Agenda packet — City Council and Authorities Concurrent, November 18, 2025 (part 2 of 9)

FHLMC MULTIFAMILY
STRUCTURED PASS THROU 7/1/2025 4.329% 6/1/2030 3137HMC65 11,192,000.00 AA+ 7/17/2025 11,191,787.35 4.33% 11,300,114.72 108,327.37 Federal Agency Commercial Mortgage-Backed Security Subtotal 129,651,996.97 128,201,218.17 130,653,574.93 2,452,356.76 ADOBE INC 4/4/2024 4.800% 4/4/2029 00724PAF6 1,635,000.00 A+ 4/4/2024 1,632,563.85 4.83% 1,679,079.60 46,515.75 ADOBE INC 4/4/2024 4.800% 4/4/2029 00724PAF6 1,340,000.00 A+ 4/4/2024 1,337,762.20 4.84% 1,376,126.40 38,364.20 ALPHABET INC 8/9/2016 1.998% 8/15/2026 02079KAC1 5,740,000.00 AA+ 1/30/2023 5,354,386.80 4.05% 5,653,153.80 298,767.00AMAZON.COM INC 4/13/2022 3.300% 4/13/2027 023135CF1 6,715,000.00 AA 4/25/2022 6,672,964.10 3.44% 6,665,779.05 -7,185.05ASTRAZENECA FINANCE LLC 2/26/2024 4.850% 2/26/2029 04636NAL7 8,500,000.00 A+ 6/27/2025 8,689,040.00 4.19% 8,718,875.00 29,835.00 BANK OF NY MELLON CORP 1/28/2021 0.750% 1/28/2026 06406RAQ0 9,000,000.00 A 2/10/2021 9,025,920.00 0.69% 8,899,470.00 -126,450.00BANK OF NY MELLON CORP 4/22/2025 4.729% 4/20/2029 06405LAH4 8,000,000.00 AA- 4/28/2025 8,093,600.00 4.40% 8,131,440.00 37,840.00 BLACKROCK INC 3/28/2017 3.200% 3/15/2027 09247XAN1 4,140,000.00 AA- 5/18/2022 4,086,055.80 3.50% 4,104,561.60 18,505.80 BLACKROCK INC 3/28/2017 3.200% 3/15/2027 09247XAN1 4,140,000.00 AA- 5/18/2022 4,085,352.00 3.50% 4,104,561.60 19,209.60 BLACKROCK INC 3/14/2024 4.700% 3/14/2029 09290DAA9 2,924,000.00 AA- 4/11/2024 2,911,222.12 4.80% 2,990,930.36 79,708.24 BLACKROCK INC 3/14/2024 4.700% 3/14/2029 09290DAA9 350,000.00 AA- 3/14/2024 349,366.50 4.74% 358,011.50 8,645.00 BOFA SECURITIES INC. 8/18/2023 5.526% 8/18/2026 06428CAA2 4,000,000.00 A+ 8/18/2023 3,998,360.00 5.54% 4,049,760.00 51,400.00 BOFA SECURITIES INC. 4/22/2021 1.734% 7/22/2027 06051GJS9 1,420,000.00 A- 8/10/2022 1,281,251.80 3.92% 1,391,642.60 110,390.80 BOFA SECURITIES INC. 1/24/2025 4.979% 1/24/2029 06051GMK2 4,980,000.00 A- 4/2/2025 5,035,178.40 4.66% 5,072,030.40 36,852.00 BRISTOL-MYERS SQUIBB CO 11/13/2020 0.750% 11/13/2025 110122DN5 5,725,000.00 A 6/30/2021 5,672,673.50 0.96% 5,701,642.00 28,968.50CISCO SYSTEMS INC 2/24/2025 4.750% 2/24/2030 17275RBX9 10,000,000.00 AA- 4/22/2025 10,124,500.00 4.46% 10,260,100.00 135,600.00 CISCO SYSTEMS INC 2/24/2025 4.750% 2/24/2030 17275RBX9 6,800,000.00 AA- 4/30/2025 6,955,924.00 4.22% 6,976,868.00 20,944.00 CITIGROUP GLOBAL MARKETS 9/29/2023 5.803% 9/29/2028 17325FBB3 11,225,000.00 A+ 9/29/2023 11,225,000.00 5.80% 11,774,014.75 549,014.75 10/10/2025 2:31 PM 3 of 6
Attachment A
City of Santa Clara Monthly Report
9/30/2025
Description Issue Date Coupon Rate Maturity Date CUSIP Par Value S&P Rating Settle Date Cost Value YTM at Cost Market Value Unrealized G/LELI LILLY & COMPANY 2/12/2025 4.550% 2/12/2028 532457CU0 6,500,000.00 A+ 6/27/2025 6,578,910.00 4.06% 6,596,915.00 18,005.00 ELI LILLY & COMPANY 8/14/2024 4.200% 8/14/2029 532457CQ9 1,555,000.00 A+ 8/14/2024 1,557,643.50 4.16% 1,566,009.40 8,365.90ELI LILLY & COMPANY 8/14/2024 4.200% 8/14/2029 532457CQ9 445,000.00 A+ 8/14/2024 444,025.45 4.25% 448,150.60 4,125.15GOLDMAN SACHS BANK USA 5/21/2024 5.414% 5/21/2027 38151LAG5 8,750,000.00 A+ 5/22/2025 8,805,037.50 5.08% 8,817,200.00 12,162.50HOME DEPOT INC/THE 9/15/2025 3.950% 9/15/2030 437076DJ8 1,885,000.00 A 9/15/2025 1,878,232.85 4.03% 1,868,789.00 -9,443.85JOHN DEERE CAPITAL CORP 6/17/2021 1.050% 6/17/2026 24422EVR7 5,000,000.00 A 12/8/2021 4,908,600.00 1.47% 4,899,250.00 -9,350.00 JOHN DEERE CAPITAL CORP 7/14/2023 4.950% 7/14/2028 24422EXB0 2,800,000.00 A 6/25/2025 2,868,544.00 4.09% 2,875,348.00 6,804.00 JOHN DEERE CAPITAL CORP 7/14/2023 4.950% 7/14/2028 24422EXB0 505,000.00 A 7/14/2023 504,247.55 4.98% 518,589.55 14,342.00 JOHN DEERE CAPITAL CORP 7/14/2023 4.950% 7/14/2028 24422EXB0 605,000.00 A 7/18/2023 610,874.55 4.73% 621,280.55 10,406.00 JOHNSON & JOHNSON 2/20/2025 4.500% 3/1/2027 478160DG6 4,850,000.00 AAA 3/13/2025 4,879,439.50 4.17% 4,904,999.00 25,559.50JPMORGAN CHASE FINANCIAL CO LLC 4/22/2021 1.578% 4/22/2027 46647PCB0 4,100,000.00 A 8/10/2022 3,710,746.00 3.80% 4,041,083.00 330,337.00JPMORGAN CHASE FINANCIAL CO LLC 2/24/2022 2.947% 2/24/2028 46647PCW4 2,925,000.00 A 9/18/2023 2,674,532.25 5.13% 2,879,106.75 204,574.50JPMORGAN CHASE FINANCIAL CO LLC 4/22/2024 5.571% 4/22/2028 46647PEE2 5,000,000.00 A 8/9/2024 5,103,350.00 4.95% 5,109,200.00 5,850.00JPMORGAN CHASE FINANCIAL CO LLC 1/24/2025 4.915% 1/24/2029 46647PEU6 2,825,000.00 A 3/13/2025 2,841,921.75 4.74% 2,875,934.75 34,013.00JPMORGAN CHASE FINANCIAL CO LLC 4/22/2024 5.581% 4/22/2030 46647PEG7 2,750,000.00 A 4/28/2025 2,835,552.50 4.87% 2,872,347.50 36,795.00KENVUE INC 10/17/2023 5.050% 3/22/2028 49177JAF9 6,250,000.00 A 6/30/2025 6,397,562.50 4.12% 6,385,375.00 -12,187.50MASTERCARD INC 5/31/2019 2.950% 6/1/2029 57636QAM6 7,500,000.00 A+ 6/27/2024 6,889,875.00 4.82% 7,247,250.00 357,375.00META PLATFORMS INC 8/9/2024 4.300% 8/15/2029 30303M8S4 5,370,000.00 AA- 8/14/2024 5,385,895.20 4.23% 5,438,306.40 52,411.20MORGAN STANLEY BANK NA 5/30/2024 5.504% 5/26/2028 61690U8B9 6,105,000.00 A+ 5/31/2024 6,117,881.55 5.45% 6,239,554.20 121,672.65MORGAN STANLEY BANK NA 5/30/2024 5.504% 5/26/2028 61690U8B9 3,145,000.00 A+ 5/30/2024 3,145,000.00 5.50% 3,214,315.80 69,315.80 NATIONAL RURAL UTILITIES COOPERATIVE FI 8/25/2025 4.150% 8/25/2028 63743HFZ0 4,380,000.00 NR 8/25/2025 4,375,094.40 4.19% 4,391,826.00 16,731.60 NATIONAL SECS CLEARING 5/20/2025 4.700% 5/20/2030 637639AQ8 10,000,000.00 AA+ 6/27/2025 10,167,800.00 4.32% 10,217,300.00 49,500.00NATIONAL SECS CLEARING 5/20/2025 4.700% 5/20/2030 637639AQ8 6,825,000.00 AA+ 6/27/2025 6,937,134.75 4.32% 6,973,307.25 36,172.50 NOVARTIS FINANCE CORPORATION 11/20/2015 3.000% 11/20/2025 66989HAJ7 10,000,000.00 AA- 1/31/2023 9,638,600.00 4.38% 9,980,300.00 341,700.00 PACCAR FINANCIAL CORP 1/31/2024 4.600% 1/31/2029 69371RS80 7,000,000.00 A+ 7/30/2024 6,996,080.00 4.61% 7,130,130.00 134,050.00PEPSICO INC 7/17/2024 4.500% 7/17/2029 713448FX1 4,380,000.00 A+ 7/17/2024 4,373,211.00 4.53% 4,457,832.60 84,621.60 PEPSICO INC 2/7/2025 4.600% 2/7/2030 713448GB8 2,380,000.00 A+ 2/7/2025 2,376,001.60 4.64% 2,431,098.60 55,097.00 STATE STREET CORP 2/28/2025 4.729% 2/28/2030 857477CW1 9,240,000.00 A 2/28/2025 9,251,365.20 4.70% 9,441,154.80 189,789.60TARGET CORP 1/24/2022 1.950% 1/15/2027 87612EBM7 4,595,000.00 A 2/1/2022 4,567,889.50 2.08% 4,485,960.65 -81,928.85TARGET CORP 1/24/2022 1.950% 1/15/2027 87612EBM7 990,000.00 A 1/24/2022 988,317.00 1.99% 966,507.30 -21,809.70 TOYOTA MOTOR CREDIT CORP 9/11/2023 5.250% 9/11/2028 89236TLB9 5,600,000.00 A+ 9/11/2023 5,590,256.00 5.29% 5,794,376.00 204,120.00 WALMART INC. 4/28/2025 4.350% 4/28/2030 931142FN8 6,000,000.00 AA 5/2/2025 6,053,940.00 4.15% 6,098,460.00 44,520.00 WALMART INC. 4/28/2025 4.350% 4/28/2030 931142FN8 3,220,000.00 AA 4/28/2025 3,214,429.40 4.39% 3,272,840.20 58,410.80Corporate Note Subtotal 250,109,000.00 249,199,111.57 252,968,144.56 3,769,032.99 AMERICAN EXPRESS CREDIT ACCOUNT MASTER 9/19/2023 5.230% 9/15/2028 02582JKD1 6,170,000.00 AAA 9/19/2023 6,169,724.20 5.23% 6,250,333.40 80,609.20AMERICAN EXPRESS CREDIT ACCOUNT MASTER 7/22/2025 4.300% 7/15/2030 02582JKV1 6,515,000.00 AAA 7/22/2025 6,514,061.19 4.30% 6,584,905.95 70,844.76 BA CREDIT CARD TRUST 12/14/2023 4.980% 11/15/2028 05522RDH8 3,045,000.00 NR 12/14/2023 3,044,591.06 4.98% 3,082,362.15 37,771.09BA CREDIT CARD TRUST 6/12/2025 4.310% 5/15/2030 05522RDK1 5,250,000.00 AAA 6/12/2025 5,249,980.05 4.31% 5,310,060.00 60,079.95 10/10/2025 2:31 PM 4 of 6
Attachment A
City of Santa Clara Monthly Report
9/30/2025
Description Issue Date Coupon Rate Maturity Date CUSIP Par Value S&P Rating Settle Date Cost Value YTM at Cost Market Value Unrealized G/LBOFA AUTO TRUST 2024-1 11/21/2023 5.740% 6/15/2028 06054YAC1 5,411,234.58 NR 11/21/2023 5,411,136.64 5.74% 5,470,325.26 59,188.62 CAPITAL ONE MULTI-ASSET EXECUTION TRUST 9/16/2025 3.820% 9/16/2030 14041NGF2 7,250,000.00 AAA 9/16/2025 7,248,625.40 3.82% 7,246,230.00 -2,395.40CHASE AUTO OWNER TRUST 2024-5A 7/30/2025 4.290% 6/25/2030 16145NAC5 3,255,000.00 NR 7/30/2025 3,254,681.99 4.29% 3,276,775.95 22,093.96CHASE ISSUANCE TRUST 9/15/2023 5.160% 9/15/2028 161571HT4 6,045,000.00 AAA 9/15/2023 6,043,324.33 5.17% 6,117,842.25 74,517.92 CHASE ISSUANCE TRUST 1/31/2024 4.600% 1/15/2029 161571HV9 7,605,000.00 AAA 1/31/2024 7,603,841.76 4.60% 7,677,019.35 73,177.59 CHASE ISSUANCE TRUST 7/25/2025 4.160% 7/15/2030 161571HZ0 9,190,000.00 AAA 7/25/2025 9,189,815.28 4.16% 9,249,183.60 59,368.32 CITIBANK CREDIT CARD ISSUANCE TRUST 6/26/2025 4.300% 6/21/2030 17305EHA6 11,485,000.00 AAA 6/26/2025 11,481,884.12 4.31% 11,604,444.00 122,559.88FIFTH THIRD AUTO TRUST 8/23/2023 5.530% 8/15/2028 31680EAD3 3,951,662.49 AAA 8/23/2023 3,951,417.49 5.53% 3,988,057.30 36,639.81 GM FINANCIAL SECURITIZED TERM AUTO RECE 1/17/2024 4.850% 12/18/2028 36268GAD7 815,000.00 NR 1/17/2024 814,836.10 4.85% 820,142.65 5,306.55GM FINANCIAL SECURITIZED TERM AUTO RECE 5/14/2025 4.280% 4/16/2030 362549AD9 1,965,000.00 AAA 5/14/2025 1,964,710.75 4.28% 1,979,973.30 15,262.55 HYUNDAI AUTO RECEIVABLES TRUST 2024-C 11/13/2023 5.540% 10/16/2028 44918CAD4 2,421,169.11 AAA 11/13/2023 2,420,850.73 5.54% 2,446,833.50 25,982.77 HYUNDAI AUTO RECEIVABLES TRUST 2024-C 3/12/2025 4.320% 10/15/2029 44935CAD3 6,570,000.00 AAA 3/12/2025 6,569,030.93 4.32% 6,620,194.80 51,163.87HYUNDAI AUTO RECEIVABLES TRUST 2024-C 6/11/2025 4.360% 12/17/2029 44935XAD7 2,825,000.00 AAA 6/11/2025 2,824,744.90 4.36% 2,851,865.75 27,120.85HYUNDAI AUTO RECEIVABLES TRUST 2024-C 9/17/2025 3.880% 4/15/2030 44935JAD8 5,770,000.00 AAA 9/17/2025 5,769,058.34 3.88% 5,763,422.20 -5,636.14KUBOTA CREDIT OWNER TRUST 2024-2A 2/19/2025 4.670% 6/15/2029 50117FAC5 4,065,000.00 NR 2/19/2025 4,064,860.57 4.67% 4,123,942.50 59,081.93 TOYOTA AUTO RECEIVABLES OWNER TRUST COM 11/14/2023 5.540% 8/15/2028 89239FAD4 1,714,233.53 AAA 11/14/2023 1,714,048.74 5.54% 1,733,947.22 19,898.48TOYOTA AUTO RECEIVABLES OWNER TRUST COM 4/30/2025 4.340% 11/15/2029 89231HAD8 4,385,000.00 AAA 4/30/2025 4,384,748.74 4.34% 4,420,737.75 35,989.01TOYOTA AUTO RECEIVABLES OWNER TRUST COM 7/30/2025 4.110% 3/15/2030 89238VAD0 4,705,000.00 AAA 7/30/2025 4,704,504.09 4.11% 4,728,477.95 23,973.86 VOLKSWAGEN AUTO LOAN ENHANCED TRUST 202 3/25/2025 4.500% 8/20/2029 92868MAD1 6,905,000.00 NR 3/25/2025 6,904,765.23 4.50% 6,974,188.10 69,422.87 Asset-Backed Security Subtotal 117,313,299.71 117,299,242.63 118,321,264.93 1,022,022.30 COOPERAT RABOBANK UA/NY 7/20/2023 5.080% 7/17/2026 21684LGS5 7,500,000.00 A-1 7/20/2023 7,500,000.00 5.08% 7,589,175.00 89,175.00 Certificate of Deposit Subtotal 7,500,000.00 7,500,000.00 7,589,175.00 89,175.00 PRINCIPAL PUBLIC DEPOSIT SWEEP PROGRAM 2.100% 10/1/2025 992995944 724,798.89 9/1/2020 724,798.89 724,798.89 -LOCAL AGENCY INVESTMENT FUND 4.212% 10/1/2025 6,279,026.69 9/30/1997 6,279,026.69 6,279,026.69 -CALIFORNIA ASSET MANAGEMENT PROGRAM 4.360% 10/1/2025 190,399,291.63 10/4/2022 190,399,291.63 190,399,291.63 -CALIFORNIA ASSET MANAGEMENT PROGRAM - TERM 4.310% 10/1/2025 10,000,000.00 7/3/2025 10,000,000.00 10,000,000.00 - CALIFORNIA ASSET MANAGEMENT PROGRAM - TERM 4.290% 10/6/2025 15,000,000.00 8/4/2025 15,000,000.00 15,000,000.00 - 10/10/2025 2:31 PM 5 of 6
Attachment A
City of Santa Clara Monthly Report
9/30/2025
Description Issue Date Coupon Rate Maturity Date CUSIP Par Value S&P Rating Settle Date Cost Value YTM at Cost Market Value Unrealized G/LCALIFORNIA ASSET MANAGEMENT PROGRAM - TERM 4.330% 10/22/2025 10,000,000.00 7/25/2025 10,000,000.00 10,000,000.00 - CALIFORNIA ASSET MANAGEMENT PROGRAM - TERM 4.290% 11/7/2025 15,000,000.00 8/4/2025 15,000,000.00 15,000,000.00 - CALIFORNIA ASSET MANAGEMENT PROGRAM - TERM 4.290% 12/1/2025 10,000,000.00 8/4/2025 10,000,000.00 10,000,000.00 - CALIFORNIA ASSET MANAGEMENT PROGRAM - TERM 4.010% 12/24/2025 10,000,000.00 9/26/2025 10,000,000.00 10,000,000.00 - DREYFUS TREASURY 4.030% 10/1/2025 2,448,199.21 10/31/1997 2,448,199.21 2,448,199.21 - Cash Equivalent Subtotal 269,851,316.42 269,851,316.42 269,851,316.42 - Grand Total Count 185 1,447,280,613.10 1,449,057,036.69 1,459,748,531.09 10,691,494.40 *NR = Not Rated by S&P Global. These Asset Backed Securities are rated by Moody's Ratings as Aaa. 10/10/2025 2:31 PM 6 of 6
Attachment A
PAGE 22

STATEMENT OF TRANSACTIONS CITY OF SANTA CLARA- CUSTODY
FOR THE PERIOD SEPTEMBER 1, 2025 THROUGH SEPTEMBER 30, 2025 ACCOUNT NUMBER XXXXXXXX ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯

STATEMENT OF TRANSACTIONS

REALIZED

CASH EQUIVALENTS
09/02/25 INTEREST RECEIVED 3,935.07

PRINCIPAL PUBLIC DEPOSIT SWEEP PRGRM
INTEREST FROM 8/1/25 TO 8/31/25
09/11/25 11,645,000 PURCHASED 11,638,182.82- 11,638,182.82 U.S. TREASURY BILLS 9/16/25
CUSIP 912797QU4
AT $99.9415 ON TRADE DATE 09/10/2025
TO SETTLE ON 09/11/2025

CITIGROUP GBL MKTS/SALOMON BRO
09/16/25 11,645,000- MATURED 11,638,182.82 11,638,182.82- U.S. TREASURY BILLS 9/16/25
CUSIP 912797QU4
AT $100.0000 ON TRADE DATE 09/16/2025
09/16/25 INTEREST RECEIVED 6,817.18
U.S. TREASURY BILLS 9/16/25
CUSIP 912797QU4
INTEREST ON 11,645,000.000 UNITS
11,645,000 PAR VALUE AT 100 %
09/30/25 37,081,054.76 CASH SWEEP PURCHASES FOR STMT PERIOD 37,081,054.76- 37,081,054.76

PRINCIPAL PUBLIC DEPOSIT SWEEP PRGRM
12 TRANSACTIONS
09/30/25 36,591,175.92- CASH SWEEP SALES FOR STMT PERIOD 36,591,175.92 36,591,175.92-

PRINCIPAL PUBLIC DEPOSIT SWEEP PRGRM
5 TRANSACTIONS
Attachment B
PAGE 23

STATEMENT OF TRANSACTIONS

REALIZED

BONDS & NOTES
09/15/25 INTEREST RECEIVED 23,345.41
AMERICAN EXPRES ABS 4.300% 7/15/30
CUSIP 02582JKV1
$0.00358/PV ON 6,515,000.00 PV
DUE 9/15/25
09/15/25 INTEREST RECEIVED 26,890.91
AMERICAN EXPRES ABS 5.230% 9/15/28
CUSIP 02582JKD1
$0.00436/PV ON 6,170,000.00 PV
DUE 9/15/25
09/15/25 INTEREST RECEIVED 18,856.25
BANK OF AMERICA ABS 4.310% 5/15/30
CUSIP 05522RDK1
$0.00359/PV ON 5,250,000.00 PV
DUE 9/15/25
09/10/25 0.02 SHARE ADJUSTMENT
BANK OF AMERICA ABS 5.530% 2/15/28
CUSIP 06428AAC2
09/11/25 2,081,718.57- SOLD 2,098,551.23 2,081,639.65- 16,911.58 BANK OF AMERICA ABS 5.530% 2/15/28
CUSIP 06428AAC2
AT $100.8086 ON TRADE DATE 09/10/2025
TO SETTLE ON 09/11/2025

MITSUBISHI UFJ SECURITIES (USA
09/11/25 ACCRUED INTEREST ON SALE 8,314.15
BANK OF AMERICA ABS 5.530% 2/15/28
CUSIP 06428AAC2
Attachment B
PAGE 24

STATEMENT OF TRANSACTIONS

REALIZED

TAXLOTS WITH FRACTIONAL SHARES
09/15/25 INTEREST RECEIVED 27,804.33
BANK OF AMERICA ABS 5.740% 6/15/28
CUSIP 06054YAC1
$0.00422/PV ON 5,812,752.08 PV
DUE 9/15/25
09/15/25 401,517.5- PAID DOWN 401,517.50 401,510.23- 7.27 BANK OF AMERICA ABS 5.740% 6/15/28
CUSIP 06054YAC1
09/15/25 INTEREST RECEIVED 12,636.75
BK OF AMERICA ABS 4.980% 11/15/28
CUSIP 05522RDH8
$0.00415/PV ON 3,045,000.00 PV
DUE 9/15/25
09/15/25 INTEREST RECEIVED 76,939.00
BLACKROCK FUNDING 4.700% 3/14/29
CUSIP 09290DAA9
INTEREST ON 3,274,000.000 UNITS
09/15/25 INTEREST RECEIVED 132,480.00
BLACKROCK INC 3.200% 3/15/27
CUSIP 09247XAN1
INTEREST ON 8,280,000.000 UNITS
09/16/25 7,250,000 PURCHASED 7,248,625.40- 7,248,625.40 CAPITAL ONE ABS 3.820% 9/16/30
CUSIP 14041NGF2
AT $99.9810 ON TRADE DATE 09/09/2025
TO SETTLE ON 09/16/2025
WACHOVIA CAPITAL MARKETS, LLC.

Attachment B
PAGE 25

STATEMENT OF TRANSACTIONS

REALIZED

DATE PAR VALUE/SHARES DESCRIPTION CASH COST VALUE GAIN/LOSS ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ 09/25/25 INTEREST RECEIVED 11,636.63
CHASE AUTO ABS 4.290% 6/25/30
CUSIP 16145NAC5
$0.00358/PV ON 3,255,000.00 PV
DUE 9/25/25
09/15/25 INTEREST RECEIVED 31,858.67
CHASE ISSUANCE ABS 0.000% 7/15/30
CUSIP 161571HZ0
09/15/25 INTEREST RECEIVED 29,152.50
CHASE ISSUANCE ABS 4.600% 1/16/29
CUSIP 161571HV9
$0.00383/PV ON 7,605,000.00 PV
DUE 9/15/25
09/15/25 INTEREST RECEIVED 25,993.50
CHASE ISSUANCE ABS 5.160% 9/15/28
CUSIP 161571HT4
$0.00430/PV ON 6,045,000.00 PV
DUE 9/15/25
09/29/25 INTEREST RECEIVED 325,693.38
CITIBANK 5.803% 9/29/28
CUSIP 17325FBB3
INTEREST ON 11,225,000.000 UNITS
09/11/25 1,855,000- SOLD 1,859,347.66 1,854,767.38- 4,580.28 CITIBANK CREDIT ABS 5.230% 12/08/27
CUSIP 17305EGW9
AT $100.2344 ON TRADE DATE 09/10/2025
TO SETTLE ON 09/11/2025

PERSHING LLC
09/11/25 ACCRUED INTEREST ON SALE 25,062.60
CITIBANK CREDIT ABS 5.230% 12/08/27
CUSIP 17305EGW9
Attachment B
PAGE 26

STATEMENT OF TRANSACTIONS

REALIZED

DATE PAR VALUE/SHARES DESCRIPTION CASH COST VALUE GAIN/LOSS ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ 09/25/25 INTEREST RECEIVED 16,948.69
FED HOME LN MTG CORP 3.117% 6/25/27
CUSIP 3137F2LJ3
$0.00260/PV ON 6,525,000.00 PV
DUE 9/25/25
09/25/25 INTEREST RECEIVED 40,375.14
FHLMC CMO V-M 4.329% 6/25/30
CUSIP 3137HMC65
$0.00361/PV ON 11,192,000.00 PV
DUE 9/25/25
09/29/25 6,945,000 PURCHASED 7,048,959.71- 7,048,959.71 FHLMC CMO V-M 4.421% 5/25/30
CUSIP 3137HN6B9
AT $101.4969 ON TRADE DATE 09/23/2025
TO SETTLE ON 09/29/2025
J.P. MORGAN SECURITIES INC., -
09/29/25 ACCRUED INTEREST ON PURCHASE 23,880.77-
FHLMC CMO V-M 4.421% 5/25/30
CUSIP 3137HN6B9
09/25/25 INTEREST RECEIVED 14,318.01
FHLMC K061 CMO V-M 3.347% 11/25/26
CUSIP 3137BTUM1
$0.00267/PV ON 5,133,438.28 PV
DUE 9/25/25
09/25/25 4,698.67- PAID DOWN 4,698.67 4,554.04- 144.63
FHLMC K061 CMO V-M 3.347% 11/25/26
CUSIP 3137BTUM1
09/25/25 INTEREST RECEIVED 22,712.50
FHLMC K508 CMO V-M 4.740% 8/25/28
CUSIP 3137HAQ74
$0.00395/PV ON 5,750,000.00 PV
DUE 9/25/25
Attachment B
PAGE 27

STATEMENT OF TRANSACTIONS

REALIZED

DATE PAR VALUE/SHARES DESCRIPTION CASH COST VALUE GAIN/LOSS ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ 09/25/25 INTEREST RECEIVED 36,451.79
FHLMC K536 CMO V-M 4.850% 1/25/30
CUSIP 3137HJZY6
$0.00404/PV ON 9,019,000.00 PV
DUE 9/25/25
09/25/25 INTEREST RECEIVED 22,002.34
FHLMC K537 CMO V-M 4.430% 2/25/30
CUSIP 3137HKPF5
$0.00369/PV ON 5,960,000.00 PV
DUE 9/25/25
09/25/25 INTEREST RECEIVED 39,443.72
FHLMC K538 CMO V-M 4.478% 1/25/30
CUSIP 3137HKQC1
$0.00373/PV ON 10,570,000.00 PV
DUE 9/25/25
09/25/25 INTEREST RECEIVED 14,736.75
FHLMC K539 CMO V-M 4.410% 1/25/30
CUSIP 3137HKXJ8
$0.00368/PV ON 4,010,000.00 PV
DUE 9/25/25
09/25/25 INTEREST RECEIVED 16,115.17
FHLMC K540 CMO V-M 4.513% 2/25/30
CUSIP 3137HLJA1
$0.00376/PV ON 4,285,000.00 PV
DUE 9/25/25
09/25/25 INTEREST RECEIVED 41,197.30
FHLMC K541 CMO V-M 4.348% 2/25/30
CUSIP 3137HLXV9
$0.00362/PV ON 11,370,000.00 PV
DUE 9/25/25
Attachment B
PAGE 28

STATEMENT OF TRANSACTIONS

REALIZED

DATE PAR VALUE/SHARES DESCRIPTION CASH COST VALUE GAIN/LOSS ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ 09/18/25 7,245,000 PURCHASED 7,353,573.57- 7,353,573.57 FHLMC K546 CMO V-M 4.361% 5/25/30
CUSIP 3137HN4R6
AT $101.4986 ON TRADE DATE 09/09/2025
TO SETTLE ON 09/18/2025

BMOCM/BONDS
09/18/25 ACCRUED INTEREST ON PURCHASE 14,920.07-
FHLMC K546 CMO V-M 4.361% 5/25/30
CUSIP 3137HN4R6
09/25/25 INTEREST RECEIVED 12,282.86
FHLMC MULTIFAMILY ST 3.243% 4/25/27
CUSIP 3137F1G44
$0.00270/PV ON 4,545,000.00 PV
DUE 9/25/25
09/25/25 INTEREST RECEIVED 23,891.60
FHLMC SER KJ46 CMO 4.777% 6/25/28
CUSIP 3137HAD45
$0.00391/PV ON 6,001,656.80 PV
DUE 9/25/25
09/25/25 6,291.77- PAID DOWN 6,291.77 6,291.61- 0.16
FHLMC SER KJ46 CMO 4.777% 6/25/28
CUSIP 3137HAD45
09/25/25 INTEREST RECEIVED 30,118.75
FHLMC SER K505 CMO 4.819% 6/25/28
CUSIP 3137HACX2
$0.00402/PV ON 7,500,000.00 PV
DUE 9/25/25
09/15/25 INTEREST RECEIVED 19,532.53
FIFTH THIRD AUT ABS 5.530% 8/15/28
CUSIP 31680EAD3
$0.00371/PV ON 4,238,523.50 PV
DUE 9/15/25
Attachment B
PAGE 29

STATEMENT OF TRANSACTIONS

REALIZED

DATE PAR VALUE/SHARES DESCRIPTION CASH COST VALUE GAIN/LOSS ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ 09/15/25 286,861.01- PAID DOWN 286,861.01 286,843.22- 17.79 FIFTH THIRD AUT ABS 5.530% 8/15/28
CUSIP 31680EAD3
09/25/25 INTEREST RECEIVED 54,516.67
FNMA SER M6 CMO V-M 4.190% 7/25/28
CUSIP 3136BQDE6
$0.00349/PV ON 15,613,364.65 PV
DUE 9/25/25
09/25/25 1,472.32- PAID DOWN 1,472.32 1,430.16- 42.16
FNMA SER M6 CMO V-M 4.190% 7/25/28
CUSIP 3136BQDE6
09/16/25 INTEREST RECEIVED 7,008.50
GM FINANCIAL ABS 4.280% 4/16/30
CUSIP 362549AD9
$0.00357/PV ON 1,965,000.00 PV
DUE 9/16/25
09/16/25 INTEREST RECEIVED 3,293.96
GM FINANCIAL ABS 4.850% 12/18/28
CUSIP 36268GAD7
$0.00404/PV ON 815,000.00 PV
DUE 9/16/25
09/15/25 1,885,000 PURCHASED 1,878,232.85- 1,878,232.85 HOME DEPOT INC 3.950% 9/15/30
CUSIP 437076DJ8
AT $99.6410 ON TRADE DATE 09/08/2025
TO SETTLE ON 09/15/2025
J.P. MORGAN SECURITIES INC., -
09/11/25 614,313.29- SOLD 618,776.66 614,186.62- 4,590.04 HONDA AUTO ABS 5.410% 2/18/28
CUSIP 43815QAC1
AT $100.7266 ON TRADE DATE 09/10/2025
TO SETTLE ON 09/11/2025
CIBC WORLD MARKETS CORP.

Attachment B
PAGE 30

STATEMENT OF TRANSACTIONS

REALIZED

CITIGROUP GBL MKTS/SALOMON BRO
09/15/25 INTEREST RECEIVED 23,652.00
HYUNDAI AUTO ABS 4.320% 10/15/29
CUSIP 44935CAD3
$0.00360/PV ON 6,570,000.00 PV
DUE 9/15/25
09/15/25 INTEREST RECEIVED 10,264.17
HYUNDAI AUTO REC ABS 4.360% 12/17/29
CUSIP 44935XAD7
$0.00363/PV ON 2,825,000.00 PV
DUE 9/15/25
09/15/25 INTEREST RECEIVED 11,680.17
HYUNDAI AUTO REC ABS 5.540% 10/16/28
CUSIP 44918CAD4
$0.00462/PV ON 2,530,000.00 PV
DUE 9/15/25
09/15/25 108,830.89- PAID DOWN 108,830.89 108,816.58- 14.31 HYUNDAI AUTO REC ABS 5.540% 10/16/28
CUSIP 44918CAD4
09/02/25 INTEREST RECEIVED 115,793.75
JOHNSON & JOHNSON 4.500% 3/01/27
CUSIP 478160DG6
INTEREST ON 4,850,000.000 UNITS
Attachment B
PAGE 31

STATEMENT OF TRANSACTIONS

REALIZED

DATE PAR VALUE/SHARES DESCRIPTION CASH COST VALUE GAIN/LOSS ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ 09/22/25 INTEREST RECEIVED 157,812.50
KENVUE INC 5.050% 3/22/28
CUSIP 49177JAF9
INTEREST ON 6,250,000.000 UNITS
09/15/25 INTEREST RECEIVED 15,819.63
KUBOTA CREDIT ABS 4.670% 6/15/29
CUSIP 50117FAC5
$0.00389/PV ON 4,065,000.00 PV
DUE 9/15/25
09/15/25 INTEREST RECEIVED 16,114.63
TOYOTA AUTO ABS 4.110% 3/15/30
CUSIP 89238VAD0
$0.00343/PV ON 4,705,000.00 PV
DUE 9/15/25
09/15/25 INTEREST RECEIVED 15,859.08
TOYOTA AUTO REC ABS 4.340% 11/15/29
CUSIP 89231HAD8
$0.00362/PV ON 4,385,000.00 PV
DUE 9/15/25
09/10/25 0.01 SHARE ADJUSTMENT
TOYOTA AUTO REC ABS 5.160% 4/17/28
CUSIP 89231FAD2
09/11/25 1,282,325.49- SOLD 1,290,891.02 1,282,035.42- 8,855.60 TOYOTA AUTO REC ABS 5.160% 4/17/28
CUSIP 89231FAD2
AT $100.6680 ON TRADE DATE 09/10/2025
TO SETTLE ON 09/11/2025

MITSUBISHI UFJ SECURITIES (USA
09/11/25 ACCRUED INTEREST ON SALE 4,778.80
TOYOTA AUTO REC ABS 5.160% 4/17/28
CUSIP 89231FAD2
Attachment B
PAGE 32

STATEMENT OF TRANSACTIONS

REALIZED

DATE PAR VALUE/SHARES DESCRIPTION CASH COST VALUE GAIN/LOSS ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ 09/15/25 INTEREST RECEIVED 7,963.75
TOYOTA AUTO REC ABS 5.540% 8/15/28
CUSIP 89239FAD4
$0.00462/PV ON 1,725,000.00 PV
DUE 9/15/25
09/15/25 10,766.47- PAID DOWN 10,766.47 10,765.31- 1.16 TOYOTA AUTO REC ABS 5.540% 8/15/28
CUSIP 89239FAD4
09/11/25 INTEREST RECEIVED 147,000.00
TOYOTA MTR CR MTN 5.250% 9/11/28
CUSIP 89236TLB9
INTEREST ON 5,600,000.000 UNITS
09/02/25 INTEREST RECEIVED 166,406.25
U.S. TREASURY NOTES 3.125% 8/31/29
CUSIP 91282CFJ5
INTEREST ON 10,650,000.000 UNITS
09/11/25 9,781,000 PURCHASED 9,781,000.00- 9,781,000.00 U.S. TREASURY NOTES 3.500% 9/15/25
CUSIP 91282CFK2
AT $100.0000 ON TRADE DATE 09/10/2025
TO SETTLE ON 09/11/2025
MORGAN STANLEY & CO.
09/11/25 ACCRUED INTEREST ON PURCHASE 167,446.47-
U.S. TREASURY NOTES 3.500% 9/15/25
CUSIP 91282CFK2
09/15/25 INTEREST RECEIVED 171,167.50
U.S. TREASURY NOTES 3.500% 9/15/25
CUSIP 91282CFK2
INTEREST ON 9,781,000.000 UNITS
Attachment B
PAGE 33

STATEMENT OF TRANSACTIONS

REALIZED

DATE PAR VALUE/SHARES DESCRIPTION CASH COST VALUE GAIN/LOSS ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ 09/15/25 9,781,000- MATURED 9,781,000.00 9,781,000.00-
U.S. TREASURY NOTES 3.500% 9/15/25
CUSIP 91282CFK2
AT $100.0000 ON TRADE DATE 09/15/2025
09/30/25 INTEREST RECEIVED 188,300.00
U.S. TREASURY NOTES 3.500% 9/30/29
CUSIP 91282CLN9
INTEREST ON 10,760,000.000 UNITS
09/30/25 INTEREST RECEIVED 48,575.00
U.S. TREASURY NOTES 3.625% 3/31/28
CUSIP 91282CGT2
INTEREST ON 2,680,000.000 UNITS
09/02/25 INTEREST RECEIVED 264,081.25
U.S. TREASURY NOTES 3.625% 8/31/29
CUSIP 91282CLK5
INTEREST ON 14,570,000.000 UNITS
09/02/25 1,500,000 PURCHASED 1,493,144.53- 1,493,144.53 U.S. TREASURY NOTES 3.625% 8/31/30
CUSIP 91282CNX5
AT $99.5430 ON TRADE DATE 09/02/2025

BMOCM/BONDS
09/02/25 ACCRUED INTEREST ON PURCHASE 300.41-
U.S. TREASURY NOTES 3.625% 8/31/30
CUSIP 91282CNX5
09/03/25 38,575,000 PURCHASED 38,370,070.31- 38,370,070.31 U.S. TREASURY NOTES 3.625% 8/31/30
CUSIP 91282CNX5
AT $99.4688 ON TRADE DATE 09/02/2025
TO SETTLE ON 09/03/2025
NOMURA SECURITIES INTL. INC.

Attachment B
PAGE 34

STATEMENT OF TRANSACTIONS

REALIZED

CITIGROUP GBL MKTS/SALOMON BRO
09/11/25 ACCRUED INTEREST ON PURCHASE 3,976.48-
U.S. TREASURY NOTES 3.625% 8/31/30
CUSIP 91282CNX5
09/02/25 INTEREST RECEIVED 121,700.00
U.S. TREASURY NOTES 4.000% 2/28/30
CUSIP 91282CGQ8
INTEREST ON 6,085,000.000 UNITS
09/02/25 INTEREST RECEIVED 462,100.00
U.S. TREASURY NOTES 4.000% 2/29/28
CUSIP 91282CGP0
INTEREST ON 23,105,000.000 UNITS
Attachment B
PAGE 35

STATEMENT OF TRANSACTIONS

REALIZED

DATE PAR VALUE/SHARES DESCRIPTION CASH COST VALUE GAIN/LOSS ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ 09/30/25 INTEREST RECEIVED 207,281.25
U.S. TREASURY NOTES 4.125% 3/31/29
CUSIP 91282CKG5
INTEREST ON 10,050,000.000 UNITS
09/30/25 INTEREST RECEIVED 232,650.00
U.S. TREASURY NOTES 4.125% 9/30/27
CUSIP 91282CFM8
INTEREST ON 11,280,000.000 UNITS
09/02/25 INTEREST RECEIVED 153,531.25
U.S. TREASURY NOTES 4.250% 2/28/29
CUSIP 91282CKD2
INTEREST ON 7,225,000.000 UNITS
09/02/25 INTEREST RECEIVED 211,640.63
U.S. TREASURY NOTES 4.375% 8/31/28
CUSIP 91282CHX2
INTEREST ON 9,675,000.000 UNITS
09/10/25 6,775,000- SOLD 6,938,552.73 6,860,336.06- 78,216.67 U.S. TREASURY NOTES 4.375% 8/31/28
CUSIP 91282CHX2
AT $102.4141 ON TRADE DATE 09/09/2025
TO SETTLE ON 09/10/2025
MORGAN STANLEY & CO.
09/10/25 ACCRUED INTEREST ON SALE 8,188.02
U.S. TREASURY NOTES 4.375% 8/31/28
CUSIP 91282CHX2
09/03/25 2,515,000- SOLD 2,535,139.65 2,517,722.77- 17,416.88 U.S. TREASURY NOTES 4.625% 9/15/26
CUSIP 91282CHY0
AT $100.8008 ON TRADE DATE 09/02/2025
TO SETTLE ON 09/03/2025
BARCLAYS CAPITAL INC. FIXED IN
Attachment B
PAGE 36

STATEMENT OF TRANSACTIONS

REALIZED

DATE PAR VALUE/SHARES DESCRIPTION CASH COST VALUE GAIN/LOSS ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ 09/03/25 ACCRUED INTEREST ON SALE 54,366.37
U.S. TREASURY NOTES 4.625% 9/15/26
CUSIP 91282CHY0
09/03/25 9,975,000- SOLD 10,059,943.36 10,019,809.57- 40,133.79 U.S. TREASURY NOTES 4.625% 10/15/26
CUSIP 91282CJC6
AT $100.8516 ON TRADE DATE 09/02/2025
TO SETTLE ON 09/03/2025
RBC DAIN RAUSCHER INC.
09/03/25 ACCRUED INTEREST ON SALE 177,730.79
U.S. TREASURY NOTES 4.625% 10/15/26
CUSIP 91282CJC6
09/03/25 25,000,000- SOLD 25,224,609.38 25,231,995.95- 7,386.57- U.S. TREASURY NOTES 4.625% 11/15/26
CUSIP 91282CJK8
AT $100.8984 ON TRADE DATE 09/02/2025
TO SETTLE ON 09/03/2025
RBC DAIN RAUSCHER INC.
09/03/25 ACCRUED INTEREST ON SALE 348,760.19
U.S. TREASURY NOTES 4.625% 11/15/26
CUSIP 91282CJK8
09/10/25 925,000- SOLD 934,864.26 933,583.85- 1,280.41
U.S. TREASURY NOTES 4.625% 11/15/26
CUSIP 91282CJK8
AT $101.0664 ON TRADE DATE 09/09/2025
TO SETTLE ON 09/10/2025
MORGAN STANLEY & CO.
09/10/25 ACCRUED INTEREST ON SALE 13,717.90
U.S. TREASURY NOTES 4.625% 11/15/26
CUSIP 91282CJK8
Attachment B
INVESTMENT AND INSURANCE PRODUCTS ARE:
• NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC) OR ANY FEDERAL GOVERNMENT AGENCY • NOT A DEPOSIT, OBLIGATION OF, OR GUARANTEED BY ANY BANK OR BANKING AFFILIATE • SUBJECT TO INVESTMENT RISKS AND MAY LOSE VALUE, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED PAGE 37

STATEMENT OF TRANSACTIONS

REALIZED

DATE PAR VALUE/SHARES DESCRIPTION CASH COST VALUE GAIN/LOSS ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ 09/24/25 5,000,000- SOLD 5,051,953.13 5,046,399.19- 5,553.94 U.S. TREASURY NOTES 4.625% 11/15/26
CUSIP 91282CJK8
AT $101.0391 ON TRADE DATE 09/23/2025
TO SETTLE ON 09/24/2025
RBC DAIN RAUSCHER INC.
09/24/25 ACCRUED INTEREST ON SALE 82,948.37
U.S. TREASURY NOTES 4.625% 11/15/26
CUSIP 91282CJK8
09/10/25 0.01 SHARE ADJUSTMENT
USAA AUTO OWNER ABS 5.580% 5/15/28
CUSIP 90291VAC4
09/11/25 3,897,892.99- SOLD 3,923,929.70 3,897,210.85- 26,718.85 USAA AUTO OWNER ABS 5.580% 5/15/28
CUSIP 90291VAC4
AT $100.6680 ON TRADE DATE 09/10/2025
TO SETTLE ON 09/11/2025

MITSUBISHI UFJ SECURITIES (USA
09/11/25 ACCRUED INTEREST ON SALE 15,708.51
USAA AUTO OWNER ABS 5.580% 5/15/28
CUSIP 90291VAC4
09/22/25 INTEREST RECEIVED 25,893.75
VOLKSWAGEN AUTO ABS 4.500% 8/20/29
CUSIP 92868MAD1
$0.00375/PV ON 6,905,000.00 PV
DUE 9/20/25
09/25/25 INTEREST RECEIVED 21,493.34
VR FHLMC MULTIFAMI 3.224% 3/25/27
CUSIP 3137BXQY1
$0.00269/PV ON 8,000,000.00 PV
DUE 9/25/25
================================================================================================================= ENDING BALANCE 0.00 1,179,930,519.16
¯¯¯¯¯¯¯¯¯¯¯¯¯¯ ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯
Attachment B
"Principal® I Custody V Solutions
Attachment 3
Department/Item
Source of
Funds
Use of
Funds Explanation
Non-Departmental -
Separation Payouts
(200,000) Decreases the budget for separation payouts and reallocates the funding to Materials, Services, and
Supplies to cover contractor costs for repairs to the
City-owned property on Gianera Street (majority
affirmative Council Votes required).

Non-Departmental -
Materials/Services/Supplies
200,000 Increases the budget for Materials, Services and Supplies to cover contractor costs for repairs to the
City-owned property on Gianera Street, offset by a
reduction to the separation payouts budget
(majority affirmative Council Votes required).

Other Fees for Services
(Ambulance Transport
Revenue) / Transfer to the
Vehicle Replacement Fund
(Fire Department Reserve
Engine)
100,000 100,000 Recognizes revenue for ambulance transport payments received from public healthcare providers
and patients for Fire Department ambulance
transports to hospitals. Ambulance transports
began in March 2023 under the current Santa Clara
County dispatch orders, allowing agencies with
ambulances to transport patients to hospitals in
conjunction with County contracted ambulance
services. These funds will be transferred to the
Vehicle Replacement Fund to purchase a used fire
engine that will replace a 1996 reserve engine in the
Fire Department; this reserve engine is used when
other engines are not in service or have been
deployed to other jurisdictions to support mutual aid
efforts (five affirmative Council votes required to
appropriate additional revenue).

Other Revenue / Human
Resources Department
18,700 18,700 Increases the Other Revenue estimate by $18,700 to recognize Flexible Spending Account (FSA)
forfeiture funds received in FY 2025/26 and
allocates those funds to the Human Resources
Department to support health and wellness
activities for City employees (five affirmative
Council votes required to appropriate additional
revenue).
118,700 118,700
FY 2025/26 Budget Amendments
General Fund (001)
1 Attachment 3
FY 2025/26 Budget Amendments
Department/Item
Source of
Funds
Use of
Funds Explanation
Materials/Services/Supplies 3,770 This action increases the Materials/Services/ Supplies appropriation to fund a portion of the
computer equipment, office furniture and cubicle
configurations for the three new positions added to
the Community Risk Reduction Division in FY
2025/26, as approved in the FY 2025/26 and FY
2026/27 Operating Budget. The costs will be funded
by enforcement fines previously received through
the Certified Unified Program Agencies (CUPA)
program (five affirmative Council votes for the
use of unused balances).

Unrestricted Ending Fund
Balance
(3,770) This change to the Ending Fund Balance offsets the recommended action above (five affirmative
Council votes required for the use of unused
balances).
- -
Department/Item
Source of
Funds
Use of
Funds Explanation
Materials/Services/Supplies 20,500 This action increases the Materials/Services/ Supplies appropriation to fund a portion of the
computer equipment, office furniture and cubicle
configurations for the three new positions added to
the Community Risk Reduction Division in FY
2025/26, as approved in the FY 2025/26 and FY
2026/27 Operating Budget (five affirmative
Council votes for the use of unused balances).

Unrestricted Ending Fund
Balance
(20,500) This change to the Ending Fund Balance offsets the recommended action above (five affirmative
Council votes required for the use of unused
balances).
- -
Fire CUPA Fund (159)
Fire Development Services Fund (158)
2 Attachment 3
FY 2025/26 Budget Amendments
Department/Item
Source of
Funds
Use of
Funds Explanation
Other Agencies Revenue /
2025 County of Santa Clara
Emergency Medical Services
Trust Fund
33,332 33,332 Recognizes and appropriates $33,332 of County funding from the 2025 Emergency Medical Services
Trust Fund, administered through the Santa Clara
County Emergency Medical Services System. The
funds will be used to support the Fire Department's
purchase of ambulance gurneys (five affirmative
Council votes required to appropriate additional
revenue).
33,332 33,332
Department/Item
Source of
Funds
Use of
Funds Explanation
Transfer from General Fund /
Capital Outlay
100,000 100,000 Increases the transfer from the General Fund and increases the Capital Outlay budget to purchase a
used fire engine that will replace a 1996 reserve
engine in the Fire Department; this reserve engine
is used when other engines are not in service or
have been deployed to other jurisdictions to support
mutual aid efforts (five affirmative Council votes
required to appropriate additional revenue).
100,000 100,000
Fire Operating Grant Trust Fund (178)
Vehicle Replacement Fund (050)
3 City of Santa Clara
Agenda Report
1500 Warburton Avenue
Santa Clara, CA 95050
santaclaraca.gov
@SantaClaraCity
25-1107 Agenda Date: 11/18/2025

REPORT TO COUNCIL

SUBJECT
Action on the City’s Debt Management Policy

BACKGROUND
The Government Finance Officers Association (GFOA) recommends that state and local governments adopt comprehensive written debt management policies. In addition, effective January 1, 2017, California Government Code section 8855(i) requires any issuer of public debt to provide the California Debt and Investment Advisory Commission (CDIAC) a report of any proposed issuance.

The report to the CDIAC must include certification that the issuer has adopted local debt policies concerning the use of debt and that the proposed debt issuance is consistent with those policies.

A debt management policy improves the quality of decisions and adherence to the policy signals to rating agencies and capital markets that a government is well managed and therefore is likely to meet its debt obligations in a timely manner. The City of Santa Clara’s (the “City”) Debt Management Policy (the “Policy”) provides guidance for the issuance of bonds and other forms of indebtedness to finance land acquisition, construction, equipment, and other capital requirements of the City. The Policy is reviewed annually by Finance Department staff and updated as necessary to promote prudent debt management decisions and to remain compliant with state and federal laws.

The City’s original Policy was adopted by City Council in March 2018 and provides written guidelines on the issuance of debt, management of the City’s debt portfolio, and adherence to various laws and regulations related to the City’s debt.

DISCUSSION
The City’s Policy is continually monitored to determine if updates are necessary and prudent. A review of the current Policy was conducted by the Finance Department in anticipation of the upcoming General Obligation bond issuance anticipated for January 2026. In the latest review of the Policy, staff has identified recommended revisions (See Attachment 1 for the revised policy and Attachment 2 for the track changes version). The following notable changes are recommended to the Policy to ensure that the Policy and City processes and procedures remain consistent with state and federal rules and GFOA best practices:

1. Require that all publicly offered debt issuances meet the disclosure requirements of the Securities and Exchange Commission and other government agencies before and following bond sales. The Policy requires the Finance Department to prepare and periodically review and update, as necessary, Disclosure Controls and Procedures. See Attachment 3.

2. Specify the types of allowable short-term debt the City may issue, including Commercial City of Santa Clara Page 1 of 3 Printed on 11/14/2025
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25-1107 Agenda Date: 11/18/2025
Paper (CP), Line of Credit (LOC), Grant Anticipation Notes (GANs), Bond Anticipation Notes (BANs), Tax and Revenue Anticipation Notes (TANs & RANs), and Other short-term debt such as a Direct Purchase Loan from a bank or Floating Rate Notes, and the conditions or requirements to issue such short-term debt.

3. Reference the Finance Department’s Citywide Tax-Exempt Bond Proceeds Drawdown Procedures under the Arbitrage Rebate section. To facilitate the accurate and timely drawdown of tax-exempt bond proceeds spent on project expenditures and adhere to the arbitrage rebate requirements of the federal tax code, the Finance Department has established Citywide Tax-Exempt Bond Proceeds Drawdown Procedures (the “Drawdown Procedures”). The Drawdown Procedures provide guidance to City staff following the issuance of debt for the financing of City capital projects and are intended to (i) ensure the City’s compliance with relevant federal and state securities laws, and (ii) maximize interest earnings on tax-exempt bond proceeds the City is legally allowed to earn and retain. See Attachment 4.

The proposed Policy establishes prudent guidelines for managing the City’s debt to meet long-term goals and is in compliance with all provisions of the City Charter and the California Government Code section 8855(i) relevant to the issuance of public debt by local agencies. Additionally, the Policy provides guidance regarding the types of debt the City may issue (fixed or variable rate, tax-exempt or taxable), the methods for issuing debt obligations (competitive sale, negotiated sale, or private placement), the selection of financial service providers (municipal advisors, bond counsel, trustees, etc.), and the structural features of debt issuances (final maturity, call options, etc.) The Policy also describes various revenue sources that may be used to secure debt, such as property taxes, enterprise revenue, lease revenue, and special assessments. To help ensure that debt is issued in a financially prudent manner, the Policy includes sections related to debt capacity limits, debt service reserves, credit ratings, credit enhancements, and the investment of bond proceeds, as well as an appendix on interest rate swap guidelines. The Policy provides guidance on continuing disclosure, compliance, and reporting requirements following the issuance of debt, and a glossary of debt management terms.

The approved policy will be incorporated in the City Policy and Procedures Manual and published on the City’s website.

ENVIRONMENTAL REVIEW
The action being considered does not constitute a “project” within the meaning of a California Environmental Quality Act (“CEQA”) pursuant to the CEQA Guidelines section 15378(a) as it has no potential for resulting in either a direct physical change in the environment, or a reasonably foreseeable indirect physical change in the environment. Furthermore, the action being considered does not constitute a “project” within the meaning of the California Environmental Quality Act (“CEQA”) pursuant to CEQA Guidelines section 15378(b)(5) in that it is a governmental organizational or administrative activity that will not result in direct or indirect changes in the environment.

FISCAL IMPACT
There is no cost to the City other than administrative staff time and expense which is already budgeted.

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25-1107 Agenda Date: 11/18/2025

COORDINATION
This report has been coordinated with the City Attorney’s Office.

PUBLIC CONTACT
Public contact was made by posting the Council agenda on the City’s official-notice bulletin board outside City Hall Council Chambers. A complete agenda packet is available on the City’s website and in the City Clerk’s Office at least 72 hours prior to a Regular Meeting and 24 hours prior to a Special Meeting. A hard copy of any agenda report may be requested by contacting the City Clerk’s Office at (408) 615-2220, email [email protected] or at the public information desk at any City of Santa Clara public library.

RECOMMENDATION
Approve the Debt Management Policy for the City of Santa Clara, its agencies and corporations.

Reviewed by: Kenn Lee, Director of Finance
Approved by: Jovan D. Grogan, City Manager

ATTACHMENT

1. Debt Management Policy

2. Debt Management Policy (blackline)

3. Disclosure Controls and Procedures

4. Citywide Tax-Exempt Bond Proceeds Drawdown Procedures City of Santa Clara Page 3 of 3 Printed on 11/14/2025
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Debt Management Policy
City of Santa Clara
City of
Santa Clara
1500 Warburton Avenue
Santa Clara, CA 95050
i
Table of Contents
INTRODUCTION ........................................................................................................................ 1 AUTHORITY ............................................................................................................................... 1 SCOPE ....................................................................................................................................... 1 OBJECTIVES ............................................................................................................................. 1 INTERNAL CONTROL PROCEDURES ..................................................................................... 2 Debt Management Policy Review and Approval ................................................................... 2 Debt Administration ............................................................................................................... 2 Reporting .............................................................................................................................. 2 DEBT ISSUANCE ....................................................................................................................... 2 Method of Sale ...................................................................................................................... 2 Competitive Sale ............................................................................................................. 2 Negotiated Sale............................................................................................................... 3 Private Placement ........................................................................................................... 3 Issuer Characteristics .......................................................................................................... 3 Market Familiarity ............................................................................................................ 3 Credit Strength ................................................................................................................ 3 Policy Goals .................................................................................................................... 3 Financing Characteristics ...................................................................................................... 3 Type of Debt Instrument .................................................................................................. 4 Issue Size........................................................................................................................ 4 Market Conditions and Timing ........................................................................................ 4 Term of Debt ................................................................................................................... 4 Story Bonds..................................................................................................................... 4 Initial Disclosure Requirements ............................................................................................ 4 FINANCIAL SERVICE PROVIDERS .......................................................................................... 5 Selection ............................................................................................................................... 5 Conflict of Interest ................................................................................................................. 5 Communication ..................................................................................................................... 5 PLANNING GOALS AND OBJECTIVES .................................................................................... 5 RELATIONSHIP OF DEBT TO CAPITAL PROGRAM ............................................................... 5 TAX STATUS .............................................................................................................................. 6 Tax-Exempt ........................................................................................................................... 6 Taxable ................................................................................................................................. 6 TYPE OF DEBT ............................................................................................................................ 6 Long-Term Debt .................................................................................................................... 6 General Obligation (G.O.) Bonds .................................................................................... 6 Revenue Bonds............................................................................................................... 6 Certificates of Participation ............................................................................................. 7 State Revolving Fund Loans ........................................................................................... 7 Special Assessment Bonds ............................................................................................. 7 Community Facilities District Bonds ................................................................................ 8 Short-Term Debt ................................................................................................................... 8 Commercial Paper (CP) .................................................................................................. 8 Line of Credit (LOC) ........................................................................................................ 9 Grant Anticipation Notes (GANs) .................................................................................... 9 Bond Anticipation Notes (BANs) ..................................................................................... 9 Tax and Revenue Anticipation Notes (TRANs) ............................................................... 9 Other ............................................................................................................................... 9 Alternative Debt Instruments – Derivative Products ............................................................. 9 DEBT CAPACITY ....................................................................................................................... 9 DEBT SERVICE RESERVE FUND ............................................................................................ 10 ii
PURPOSE OF FINANCING ........................................................................................................10 New Money Financing .......................................................................................................... 10 Refinancing ........................................................................................................................... 10 CREDIT RATINGS...................................................................................................................... 11 Rating Agency Relationships ................................................................................................ 11 Use of Rating Agencies ........................................................................................................ 11 CREDIT ENHANCEMENT .......................................................................................................... 12 Bond Insurance ..................................................................................................................... 12 Benefit Analysis............................................................................................................... 12 Provider Selection ........................................................................................................... 12 Bank Facilities (Letters of Credit) .......................................................................................... 12 STRUCTURAL FEATURES OF DEBT ISSUANCE ....................................................................12 Maturity ................................................................................................................................. 13 Debt Service Structure .......................................................................................................... 12 Fixed Rate Debt .................................................................................................................... 13 Variable Rate Debt ................................................................................................................13 Debt Service Coverage……………………………………………………………………………..13
Capitalized Interest ............................................................................................................... 13 Call Options/Redemption Provisions .................................................................................... 13 INVESTMENT OF BOND PROCEEDS ...................................................................................... 14 CONTINUING DISCLOSURE ..................................................................................................... 14 ARBITRAGE REBATE ................................................................................................................ 14 POST ISSUANCE COMPLIANCE .............................................................................................. 15 APPENDIX A – Interest Rate Swap Agreement Guidelines ....................................................... A-1 APPENDIX B – Post Issuance Compliance Guidelines for Tax-Exempt Bonds ......................... B-1 APPENDIX C – Local Goals and Policies for Community Facilities Districts .............................. C-1 APPENDIX D – Glossary of Debt Management Terms .............................................................. D-1 1 CITY OF SANTA CLARA

DEBT MANAGEMENT POLICY
Effective as of November 18, 2025

INTRODUCTION
This Debt Management Policy (the “Debt Policy”) provides guidance for the issuance of bonds and other forms of indebtedness to finance land acquisition, construction, equipment, and other capital requirements of the City of Santa Clara (the “City”). While the issuance of debt is an appropriate method of financing capital projects and major equipment acquisitions, such issuance shall be carefully monitored to preserve the City’s credit strength and to provide the necessary flexibility to fund future capital needs. In addition, the issuance of debt shall be closely aligned with the cash flow requirements of the projects being financed.

This Debt Policy is intended to satisfy the requirements of California Government Code section 8855(i) and the California Debt and Investment Advisory Commission (CDIAC), including requiring any issuer of public debt within the State of California to provide to CDIAC, no later than thirty days prior to the sale of any debt, a report of the proposed issuance, including certification that the issuer has adopted local debt policies concerning the use of debt and that the proposed debt issuance is consistent with those policies.

AUTHORITY
The City, under the authority of the City Manager, executes debt instruments, oversees the accounting and reporting of debt, administers debt proceeds, manages continuing disclosure and debt compliance requirements, and makes debt service payments, while acting with prudence, diligence, and attention to prevailing economic conditions. The City Manager may delegate such authority to the Director of Finance.

The issuance of all debt shall receive required voter and/or City Council approval, and shall comply with all federal, state and local legal requirements.

SCOPE
The Debt Policy shall govern, except as otherwise covered by the City Charter and City Code, the issuance and management of all bonds and other forms of indebtedness by the City and any joint powers authority, financing corporation, or other entity created by the City Council or by State law for which the City Council serves as the governing or legislative body.

While adherence to the Debt Policy is required in applicable circumstances, the City recognizes that changes in the capital markets as well as unforeseen circumstances may from time to time produce situations that are not covered by the Debt Policy and may require modifications or exceptions to achieve City goals. As appropriate, the Director of Finance shall seek City Manager and City Council direction and approval of all such modifications or exceptions. Failure of the City to comply with any provision of this Debt Policy will not affect the authorization, validity, or enforceability of any bonds or other forms of indebtedness that are otherwise issued in accordance with applicable law.

OBJECTIVES
The Debt Policy will guide the City in determining appropriate uses of debt financing, establish certain debt management goals and assist the City in maintaining strong credit ratings, while assuming a prudent level of financial risk and preserving the City’s flexibility to finance future capital programs and requirements. Additionally, the Debt Policy is intended to set forth criteria for selecting 2 firms to provide certain financial, legal, and other services related to the issuance and subsequent monitoring and reporting of debt.

INTERNAL CONTROL PROCEDURES
The Finance Department shall be responsible for managing and coordinating all activities related to the issuance and administration of the City’s debt and shall coordinate with other departments on certain debt issuances, as needed. The Finance Department will assist other City departments with establishing and implementing debt-financed capital programs, as needed.

I. Debt Management Policy Review and Approval
The Debt Policy shall be approved by the City Manager and adopted by resolution of the City Council. The Debt Policy shall be reviewed annually by the Finance Department to ensure its consistency with the City's debt management objectives and any modifications must be approved by the City Manager and adopted by the City Council.

II. Debt Administration
The Finance Department shall have the responsibility and authority for structuring, implementing, and managing the City’s debt and financing program, in accordance with City Council authorization. The issuance of all debt is required to be approved by the City Council as a regular item of business and not a consent agenda item, unless otherwise permitted by law.

The Finance Department shall oversee the City’s debt management activities, including without limitation: payment of debt service; investment of debt proceeds; expenditure of debt proceeds; monitoring compliance with debt covenants; monitoring use of facilities financed with tax-exempt debt; relationships with credit rating agencies; compliance with continuing disclosure undertakings for publicly offered bonds and periodic reporting requirements for privately placed debt; arbitrage and rebate compliance for tax-exempt debt; and meeting all other required federal, state, and local reporting requirements.

III. Reporting
Information regarding the City’s outstanding debt is provided through the City’s Annual Comprehensive Financial Report (ACFR), Stadium Authority Quarterly Financial Status Reports, Citywide Budget, and Stadium Authority Budget.

DEBT ISSUANCE
I. Method of Sale
The three most commonly used methods of issuing debt obligations are competitive sale, negotiated sale, and private placement.

A. Competitive Sale
In a competitive sale, the issuer solicits bids from investment banks for award of the debt obligations. On a designated pricing date, investment banks submit bids through an electronically secure internet bidding platform and the investment bank whose bid represents the lowest True Interest Cost (TIC), and otherwise complies with the issuer’s bid parameters, is awarded the debt obligations and serves as underwriter. The underwriter’s compensation is included as a component of the bid. 3 B. Negotiated Sale
In a negotiated sale, the issuer selects an investment bank (or syndicate of investment banks) to serve as underwriter of the debt obligations. On a designated pricing date, the underwriter establishes the interest rates and other terms of the obligations, based on market conditions, subject to approval by the Director of Finance or other designated City official. If a negotiated sale is used, the underwriter or underwriter syndicate will be selected by the Director of Finance.

C. Private Placement
A private placement is the sale of an issue of debt to one or a limited number of investors, such as a commercial bank, insurance company, mutual fund, or other financial institution, without a public offering. Private placements may be entered into in special circumstances where bonds may be difficult to market but may be attractive to a specific individual investor, in markets where a private placement would result in lower borrowing costs than other methods of sale, to avoid the costs of a public offering and therefore reduce borrowing costs, or to secure financing quickly. All private placements shall be approved by the Director of Finance and the rationale for entering into a private placement shall be documented in writing.

If the Director of Finance determines that it is in the best interest of the City to pursue a private placement, the Director of Finance, or designee, will solicit proposals from potential lenders. The bidder whose bid represents the lowest True Interest Cost (TIC) for the debt, and otherwise provides the most beneficial terms to the City, will be selected as purchaser of the debt. The Director of Finance may engage a municipal advisor and other consultants to assist with a private placement sale.

II. Issuer Characteristics
The following issuer characteristics shall be considered to determine whether a competitive sale, negotiated sale, or private placement will be used.

A. Market Familiarity. A frequent issuer of a well-recognized type of debt such as general obligation bonds or revenue bonds can generally sell these bonds through a competitive sale since investors and underwriters are familiar with the quality of the credit. A negotiated sale may be appropriate if extensive pre-marketing to investors is desired or required.

B. Credit Strength. The higher the credit quality of the debt being issued, the more likely the debt can be sold using a competitive sale due to the high demand for high quality municipal debt. High quality credits fare well in competitive sales.

C. Policy Goals. A competitive sale does not provide the City with the flexibility of choosing the underwriter or underwriter syndicate. If the Director of Finance concludes that determining the composition of the underwriter syndicate to achieve certain policy objectives is important, or that current market conditions are such that a competitive sale is not advisable, then a negotiated sale will be used. If the Director of Finance selects a negotiated sale solely for policy reasons, the specific rationale and criteria for selection should be clearly specified.

III. Financing Characteristics
The following financing characteristics shall be considered to determine whether a competitive sale, negotiated sale, or private placement will be used. 4 A. Type of Debt Instrument. The market favors familiar debt instruments (such as general obligation bonds or utility enterprise revenue bonds) backed by strong revenue streams.

New credit types may require an education process that is more conducive to a negotiated sale or private placement until the market becomes comfortable with the credit.

B. Issue Size. The size of the borrowing amount will influence both investor interest and the market’s ability to absorb the debt. In general, if the debt sale is very small or very large a negotiated sale may be the most financially prudent method of sale. Large borrowing amounts may be difficult for the market to absorb without the presale activity available through a negotiated sale. Small borrowing amounts may require greater marketing through a negotiated sale to garner investor interest, or may be appropriate for a private placement due to efficiencies in timing and lower issuance costs.

C. Market Conditions and Timing. During periods of stable interest rates, market timing is not as critical. However, during periods of volatile interest rates, the timing of the sale becomes more critical. Debt refinancings are dependent on favorable interest rates in order to produce the desired level of debt service savings. A negotiated sale or private placement provides more flexibility in terms of the structure and timing, and may be more appropriate when refinancing debt or when interest rates are volatile.

D. Term of Debt. Debt issuances with a shorter term (generally less than 15 years) may be more appropriate for a negotiated sale or private placement than a competitive sale due to a smaller pool of potential investors.

E. Story Bonds. Debt issuances that require a detailed explanation due to the complexity of the credit, or limited sources of repayment (such as land-secured financings), are often referred to as “Story Bonds.” Due to their complexity and the additional explanation these types of debt require, an extensive pre-marketing campaign may be necessary. Story Bonds often require a negotiated sale to an underwriter or an underwriting syndicate that is qualified to market the debt, or to a single financial institution in a private placement to obtain the lowest cost financing.

IV. Initial Disclosure Requirements
Each publicly offered debt issuance shall meet the disclosure requirements of the Securities and Exchange Commission and other government agencies before and following the sale. The Finance Department, together with the City Attorney’s Office and Disclosure Counsel, shall coordinate the preparation of all necessary documents for disclosure, with input from various other City departments and outside consultants, as needed.

Disclosure Documents shall provide complete and accurate information at the time they are prepared and distributed to allow potential investors to make informed investment decisions.

The Finance Department shall prepare and periodically review and update, as necessary, Disclosure Controls and Procedures. The Disclosure Controls and Procedures are intended to (i) ensure the accuracy of the City’s disclosures and the City’s compliance with all applicable federal and state securities laws, and (ii) promote best practices regarding disclosures relating to debt issued by the City.

5 FINANCIAL SERVICE PROVIDERS
I. Selection
For negotiated sales, an underwriter or underwriter syndicate will be selected by the Director of Finance. The allocation of bonds among syndicate members will be at the sole discretion of the Director of Finance. For competitive sales, any security dealer meeting the qualification criteria outlined in the competitive bid notice may bid on the debt.

In connection with debt financings, municipal advisors, bond counsel, disclosure counsel, placement agents, trustees, and all other service providers shall be procured and/or selected by the Director of Finance in accordance with the City’s Municipal Code and City procurement standards. Contracts shall conform to the City Attorney approved contract standards and language and shall be administered by the Director of Finance, or his/her designee.

II. Conflict of Interest
The City shall hire municipal advisors who do not have a conflict of interest. If the best available municipal advisor is an investment banking firm, the firm will under no circumstances be permitted to participate as the lead underwriter or as a member of an underwriter syndicate that is bidding on the bonds for which the firm is acting as a municipal advisor. In addition, if the firm has any profit sharing or other type of agreement with any member of the underwriting syndicate for the transaction in question, they will not be allowed to act as the municipal advisor. In general, no agreement will be permitted that would compromise the firm’s ability to provide independent advice or that could be reasonably perceived by the City as a conflict of interest.

Municipal advisors must alert the Director of Finance in writing, of any conflict, potential conflict, or potentially perceived conflict prior to entering into an agreement with the City, or if occurring after entering into an agreement with the City, as soon as the conflict, potential conflict, or potentially perceived conflict arises.

Pursuant to Rule G-37 of the Municipal Securities Rulemaking Board (MSRB), a firm may be banned from providing underwriting services to the City for two years for making any political contribution to an elected City official.

III. Communication
All financial consultants, including all investment banking firms, municipal advisors, bond counsel, disclosure counsel, and other consultants hired in connection with any debt issuance will direct all communications, solicitations and questions to the Director of Finance or his/her designee.

RELATIONSHIP OF DEBT TO CAPITAL PROGRAM
The five-year capital improvement program (CIP) of the City is approved by the City Council. The CIP shall provide the basis for determining long-term capital needs of the City and may be supplemented with longer term capital plans or master plans when appropriate. As necessary, the Finance Department shall work with the various City departments to develop financial forecasts related to the CIP to identify the optimal method to finance the program, including pay-as-you-go 6 and/or the issuance of debt obligations. The Finance Department will work with other City departments, as applicable, in reviewing funding sources and financial forecasts to ensure their adequacy in complying with existing bond covenants, debt limits and any potential impact on existing bond ratings prior to the issuance of any new debt.

TAX STATUS
Prior to the issuance of any debt, the Finance Department, in conjunction with bond counsel and the City Attorney’s Office, will evaluate the tax status of the proposed debt.

I. Tax-Exempt
Interest on the City’s tax-exempt debt is excluded from the gross income of its owners for federal income tax purposes and from California income taxes and, as a result, tax-exempt debt can be sold at a lower True Interest Cost than taxable debt. The Finance Department, along with bond counsel, shall evaluate all projects contemplated to be debt-financed to assess their eligibility to be funded by tax-exempt debt. The City will make every effort to ensure compliance with all tax regulations to ensure the debt maintains its tax-exempt status.

II. Taxable
Certain debt issuances may be sold on a federally taxable basis because it is issued for purposes that the federal government deems do not provide a significant benefit to the public at large or involve “private activity”. In addition, certain tax laws such as the alternative minimum tax (AMT) reduced the tax exemption applicable to certain types of bonds and to certain taxpayers. Taxable bonds may be used whenever a particular project has the potential for private activity or other uses that are not eligible for tax-exempt treatment.

TYPE OF DEBT
I. Long-Term Debt
Long-term debt may be used to finance the construction, acquisition, and rehabilitation of public capital facilities; acquiring and improving land; and acquiring certain equipment where it is appropriate to spread the costs over more than one budget year. Long-term debt should not be issued for longer than the useful life of the capital facilities or equipment being financed. With the issuance of long-term debt, the City recognizes that future taxpayers who will benefit from the project should pay a share of its cost. Long-term debt will not be considered for current operating expenses and routine maintenance expenses.

A. General Obligation (G.O.) Bonds
G.O. bonds are issued to fund the acquisition and improvement of real property and are usually issued at lower interest rates than other financing instruments due to their lower repayment risk. G.O. bonds are payable solely from ad valorem property taxes levied within the City and require two-thirds voter approval to be issued.

B. Revenue Bonds
Revenue bonds are supported solely by fees generated from specific Enterprise Funds.

Accordingly, the City will issue revenue bonds when an identifiable revenue stream can be dedicated to support the payment of debt service. The final maturity of revenue bonds will be determined by the expected life of the project to be financed and the revenues available to repay the debt. Revenue bonds require majority voter approval in order to 7 be issued by the City, except for revenue bonds issued to finance the generation, production transmission and distribution of electric energy, including the acquisition and/or construction of land and facilities therefore, which may be authorized by City Council.

C. Certificates of Participation
Certificates of Participation (COPs) are a debt instrument evidencing a pro-rata share in a specific pledged revenue source, usually lease payments, made by the City under an installment sale or lease/leaseback structure between the City and another public entity, such as a non-profit financing corporation. Operating revenues are pledged to pay lease payments, which are then used to pay debt service on the COPs. The lease and lease payments are typically assigned to a trustee, which distributes the lease payments to investors.

In the case of a lease/leaseback structure, the City Council is required to annually budget and appropriate lease payments each year. Payments to be made under valid leases are payable only in the year in which use and occupancy of the leased property is available, and lease payments may not be accelerated. Lease financings require a finding that the fair market rental value of the leased property is equal to or greater than the required lease payments.

D. State Revolving Fund Loans
The State of California administers various State Revolving Fund (SRF) programs to assist cities and other agencies with financing large capital projects. The programs function like an infrastructure bank by distributing low-interest rate loans for projects.

Compared to traditional bond financing, the City may realize substantial savings as a result of the low interest rate of SRF loans.

The City’s Finance Department, in conjunction with the benefiting department, shall request City Council approval to apply for SRF loans to finance capital projects when prudent to do so. The City may also apply for SRF loans with other cities or agencies to fund joint projects such as improvements to the San Jose/Santa Clara Regional Wastewater Facility.

Other State and Federal agencies such as the California Infrastructure and Economic Development Bank (I-Bank) and the United States Department of Transportation also provide low-cost loan programs to public agencies for a wide variety of public infrastructure projects including transportation, energy, and economic development projects. The Finance Department and benefiting departments within the City will evaluate such programs on a case-by-case basis.

E. Special Assessment Bonds
Special assessment bonds are used to fund public capital improvements that benefit a discrete group of properties within a designated assessment district. Principal and interest owed on the bonds is paid from assessments on the property within the assessment district benefiting from the particular bond-funded project. The creation of a special assessment district is subject to approval of the property owners within the district and must follow a detailed legal process, including City Council approval.

The City is required to provide ongoing administrative support for special assessment districts, including annual assessment levies and disclosure filings, and to pursue foreclosure of parcels with assessment delinquencies. Although certain aspects of this ongoing support may be outsourced to consultants, consideration will be given to the 8 additional work placed on the City’s limited resources before approving any assessment district formation or assessment bond issuance.

The City will consider requests for assessment district formation and debt issuance when such requests address a public need or provide a public benefit. Each application will be considered on a case-by-case basis, and the Director of Finance may not recommend a financing if it is determined that the financing is not in the best interests of the City.

F. Community Facilities District Bonds
Community Facilities District (CFD) bonds are used to fund public capital improvements (and certain permitted privately owned improvements) that benefit a discrete group of properties within a designated special district. Debt service on the bonds is paid solely from special taxes levied on the property within the special district. Special taxes are levied and collected on the County secured property tax rolls. The creation of a CFD is subject to the approval of property owners to be included within the proposed district and must follow a detailed legal process, including City Council approval.

The creation of a CFD and issuance of special district bonds are typically requested by a property developer seeking a public financing mechanism to fund public infrastructure required by the City as a condition of approval for a development project. Subject to voter approval, once a district is formed special district bonds may be issued and special taxes levied upon properties within the district to pay debt service on the bonds. In addition, special taxes may be used to directly pay for the cost of capital improvements and to pay for certain municipal services such as police and fire protection and maintenance of public parks.

The City is required to provide ongoing administrative support for CFDs, including annual special tax levies and disclosure filings, and to pursue foreclosure of parcels with special tax delinquencies. Although certain aspects of this ongoing support may be outsourced to consultants, consideration will be given to the additional work placed on the City’s limited resources before approving any CFD formation or special tax bond issuance.

The formation of any CFD and the issuance of bonds secured by special taxes levied by a CFD shall be in accordance with the City’s “Local Goals and Policies for Community Facilities Districts” adopted by City Council Resolution 10-7706 on March 30, 2010 (see Appendix C).

The City will consider requests for CFD formation and debt issuance when such requests address a public need or provide a public benefit. Each application will be considered on a case-by-case basis, and the Director of Finance may not recommend a financing if it is determined that the financing is not in the best interests of the City.

II. Short-Term Debt
Short-term debt may be utilized as a temporary source of funding for capital projects with uncertain cash flow requirements and timing. It is anticipated that short-term debt will be retired with the issuance of long-term debt. The City will determine and utilize the least costly method for short-term borrowing.

A. Commercial Paper (CP)
Commercial Paper may be issued for a term of up to 270 days as an alternative to longterm fixed rate debt, particularly when the timing of funding requirements is uncertain.

Source of repayment usually includes revenue generated by the City’s various enterprises, such as Electric, Water, and Sewer. Upon maturity, the CP may be reissued for additional 9 periods of up to 270 days. The City may maintain an ongoing commercial paper program to ensure flexibility and immediate access to capital funding when needed. The retirement of CP is most commonly a result of the issuance of long-term bonds, but CP may also be retired with available cash.

B. Line of Credit (LOC)
An LOC shall be considered when more cost effective than other short-term debt options.

Source of repayment usually includes revenue generated by the City’s various enterprises, such as Electric, Water, and Sewer. An LOC shall be structured in conformity with Internal Revenue Code requirements.

C. Grant Anticipation Notes (“GANs”)
GANs are short-term notes that are repaid with proceeds of State or federal grants of any type. The City shall generally issue GANs only when there is no other viable source of funding for the project.

D. Bond Anticipation Notes (“BANs”)
BANs are short-term notes issued prior to the issuance of long-term debt. BANs may be used when an issuer wants to delay a long-term debt issuance, or if an issuer wants to combine several projects into one larger issue. BANs are usually retired, or refunded, with long-term debt. BANs will be issued only when there is no better alternative to reduce the overall cost of a financing program.

E. Tax and Revenue Anticipation Notes (“TANs” and “RANs”) TANs and RANs may be issued to solve a mismatch between tax or other revenue receipts and ongoing expenditures. TANs and RANs may be used to raise funds for capital projects and will be repaid with future tax or revenue collections. The sizing of the issue shall fully conform to Internal Revenue Code requirements and limitations.

F. Other
Other short-term debt such as a Direct Purchase Loan from a bank or Floating Rate Notes may be considered and utilized when appropriate with the written approval of the Director of Finance.

III. Alternative Debt Instruments – Derivative Products The City will consider the use of derivative products on a case-by-case basis consistent with state statutes and this Policy. The use of certain derivative products, such as swaps and swaptions, allow the City to realize lower all-in costs on a new debt issuance or to receive an upfront payment. One type of swap that may be used allows the City to issue variable rate debt in exchange for fixed payments that are typically lower than fixed rate debt. However, derivative products have unique risks that the City and its municipal advisor must evaluate per the City’s Swap Guidelines. The Swap Guidelines are included in Appendix A – Interest Rate Swap Agreement Guidelines.

DEBT CAPACITY
In accordance with the City Charter Section 1309, the bonded indebtedness of the City may not in the aggregate exceed the sum of 15% of the total assessed valuation of property within the City, exclusive of revenue bonds or any indebtedness that has been or may be incurred for the purposes of acquiring, constructing, extending, or maintaining municipally owned utilities, for which purposes 10 a further indebtedness may be incurred by the issuance of bonds, subject only to the provisions of the State Constitution and the City Charter.

Within the limitations of City Charter Section 1309, determining the amount of indebtedness the City can afford begins by assessing the sufficiency of future revenues. The amount of debt issued is based on the requirements of the approved 5-year Capital Improvement Program, subject to the condition that sufficient revenues are projected to be available to pay debt service. Factors such as debt service coverage requirements for outstanding debt, the impact on the citizens based on necessary increases in property tax rates or utility user rates, and any impact on the bond ratings will be carefully considered. Different factors are considered for each type of credit. For example, electric, water or sewer bonds will take into consideration the impact on customer utility rates. Other factors such as providing debt capacity for future programs and existing and forecasted fund balances, including reserves, will also be taken into consideration.

DEBT SERVICE RESERVE FUND
A debt service reserve fund for each debt issuance may be held by a bond trustee to make principal and interest payments to bondholders in the event that pledged revenues are insufficient to make the payments on a particular bond issuance. Investments held within a debt service reserve fund shall conform to the applicable bond indenture and the City’s Investment Policy.

Under federal tax law, the maximum size of a debt service reserve fund for tax-exempt debt is generally calculated as the least of (1) 10% of the original principal amount of the debt, (2) 125% of average annual debt service, or (3) maximum annual debt service.

The City shall have the option to issue debt with a debt service reserve fund that is less than the maximum allowable amount, or to issue debt without a reserve fund.

The Director of Finance shall have the authority to determine whether to establish a debt service reserve fund, the size of any debt service reserve fund, and the investments to be purchased within the reserve fund. Factors to consider include the cost of a debt service reserve fund over the life of the bonds compared to expected interest earnings, and bond pricing and credit rating impacts.

A debt service reserve may be funded with a reserve insurance policy or surety policy when economically feasible, as determined by the Director of Finance.

PURPOSE OF FINANCING
Generally, debt may be issued to fund new capital projects (“new money financing”) or to refund existing debt.

I. New Money Financing
New money issues are financings that generate funding for capital projects. These funds will be used for land acquisitions, capital construction, equipment, and other items deemed necessary by the City. New money bond proceeds are not used to fund operational activities.

II. Refinancing
A periodic review of the City’s outstanding debt will be performed by the Finance Department, or other delegated department, to identify potential refunding opportunities.

Refunding debt is issued to retire all or a portion of an outstanding debt issue, typically to refinance at a lower interest rate and reduce debt service costs. Alternatively, a refunding transaction may be undertaken for reasons other than to achieve cost savings, such as to 11 restructure debt service payments, to change the type of debt instruments being used, or to eliminate undesirable covenants.

For each refinancing, the Finance Department will prepare, or have a consultant prepare, a present value savings analysis that identifies the financial effects of a proposed refinancing.

The debt service savings shall generally be at least 3% of the refunded par amount, net of all transaction expenses. This 3% savings target may be waived by the Director of Finance if he/she determines that the refunding is in the City's best overall financial interest and shall not be applicable for refunding transactions that are not solely undertaken to achieve cost savings.

CREDIT RATINGS
The City seeks to obtain and maintain the highest possible credit ratings for its short- and longterm debt. The City will not issue bonds with a rating below investment grade.

I. Rating Agency Relationships
The Finance Department shall be responsible for maintaining relationships with rating agencies that assign ratings to the City's various debt obligations. This responsibility shall include coordinating meetings and presentations in conjunction with the issuance of debt.

Full disclosure of operations and open lines of communication shall be maintained with the rating agencies used by the City.

II. Use of Rating Agencies
The City shall obtain a rating from at least one nationally recognized rating agency on all new debt issues being sold in the public market, except as described below.

A. The Director of Finance shall determine if any additional ratings will be requested on a particular financing. The Director of Finance shall determine which major rating agencies will be asked to provide a rating. Exceptions to this requirement, such as when using a private placement or for Special District or Special Assessment Bonds, are permissible, if warranted by the circumstances and approved by the Director of Finance. See Appendix C – Local Goals and Policies for Community Facilities Districts, Section III.

B. The City shall contact rating agencies when the City anticipates issuing debt. The appropriate financing and disclosure documents shall be sent several weeks prior to the debt sale to the selected rating agencies in order to provide the rating agencies sufficient time to perform their review. A personal meeting with the selected rating agencies may be scheduled if, in the opinion of the Director of Finance, such a meeting is in the best interest of the City in order to obtain the highest possible credit rating.

C. The City shall make every reasonable effort to maintain or improve its credit ratings.

D. The City shall request an underlying rating and an insured rating on all debt issues utilizing bond insurance or other credit enhancement instrument.

E. The City shall notify all rating agencies utilized by the City of the disclosure of certain enumerated events relating to its outstanding debt made by the City to the Electronic Municipal Market Access (EMMA®) system pursuant to a continuing disclosure agreement or undertaking meeting the requirements of SEC Rule 15c2-12.

F. All communications, both oral and written, in response to requests for information from the rating agencies shall be made in a timely manner.
12 G. The City shall submit its audited Annual Comprehensive Annual Financial Report (ACFR) to all rating agencies then maintaining a rating on the City’s outstanding debt.

CREDIT ENHANCEMENT
Credit enhancement through the use of bond insurance or a bank facility such as a letter of credit to strengthen the underlying credit rating of certain debt may be financially beneficial. For example, bonds insured by insurers rated AAA will also receive the AAA rating and thus be able to be sold at a lower interest rate. Bank facilities, such as letters of credit from highly rated banks, can also be used to provide credit enhancement.

I. Bond Insurance
Bond insurance will be considered when it provides an economic benefit to a particular debt issue. Bond insurance provides improved credit quality for the debt as a result of the insurance provider’s guarantee of the payment of principal and interest on the debt. Because of the decreased risk of non-payment, investors are willing to purchase insured debt at lower yields than uninsured debt, thus providing the issuer with interest cost savings.

A. Benefit Analysis. The decision to use bond insurance is a financial decision. The Finance Department, in conjunction with the City’s municipal advisor or other qualified consultant, shall prepare a benefit analysis that compares the present value of the interest savings to the cost of the insurance. Insurance may be purchased when the premium cost is less than the present value of the projected interest savings. A copy of the benefit analysis shall be maintained in the files of the Finance Department.

B. Provider Selection. The Finance Department will undertake a competitive selection process when soliciting pricing for bond insurance, or in the case of a competitive sale, facilitating the prequalification of bonds by insurance providers, and may engage a municipal advisor to assist with the provider selection process. The City recognizes that all providers may not be interested in providing bids to the City or pre-qualifying the issue.

The winning security dealer in a competitive sale will determine whether it will purchase insurance for the issue. For a negotiated sale, the Director of Finance shall have the authority to purchase bond insurance when the benefit analysis prepared under paragraph (A) above demonstrates positive interest savings, and the terms and conditions governing the guarantee are satisfactory.

II. Bank Facilities (Letters of Credit)
When used for credit enhancement, letters of credit (LOC) represent a bank’s promise to pay principal and interest when due for a defined period of time, subject to certain conditions. In the case of a direct-pay LOC, the trustee draws upon the LOC to make debt service payments and the City reimburses the LOC provider the amount drawn on the LOC by the trustee. A stand-by LOC is used to ensure the availability of funds to pay principal and interest of an obligation only if the funds in the debt service account held by the trustee are insufficient to make the debt service payment on the bonds.

STRUCTURAL FEATURES OF DEBT ISSUANCE
I. Maturity
The final maturity of a debt issuance shall be equal to or less than the remaining useful life of the assets or capital improvements being financed.
13 II. Debt Service Structure
The City will carefully consider the debt service structure for each debt issue. Factors such as the flow of revenues available for a particular credit or the desire to structure savings from a refunding in a particular year shall be considered. Accelerated repayment may be considered within the bonding capacity constraints to provide capacity for future financings.

A debt structure that is back loaded may be considered when such structuring is beneficial to the City’s aggregate debt schedule or when such amortization more closely matches anticipated program cash flows.

III. Fixed Rate Debt
Fixed rate debt provides the benefit of fixed interest rates and debt service payments over the life of the debt and provides certainty for long-term capital budgeting and planning.

IV. Variable Rate Debt
The municipal bond market has developed several vehicles by which municipalities can borrow at short-term, variable interest rates. For example, Variable Rate Demand Notes may be issued with interest rates that “reset” daily, weekly, monthly or semiannually at the option of the issuer. Commercial paper is issued with a maturity of up to 270 days at the issuer’s option. As the commercial paper matures, it is resold at prevailing interest rates by a commercial paper dealer for another period up to 270 days.

These products are structured as a rolling series of short-term investments and therefore are priced at the short-end of the yield curve at lower interest rates than long-term fixed rate bonds (assuming a normal interest rate environment/upward sloping yield curve). Even with the risks inherent in variable interest rates, it may be prudent for the City to issue variable rate debt to take advantage of the lower interest rates. A bank liquidity facility may be required or desirable in connection with variable rate debt, as determined by the Director of Finance.

Factors to be considered in the use of variable rate debt are the availability and size of fund balances to cover variable rate risk and the budget flexibility of the program being financed.

Programs with large complex capital programs may use short-term variable rate financing to fund uncertain construction cash flow requirements. The short-term variable rate debt can be refinanced as long term, fixed-rate debt once the projects are complete. A project that must be carried in anticipation of grant funding may also be a candidate for the use of variable rate financing.

V. Debt Service Coverage
The City will determine the appropriate minimum debt service coverage levels based upon the nature of the pledged revenues, rating considerations, existing contractual requirements, and other relevant factors.

VI. Capitalized Interest
Subject to IRS regulations, interest on new money tax-exempt debt may be capitalized during the construction period of a project, but in any case, no longer than three years. Interest may not be capitalized on refunding bond issues. Interest may also be capitalized on projects for which the revenue designated to pay debt service on the bonds will be collected at a future date. Use of capitalized interest shall be reviewed by bond counsel.

14 VII. Call Options/Redemption Provisions
A call option, or optional redemption provision, provides the City the right to prepay debt prior to its stated maturity. Under certain market conditions, a call option allows the City to achieve future interest savings by refunding outstanding debt at lower interest rates. The City may also call outstanding bonds to alleviate undesirable bond covenants or to restructure debt service.

The Director of Finance, or his/her designee, shall determine appropriate prepayment or redemption terms on each issuance of debt, respectively, based on the City’s planning and policy goals for the debt, prevailing market conditions for publicly offered debt, and lender requirements for privately placed debt.

INVESTMENT OF BOND PROCEEDS
The City shall comply with all applicable Federal, State, and indenture restrictions, if any, regarding the use and investment of bond proceeds. This includes compliance with any restrictions on the types of investment securities allowed, restrictions on the allowable yield of invested funds as well as restrictions on the time period over which some bond proceeds may be invested. The Director of Finance, or his/her designee, will direct the investment of bond proceeds in accordance with the permitted investments for each particular bond issue. Investments such as guaranteed investment contracts may be considered when their use is in the best interest of the City and will be selected on a competitive basis.

CONTINUING DISCLOSURE
The City will comply with Rule 15(c)2-12 of the Securities and Exchange Commission for all publicly offered debt. The Finance Department shall be responsible for filing annual financial information and notices of certain events with the Municipal Securities Rulemaking Board’s Electronic Municipal Market Access System (EMMA®) in a timely manner. The City may engage consultants to assist in the preparation and filing of continuing disclosure reports.

The City shall follow the procedures and guidelines set forth in the Code regarding the expenditure of proceeds, the investment of proceeds and applicable arbitrage rebate requirements (the “Arbitrage Regulations”). The Finance Department shall actively monitor the investment and disbursement of tax-exempt bond proceeds for compliance with the Arbitrage Regulations.

The Finance Department shall establish a system of record keeping and reporting to meet the arbitrage rebate compliance requirements of the federal tax code. This effort shall include tracking project expenditures financed with bond proceeds, tracking investment earnings on bond proceeds, calculating rebate payments in compliance with tax law, and remitting any rebatable earnings to the federal government in a timely manner in order to preserve the tax-exempt status of the City's outstanding tax-exempt debt issues. The City may enter into agreements with arbitrage service providers to assist the City with complying with arbitrage regulations. 15 To facilitate the accurate and timely drawdown of tax-exempt bond proceeds spent on project expenditures and adhere to the arbitrage rebate requirements of the federal tax code, the Finance Department has established Citywide Tax-Exempt Bond Proceeds Drawdown Procedures (the “Drawdown Procedures”). The Drawdown Procedures provide guidance to City staff following the issuance of debt for the financing of City capital projects and are intended to (i) ensure the City’s compliance with applicable federal and state laws, and (ii) maximize the interest earnings on taxexempt bond proceeds the City is legally allowed to earn and retain. The Finance Department shall review the Drawdown Procedures at least annually and update as necessary.

POST ISSUANCE COMPLIANCE
The City shall comply with all applicable laws and regulations to ensure the tax-exempt status of its debt and shall follow the procedures contained in Appendix B – Post Issuance Compliance Guidelines for Tax-Exempt Bonds.

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APPENDIX A

INTEREST RATE SWAP AGREEMENT GUIDELINES
(the “Swap Guidelines”)
These Swap Guidelines are promulgated by the City of Santa Clara (the “City”) to govern the use of Interest Rate Swap Agreements. Interest Rate Swap Agreements shall be used judiciously and must be approved by the Director of Finance and City Manager, as detailed herein. “Interest Rate Swap Agreement” shall mean a written contract, entered into in connection with the issuance of debt by the City, in connection with City debt already outstanding or as a hedge for future anticipated debt, with a counterparty to provide for an exchange of payments based upon fixed and/or variable interest rates. “Swaps” shall be inclusive of Swaptions which are options on Swaps.

Conditions Under Which Interest Rate Swap Agreements May Be Entered Purposes
Interest Rate Swap Agreements may be used for the following purposes only:

1. To achieve additional savings as compared to other, non-derivative type products available in the bond market,

2. To prudently hedge risk in the context of a particular financing or the overall asset/liability management of the City,

3. To incur variable rate exposure within prudent guidelines,

4. To achieve more flexibility in meeting overall financial objectives than available in conventional markets,

5. To accomplish a financial objective not otherwise obtainable using traditional financing methods (e.g., synthetic advance refundings of private activity bonds).

Legality
The City must receive an opinion acceptable to the market from a reputable law firm that the Interest Rate Swap Agreement is a legal, valid and binding obligation of the City and the transaction is not prohibited by any applicable law.

Speculation
Interest Rate Swap Agreements shall not be used for speculative purposes. Associated risks will be risks that the City has determined are prudent in the context of the transaction in which an Interest Rate Swap Agreement is considered and appropriate for the City to take.

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Methods By Which Such Contracts Shall Be Solicited And Procured Generally, the City shall procure Interest Rate Swap Agreements by competitive bidding, with at least three firms solicited. The City will determine which parties it will allow to participate in a competitive transaction taking into consideration, among other factors, the credit ratings of the swap counterparties. The City may also procure Interest Rate Swap Agreements by negotiated methods if it makes a determination that, due to the size or complexity of a particular swap, a negotiated transaction would result in the most favorable pricing and terms or that doing so will promote its interests by encouraging and rewarding innovation, or a negotiated transaction is otherwise determined to be in the interests of the City and the use of the negotiated Interest Rate Swap Agreement is approved by the City Council. The City has the right to accept matching of bids in order to decrease counterparty risk. The City may obtain an independent opinion from a Swap Advisor that the terms and conditions of the Interest Rate Swap Agreement reflect a fair market value of such agreement as of the date of its execution.

Form and Content of Interest Rate Swap Agreements
To the extent possible, the Interest Rate Swap Agreements entered into by the City shall contain the terms and conditions set forth in the International Swap and Derivatives Association. Inc. ("ISDA") Master Agreement, including the schedule, credit support annex and confirmation. The schedule should be modified to reflect specific legal requirements and business terms desired by the City.

The City shall consider including provisions that permit the City to assign its rights and obligations under the Interest Rate Swap Agreement and to optionally terminate the agreement at its market value at any time. In general, the counterparty shall not have the right to optionally terminate an agreement.

The Agreement shall include the following events of default of a counterparty:

1. Failure to make payments when due,

2. Material breach of representations and warranties,

3. Illegality,

4. Failure to comply with applicable downgrade provisions, and

5. Failure to comply with any other provisions of the agreement after a specified notice period.

The City shall have the right to terminate the agreement upon an event of default by the counterparty. Upon such termination, the counterparty will be the “defaulting party” or the "affected party" for purposes of calculating the termination payment owed.

Aspects of Risk Exposure Associated with Such Contracts Before entering into an Interest Rate Swap Agreement, the City shall evaluate all risks inherent in the transaction. The risks to be evaluated may include: counterparty risk, termination risk, rollover risk, basis risk, tax event risk, credit risk and amortization risk. The City shall endeavor to diversify its exposure to counterparties. To that end, before entering into a transaction, the City should determine its exposure to the relevant counterparty or counterparties and determine how the proposed transaction would affect the exposure. The exposure should not be measured solely in terms of notional amount, but rather how changes in interest rates would affect the City's exposure "Value at Risk". The Value at Risk should be based on all outstanding derivative transactions of the City. Evaluation of risks will also include the following considerations:

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1. Uncertainty with respect to the City's future debt obligations;

2. Effect on the City's credit quality;

3. Cumulative exposure to all risk factors identified;

4. Termination provisions of the swaps.

Counterparty Selection Criteria
The City may enter into an Interest Rate Swap Agreement if the counterparty or its guarantor has credit ratings of at least Aa3 from Moody’s Investors Service and AA- from Standard & Poor’s, and the counterparty has demonstrated experience in successfully executing Interest Rate Swap Agreements. If after entering into an agreement, the counterparty does not maintain the minimum ratings of Aa3/AA-, or as otherwise specified in the swap documents, then the agreement shall be subject to termination unless (a) the counterparty provides either a substitute guarantor or assigns the agreement, in either case, to a party meeting the rating criteria acceptable to the City, or (b) the counterparty (or guarantor) collateralizes the Interest Rate Swap Agreement in accordance with the criteria set forth in this Policy and the Interest Rate Swap Agreement. In addition, if after entering into an agreement, a rating of the counterparty is downgraded below Baa1/BBB+ or as otherwise specified in the swap documents, then the agreement shall be subject to termination unless the counterparty provides either a substitute guarantor or assigns the agreement, in either case, to a party meeting the rating criteria acceptable to the City.

Provisions for Collateralization
Should the rating of the counterparty, or if secured, the entity unconditionally guaranteeing its payment obligations, not satisfy the requirements of having at least two ratings of at least Aa3/AA-, then the obligations of the counterparty shall be fully and continuously collateralized by (1) direct obligations of the United States of America, (2) obligations of which the principal and interest are guaranteed by the United States of America, or (3) direct obligations of US Agencies and such collateral shall be deposited with the City or an agent thereof. Collateral requirements shall be subject to reasonable threshold and minimum transfer amounts. The specific collateralization requirements for each interest rate swap transaction shall be set forth in the corresponding swap documentation.

Long- Term Implications
In evaluating a particular transaction involving the use of Interest Rate Swap Agreements, the City shall review long-term implications associated with entering into Interest Rate Swap Agreements, including: cost of borrowing, historical interest rate trends, variable rate capacity, credit enhancement capacity, opportunities to refund related debt obligations, and other similar considerations. The required minimum present value savings to the City of a swap transaction issued to refund outstanding debt shall be at least twice the minimum required for a fixed rate refunding to compensate for the inherent risks associated with the use of interest rate swaps, unless it is determined by the Director of Finance that it is in the best financial interest of the City to accept present value savings of less than twice the requirement for a fixed rate refunding. Such determination shall be documented in writing.

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Methods to Be Used to Reflect Such Contracts in the City's Financial Statements The City shall reflect the use of Interest Rate Swap Agreements on its financial statements in accordance with generally accepted accounting principles, including the Governmental Accounting Standards Board pronouncements and guidance. Further, the City will provide appropriate swap disclosures to credit rating agencies, to investors in connection with bond offerings, and the municipal secondary market. Appropriate disclosure includes information about legal authority, risks, guidelines, and market value.

Monitoring
The City may use an independent Swap Advisor to assist internal professional staff in monitoring its existing or proposed swaps if it is in the best interests of the City to do so.

The City shall monitor its use of Interest Rate Swap Agreements on at least a semiannual basis as follows:

1. Preparing a description of each contract, including a summary of its terms and conditions, the notional amount, rates, maturity, and other provisions thereof;

2. Determining any amounts which were required to be paid and received, and that the amounts were paid and received;

3. Assessing the counterparty risk, termination risk, and other risks associated therewith, which shall include the aggregate mark to market value for each counterparty and relative exposure compared to other counterparties and a calculation of the City’s Value at Risk for each counterparty;

4. Determining that each counterparty is in compliance with its rating requirements;

5. Determining that each counterparty is in compliance with the downgrade provisions, if applicable (See Counterparty Selection Criteria): and Determining that all posted collateral, if required, has a net market value of at least the collateral requirements specified in the Interest Rate Swap Agreement.

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APPENDIX B

POST ISSUANCE COMPLIANCE GUIDELINES FOR TAX-EXEMPT BONDS The City has issued and may in the future issue obligations (including, without limitation, bonds, notes, loans, leases and certificates) that are subject to certain requirements under the Internal Revenue Code of 1986, as amended (the “IRS Code”) and applicable requirements of California Government Code Section 8855 (the “California Code”).

The City has established the guidelines contained herein (the “Guidelines”) in order to ensure that the City complies with the requirements of the IRS Code and California Code that are applicable to its bonds. These Guidelines, along with requirements contained in the tax certificate (the “Tax Certificate”) and other documents executed at the time of issuance of debt, as well as the City’s internal arbitrage procedures, are intended to constitute written Guidelines for ongoing compliance with Federal tax requirements and the California Code, as applicable, and for timely identification and remediation of violations, if any, of such requirements.

A. GENERAL MATTERS.

1. Responsible Officer. The Director of Finance shall have overall responsibility for ensuring that the ongoing requirements described in these Guidelines are met with respect to bonds (the “Responsible Officer”).

2. Establishment of Guidelines. The Guidelines are included as a part of the City’s Debt Management Policy.

3. Identify Additional Responsible Employees. The Responsible Officer shall identify any additional persons who will be responsible for each section of the Guidelines, notify the current holder of that office of the responsibilities, and provide that person a copy of the Guidelines (For each section of the Guidelines, this may be the Responsible Officer or another person who is assigned the particular responsibility.). a. Upon employee or officer transitions, new personnel shall be advised of responsibilities under the Guidelines and ensure they understand the importance of the Guidelines.
b. If employee or officer positions are restructured or eliminated, responsibilities shall be reassigned as necessary to ensure that all guidelines have been appropriately assigned.

4. Training Required. The Responsible Officer and other responsible persons shall receive appropriate training that includes the review of contents of these Guidelines, review of the requirements contained in the IRS Code and California Code applicable to each debt issuance, identification of all debt that must be monitored, and familiarity with the actions that must be taken in order to correct noncompliance with the requirements of the IRS Code and California Code in a timely manner.

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5. Periodic Review. The Responsible Officer or other responsible person shall periodically review compliance with the Guidelines to determine whether any violations have occurred so that such violations can be timely remedied through the “remedial action” regulations (Treasury Regulation §1.141-12, §1.142-2, §1.144-2, §1.145-2 or §1.147-2, as applicable) or the Voluntary Closing Agreement Program described in Internal Revenue Service (“IRS”) Notice 2008-31 (or successor guidance) and related sections of the Internal Revenue Manual. Such review shall consist initially of compiling (a) a listing of fixed assets financed with tax-exempt debt, (b) a description of any sales or other dispositions of fixed assets so financed and (c) identifying any management contracts, lease or other use agreements discussed in Section D.3 hereof or amendments with respect to such agreements with private entities entered into (including, but not limited to agreements relating to solar energy or cellular phone towers) which have not been reviewed and approved by bond counsel as contemplated by Section D.3 hereof.

6. Change in Bond Terms. If changes to the terms of any bonds are contemplated, bond counsel shall be consulted. Such modifications could result in a reissuance (i.e., a deemed refunding of the bonds, which could jeopardize the tax-exempt status of the bonds, if applicable).

B. IRS INFORMATION RETURN FILING.

1. Filing of Applicable Form 8038. The Responsible Officer will confirm that bond counsel has filed the applicable information reports (such as Forms 8038 and 8038- G) with the IRS on a timely basis, and maintain copies of such reports, including evidence of timely filing as part of the transcript of the bond issue.

2. Filing of Forms 8038-T or 8038-R. The Responsible Officer shall file the IRS Form 8038-T relating to the payment of rebate or yield reduction payments in a timely manner. The Responsible Officer shall also monitor the extent to which the City is eligible to receive a refund of prior rebate payments and provide for the timely filing for such refunds using IRS Form 8038-R.

C. USE OF PROCEEDS. The Responsible Officer or other assigned personnel shall:

1. Use Consistent Accounting Guidelines. Maintain clear and consistent accounting guidelines for tracking the investment and expenditures of bond proceeds, including investment earnings on bond proceeds.

2. Monitor Reimbursement Allocations at Closing. At or shortly after closing of a bond issue, ensure that any allocations for reimbursement expenditures comply with the Tax Certificate.

3. Monitor Bond Proceeds. Monitor that sale proceeds and investment earnings on sale proceeds of tax-exempt bonds are spent in a timely fashion consistent with the requirements of the Tax Certificate. Maintain records identifying the assets or portion of assets that are financed or refinanced with proceeds of each issue of debt.

4. Monitor Costs of Issuance. With respect to qualified private activity bonds, monitor that no more than 2% of the sale proceeds are used to pay costs of issuance.

5. Qualified Use of Proceeds of Qualified Private Activity Bonds. With respect to qualified bonds, including exempt facility bonds, monitor that sale proceeds and B-3
investment earnings on sale proceeds are allocated to qualifying expenditures permitted for each type of qualified bond in a timely fashion consistent with the requirements of the Tax Certificate. If an exempt facility or other applicable facility will not be completed, or the facility has been placed in service, and there are remaining unspent bond proceeds, immediately consult with bond counsel to determine whether bonds are required to be redeemed under Treasury Regulation §1.142-2. If exempt facility bonds are required to be redeemed or defeased in order to comply with the remedial action rules under Treasury Regulation §1.142-2, such redemption or defeasance must occur within 90 days of the date an action is taken that causes the bonds to not be used for the qualifying purpose for which the bonds were issued.

6. Requisitions. Utilize requisitions to draw down bond proceeds. Review requisitions to ensure proper use of bond proceeds to minimize the need for reallocations. The Director of the department overseeing projects utilizing bond proceeds shall be responsible for ensuring that proceeds are used for their intended purpose and allocated to qualifying expenditures consistent with the Tax Certificate.

7. Final Allocation. Ensure that a final allocation of bond proceeds (including investment earnings) to qualifying expenditures is made if bond proceeds are to be allocated to project expenditures on a basis other than “direct tracing” (direct tracing means treating the bond proceeds as spent as shown in the accounting records for bond draws and project expenditures). An allocation other than on the basis of “direct tracing” is often made to reduce the private business use of bond proceeds that would otherwise result from “direct tracing” of proceeds to project expenditures. Bond counsel can assist with the final allocation of bond proceeds to project costs.

Maintain a copy of the final allocation in the records of the bonds.

8. Maintenance and Retention of Records Relating to Proceeds. Maintain careful records of all project and other costs (e.g., costs of issuance, credit enhancement, and capitalized interest) and uses (e.g., deposits to a reserve fund) for which bond proceeds were spent or used. Records shall include a copy of all contracts and arrangements involving the use of debt-financed assets. These records should be maintained separately for each issue of bonds for the period indicated under Section E below.

D. MONITORING PRIVATE BUSINESS USE. With respect to tax-exempt bonds that are subject to the private activity bond limitations provided in the Code (e.g., governmental bonds and qualified 501(c)(3) bonds), the Responsible Officer, the Director of the department responsible for managing any asset financed with tax-exempt obligations, and any other responsible person shall:

1. Identify Bond-Financed Facilities. Identify the voter and/or City Council approval that approved each issue of bonds and the amounts and facilities financed.

2. Review Private Persons Contracts. Review all of the following contracts or arrangements with non-governmental persons or organizations or the federal government (collectively referred to as “private persons”) with respect to the bondfinanced facilities which could result in private business use of the facilities:
a. Sales of bond-financed facilities;
b. Leases of bond-financed facilities;
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c. Management or service contracts relating to bond-financed facilities; d. Research contracts under which a private person sponsors research in bondfinanced facilities; and e. Any other contracts involving “special legal entitlements” (such as naming rights or exclusive provider arrangements) granted to a private person with respect to bond-financed facilities.

3. Review New Contracts or Amendments with Bond Counsel. With respect to taxexempt bond financed facilities, prior to amending an existing agreement with a private person or entering into any new lease, management, service, or research agreement with a private person, consult legal counsel to review such amendment or agreement to determine whether it results in private business use.

4. Analyze Use. Analyze any private business use of bond-financed facilities and, for each issue of bonds, determine whether the 10% limit on private business use (5% in the case of qualified 501(c)(3) bonds or “unrelated or disproportionate” private business use), as may be revised by the IRS, is exceeded, and contact bond counsel or other tax advisors if either of these limits appears to be exceeded.

5. Remediate if Limits Exceeded. If it appears that private business use limits have been exceeded, immediately consult with bond counsel to determine if remedial action is required with respect to nonqualified bonds of the issue under Treasury Regulation §1.141-12, or if the IRS should be contacted under its Voluntary Closing Agreement Program.

6. Retain Records Relating to Private Use. Retain copies of all of the above contracts or arrangements (or, if no written contract exists, detailed records of the contracts or arrangements) with private persons for the period indicated under Section E below.

E. RECORD RETENTION. The Responsible Officer or other responsible person shall ensure that for each issue of bonds, the transcript and all records and documents described in these Guidelines will be maintained while any of the bonds are outstanding and during the threeyear period following the final maturity or redemption of that bond issue, or if the bonds are refunded, while any of the refunding bonds are outstanding and during the three-year period following the final maturity or redemption of the refunding bonds.

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APPENDIX C

LOCAL GOALS AND POLICIES FOR

COMMUNITY FACILITIES DISTRICTS
I. GENERAL.

Section 53312.7(a) of the California Government Code requires that the City of Santa Clara (the “City”) consider and adopt local goals and policies concerning the use of the Mello-Roos Community Facilities Act of 1982, Section 53311 et seq. of the California Government Code (the "Act"), prior to the initiation of proceedings to establish a new community facilities district under the Act.

These Local Goals and Policies for Community Facilities Districts (these “Policies”) provide guidance and conditions for the conduct by the City of proceedings for, and the issuance of bonds secured by special taxes levied in, a community facilities district (a "CFD") established under the Act. These Policies are intended to be general in nature; specific details will depend on the nature of each particular financing. These Policies are applicable to financings under the Act and are intended to comply with Section 53312.7 (a) of the Act. These Policies shall not apply to any assessment financing or any certificate of participation or similar financings involving leases of or security in public property. These Policies are subject to amendment by the City Council at any time.

II. FINANCING PRIORITIES.

Eligible Public Facilities. Except as provided below, the public improvements eligible to be financed by a CFD must be owned by a public agency and must have a useful life of at least five years. Any development proposed within a CFD must be consistent with the City's general plan and must receive any required legislative approvals, such as zoning or specific plan approvals, prior to the issuance of bonds by the CFD to finance the acquisition or construction of public facilities. The formation of or issuance of bonds by a CFD shall not vest any rights to future land use on any properties, including those responsible for paying special taxes.

Eligible public facilities include, but are not limited to, the following:
• Streets
• Street lighting
• Traffic signals and safety lighting
• Landscaping on public property or in public easements • Sanitary sewer facilities
• Storm drain facilities
• Flood control facilities
• Potable and reclaimed water facilities
• Utility improvements and relocations
• Elementary and secondary school sites and facilities
• Libraries
• Parks and recreational facilities
• Public utilities
• Cultural facilities
• Police and fire protection facilities
• Governmental facilities
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• Parking lots and facilities
• Sidewalks, pedestrian pathways and pedestrian bridges • Fencing
It is acknowledged that the Act permits the financing of fee obligations imposed by governmental agencies the proceeds of which fees are to be used to fund public capital improvements of the nature listed above. The City will consider an application to finance fee obligations on a case-by-case basis. The City will give priority to financing City fees because of the administrative burden associated with financing fees payable to other local agencies.

The funding of public facilities to be owned and operated by public agencies other than the City shall be considered on a case-by-case basis. If the proposed financing is consistent with a public facilities financing plan approved by the City, or the proposed facilities are otherwise consistent with approved land use plans for the property, the City shall consider entering into a joint community facilities agreement or joint powers authority in order to finance these facilities.

A CFD may also be formed for the purpose of refinancing any fixed special assessment or other governmental lien on property, to the extent permitted under the Act.

Priority Facilities. Priority for CFD financing of public facilities shall be given to public facilities which: (a) are necessary for development to proceed in an orderly fashion, or (b) are otherwise coordinated to correspond to the phasing of the related private development project. If appropriate, the City may prepare a public facilities financing plan as a part of the specific plan or other land use document that identifies the public facilities required to serve a project, and the type of financing to be utilized for each facility. The City will attempt to schedule construction of CFD-financed facilities in a manner such that private development will not occur ahead of the installation of public infrastructure necessary to support that development.

Eligible Services; Priority Services. The services eligible to be funded by a CFD are those identified in the Act. Subject to the conditions set forth in the Act, if applicable, priority for public services to be funded by a CFD shall be given to services which are (a) necessary for the public health, safety and welfare and (b) would otherwise be paid from the City’s general fund. The City may fund services to be provided by another local agency if it determines the public convenience and necessity require it to do so, although the City prioritizes financing services to be provided by the City. If appropriate, the City may prepare a public services financing plan as a part of the specific plan or other land use document that identifies the public services required to serve a project and the source of funding for each such service.

Eligible Private Facilities. Financed improvements may be privately owned in the specific circumstances, and subject to the conditions, set forth in the Act.

III. BOND FINANCINGS; CREDIT QUALITY.

Value-to-Public Lien Ratio. At the time that a CFD issues a series of bonds, the value of the taxable property within the CFD should be at least three times the sum of (i) the principal amount of the bonds to be sold plus (ii) the pro rata principal amount of other outstanding publicly issued bonds that are secured by a special tax or assessment lien on the taxable property within the CFD; provided, however, that this requirement may be modified or waived pursuant to specific findings by the City Council as provided in Section 53345.8(b) or (c) of the Act. Property value may be based on either an appraisal (as described in VI below), or on assessed values as indicated on the last equalized County assessor's tax roll.

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Development Status. The City will require all major land use approvals and governmental permits necessary for development of land in the CFD to be substantially in place before bonds are issued. The City may delay or disallow the formation of a CFD or sale of CFD bonds where a development project is on hold or other factors cause the City to determine that the development project’s economic viability is uncertain.

Property Tax Delinquencies. The City may delay or disallow the formation of a CFD or sale of CFD bonds where property tax delinquencies exist with respect to the taxable property within the CFD.

Reserve Fund. In most cases, a debt service reserve fund will be required for CFD bond issues, which will be funded in an amount equal to the lesser of (i) 10% of the original proceeds of the CFD bond issue, (ii) the maximum annual debt service on the CFD bonds, or (iii) 125% of the average annual debt service on the CFD bonds. The City may agree to a smaller debt service reserve fund for CFDs for which certain development thresholds identified by the City have been met.

Failure to Meet Credit Criteria; Credit Enhancement; Escrow of Bond Proceeds. The City may consider exceptions to the credit quality criteria contained in these Policies for bond issues that do not represent an unusual credit risk, either due to credit enhancement or other reasons specified by the City, or which otherwise provide extraordinary public benefits, to the extent permitted by and subject to any applicable requirements of the Act.

If the City requires credit enhancement (in the form of a letter of credit, surety or other security), the credit enhancement shall be issued by an institution, in a form and upon terms and conditions satisfactory to the City. Any security required to be provided by the applicant may be discharged by the City upon satisfaction of the applicable credit criteria specified by the City.

As an alternative to providing other security, and subject to federal tax law, the applicant may request that a portion of the bond proceeds be placed in escrow with a trustee or fiscal agent in an amount sufficient to assure the financing will meet the applicable credit criteria, as determined by the City in its sole discretion. The escrowed proceeds shall be released at such times and in such amounts as may be necessary to assure the applicable credit criteria have been met.

Investor Suitability. The City will require that CFD bond financings be structured so that bonds are purchased and owned by suitable investors. In situations where the City determines that the credit quality of the CFD or the CFD bonds so warrant (for example, where there is an insufficient value-to-lien ratio, where a substantial amount of the property within a CFD is undeveloped, where tax delinquencies are present in parcels within the CFD, and in any other situation identified by the City), the City may require placement of bonds with a limited number of sophisticated investors, large bond denominations, or transfer restrictions.

IV. DISCLOSURES
Purchasers of Property. As a minimum, any disclosures mandated by applicable state law to inform prospective purchasers of their obligations under the CFD shall apply to each CFD. In addition, there may be additional requirements mandated by the City for particular kinds of financings on a case-by-case basis. The City may prescribe specific forms to be used to disclose the existence and extent of obligations imposed by CFD.

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Disclosure Requirements for the Resale of Lots. The City shall provide a notice of special taxes to sellers of property (other than developers) which will enable them to comply with their notice requirements under Section 1102.6 of the California Civil Code. This notice shall be provided by the City within five working days of receiving a written request for the notice. A reasonable fee may be charged for providing the notice, not to exceed any maximum fee specified in the Act.

Continuing Bond Disclosure. The City may require landowners in a CFD that are responsible for 10% or more of the annual special taxes to provide: (i) initial disclosure at the time of issuance of any bonds; and (ii) annual disclosure as required under Rule 15c2-12 of the Securities Exchange Commission until the special tax obligation of the property owned by such owner drops below 10%.

V. EQUITY OF SPECIAL TAX FORMULAS AND MAXIMUM SPECIAL TAXES Minimum Special Tax Levels. Special tax formulas shall provide for minimum special tax levels which satisfy the following payment obligations of a CFD: (a) 110 percent gross debt service coverage for all CFD bonded indebtedness, (b) the administrative expenses of the CFD, and (c) amounts equal to the differences between expected earnings on any escrow fund and the interest payments due on related bonds of the CFD.

In addition, the special tax formula may provide for the following to be included in the special tax levels: (a) any amounts required to establish or replenish any reserve fund established in association with the indebtedness of the CFD, (b) the accumulation of funds reasonably required for future debt service, (c) amounts equal to projected delinquencies of special tax payments, (d) the costs of remarketing, credit enhancement and liquidity facility fees, (e) the cost of acquisition, construction, rehabilitation, furnishing or equipping of authorized facilities, (f) lease payments for existing or future facilities, (g) costs associated with the release of funds from an escrow account, (h) the costs of authorized services, and (i) any other costs or payments permitted by law.

Equity of Special Tax Allocation Formula. The special tax formula shall be reasonable in allocating the CFD’s payment obligations to parcels within the CFD. Exemptions from the special tax may be given to parcels which are publicly owned, held by a property owners' association, used for a public purpose such as open space or wetlands, affected by public utility easements making impractical their utilization for other than the purposes set forth in the easements, have insufficient value to support bonded indebtedness, or under other reasonable criteria set forth in the special tax formula.

Aggregate Tax Burden. The total projected property tax levels for any CFD (including ad valorem taxes, any maintenance, landscaping or other impositions on the land in the CFD and other similar annual government charges levied on parcels in the CFD, but excluding property owners’ association annual levies and as to any special tax levies, based on the expected special tax rates and not any "back-up" special taxes) must be reasonable, and will be considered by the City on a case-by-case basis.

The annual increase, if any, in the maximum special tax for any parcel may not exceed any maximum specified in the Act. The increase in the special tax levied on any residential parcel as a consequence of delinquency or default by the owner of any other parcel may not exceed any maximum specified in the Act.

Levy on Entire Parcels. Special taxes will only be levied on an entire County assessor's parcel, and any allocation of special tax liability of a County assessor’s parcel to leasehold or possessory interest in the fee ownership of such County assessor’s parcel shall be the responsibility C-5
of the fee owner of such parcel and the City shall have no responsibility therefor and has no interest therein. Failure of the owner of any County assessor’s parcel to pay or cause to be paid any special taxes in full when due shall subject the entire parcel to foreclosure in accordance with the Act.

Feasibility Analysis. The City may retain a special tax consultant to prepare a report which:
(a) recommends a special tax for the proposed CFD, and (b) evaluates the special tax proposed to determine its ability to adequately fund identified public facilities, privately-owned improvements, City administrative costs, public services (if applicable) and other related expenditures. Such analysis, if prepared, will also address the resulting aggregate tax burden of all proposed special taxes plus existing special taxes, ad valorem taxes and assessments on the properties within the CFD.

VI. APPRAISALS
The definitions, standards and assumptions to be used for any appraisals shall be determined by City staff on a case-by-case basis, with input from City consultants, and by reference to relevant materials and information promulgated by the State of California (including, but not limited to, the California Debt and Investment Advisory Commission). The appraiser shall be an independent appraiser selected and retained by the City, and the appraisal shall be coordinated by and under the direction of the City.

The date of value referenced in the appraisal must be no more than 90 days before the date the bonds are priced, unless the City Council determines a longer time is appropriate.

All costs associated with the preparation of the appraisal report shall be paid by the applicant requesting the establishment of the CFD, if applicable, through an advance deposit.

VII. FINANCING TERMS
All terms and conditions of any CFD bonds shall be established by the City in its sole discretion. The City will control, manage and invest all proceeds of CFD bonds. Each CFD bond issue shall be structured (through the special tax levy, credit enhancements, foreclosure covenants, debt service reserve funds, or other measures) to adequately protect bond owners and to avoid any negative impact on the bonding capacity or credit rating of the City.

Neither the faith and credit nor the taxing power of the City will be pledged to security or repayment of any CFD bonds. The sole source of revenues that will be available to pay debt service on CFD bonds are special taxes, reserve funds or other pledged amounts held under the bond issuance documents, the proceeds of foreclosure proceedings for the collection of delinquent special taxes, and the proceeds of any additional security instruments or credit enhancements available to pay debt service on the CFD bonds.

The City shall, in its sole discretion, select and retain all consultants necessary for the formation of the CFD and the issuance of bonds, including one or more underwriters, bond counsel, disclosure counsel, municipal advisors, the special tax consultant, and as applicable, an appraiser and market absorption/pricing consultant.

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VIII. EXCEPTIONS TO THESE POLICIES
To the extent permitted by the Act, the City Council may waive or modify these Policies in any respect upon a finding that such a waiver or modification is reasonable or desirable under circumstances specific to a given CFD.

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APPENDIX D

GLOSSARY OF DEBT MANAGEMENT TERMS
ADVANCE REFUNDING: A refinancing transaction whereby new (refunding) bonds are issued to repay (refund) outstanding bonds prior to the next call date. The proceeds of the refunding bonds are deposited in an escrow account, invested in government securities, and used to pay debt service (interest, principal and premium, if any) on the refunded bonds through the applicable call date. For accounting purposes, the refunded obligations are no longer considered outstanding bonds.

AMORTIZATION: The planned reduction of a debt obligation according to a stated maturity or redemption schedule.

ARBITRAGE: Investment earnings representing the difference between interest paid on bonds and the interest earned on securities in which bond proceeds are invested. The Internal Revenue Code regulates the amount and conditions under which arbitrage on the investment of bond proceeds is permissible and the 1986 Tax Reform Act requires, with limited exceptions, that arbitrage earnings from investments be paid to the federal government.

BOND: Written evidence of the borrowing of money with the promise to repay principal, and usually interest, at a specified time.

BOND INSURANCE: Insurance supporting the timely payment of principal and interest of a bond in the event of failure by the issuer to pay principal and/or interest as promised. The cost of insurance is usually paid by the issuer, and should not be purchased unless the cost is more than offset by lower interest rates due to the insurance.

CALL: An action taken to pay the principal amount of bonds prior to their stated maturity date, in accordance with the bond provisions.

CALL PREMIUM: A dollar amount, usually stated as a percentage of the principal amount called, paid as a "penalty" or "premium" for the exercise of a call provision.

CALL PROVISIONS: The terms of the bond giving the issuer the right to redeem all or a portion of a bond issue prior to its stated date of maturity at a specific price, usually at or above par.

CAPITALIZED INTEREST: A portion of the proceeds of a bond issue which is set aside to pay interest on such bond issue for a specific period of time. Interest is commonly capitalized during the construction period of a debt financed project.

CERTIFICATE OF PARTICIPATION: A financial instrument representing a proportionate interest in payments such as lease payments by one party, such as a city acting as a lessee, to another party.

COMMERCIAL PAPER: A short-term, unsecured debt obligation issued with a stated maturity of up to 270 days.

COMPETITIVE SALE: A sale of bonds in which the bonds are awarded to the bidder who offers to purchase the bonds at the lowest cost via a sealed bid or electronic format.

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CONTINUING DISCLOSURE: The requirement by the Securities and Exchange Commission to provide current financial information to the Municipal Securities Rulemaking Board (MSRB) for access by the public.

CURRENT REFUNDING: A refinancing transaction whereby new (refunding) bonds are issued to immediately repay (refund) outstanding bonds.

DEBT LIMIT: Statutory or constitutional limits on the principal amount of debt that an issuer may incur or may have outstanding at any one time.

DEBT SERVICE: Principal and/or interest payment on outstanding bonds.

DEBT SERVICE RESERVE FUND: A fund in which moneys are placed which may be used to pay debt service if pledged revenues are insufficient to satisfy the debt service requirements.

DISCOUNT: Amount (stated in dollars or a percent) by which the purchase price of a bond is less than its face amount.

GENERAL OBLIGATION DEBT: Bonds issued by a governmental entity and secured by the pledge of the full faith and credit and unlimited taxing power of the issuer.

LEGAL DEBT MARGIN: The amount of general obligation bonds that a municipality may have outstanding expressed as a percentage of the assessed value of real estate in the municipality as shown on the last preceding assessment of property taxes.

LEGAL OPINION: An opinion of bond counsel concerning the validity of a bond issue with respect to statutory authority, constitutionality, procedural conformity and the exemption of interest from federal income and state taxes, if applicable.

NEGOTIATED SALE: A sale of securities in which the terms of the sale are determined through negotiation between the issuer and the purchaser, typically an underwriter.

NET INTEREST COST (NIC): The average interest cost of a bond issue calculated based on the average coupon rate weighted to years of maturity, and adjusted for any original issue discount or premium.

OPTIONAL REDEMPTION: A right to retire a bond issue, or a portion thereof, prior to the stated maturity date. The exercise of an optional redemption (call) may require the payment of a premium.

PAR VALUE: The principal amount of a bond due at maturity.

PRIVATE ACTIVITY BOND: A bond issued by a state or local government for the purpose of financing a project of one or more private users. Interest is not tax-exempt unless the use of proceeds meets certain requirements of the Internal Revenue Code.

PRIVATE PLACEMENT: The original placement of an issue with one or more investors as opposed to being publicly offered or sold.

REVENUE BOND: A bond secured by a specific source of revenue, such as a pledge of rates, rents, or fees.

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TRUE INTEREST COST (TIC): A method of calculating the overall cost of a financing that takes into account the time value of money. The TIC is the rate of interest that will discount all future payments so that the sum of such payments equals the issue proceeds.

UNDERWRITER: A dealer that purchases new issues of municipal securities from an issuer and resells them to investors.

UNDERWRITER’S DISCOUNT: The difference between the price at which bonds are bought by an Underwriter from an issuer and the price at which they are reoffered to investors. i
Table of Contents
INTRODUCTION ........................................................................................................................ 1 AUTHORITY ............................................................................................................................... 1 SCOPE ....................................................................................................................................... 1 OBJECTIVES ............................................................................................................................. 1 DEBT MANAGEMENT ACTIVITIESINTERNAL CONTROL PROCEDURES ............................ 2 Debt Management Policy Review and Approval ................................................................... 2 Debt Administration ............................................................................................................... 2 Reporting .............................................................................................................................. 2 DEBT ISSUANCE ....................................................................................................................... 2 Method of Sale ...................................................................................................................... 2 Competitive Sale ............................................................................................................. 2 Negotiated Sale............................................................................................................... 3 Private Placement ........................................................................................................... 3 Issuer Characteristics .......................................................................................................... 3 Market Familiarity ............................................................................................................ 3 Credit Strength ................................................................................................................ 3 Policy Goals .................................................................................................................... 3 Financing Characteristics ...................................................................................................... 3 Type of Debt Instrument .................................................................................................. 4 Issue Size........................................................................................................................ 4 Market Conditions and Timing ........................................................................................ 4 Term of Debt ................................................................................................................... 4 Story Bonds..................................................................................................................... 4 Initial Disclosure Requirements ............................................................................................ 4 FINANCIAL SERVICE PROVIDERS .......................................................................................... 5 Selection ............................................................................................................................... 5 Conflict of Interest ................................................................................................................. 5 Communication ..................................................................................................................... 5 ASSESSING FINANCING NEEDS FORPLANNING GOALS AND OBJECTIVES ..................... 5 RELATIONSHIP OF DEBT TO CAPITAL PROGRAMSPROGRAM .......................................... 5 TAX STATUS .............................................................................................................................. 6 Tax-Exempt ........................................................................................................................... 6 Taxable ................................................................................................................................. 6 TYPE OF DEBT ............................................................................................................................ 6 Long-Term Debt .................................................................................................................... 6 General Obligation (G.O.) Bonds .................................................................................... 6 Revenue Bonds............................................................................................................... 6 Certificates of Participation ............................................................................................. 7 State Revolving Fund Loans ........................................................................................... 7 Special Assessment Bonds ............................................................................................. 7 Special DistrictCommunity Facilities District Bonds ........................................................ 8 Short-Term Debt ................................................................................................................... 8 Commercial Paper (CP) .................................................................................................. 8 Line of Credit (LOC) ........................................................................................................ 9 Grant Anticipation Notes (GANs) .................................................................................... 9 Bond Anticipation Notes (BANs) ..................................................................................... 9 Tax and Revenue Anticipation Notes (TRANs) ............................................................... 9 Other ............................................................................................................................... 9 Alternative Debt Instruments – Derivative Products ............................................................. 9 DEBT CAPACITY ....................................................................................................................... 9 DEBT SERVICE RESERVE FUND ............................................................................................ 10 ii
PURPOSE OF FINANCING ........................................................................................................10 New Money Financing .......................................................................................................... 10 Refinancing ........................................................................................................................... 10 CREDIT RATINGS...................................................................................................................... 11 Rating Agency Relationships ................................................................................................ 11 Use of Rating Agencies ........................................................................................................ 11 CREDIT ENHANCEMENT .......................................................................................................... 12 Bond Insurance ..................................................................................................................... 12 Benefit Analysis............................................................................................................... 12 Provider Selection ........................................................................................................... 12 Bank Facilities (Letters of Credit) .......................................................................................... 12 STRUCTURAL FEATURES OF DEBT ISSUANCE ....................................................................12 Maturity ................................................................................................................................. 13 Debt Service Structure .......................................................................................................... 12 Fixed Rate Debt .................................................................................................................... 13 Variable Rate Debt ................................................................................................................13 Debt Service Coverage……………………………………………………………………………..13
Capitalized Interest ............................................................................................................... 13 Call Options/Redemption Provisions .................................................................................... 13 INVESTMENT OF BOND PROCEEDS ...................................................................................... 14 CONTINUING DISCLOSURE ..................................................................................................... 14 ARBITRAGE REBATE ................................................................................................................ 14 POST ISSUANCE COMPLIANCE .............................................................................................. 15 APPENDIX A – Interest Rate Swap Agreement Guidelines ....................................................... A-1 APPENDIX B – Post Issuance Compliance Guidelines for Tax-Exempt Bonds ......................... B-1 APPENDIX C – Local Goals and Policies for Community Facilities Districts .............................. C-1 APPENDIX D – Glossary of Debt Management Terms .............................................................. D-1 1 CITY OF SANTA CLARA

DEBT MANAGEMENT POLICY
Effective as of November 18, 2025

The issuance of all debt shall receive required voter and/or City Council approval, and shall comply with all federal, state and local legal requirements.

SCOPE
The Debt Policy shall govern, except as otherwise covered by the City Charter and City Code, the issuance and management of all debt and lease financings funded in the capital markets. bonds and other forms of indebtedness by the City and any joint powers authority, financing corporation, or other entity created by the City Council or by State law for which the City Council serves as the governing or legislative body.

OBJECTIVES
The Debt Policy will guide the City in determining appropriate uses of debt financing, establish certain debt management goals and assist the City in maintaining strong credit ratings, while assuming a prudent level of financial risk and preserving the City’s flexibility to finance future capital 2 programs and requirements. Additionally, the Debt Policy is intended to set forth criteria for selecting firms to provide certain financial, legal, and other services related to the issuance and subsequent monitoring and reporting of debt.

DEBT MANAGEMENT ACTIVITIES

DEBT ISSUANCE
I. Method of Sale
The three most commonly used methods of issuing debt obligations are competitive sale, negotiated sale, and private placement.

B. Negotiated Sale
In a negotiated sale, the issuer selects an investment bank (or syndicate of investment banks) to serve as underwriter of the debt obligations. On a designated pricing date, the underwriter establishes the interest rates and other terms of the obligations, based on market conditions, subject to approval by the Director of Finance or other designated City official. If a negotiated sale is used, the underwriter or underwriter syndicate will be selected by the Director of Finance.

II. Issuer Characteristics
The following issuer characteristics shall be considered to determine whether a competitive sale, negotiated sale, or private placement will be used.

A. Type of Debt Instrument. The market favors familiar debt instruments (such as general obligation bonds or utility enterprise revenue bonds) backed by strong revenue streams.

New credit types may require an education process that is more conducive to a negotiated sale or private placement until the market becomes comfortable with the credit.

Disclosure Documents shall provide complete and accurate information at the time they are prepared and distributed to allow potential investors to make informed investment decisions.

The Finance Department shall prepare and periodically review and update, as necessary, Disclosure Controls and Procedures. The Disclosure Controls and Procedures are intended to (i) ensure the accuracy of the City’s disclosures and the City’s compliance with 5 all applicable federal and state securities laws, and (ii) promote best practices regarding disclosures relating to debt issued by the City.

FINANCIAL SERVICE PROVIDERS
I. Selection
For negotiated sales, an underwriter or underwriter syndicate will be selected by the Director of Finance. The allocation of bonds among syndicate members will be at the sole discretion of the Director of Finance. For competitive sales, any security dealer meeting the qualification criteria outlined in the competitive bid notice may bid on the debt.

ASSESSING FINANCING NEEDS FOR CAPITAL PROGRAMS

PLANNING GOALS AND OBJECTIVES
The City is committed to long-term financial planning, maintaining appropriate reserves levels and employing prudent practices in governance, management and budget administration. The City shall issue debt for the purposes stated in this Debt Policy and to implement policy decisions incorporated in the City’s annual budget.
6 RELATIONSHIP OF DEBT TO CAPITAL PROGRAM
The five-year capital improvement program (CIP) of the City is approved by the City Council. The CIP shall provide the basis for determining long-term capital needs of the City and may be supplemented with longer term capital plans or master plans when appropriate. As necessary, the Finance Department shall work with the various City departments to develop financial forecasts related to the CIP to identify the optimal method to finance the program, including pay-as-you-go and/or the issuance of debt obligations. The Finance Department will work with other City departments, as applicable, in reviewing funding sources and financial forecasts to ensure their adequacy in complying with existing bond covenants, debt limits and any potential impact on existing bond ratings prior to the issuance of any new debt.

TAX STATUS
Prior to the issuance of any debt, the Finance Department, in conjunction with bond counsel and the City Attorney’s Office, will evaluate the tax status of the proposed debt.

Accordingly, the City will issue revenue bonds when an identifiable revenue stream can be dedicated to support the payment of debt service. The final maturity of revenue bonds will be determined by the expected life of the project to be financed and the revenues available to repay the debt. Revenue bonds require majority voter approval in order to be issued by the City, except for revenue bonds issued to finance the generation, production transmission and distribution of electric energy, including the acquisition and/or construction of land and facilities therefore, which may be authorized by City Council.

Compared to traditional bond financing, the City may realize substantial savings as a result of the low interest rate of SRF loans.

E. Special Assessment Bonds
Special assessment bonds are used to fund public capital improvements that benefit a discrete group of properties within a designated assessment district. Principal and interest owed on the bonds is paid from assessments on the property within the assessment district benefiting from the particular bond-funded project. The creation of a 8 special assessment district is subject to approval of the property owners within the district and must follow a detailed legal process, including City Council approval.

The City is required to provide ongoing administrative support for special assessment districts, including annual assessment levies and disclosure filings, and to pursue foreclosure of parcels with assessment delinquencies. Although certain aspects of this ongoing support may be outsourced to consultants, consideration will be given to the additional work placed on the City’s limited resources before approving any assessment district formation or assessment bond issuance.

F. Special Community Facilities District Bonds
Special districtCommunity Facilities District (CFD) bonds are used to fund public capital improvements (and certain permitted privately owned improvements) that benefit a discrete group of properties within a designated special district. Debt service on the bonds is paid solely from special taxes levied on the property within the special district. Special taxes are levied and collected on the County secured property tax rolls. The creation of a special districtCFD is subject to the approval of property owners to be included within the proposed district and must follow a detailed legal process, including City Council approval.

The City will consider requests for special districtCFD formation and debt issuance when such requests address a public need or provide a public benefit. Each application will be considered on a case-by-case basis, and the Director of Finance may not recommend a financing if it is determined that the financing is not in the best interests of the City. 9 II. Short-Term Debt
Short-term debt may be utilized as a temporary source of funding for capital projects with uncertain cash flow requirements and timing. It is anticipated that short-term debt will be retired with the issuance of long-term debt. The City will determine and utilize the least costly method for short-term borrowing.

A. Commercial Paper (CP)
Commercial Paper may be issued for a term of up to 270 days as an alternative to longterm fixed rate debt, particularly when the timing of funding requirements is uncertain.

Source of repayment usually includes revenue generated by the City’s various enterprises, such as Electric, Water, and Sewer. Upon maturity, the CP may be reissued for additional periods of up to 270 days. The City may maintain an ongoing commercial paper program to ensure flexibility and immediate access to capital funding when needed. The retirement of CP is most commonly a result of the issuance of long-term bonds, but CP may also be retired with available cash.

B. Line of Credit (LOC)
An LOC shall be considered when more cost effective than other short-term interest rates, refinanced with debt options. Source of repayment usually includes revenue generated by the City’s various enterprises, such as Electric, Water, and Sewer. An LOC shall be structured in conformity with Internal Revenue Code requirements.

D. Bond Anticipation Notes (“BANs”)
BANs are short-term notes issued prior to the issuance of long-term debt. BANs may be used when an issuer wants to delay a long-term bondsdebt issuance, or paid off with cashif an issuer wants to combine several projects into one larger issue. BANs are usually retired, or refunded, with long-term debt. BANs will be issued only when there is no better alternative to reduce the overall cost of a financing program.

F. Other
Other short-term debt such as a Direct Purchase Loan from a bank or Floating Rate Notes may be considered and utilized when appropriate with the written approval of the Director of Finance.

III. Alternative Debt Instruments – Derivative Products The City will consider the use of derivative products on a case-by-case basis consistent with state statutes and this Policy. The use of certain derivative products, such as swaps and swaptions, allow the City to realize lower all-in costs on a new debt issuance or to receive an upfront payment. One type of swap that may be used allows the City to issue 10 variable rate debt in exchange for fixed payments that are typically lower than fixed rate debt. However, such derivative products have unique risks that the City and its municipal advisor must evaluate per the City’s Swap Guidelines. The Swap Guidelines are included in Appendix A – Interest Rate Swap Agreement Guidelines.

DEBT CAPACITY
In accordance with the City Charter Section 1309, the bonded indebtedness of the City may not in the aggregate exceed the sum of 15% of the total assessed valuation of property within the City, exclusive of revenue bonds or any indebtedness that has been or may be incurred for the purposes of acquiring, constructing, extending, or maintaining municipally owned utilities, for which purposes a further indebtedness may be incurred by the issuance of bonds, subject only to the provisions of the State Constitution and the City Charter.

The City shall have the option to issue debt with a debt service reserve fund that is less than the maximum allowable amount, or to issue debt without a reserve fund.

A debt service reserve may be funded with a reserve insurance policy or surety policy when economically feasible, as determined by the Director of Finance.

PURPOSE OF FINANCING
Generally, debt may be issued to fund new capital projects (“new money financing”) or to refund existing debt.

I. New Money Financing
11 New money issues are financings that generate funding for capital projects. These funds will be used for land acquisitions, capital construction, equipment, and other items deemed necessary by the City. New money bond proceeds are not used to fund operational activities.

II. Refinancing
A periodic review of the City’s outstanding debt will be performed by the Finance Department, or other delegated department, to identify potential refunding opportunities.

Refunding debt is issued to retire all or a portion of an outstanding debt issue, typically to refinance at a lower interest rate and reduce debt service costs. Alternatively, a refunding transaction may be undertaken for reasons other than to achieve cost savings, such as to restructure debt service payments, to change the type of debt instruments being used, or to eliminate undesirable covenants.

For each refinancing, the Finance Department will prepare, or have a consultant prepare, a present value savings analysis that identifies the financial effects of a proposed refinancing.

CREDIT RATINGS
The City seeks to obtain and maintain the highest possible credit ratings for its short- and longterm debt. The City will not issue bonds with a rating below investment grade.

Full disclosure of operations and open lines of communication shall be maintained with the rating agencies used by the City.

II. Use of Rating Agencies
The City shall obtain a rating from at least one nationally recognized rating agency on all new debt issues being sold in the public market, except as described below.

C. The City shall make every reasonable effort to maintain or improve its credit ratings. 12 D. The City shall request an underlying rating and an insured rating on all debt issues utilizing bond insurance or other credit enhancement instrument.

E. The City shall notify all rating agencies utilized by the City of any material financialthe disclosure of certain enumerated events that occur withinrelating to its outstanding debt made by the City to the Electronic Municipal Market Access (EMMA®) system pursuant to a continuing disclosure agreement or undertaking meeting the requirements of SEC Rule 15c2-12.

F. All communications, both oral and written, in response to requests for information from the rating agencies shall be made in a timely manner.

G. The City shall submit its audited Annual Comprehensive Annual Financial Report (ACFR) to all rating agencies then maintaining a rating on the City’s outstanding debt.

A. Benefit Analysis. The decision to use bond insurance is a financial decision. A The Finance Department, in conjunction with the City’s municipal advisor or other qualified consultant, shall prepare a benefit analysis that compares the present value of the interest savings to the cost of the insurance. Insurance may be purchased when the premium cost is less than the present value of the projected interest savings. A copy of the benefit analysis shall be maintained in the files of the Finance Department.

B. Provider Selection. The City or its financial advisorFinance Department will undertake a competitive selection process when soliciting pricing for bond insurance, or in the case of a competitive sale, facilitating the prequalification of bonds by insurance providers., and may engage a municipal advisor to assist with the provider selection process. The City recognizes that all providers may not be interested in providing bids to the City or pre-qualifying the issue. The winning security dealer in a competitive sale will determine whether it will purchase insurance for the issue. For a negotiated sale, the Director of Finance shall have the authority to purchase bond insurance when deemed advantageousthe benefit analysis prepared under paragraph (A) above demonstrates positive interest savings, and the terms and conditions governing the guarantee are satisfactory.

II. Bank Facilities (Letters of Credit)
When used for credit enhancement, letters of credit (LOC) represent a bank’s promise to pay principal and interest when due for a defined period of time, subject to certain conditions. In the case of a direct-pay LOC, the trustee draws upon the LOC to make debt service payments 13 and the City reimburses the LOC provider the amount drawn on the LOC by the trustee. A stand-by LOC is used to ensure the availability of funds to pay principal and interest of an obligation only if the funds in the debt service account held by the trustee are insufficient to make the debt service payment on the bonds.

STRUCTURAL FEATURES OF DEBT ISSUANCE
I. Maturity
The final maturity of a debt issuance shall be equal to or less than the remaining useful life of the assets or capital improvements being financed.

II. Debt Service Structure
The City will carefully consider the debt service structure for each debt issue. Factors such as the flow of revenues available for a particular credit or the desire to structure savings from a refunding in a particular year shall be considered. Accelerated repayment may be considered within the bonding capacity constraints to provide capacity for future financings.

Factors to be considered in the use of variable rate debt are the availability and size of fund balances to cover variable rate risk and the budget flexibility of the program being financed.

V. Debt Service Coverage
14 The City will determine the appropriate minimum debt service coverage levels based upon the nature of the pledged revenues, rating considerations, existing contractual requirements, and other relevant factors.

VII. Call Options/Redemption Provisions
A call option, or optional redemption provision, provides the City the right to prepay debt prior to its stated maturity. Under certain market conditions, a call option allows the City to achieve future interest savings by refunding outstanding debt at lower interest rates. The City may also call outstanding bonds to alleviate undesirable bond covenants or to restructure debt service.

ARBITRAGE REBATE
Upon the issuance of tax-exempt bonds, the City shall not take any action that would cause the bonds to be declared "arbitrage bonds" within the meaning of the Internal Revenue Code of 1986 (the “Code”). Federal law states that investment earnings on tax-exempt bond proceeds in excess of the bond yield are arbitrage earnings and must be rebated to the Federal Government within certain prescribed timeframes, unless certain exceptions are met. Satisfying one or more of the exceptions may exempt a bond issue, or certain proceeds of a bond issue, from the rebate requirements. The Federal arbitrage regulations do not apply to taxable bond issues. 15 The City shall follow the procedures and guidelines set forth in the Code regarding the expenditure of proceeds, the investment of proceeds and applicable arbitrage rebate requirements (the “Arbitrage Regulations”). The Finance Department shall actively monitor the investment and disbursement of tax-exempt bond proceeds for compliance with the Arbitrage Regulations.

To facilitate the accurate and timely drawdown of tax-exempt bond proceeds spent on project expenditures and adhere to the arbitrage rebate requirements of the federal tax code, the Finance Department has established Citywide Tax-Exempt Bond Proceeds Drawdown Procedures (the “Drawdown Procedures”). The Drawdown Procedures provide guidance to City staff following the issuance of debt for the financing of City capital projects and are intended to (i) ensure the City’s compliance with applicable federal and state laws, and (ii) maximize the interest earnings on taxexempt bond proceeds the City is legally allowed to earn and retain. The Finance Department shall review the Drawdown Procedures at least annually and update as necessary.