in the City, all of which will serve Lower-Income households in need of housing. Each development will also set aside units to provide for special-needs housing, a critically underserved population in the community.

The developers of both projects are long-time City partners with excellent histories in developing, managing, and operating affordable housing properties within the City. The majority of affordable units currently in the City exist due to their successful past developments. The City’s new Local Housing Trust Fund and RFP have attracted two well-qualified affordable housing developers and presented the City with a rare opportunity to support two eligible, exciting, and aesthetically pleasing new projects.

Supporting local experienced affordable housing developers is key to providing the community with quality units that will last for generations to come.

Details of both projects are listed below:

1. Agency: The Housing Authority of the City of Santa Barbara Project Name: 15 South Hope
Estimated Cost: $41,200,000; awarded funding will provide for construction costs Project Description: The proposed project consists of a new-construction, multifamily rental housing development totaling 46 units, to be built on a 53,910- square-foot vacant parcel, located at 15 South Hope Street. The project will encompass one building containing 17 studios, 13 one-bedrooms, and 16 twobedroom apartments, with one two-bedroom apartment set aside as unrestricted for an on-site manager. The development will have four stories, and all floors will Finance Committee Agenda Report
Authorization to Apply for Matching Funds Totaling $2.9 Million from the State’s Local Housing Trust Fund Program for Affordable Housing Projects September 10, 2024

be serviced by a central elevator. The project will set aside 50 percent of the units (23) to serve special-needs individuals living with developmental or mental health disabilities. The remaining 22 units will be non–special needs. The 45 affordabilityrestricted units will be reserved for households with incomes at or below 60 percent AMI, with 18 set aside for households with incomes at or below 30 percent AMI (Extremely Low-Income), 14 at or below 50 percent AMI (Very Low-Income) and 13 at or below 60 percent AMI (Low-Income).

2. Agency: People’s Self-Help Housing
Project Name: Carrillo Street Apartments
Estimated Cost: $55,252,462; awarded funding will provide for acquisition costs Project Description: The proposed project is to develop and construct 65 permanently affordable, newly constructed apartment homes on 0.71 acres. The site comprises four separate parcels: 1. 312 W. Carrillo St., 2. 316 W. Carrillo St.,

3. 1018 Placida Place (aka 1018 Placido Avenue), and 4. 318 W. Carrillo St. The 312 W. Carrillo St. and 316 W. Carrillo St. properties are currently vacant land. The 318 W. Carrillo St. property is improved with an apartment building. The 1018 Placida Pl. property is currently being used as a parking lot for the residents of the apartment building located at 318 W. Carrillo St. Development will involve demolition of existing structures and new construction of 20 studios, 42 onebedroom, and three two-bedroom units, with one unrestricted manager’s unit. All 64 affordability-restricted units will be for households with incomes at or below 60 percent AMI, with 50 percent (33 units) for incomes at or below 30 percent AMI (Extremely Low-Income), 20 units at or below 50 percent AMI (Very Low-Income), and 11 units at or below 60 percent AMI (Low-Income). The project will set aside some units for special needs populations and will provide supportive services.

Under California housing element law, special-needs populations can include persons who are elderly or disabled, female-headed households, large families, farmworkers, and people experiencing homelessness.

In the event that one of the projects listed above is unable to move forward, the other project will receive 100 percent of both the program funds and matching funds, minus five percent of program funds and five percent of matching funds for allowable administration costs, for a total of $5,510,000.

Program Funding
Because the SBLHTF was formed this past year and the City is submitting its first application to the HCD LHTF program, it is considered a “new” Local Housing Trust Fund.

Fifteen percent of NOFA funding is reserved for new Local or Regional Housing Trust Funds, which increases the likelihood that the SBLHTF will receive funding. In the event that there are insufficient applications from new Local Housing Trust Funds, the funds will be used for applications from existing Local Housing Trust Funds.

Finance Committee Agenda Report
Authorization to Apply for Matching Funds Totaling $2.9 Million from the State’s Local Housing Trust Fund Program for Affordable Housing Projects September 10, 2024

If the SBLHTF is awarded program funding from the HCD LHTF program, the funding will be provided as loans to the Projects on residual-receipt terms. These loans will have 30- year terms at three percent simple interest. Payments on the loan will be due on a residual-receipts basis, meaning no payments will be due unless the net income of the project, after payment of necessary operating expenses and debt service, is sufficient to support such payments. All repayments of principal and interest will be considered program income and will be returned to the SBLHTF to be utilized in accordance with SBLHTF guidelines.

Pursuant to the NOFA Guidelines, a Local Housing Trust Fund that receives an award under this NOFA shall not use more than five percent of the allocation and not more than five percent of matching funds for administrative costs related to the execution of eligible activities.

Long-Term Affordability
As a condition of receiving HCD LHTF program funds, housing projects require tenant income and rent restrictions imposed through a State regulatory agreement for a minimum of 55 years; however, as a condition for the City’s subsidy through the SBLHTF, a City Affordability Control Covenant Imposed on Real Property (covenant) will be recorded concurrently with the loan documents, requiring that the project remain affordable to LowerIncome households for 90 years.

The actual mix of income-limit categories that will be restricted in the Lower-Income Households range (which includes Low-, Very Low-, and Extremely Low-Income) ultimately will depend on the LHTF program award, and the covenant will be written to reflect the appropriate number in each category; however, initially all units will be restricted to tenancies of Lower-Income Households (at 60 percent AMI and below) to be awarded the maximum points in that category of the application.

Conclusion
Staff worked closely with City Council to establish the Santa Barbara Local Housing Trust Fund specifically for matching-fund opportunities like this one, and strongly recommends Council approve the application for the LHTF program. If awarded, the funding City Council set aside for this purpose will be matched dollar-for-dollar, leveraging the funding 100 percent. This is an extremely rare opportunity.

The SBLHTF and HCD LHTF program contributes to the City’s goals as outlined in the City’s General Plan 2023–2031 Housing Element, Goal 8 – Fund Affordable Housing, Policy 8.1, which states, “Identify new funding sources and strategies to support affordable housing.”
Staff requests that the Finance Committee recommend that City Council approve applying for matching funding of $2,900,000 through HCD in response to their LHTF program Finance Committee Agenda Report
Authorization to Apply for Matching Funds Totaling $2.9 Million from the State’s Local Housing Trust Fund Program for Affordable Housing Projects September 10, 2024

NOFA. The matching funds are already in the SBLHTF and are eligible to apply for the proposed funding. If awarded, the funds would enable development of additional permanent affordable housing units for Lower-Income households in our community.

BUDGET/FINANCIAL INFORMATION:

On December 6, 2022, City Council allocated $2,883,548 from the Fiscal Year 2022 General Fund operating surplus to meet the matching funds requirement of establishing a Local Housing Trust Fund. This funding has earned interest and is now able to provide $2.9 million in an application to HCD for matching funds through the LHTF program. On January 23, 2024, City Council adopted Ordinance Number 6138, which established the SBLHTF, and dedicated inclusionary housing in-lieu fees collected under sections

28.43.030, 28.43.070, 28.43.130, and 30.160.070 in the Municipal Code as an ongoing revenue source for operations of the SBLHTF.

At the end of Fiscal Year 2024, there were $945,776 in available inclusionary housing inlieu funds. The recommended transfer of $500,000 of inclusionary housing in-lieu funds to the SBLHTF will reduce the available inclusionary housing in-lieu funds balance to $445,776. The recommended transfer is necessary to provide the SBLHTF with ongoing revenues sufficient to pay for the trust fund’s operating costs for a minimum of five years after the date of a program award. The Fiscal Year 2025 budget includes transfer of $100,000 of inclusionary housing in-lieu funds to the SBLHTF as an ongoing revenue source.

ATTACHMENTS: 1. Ordinance Number 6138 Establishing SBLHTF

2. Resolution Authorizing Application to HCD LHTF Program with Attachment 1.

3. Resolution for Inclusionary Revenue LHTF Transfer – FY24 Appropriation Amendment

4. Resolution to Adopt State Regulations as Underwriting Guidelines

5. SBLHTF Request for Proposals

6. HCD 2024 LHTF Notice of Funding Availability
PREPARED BY: Laura Dubbels, Housing and Human Services Manager SUBMITTED BY: Elias Isaacson, Community Development Director APPROVED BY: Kelly McAdoo, City Administrator
ORDINANCE NO. 6138

AN ORDINANCE OF THE COUNCIL OF THE CITY OF

SANTA BARBARA AMENDING THE SANTA BARBARA
MUNICIPAL CODE BY ADDING CHAPTER 26.80
ESTABLISHING THE CITi' OF SANTA BARBARA LOCAL

HOUSING TRUST FUND

THE CITY COUNCIL OF THE CITY OF SANTA BARBARA DOES ORDAIN AS FOLLOWS:

SECTION 1. Title 26 of the Santa Barbara Municipal Code is amended by adding Chapter 26.80 which reads as follows:

26.80.010 Establishment and Purpose.

In accordance with Santa Barbara Charter Section 1215, the City Council hereby establishes the City of Santa Barbara Local Housing Trust Fund ("SBLHTF"), for the purpose of utilizing and leveraging locally generated dollars for the production and preservation of affordable housing units.

26.80.020 Definitions.

The following definitions shall apply to the interpretation of this Chapter:

A. AREA MEDIAN INCOME or AMI. The most recent applicable county median family income published by the State of California Department of Housing and Community Development ("HCD").

B. ELIGIBLE PROJECT. Shall be defined as projects that are considered eligible and in compliance with the California Department of Housing and Development guidelines.

C. EXTREMELY LOW INCOME HOUSEHOLDS. Shall have the definition given in California Health & Safety Code Section 50106.

D. HCD or DEPARTMENT. Shall mean the State of California Department of Housing and Community Development.

E. HCD GUIDELINES. As adopted by HCD to implement, interpret and make specific Health and Safety Code (HSC) Sections 50842. 1, 50842. 2, 50843. 5 and 54006(f) which governs the Local hlousing Trust Fund Program.

Attachment 1
F. LOWER INCOME HOUSEHOLDS. Shall have the definition given in Health and Safety Code Section 50079.5.

G MATCHING FUNDS. Funds to the SBLHTF that are provided on an ongoing basis from both private and public contributions or public sources and that are not otherwise restricted for housing use under federal or state law.

H. MODERATE INCOME HOUSEHOLDS. Shall have the definition given in Health and Safety Code Section 50093.

I. VERY LOW INCOME. Shall have the definition given in Health and Safety Code Section 50105.

26.80.030 Funding Sources.

SBLHTF shall receive funding from the sources set forth below. SBLHTF may also receive funding from any other legally available source.

A. MATCHING FUNDS. The SBLHTF shall receive Matching Funds in the amount of $2,883,548.00, that was allocated by the City Council on December 6, 2022, from the General Fund and specifically dedicated to a local housing trust fund.

B. ONGOING REVENUE. All inclusionary housing in-lieu fees collected under Sections 28.43.030, 28.43.070, 28.43. 130, and 30. 160.070 in the Municipal Code shall be deposited in the Local Housing Trust Fund as a dedicated and continuous source for operations of the Fund for a minimum of the required first five years of the Fund's existence.

C. City Council may allocate funds as Ongoing Revenue and Matching Funds to the SBLHTF to provide additional funding as needed.

26. 80. 040 Eligible Uses of SBLHTF.

A. Monies deposited in the SBLHTF shall be used to secure Program Funds under the applicable HCD Guidelines and statutes. Program Funds and Matching Funds shall be used for payment of predevelopment costs, acquisition, construction, or rehabilitation of Eligible Projects. Monies in the SBLHTF not used as Matching Funds or as Ongoing Revenue sources, may be used in accordance with the priorities identified by the Council approved Housing Element and financing strategy to construct, acquire, rehabilitate, or subsidize Very Low, Lower, and Moderate income housing.

B. Administrative expenses of up to five percent of Program Funds and Matching Funds are permitted.

C. At least 30 percent of Program Funds and Matching Funds shall be expended on assistance to Extremely Low Income Households.

D. No more than 20 percent of Program Funds and Matching Funds, shall be expended on assistance to Moderate Income Households.

E. The remaining Program Funds and Matching Funds may be expended on assistance to Lower Income hlousing.

F. Expenditures from the SBLHTF shall be controlled, authorized, and paid in accordance with general City budgetary policies. Execution of contracts related to the use or administration of SBLHTF monies shall be in accordance with requirements expressly contained in the City's Charter, the Municipal Code, and City policy.

26.80.050 Administration of Funds.

A. Applications for funding shall be in a form approved by the Community Development Director and shall specify the Eligible Project and the number of Extremely Low, Very Low, Lower, and Moderate income housing units to be included in the Project.

The application shall include all documentation and information deemed necessary by the Director for the evaluation of the application for compliance with State HCD requirements and City Council priorities. The application process will not require a request for proposal or a NOFA application. Application requirements will be based upon compliance with the State HCD requirements and the requirements of the established City of Santa Barbara Affordable Housing Policies and Procedures Handbook. Once reviewed for compliance, the Community Development Director will then forward the application to the City Council for consideration of financial assistance from the SBLHTF.

B. The SBLHTF shall be administered by the Finance Director and applications for funding shall be submitted to the Community Development Director as described in

26. 80. 050 (A).

C. Not later than July 31 st of each year, the City shall provide the hlCD with an annual report which contains the information required by the Guidelines, as may be amended from time to time. Additionally, revenues collected, funds committed, expenditures made, and any decisions made as to requests for reductions or exceptions shall be forwarded by the Finance Director and the Community Development Director and presented to the City Council.

SECTION 2. Severability. If any section, subsection, subdivision, paragraph, sentence, clause or phrase of this Chapter or any part hereof is for any reason held to be unconstitutional, such decision shall not affect the validity of the remaining portions of this Chapter of any part hereof. The City Council declares that it would have passed each section, subsection, paragraph, sentence, clause, or phrase hereof, irrespective of the fact that any one or more sections, subsections, subdivisions, paragraphs, sentences, clauses, or phrases be declared unconstitutional.

SECTION 3. The City Council finds that, on the basis of the whole record and exercising its independent judgment, this Ordinance is not subject to environmental review pursuant to the State Guidelines for Implementation of the California Environmental Quality Act Section 15060(c)(3) pertaining to activities that will not result in a direct or reasonably foreseeable indirect change to the environment and that are not defined as a project under Section 15378. This Ordinance has no potential for resulting in physical change to the environment directly or indirectly in that it merely regulates existing physical development.

ORDINANCE NO. 6138

STATE OF CALIFORNIA
COUNTY OF SANTA BARBARA ) ss.
)

CITY OF SANTA BARBARA )
I HEREBY CERTIFY that the foregoing ordinance was introduced on January 9, 2024, and adopted by the Council of the City of Santa Barbara at a meeting held on January 23, 2024, by the following roll call vote:

AYES: Councilmembers Eric Friedman, Alejandra Gutierrez, Oscar Gutierrez, Meagan hlarmon, Mike Jordan, Kristen W. Sneddon, Mayor Randy Rowse
NOES:

ABSENT:

None
None
ABSTENTIONS: None
IN WITNESS WHEREOF, I have hereto set my hand and affixed the official seal of the City of Santa Barbara on January 23, 2024.
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Sarah German, MMC
City Clerk Services Manager
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1 ______________________
_________________________________________________

AUTHORIZING RESOLUTION
_____________________________________of the ___________________________________ of _________________________________________________________(“Applicant”) hereby consents to, adopts and ratifies the following resolution:

A. WHEREAS, the Department is authorized to provide up to $53 million under the Local Housing Trust Fund (“LHTF”) Program from the Veterans and Affordable Housing Bond Act of 2018 (Proposition 1) (as described in Health and Safety Code section 50842.2 et seq. (Chapter 365, Statutes of 2017 (SB 3)) (“Program”).

B. WHEREAS the State of California (the “State”), Department of Housing and Community Development (“Department”) issued a Notice of Funding Availability (“NOFA”) dated 7/9/2024 under the LHTF Program;
C. WHEREAS Applicant is an eligible Local or Regional Housing Trust Fund applying to the Program to administer one or more eligible activities using Program Funds.

D. WHEREAS the Department may approve funding allocations for the LHTF Program, subject to the terms and conditions of H&S Code Section 50842.2, the LHTF Program Guidelines, NOFA, Program requirements, the Standard Agreement and other related contracts between the Department and LHTF award recipients;
NOW THEREFORE BE IT RESOLVED THAT:

1. If Applicant receives an award of LHTF funds from the Department pursuant to the above referenced LHTF NOFA, it represents and certifies that it will use all such funds on Eligible Projects in a manner consistent and in compliance with all applicable state and federal statutes, rules, regulations, and laws, including, without limitation, all rules and laws regarding the LHTF Program, as well as any and all contracts Applicant may have with the Department (“Eligible Project”).
2 2. NOW, THEREFORE, IT IS RESOLVED: That the ____________________________________ is hereby authorized to act as the ______________ in connection with the Department's funds to Eligible Projects pursuant to the above described Notice of Funding Availability in an amount not to exceed $ (the "LHTF Award"). NOTE: Dollar amount must include amount used for administrative costs, pursuant to Section 105(b) of the Guidelines.

3. Applicant hereby agrees to match on a dollar for dollar basis the LHTF Award pursuant to Guidelines Section 104. Applicant hereby agrees to utilize matching finds on a dollar-for-dollar basis for the same Eligible Project for which Program Funds are used, as required by HSC Section 50843.5(c).

INSTRUCTION: Provide a short summary on how you commit to use the Program Funds and Matching Funds. The summary, which shall be labeled Attachment 1 shall include: (1) identification of the percent of the total funds requested that will be used for each activity/project, including Area Median Income (AMI) level; and (2) a list of the jurisdictions where the activities/projects will be delivered, in the case of any HTF that serves more than one jurisdiction. Attachment 1 MUST be incorporated into your Resolution as an attachment before it is adopted.

4. Pursuant to Attachment 1 and the Applicant’s certification in this resolution, the LHTF funds will be expended only for Eligible Projects and consistent with all program requirements.

5. Nonprofit Housing Trust Funds and Native American Tribe Housing Trust Funds agree to use Program Funds only for Eligible Projects located in cities and counties that submitted an adopted Housing Element that was found by the Department to be in compliance and that have submitted their Housing Element Annual Progress Report (APR) for the current year or prior year by the application due date.

6. Applicant shall be subject to the terms and conditions as specified in the Standard Agreement, H&S Section 50842.2 and LHTF Program Guidelines

7. _______________________________ is/are authorized to execute the LHTF Program Application, the LHTF Standard Agreement and any subsequent amendments or modifications thereto, as well as any other documents which are related to the Program or the LHTF Award to Applicant, as the Department may deem appropriate.
3 PASSED AND ADOPTED at a regular meeting of
the _________________________________________________________ this _____ day of ____________, _________ by the following vote:

AYES: _____ ABSTENTIONS: _____ NOES: ____ ABSENT: _____ Approving Officer: _______________________
Signature of Approving Officer
__________________________________________
INSTRUCTION: The attesting officer cannot be the person identified in the resolution as the authorized signor

CERTIFICATE OF THE ATTESTING OFFICER
The undersigned, Officer of _________________________ does hereby attest and certify that the ________________ Resolution is a true, full and correct copy of a resolution duly adopted at a meeting of the _____________________________________________________________, which was duly convened and held on the date stated thereon, and that said document has not been amended, modified, repealed or rescinded since its date of adoption and is in full force and effect as of the date hereof.

ATTEST: ____________________
Signature of Attesting Officer
________________________________________
Resolution No. ________
Attachment 1 for Resolution
The City of Santa Barbara Local Housing Trust Fund will commit funding to two projects within the City of Santa Barbara’s jurisdiction as follows:
1) Agency: The Housing Authority of the City of Santa Barbara Project Name: 15 South Hope
Total Funding to Project:
50% Program Funds minus 5% Administration $1,377,500
50% Matching Funds minus 5% Administration $1,377,500
Total Funding to Project: $2,755,000 toward construction costs Project Description:

The proposed project consists of a new construction multifamily rental housing development totaling 46 units, to be built on a 53,910 sq. ft. vacant parcel, located at 15 South Hope Street. The project will encompass one building containing 17 studios, 13 one-bedrooms, and 16 two-bedroom apartments with one 2-bedroom apartment set aside as unrestricted for an onsite manager. The development will have four stories, and all floors will be serviced by a central elevator. The project will set aside 50 percent of the units (23) as special needs serving individuals living with developmental or mental health disabilities. The remaining 22 units will be non-special needs. The 45 affordability restricted units will be reserved for households with incomes at or below 60% AMI, with 18 being for households with incomes at or below 30% AMI (Extremely Low-Income), 14 at or below 50% AMI (Very Low-Income) and 13 at or below 60% AMI (Low-Income). 2) Agency: People’s Self-Help Housing
Project Name: Carrillo Street Apartments
Total Funding to Project:
50% Program Funds minus 5% Administration $1,377,500
50% Matching Funds minus 5% Administration $1,377,500
Total Funding to Project: $2,755,000 toward acquisition costs Project Description:

The proposed project is to develop and construct 65 permanently affordable newly constructed apartment homes on 0.71 acres located in downtown Santa Barbara. The site is comprised of four separate parcels: 1) 312 W. Carrillo St., 2) 316 W. Carrillo St., 3) 1018 Placida Place (aka 1018 Placido Avenue), and 4) 318 W. Carrillo St. The 312 W. Carrillo St. and 316 W. Carrillo St. properties are currently vacant land. 318 W. Carrillo St. is improved with an apartment building.

The 1018 Placida Place property is currently being used as a parking lot for the residents of the apartment building located at 318 W. Carrillo St. Development will involve demolition of existing structures and new construction of 20 studios, 42 one bedrooms and 3 two-bedroom units (1 unrestricted for a manager’s unit). All 64 affordability restricted units will be for households with incomes at or below 60% AMI, with 50 percent (33 units) for incomes at or below 30% AMI (Extremely Low-Income), 20 units at or below 50% AMI (Very Low-Income), and 11 units at or below 60% AMI (Low-Income). The project will also set aside units to serve special needs populations and will provide supportive services. Under California housing element law, special needs populations can include persons who are elderly or disabled, female headed households, large families, farmworkers, and people experiencing homelessness.

In the event that one of the projects listed above is unable to move forward, then 100 percent of both the Program Funds and Matching Funds minus five percent of Program Funds and five percent of Matching Funds for allowable administration costs, for a total of $5,510,000, will be provided to the other project.

Attachment 3
RESOLUTION NO.

A RESOLUTION OF THE COUNCIL OF THE CITY OF

SANTA BARBARA, AUTHORIZED TO ACT AS MANAGER

OF THE CITY OF SANTA BARBARA LOCAL HOUSING
TRUST FUND, AMENDING RESOLUTION NO. 23-076,
ADOPTING THE BUDGET FOR FISCAL YEAR 2024, TO
APPROVE AN INCREASE IN FISCAL YEAR 2024

EXPENDITURE APPROPRIATIONS IN THE COMMUNITY

DEVELOPMENT GENERAL FUND IN THE AMOUNT OF
$500,000 AND APPROVE AN INCREASE IN FISCAL YEAR
2024 REVENUE APPROPRIATIONS IN THE LOCAL
HOUSING TRUST FUND IN THE AMOUNT OF $500,000

FUNDED BY INCLUSIONARY HOUSING IN-LIEU FEES TO

PROVIDE THE LOCAL HOUSING TRUST FUND WITH

ONGOING REVENUES SUFFICIENT TO PAY FOR THE
TRUST FUND’S OPERATING COSTS FOR A MINIMUM OF
FIVE YEARS AFTER THE DATE OF A PROGRAM AWARD.

WHEREAS, in accordance with the City Charter, the City Administrator filed with the Council a proposed budget for the fiscal year beginning July 1, 2023; and WHEREAS, the City Council is required to adopt a budget before the beginning of the fiscal year on July 1, 2023; and
WHEREAS, the City Charter provides that at any public meeting after the adoption of the budget, the City Council may amend or supplement the budget by motion adopted by the affirmative votes of at least a majority of the total members of the City Council; and WHEREAS, as authorized by Resolution No. 23-076, this Resolution approves the amendment to the budget as provided herein.

NOW THEREFORE, be it resolved by the Council of the City of Santa Barbara that in accordance with the provisions of Section 1205 of the City Charter, the budget for the fiscal year 2024, as adopted [or amended] by Resolution No. 23-076, is hereby amended as follows:

1. City Council approves of appropriating available General Fund Inclusionary Housing In-Lieu fee reserve funds in Fiscal Year 2024 in the amount of $500,000 in order to fund a transfer to the Local Housing Trust Fund to provide ongoing revenues sufficient to pay for the trust fund’s operating costs for a minimum of five years after the date of a program award.

RESOLUTION NO.

A RESOLUTION OF THE COUNCIL OF THE CITY OF

SANTA BARBARA, AUTHORIZED TO ACT AS MANAGER

OF THE CITY OF SANTA BARBARA LOCAL HOUSING
TRUST FUND, ADOPTING THE 2017 CALIFORNIA CODE
OF REGULATIONS TITLE 25, DIVISION 1, CHAPTER 7,
SUBCHAPTER 19, COMMENCING WITH SECTION 8300

UNIFORM MULTIFAMILY REGULATIONS AS THE

UNDERWRITING GUIDELINES FOR THE SANTA
BARBARA LOCAL HOUSING TRUST FUND.

WHEREAS, the City Council has authorized an application to be submitted to the California Department of Housing and Community Development Local Housing Trust Fund (LHTF) Program for consideration of award of Matching Funds with the Santa Barbara Local Housing Trust Fund (SBLHTF) in the amount of $2.9 million; and WHEREAS, the City Council hereby adopts the 2017 California Code of Regulations Title 25, Division 1, Chapter 7, Subchapter 19, Commencing with Section 8300 Uniform Multifamily Regulations as the underwriting guidelines for the Santa Barbara Local Housing Trust Fund; and
NOW THEREFORE, be it resolved by the Council of the City of Santa Barbara, authorized to act as the manager of the City of Santa Barbara Local Housing Trust Fund, that in accordance with the provisions of Section 1205 of the City Charter, the SBLHTF project underwriting guidelines are hereby adopted as follows:

1. City Council approves of the adoption of the 2017 California Code of Regulations Title 25, Division 1, Chapter 7, Subchapter 19, Commencing with Section 8300 Uniform Multifamily Regulations as the underwriting guidelines for the SBLHTF.(Exhibit A attached hereto and incorporated herein by reference.) Attachment 4

California Code of Regulations
Title 25, Division 1
Chapter 7
Subchapter 19
Commencing with Section 8300
Effective date: November 15, 2017
Section 8300. Purpose and Scope........................................................................2 Section 8301. Definitions . .....................................................................................2 Section 8302. Restrictions on Demolition. ............................................................6 Section 8303. Site Control Requirements and Scattered Site Projects.................7 Section 8304. Unit Standards. ..............................................................................8 Section 8305. Tenant Selection. ...........................................................................9 Section 8306. Tenant Recertification. .................................................................12 Section 8307. Rental Agreement and Grievance Procedure. .............................12 Section 8308. Operating Reserves. ....................................................................14 Section 8309. Replacement Reserves................................................................16 Section 8310. Underwriting Standards................................................................18 Section 8311. Limits on Development Costs. .....................................................21 Section 8312. Developer Fee. ............................................................................22 Section 8313. Program Compatibility.................................................................24 Section 8313.1 Funding Source Surpluses........................................................24 Section 8313.2 Special Purpose Entity(ies). .......................................................25 Section 8314. Use of Operating Cash Flow. ......................................................26 Section 8315. Subordination Policy. ...................................................................29 Section 8316. Leasehold Security.......................................................................32 Section 8317. Restructuring Transaction Fees. ..................................................34 Section 8318. Federal Loan Extensions. ............................................................35 Uniform Multifamily Regulations 11/15/2017 Page 1 of 35 Exhibit A

Section 8300. Purpose and Scope.
(a) These regulations provide uniform standards and program rules for multifamily rental housing developments assisted by the Department of Housing and Community Development.
(b) When expressly incorporated by reference, some or all of the provisions of this Chapter shall apply to: the Joe Serna, Jr.

Farmworker Housing Grant (JSJFWHG) Program (Chapter 7,
subchapter 3, commencing with Section 7200); the Multifamily Housing Program (MHP) (Chapter 7, subchapter 4, commencing with Section 7300); and the HOME Investment Partnerships (HOME) Program (Chapter 7, subchapter 17, commencing with Section 8200). These regulations interpret and make specific the following statutes applicable to these programs: Health and Safety Code Division 31, Part 3.2, Chapter 2 (commencing with Section 50517.5), Chapter 6.7 (commencing with Section 50675), and Chapter 16 (commencing with Section 50896).
(c) The 2017 adoptions and amendments to subchapter 19 shall be effective on November 15, 2017 and shall apply prospectively to all standard agreements between the Department and Sponsors that are executed or amended on or after the foregoing effective date and are governed by the authorities set forth in subsection (b).

These agreements are subject to the standard contract format referenced in the California State Contracting Manual.

Note: Authority cited: Sections 50406(n), 50517.5(a)(1), 50517.5(a)(2), 50675.1(d), 50675.11 and 50896.3(b), Health and Safety Code. Reference:

Sections 50517.5, 50675, 50896, 50896.1 and 50896.3, Health and Safety Code; and 24 CFR part 92.

Section 8301. Definitions.

The following definitions govern this subchapter.
(a) "Assisted Unit" means a Unit that is subject to the Program’s rent and/or occupancy restrictions as a result of the financial assistance provided by the Program, as specified in the Regulatory Agreement.
(b) “CalHFA” means the California Housing Finance Agency. (c) “Commercial Space” means any nonresidential space located in or on the property of a Rental Housing Development that is, or is Uniform Multifamily Regulations 11/15/2017 Page 2 of 35

proposed to be, rented or leased by the owner of the Project, the income from which shall be included in Operating Income. (d) “CPI” means the Consumer Price Index for All Urban Consumers, West Region, All Items, as published by the Bureau of Labor Statistics, United States Department of Labor.
(e) “Debt Service Coverage Ratio" means the ratio of (1) Operating Income less the sum of Operating Expenses and required reserves to (2) debt service payments, excluding voluntary prepayments and non-mandatory debt service. In calculating Debt Service Coverage Ratio, the Department may include all Operating Income, and may exclude Operating Income that cannot be reasonably underwritten by lenders making amortized loans or that is approved by the Department to be deposited into a reserve account to defray projected operating deficits.
(f) "Department" means the Department of Housing and Community Development.
(g) “Developer Fee” means the same as the definition of that term in California Code of Regulations, Title 4, Section 10302. (h) "Distributions" means the amount of cash or other benefits received from the operation of a Rental Housing Development and available to be distributed pursuant to Section 8314 to the Sponsor or any party having a beneficial interest in the Sponsor or the Project, after payment of all due and outstanding obligations incurred in connection with the Rental Housing Development. Distributions do not include payments for: deferred Developer Fee up to the limit set forth in Section 8312, approved partnership and asset management fees, mandatory debt service, approved reserve accounts established to prevent tenant displacement resulting from the termination of rent subsidies, operations, maintenance, payments to approved reserve accounts, land lease payments to parties that do not have a beneficial interest in the Sponsor entity, or payments for property management or other services as set forth in the Regulatory Agreement for the Rental Housing Development.

Distributions include releases to the Sponsor or any other party of reserve funds, where the use of these funds have not been approved by the Department for Project costs.
(i) “Eligible Households” for MHP means “eligible household” as defined in Section 7301, for HOME this term means the same as “low income families” as defined in 24 CFR 92.2, and for JSJFWHG Uniform Multifamily Regulations 11/15/2017 Page 3 of 35

this term means the same as “agricultural household” as defined in Section 7202.
(j) “Native American Lands” means real property located within the geographic boundary of the State of California that meets both the following criteria: it is trust land for which the United States holds title to the tract or interest in trust for the benefit of one or more Indian tribes or individual Indians, or is restricted Indian land for which one or more tribes or individual Indians holds fee title to the tract or interest but can alienate or encumber it only with the approval of the United States; and the land may be leased for housing development and residential purposes under federal law. (k) "Operating Expenses" means the amount approved by the Department that is necessary to pay for the recurring expenses of the Project, such as utilities, maintenance, management, taxes, licenses, and Supportive Services Costs, but not including debt service or required reserve account deposits.
(l) "Operating Income" means all income generated in connection with operation of the Rental Housing Development including rental income for Assisted Units and non-Assisted Units, rental income for Commercial Space or commercial use, laundry and equipment rental fees, rental subsidy payments, and interest on any accounts, other than approved reserve accounts, related to the Rental Housing Development. "Operating Income" does not include security and equipment deposits, payments to the Sponsor for Supportive Services not included in the Department-approved operating budget, cash contributed by the Sponsor, or tax benefits received by the Sponsor.
(m) "Program" means the Department funding program or programs providing assistance to the Project.
(n) "Project" means a Rental Housing Development, and includes the development, the construction or rehabilitation, and the operation thereof, and the financing structure and all agreements and documentation approved in connection therewith.
(o) “Regulatory Agreement” means the written agreement between the Department and the Sponsor that will be recorded as a lien on the Rental Housing Development to control the use and maintenance of the Project, including restricting the rent and occupancy of the Assisted Units.

Uniform Multifamily Regulations 11/15/2017 Page 4 of 35

(p) "Rental Housing Development" means a structure or set of structures which collectively contains 5 or more Units (except that HOME projects may contain fewer than 5 Units.). “Rental Housing Development” does not include any “health facility” as defined by Section 1250 of the Health and Safety Code or any “alcoholism or drug abuse recovery or treatment facility” as defined by Section 11834.02 of the Health and Safety Code.
(q) “Restricted Unit” means any Assisted Unit and any Unit that is subject to Rent and occupancy restrictions that are comparable to those applicable to Assisted Units. Restricted Units include Units subject to a TCAC regulatory agreement, and all Units subject to similar long-term, low-income or occupancy restrictions imposed by other public agencies.
(r) "Rural Area" means the same as defined in Section 50199.21 of the Health and Safety Code.
(s) “Sponsor” means the legal entity or combination of legal entities with continuing control of the Rental Housing Development. Where the borrowing entity is or will be organized as a limited partnership, Sponsor includes the general partner or general partners who have effective control over the operation of the partnership, or, if the general partner is controlled by another entity, the controlling entity.

Sponsor does not include the seller of the property to be developed as the Project, unless the seller will retain control of the Project for the period of time necessary to ensure Project feasibility as determined by the Department.
(t) “Supportive Services” means social, health, educational, income support and employment services and benefits, coordination of community building and educational activities, individualized needs assessment, and individualized assistance with obtaining services and benefits.
(u) “Supportive Services Costs” means the costs of providing tenants service coordination, case management, and direct resident and Supportive Services. It includes:
(1) the cost of providing tenants with information on and referral to social, health, educational, income support and employment services and benefits, coordination of community building and educational activities, individualized needs assessment, and individualized assistance with obtaining services and benefits; Uniform Multifamily Regulations 11/15/2017 Page 5 of 35

(2) salaries, benefits, contracted services, telecommunication expenses, travel costs, supplies, office expenses, staff training, maintenance of on-site equipment used in services programs, such as computer labs, incidental costs related to resident events, and other similar costs approved by the Department. (v) “TCAC" means the California Tax Credit Allocation Committee. (w) "Transitional Housing" means a Rental Housing Development operating under programmatic constraints that require the termination of assistance after a specified time or event, in no case less than 6 months after initial occupancy, and the re-renting of the Assisted Unit to another eligible participant.
(x) “Unit” means a residential Unit that is used as a primary residence by its occupants, including efficiency Units, residential hotel units, and units used as Transitional Housing.

Note: Authority cited: Sections 50406(n), 50517.5(a)(1), 50517.5(a)(3), 50675.1(d), 50675.11, 50896.1(a) and 50896.3(b), Health and Safety Code.

Reference: Sections 50517.5, 50675, 50675.1(c), 50675.2 and 50896.1(a), Health and Safety Code; and 24 CFR part 92.

Section 8302. Restrictions on Demolition.
(a) Proposed projects involving new construction and requiring the demolition of existing residential Units are eligible only if the number of bedrooms in the new Project is at least equal to the total number of bedrooms in the demolished structures. The new Units may exist on separate parcels provided all parcels are part of the same Rental Housing Development meeting the requirements of Section 8303(b).
(b) The Department may approve exceptions to subsection (a) where it determines that such exceptions will substantially improve the livability of the remaining units, or serve some other compelling public policy objective. For example, it may approve a reduction in the number of single room occupancy (SRO) units where
necessary to add private cooking and bathing facilities, or a reduction in the number of bedrooms in public housing necessary to meet federal requirements.

Note: Authority cited: Sections 50406(n), 50517.5(a)(1), 50517.5(a)(3), 50675.1(d), 50675.11, 50896.1(a) and 50896.3(b), Health and Safety Code.

Reference: Sections 50517.5(a)(1), 50517.5(d)(3), 50675.4, 50675.7 and 50896.1(a), Health and Safety Code; and 24 CFR Section 92.353(a).

Uniform Multifamily Regulations 11/15/2017 Page 6 of 35

Section 8303. Site Control Requirements and Scattered Site Projects. (a) At the time of application, a Sponsor must have site control of the of the proposed Project property, in the name of the Sponsor or an entity controlled by the Sponsor, by one of the following means:
(1) fee title, which, for tribal trust land, may be evidenced by a title status report or an attorney’s opinion regarding chain of title and current title status;
(2) a leasehold interest on the Project property with provisions that enable the lessee to make improvements on and
encumber the property provided that the terms and
conditions of any proposed lease shall permit, prior to loan closing, compliance with all Program requirements, including compliance with Section 8316;
(3) an enforceable option to purchase or lease which shall extend through the anticipated date of the Program award as specified in the Notice of Funding Availability (NOFA); (4) a disposition and development agreement with a public agency;
(5) an agreement with a public agency that gives the Sponsor exclusive rights to negotiate with that agency for acquisition of the site, provided that the major terms of the acquisition have been agreed to by both parties; or
(6) a land sales contract, or other enforceable agreement for the acquisition of the property.
(b) If the Project has multiple contiguous or non-contiguous sites, the configuration of those sites must satisfy all provisions of the statutes governing the applicable Department funding program or programs, and meet the following additional requirements:
(1) all of the developments on the various sites must have a single owner and property manager at the time of the closing of the Department loan, with the exception of any nonresidential condominium units; (2) the debt and associated security instruments of all lenders senior to the Department must be the same for all sites, and multiple senior lenders shall not be allowed;
Uniform Multifamily Regulations 11/15/2017 Page 7 of 35

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(3) there must be a single annual report, schedule of rental income, and annual audit of project operations covering all sites;
(4) the Department must be secured against all sites, with lien priority relative to local public agency lenders and use of cash flow available for residual receipt loan payments
determined in accordance with Section 8314(a)(2)(A) and (B) of these regulations (with each lender’s share of residual receipts proportionate to their share of total Department and local government assistance for the entire multi-site project); and
(5) the Department must be named on applicable insurance policies subject to the Department’s approval covering all sites, including but not limited to title insurance policies and other policies with coverage for hazard and liability insurance for the Rental Housing Development, including flood
insurance, if applicable. The Department shall be named as a loss payee or an additional insured on all such policies.

Such policies also shall provide for notice to the Department in the event of any lapse of coverage and in the event of any claim thereunder. Insurance must be obtained and
maintained for the term of the Department’s program loan.

Note: Authority cited: Sections 50406(n), 50517.5(a)(1), 50517.5(a)(3), 50675.1(d), 50675.11, 50896.1(a) and 50896.3(b), Health and Safety Code.

Reference: Sections 50517.5(d)(4)(A), 50675.6, 50675.7(c)(3) and 50896.1(a), Health and Safety Code; 42 U.S.C. Section 5304(b); and 24 CFR Section

92.35(a).

Section 8304. Unit Standards.
(a) Restricted Units shall not differ substantially in size or amenity level from non-Restricted Units with the same number of bedrooms, and Units shall not differ in size or amenity level on the basis of incomelevel restrictions. Restricted Units shall not be segregated from non-Restricted Units, and Units shall not be segregated from each other on the basis of income-level restrictions. Within these limits, Sponsors may change the designation of a particular Unit from Assisted to non-Assisted or from one income-restriction to another over time. For Projects involving rehabilitation or conversion, the Department may permit certain Units to be designated as exclusively market-rate Units where necessary for fiscal integrity and where all other Program requirements are satisfied.

Uniform Multifamily Regulations 11/15/2017 Page 8 of 35

(b) For the full loan term, the number, size, type, and amenity level of Assisted Units shall not be fewer than the number nor different from the size, type and amenity level described in the Regulatory Agreement.
(c) For projects assisted by MHP, the number of Assisted Units shall equal the number of Restricted Units to the extent allowed by the requirements of Article XXXIV of the California Constitution.

Note: Authority cited: Sections 50406(n), 50517.5(a)(1), 50517.5(a)(3), 50675.1(c), 50675.11, 50896.1(a) and 50896.3(b), Health and Safety Code.

Reference: Sections 50517.5(d)(4)(A), 50517.5(d)(5), 50517.5(e)(2), 50675.1(c), 50675.2(b), 50675.7, 50675.8 and 50896.1(a), Health and Safety Code; and 24 CFR Sections 92.252(e) and 92.504(c).

Section 8305. Tenant Selection.
(a) Sponsors shall select only Eligible Households as tenants of vacant Assisted Units, using procedures approved by the Department that include:
(1) reasonable criteria for selection or rejection of tenant applications which shall not discriminate in violation of any federal, state or local law governing discrimination, or any other arbitrary factor;
(2) prohibition of local residency requirements;
(3) prohibition of local residency preferences, except where there is evidence satisfactory to the Department that the preference as applied will comply with fair housing law and:
(A) where accompanied by an equal preference for
employment in the local area and applied to areas not
smaller than municipal jurisdictions or recognized
communities within unincorporated areas, or
(B) where a local ordinance grants a preference to
neighborhood residents who have been or are about
to be displaced;
(4) tenant selection procedures that include the following components, and that are available to prospective tenants upon request:
(A) selection of tenants based on order of application, lottery or other reasonable method approved by the
Uniform Multifamily Regulations 11/15/2017 Page 9 of 35

Department, including priority status under a local
coordinated entry (also known as centralized or
coordinated assessment, or coordinated access)
system established pursuant to federal regulations
governing the Continuum of Care program, 24 Code
of Federal Regulations, Part 578 (June 6, 2017)
hereby incorporated by reference;
(B) does not encourage or require applicants to wait in a physical line;
(C) notification to tenant applicants of eligibility for residency and, based on turnover history for Units in
the Rental Housing Development, the approximate
date when a Unit may be available;
(D) notification of tenant applicants who are found
ineligible to occupy an Assisted Unit of their
ineligibility and the reason for the ineligibility, and of their right to appeal this determination;
(E) maintenance of a waiting list of applicant households eligible to occupy Assisted Units and Units designated
for various tenant income levels, which shall be made
available to prospective tenants upon request;
(F) targeting specific Special Needs Populations (“Special Needs Populations” has the same meaning as
defined in Section 7301(s)) in accordance with the
Regulatory Agreement and applicable laws; and
(G) affirmative fair housing marketing procedures as
specified in the Affirmative Fair Housing Marketing
Plan Compliance Regulations of the United States
Department of Housing and Urban Development, 24
CFR part 200.620 (a)-(c), or similar affirmative fair
marketing housing plan as approved by the
Department.
(b) Sponsors shall rent vacant units to households with no less than the number of people specified in the following schedule:

Uniform Multifamily Regulations 11/15/2017 Page 10 of 35

Unit Size Minimum Number of Persons in
Household
SRO 1
0-BR 1
1-BR 1
2-BR 2
3-BR 4
4-BR 6
5-BR 8
Exceptions:
(1) Live-in aids may be allocated a separate bedroom.
(2) A separate bedroom may be allocated as a reasonable accommodation for individuals with disabilities who have a need for such an accommodation.
(3) For units covered under Housing Choice Vouchers or
project-based Section 8 rental assistance contracts,
Sponsors may defer to the local housing authority’s
determination of appropriate unit occupancy.

A Sponsor may assign tenant households to Units of sizes other than those indicated as appropriate in the table and exceptions listed above if the Sponsor reasonably determines that special circumstances warrant such an assignment and the reasons are documented in the tenant's file. The Sponsor’s determination is subject to approval by the Department. Through the Project’s tenant selection or management plan, a Sponsor may receive advance Department approval of additional categorical exceptions. (c) The Department may approve exceptions to the requirements of this section for Projects located on Native American Lands, based on the unique legal requirements applicable to Native American Lands.

Note: Authority cited: Sections 50406(n), 50517.5(a)(1), 50517.5(a)(3), 50675.1(d), 50675.11, 50896.1(a) and 50896.3(b), Health and Safety Code.

Reference: Sections 50517.5(a)(1), 50517.5(d)(3), 50517.5(d)(5), 50517.5(e)(2), 50675.1(c), 50675.8(a)(1) and 50896.1(a), Health and Safety Code; and 24 CFR Sections 92.303, 92.350 and 92.351.

Uniform Multifamily Regulations 11/15/2017 Page 11 of 35

Section 8306. Tenant Recertification.
(a) The Sponsor shall annually recertify household size and income for Assisted Units.
(b) If at the time of recertification, a tenant's household size has changed and no longer meets the occupancy standards pursuant to the previous section, the Sponsor may require the tenant household to move to the next available appropriately sized Unit.

Note: Authority cited: Sections 50406(n), 50517.5(a)(1), 50517.5(a)(3), 50675.1(c), 50675.11, 50896.1(a) and 50896.3(b), Health and Safety Code.

Reference: Sections 50517.5(a)(1), 50517.5(d)(3), 50517.5(d)(5), 50517.5(e)(2), 50675.1(c), 50675.8(a)(1) and 50896.1(a), Health and Safety Code, and 24 CFR Sections 92.303, 92.350 and 92.351.

Section 8307. Rental Agreement and Grievance Procedure. (a) All rental or occupancy agreements for Assisted Units are subject to Department approval and shall include:
(1) provisions requiring good cause for termination of tenancy.

One or more of the following constitutes "good cause":
(A) failure by the tenant to maintain applicable eligibility requirements under the Program or other eligibility
requirements as approved by the Department;
(B) material noncompliance by the tenant with the lease, including one or more substantial violations of the
lease or habitual minor violations of the lease which:

1. adversely affect the health and safety of any
person or the right of any tenant to the quiet
enjoyment of the leased premises and related
Project facilities;

2. substantially interfere with the management,
maintenance, or operation of the Rental
Housing Development; or

3. result from the failure or refusal to pay, in a
timely fashion, Rent or other permitted charges
when due. Failure or refusal to pay in a timely
fashion is a minor violation if payment is made
during the 3-day notice period;
Uniform Multifamily Regulations 11/15/2017 Page 12 of 35

(C) material failure by the tenant to carry out obligations under federal, state or local law;
(D) subletting by the tenant of all or any portion of the Assisted Unit;
(E) any other action or conduct of the tenant constituting significant problems which can be reasonably
resolved only by eviction of the tenant, provided that
the Sponsor has previously notified the tenant that the conduct or action in question would be considered
cause for eviction. Examples of action or conduct in
this category include the refusal of a tenant, after
written notice, to accept reasonable rules or any
reasonable changes in the lease or the refusal to
recertify income or household size; or
(F) for Transitional Housing, the end of the maximum
term prescribed for tenant occupancy by the Program
operated in a particular Transitional Housing Project.
(2) a provision requiring that the facts constituting the grounds for any eviction be set forth in the notice provided to the tenant pursuant to state law;
(3) notice of grievance procedures for hearing complaints of tenants and appeal of management action; and
(4) a requirement that the tenant annually recertify household income and size.
(b) The Sponsor shall adopt an appeal and grievance procedure to resolve grievances filed by tenants and appeals of actions taken by Sponsors with respect to tenants' occupancy in the Rental Housing Development, and prospective tenants' applications for occupancy.

The Sponsor’s appeal and grievance procedure shall be subject to Department approval and, at a minimum, shall include the following:
(1) a requirement for delivery to each tenant and applicant of a written copy of the appeal and grievance procedure;
Uniform Multifamily Regulations 11/15/2017 Page 13 of 35

(2) procedures for informal dispute resolution;
(3) a right to a hearing before an impartial body, which shall consist of one or more persons with the power to render a final decision on the appeal or grievance; and
(4) procedures for the conduct of an appeal or grievance hearing and the appointment of an impartial hearing body.
(c) Neither utilization of, nor participation in any of the appeal and grievance procedures shall constitute a waiver of or affect the rights of the tenant, prospective tenant, or Sponsor to a trial de novo or judicial review in any judicial proceeding which may thereafter be brought in the matter.
(d) This section shall not be construed to pre-empt or supersede requirements established by local government which further limit good cause for eviction.
(e) For Projects located on Native American Lands, the Department may approve exemptions to the requirements of this section, based on the unique legal requirements applicable to Native American Lands.

Note: Authority cited: Sections 50406(n), 50517.5(a)(1), 50517.5(a)(3), 50675.1(d), 50675.11, 50896.1(a) and 50896.3(b), Health and Safety Code.

Reference: Sections 50517.5(d)(3), 50517.5(d)(5), 50517.5(e)(2), 50675.8(a)(1), 50675.8(a)(2) and 50896.1(a), Health and Safety Code; and 24 CFR Sections

92.253 and 92.303.

Section 8308. Operating Reserves.

The Sponsor shall establish an operating reserve for the purpose of defraying operating shortfalls resulting from Department-approved Operating Expenses exceeding Operating Income beyond the rent-up period.
a) Withdrawals from the operating reserve shall require prior written approval of the Department. Should the Department fail to take action on a request for an eligible withdrawal from the operating reserve within 30 days from documented receipt of the request, that request shall be deemed approved.
b) The initial deposit to the operating reserve shall be funded from development funding sources in an amount determined by the Department, which shall be not less than the total of the following:
4 months of projected Operating Expenses (excluding the cost of on-site Supportive Services coordination), 4 months of required Uniform Multifamily Regulations 11/15/2017 Page 14 of 35

replacement reserve deposits, and 4 months of non-contingent debt service. For projects with tax credits, the requirement shall be 3 months of these items. In setting the initial funding requirement, the Department shall consider factors including, but not limited to the projected level of Project cash flow, the adequacy of the operating budget, Project location, local market characteristics, the number of sites, and Project design.
c) Sponsor shall fully replace any withdrawals from the Operating Reserve, up to the minimum initial deposit amount specified in subsection (b) above, as may be modified in accordance with subsection (d) or (e) below, using available cash flow prior to use of any cash flow to pay deferred Developer Fee, partnership management or similar fees, or Distributions.
d) In the absence of some extraordinary occurrences, such as litigation affecting the project or construction defects, and upon occurrence of both of the following events, the Department shall reduce the required minimum balance: (i) operation at a debt service coverage ratio of 1.15 or greater for 5 years; and (ii) operation at an Operating Expense coverage ratio of 1.08, where Operating Expense ratio is defined to equal effective gross income, less required replacement reserve deposits and non-contingent debt service, divided by total Operating Expenses, not including the approved cost of Supportive Services coordination.
e) The Department may agree with other financing sources to allocate authority regarding amounts deposited into or withdrawn from the Operating Reserve, where the Department determines that such arrangement would not jeopardize the fiscal integrity of the Project and the minimum reserve requirements would be maintained. For Projects subject to direct federal loan or grant programs, including the Native American Housing Assistance and Self Determination Act programs, or receiving a permanent loan from CalHFA, the Department may also defer to the operating reserve requirements of these agencies during the time such projects are regulated by a federal agency or CalHFA, and not require deposits in the amounts specified in subsection (b).
f) Where all Project development funding sources are legally precluded from using their funds to capitalize the operating reserve as required by subsection (b), the Sponsor may fund this account out of Operating Income, provided that cash flow is sufficient to reasonably ensure that the required balance can be accumulated within six years of initial occupancy.

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g) In no event shall this reserve balance be used to fund limited partner exit costs, except for amounts in excess of the reserve balance required by the Department.

Note: Authority cited: Sections 50406(n), 50517.5(a)(1), 50517.5(a)(3), 50675.1(d), 50675.11, 50896.1(a) and 50896.3(b), Health and Safety Code.

Reference: Sections 50517.5, 50675.5(b)(8) and 50896.1(a), Health and Safety Code.

Section 8309. Replacement Reserves.

The Sponsor shall establish a replacement reserve to repair or replace failed or damaged capital items and to cover extraordinary maintenance expenses, as approved by the Department. Extraordinary maintenance expenses are expenses for infrequent major repairs and replacements of building components too costly to be absorbed by the Project’s annual operating budget. In no event shall this reserve be used to fund limited partner exit costs. (a) Withdrawals from the replacement reserve shall require prior written approval of the Department. Should the Department fail to take action on a request for an eligible withdrawal from the replacement reserve within 30 days of documented receipt of the request, that request shall be deemed approved.
(b) The replacement reserve shall be funded from Operating Income, development sources or a combination of Operating Income and development sources.
(1) For new construction or conversion Projects, the initial amount of annual deposits to the replacement reserve
account shall be equal to at least the lesser of 0.6% of estimated construction costs associated with structures in the Project, excluding construction contingency and general contractor profit, overhead and general requirements, or $500 per unit. However, the Department may approve a
different amount based on the results of a third-party reserve analysis, which it may require, or other reliable indicators of the need for replacement reserve funds over the initial 20 years of operation, or, in the case of transactions involving restructuring of existing Department loans, 20 years of operations after the restructuring.
(2) For rehabilitation Projects, the initial amount of annual deposits to the replacement reserve account shall be
determined by the Department based on the results of a
third-party physical needs assessment or other reliable indicators of the need for replacement reserve funds over Uniform Multifamily Regulations 11/15/2017 Page 16 of 35

the initial 20 years of operation. In its initial underwriting, in the absence of an approved physical needs assessment or other reliable indicators of the need for replacement reserve funds, the Department may assume that the initial amount of annual deposits shall be $500 per unit.
(3) The Department may periodically adjust the amount of required deposits to the replacement reserve for a particular Project based on the results of reserve analysis or other reliable indicators of the need for replacement reserve funds over time.
(4) The Department may agree with other financing sources to allocate authority regarding amounts deposited into or
withdrawn from the replacement reserve, where the
Department determines that such arrangement would not
jeopardize the fiscal integrity of the Project and the minimum reserve requirements would be maintained. For Projects
subject to direct federal loan or grant programs, including Native American Housing Assistance and Self Determination Act programs, or receiving a permanent loan from CalHFA, the Department may also defer to the replacement reserve requirements of these agencies during the time such
projects are regulated by a federal agency or CalHFA.
(5) If the Department requires a reserve analysis because the Department determines the reserve is inadequate due to
annual replacement costs exceeding or being reasonably
likely to exceed the amounts deposited to the reserve, or due to a request by the Sponsor to adjust the required
reserve amount, the analysis must result in a due diligence report that examines the current physical conditions at property(ies), specifies repairs or replacements needed immediately, and budgets for the long-term capital repair and replacement needs during the life of an asset, such as the results of using the Capital Needs Assessment eTool,
developed by the U.S. Department of Housing and Urban
Development.

Note: Authority cited: Sections 50406(n), 50517.5(a)(1), 50517.5(a)(3), 50675.1(d), 50675.11, 50896.1(a) and 50896.3(b), Health and Safety Code.

Reference: Sections 50517.5(d)(1), 50675.5(b)(8) and 50896.1(a), Health and Safety Code.

Uniform Multifamily Regulations 11/15/2017 Page 17 of 35

Section 8310. Underwriting Standards.

In analyzing Project feasibility, the Department shall, at a minimum, utilize the following assumptions and criteria:
(a) Residential vacancy rates shall be assumed to be 5%, unless a different figure is required by another funding source (including TCAC) or supported by compelling market evidence.
(b) Vacancy rates for Commercial Space shall be assumed to be 50%, except the Department may use the vacancy loss assumption of the Project’s senior lender or equity investor under either of the following circumstances:
(1) where the commercial income is guaranteed by the
Sponsor through a long-term master lease and the
amount of the Sponsor’s annual master lease
payment is both:
(A) less than one percent of the Sponsor’s cash
and cash equivalent current assets; and
(B) less than or equal to the projected commercial
income, as evidenced by a market study or
appraisal commissioned by the first lien lender
or equity investor, and reflected in the final pro
forma approved by the first lien lender or equity
investor; or
(2) where the Commercial Space has been leased to a
national or regional firm widely recognized by the
general public, and the term of the lease extends at
least five years past the projected date of construction completion.
(c) Total Operating Expenses (not including property taxes or the approved costs of on-site service coordination) shall not be less than those specifically listed in California Code of Regulations, Title 4, Section 10327 as minimum Operating Expenses (without the reduction allowed by those regulations for bond-financed projects).

The Department may project higher Operating Expenses where warranted by the experience of comparable properties and particular building characteristics, such as the nature of the tenant population or the level of rehabilitation. Prior to loan closing, the Department may approve total Operating Expenses that are less than those specified in Section 10327, supra, only if the Project has Uniform Multifamily Regulations 11/15/2017 Page 18 of 35

an extraordinary design feature, such as its own electrical generation system, which results in a quantifiable operating cost savings as documented by a qualified third party.
(d) All Operating Expenses, including property management fees, shall be within the normal market range, as periodically determined by the Department in surveys or based on costs observed in its portfolio.
(e) The first year Debt Service Coverage Ratio shall not be:
(1) less than 1.10:1 or
(2) greater than 1.20:1, except where a higher first-year ratio is necessary to:
(A) project first-year cash flow after debt service and required reserve deposits equal to or less than 12
percent of operating expenses;
(B) meet the requirements of subsection (i);
(C) meet CalHFA’s standard underwriting requirements or those of a direct federal lending program; or
(D) project a positive cash flow over 20 years, using the assumptions specified in subsection (i).

In applying the requirements of subsections (e)(1) and (e)(2), the annual MHP Program loan payment of 0.42% will be considered debt service.

The Department may modify the application of these requirements on a case-by-case basis for Projects receiving operating or rental subsidies structured to allow for breakeven operation, or for operation at a level of cash flow that differs from that resulting from application of these requirements in order to meet the cash flow obligations in this subsection.
(f) Balloon payments are not allowed on senior debt, except where the Department’s affordability covenant or regulatory agreement (collectively “Use Restriction”) is recorded in a position that is senior to the debt with a balloon payment. Any such Use Restriction may include provisions that, upon foreclosure of the debt instrument securing such debt, allow the Use Restriction to be amended to delete any portion of the Use Restriction that is not Uniform Multifamily Regulations 11/15/2017 Page 19 of 35

necessary to ensure the continued restriction of the project to the same affordability level for all occupants, rents or amounts charged pursuant thereto, reporting requirements not related to tenant occupancy and affordability, and level of operations and maintenance (collectively, the “Affordability Provisions”). The Sponsor may also include an executory provision in the original Use Restriction that immediately limits the effect of the Use Restriction to only those set forth in the Affordability Provisions.

Furthermore, in the event project-based rental assistance is terminated, the Affordability Provisions may include a provision allowing rents to increase to the minimum extent required for fiscal integrity, as defined in Section 7301(g), but not in any event shall rents exceed 30% of 50% of area median income, as such area median income is determined by the U. S. Department of Housing and Urban Development, adjusted by bedroom count by TCAC pursuant to 26 U.S. Code Section 42(g)(2)(C) with the annually published TCAC Income Limits and Maximum Rents posted on the TCAC website.
(g) Balloon payments are allowed on junior debt during the term of the Program loan only where the Department determines that the balloon payment will not jeopardize project feasibility. (h) Variable interest rate debt shall be underwritten at the ceiling interest rate, unless the Department determines that using a lower interest rate assumption will not jeopardize project feasibility. (i) The Project must demonstrate a positive cash flow for 15 years, using income and expenses increase rate assumptions specified in California Code of Regulations, Title 4, Section 10327. If projected Project income includes rental assistance or operating subsidy payments under a renewable contract, the Department may assume that this contract will be renewed, where the renewal of the rental assistance or operating subsidy is likely.
(j) Where the Department is providing construction-period financing, the minimum budgeted construction contingency shall be 5 percent of construction costs for new construction projects and 10 percent of construction costs for rehabilitation and conversion projects. (k) Local public agency loans shall not have required payments exceeding 0.5% per year of the original principal loan amount.

Uniform Multifamily Regulations 11/15/2017 Page 20 of 35

Note: Authority cited: Sections 50406(n), 50517.5(a)(1), 50517.5(a)(3), 50675.1(d), 50675.11, 50896.1(a) and 50896.3(b), Health and Safety Code.

Reference: Sections 50517.5(d)(2), 50517.5(e)(2), 50675.7(b)(3) and 50896.1(a), Health and Safety Code; and 24 CFR Section 92.252.

Section 8311. Limits on Development Costs.
(a) Project development costs must be reasonable, as measured by the ratio of the project’s total eligible basis to its total adjusted threshold basis limits, calculated at the time of application for Department funds. Both total eligible basis and total adjusted basis limits shall be computed in accordance with TCAC regulations and procedures set forth in Title 4, California Code of Regulations, Sections 10325 - 10327, except as follows:
(1) There shall not be an adjustment of threshold basis limits based on units that will be income and rent restricted at or below certain area median income levels, such as that in Title 4, California Code of Regulations, Section
10327(c)(5)(C) as in effect as of September 2016.
(2) Costs shall be deemed reasonable under this section if the ratio calculated pursuant to the above subsection (a) is less than 160 percent.
(b) If the ratio calculated above in subsection (a) exceeds 170 percent, calculated based on actual development costs following completion of construction, the Sponsor shall incur up to 20 negative points which may, in the Department’s discretion, be assessed, and which negative points shall reduce the Sponsor’s score by the same amount for future applications to any of the Department’s Notice of Funding Availability for any of the Department’s programs, and may continue to be repeatedly assessed for any and all successive NOFAs for a period of up to three years following the date on which the Department determined that the cost exceeded the 170 percent limit.
(c) Builder overhead, profit and general requirements shall be limited in accordance with California Code of Regulations, Title 4, Section 10327.
(d) Property acquisition prices shall not exceed appraised value, except where the increment above appraised value is fully covered by junior public agency financing that carries no mandatory debt service.

Uniform Multifamily Regulations 11/15/2017 Page 21 of 35

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(e) Proposed Project sites shall not require site development work that is significantly more costly than that typical for other similar projects in the local market area, unless either:
(1) the proposed site acquisition cost together with the site development costs are less than the cost of a typical site together with typical site development costs in the Project’s market area; or
(2) there are no other sites available in the market area with a lower combined cost.

Note: Authority cited: Sections 50406(n), 50517.5(a)(1), 50517.5(a)(3), 50675.1(d), 50675.11, 50896.1(a) and 50896.3(b), Health and Safety Code.

Reference: Sections 50517.5(a)(1), 50517.5(c)(2), 50517.5(e)(2), 50675(a), 50675.4(b)(2), 50675.4(c)(1), 50675.5 and 50896.(1)(a), Health and Safety Code.

Section 8312. Developer Fee.
(a) For Projects not utilizing low income housing tax credits, Developer Fee shall not exceed the amount calculated in accordance with subsections (1), (2) or (3) below. The per unit amounts will be adjusted in thousand dollar increments in accordance with changes in the CPI when, following the year 2016, the CPI has indicated the next full thousand dollar increment has been reached.
(1) For new construction Projects and Projects where the contract for the rehabilitation work equals or exceeds
$35,000 per Unit:
(A) For the first 30 Units, $26,000 per Unit.
(B) For each Unit in excess of 30, $10,500 per Unit.
(2) For other Projects involving acquisition and rehabilitation where the contract amount for the rehabilitation work,
excluding contractor profit and overhead, equals or exceeds $10,500 per Unit and is less than $35,000 per Unit:
(A) For the first 30 Units, $12,000 per Unit.
(B) For each Unit in excess of 30, $5,500 per Unit.
(3) For all other Projects, $2,000 per Unit.
(b) For Projects utilizing 9% competitive low income housing tax credits, Developer Fee payments shall not exceed the amount that Uniform Multifamily Regulations 11/15/2017 Page 22 of 35

may be included in project costs pursuant to California Code of Regulations, Title 4, Section 10327.
(c) For Projects utilizing 4% percent tax credits, Developer Fee payments shall not exceed the lesser of $3,500,000 or the sum of:
(1) the amount that could be included in project costs pursuant to Title 4, California Code of Regulations, Section 10327 if the project was receiving 9% competitive credits; plus
(2) any remaining deferred Developer Fee (payable exclusively from operating income) that is allowed in eligible basis under Title 4, California Code of Regulations, Section 10327 of the TCAC regulations.
(Subsection (c) limits Developer Fee paid from development funding sources.)
(d) The dollar value of any capital contribution of funds or real property made by the Sponsor or an affiliate, as approved by the Department, for Project development costs shall increase the Developer Fee limit by the dollar value of the capital contribution. (e) The limits set forth in this section shall apply to each Project pursuant to the terms of a program standard agreement, as memorialized in Department loan or grant documents entered into pursuant thereto (the “Original Award”). For any future work performed for the benefit of the Project, to the extent such work was not captured, set forth, or otherwise contemplated in any of the legal documents memorializing terms related to the Original Award, the fees for such new developer work benefiting the Project shall be recalculated in accordance with this section, treating that new work as if it were a separate project.
(f) For projects where less than 25 percent of total units are counted in the determination of maximum Department loan or grant amounts, the Department may defer to the limits on Developer Fees applicable to other public agency project funding sources, to the extent it deems necessary to attract sufficient applications to utilize available Department funding.

Note: Authority cited: Sections 50406(n), 50517.5(a)(1), 50517.5(a)(3), 50675.1(d), 50675.11, 50896.1(a) and 50896.3(b), Health and Safety Code.

Reference: Sections 50517.5(a)(1), 50517.5(c)(2), 50517.5(e)(2), 50675.5(b)(5), 50675.8(a)(5) and 50896.1(a), Health and Safety Code.

Uniform Multifamily Regulations 11/15/2017 Page 23 of 35

Section 8313. Program Compatibility.
(a) Where the requirements of federal funding for a Project (including low income housing tax credits and direct federal loans but excluding federal loan guarantees) would cause a violation of the requirements to these regulations, the Department may modify these requirements as minimally necessary to ensure program compatibility.

Note: Authority cited: Sections 50406(n), 50517.5(a)(1), 50517.5(a)(3), 50675.1(d), 50896.1(a) and 50896.3(b), Health and Safety Code. Reference:

Sections 50406(n), 50675.1(d), 50675.9, 50517.5(a)(1), 50517.5(a)(3), 50896.1(a) and 50896.3(b), Health and Safety Code.

Section 8313.1 Funding Source Surpluses.
(a) If, upon completion of construction, permanent development funding sources exceed actual total development costs the following requirements apply to the resulting funding surplus:
(1) If there are local public agency lenders providing
construction–period financing, and the Department is
providing only permanent financing, the local lenders may reduce their loans by an amount not exceeding the
contingency shown in the loan documents approved by the Department at construction loan closing.
(2) In other cases, or to the extent that the surplus exceeds the budgeted contingency, the Department loan amount shall be reduced by an amount not less than the surplus multiplied by the ratio of the Department’s loan amount to total local government assistance, as defined in 8315(c)(3).
(3) As an alternative to (1) or (2), the Department may approve use of surplus funds to reduce tenant rents or for other direct tenant benefits.

Note: Authority cited: Sections 50406(n), 50517.5(a)(1), 50517.5(a)(3), 50675.1(d), 50896.1(a) and 50896.3(b), Health and Safety Code. Reference:

Sections 50517.5(a)(1), 50517.5(c)(2), 50517.5(e)(2), 50675.5(b)(5), and 50896.1(a), Health and Safety Code.

Uniform Multifamily Regulations 11/15/2017 Page 24 of 35

Section 8313.2 Special Purpose Entity(ies).
(a) The Department may permit the ultimate borrower or recipient of Department funds to be a special purpose entity formed and controlled by the Sponsor if and only if the Sponsor can demonstrate to the satisfaction of the Department all the following criteria:
(1) The Sponsor will remain as equally liable to the Department as the special purpose entity with respect to the specific performance of the obligations of the loan or grant
documents. The Sponsor may be as equally liable to the
Department as the special purpose entity with respect to the financial obligations of the loan or grant documents;
(2) The Sponsor shall not intentionally or in effect limit or abrogate its legal liability to the Department by utilizing the special purpose entity; and
(3) There shall be no more than two corporate entities between the Sponsor and the special purpose entity in the corporate control and organizational structure(s). For the purposes of this subsection, “corporate entity” may include a corporation, limited liability company, business trust, limited partnership, or general partnership. For the purposes of determining “control,” the Sponsor must provide, at the very minimum, evidence satisfactory to the Department that the Sponsor (or Sponsors) through direct control of the corporate entities between the Sponsor and the special purpose entity,
performs the substantial management duties on behalf of the special purpose entity that involves:
(A) renting, maintaining and repairing the low-income
housing property (or if these duties are delegated to
an agent, hiring and overseeing the agent’s duties);
(B) acquiring, holding, assigning or disposing of property or any interest in property;
(C) borrowing money on behalf of the special purpose
entity, encumbering the special purpose entity’s
assets, placing title in the name of a nominee to
obtain financing, preparing items in whole or in part, in connection to refinancing, increasing, modifying or
extending any obligation; and
Uniform Multifamily Regulations 11/15/2017 Page 25 of 35

(D) determining the amount and timing of distributions to partners and establishing and maintaining all required
reserves.

Note: Authority cited: Sections 50406(n), 50517.5(a)(1), 50517.5(a)(3), 50675.1(d), 50896.1(a) and 50896.3(b), Health and Safety Code. Reference:

Sections 50517.5(a)(1), 50517.5(c)(2), 50517.5(e)(2), 50675.2(g) and 50896.1(a), Health and Safety Code.

Section 8314. Use of Operating Cash Flow.
(a) Operating income remaining after payment of approved current and prior year operating expenses, reserve deposits and mandatory debt service shall be applied in the following priority order:
(1) First, towards payment of any:
(A) Approved deferred Developer Fee, pursuant to
Section 8312;
(B) Asset management, partnership management and
similar fees, including fees paid to investors, in an
amount not to exceed the sum of:

1. An amount for the current year, equal to $30,000
for 2016 and increased at the rate of 3.5% for
each subsequent year, plus

2. Unpaid asset management, partnership
management, and similar fees accrued for a
period not to exceed three project fiscal years
following the year during which they are earned,
up to the difference between the limit for the
year and the amount paid for that year; and
(C) Supportive Services Costs that these regulations
would allow to be paid as operating costs, but that
other funding sources do not.
(2) Second, 50 percent to the Sponsor as Distributions and 50 percent to the Department as payments on the Program
loan.
(A) If the terms of other public agencies’ financing also require payments from remaining cash flow, the
Department may agree to share what would otherwise
be its 50 percent share of available cash flow with the Uniform Multifamily Regulations 11/15/2017 Page 26 of 35

public agencies in amounts proportional to the
agencies’ respective assistance amounts (total local
government assistance, as defined in Section 8315,
and total Department loans and grants).
(B) To be consistent with the terms of other public agency loans or leases, the Department may agree to set the
percentage payable to the Sponsor at an amount less
than 50 percent.
(C) For projects with income from project-based Section 8 or similar project-based rental assistance that is not
underwritten by other Project lenders, the Department
may reduce the Sponsor’s share to an amount
equivalent to the amount they would receive if one of
the other lender’s loan amount was based on an
income stream that included the income from the
rental assistance.
(b) A Sponsor may not accumulate Distributions from year to year. A Sponsor may deposit all or a portion of permitted Distributions into a Project account for distribution in subsequent years. These future Distributions shall not reduce the otherwise permitted Distribution in those subsequent years.
(c) The limits on payments for Developer Fee pursuant to subsection (a)(1)(A) and for asset management, partnership management, and similar fees pursuant to subsection (a)(1)(B) shall not apply to payments of those fees made from Distributions.
(d) Payment of Distributions, deferred Developer Fee, asset management fees, partnership management fees and similar fees shall be permitted only after the Sponsor submits a complete annual report and operating budget, and the Department
determines that the report and budget demonstrate compliance with all Program requirements for the applicable year. Circumstances under which no Distributions, deferred Developer Fee, asset management fees, or partnership management fees, and similar fees shall be paid include:
(1) when written notice of default has been issued by any entity with an equitable or beneficial interest in the Project; (2) when the Department determines that the Sponsor has failed to comply with the Department's written notice of any
reasonable requirement for proper maintenance or operation Uniform Multifamily Regulations 11/15/2017 Page 27 of 35

of the Rental Housing Development or use of Project
income;
(3) if all currently required debt service, including mandatory payments on the Program loan, and Operating Expenses
have not been paid;
(4) if the replacement reserve account, operating reserve account, or any other reserve accounts are not fully funded pursuant to Sections 8308 and 8309 and the Regulatory
Agreement.
(e) For 2017, the following limits shall apply to total Supportive Services Costs paid as Operating Expenses. These limits shall be increased each year after 2017 at the rate of 2.5 percent per year:
(1) $4,080 per unit per year for supportive housing restricted to individuals or families experiencing chronic homelessness, as defined consistent with Health and Safety Code Section 50675.14;
(2) $3,060 per unit per year
(A) for supportive housing that is not restricted to
individuals or families experiencing chronic
homelessness as defined pursuant to Health and
Safety Code Section 50675.14; and
(B) for units restricted to occupancy by Special Needs
Populations under any Department programs
(“Special Needs Population” has the same meaning
as defined in Section 7301(s));
(3) $1,051 per unit per year for other units where the Sponsor, their affiliate, or a service provider under contract to provide Supportive Services at the Project has both:
(A) qualified staff devoted exclusively to oversight and quality control of resident services in affordable
housing, including the Project; and
(B) a system to track and report on tenant outcomes,
such as changes in employment status and income;
Uniform Multifamily Regulations 11/15/2017 Page 28 of 35

(4) $250 per unit per year for other units, where the Sponsor, their affiliate, or a service provider under contract does not satisfy the requirements set forth in subsection (e)(3). (f) The following limits shall apply to Supportive Services Costs paid as Operating Expenses:
(1) The cost of staff supervision shall not exceed 10% of the cost of on-site staff salaries.
(2) Administrative overhead expenses, including accounting and human relations, shall not exceed 15% of the total Supportive Services Costs paid as Operating Expenses.
(g) Sponsors paying Supportive Services Costs as Operating Expenses shall maintain onsite and available for Department inspection records of group activities (including calendars and signin sheets) and individualized services and referrals. The Department may also require annual reporting on these and related matters.
(h) For supportive housing, as defined pursuant to Health and Safety Code Section 50675.14, and upon approval by the Department, Sponsors may establish a reserve to cover unexpected shortfalls in revenues to pay for resident services coordination and case management costs. This reserve may be funded through project cash flow available after funding Operating Expenses and other required reserves, or through development sources. The
maximum balance shall not exceed three times the per-unit, peryear limits specified in subsection (e).

Note: Authority cited: Sections 50406(n), 50517.5(a)(1), 50517.5(a)(3), 50675.1(d), 50675.11, 50896.1(a) and 50896.3(b), Health and Safety Code.

Reference: Sections 50517.5(a)(1), 50517.5(c)(2), 50517.5(e)(2), 50675.8(a)(5), and 50896.1(a), Health and Safety Code.

Section 8315. Subordination Policy.
(a) The Department may execute and cause to be recorded a subordination agreement subordinating the Department's lien so long as the subordination does not increase the Department's risk beyond that contemplated in the Program loan or grant
commitment, as may be amended from time to time, and so long as the subordination would further the interest of the Program.

However, and except for Projects assisted by the U.S. Department of Housing and Urban Development under the Section 811 or Section 202 programs, the Department shall not enter into a Uniform Multifamily Regulations 11/15/2017 Page 29 of 35

subordination agreement or other agreement that contains any of the following:
(1) Any limitation of, or condition on, the Department's exercise of its remedies including, but not limited to issuing a notice of default based on a breach under the Department's loan
documents, including a default based solely on a breach of the senior lienholder's documents.
(2) An agreement that the senior lienholder's acceptance of a deed in lieu of foreclosure would result in the senior
lienholder taking title to the Rental Housing Development free and clear of the Department's lien(s).
(3) An agreement permitting any modification or supplement of the senior lienholder's lien without the prior written consent of the Department except an agreement that permits a
senior lienholder to make advances to: (i) cure a default under a lien with a higher priority than the Department's lien; (ii) pay delinquent taxes on the security property; (iii) pay delinquent hazard or liability insurance premiums for the security property; or (iv) to protect the health and safety of the tenants.
(4) An agreement that would require the Department to
undertake additional obligations to any party.
(b) The Department's lien(s) shall not be subordinated to the liens of a local governmental entity unless either:
(1) the total local governmental assistance to the Project is more than twice the amount of the Department's total assistance to the Project (including both loans and grants); or
(2) the total local governmental assistance to the Project is more than the Department's total assistance to the Project
(including both loans and grants) and the local government entity manages a portfolio of their own loans that includes over 10,000 rental units with rent and occupancy restrictions. (c) As used in this section:

Uniform Multifamily Regulations 11/15/2017 Page 30 of 35

(1) “Department's lien” means a deed of trust, regulatory agreement, or other agreement securing payment or
performance under an award of Program funds that has
been recorded in the office of the recorder of the county in which the Rental Housing Development is located.
(2) “Lien of a local government entity” means a recorded deed of trust, regulatory agreement, reversion, or other recorded agreement securing payment or performance, or a covenant running with the land that affects the maintenance, use, operation, or occupancy of the Rental Housing
Development. Except that covenants in favor of a community redevelopment agency or successor agency regarding the
use, maintenance, operation, or transferability of a Rental Housing Development including rent limitations or income restrictions on tenants, or prohibiting discrimination, shall not constitute liens subject to the requirements of this section. (3) “Total local government assistance” means the sum of the original principal amounts of loans and grants made by the local government entity plus other direct project costs paid for by the local governmental entity and approved by the Department including, but not limited to, costs of site preparation, demolition, environmental remediation, and land acquisition. The value of assistance in the form of land writedowns or donations shall be limited to the cost paid by the public agency to acquire the land, less any sales proceeds paid to the agency; or in the case of a leasehold, the cost paid by the public agency less the present value of projected lease payments.
(d) The Department's lien(s) shall not be subordinated to the liens of a lender affiliated with an entity that has an ownership interest in the Project unless a covenant, regulatory agreement, or similar instrument is recorded senior to the lender’s documents that includes the provisions specified in Section 8310(f).

Note: Authority cited: Sections 50406(n), 50517.5(a)(1), 50517.5(a)(3), 50675.1(d), 50675.11 and 50896.3(b), Health and Safety Code. Reference:

Sections 50517.5(d)(4)(D), 50675(e), 50675.1(b), 50675.6(d), 50896, 50896.1 and 50896.3, Health and Safety Code.

Uniform Multifamily Regulations 11/15/2017 Page 31 of 35

Section 8316. Leasehold Security.
(a) In any Project where the Sponsor proposes to control the Project land through a long-term ground lease, either:
(1) the Regulatory Agreement and other Program documents shall be recorded against both the Sponsor’s interest in the Project and the fee interest in the land, and the lease shall have a term remaining at the time of recordation at least equal to the term of the Program loan or grant; or
(2) if the Regulatory agreement and other Program documents are not recorded against the Project’s fee interest, the ground lease shall be subject to the Department’s approval, must not be subject to any other mortgages, regulatory
agreements, use restrictions, or equivalent instruments on the fee interest, and shall contain, or be amended to contain, provisions which:
(A) establish a remaining term of at least ninety (90)
years from the date the Department documents are
recorded, provided that the Department may accept a
lesser term, not less than 65 years, when the lessor is a public agency;
(B) ensure the validity of the lien of the Program loan and/or grant documents on the lease;
(C) ensure that the lease permits the Project to satisfy all Program requirements and permit the Department to
enforce the provisions of the Program loan and/or
grant without restriction;
(D) expressly consent to the lessee’s assignment of the lease to the Department without further consent of the
lessor, and permit the Department, after acquisition of the leasehold property, to transfer or assign the lease to a third party without consent of the lessor.
(E) provide that the lessor does not have the right to
terminate the lease or accelerate the rent upon
lessee’s breach without first giving the lessee and the Department reasonable notice and opportunity to cure
within a reasonable period;
Uniform Multifamily Regulations 11/15/2017 Page 32 of 35

(F) provide that no termination, modification or
amendment to any terms of the lease shall be
effective without the written consent of the
Department, and any attempt to take such actions
would be void without the Department’s consent;
(G) require that, in the event of destruction of any
improvements on the land, neither the lessor nor the
lessee shall terminate the lease if and so long as the
lessee or Department pursues reconstruction of the
improvements with reasonable diligence;
(H) provide that the Department shall not have any
liability for the performance of any of the obligations of lessee under the lease until the Department has
acquired the leasehold interest, and then only in
accordance with the terms of the lease and only with
respect to obligations that accrue during the
Department’s ownership of the leasehold interest;
(I) provide that neither the lessor nor the lessee, in the event of bankruptcy by either, will take the benefit of any provisions in the United States Bankruptcy Code
that would cause the termination of the lease or
otherwise render it unenforceable in accordance with
its terms;
(J) provide that the leasehold interest will not merge into the fee in the event that the lessee acquires the
reversionary interest in the Project; and
(K) provide that acquisition of the leasehold property by the Department will not result in a termination of the
leasehold; and upon such event, obligate the lessor to
enter into a new lease having a term at least as long
as the term remaining on the lease prior to acquisition by the Department and on substantially the same
terms and conditions.
(b) If any other regulatory agreement, use restriction, or equivalent instrument is recorded against the fee, the Department’s Regulatory Agreement or covenant must also be recorded against the fee. This subsection shall not apply if the total local governmental assistance to the Project is more than the Department's total assistance to the Project (including both loans and grants) and the local government entity manages a portfolio of Uniform Multifamily Regulations 11/15/2017 Page 33 of 35

their own loans that includes over 10,000 rental units with rent and occupancy restrictions. For the purposes of this subsection, the phrase “regulatory agreement, use restriction, or equivalent instrument” shall not be interpreted to include any instrument that does not relate in any way to affordability, or any affordability restriction that is not required as a condition of public financing. (c) Where the lessee and lessor are related or affiliated parties, the Program loan and/or grant documents shall be recorded against both the Sponsor’s interest in the Project and the fee interest in the land.
(d) To the extent consistent with the statutes and regulations governing the Program, the Department may modify or waive the
requirements of subparagraph (a)(2) where the lessor is a public agency that demonstrates that it is prohibited by law from meeting the requirements, or where the Project will be located on Native American Lands and there is a legal prohibition on meeting these requirements, and the Department determines that there remains adequate security for the Program loan.

Note: Authority cited: Sections 50406(n), 50517.5(a)(1), 50517.5(a)(3), 50675.1(d), 50675.11 and 50896.3(b), Health and Safety Code. Reference:

Sections 50517.5(d)(4)(A), 50675.7, 50896.1 and 50896.3, Health and Safety Code.

Section 8317. Restructuring Transaction Fees.
(a) To cover the Department’s costs of processing any specific Restructuring Transaction as defined in this section, the Department shall charge as authorized by subsections (f) and (n) of Section 50406 of the Health and Safety Code fees to cover the administrative costs incurred for the Department’s staff to negotiate and prepare the legal documents necessary to accomplish the subject Restructuring Transaction.
(b) For the purposes of this section, the term “Restructuring Transaction” means one or more of the following:
(1) extension of the Department’s loan term (or terms, if there are multiple Department loans),
(2) change of ownership (excluding transfer of ownership between two entities controlled by the same parent entity), (3) a new subordination of the Department’s loan or loans to a senior loan or loans, and/or investment of tax credit equity.

Uniform Multifamily Regulations 11/15/2017 Page 34 of 35

Other transactions, such as those limited to the placement of new junior public agency debt without required payments and assignments of limited partner interests, do not constitute a Restructuring Transaction.
(c) The fees charged by this section shall be calculated on a case-bycase basis, and shall be based on the number of work hours necessary for Department staff, at the respective rate for each staff’s classification, to negotiate and prepare final executable versions of all legal documents necessary to accomplish the subject Restructuring Transaction.
(d) Notwithstanding subsection (c), the Department shall not be authorized under this section to charge an amount exceeding the amount that the Department charges for the same or similar restructuring activities that the Department performs under other programs administered by the Department in its Related
Restructuring Programs, as defined by this section.
(e) For the purposes of this section, the term “Related Restructuring Programs” shall include but not be limited to the restructuring activities authorized by Section 50560(a) of the Health and Safety Code, and shall include any fees set forth by the Department pursuant to the guidelines (published on the Department’s website) adopted and authorized pursuant thereto under Health and Safety Code Section 50560.
(f) The legal documents necessary to accomplish the subject Restructuring Transaction shall be subject to the provisions set forth in this subchapter.

Note: Authority cited: Section 50406, Health and Safety Code. Reference:

Section 50406, Health and Safety Code.

Section 8318. Federal Loan Extensions.
(a) The term of any existing federal program loan or regulatory agreement enforced by the Department may be extended, if allowed by the subject federal statute. Such extensions shall not be for a period of less than 10 years nor more than 55 years.

Note: Authority cited: Sections 50406(n) and 50896.3(b), Health and Safety Code. Reference: 24 CFR part 92.

Uniform Multifamily Regulations 11/15/2017 Page 35 of 35 City of Santa Barbara
Community Development Department
Housing & Human Services Division

LOCAL HOUSING TRUST FUND (LHTF) PROGRAM

REQUEST FOR PROPOSALS (RFP)
Proposals due August 23, 2024, by 4:00 p.m.

Attachment 5
Table of Contents
I. OVERVIEW ........................................................................................................................... 1 II. FUNDING RESTRICTIONS & ELIGIBILITY..................................................................... 3 III. PROJECT REQUIREMENTS............................................................................................. 3 IV. PROPOSAL PROCESS ...................................................................................................... 4 V. REVIEW PROCESS AND SCORING ............................................................................... 6 VI. RATING CRITERIA.............................................................................................................. 7 VII. LOCAL APPEAL PROCESS............................................................................................. 10 VIII.HCD APPROVAL................................................................................................................ 10 IX. STATE AND FEDERAL REQUIREMENTS.................................................................... 11 X. OTHER STATE REQUIREMENTS.................................................................................. 12 XI. INSURANCE REQUIREMENTS...................................................................................... 14 XII. RESERVATION OF RIGHTS ........................................................................................... 18 Appendices
A – State of California Department of Housing and Community Development 2024 Local Housing Trust Fund Program Notice of Funding Availability B – Underwriting Requirements from Uniform Multifamily Regulations under 2017 California Code of Regulations Title 25, Division 1, Chapter 7, Subchapter 19, Commencing with Section 8300
Questions on this Notice: contact Laura Dubbels by email at [email protected] or by phone at (805)564-5491
City of Santa Barbara – HCD LHTF Program Request for Proposals