Agenda packet, first session — Santa Barbara City Council, September 10, 2024 (part 6 of 6)

Statements contained in this Official Statement which involve estimates, forecasts or matters of opinion, whether or not expressly so described herein, are intended solely as such and are not to be construed as representations of fact.

The information and expressions of opinions herein are subject to change without notice, and neither delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the Authority or the City since the date hereof.

The issuance and sale of the Series 2024 Bonds have not been registered under the Securities Act of 1933 or the Securities Exchange Act of 1934, both as amended, and the Indenture has not been qualified under the Trust Indenture Act of 1939, as amended, in reliance upon exemptions provided thereunder.

All descriptions and summaries of documents and statutes hereinafter set forth do not purport to be comprehensive or definitive, and reference is made to each document and statute for complete details of all terms and conditions. Allstatements herein are qualified in their entirety by reference to each such document and statute. Certain capitalized terms used but not defined herein are defined in APPENDIX C – “DEFINITIONS AND SUMMARY OF PRINCIPAL LEGAL DOCUMENTS – DEFINITIONS.”
The Initial Purchaser may offer and sell the Series 2024 Bonds to certain dealers, institutional investors, and others at prices lower than the public offering prices stated on the inside cover page hereof and said public offering prices may be changed from time to time by the Initial Purchaser.

Certain statements contained in this Official Statement reflect not historical facts but forecasts and “forwardlooking statements.” In this respect, the words “estimate,” “project,” “anticipate,” “expect,” “intend,” “believe,” “plan,” “budget,” and similar expressions are intended to identify forward-looking statements. Projections, forecasts, assumptions, expressions of opinions, estimates and other forward statements are not to be construed as representations of fact and are qualified in their entirety by the cautionary statements set forth in this Official Statement.

The achievement of certain results or other expectations contained in such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements described to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The Authority and the City do not plan to issue any updates or revisions to those forward-looking statements if or when its expectations or events, conditions, or circumstances on which such statements are based occur or do not occur.

CUSIP data herein is provided by Standard & Poor’s CUSIP Service Bureau, a division of The McGraw-Hill Companies, Inc., and is set forth herein for convenience of reference only. None of the City, the Authority or the Municipal Advisor assumes any responsibility for the accuracy of such numbers.

The City maintains a website. However, the information presented on that website is not part of this Official Statement and should not be relied upon in making investment decisions with respect to the Series 2024 Bonds. i
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TABLE OF CONTENTS
Page
INTRODUCTION .......................................................................................................................................1 Purpose............................................................................................................................................1 The Authority..................................................................................................................................1 The City of Santa Barbara...............................................................................................................2 The Series 2024 Bonds...................................................................................................................3 Authority for Issuance of the Series 2024 Bonds ...........................................................................3 Additional General Fund Obligations.............................................................................................3 Security for the Bonds ....................................................................................................................4 Summaries Not Definitive ..............................................................................................................5 Continuing Disclosure ....................................................................................................................5 LEASED PROPPERTY...............................................................................................................................5 SERIES 2024 PROJECT .............................................................................................................................6 ESTIMATED SOURCES AND USES OF FUNDS ...................................................................................8 THE BONDS ...............................................................................................................................................8 General............................................................................................................................................8 Payment of Principal and Interest...................................................................................................9 Redemption Terms of the Series 2024 Bonds.................................................................................9 SECURITY AND SOURCES OF PAYMENT FOR THE BONDS.........................................................12 Pledge Under the Indenture ..........................................................................................................12 Base Rental Payments...................................................................................................................13 Abatement.....................................................................................................................................14 Series 2024 Reserve Account of the Reserve Fund ......................................................................15 Insurance.......................................................................................................................................16 Damage or Destruction of the Property ........................................................................................18 Additional Bonds..........................................................................................................................18 Investment of Bond Funds............................................................................................................19 Debt Service Schedule ..................................................................................................................19 RISK FACTORS .......................................................................................................................................19 General..........................................................................................................................................19 Limited Obligation........................................................................................................................20 Limitations on Base Rental Payments; Abatement Risk ..............................................................21 No Acceleration Upon Default .....................................................................................................21 Teeter Plan Termination ...............................................................................................................22 Limitations on Remedies..............................................................................................................22 Economic and Tourism Factors....................................................................................................23 Bankruptcy of the City..................................................................................................................23 City Obligations............................................................................................................................24 No Limitation on Incurring Additional Obligations.....................................................................24 Natural Disasters...........................................................................................................................24 Hazardous Substances...................................................................................................................27 Climate Change Issues..................................................................................................................28 Cybersecurity................................................................................................................................28 ii
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Other Financial Matters................................................................................................................29

CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND
APPROPRIATIONS..................................................................................................................................29 Article XIIIA of the State Constitution.........................................................................................29 Article XIIIB of the State Constitution.........................................................................................30 Articles XIIIC and XIIID of the State Constitution......................................................................30 Proposition 26...............................................................................................................................32 Proposition 1A of 2004.................................................................................................................32 Proposition 22...............................................................................................................................32 Initiative, Referendum and Charter Amendments ........................................................................33 THE CITY .................................................................................................................................................33 THE AUTHORITY ...................................................................................................................................34 CITY FINANCIAL INFORMATION.......................................................................................................34 CONTINUING DISCLOSURE.................................................................................................................34 TAX MATTERS........................................................................................................................................35 LEGAL MATTERS...................................................................................................................................37 LITIGATION.............................................................................................................................................37 MUNICIPAL ADVISOR...........................................................................................................................38 RATINGS ..................................................................................................................................................38 SALE AND REOFFERING ......................................................................................................................38 MISCELLANEOUS ..................................................................................................................................38 APPENDIX A THE CITY OF SANTA BARBARA: ECONOMIC, DEMOGRAPHIC, AND FINANCIAL INFORMATION.........................................................................................1

APPENDIX B CITY OF SANTA BARBARA ANNUAL COMPREHENSIVE FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2023........................................1 APPENDIX C DEFINITIONS AND SUMMARY OF PRINCIPAL LEGAL DOCUMENTS.................1 APPENDIX D BOOK ENTRY SYSTEM..................................................................................................1 APPENDIX E FORM OF CONTINUING DISCLOSURE AGREEMENT..............................................1 APPENDIX F PROPOSED FORM OF OPINION OF BOND COUNSEL...............................................1 4140-2813-5503.3
$__________
*
Finance Authority of the City of Santa Barbara
Lease Revenue Bonds (Public Safety and Park Projects)
Series 2024

INTRODUCTION
This Introduction is qualified in its entirety by reference to the more detailed information included and referred to elsewhere in this Official Statement. The offering of the Series 2024 Bonds to potential investors is made only by means of the entire Official Statement. Capitalized terms used in this Introduction and not otherwise defined herein shall have the respective meanings assigned to them elsewhere in this Official Statement.

Purpose
The purpose of this Official Statement, including the cover page, and inside cover page, and the appendices hereto, is to provide certain information concerning the sale and delivery 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 will be payable from Base Rental Payments (as defined below) to be made to the Authority by the City of Santa Barbara (the “City”) pursuant to a Lease Agreement, dated as of ______ 1, 2024, (the “Lease Agreement”), by and between the Authority and the City. The Series 2024 Bonds are being issued to provide funds to: (i) 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, (ii) finance capitalized interest on the Series 2024 Bonds through May 15, 2027, (iii) fund a debt service reserve fund for the Series 2024 Bonds, and (iv) pay the costs of issuance of the Series 2024 Bonds. See “SERIES 2024 PROJECT” and “ESTIMATED SOURCES AND USES OF FUNDS” herein. It is anticipated that the Series 2024 Bonds will be available for delivery to the Initial Purchaser thereof on or about _____ __, 2024.

Base Rental Payments to be made by the City in accordance with the Lease Agreement will be rent for that real property and improvements, upon completion, constituting the City Police Station to be completed thereon as more particularly described herein (the “Property”), and the Authority will sublease the Property to the City pursuant to the Lease Agreement. The Base Rental Payments to be made by the City pursuant to the Lease Agreement are payable by the City from its General Fund and any other legally available funds of the City, as annual rental payments with principal and The Authority
The Authority is a Joint Powers Authority created pursuant to a Joint Exercise of Powers Agreement, dated as of November 1, 2023, (the “Joint Powers Agreement”), between the City and the California Statewide Communities Development Authority, a joint exercise of powers agency, duly organized and existing under the laws of State of California (“CSCDA”), to facilitate financings by the City and CSCDA. See “THE AUTHORITY.”
*
Preliminary, subject to change.
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The City of Santa Barbara
The City was incorporated on August 26, 1850. The City is a charter city under the laws of the State and operates under a Council-Administrator form of government. The City Council consists of seven members, 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. 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 utilizes a biennial budget process. The City's fiscal year for budgeting and accounting purposes runs from July 1 to June 30. In its budget proceedings, 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. On June 13, 2023, the City adopted its Two-Year Financial Plan for Fiscal Years 2023-24 and 2024-25 including the operating and capital budget for Fiscal Year 2023-24, as required by the City Charter. Although the Fiscal Year 2023-24 budget included a small use of reserves, it represented a balanced budget. On June 11, 2024, the City adopted its operating and capital budget for Fiscal Year 2024-25. The Fiscal Year 2024-25 budget is comprised of all City funds, including the General Fund, special revenue funds, and enterprise funds. Each fund accounts for distinct and uniquely funded operations. As described herein, over the past five years, the City has been required 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. The Fiscal Year 2024-25 budget closed a $7.4 Million General Fund deficit requiring the use of reserves and expenditure reductions, as modest revenue growth not projected to be adequate to cover ongoing expenditure increases from current commitments, including pension costs, high inflation, insurance, capital investment. Based on current trends and projections, the General fund would continue to have an operating deficit over the next three fiscal years if not balanced through new revenues, reduced expenditures, the deferral of capital projects, labor concessions; or the [additional] use of reserves. [The General fund is currently projected to have an operating deficit over the next three fiscal years.] Santa Barbara and the central coast of California are popular tourist destinations, and the City’s economy is directly affected by the number of visitors to the City. Inflation, changes in travel and purchasing habits over the past three years have substantially impacted local businesses and residents in the City. As a result of the COVID-19 pandemic, 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, following an approximately $30.0 Million reduction in revenue across all funds. Of this, the impact to the General Fund, which provides funding for essential City services like public safety, is estimated to be over $20.0 Million, or more than 10.0% of revenues. As a result, the City was forced to take additional steps to control and reduce costs by eliminating nearly all hourly employees, delaying projects, and reducing services. Some examples of this have been reducing staff or not filling open positions in nearly all City departments, including Public Safety. 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 stabilized and grown at a much slower pace into Fiscal Year 2023-24, suggesting a leveling of economic activity to a new baseline. 3 4140-2813-5503.3
A significant source of local revenues is attributable to the Measure C sales tax which commenced in the fourth quarter of Fiscal Year 2017-18. 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. See “Measure C Sales Tax” in Appendix A. In addition, a half-cent sales tax measure is being proposed for the upcoming November 2024 election that will fund City services. 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’” in Appendix A.

See “THE CITY” and APPENDIX A – “THE CITY OF SANTA BARBARA: ECONOMIC, DEMOGRAPHIC AND FINANCIAL INFORMATION.”
The Series 2024 Bonds
The Series 2024 Bonds will be issued in the aggregate principal amount and will mature on the dates and bear interest at the rates shown on the inside cover page of this Official Statement. The Series 2024 Bonds will be dated the date of original delivery and will bear interest from that date. Interest on the Series 2024 Bonds will be payable on May 15 and November 15 in each year, commencing ______ 15, 20__. The Series 2024 Bonds will be issued in denominations of $5,000 or any integral multiple thereof.

The Depository Trust Company (“DTC”) will act as the initial securities depository for the Series 2024 Bonds, which will be issued initially pursuant to a book-entry only system. 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 (each as defined herein). See APPENDIX D – “BOOK-ENTRY SYSTEM.” Authority for Issuance of the Series 2024 Bonds
The Series 2024 Bonds are being issued in accordance with the Marks-Roos Local Bond Pooling Act of 1985, constituting Section 6584 et seq. of the California Government Code (the “Act”), and other applicable laws of the State of California (the “State”). Pursuant thereto and in accordance with the City Charter, an ordinance adopted by the City and a resolution adopted by the Authority prior to the issuance of the Series 2024 Bonds, the City will lease that real property and improvements constituting the City Police Station to be completed thereon as more particularly described herein (the “Property”) to the Authority pursuant to a Ground Lease, dated as of ______ 1, 2024, (the “Ground Lease”) and the City will lease the Property back from the Authority pursuant to the Lease Agreement. The Series 2024 Bonds will be 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”) and are payable from base rental payments (the “Base Rental Payments”) to be made by the City under the Lease Agreement for the right to the use the Property. See “LEASED PROPPERTY.” Under the Indenture and the Lease Agreement, the Authority may issue additional bonds (the “Additional Bonds”) payable from Base Rental Payments on a parity basis with the Series 2024 Bonds.

The Series 2024 Bonds and any Additional Bonds are collectively referred to in this Official Statement as the “Bonds.” See the caption “SECURITY AND SOURCES OF PAYMENT FOR THE BONDS – Additional Bonds.”
Additional General Fund Obligations
Base Rental Payments will be payable from any funds lawfully available to the City. The City has not pledged such funds nor limited its ability to use such funds for other purposes. Measure C revenues 4 4140-2813-5503.3
constitute a portion of such funds, and the City expects to apply Measure C revenues to pay Base Rental Payments due under the Lease Agreement. The City does not currently have any significant capital lease obligations payable from the City’s General Fund revenues except for its obligations under a facility lease with respect to the Santa Barbara Financing Authority Revenue Refunding Bonds (Airport Project), Series 2019 (the “2019 Airport Revenue Refunding Bonds”), the related lease payment obligations of which have to date been offset in full by the City’s Airport Fund. The City does have other obligations related to retirement benefits and other post-employment benefits as well as certain other liabilities, a portion of which is payable from General Fund revenues and other funds lawfully available to the City. See “RISK FACTORS – City Obligations” and “– No Limitation on Incurring Additional Obligations” herein. Neither the Lease Agreement nor the Indenture contains any limitations on the ability of the City to enter into other obligations that may constitute additional claims against its General Fund revenues including, without limitation, Measure C revenues.

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, (the “2019 Facility Lease”), 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, by and between the SBFA and the City. 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 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. See APPENDIX A – “THE CITY OF SANTA BARBARA: ECONOMIC, DEMOGRAPHIC AND FINANCIAL INFORMATION – Outstanding Indebtedness.”
Security for the Bonds
The Bonds are special obligations of the Authority, payable, as provided in the Indenture, solely from Lease Revenues and the other assets pledged therefor thereunder. The Lease Revenues consist of all Base Rental Payments payable by the City pursuant to the Lease Agreement, including any prepayments thereof. The City will covenant under the Lease Agreement to take such action as may be necessary to include all Rental Payments, which are comprised of Base Rental Payments and Additional Rental Payments (which include taxes and assessments affecting the Property, administrative costs of the Authority relating to the Property, fees and expenses of the Trustee and other amounts payable under the Lease Agreement), due under the Lease Agreement [as a separate line item in its annual budgets] and to make the necessary annual appropriations therefor, subject to abatement as described herein. The Base Rental Payments to be made by the City pursuant to the Lease Agreement are payable by the City from its General Fund.

Rental Payments are subject to complete or partial abatement in the event and to the extent that there is substantial interference with the City's right to use and occupy the Property or any portion thereof.

See “RISK FACTORS – Limitations on Base Rental Payments; Abatement Risk.” Abatement of Base Rental Payments under the Lease Agreement, to the extent payment is not made from alternative sources as set forth below, would result in all Bond Owners receiving less than the full amount of principal of and interest on the Bonds. To the extent that Net Proceeds (as defined herein) of rental interruption insurance are available for the payment of Rental Payments due under the Lease Agreement, Rental Payments will not be abated as provided above but, rather, will be payable by the City as a special obligation payable solely from such Net Proceeds. See “SECURITY AND SOURCES OF PAYMENT FOR THE BONDS – Base Rental Payments.”
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The Base Rental Payments to be made by the City pursuant to the Lease Agreement are payable in an amount equaling the debt service for the Series 2024 Bonds for the right to use and the possession of the real property and facilities comprising the Property. As provided in the Lease Agreement, such Property may be substituted or released in accordance therewith. See APPENDIX C – “DEFINITIONS AND SUMMARY OF PRINCIPAL LEGAL DOCUMENTS – LEASE AGREEMENT.” A debt service reserve account (the “Series 2024 Reserve Account”) is established under the Indenture for the benefit of the Series 2024 Bonds, to be held in trust and maintained by the Trustee, and is required to be funded, as of the date of calculation, an amount equal to 50% of the maximum annual amount of principal of and interest on the Series 2024 Bonds coming due in any Bond Year (the “Series 2024 Reserve Requirement”) as described herein. See “SECURITYAND SOURCES OF PAYMENT FOR THE BONDS - Series 2024 Reserve Account of the Reserve Fund.” Summaries Not Definitive
Brief descriptions of the Series 2024 Bonds, the Authority, the City, and the Property are included in this Official Statement, together with summaries of the Ground Lease, the Lease Agreement, and the Indenture. Such descriptions and summaries do not purport to be comprehensive or definitive. All references herein to the Series 2024 Bonds, the Ground Lease, the Lease Agreement, and the Indenture are qualified in their entirety by reference to the actual documents, or with respect to the Series 2024 Bonds, the forms thereof included in the Indenture, copies of all of which are available for inspection by written request mailed to the City of Santa Barbara, 735 Anacapa Street, Santa Barbara, California 93101, Attention: City Administrator, and will be available upon request and payment of duplication costs from the Trustee.

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 the report for the 2023-24 fiscal Year, and to provide notices of the occurrence of certain enumerated events, if material. The nature of the information to be contained in the Annual Report or the notices of enumerated events is summarized below under the caption “CONTINUING DISCLOSURE.” See also, APPENDIX E – “FORM OF CONTINUING DISCLOSURE AGREEMENT.”

LEASED PROPPERTY
The Property consists of that real property upon which is to be located the City Police Station, at 601 Santa Barbara Street (formerly 119 E. Cota Street) in the City, an approximately 1.61-acre site, and the improvements to be completed thereon. See “SERIES 2024 PROJECT” below.

The City and the Authority have agreed and determined that based on the aggregate value of the land comprising the Property as of the date of delivery of the Series 2024 Bonds, and as of the completion of the Series 2024 Project, the Property will have an annual fair rental value greater than or equal to the maximum Base Rental Payments payable by the City in any Rental Period, and that the Fair Rental Value of the Property. In making such determinations of Fair Rental Value, consideration has been given to the uses and purposes that may be served by the Property and the benefits therefrom that will accrue to the City and the general public. Payments of the Rental Payments for the Property during each Rental Period shall constitute the total rental for said Rental Period.
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The City will lease the Property to the Authority pursuant to the Ground Lease. The Authority will then sublease the Property to the City pursuant to the Lease Agreement.

As provided in the Lease Agreement, such Property may be substituted or released in accordance therewith. See APPENDIX C – “DEFINITIONS AND SUMMARY OF PRINCIPAL LEGAL DOCUMENTS – LEASE AGREEMENT” – Substitution or Release of the Property.” SERIES 2024 PROJECT
The Series 2024 Bonds are being issued to provide net proceeds 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.

Police Station. The existing Police Headquarters was constructed in 1959 for a staff of 85, which has now grown to 212 sworn and non-sworn officers. The existing Police Headquarters does not meet the seismic codes for essential services buildings, nor does it meet the current building code and accessibility standards. Currently, police staff are located in four separate locations. A new building at a new location is required to house all Police Department operations in one place and to ensure uninterrupted public safety services to the community. The new location will be located at 601 Santa Barbara Street at the intersection of Cota Street and Santa Barbara Street on property which is currently owned by the City.

Over the past four years, major work efforts have included site selection and acquisition, community outreach, environmental review, and preliminary design. The Police Station project consists of demolition of an existing parking lot and construction of a new three-story, approximately 53-foot-high, approximately 64,000-square-foot Police Station building, and associated 37.5-foot-high, approximately 84,000-square-foot parking structure to accommodate 236 parking spaces (128 for Police Department fleet vehicles and 108 for employee vehicles). Each structure will also have a subterranean level. Emergency service antennas will be installed on the roof of the parking structure. Eight additional vehicle surface parking spaces and four bicycle parking spaces will be provided for visitors. Construction is anticipated to begin in late 2024 with a completion date in late 2026. The City expects that approximately $_______ of net proceeds of the Series 2024 Bonds will be applied to provide funds to finance costs of the design, engineering, construction, improvement, and installation of facilities to comprise the City Police Station.

The Police Station project is expected to be completed in late 2026. As described herein, a Capitalized Interest Subaccount within the Series 2024 Interest Account has been funded to make interest payments on Interest Payment Date occurring on or before [May 15, 2027]. [To be updated: Following the solicitation of bids and a review and selection process, the City awarded the Police Station project design to Cearnal Collective LLP, a Santa Barbara architectural, design, and project management firm (the “Architect”) and TynanGroup LP, a national real estate development services firm construction management firm founded in the City to act as owner’s representative (the “Construction Manager”). Completing the construction team will be ______________, as general contractor (the “Builder”) to build the Police Station as provided in a fixed price contract between the [City/Authority] and the Builder (the “Construction Contract”). The Construction Contract includes a price of $_______ subject to its terms.]
The Police Station project and its completion on budget and on time may be subject to unavoidable delays for a variety of reasons. Such unavoidable delays under the Construction Contract include any delay in the performance by any contractor, subcontractors, and/or the Builder of its respective obligations with respect to construction of the Police Station project caused by strikes or labor disputes, acts of God, 7 4140-2813-5503.3
unavoidable casualties, adverse weather conditions, acts of terrorists, delays by an agency having jurisdiction over the Police Station project (including, but not limited to, unanticipated delays in providing inspections or approvals by such agency), governmental embargo restrictions, site conditions not reasonably and previously identified, or other causes beyond the reasonable control of the contractor, subcontractors, and/or the Builder, which, after the exercise of due diligence to mitigate the effects thereof, delay construction of the Police Station project. Such unavoidable delays will entitle the contractor, subcontractors, and the Builder to an extension of the delivery date of the Police Station project but is not expected to entitle the contractor and subcontractors to additional compensation.

Pursuant to the Construction Contract, the Builder will procure and maintain, and cause contractor and subcontractors to procure and maintain, for the duration of the Construction Contract, builder’s risk insurance, which will provide funds for reconstruction costs during any period of reconstruction required by an insured peril. The Builder is required to obtain payment and performance bonds to insure its performance under the Construction Contract.]
Only the real property upon which is to be located the City Police Station and the improvements to be completed thereon, will constitute the Property to be leased under the Lease Agreement, subject to substitution and release thereof in accordance with the Lease Agreement. See APPENDIX C – “DEFINITIONS AND SUMMARY OF PRINCIPAL LEGAL DOCUMENTS – LEASE AGREEMENT.” Dwight Murphy Field Project. The property known as Dwight Murphy Field was acquired by the City of Santa Barbara in 1925. Commonly known as the Municipal Soccer Field, it was named in honor of Dwight Murphy in recognition of his civic leadership. Today, it still serves as the City’s only dedicated soccer facility, and also includes a softball field, outdoor fitness area, and playground.

The Dwight Murphy Field Project will achieve a full-scale renovation of a 8.3 acre park with the installation of all new amenities, including a multi-sport synthetic turf field with lighting and fencing, a natural turf field, a universally accessible playground, outdoor fitness gym, family picnic areas, fully accessible restrooms, new trees and landscaping, bicycle parking, accessible entries, and improved circulation with pedestrian pathways surrounding and through the park and expanded park parking.

Construction is anticipated to begin in January 2025 with a completion date in March 2026. The City expects that approximately $[13 million] of net proceeds of the Series 2024 Bonds will be applied to pay costs of the design, engineering, construction, and improvement of Dwight Murphy Field.

In late 2016, the Gwendolyn Strong Foundation reached out to the Parks and Recreation Department (the “Parks Department”) with a vision to develop Santa Barbara’sfirst all-abilities playground.

Dwight Murphy Field was identified asthe best site for the new and exciting project. The Parks Department has partnered with the Gwendolyn Strong Foundation to develop Gwendolyn’s Playground, Santa Barbara’s first and the region’s largest all-abilities playground. Together, a design was created for a whimsical play space that removes the physical barriers of traditional playgrounds that prevent children living with disabilities from playing side by side with other children.

In 2019, the City Council approved the Dwight Murphy Master Plan. Through a memorandum of understanding, the City and the Gwendolyn Strong Foundation are co-funding the project design and construction of Gwendolyn’s Playground. Funding for project construction includes $6.0 Million raised by the Gwendolyn Strong Foundation, $1.5 Million Community Project Funding grant the awarded to the City through U.S. Congressman Salud Carbajal, and $6 million committed through a Measure C capital allocation in Fiscal Year 2023.
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ESTIMATED SOURCES AND USES OF FUNDS
The estimated sources and uses of funds with respect to the Series 2024 Bonds are as follows:

Sources of Funds
Aggregate Principal Amount of Series 2024 Bonds.............................

Original Issue Premium/Discount.........................................................

Total Sources..................................................................................

Uses of Funds
Project Fund (1)......................................................................................

Capitalized Interest Subaccount (2).......................................................

Series 2024 Reserve Account
Costs of Issuance Fund (3).....................................................................

Total Uses....................................................................................... (1) To be applied to pay a portion of the costs of the Series 2024 Project. (2) To be applied to pay capitalized interest on the Series 2024 Bonds through May 15, 2027. (3)
Includeslegal fees, financing and consulting fees, fees of bond counsel, disclosure counsel and trustee, printing costs, rating agency fees, and other miscellaneous expenses.

THE BONDS
The following is a summary of certain provisions of the Series 2024 Bonds. Reference is made to the Series 2024 Bonds for the complete text thereof and to the Indenture for a more detailed description of these provisions. The discussion herein is qualified by such reference. See APPENDIX C – “DEFINITIONS AND SUMMARY OF PRINCIPAL LEGAL DOCUMENTS – INDENTURE.” General
The Series 2024 Bonds will be issued in the aggregate principal amount and will mature on the dates and bear interest at the rates shown on the inside cover page of this Official Statement. The Series 2024 Bonds will be dated the date of original delivery and will bear interest from that date. Interest on the Series 2024 Bonds will be payable on May 15 and November 15 in each year, commencing ______ 15, 20__, (each, an “Interest Payment Date”). The Series 2024 Bonds shall be issued in fully registered form without coupons in denominations of $5,000 or any integral multiple thereof (each, an “Authorized Denomination”).

The Series 2024 Bonds, when issued, will be registered in the name of Cede & Co., as nominee of DTC. Individual purchases of interests in the Series 2024 Bonds will be made in book-entry form only, in authorized denominations. Purchasers of interests will not receive certificates representing their interests in the Series 2024 Bonds. For a description of the method of payment of principal, premium, if any, and interest on the Series 2024 Bonds and matters pertaining to transfers and exchanges while in the book-entry system, see APPENDIX D – “BOOK-ENTRY SYSTEM.”
So long as Cede & Co. is the registered owner of the Series 2024 Bonds, the Trustee will pay principal of and interest on the Series 2024 Bonds to DTC, which will remit principal, premium, if any, and interest payments to the Beneficial Owners of the Series 2024 Bonds, as described under APPENDIX D – “BOOK-ENTRY SYSTEM.” DTC will act as the initial securities depository for the Series 2024 Bonds.

Under the Indenture, the Authority may appoint a successor securities depository to DTC for the Series 9 4140-2813-5503.3
2024 Bonds. The information under this caption, “THE BONDS” is subject in its entirety to the provisions described below under APPENDIX D – “BOOK-ENTRY SYSTEM” while the Series 2024 Bonds are in the book-entry only system.

Payment of Principal and Interest
Interest on the Series 2024 Bonds shall be payable from the Interest Payment Date next preceding the date of authentication thereof unless (i) a Series 2024 Bond is authenticated on or before an Interest Payment Date and after the close of business on the preceding Record Date, in which event interest thereon shall be payable from such Interest Payment Date, (ii) a Series 2024 Bond is authenticated on or before the first Record Date, in which event interest thereon shall be payable from the Closing Date, or (iii) interest on any Series 2024 Bond isin default as of the date of authentication thereof, in which event interest thereon shall be payable from the date to which interest has previously been paid or duly provided for. As defined in the Indenture, the term Record Date means the close of business 15 days immediately preceding an Interest Payment Date, whether or not such day is a Business Day.

Interest will be paid in lawful money of the United States on each Interest Payment Date. Interest will be paid by wire transfer to DTC. Notwithstanding the foregoing, interest on any Series 2024 Bond which is not punctually paid or duly provided for on any Interest Payment Date will, if and to the extent that amounts subsequently become available therefore, be paid on a payment date established by the Trustee to the Person in whose name the ownership of such Series 2024 Bond is registered on the Registration Books at the close of business on a special record date to be established by the Trustee for the payment of such defaulted interest, notice of which shall be given to such Owner not less than ten days prior to such special record date.

While the Series 2024 Bonds are book-entry bonds, payment of the principal of and interest on any Series 2024 Bonds will be made by the Trustee directly to DTC, to the account of Cede & Co. In the event the Series 2024 Bonds are no longer in a book-entry system, principal or purchase price on such Series 2024 Bonds will be payable at the Principal Corporate Trust Office of the Trustee, and interest on the Series 2024 Bonds due on or before the maturity or prior redemption thereof shall be paid by check of the Trustee mailed by first-class mail, postage prepaid, on each Interest Payment Date to the Owners of the Bonds at their respective addresses shown on the Registration Books as of the close of business on the preceding Record Date. Notwithstanding the foregoing, interest on any Bond that is not punctually paid or duly provided for on any Interest Payment Date shall, if and to the extent that amounts subsequently become available therefore, be paid on a payment date established by the Trustee to the Person in whose name the ownership of such Bond is registered on the Registration Books at the close of business on a special record date to be established by the Trustee for the payment of such defaulted interest, notice of which shall be given to such Owner not less than ten days prior to such special record date.

The principal of the Bonds shall be payable in lawful money of the United States of America upon presentation and surrender thereof upon maturity or earlier redemption at the Office of the Trustee.

Redemption Terms of the Series 2024 Bonds
Optional Redemption. The Series 2024 Bonds maturing on or after May 15, 20__, shall be subject to optional redemption, in whole or in part in Authorized Denominations on any date on or after May 15, 20__, from and to the extent of prepaid Base Rental Payments paid pursuant to the Lease Agreement, at a redemption price equal to the principal amount of the Series 2024 Bonds to be redeemed, plus accrued interest thereon to the date of redemption, without premium. 10 4140-2813-5503.3
Extraordinary Redemption. The Series 2024 Bonds shall be subject to redemption, in whole or in part, on any date, in Authorized Denominations, from and to the extent of any insurance proceeds or condemnation award received (in excess of $50,000) with respect to all or a portion of the Property and deposited by the Trustee in the Redemption Fund in accordance with the Indenture, at a redemption price equal to the principal amount thereof, plus accrued interest thereon to the date fixed for redemption, without premium.

Mandatory Sinking Fund Redemption. The Series 2024 Bonds maturing May 15, 20__, shall be subject to mandatory sinking fund redemption, in part, on May 15 in each year, commencing May 15, 20__, at a redemption price equal to the principal amount thereof, plus accrued interest thereon to the date fixed for redemption, without premium, in the aggregate respective principal amounts in the respective years as follows:

Sinking Fund
Redemption Date
(May 15)
Principal Amount to
be Redeemed
20__ $
20__
20__
20__
†
______________________
† Maturity Date.

If some but not all of the Series 2024 Bonds maturing on May 15, 20__, are redeemed by the terms for extraordinary redemption, the principal amount of Series 2024 Bonds maturing on May 15, 20__, to be subject to sinking fund redemption will be reduced by the aggregate principal amount of the Series 2024 Bonds maturing on May 15, 20__, so redeemed by the terms for extraordinary redemption, such reduction to be allocated among redemption dates as nearly as practicable on a pro rata basis, in amounts equal to Authorized Denominations, as determined by the Trustee, notice of which determination will be given by the Trustee to the Authority and the City. If some but not all of the Series 2024 Bonds maturing on May 15, 20__, are optionally redeemed, the principal amount of Series 2024 Bonds maturing on May 15, 20__, to be subject to sinking fund redemption will be reduced by the aggregate principal amount of the Series 2024 Bonds maturing on May 15, 20__, so optionally redeemed, such reduction to be allocated among redemption dates in Authorized Denominations, as designated by the City in a Written Certificate of the City.

The Series 2024 Bonds maturing May 15, 20__, shall be subject to mandatory sinking fund redemption, in part, on May 15 in each year, commencing May 15, 20__, at a redemption price equal to the principal amount thereof, plus accrued interest thereon to the date fixed for redemption, without premium, in the aggregate respective principal amounts in the respective years as follows:

Sinking Fund
Redemption Date
(May 15)
Principal Amount to
be Redeemed
20__ $
20__
20__
20__
†
______________________
† Maturity Date.
11 4140-2813-5503.3
If some but not all of the Series 2024 Bonds maturing on May 15, 20__, are redeemed by the terms for extraordinary redemption, the principal amount of Series 2024 Bonds maturing on May 15, 20__, to be subject to sinking fund redemption will be reduced by the aggregate principal amount of the Series 2024 Bonds maturing on May 15, 20__, so redeemed by the terms for extraordinary redemption, such reduction to be allocated among redemption dates as nearly as practicable on a pro rata basis, in amounts equal to Authorized Denominations, as determined by the Trustee, notice of which determination will be given by the Trustee to the Authority and the City. If some but not all of the Series 2024 Bonds maturing on May 15, 20__, are optionally redeemed, the principal amount of Series 2024 Bonds maturing on May 15, 20__, to be subject to sinking fund redemption will be reduced by the aggregate principal amount of the Series 2024 Bonds maturing on May 15, 20__, so optionally redeemed, such reduction to be allocated among redemption dates in Authorized Denominations, as designated by the City in a Written Certificate of the City.

Notice of Redemption. The Trustee on behalf and at the expense of the Authority will mail (by first class mail) notice of any redemption to the respective Owners of any Bonds designated for redemption at their respective addresses appearing on the Registration Books at least 20 but not more than 60 days prior to the date fixed for redemption. Such notice will state the date of the notice, the redemption date, the redemption place and the redemption price and will designate the CUSIP numbers, if any, the Bond numbers, Series and the maturity or maturities of the Bonds to be redeemed (except in the event of redemption of all of the Bonds of such Series, maturity or maturities in whole), and will require that such Bonds be then surrendered at the Office of the Trustee for redemption at the redemption price, giving notice also that further interest on such Bonds will not accrue from and after the date fixed for redemption. Neither the failure to receive any notice so mailed, nor any defect in such notice, shall affect the validity of the proceedings for the redemption of the Bonds or the cessation of accrual of interest thereon from and after the date fixed for redemption. With respect to any notice of any optional redemption of Bonds of a Series, unless at the time such notice is given the Bonds to be redeemed shall be deemed to have been paid in accordance with the Indenture, such notice will state that such redemption is conditional upon receipt by the Trustee, on or prior to the date fixed for such redemption, of moneys that, together with other available amounts held by the Trustee, are sufficient to pay the redemption price of, and accrued interest on, the Bonds to be redeemed, and that if such moneys shall not have been so received said notice shall be of no force and effect and the Authority will not be required to redeem such Bonds. In the event a notice of redemption of Bonds contains such a condition and such moneys are not so received, the redemption of Bonds as described in the conditional notice of redemption will not be made and the Trustee will, within a reasonable time after the date on which such redemption was to occur, give notice to the Persons and in the manner in which the notice of redemption was given, that such moneys were not so received and that there will be no redemption of Bonds pursuant to such notice of redemption.

Selection of Bonds for Redemption. Whenever provision is made in the Indenture for the redemption of less than all of the Bonds, the Trustee will select the Bonds to be redeemed from all Bonds not previously called for redemption (a) with respect to any extraordinary redemption, among maturities of all Series of Bonds on a pro rata basis as nearly as practicable, (b) with respect to any optional redemption of Bonds of a Series, as directed in a Written Certificate of the City, and (c) with respect to any other redemption of Additional Bonds, among maturities as provided in the Supplemental Indenture pursuant to which such Additional Bonds are issued, and by lot among Bonds of the same Series with the same maturity in any manner which the Trustee in its sole discretion shall deem appropriate and fair. The Trustee will promptly notify the Authority and the City in writing of the numbers of the Bondsso selected for redemption on such date. For purposes of such selection, all Bonds shall be deemed to be comprised of separate $5,000 denominations and such separate denominations will be treated as separate Bonds that may be separately redeemed.
12 4140-2813-5503.3
Partial Redemption of Bonds. Upon surrender of any Bonds redeemed in part only, the Authority will execute, and the Trustee will authenticate and deliver to the Owner thereof, at the expense of the Authority, a new Bond or Bonds of the same Series in Authorized Denominations equal in aggregate principal amount representing the unredeemed portion of the Bonds surrendered.

Effect of Notice of Redemption. Notice having been mailed as aforesaid, and moneys for the redemption price, and the interest to the applicable date fixed for redemption, having been set aside with the Trustee, the Bonds will become due and payable on said date, and, upon presentation and surrender thereof at the Office of the Trustee, said Bonds will be paid at the redemption price thereof, together with interest accrued and unpaid to said date.

If, on said date fixed for redemption, moneys for the redemption price of all the Bonds to be redeemed, together with interest to said date, will be held by the Trustee so as to be available therefor on such date, and, if notice of redemption thereof shall have been mailed as aforesaid and not canceled, then, from and after said date, interest on said Bonds shall cease to accrue and become payable. All moneys held by or on behalf of the Trustee for the redemption of Bonds will be held in trust for the account of the Owners of the Bonds so to be redeemed without liability to such Owners for interest thereon.

All Bonds paid at maturity or redeemed prior to maturity pursuant to the provisions hereof will be canceled upon surrender thereof and destroyed.

SECURITY AND SOURCES OF PAYMENT FOR THE BONDS
Pledge Under the Indenture
The Bonds are payable from and secured by Lease Revenues and any other amounts held in the Payment Fund established under the Indenture. The term “Lease Revenues” means all Base Rental Payments payable by the City pursuant to the Lease Agreement, including any prepayments thereof, any Net Proceeds and any amounts received by the Trustee as a result of or in connection with the Trustee's pursuit of remedies under the Lease Agreement upon a Lease Default Event. Base Rental Payments shall be paid by the City from any and all legally available funds.

The Trustee will establish and maintain a separate fund designated the “Payment Fund” to be held in trust under and in accordance with the Indenture. Within the Payment Fund, the Trustee will establish and maintain a separate account designated the “Series 2024 Interest Account” and a separate account designated the “Series 2024 Principal Account.” Within the Series 2024 Interest Account, the Trustee shall establish and maintain a separate account designated the “Capitalized Interest Subaccount” until the date all amounts are transferred therefrom in accordance with the Indenture. Upon the issuance of Additional Bonds, the Trustee shall also establish and maintain, within the Payment Fund, a separate Interest Account, and a separate Principal Account for each Series of Additional Bonds.

As provided in the Indenture, to secure the payment of the principal of, premium, if any, and interest on the Bonds in accordance with their terms, the Authority will pledge to the Owners of the Bonds, and grant a lien on and a security interest in, all right, title and interest of the Lease Revenues and any other amounts held in the Payment Fund whether now owned or hereafter arising as security for the payment of the principal of and interest on the Bonds in accordance with their terms, the provisions of the Indenture and the Act. This pledge and grant will constitute a first lien on such assets, which shall immediately attach to such assets and be effective, binding, and enforceable against the Authority in accordance with the Indenture without the need for any physical delivery, recordation, filing or further act, and will be subject only to the provisions of the Indenture.
13 4140-2813-5503.3
As further provided in the Indenture, the Authority will assign to the Trustee for the benefit of the Bond Owners all of the Authority's right, title and interest in and to the Lease Agreement, including, without limitation, its right to receive Base Rental Payments to be paid by the City under and pursuant to the Lease Agreement; provided that, the Authority will retain the rights to indemnification and to payment of reimbursement of its reasonable costs and expenses under the Lease Agreement. The City will pay Base Rental Payments directly to the Trustee, as assignee of the Authority. See “— Base Rental Payments” below.

The Bonds are special obligations of the Authority, payable, as provided in the Indenture, solely from Lease Revenues and the other assets pledged therefor under the Indenture. Neither the faith and credit nor the taxing power of the Authority, the City or the State, or any political subdivision thereof, is pledged to the payment of the Bonds. The Lease Revenues consist of all Base Rental Payments payable by the City pursuant to the Lease Agreement, including any prepayments thereof, any Net Proceeds and any amounts received by the Trustee as a result of or in connection with the Trustee’s pursuit of remedies under the Lease Agreement upon a Lease Default Event. Each annual obligation of the City to make the Base Rental Payments and Additional Payments under the Lease Agreement shall constitute a current expense of the City and shall not in any way be construed to be a debt of the City in contravention of any applicable constitutional or statutory limitation or requirement concerning the creation of indebtedness by the City, nor shall anything contained in the Lease Agreement constitute a pledge of the general tax revenues, funds or moneys of the City. The Bonds are not a debt of the City, the State or any of its political subdivisions, and neither the City, the State nor any of its political subdivisions is liable thereon, nor in any event shall the Bonds be payable out of any funds or properties other than those of the Authority as provided in the Indenture. The Authority has no taxing power.

All of the Bonds are equally secured by a pledge of and charge and lien upon the Lease Revenues, and the Lease Revenues constitute a trust fund for the security and payment of the interest on and principal of and redemption premiums, if any, on the Bonds as provided in the Indenture.

Base Rental Payments
Pursuant to the Lease Agreement, the Authority will sublease the Property, obligating the City to make Base Rental Payments as required therein, subject to abatement. The term “Property” means that that real property and improvements constituting the City Police Station to be completed thereon (financed with a portion of the net proceeds of the Series 2024 Bonds) as specifically described in the Lease Agreement.

As provided in the Lease Agreement, such Property may be substituted or released in accordance therewith.

See APPENDIX C – “DEFINITIONS AND SUMMARY OF PRINCIPAL LEGAL DOCUMENTS – LEASE AGREEMENT.”
Rental Payments, including Base Rental Payments, will be paid by the City to the Authority for and in consideration of the right to use and occupy the Property and in consideration of the continued right to the quiet use and enjoyment thereof during each Rental Period for which such Rental Payments are to be paid. Each Base Rental Payment shall be deposited with the Trustee no later than the fifth Business Day next preceding each Interest Payment Date (the “Base Rental Deposit Date”) on which such Base Rental Payment is due. All Base Rental Payments will be paid directly by the City to the Trustee, and if received by the Authority at any time will be transferred by the Authority to the Trustee within one Business Day after the receipt thereof. All Base Rental Payments received by the Trustee will be deposited by the Trustee in the Payment Fund.

As provided in the Indenture, all Lease Revenues received by the Trustee shall be deposited by the Trustee in the Payment Fund; provided, however, that Net Proceeds, other than those constituting proceeds of rental interruption insurance received with respect to the Property, shall not be deposited in the Payment Fund but, rather, shall be applied to the cost of repair or replacement of the Property or the affected portion 14 4140-2813-5503.3
thereof, or to the extraordinary redemption of Bonds as provided in the Indenture. There shall additionally be deposited in the applicable Interest Account of the Payment Fund amounts transferred from the related Reserve Account pursuant to the Indenture. See “Series 2024 Reserve Account of the Reserve Fund” below.

The Indenture requiresthat the Base Rental Payments be deposited in the Payment Fund maintained by the Trustee. In accordance with the Indenture, the Trustee will transfer such amounts as are necessary to the Interest Account or the Principal Account, as the case pay be, to pay principal of and interest on the Bonds as the same becomes due and payable. On each Principal Payment Date, following the payment of principal of and interest on the Bonds, any excess amount in the Payment Fund will be transferred to the Reserve Fund, as necessary in connection with the issuance of Additional Bonds, if any, and thereafter deposited into the Payment Fund to be applied to pay the principal of and interest on the Bonds. With respect to the Series 2024 Bonds, on each Interest Payment Date occurring on or before ______ 15, 20__, before making said deposit, if and to the extent available in the Capitalized Interest Subaccount within the Series 2024 Interest Account, an amount equal to the difference between (1) the aggregate amount of interest component coming due on such Interest Payment Date and (2) the aggregate amount of the interest component of any Base Rental Payments payable under the Lease Agreement, shall be transferred from the Capitalized Interest Subaccount to the Series 2024 Interest Account. See APPENDIX C – “DEFINITIONS AND SUMMARY OF PRINCIPAL LEGAL DOCUMENTS – INDENTURE – Creation of Funds and Accounts.”
[Base Rental Payments are calculated on an annual basis, for twelve-month periods commencing on May 15 and ending on March 31, and each annual Base Rental Payments will be divided into two interest components, due on May 15 and November 15, and one principal component, due on May 15, except that the first Base Rental Payment period will commence on the date of recordation of the Lease Agreement and end on May 14, 2025. Each Base Rental Payment with respect to the Lease Agreement will be payable on the 26th day of the month immediately preceding each Interest Payment Date on the Series 2024 Bonds.

Each annual Base Rental payment will be for the use of the Property for the twelve-month period commencing on May 15 of the period in which such installments are payable (except for the first Base Rental Payment period which will commence on the date of recording of the Lease Agreement).] The obligation of the City to make Base Rental payments is an obligation payable solely from amounts legally available therefore and does not constitute a debt of the City or of the State or of any political subdivision thereof in contravention of any constitutional or statutory debt limitation or restriction or an obligation for which the City must levy or pledge, or has levied or pledged, any form of taxation.

For a further description of the provisions of the Lease Agreement, including the terms thereof and a description of certain covenantstherein, including construction, maintenance, utilities, taxes, assessments, insurance and events of default and available remedies, see APPENDIX C – “DEFINITIONS AND SUMMARY OF PRINCIPAL LEGAL DOCUMENTS – LEASE AGREEMENT.” For information regarding the City, see Appendix A and Appendix B attached hereto. See also “CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS.” Abatement
Base Rental Payments are paid by the City in each rental payment period for and in consideration of the right of use and occupancy of the Property during each such period for which said rental is to be paid.

The Base Rental Payments and Additional Payments are subject to abatement under the Lease Agreement.

As provided therein, except to the extent of (a) amounts held by the Trustee in the Interest Account, (b) amounts received in respect of rental interruption insurance, and (c) amounts, if any, otherwise legally available to the Trustee for payments in respect of the Series 2024 Bonds, Rental Payments shall be abated 15 4140-2813-5503.3
proportionately (in the proportion in which the annual fair rental value of that portion of the Property rendered unusable bears to the annual fair rental value of the whole of the Property) during any period in which, by reason of material damage to, or destruction or condemnation of, the Property, or any defect in title to the Property, there is substantial interference with the City’s right to use and occupy any portion of the Property. As provided in the Lease Agreement, the City and the Authority will determine the amount of such abatement; provided, however, that the Rental Payments due for any Rental Period shall not exceed the annual fair rental value of that portion of the Property available for use and occupancy by the City during such Rental Period. Such abatement shall continue for the period commencing with the date of interference resulting from such damage, destruction, condemnation, or title defect and, with respect to damage to or destruction of the Property, ending with the substantial completion of the work of repair or replacement of the Property, or the portion thereof so damaged or destroyed.

To the extent that Net Proceeds of rental interruption insurance are available for the payment of Rental Payments, Rental Payments shall not be abated as provided above but, rather, shall be payable by the City as a special obligation payable solely from such Net Proceeds.

See “RISK FACTORS – Limitations on Base Rental Payments; Abatement Risk.” Such abatement shall continue for the period commencing with such damage or destruction and ending with the substantial completion of the work of repair or reconstruction. In the event of any such damage or destruction, the Lease Agreement shall continue in full force and effect and the City waives any right to terminate the Lease Agreement by virtue of any such damage or destruction. In the event the Property cannot be repaired during the period of time that proceeds of the City’s rental interruption insurance will be available in lieu of Base Rental Payments (a period of two years), or in the event that casualty insurance proceeds are insufficient to provide for complete repair of the Property, there could be insufficient funds to cover payments to Owners of the Bonds in full. See APPENDIX C – “DEFINITIONS AND SUMMARY OF PRINCIPAL LEGAL DOCUMENTS – LEASE AGREEMENT – Rental Abatement” and “SECURITY AND SOURCES OF PAYMENT FOR THE BONDS – Insurance.” Series 2024 Reserve Account of the Reserve Fund
The Trustee will establish and maintain in trust in the name of the Trustee a special Fund designated the “Reserve Fund.” Within the Reserve Fund, the Trustee will establish and maintain in trust in the name of the Trustee a separate account designated the “Common Reserve Account” and may establish and maintain one or more additional Reserve Accounts, [including the Series 2024 Reserve Account which the Trustee will establish and maintain for the benefit of the holders of the Series 2024 Bonds], each of which may secure one or more Series of Bonds pursuant to the Indenture and to the Supplemental Indenture authorizing the issuance thereof. On the Closing Date, the Trustee will deposit in the Series 2024 Reserve Account $________ in accordance with the Indenture. In connection with the issuance of Additional Bonds, there will additionally be deposited in the Common Reserve Account or any other Reserve Account established and/or maintained forsuch Additional Bonds, as applicable, the amount required to be deposited therein under the Supplemental Indenture pursuant to which such Additional Bonds are issued. As defined in the Indenture, the term “Series 2024 Reserve Account Requirement” means, as of the date of any calculation, 50% Maximum Annual Debt Service of the Series 2024 Bonds.

The City may substitute a Reserve Facility for all or part of the moneys on deposit in any Reserve Account by depositing such Reserve Facility with the Trustee, provided that, at the time ofsuch substitution, the amount on deposit in such Reserve Account, together with the amount available under all Reserve Facilities on deposit in such Reserve Account, shall be at least equal to the Reserve Requirement for such Reserve Account. Moneys for which a Reserve Facility has been substituted as provided herein shall be transferred, at the election of the City, to the Redemption Fund for the purpose of redeeming the related 16 4140-2813-5503.3
Series of Bonds or, upon receipt of an Opinion of Bond Counsel that such transfer will not, in and of itself, adversely affect the exclusion of interest on Outstanding Tax-Exempt Bonds from gross income for federal income tax purposes, to the City and applied to the payment of capital costs of the City. Amounts on deposit in any Reserve Account which were not derived from payments under any Reserve Facility credited to such Reserve Account to satisfy a portion of the Reserve Requirement for such Reserve Account will be used and withdrawn by the Trustee prior to using and withdrawing any amounts derived from payments under such Reserve Facility. In order to accomplish such use and withdrawal of such amounts not derived from payments under any such Reserve Facility, the Trustee will, as and to the extent necessary, liquidate any investments purchased with such amounts.

In the event that, on the second Business Day prior to a date on which the Trustee is to transfer money from the Payment Fund to the Interest Accounts or to the Principal Accounts pursuant to the Indenture, amounts in the Payment Fund are insufficient for such purpose, the Trustee will withdraw from each Reserve Account, to the extent of any funds therein, the amount of the insufficiency of the related Series of Bonds, and will transfer any amounts so withdrawn first to the related Interest Account and then to the related Principal Account. If the amount on deposit in any Reserve Account is not sufficient to make such transfer, the Trustee will make a claim under any available Reserve Facility, in accordance with the provisions thereof, in order to obtain an amount sufficient to allow the Trustee to make such transfer as and when required.

If the sum of the amount on deposit in any Reserve Account, plus the amount available under all available Reserve Facilities held for such Reserve Account, is less than the Reserve Fund Requirement for such Reserve Account, the first of Base Rental Payments thereafter received from the City under the Lease Agreement and not needed to pay the principal of and interest on the Bonds on the next Interest Payment Date or Principal Payment Date will be used, first, to reinstate the amounts available under any Reserve Facilities that have been drawn upon and, second, to increase the amount on deposit in the Reserve Accounts, so that the amount available under all available Reserve Facilities, when added to the amount on deposit in the Reserve Fund, shall equal the Reserve Requirement for each Reserve Account; provided, however, that such Base Rental Payments will be allocated among all Reserve Accounts ratably without preference or priority of any kind, according to each Reserve Account's percentage share of the total deficiencies in all Reserve Accounts.

If, as a result of the payment of principal of or interest on any Series of Bonds, the Reserve Requirement applicable to such Series of Bonds is reduced, amounts on deposit in the applicable Reserve Account in excess of such reduced Reserve Requirement will be transferred to the related Interest Account(s) and Principal Account(s) of the Payment Fund as directed in a Written Request of the City.

On any date on which Bonds of a Series are defeased as provided in the Indenture, the Trustee will, if so directed in a Written Request of the City, transfer any moneys in the related Reserve Account in excess of the applicable Reserve Requirement resulting from such defeasance to the entity or fund so specified in such Written Request of the City, to be applied to such defeasance.

See APPENDIX C – “DEFINITIONS AND SUMMARY OF PRINCIPAL LEGAL DOCUMENTS – INDENTURE – Pledge and Assignment; Funds and Accounts – Reserve Fund.” Insurance
The Lease Agreement requires the City to maintain or cause to be maintained throughout the term of the Lease Agreement, a standard comprehensive general liability insurance policy or policies in protection of the City, the Authority and their respective members, officers, agents, and employees. Such policy or policies will provide for indemnification of said parties against direct or contingent loss or liability 17 4140-2813-5503.3
for damages for bodily and personal injury, death or property damage occasioned by reason of the use or ownership of the Property. Such policy or policies will provide coverage in the minimum liability limits of $1,000,000 for personal injury or death of each person and $3,000,000 for personal injury or deaths of two or more persons in a single accident or event, and in a minimum amount of $500,000 for damage to property (subject to a deductible clause of not to exceed $100,000) resulting from a single accident or event. Such public liability and property damage insurance may, however, be in the form of a single limit policy in the amount of $3,000,000 covering all such risks. Such liability insurance may be maintained as part of or in conjunction with any other liability insurance coverage carried or required to be carried by the City. The Net Proceeds ofsuch liability insurance will be applied toward extinguishment orsatisfaction of the liability with respect to which the Net Proceeds of such insurance have been paid. The City's obligations as described above may be satisfied by self-insurance in accordance with the Lease Agreement. See APPENDIX C – “DEFINITIONS AND SUMMARY OF PRINCIPAL LEGAL DOCUMENTS – LEASE AGREEMENT – Insurance to be Maintained by the City.”
The City will maintain or cause to be maintained casualty insurance insuring the Property against fire, lightning and all other risks covered by an extended coverage endorsement ([excluding earthquake and flood insurance]) to the [then] full insurable value of the Property, subject to a $100,000 loss deductible provision. Full insurable value will not be less than the aggregate principal amount of the Outstanding Bonds. Such coverage may be provided in the form of a policy insuring the Property and additional property owned by the City against such risks; provided, however, that the amount of the coverage provided pursuant to such policy may be less than the aggregate amount of the full insurable value of all properties insured thereby if the City provides to the Trustee a written evaluation of a qualified insurance consultant that the City's coverage is reasonable given the maximum foreseeable loss in the event of fire, lightning and all other risks covered by an extended coverage endorsement (excluding earthquake and flood), the nature of such risks insured and the proximity of the insured properties to each other. The Net Proceeds of such casualty insurance will be applied as set forth below under “Damage or Destruction of the Property.” The City's obligations as described above may be satisfied by self-insurance in accordance with the Lease Agreement. See APPENDIX C – “DEFINITIONS AND SUMMARY OF PRINCIPAL LEGAL DOCUMENTS – LEASE AGREEMENT.”
The City will maintain rental interruption insurance to cover the Authority's loss, total or partial, of Base Rental Payments resulting from the loss, total or partial, of the use of any part of the Property as a result of any of the hazards required to be covered pursuant to the paragraph immediately above in an amount not less than the product of two times the maximum amount of Base Rental Payments scheduled to be paid during any Rental Period. The Net Proceeds of such rental interruption insurance will be applied to the payment of Rental Payments during the period in which, as a result of the damage or destruction to the Property that resulted in the receipt of such Net Proceeds, there is substantial interference with the City's right to the use or occupancy of the Property. The City's obligations as described above may not be satisfied by self-insurance. The insurance required above will be provided by reputable insurance companies with claims paying abilities determined, in the reasonable opinion of the City's professionally qualified risk manager or an independent insurance consultant, to be adequate for the purposes of the Lease Agreement.

The City is required under the Lease Agreement to provide, at its own expense, a CLTA or ALTA title insurance policy for the Property, in the aggregate amount of not less than the initial aggregate principal amount of the respective series of the Bonds, insuring (a) the fee interest of the City in the Property (b) the Authority's ground leasehold estate in the Property under the Ground Lease, and (c) the City's leasehold estate in the Property under the Lease Agreement, subject only to Permitted Encumbrances, and providing that all proceeds thereunder are payable to the Trustee for the benefit of the Owners. See APPENDIX C – “DEFINITIONS AND SUMMARY OF PRINCIPAL LEGAL DOCUMENTS – LEASE AGREEMENT – Insurance to be Maintained by the City.”
18 4140-2813-5503.3
Damage or Destruction of the Property
If the Property or any portion thereof is damaged or destroyed, the City will, within 30 days of the occurrence of the event of damage or destruction, notify the Trustee in writing of the City's determination as to whether or not such damage or destruction will result in a substantial interference with the City's right to the use or occupancy of the Property and an abatement in whole or in part of Rental Payments pursuant to the Lease Agreement. If the City determines that such damage or destruction will not result in a substantial interference with the City's right to the use or occupancy of the Property and an abatement in whole or in part of Rental Payments pursuant to the Lease Agreement, the City' will, as expeditiously as possible, continuously and diligently prosecute or cause to be prosecuted the repair or replacement thereof.

If the City determines that such damage or destruction will result in a substantial interference with the City's right to the use or occupancy of the Property and an abatement in whole or in part of Rental Payments pursuant to the Lease Agreement, then the City will (i) apply sufficient funds from the Net Proceeds of any insurance (other than Net Proceeds of rental interruption insurance), including the proceeds of any self-insurance, received on account of such damage or destruction and other legally available funds to the repair or replacement of the Property or the portions thereof that have been damaged or destroyed to the condition that existed prior to such damage or destruction, provided that, within 40 days of the occurrence of the event of damage or destruction, the City delivers to the Trustee a Written Certificate of the City (A) certifying that the City has sufficient funds to so complete such repair or replacement of the Property or such portions thereof and identifying such funds and the location thereof, and (B) stating that such funds will not be used for any other purpose until such repair or replacement is completed, (ii) within 60 days of the occurrence of the event of damage or destruction, cause alternate real property to be substituted for all or a portion of the Property pursuant to the Lease Agreement, or (iii) within 60 days of the occurrence of the event of damage or destruction, deliver sufficient funds from such Net Proceeds and other legally available funds to the Trustee for the application to the redemption from and to the extent of any insurance proceeds or condemnation award received with respect to all or a portion of the Property (A) of all of the Outstanding Bonds, or (B) of such portion of the Outstanding Bonds as shall result in (I) the annual fair rental value of the Property after such damage or destruction, and after any repairs or replacements made as a result of such damage or destruction, as certified in a Written Certificate of the City delivered to the Trustee, being at least equal to 105% of the maximum amount of the principal (including principal due and payable by reason of mandatory sinking fund redemption of such Bonds) of and interest on the Bonds coming due in the then current Rental Period or any subsequent Rental Period, and (II) the fair replacement value of the Property after such damage or destruction, and after any repairs or replacements made as a result of such damage or destruction, as certified in a Written Certificate of the City delivered to the Trustee, being at least equal to the aggregate principal amount of the Bonds then Outstanding. See APPENDIX C – “DEFINITIONS AND SUMMARY OF PRINCIPAL LEGAL DOCUMENTS – LEASE AGREEMENT – Abatement,” “– Substitution or Release of the Property” and “– Damage or Destruction.”
Additional Bonds
The Authority may at any time issue one or more Series of Additional Bonds payable from Lease Revenues, as provided under the Indenture, on a parity with the Series 2024 Bonds and all other Bonds theretofore issued thereunder, but only subject to the conditions set in the Indenture and the Lease Agreement, which are thereby made conditions precedent to the issuance of such Additional Bonds, and which are further described in APPENDIX C – “DEFINITIONS AND SUMMARY OF PRINCIPAL LEGAL DOCUMENTS – INDENTURE – Additional Bonds.” As provided in the Indenture, (i) the proceeds of the sale of such Additional Bonds will be applied to (A) pay costs of City facilities (including capitalized interest), (B) refund any Bonds issued hereunder or other obligations of the City, (C) pay Costs of Issuance incurred in connection with the issuance of such Additional Bonds, and (D) make any deposit 19 4140-2813-5503.3
to any Reserve Account that may be established in connection with the issuance of Additional Bonds, if any; (ii) that the Lease Agreement shall have been amended, if necessary, so that the sum of Base Rental Payments, including any increase in the Base Rental Payments as a result of the issuance of such Additional Bonds, plus Additional Rental Payments, in any Rental Period will not be in excess of the annual fair rental value of the Property after taking into account the use of the proceeds of such Additional Bonds (evidence of the satisfaction of such condition will be made by a Written Certificate of the City).

As discussed herein, the Base Rental Payments will be payable from any funds lawfully available to the City. The City has not pledged such funds nor limited its ability to use such funds for other purposes.

See APPENDIX A – “THE CITY OF SANTA BARBARA: ECONOMIC, DEMOGRAPHIC AND FINANCIAL INFORMATION – Outstanding Indebtedness.”
Investment of Bond Funds
Pursuant to the Indenture, all money held by the Trustee in any of the funds or accounts established pursuant to the Indenture are required to be invested only in “Permitted Investments” as defined in the Indenture. See APPENDIX C – “DEFINITIONS AND SUMMARY OF PRINCIPAL LEGAL DOCUMENTS – DEFINITIONS.”
Debt Service Schedule
The following table shows the debt service schedule relating to the Series 2024 Bonds:

DEBT SERVICE SCHEDULE
Bond Year
(May 15) Principal Interest Total
Bond Year
(May 15) Principal Interest Total
2057

RISK FACTORS
The following factors, which represent material risk factors that have been identified at this time, should be considered along with all other information in this Official Statement by potential investors in evaluating the Series 2024 Bonds. There can be no assurance made that other risk factors will not become evident at any future time. In addition, the order in which the following factors are presented is not intended to reflect the relative importance of any such risks.

General
The Series 2024 Bonds are payable solely from the Lease Revenues of the Authority under the Indenture consisting primarily of the Base Rental Payments payable by the City pursuant to the Lease Agreement for the beneficial use and occupancy of the Property. 20 4140-2813-5503.3
The practical realization of any rights upon default by the City under the Lease Agreement will depend upon the exercise of various remedies specified in such instrument, as restricted by state and federal law. The federal bankruptcy laws may have an adverse effect on the ability of the Trustee to enforce its rights under the Indenture and of the Authority to enforce its rights under the Lease Agreement. See “– Limitation on Remedies” below.

In certain situations, with the consent of the Owners of a majority in aggregate principal amount of the Outstanding Bonds, certain amendments to the Indenture, the Lease Agreement may be made. Such amendments could affect the security of Owners of the Bonds.

Future economic and other conditions may adversely affect the value or essential nature of the Property and, consequently, the value of the Property to the Authority in exercising available remedies upon default by the City. In addition, there are certain other factors discussed herein as a result of which certain remedies available to the Trustee or the Authority may not be a viable option.

Limited Obligation
The Bonds are special obligations of the Authority, payable, as provided in the Indenture, solely from Lease Revenues and the other assets pledged therefor thereunder. Neither the faith and credit nor the taxing power of the Authority, the City or the State, or any political subdivision thereof, is pledged to the payment of the Bonds. The Lease Revenues consist of all Base Rental Payments payable by the City pursuant to the Lease Agreement, including any prepayments thereof. The obligation of the City to make the Base Rental Payments does not constitute a debt of the City or of the State or of any political subdivision thereof within the meaning of any constitutional or statutory debt limit or restriction, and does not constitute an obligation for which the City or the State is obligated to levy or pledge any form of taxation or for which the City or the State has levied or pledged any form of taxation. The Authority has no taxing power.

Each annual obligation of the City to make the Base Rental Payments and Additional Payments under the Lease Agreement shall constitute a current expense of the City and shall not in any way be construed to be a debt of the City in contravention of any applicable constitutional or statutory limitation or requirement concerning the creation of indebtedness by the City, nor shall anything contained in the Lease Agreement constitute a pledge of the general tax revenues, funds or moneys of the City. Base Rental Payments and Additional Payments due under the Lease Agreement shall be payable only from current funds which are budgeted and appropriated or otherwise legally available for the purpose of paying Base Rental Payments and Additional Payments or other payments due under the Lease Agreement as consideration for use of the Property. The Lease Agreement shall not create an immediate indebtedness for any aggregate payments which may become due under the Lease Agreement in the event that the term of the Lease Agreement is continued. The City has not pledged the full faith and credit of the City to the payment of the Base Rental Payments and Additional Payments or any other payments due under the Lease Agreement.

The Authority shall not be required to advance any money derived from any source other than the Lease Revenues as provided in the Indenture for the payment of the interest on or principal of or redemption premiums, if any, on the Bonds or for the performance of any agreements or covenants in the Indenture contained. Nothing contained in the Indenture, expressed or implied, is intended to give to any person other than the Authority, the Trustee, and Owners of the Bonds any right, remedy or claim under or by reason thereof. Any agreement or covenant required in the Indenture to be performed by or on behalf of the Authority or any member, officer or employee thereof shall be for the sole and exclusive benefit of the Authority, the Trustee, and Owners of the Bonds.
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Limitations on Base Rental Payments; Abatement Risk
General. The Base Rental Payments and Additional Payments due under the Lease Agreement (including insurance, payment of costs of repair and maintenance of the Property, taxes and other governmental charges and assessments levied against the Property) are not secured by any pledge of taxes or other revenues of the City but are payable from any funds lawfully available to the City. The City will incur other obligations in the future payable from the same sources as the Base Rental Payments. In the event the City’s revenue sources are less than its total obligations, the City could choose to fund other City services before making Base Rental Payments. The same result could occur if, because of State Constitutional limits on expenditures, the City is not permitted to appropriate and spend all of its available revenues. The City’s appropriations, however, have never exceeded the limitation on appropriations under Article XIIIB of the California Constitution. See “CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS – Article XIIIB of the State Constitution.” Covenant to Budget and Appropriate. Pursuant to the Lease Agreement, the City will covenant to take such action as may be necessary to include Base Rental Payments due in its annual budgets and to make the necessary annual appropriations for all such payments. See “SECURITY AND SOURCES OF PAYMENT FOR THE BONDS – Base Rental Payments.” Such covenants are deemed to be duties imposed by law, and it is the duty of the public officials of the City to take such action and do such things as are required by law in the performance of the official duty of such officials to enable the City to carry out and perform such covenants. A court, however, in its discretion may decline to enforce such covenants. Upon issuance of the Series 2024 Bonds, Bond Counsel will render its opinion (substantially in the form of Appendix F attached hereto) to the effect that, subject to the limitations and qualifications described therein, the Lease Agreement constitutes a valid and binding obligation of the City. As to the Trustee’s or the Authority’s practical realization of remedies upon default by the City, see “– Limitations on Remedies” below.

Abatement Risk. During any period in which, by reason of material damage or destruction, there is substantial interference with the use and occupancy by the City of any portion of the Property, rental payments due under the Lease Agreement with respect to the Property will be abated proportionately, in the proportion in which the annual fair rental value of that portion of the Property rendered unusable bears to the annual fair rental value of the whole of the Property, and the City waives any and all rights to terminate the Lease Agreement by virtue of any such interference and the Lease Agreement shall continue in full force and effect. See “SECURITY AND SOURCES OF PAYMENT FOR THE BONDS – Abatement.” Project Completion Risk. Completion of the City Police Station component of the Series 2024 Project may be delayed as a result of any number of causes, including but not limited to, [future financing difficulties including revenue shortfalls, shortages of or other supply problems relating to labor and materials, increases in costs due to inflation, design or construction defects, global health concerns, delays in obtaining governmental or agency approvals and permits, construction contract difficulties or disputes, adverse weather conditions, unavailability of subcontractors, negligence on the part of subcontractors or materials, labor disputes, litigation, unexpected subterranean archaeological or environmental conditions, or unanticipated or increased costs of construction]. Any of these events or occurrences, separately or in combination, could have a material adverse effect on the ability to complete the City Police Station component of the Series 2024 Project, or to complete it as planned within the expected budget and schedule and period of capitalized interest. See “SERIES 2024 PROJECT” above.

No Acceleration Upon Default
In the event of a default, there is no remedy of acceleration of the total Base Rental Payments due over the term of the Lease Agreement, and the Trustee is not empowered to sell a fee simple interest in the 22 4140-2813-5503.3
Property and use the proceeds of such sale to prepay the Series 2024 Bonds or pay debt service thereon.

Any suit for money damages would be subject to limitations on legal remedies against public agencies in the State, including a limitation on enforcement of judgments against funds needed to serve the public welfare and interest as described below.

Teeter Plan Termination
The County has implemented the Teeter Plan as an alternate procedure for the distribution of certain property tax and assessment levies on the secured roll. Pursuant to its Teeter Plan, the County has elected to provide local agencies and taxing areas with full tax and assessment levies instead of actual tax and assessment collections. In return, the County is entitled to retain all delinquent tax and assessment payments, penalties, and interest. Thus, the County’s Teeter Plan may help protect Owners of the Bonds from the risk of delinquencies in the payment of property taxes. However, the County is entitled, and under certain circumstances could be required, to terminate its Teeter Plan with respect to all or part of the local agencies and taxing areas covered thereby. See APPENDIX A – “THE CITY OF SANTA BARBARA:

ECONOMIC, DEMOGRAPHIC AND FINANCIAL INFORMATION – Assessed Valuation, Property Tax Levies and Collections – The Teeter Plan.”
Limitations on Remedies
The enforcement of any remedies provided in the Lease Agreement and the Indenture could prove both expensive and time consuming. Although the Lease Agreement provides that if the City defaults the Trustee may reenter the Property and re-let it, portions of the Property may not be easily recoverable, and even if recovered, could be of little value to others because of the Property’specialized nature. Additionally, the Trustee may have limited ability to re-let the Property to provide a source of rental payments under the Lease Agreement sufficient to pay the principal and interest on the Bonds so as to preserve the tax-exempt nature of interest on the Series 2024 Bonds. The Trustee is not obligated to re-let the Property in a manner so as to preserve the tax-exempt nature of interest on the Series 2024 Bonds. Furthermore, due to the governmental nature of the Property, it is not certain whether a court would permit the exercise of the remedy of re-letting with respect thereto.

Alternatively, the Trustee may terminate the Lease Agreement and proceed against the City to recover damages pursuant thereto. Any suit for money damages would be subject to limitations on legal remedies against public agencies in the State, including a limitation on enforcement of judgments against funds needed to serve the public welfare and interest.

The rights of the Owners of the Bonds are subject to certain limitations on legal remedies against cities and other governmental entities in the State, including but not limited to a limitation on enforcement against funds that are otherwise needed to serve the public welfare and interest. Additionally, the rights of the Owners of the Bonds may be subject to (i) bankruptcy, insolvency, reorganization, moratorium, or similar laws limiting or otherwise affecting the enforcement of creditors’ rights generally (as such laws are now or hereafter may be in effect), (ii) equity principles(including but not limited to concepts of materiality, reasonableness, good faith and fair dealing) and the possible unavailability of specific performance or injunctive relief, regardless of whether considered in a proceeding in equity or law, (iii) the exercise by the United States of America of the powers delegated to it by the Constitution, and (iv) the reasonable and necessary exercise, in certain exceptional situations, of the police powers inherent in the sovereignty of the State and its governmental bodies in the interest of serving a significant and legitimate public purpose.

Under Chapter 9 of the Bankruptcy Code (Title 11, United States Code), which governs bankruptcy proceedings for public agencies, there are no involuntary petitions in bankruptcy. If the City were to file a petition under Chapter 9 of the Bankruptcy Code, the Owners, the Trustee, and the Authority could be 23 4140-2813-5503.3
prohibited or severely restricted from taking any steps to enforce their rights under the Lease Agreement and from taking any steps to collect amounts due from the City under the Lease Agreement.

Economic and Tourism Factors
Santa Barbara and the central coast of California are tourist destinations, and the City’s economy is directly affected by the number of visitors to the City. Numerous factors, many of which are beyond the control of the City, could have an adverse impact on the number of visitors to the City, including but not limited to, the national economy and levels of tourism, terrorist attacks, natural disasters, competition from other vacation and convention center destinations, sales taxes, energy costs and airline fares.

Bankruptcy of the City
In addition to the limitation on remedies contained in the Indenture, the rights and remedies provided in the Indenture and the Lease Agreement may be limited by and are subject to the provisions of federal bankruptcy laws and to other laws or equitable principles that may affect the enforcement of creditors’ rights. The City is a unit of State government and therefore is not subject to the involuntary procedures of the United States Bankruptcy Code (the “Bankruptcy Code”). However, pursuant to Chapter 9 of the Bankruptcy Code, the City may seek voluntary protection from its creditors for purposes of adjusting its debts. In the event the City were to become a debtor under the Bankruptcy Code, the City would be entitled to all of the protective provisions of the Bankruptcy Code as applicable in a Chapter 9 proceeding. Among the adverse effects of such a bankruptcy might be: (i) the application of the automatic stay provisions of the Bankruptcy Code, which, until relief is granted, would prevent collection of payments from the City or the commencement of any judicial or other action for the purpose of recovering or collecting a claim against the City; (ii) the avoidance of preferential transfers occurring during the relevant period prior to the filing of a bankruptcy petition; (iii) the existence of unsecured or court-approved secured debt which may have a priority of payment superior to that of Owners of Bonds; and (iv) the possibility of the adoption of a plan for the adjustment of the City’s debt (a “Plan”) without the consent of the Trustee or all of the Owners of Bonds, which Plan may restructure, delay, compromise or reduce the amount of any claim of the Owners if the Bankruptcy Court finds that the Plan is fair and equitable.

In addition, the City could either reject the Lease Agreement or assume the Lease Agreement despite any provision of the Lease Agreement which makes the bankruptcy or insolvency of the City an event of default thereunder. In the event the City rejects the Lease Agreement, the Trustee, on behalf of the Owners of the Bonds, would have a pre-petition claim that may be limited under the Bankruptcy Code and treated in a manner under a Plan over the objections of the Trustee or Owners of the Bonds. Moreover, such rejection would terminate the Lease Agreement and the City’s obligations to make payments thereunder.

The Authority is a public agency and, like the City, is not subject to the involuntary procedures of the Bankruptcy Code. TheAuthority may also seek voluntary protection under Chapter 9 of the Bankruptcy Code. In the event the Authority were to become a debtor under the Bankruptcy Code, the Authority would be entitled to all of the protective provisions of the Bankruptcy Code as applicable in a Chapter 9 proceeding. Such a bankruptcy could adversely affect the payments under the Indenture. Among the adverse effects might be: (i) the application of the automatic stay provisions of the Bankruptcy Code, which, until relief is granted, would prevent collection of payments from the Authority or the commencement of any judicial or other action for the purpose of recovering or collecting a claim against the Authority; (ii) the avoidance of preferential transfers occurring during the relevant period prior to the filing of a bankruptcy petition; (iii) the existence of unsecured or court-approved secured debt which may have priority of payment superior to that of the Owners of the Bonds; and (iv) the possibility of the adoption of a plan for the adjustment of the Authority’s debt without the consent of the Trustee or all of the Owners of the Bonds, 24 4140-2813-5503.3
which plan may restructure, delay, compromise or reduce the amount of any claim of the Owners if the Bankruptcy Court finds that the Plan is fair and equitable. However, the bankruptcy of the Authority, and not the City, should not affect the Trustee’s rights under the Lease Agreement. The Authority could still challenge the assignment, and the Trustee and/or the Owners of the Bonds could be required to litigate these issues in order to protect their interests.

City Obligations
Except for its obligations under the Lease Agreement and under the 2019 Facility Lease with respect to the Santa Barbara Financing Authority Revenue Refunding Bonds (Airport Project), Series 2019 (the “2019 Airport Revenue Refunding Bonds”), the related lease payment obligations of which have to date been offset in full by the City’s Airport Fund, the City does not currently have any significant capital lease obligations payable from the City’s General Fund revenues, but does have other obligations related to retirement benefits and other post-employment benefits as well as certain other liabilities.

The 2019 Airport Revenue Refunding Bonds are limited obligations of 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 2019 Facility Lease and installment payments received by the SBFA from the City under an Installment Payment Contract, dated as of April 1, 2019, by and between the SBFA and the City. 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 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 ofsuch date. SeeAPPENDIX A– “THE CITY OF SANTABARBARA: ECONOMIC, DEMOGRAPHIC AND FINANCIAL INFORMATION – Outstanding Indebtedness.” No Limitation on Incurring Additional Obligations
Neither the Lease Agreement nor the Indenture contains any limitations on the ability of the City to enter into other obligations that may constitute additional claims against its General Fund revenues. To the extent that the City incurs additional obligations, the funds available to make Base Rental Payments may be decreased. The City is currently liable on other obligations payable from General Fund revenues.

Natural Disasters
[The obligation to pay Base Rental Payments may be adversely affected if the Property is damaged or destroyed by natural disasters such as earthquake, flood, or wildfire. While the City currently maintains both earthquake insurance and flood insurance over City-owned facilities, City-wide, which include the Property (currently, an earthquake and flood limit of $50.9 Million per occurrence over a pool of insurable City property), there can be no assurance that any such proceeds will be sufficient to cover any or all claims, and the City has no obligation to continue either form of insurance through the remainder of the lease term.

The City is not obligated under the Lease Agreement to maintain earthquake insurance on the Property.

Damage or destruction to the Property caused by earthquake or flood could result in abatement of Base Rental Payments. Pursuant to and under the circumstances described in the Lease Agreement, the City is required to maintain or is permitted to self-insure for casualty, workers’ compensation, and standard comprehensive public entity liability. However, no assurance can be given that such insurance or selfinsurance at the time of any casualty or loss will be adequate to cover any claims that might arise.

The City may not self-insure for loss of use and occupancy of any portion of the Property (rental or business interruption insurance). See “SECURITYAND SOURCES OF PAYMENT FOR THE BONDS – Insurance” and APPENDIX C – “DEFINITIONS AND SUMMARY OF PRINCIPAL LEGAL DOCUMENTS – LEASE AGREEMENT – Insurance to be Maintained by the City.” 25 4140-2813-5503.3
Wildfires. The City is exposed to a variety of wildfire hazard conditions ranging from very low levels of risk along the coastal portions of the County, to extreme hazards in the inland and chaparral covered hillsides of the Santa Ynez Mountains and the Los Padres National Forest. Currently, fire hazard severity is a function of fuel conditions, historic climate, and topography. Population density or the number of structures in a particular region are not currently used to determine the fire hazard severity for a particular region. Areas throughout the County have been designated as having a “Very High Severity Hazard,” “High Hazard,” or “Moderate Hazard.” In the County, most of the area that has been designated as having a “Very High Severity Hazard” are located in the Santa Ynez Mountains and the Los Padres National Forest. These areas exhibit the combination of vegetative fuel, topography, and human proximity that contribute to an extreme fire hazard potential. The fact that an area is in a Moderate Hazard designation does not mean it cannot experience a damaging fire; it means only that the probability is reduced, generally because the number of days a year that the area has “fire weather” is less. Since 1990, 13 significant fires burned the southern parts of the County close to Goleta, Santa Barbara, and Carpinteria. Impact to the City’s General Fund has been minimal.

Santa Barbara has recently been impacted by wildfires in and around the City and County areas.

In November 2008, a wildfire consumed approximately 1,940 acres in nearby Montecito. As is often the case with Southern California wildfires, the wind caused the fire to hopscotch in places, sparing some homes while igniting others. The Montecito fire was relatively smaller than many of the wildfires that have occurred in Southern California in recent years, but its speed and ferocity took its toll in property damage, racing through the populated slopes of the Santa Ynez Mountains, exacerbated by 70 mph winds, combustible brush and narrow roads. The Montecito fire destroyed 151 residences in the City and 80 residences in the County and damaged others. At that time, Governor Schwarzenegger declared a state of emergency for Santa Barbara County.

On May 5, 2009, a wildfire started in Santa Barbara County, immediately exacerbated by high winds. The fire, referred to as Santa Barbara Jesusita Fire, burned for over a week, blackened approximately 8,733 acres, destroyed 80 homes, 1 commercial building and 79 outbuildings, damaged 15 homes and 2 outbuildings and injured 30 firefighters. Approximately 30,000 people were forced from their homes.

In May 2013, a wildfire originated in the Los Padres National Forest. The fire, referred to as the White Fire burned approximately 1,984 acres of recreational areas.

In July 2016, a wildfire originated in the Los Padres National Forest. The fire, referred to as the Sherpa Fire was fully contained on July 12, after having burned approximately 7,474 acres. In August 2016, a wildfire originated in an area southeast of Lake Cachuma in the range above the Santa Ynez River.

The fire, referred to as the Rey Fire was fully contained on September 16, after having burned approximately 32,606 acres. In September 2016, a wildfire originated in a canyon at the southern half of Vandenberg Air Force Base in the County. The fire, referred to as the Canyon Fire was fully contained on September 24, it had burned approximately 12,742 acres.

In July 2017, the Whittier Fire originated as a wildfire in the Santa Ynez Mountains, south of Lake Cachuma. Upon containment on July 28, the fire had burned approximately 18,430 acres and destroyed 16 homes. In December 2017, one of the largest Southern California wildfires which had originated in Ventura County spread into Santa Barbara County. The fire, referred to as Thomas Fire included mandatory evacuation orders for large swaths of the County, including Montecito and some parts of the City, with approximately 95,000 placed under mandatory evacuation. Upon containment on January 12, 2018, approximately 281,893 acres had burned.
26 4140-2813-5503.3
In July 2024, the Lake Fire grew to more than 37,000 acres (59 square miles) northeast of Santa Ynez. Six structures were damaged by the blaze, including an outbuilding on forest land and some recreational residences.

As in this case, the Fire Management Assistance declaration process is initiated when a state submits a request for assistance to the FEMA Regional Director at the time a “threat of major disaster” exists. The entire process is accomplished on an expedited basis and a FEMA decision is rendered in a matter of hours. The Fire Management Assistance Grant Program (FMAGP) provides a 75 percent Federal cost share and the State pays the remaining 25 percent for actual costs. Typically costs accrue to public safety, with fire suppression costs being the most significant. Eligible firefighting costs may include expenses for field camps; equipment use, repair and replacement; tools, materials, and supplies; and mobilization and demobilization activities. The recent fires have not caused material negative impacts on tax receipts to the City.

When wildfires scorch thousands of acres in Southern California, they destroy all vegetation on mountains and hillsides. As a result, when heavy rain falls in the winter, there is nothing to stop the rain from penetrating directly into the soil. In addition, waxy compounds in plants and soil that are released during fires create a natural barrier in the soil that prevents rainwater from seeping deep into the ground.

The result is erosion, mudslides, and excess water running off the hillsides often causing flash flooding as described below.

Flooding. Flood zones are identified by FEMA. FEMA designates land located in a low– to moderate-risk flood zone (i.e., not in a floodplain) and has less than a 1% chance of flooding each year as being within a Non-Special Flood Hazard Area (a “NSFHA”). [The Property is located in areas designed by FEMA as subject to low to moderate flood risk.] The City can make no representation that future maps will not be revised to include the Property within an area deemed subject to flooding. To the north of the City lies the Goleta Valley, which is bordered on the south by the coastal plateaus that encompass the Ellwood Mesa, Isla Vista, the University of California, Santa Barbara (UCSB), and the More Mesa areas.

The northern limit of the Goleta Valley is defined by the foothills of the Santa Ynez Mountains. To the east, the Goleta Valley extends to the hills near the western edge of the City. Most of the valley drains into the Goleta Slough, a coastal salt marsh located south of the City of Goleta. Several flat-floored stream valleys, including Glen Annie Creek, San Pedro Creek, Las Vegas Creek, San Jose Creek, and Maria Ygnacio Creek, convey water through the slough from the Santa Ynez Mountains.

The City most recently experienced severe flooding and mudslides in 2017 and 2018 and 2023. In 2017, heavy rains caused flooding, mud and debris slides, and downed trees. Evacuations included several apartment complexes. In addition to fast moving water in the canyons, burn areas associated with the Sherpa, Rey and Canyon fires of 2016 caused concern to emergency responders. The storm caused minimal damage to public property in the City. In 2018, record rainfall unleashed flash floods, mudslides and debris flow including downed trees in Santa Barbara County. As above, burn areas associated with the Thomas Fire were a concern. During that storm, many homes were lost or severely damaged and many lives were lost, all within the unincorporated area known as Montecito. Damage to public property in the City occurred primarily in two areas: Coast Village Road, a commercial corridor flanked to the north and south by Montecito; and Gibraltar Reservoir, which has and will continue to see increased siltation due to extraordinary runoff in part caused by the Thomas Fire’s removal of vegetation. The total damage to City property as a result of the combined fire and debris flow incidents is approximately $146.0 Million, of which $145.0 Million is the estimated damage to Gibraltar Reservoir. U.S. Route 101 was flooded with runoff water from Montecito Creek and was closed to traffic. Debris and mudflow blocked the railway for the main line of the Union Pacific Railroad through Montecito, California. In January 2023, another historic storm brought torrential rain, mudflows, flooding, evacuations, and damage to communities in the City and the County. Major flooding resulted in the closing of many roads in the City and the surrounding areas, 27 4140-2813-5503.3
and the closing of the airport for a period of time. Again, the City’s infrastructure was tested at its upper limits, but avoided any catastrophic failures. Hundreds of rescues were completed, with no deaths or injuries reported, and no homes or structures were damaged beyond repair.

The City is obligated under the Lease Agreement to maintain flood insurance on the Property. The occurrence of flooding to the Property could result in an abatement of Base Rental Payments and could have an adverse effect on the ability of the City to make timely Base Rental Payments.

Seismic Factors. Generally, seismic activity occurs on a regular basis in the State. Periodically, the magnitude of a single seismic event can cause significant ground shaking and potential damage to property located at or near the center of such seismic activity. The Property is located in a seismically active area of southern California. Significant ground shaking as a result of a local or regional earthquake is likely to occur during the term of the Lease Agreement. Due to the presence of groundwater and loose to medium dense silty sand, the site is considered to be susceptible to liquefaction in the event of a strong earthquake.

In addition, the City issusceptible to tsunami and seiche hazards. Atsunami is a sea wave generated by a submarine earthquake, landslide, or volcanic eruption. A seiche is another form of earthquake– or landslide-induced wave or oscillation that can be generated in an enclosed body of water such as a lagoon or harbor. [The Property is located within the tsunami run-up zone as identified in the City’s Master Environmental Assessment.] The proposed project consists of new infill development and would not substantially change the level of public exposure nor result in increased tsunami risks beyond existing levels. Impacts are considered less than significant. [The Property is not particularly subject to seiche hazards.]
Both the City and the County have a program requiring the retrofitting of certain property to meet higher standards of earthquake safety. Implementation of this program is ongoing and will continue for some years. There has been no major earthquake with an epicenter located in the County since August 1978; however, a number of faults located both within and outside of the County could become the site of quake activity impacting the County. The 1994 earthquake in Los Angeles County, which was centered in Northridge and was felt in the City, did not result in any deaths, injuries, or property damage in the County according to the County Office of Emergency Services. In December 2003, an earthquake registering 6.5 on the Richter scale occurred with an epicenter 11 miles northeast of San Simeon.

The City is not obligated under the Lease Agreement to maintain earthquake insurance on the Property. In the event of damage or destruction to the Property caused by perils for which the City does not provide insurance and is not required to provide insurance under the Lease Agreement, the City is not obligated to repair, replace, or reconstruct the Property. If an earthquake were to cause serious damage to the Property during any period when such facilities were not insured for earthquake damage, or if the proceeds of any earthquake insurance were insufficient to replace or repair the damaged Property, the City would be limited to its General Fund, reserves, and emergency grants, if any, in seeking to make appropriate repairs. Pending such repairs, the City’s obligation to make Base Rental Payments would be subject to abatement and rental interruption insurance proceeds likely would not cover losses caused by earthquakes.

The City will not be obligated to repair or restore the Property in the event of uninsured damage caused by an earthquake. See “RISK FACTORS – Limitations on Base Rental Payments; Abatement Risk.”] Hazardous Substances
The City knows of no existing hazardous substances which require remedial action on or near the Property. However, it is possible that such substances do currently or potentially exist and that the City is not aware of them.
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Owners and operators of real property may be required by law to remedy conditions of the property relating to releases or threatened releases of hazardous substances. The federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, sometimes referred to as “CERCLA” or the “Superfund Act,” is the most well-known and widely applicable of these laws, but California laws with regard to hazardous substances are also stringent and similar. Under many of these laws, the owner (or operator) is obligated to remedy a hazardous substance whether or not the owner (or operator) has anything to do with creating or handling the hazardous substance. Further, such liabilities may arise not simply from the existence of a hazardous substance but from the method of handling it. All of these possibilities could significantly and adversely affect the operations and finances of the City.

Climate Change Issues
On July 2, 2024, the City Council adopted a resolution providing a climate goal for achieving carbon neutrality by 2035. The City’s Climate Action Plan (the “CAP”), entitled Together to Zero, serves as the City’s roadmap to achieve this goal through reducing GHG emissions across the City and new strategies to remove carbon from the atmosphere. The CAP has been developed based on substantial public engagement and over 10 public meetings as an update to the City’s original 2012 Climate Action Plan. By design, the implementation of Together to Zero is expected to reduce emissions from all municipal, residential, and commercial sectors within City bounds.

The CAP outlines a “10-year plan” of strategies that the City intends to undertake over the next decade given the best information we have today, and a “2-year plan” detailing the strategies either in process or quickly planned, for which funding and capacity currently exist. The City intends to review the CAP annually and adapt the priorities and timeline to current developments and best practices, and to review local greenhouse gas emissions at least every five years and incorporating the results into renewed commitments and strategies.

Cybersecurity
The City, like other public and private entities, relies on a large and complex technology environment to conduct its operations, and consequently faces the threat of cybersecurity incidents. Such incidents can result from unintentional events, or from deliberate attacks by unauthorized entities or individuals attempting to gain access to the City’s information technology systems to misappropriate assets or information or to cause operational disruption and damage. The City and its departments face cyber threats from time to time, including but not limited to hacking, viruses, malware, phishing, distributed denial-of-service, and other attacks on computers, networks, and systems. The City has not experienced a major cyber breach that resulted in a financial loss. The City currently purchases cyber insurance coverage.

The City contracts with Arctic Wolf for managed detection and response. Managed detection and response provide monitoring of City networks, endpoints, and cloud environments to help detect, respond, and recover from cyber-attacks as follows. Detection includes broad visibility into the City’s technology stack, 24/7 monitoring, and identification of advanced threats. Response includes investigations of suspicious activity, log retention for additional investigations that may be needed, and timely response to security incidents. Recovery from cyber-attacks includes guided remediation to validate the threat has been neutralized, root cause analysis, and recommendations to enhance the City’s multi-layered security posture.

In addition, the City contracts with Arctic Wolf for managed security awareness training for all employees. Training consists of regular focused micro-training to prepare employees, measure their understanding, and create a culture of security for the City and its departments. 29 4140-2813-5503.3
Other Financial Matters
Due to economic changes in the State and the United States as may be attributable to terrorist attacks, military movements, and responses thereto, it is possible that the general revenues of the City will decline, particularly those based on tourism. Such a reduction in revenues may include, but may not be limited to, a decline in transient occupancy tax and sales tax revenues, and the loss of vehicle license fee revenue. Such financial matters may have a detrimental impact on the City’s General Fund. See APPENDIX A – “THE CITY OF SANTA BARBARA: ECONOMIC, DEMOGRAPHIC AND FINANCIAL INFORMATION” for additional information.

CONSTITUTIONALAND STATUTORY LIMITATIONS

ON TAXES AND APPROPRIATIONS
Article XIIIA of the State Constitution
Article XIIIAof the State Constitution, known as Proposition 13, was approved by California voters in June 1978. Section 1(a) of Article XIIIA limits the maximum ad valorem tax on real property to one percent of “full cash value,” and provides that such tax shall be collected by the counties and apportioned according to State law. Section 1(b) of Article XIIIA provides that the one percent limitation does not apply to ad valorem taxes to pay interest or redemption charges on (1) indebtedness approved by the voters prior to July 1, 1978, (2) any bonded indebtedness for the acquisition or improvement of real property approved on or after July 1, 1978, by two-thirds of the votes cast by the voters voting on the proposition, or (3) bonded indebtednessincurred by a school district or community college district for the construction, reconstruction, rehabilitation or replacement of school facilities or the acquisition or lease of real property for school facilities, approved by 55.0% of the voters of the district, but only if certain accountability measures are included in the proposition.

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

Since its adoption, Article XIIIA has been amended a number of times. These amendments have created a number of exceptions to the requirement that property be assessed when purchased, newly constructed or a change in ownership has occurred. These exceptions include certain transfers of real property between family members, certain purchases of replacement dwellings for persons over age 55 and by property owners whose original property has been destroyed in a declared disaster, and certain improvements to accommodate disabled persons and for seismic upgrades to property. These amendments have resulted in marginal reductions in the property tax revenues of the City.

Both the California State Supreme Court and the United States Supreme Court have upheld the validity of Article XIIIA.
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Article XIIIB of the State Constitution
In addition to the limits Article XIIIA imposes on property taxes that may be collected by local governments, certain other revenues of the State and most local governments are subject to an annual “appropriations limit” imposed by Article XIIIB of the State Constitution, which limits the amount of revenues that government entities are permitted to spend. Article XIIIB, approved by California voters in June 1979, was modified substantially by Proposition 111 in 1990. The appropriations limit of each government entity applies to “proceeds of taxes,” which consist of tax revenues, state subventions and certain other funds, including proceeds from regulatory licenses, user charges or other fees to the extent that such proceeds exceed “the cost reasonably borne by such entity in providing the regulation, product or service.” “Proceeds of taxes” excludes tax refunds and some benefit payments such as unemployment insurance. No limit is imposed on appropriations of funds which are not “proceeds of taxes,” such as reasonable user charges or fees, and certain other non-tax funds.

Article XIIIB also does not limit appropriation of local revenues to pay debt service on bonds existing or authorized by January 1, 1979, or subsequently authorized by the voters, appropriations required to comply with mandates of courts or the federal government, appropriations for qualified capital outlay projects, and appropriation by the State of revenues derived from any increase in gasoline taxes and motor vehicle weight fees above January 1, 1990, levels. The appropriations limit may also be exceeded in cases of emergency; however, the appropriationslimit for the three years following such emergency appropriation must be reduced to the extent by which it was exceeded, unless the emergency arises from civil disturbance or natural disaster declared by the Governor, and the expenditure is approved by two-thirds of the legislative body of the local government.

The State and each local government entity has its own appropriations limit. Each year the limit is adjusted to allow for changes, if any, in the cost of living, the population of the jurisdiction, and any transfer to or from another government entity of financial responsibility for providing services. Proposition 111 requires that each governmental entity’s actual appropriations be tested against its limit every two years. If the aggregate “proceeds of taxes” for the preceding two-year period exceeds the aggregate limit, the excess must be returned to such entity’s taxpayers through tax rate or fee reductions over the following two years.

For Fiscal Year 2023-24, permitted appropriations of “proceeds of taxes” are limited to $176,743,884, and the City’s budgeted appropriations from the proceeds of taxes for Fiscal Year 2023-24 are expected to be within such limit. The City has estimated that for Fiscal Year 2024-25, permitted appropriations of “proceeds of taxes” are limited to $183,783,010, and the City’s budgeted appropriations from the proceeds of taxes for Fiscal Year 2024-25 Fiscal Year are within such limit.

Articles XIIIC and XIIID of the State Constitution
On November 5, 1996, the voters of the State approved Proposition 218 – the “Right to Vote on Taxes Act.” Proposition 218 added Articles XIIIC and XIIID to the State Constitution, which affect the ability of local governments, including cities, to impose new, or increase or extend existing, taxes, assessments, fees, and charges. Proposition 218 became effective on November 6, 1996, although application of some of its provisions was deferred until July 1, 1997.

Article XIIIC requires that all new local taxes be submitted to the electorate for approval before such taxes becomes effective. General taxes imposed for general governmental purposes of the City require a majority vote and special taxes imposed for specific purposes (even if deposited in the general fund) require a two-thirds vote. The voter approval requirements of Article XIIIC reduce the flexibility of local governments to deal with fiscal problems by raising revenue through new, extended, or increased taxes. No 31 4140-2813-5503.3
assurance can be given that the City will be able to raise taxes in the future to meet increased expenditure requirements.

Under Proposition 218, the City can only continue to collect taxes that were imposed after January 1, 1995, if they were approved by voters by November 6, 1998. Any tax levied by the City subject to such approval has been either authorized in accordance with Proposition 218 or discontinued.

Among other things, Section 3 of Article XIIIC states that “. . . the initiative power shall not be prohibited or otherwise limited in matters of reducing or repealing any local tax, assessment, fee or charge.” Absent the application of other legal authority, Section 3 of Article XIIIC could result in a local initiative measure to retroactively reduce or repeal any property related fees contributing to the City’s General Fund revenues.

Such initiative power could be subject to the limitations imposed on the impairment of contracts under the contract clause of the United States Constitution. Additionally, the Proposition 218 Omnibus Implementation Act enacted in 1997 to prescribe specific procedures and parameters for local jurisdictions in complying with Article XIIIC and Article XIIID (“SB 919”) provides that the initiative power provided for in Proposition 218 “shall not be construed to mean that any owner or beneficial owner of a municipal security, purchased before or after (the effective date of Proposition 218) assumes the risk of, or in any way consents to, any action by initiative measure that constitutes an impairment of contractual rights” protected by the United States Constitution. However, no assurance can be given that the voters within the City will not, in the future, approve an initiative that reduces or repeals local taxes, assessments, fees or charges or what limitations, if any, future court decisions may place on the initiative power granted under Article XIIIC.

The City raises a portion of its revenues from various local taxes which could be reduced by initiative under Article XIIIC. “Assessment,” “fee” and “charge” are not defined in Article XIIIC, and it is not clear whether the definitions of these terms in Article XIIID (which are generally property-related, as described below) would be applied to Article XIIIC. However, on July 24, 2006, the California Supreme Court ruled in Bighorn-Desert View Water Agency v. Virjil (Kelley) that charges for ongoing water delivery are property related fees and charges within the meaning of Article XIIID and are also fees or charges within the meaning of Section 3 of Article XIIIC.

Article XIIID contains several provisions making it generally more difficult for local agencies, such as the City, to levy and maintain “assessments” for local services and programs. “Assessment” is defined to mean any levy or charge upon real property for a special benefit conferred upon real property, and expressly includes standby charges. Article XIIID also includes new provisions affecting “fees” and “charges,” defined for purposes of Article XIIID to mean “any levy other than an ad valorem tax, a special tax, or an assessment, imposed by a county upon a parcel or upon a person as an incident of property ownership, including a user fee or charge for a property related service.” All new and existing property related fees and charges must conform to specific requirements and prohibitions set forth in Article XIIID.

Further, before any property related fee or charge may be imposed or increased, written notice must be given to the record owner of each parcel of land affected by such fee or charge. The City must then hold a hearing upon the proposed imposition or increase, and if written protests against the proposal are presented by a majority of the owners of the identified parcels, the City may not impose or increase the fee or charge.

Moreover, except for fees or charges for sewer, water and refuse collection services (or fees for electrical and gas service, which are not treated as “property related” for purposes of Article XIIID), no property related fee or charge may be imposed or increased without majority approval by the property owners subject to the fee or charge, or, at the option of the local agency, two-thirds voter approval by the electorate residing in the affected area.
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Proposition 26
Proposition 26, a State ballot initiative aimed at restricting regulatory fees and charges, was approved by the California voters on November 2, 2010. Proposition 26 broadens the definition of “tax” in Article XIIIC of the California Constitution to include levies, charges and exactions imposed by local governments, except for charges imposed for benefits or privileges or for services or products granted to the payor (and not provided to those not charged) that do not exceed their reasonable cost; regulatory fees that do not exceed the cost of regulation; fees for the use of local governmental property; fines and penalties imposed for violations of law; real property development fees; and assessments and property-related fees imposed under Article XIIID of the California Constitution. California local taxes are subject to approval by two-thirds of the voters voting on the ballot measure for authorization. Proposition 26 applies to charges imposed or increased by local governments after the date of its approval.

Proposition 1A of 2004
City services are funded with money from local taxes, fees and user charges, State aid and other sources. Property tax, sales taxes, transient occupancy tax, utility user’s tax, business license tax, parking revenues and development-related fees constitute the majority of City revenue sources.

On November 3, 2004, the voters of the State approved Proposition 1A (“Proposition 1A of 2004”).

Proposition 1A of 2004 amended the State Constitution to, among other things, reduce the Legislature’s authority over local government revenue sources by placing restrictions on the State’s access to local governments’ property, sales, and vehicle license fee (VLF) revenues as of November 3, 2004. Pursuant to Proposition 1A of 2004, the State is able to borrow up to 8.0% of local property tax revenues but only if the Governor proclaims such action is necessary due to a severe State fiscal hardship and two-thirds of both houses of the State Legislature approve the borrowing. Any amounts borrowed are required to be repaid within three years. Proposition 1Aof 2004 also permitsthe State to borrow from local property tax revenues for no more than two fiscal years within a period of 10 fiscal years, and only if previous borrowings have been repaid. In addition, the State cannot reduce the local sales tax rate or restrict the authority of the local governments to impose or change the distribution of the Statewide local sales tax. Proposition 1A of 2004 generally prohibits the State from mandating activities on cities, counties, or special districts without providing the funding needed to comply with the mandates, and if the State does not provide funding for the activity that has been determined to be mandated, the requirement on cities, counties, or special districts to abide by the mandate is suspended. Proposition 1A of 2004 also expanded the definition of what constitutes a mandate to encompass State action that transfers to cities, counties, and special districts financial responsibility for a required program for which the State previously had partial or complete responsibility. The State mandate provisions of Proposition 1A of 2004 do not apply to schools or community colleges or to mandates relating to employee rights.

Proposition 22
On November 2, 2010, California voters approved Proposition 22 , a ballot initiative for a constitutional amendment to eliminate the State’s ability to borrow or shift local revenues and certain State revenues that fund transportation programs. (“Proposition 22”). Proposition 22 restricts the State’s authority over a broad range of tax revenues, including property taxes allocated to cities (including the City), counties, special districts and redevelopment agencies, VLF, State excise taxes on gasoline and diesel fuel, the State sales tax on diesel fuel, and the former State sales tax on gasoline. It also makes a number of significant other changes, including restricting the State’s ability to use motor vehicle fuel tax revenues to pay debt service on voter-approved transportation bonds. 33 4140-2813-5503.3
Proposition 22 supersedes certain provisions of Proposition 1A of 2004. See “—Proposition 1A of 2004” above. In addition, Proposition 22 generally eliminates the State’s authority to temporarily shift property taxes from cities, counties, and special districts to schools, temporarily increase school and community college district’s share of property tax revenues, prohibits the State from borrowing or redirecting redevelopment property tax revenues or requiring increased pass-through payments thereof, and prohibits the State from reallocating VLF revenues to pay for State imposed mandates. In addition, Proposition 22 requires a two-thirds vote of each house of the State Legislature and a public hearing process to be conducted in order to change the amount of fuel excise tax revenues shared with cities and counties.

Proposition 22 prohibits the State from borrowing sales taxes or excise taxes on motor vehicle fuels or changing the allocations of those taxes among local government except pursuant to specified procedures involving public notices and hearings. In addition, Proposition 22 requires that the State apply the formula setting forth the allocation of State fuel tax revenues to local agencies revert to the formula in effect on June 30, 2009.

Initiative, Referendum and Charter Amendments
Under the State Constitution, the voters of the State have the ability to initiate legislation and require a public vote on legislation passed by the State Legislature through the powers of initiative and referendum, respectively. For example, Article XIIIA, Article XIIIB and Articles XIIIC and XIIID and Proposition 26 were adopted pursuant to the State’s constitutional initiative process. Under the City Charter, the voters of the City can restrict or revise the powers of the City through the approval of a charter amendment. From time to time, other initiative measures could be adopted, or legislative measures could be approved by the Legislature, which may place limitations on the ability of the City to increase revenues or to increase appropriations. Such measures may further affect the City’s ability to collect taxes, assessments or fees and charges, which could have an effect on revenues. The City is unable to predict whether any such initiatives or charter amendments might be submitted to or approved by the voters, the nature of such initiatives or charter amendments, or their potential impact on the City.

THE CITY
The City of Santa Barbara (the primary government) was incorporated on August 26, 1850. The City is a charter city under the laws of the State and operates under a Council-Administrator form of government. The City Council consists of seven members, 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. Terms of office for Council Members are overlapping terms of four years. The current Mayor shall 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 current City Charter was adopted on May 2, 1967, and provides for the following services:
public safety (police and fire), construction and maintenance of highways and streets, sanitation, culture and recreation, public improvements, planning, zoning, and general administration. The City’s enterprise and fiduciary funds, operated in a manner similar to a private business, include water, wastewater, airport, parking, golf and waterfront. See APPENDIX A – “THE CITY OF SANTA BARBARA: ECONOMIC, DEMOGRAPHIC AND FINANCIAL INFORMATION.”
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THE AUTHORITY
The Finance Authority of the City of Santa Barbara was organized pursuant to the provisions of the Act and a Joint Exercise of Powers Agreement, dated as of November 1, 2023, by and between the City and the California Statewide Communities Development Authority, a joint exercise of powers authority organized and existing under and by virtue of the laws of the State (“CSCDA”). The Authority was organized for the purpose of providing an entity which can assist in providing financing for purposes which are authorized under the Joint Powers Act. The Authority has no financial liability to the Owners of the Series 2024 Bonds with respect to the payment the Base Rental Payments by the City or with respect to the performance by the City of the other agreements and covenants it is required to perform.

The Authority functions as an independent entity and its policies are determined by its Governing Board, which is comprised of the members of the City Council. The Authority has no employees and all staff work is done by the City staff or by consultants to the Authority. The City Administrator of the City has been designated as Executive Director of the Authority and the Finance Director of the City has been designated as Treasurer of the Authority. The Treasurer of the Authority has charge of, handles, and has access to any property of the Authority, has custody of all the money of the Authority from whatever source, and is required to perform the other functions of Treasurer of the Authority as set forth in the Act.

The Authority, the City and CSCDA are each separate and distinct legal entities, and the debts and obligations of any one such entity are not debts or obligations of the other entity.

THE BONDS ARE SPECIAL OBLIGATIONS OF THE AUTHORITY, PAYABLE, AS

PROVIDED IN THE INDENTURE, SOLELY FROM LEASE REVENUES AND THE OTHER ASSETS PLEDGED THEREFOR THEREUNDER. NEITHER THE FAITH AND CREDIT NOR THE TAXING

POWER OF THE AUTHORITY, THE CITY OR THE STATE, OR ANY POLITICAL SUBDIVISION THEREOF, IS PLEDGED TO THE PAYMENT OF THE BONDS. THE AUTHORITY HAS NO TAXING POWER. NEITHER THE PAYMENT OF THE PRINCIPAL OF NOR INTEREST ON THE BONDS CONSTITUTES A DEBT, LIABILITY OR OBLIGATION OF THE CITY OR CSCDA.

As described in this Official Statement with respect to the 2019 Airport Revenue Refunding Bonds, the City is a member of an additional joint-powers authority, the Santa Barbara Financing Authority, which is the issuer of the 2019 Airport Revenue Refunding Bonds, and a joint powers authority issuer unrelated to the Authority. That financing authority remains active with respect to its obligations relating to the 2019 Airport Revenue Refunding Bonds but has otherwise ceased its operations following the dissolution of redevelopment agenciesin California, thereby limiting the powers and legal authority of one of its members.

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.
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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.]
39 4140-2813-5503.3
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.
1 4140-2813-5503.3

APPENDIX B

CITY OF SANTA BARBARA

ANNUAL COMPREHENSIVE FINANCIAL REPORT FOR
THE FISCAL YEAR ENDED JUNE 30, 2023
1 4140-2813-5503.3

APPENDIX C

DEFINITIONS AND SUMMARY OF PRINCIPAL LEGAL DOCUMENTS
1 4140-2813-5503.3

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.
1 4140-2813-5503.3

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
3 4140-2813-5503.3
(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.
4 4140-2813-5503.3
(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.
5 4140-2813-5503.3
(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”); 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, 2017, the City Council adopted a Debt Management Policy for the City, as amended by Resolution No. 23-131 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:

Section 1. The foregoing recitals are true and correct.

Section 2. 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.

Section 3. 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.

Section 4. 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.

Section 5. 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.

Section 6. 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.

Section 7. 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.

Section 8. 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.

Section 9. 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).

Section 10. 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.

Section 11. 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.

Section 12. 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.

Section 13. 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.

Section 14. 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.

Section 15. 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.

Section 16. 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;
2 4144-4756-4111.4
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, 2017, the City Council of the City adopted a Debt Management Policy for the City, as amended by Resolution No. 23-131, 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”);
3 4144-4756-4111.4
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:

Section 1. The foregoing recitals are true and correct, and the Board of Directors so finds and determines.
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Section 2. 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.

Section 3. 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.

Section 4. 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.

Section 5. 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%.

Section 6. 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.
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Section 7. 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.

Section 8. 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).

Section 9. 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.

Section 10. 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.

Section 11. 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
Section 12. 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.

Section 13. 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.

Section 14. 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.

Section 15. The City Clerk shall certify to the adoption of this resolution and thenceforth and thereafter the same shall be in full force and effect.

Section 16. This resolution shall take effect immediately upon its adoption.

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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
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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

Santa Barbara City CouncilSeptember 10, 2024

Santa Barbara City Council
September 10, 2024