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but is not lim ited to, addressing outdoor storage areas, loading and unloading areas, trash enclosures, parking areas, any wash areas and maintenance areas. The SWQCP must conform to the content and format requirements indicated in Appendix D of the Manual and must be approved by the Utilities Director prior to issuance of grading or building permits.
9. All on-si
te construction activity associated with development of this Tracy Assisted Living and Memory Care facility shall be limited to daylight hours or 7:00 a.m. to 8:00 p.m.
10. No roof mount ed
equipment, including, but not limited to, HVAC units, fans, antennas, vents, ladders, and dishes whether proposed as part of this application, potential future equipment, or any portion thereof, shall be visible from Corral Hollow Road, Alegre Drive, Grant Line Road, or any other public right-of-way to the satisfaction of the Development Services Director. The building permit construction documents shall demonstrate that the building’s exterior parapet wall is at least as tall as all HVAC units, vents, fans, antennas, or any other roof equipment or utilities.
11. All vents, gutters,
downspouts, flashing, electrical conduit, gas meters, electrical panels and doors, and other wall-mounted or building-attached utilities shall be painted to match the color of the adjacent surface or otherwise designed in harmony with the building exterior to the satisfaction of the Development Services Director.
12. Prior to the iss uance
of a building permit, bicycle parking spaces shall be provided in accordance with Tracy Municipal Code Section 10.08.3510 to the satisfaction of the Development Services Director.
13. All PG
&E transformers, phone company boxes, Fire Department connections, backflow preventers, irrigation controllers, and other on-site utilities, shall be vaulted or screened f rom view from any public r
ight-of-way, behind structures or
landscaping, to the satisfaction of the Development Services Director.
14. Pri
or to the installation of any signs, the applicant shall submit a sign permit application and receive approval from the Development Services Director in accordance with City Regulations.
15. Pr
ior to the issuance of a building permit, the building permit construction documents shall include an enclosure for all trash or recycling receptacles. The trash enclosure exterior wall shall be of masonry construction, finished with stucco material and color to match the existing trash enclosures on site; include solid metal doors painted to match the enclosure; and a solid roof (painted to match the color(s) of the building) to the extent required by City stormwater quality regulations. The enclosure should also contain an interior concrete curb to prevent the trash dumpsters and containers from hitting and damaging the walls.
16. The approxi
mately eight-foot tall, masonry wall along the north side of Alegre Drive shall be reduced in height to approximately four feet tall (excluding where adjacent to the lot at 2193 Misquez Lane, APN 238-140-15). The wall shall include a decorative Conditions of Approval Exhibit 1
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trim cap along the top of the wall. Prior to the issuance of a building permit, the developer shall include plans detailing how this will be designed, to the satisfaction of the Development Services Director, and the wall shall be completed prior to the occupancy or final inspection. An opening with a gate shall be installed along the wall in accordance with the California Fire Code standards to the satisfaction of the Fire Marshal.
17. Pri
or to the issuance of a building permit, the developer shall submit to the City and cause to be recorded, a lot line adjustment or other instrument to effectively merge lots or otherwise relocate property lines, consistent with City standards, to result in no property lines passing through or underneath buildings, to the satisfaction of the Development Services Director. The developer shall prepare and record easement(s), agreement(s), or other instruments to ensure all lots affected by this project have access to utilities, parking, and circulation, to the satisfaction of the Development Services Director.
18. Prior to occupancy or final inspection, all dead or missing trees or other on-site landscaping shall be replaced or restored in accordance with City standards to the satisfaction of the Development Services Director.
19. Developer shall comply with all performance, monitoring, and reporting requirements of the San Joaquin Valley Air Pollution Control District, as identified in APCD correspondence dated July 24, 2019, to the satisfaction of the District.
20. Streets, Streetlights and Sidewalks
Before issuance of any building permit for the Property, Developer shall provide for perpetual funding of the on-going costs of operation, maintenance and replacement for the streets, traffic signals, streetlights, sidewalks, and street sweeping that will serve the Property (including all costs required PG&E), by doing one of the following, subject to the approval of the City’s Finance Director:
Community Facilities District (CFD). Developer shall enter into an agreement with the City, to be signed by the Finance Director, which shall be recorded against the Property, which requires that prior to the final inspection, Developer shall complete the annexation of the Property to City of Tracy Community Facilities District in compliance with the requirements of the Mello – Roos Community Facilities Act of 1982 (Gov. Code § 53311 et seq.) including, without limitation, affirmative votes, and the recordation of a Notice of Special Tax Lien. Developer shall be responsible for all costs associated with the CFD proceedings.
Or
a. POA and dormant CFD. If the POA is the chosen funding mechanism, Developer must do the following:
Conditions of Approval Exhibit 1
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1) Form a Property Owner’s Association (POA) or other maintenance association, with CC&Rs reasonably acceptable to the City, to assume the obligation for the on-going costs of operation, maintenance and replacement for the streets, traffic signals, streetlights, sidewalks, and street sweeping that will serve the Property (including all costs required by PG&E);
2) Cause the POA to enter into an agreement with the City, in a form to be approved by the City and to be recorded against the Property prior to the final inspection, setting forth, among other things, the required maintenance obligations, the standards of maintenance, and all other associated obligation(s) to ensure the long-term maintenance by the POA for the streets, traffic signals, streetlights, sidewalks, and street sweeping that will serve the Property;
3) Before final inspection, annex into a CFD in a "dormant" capacity, to be triggered if the POA fails (as determined by the City in its sole and exclusive discretion) to perform the required level of operation, maintenance and replacement for the streets, traffic signals, streetlights, sidewalks, and street sweeping that will serve the Property. The dormant tax or assessment shall be disclosed to all property owners, even during the dormant period.
Or
b. Direct funding. Developer shall enter into an agreement with the City, which shall be recorded against the Property, which requires that prior to approval of final inspection, Developer shall deposit with the City an amount necessary, as reasonably determined by the City, to fund in perpetuity the on-going costs of operation, maintenance and replacement for the streets, traffic signals, streetlights, sidewalks, and street sweeping that will serve the Property (including all costs required PG&E).
If the provisions for adequate funding of the on-going costs of operation, maintenance and replacement for the streets, traffic signals, streetlights, sidewalks, and street sweeping that will serve the Property (including all costs required PG&E) are met prior to issuance of the building permit for the Property, subject to the Finance Director’s review and approval, the terms of this condition shall be considered to have been met and this condition shall become null and void.
21. Landscaping Maintenance
Prior to issuance of any building permit for the Property, Developer shall provide for perpetual funding of the on-going costs of operation, maintenance and replacement Conditions of Approval Exhibit 1
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for public landscaping for the Property at a high-quality service level as determined by the Public Works Director by doing one of the following, subject to the approval of the City’s Finance Director:
a. CFD or other funding mechanism. The Developer shall enter into an agreement with the City, which shall be recorded against the Property, which stipulates the following: (1) prior to issuance of a building permit, the Developer shall form or annex into a Community Facilities District (CFD) for funding the on-going costs related to maintenance, operation, repair and replacement of public landscaping, public walls and any public amenities included in the Project, and ongoing public landscaping maintenance costs associated with major program roadways identified in the Citywide Roadway and Transportation Master Plan; (2) the items to be maintained include but are not limited to the following: ground cover, turf, shrubs, trees, irrigation systems, drainage and electrical systems; masonry walls or other fencing, entryway monuments or other ornamental structures, furniture, recreation equipment, hardscape and any associated appurtenances within medians, parkways, dedicated easements, channel-ways, public parks, and public open space areas and trails; (3) formation of the CFD shall include, but not be limited to, affirmative votes and the recordation of a Notice of Special Tax Lien; (4) upon successful formation, the parcels will be subject to the maximum special tax rates as outlined in the Rate and Method of Apportionment; (5) prior to issuance of a building permit, the Developer shall deposit an amount equal to the first year's taxes; and (6) the Developer shall be responsible for all costs associated with formation or annexation of the CFD.
Or
b. POA and dormant CFD. If the POA is the chosen funding mechanism, the Developer must do the following:
1. Form a Property Owner’s Association (POA) or other maintenance association, with CC&Rs reasonably acceptable to the City, to assume the obligation for the on-going maintenance of all public landscaping areas that will serve the Property;
2. Cause the POA to enter into an agreement with the City, in a form to be approved by the City and to be recorded against the Property prior to the final inspection, setting forth, among other things, the required maintenance obligations, the standards of maintenance, and all other associated obligation(s) to ensure the long-term maintenance by the POA of all public landscape areas that will serve the Property;
3. Make and submit to the City, in a form reasonably acceptable to the City, an irrevocable offer of dedication of all public landscape areas that will serve the Property;
4. Before final inspection, annex into a CFD in a "dormant" capacity, to be triggered if the POA fails (as determined by the City in its Conditions of Approval Exhibit 1
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sole and exclusive discretion) to perform the required level of public landscape maintenance. The dormant tax or assessment shall be disclosed to all property owners, even during the dormant period.
Or
c. Direct funding. The Developer shall enter into an agreement with the City, which shall be recorded against the Property, which stipulates that prior to issuance of a building permit, the Developer shall deposit with the City an amount necessary, as reasonably determined by the City, to fund in perpetuity the full on-going maintenance costs related to maintenance, operation, repair and replacement of public landscaping, public walls and any public amenities included in the Project, and ongoing public landscaping maintenance costs associated with major program roadways identified in the Citywide Roadway and Transportation Master Plan. The items to be maintained include but are not limited to the following:
ground cover, turf, shrubs, trees, irrigation systems, drainage and electrical systems, masonry walls or other fencing, entryway monuments or other ornamental structures, furniture, recreation equipment, hardscape and any associated appurtenances within medians, parkways, dedicated easements, channel-ways, public parks, and public open space areas and trails.
C. Engineering Division Conditions of Approval
C.1. General Conditions
Devel
oper shall comply with the applicable sections of approved documents and/or recommendations of the technical analyses/reports prepared for the Project listed as follows:
1) Traffic Memorandum prepared by Kimley Horn and Associates dated October 17, 2019.
2) Storm Drain Memorandum by Storm Water Consultants dated October 7, 2019. 3) Water Supply Memorandum by Black Water Consulting Engineers dated October 17, 2019.
4) Sanitary Sewer Memorandum by Black Water Consulting Engineers yet to be completed.
C.2. R
ESERVED
C.3. RESERVED
C.4. Grading Permit
Conditions of Approval Exhibit 1
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All grading work (on-site and off-site) shall require a Grading Plan. All grading work shall be performed and completed in accordance with the recommendation(s) of the Project’s Registered Geotechnical Engineer. The City will not accept a Grading Permit application for the Project until Developer provides all documents related to said Grading Permit required by the applicable City Regulations and these Conditions of Approval, to the satisfaction of the City Engineer, including, but not limited to, the following:
C.4.1 Developer has completed all requirements set forth in this section.
C.4.2 Developer has obtained the approval (i.e. recorded easements for slopes, drainage, utilities, access, parking, etc.) of all other public agencies and/or private entities with jurisdiction over the required public and/or private facilities and/or property. Written permission from affected owner(s) will be required to be submitted to the City prior to the issuance of the Grading Permit.
C.4.3 Developer has obtained a demolition permit to remove any existing structure located within the project’s limits.
C.4.4 All existing on-site water well(s), septic system(s), and leech field(s), if any, shall be abandoned or removed in accordance with the City and San Joaquin County requirements. Developer shall be responsible for all costs associated with the abandonment or removal of the existing well(s), septic system(s), and leech field(s) including the cost of permit(s) and inspection. Developer shall submit a copy of written approval(s) or permit(s) obtained from San Joaquin County regarding the removal and abandonment of any existing well(s), prior to the issuance of the Grading Permit.
C.4.5 The Improvement Plans for all improvements to serve the Project (on-site and off-site) including the Grading and Drainage Plans shall be prepared in accordance with the City’s Subdivision Ordinance (TMC Chapter 12.36), City Design Documents as defined in Title 12 of the TMC, and these Conditions of Approval.
Conditions of Approval Exhibit 1
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C.4.6 On-sit e Grading/Drainage Plans and Improvement Plans shall be prepared on a twenty-four (24) inch x thirty-six (36) inch size four (4) millimeter thick polyester film (mylar). These plans shall use the City’s Title Block. Improvement Plans shall be prepared under the supervision of, stamped and signed by a Registered Civil Engineer and Registered Geotechnical Engineer. Developer shall obtain all applicable signatures by City departments and outside agencies (where applicable) on the mylars including signatures by the Fire Marshal prior to submitting the mylars to Engineering Division for City Engineer’s signature.
Erosion control measures shall be implemented in accordance with the Improvement Plans approved by the City Engineer for all grading work. All grading work not completed before October 15 may be subject to additional requirements as applicable. Improvement Plans shall specify all proposed erosion control methods and construction details to be employed and specify materials to be used during and after the construction.
C.4.7 P
ayment of the applicable Grading Permit fees which include grading plan checking and inspection fees, and other applicable fees as required by these Conditions of Approval.
C.4.8 For
Projects on property larger than one (1) acre: Prior to the issuance of the Grading Permit, Developer shall submit to the Utilities Department ([email protected]) one (1) electronic copy and one (1) hard copy of the Storm Water Pollution Prevention Plan (SWPPP) as submitted in Stormwater Multiple Applications and Reporting Tracker System (SMARTS) along with either a copy of the Notice of Intent (NOI) with the state-issued Wastewater Discharge Identification number (WDID) or a copy of the receipt for the NOI. After the completion of the Project, the Developer is responsible for filing the Notice of Termination (NOT) required by SWQCB, and shall provide the City, a copy of the completed Notice of Termination. Cost of preparing the SWPPP, NOI and NOT including the annual storm drainage fees and the filing fees of the NOI and NOT shall be paid by the Developer. Developer shall comply with all the requirements of the SWPPP, applicable Best Management Practices (BMPs) and the Stormwater Post-Construction Standards adopted by the City in 2015 and any subsequent amendment(s).
For Pr
ojects on property smaller than one (1) acre: Prior to the issuance of the Grading Permit, the Developer shall submit to the Utilities Department ([email protected]) one (1) electronic copy and 1 hard copy of the City of Tracy Erosion and Sediment Control Plan (ESCP) for approval. Cost of preparing the ESCP including any annual storm drainage fees shall be paid by the Developer. Developer shall comply with all the requirements of the Conditions of Approval Exhibit 1
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ESCP, applicable BMPs and the Post-Construction Stormwater Standards adopted by the City in 2015 and any subsequent amendment(s).
C.4.9 D eveloper shall provide a PDF copy of the Project’s Geotechnical Report signed and stamped by a Registered Geotechnical Engineer. The technical report must include relevant information related to soil types and characteristics, soil bearing capacity, compaction recommendations, retaining wall recommendations, if necessary, paving recommendations, paving calculations such as gravel factors, gravel equivalence, etc., slope recommendations, and elevation of the highest observed groundwater level.
C.4.10 Minor Retaining – Developer shall use reinforced or engineered masonry blocks for retaining soil at property lines when the grade differential among the in-tract lots exceeds twelve (12) inches. Developer will include construction details of these minor retaining walls with the on-site Grading and Drainage Plan.
Developer may use slopes among the lots to address the grade differential but said slope shall not exceed a slope gradient of 3 (horizontal) to 1 (vertical) unless a California licensed geotechnical engineer signs and stamps a geotechnical report letter that supports a steeper slope gradient. Slope easements may be required and will be subject to approval by the City Engineer.
Minor Retaining along Project Perimeter – Developer shall use reinforced or engineered masonry blocks for retaining soil along the Project boundary and adjacent property(s) when the grade differential exceeds 12-inches. Developer will include construction details for these minor retaining walls with the on-site Grading and Drainage Plan. Developer may use slopes to address the grade differential but said slope shall not exceed a slope gradient of 3 (horizontal) to 1 (vertical). Slope easements may be subject to approval by the City Engineer and if adjacent and affected property(s) owner(s) grants said easements.
Slopes are an acceptable option as a substitute to engineered retaining walls, where cuts or fills do not match existing ground or final grade with the adjacent property or public right of way, up to a maximum grade differential of two (2) feet, subject to approval by the City Engineer.
Conditions of Approval Exhibit 1
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Slope easements will be rec orded, prior to the issuance of the Grading Permit.
The Developer shall be responsible to obtain and record slope easement(s) on private properties, where it is needed to protect private improvements constructed within and outside the Project, and a copy of the recorded easement document must be provided to the City, prior to the issuance of the Grading Permit.
Walls - Developer shall show proposed retaining walls and masonry walls on the on-site Grading and Drainage Plan. The Developer is required to submit improvement plans, construction details, and structural calculations for retaining walls and masonry walls to Building and Safety. Retaining wall and masonry wall design parameters will be included in the geotechnical report.
C.4.
11 Developer shall provide a copy of the approved Incidental Take Minimization Measures (ITMM) habitat survey [San Joaquin County Multi-Species Habitat Conservation & Open Space Plan (SJMSCP)] from San Joaquin Council of Governments (SJCOG), if applicable.
C.4.
12 Developer shall provide a copy of the approved Air Impact Assessment (AIA) with an Indirect Source Review (ISR) from San Joaquin Valley Air Pollution Control District (SJVAPCD).
C.4.
13 Developer shall abandon or remove all existing irrigation structures, channels and pipes, if any, as directed by the City after coordination with the irrigation district, if the facilities are no longer required for irrigation purposes. If irrigation facilities including tile drains, if any, are required to remain to serve existing adjacent agricultural uses, the Developer will design, coordinate and construct required modifications to the facilities to the satisfaction of the affected agency and the City. Written permission from irrigation district or affected owner(s) will be required to be submitted to the City prior to the issuance of the Grading Permit. The cost of relocating and/or removing irrigation facilities and/or tile drains is the sole responsibility of the Developer.
C.4.
14 If the Project contains overhead utilities, the Developer shall underground existing overhead utilities such as electric, TV cable, telephone, and others.
Each dry utility shall be installed at the location approved by the respective Conditions of Approval Exhibit 1
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owner(s) of dry utility and the Developer shall coordinate such activities with each utility owner. All costs associated with the undergrounding shall be the sole responsibility of the Developer and no reimbursement will be due from the City. Developer shall submit undergrounding plans. Exempt from this condition are high voltage power lines along the Project’s northerly property line, if any.
C.4.15 If at any point during grading that the Developer, its contractor, its engineers, and their respective officials, employees, subcontractor, and/or subconsultant exposes/encounters/uncovers any archeological, historical, or other paleontological findings, the Developer shall address the findings as required per the General Plan Cultural Resource Policy and General Plan EIR; and subsequent Cultural Resource Policy or mitigation in any applicable environmental document.
C.4.16 Per the recommendation of SWC, Developer shall set the building’s finish floor at least one (1) foot above a top-of-curb elevation. Please review SWC’s technical memorandum for the precise location and other mitigations.
C.5. Improvement Agreement(s)
All construction activity involving public improvements will require a fully executed improvement agreement (Off-site, Subdivision, and/or Inspection). Any construction activity involving public improvements without a fully executed improvement agreement is prohibited. All public improvements shall be performed and completed in accordance with the recommendation(s) of the Project’s Registered Civil Engineer.
The City will not start writing any improvement agreement or schedule any improvement agreement to be approved by City Council for the Project until the Developer provides all documents related to said improvements required by the applicable City Regulations and these Conditions of Approval, to the satisfaction of the City Engineer, including, but not limited to, the following:
C.5.1. Off-site and/or Public Infrastructure Improvement Plans prepared on a 24- inch x 36-inch size 4-millimeter thick mylar that incorporate all requirements described in the documents described in these Conditions of Approval, the City’s Design Documents as defined in Title 12 of the Tracy Municipal Code.
Developer shall use the latest title block and, if necessary, contain a signature block for the Fire Marshal. Improvement Plans shall be prepared Conditions of Approval Exhibit 1
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under the supervision of, and stamped and signed by a Registered Civil, Traff
ic, Electrical, Mechanical Engineer, and Registered Landscape Architect for the relevant work. Developer shall obtain all applicable signatures by City departments and outside agencies (where applicable) on the mylars including signatures by Fire Marshal to submitting the mylars to Engineering Division for City Engineer’s signature. The improvement plans shall be prepared to specifically include, but not be limited to, the following items:
C.5.1
.a. All existing and proposed utilities such as domestic water line, irrigation service, fire service line, storm drain, and sanitary sewer, including the size and location of the pipes.
C.5.1
.b. All supporting engineering calculations, materials information or technical specifications, cost estimate, and technical reports. All improvement plans shall contain a note stating that the Developer (or Contractor) will be responsible to preserve and protect all existing survey monuments and other survey markers such as benchmarks.
C.5.
1.c. A PDF copy of the Project’s Geotechnical/Soils Report, prepared or signed and stamped by a Registered Geotechnical Engineer. The technical report must include relevant information related to street pavement thickness, materials, compaction and other pertinent information.
C.5.1.d. Storm Water - The Project’s on-site storm water drainage connection to the City’s storm water system shall be approved by the City Engineer. Drainage calculations for the sizing of the on- site storm drainage system. Improvement Plans to be submitted with the hydrology and storm water.
Stor
m drainage release point is a location at the boundary of the Project adjacent public right-of-way where storm water leaves the Property, in a storm event and that the Property’s on-site storm drainage system fails to function or it is clogged. Site grading shall be designed such that the Project’s storm drainage overland release point will be directly to an adjacent public right-of-way with a functional storm drainage system and the existing storm drainage line has adequate capacity to drain storm water from the Property.
The storm drainage release point is recommended to be at least
0.70-feet lower than the building finish floor elevation and shall be designed and improved to the satisfaction of the City Engineer.
Conditions of Approval Exhibit 1
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The Project’s permanent storm drainage connection(s) shall be designed and constructed in accordance with City Regulations. The design of the permanent storm drainage connection shall be shown on the Grading and Drainage Plans with calculations for the sizing of the storm drain pipe(s), and shall comply with the applicable requirements of the City’s storm water regulations adopted by the City Council in 2012 and any subsequent amendments.
Developer shall construct a storm water quality treatment basin.
Developer and its heirs (i.e. apartment complex owner) shall be responsible for repairing and maintaining the on-site storm water system and treatment basin at the Developer’s (and heirs’) sole cost and expense.
C.5.1.e. Sanitary Sewer
- It is the Developer’s responsibility to design and
construct the Project’s permanent on-site sanitary sewer (sewer) improvements including the Project’s sewer connection in accordance with the City’s Design Standards, City Regulations and Standard Specifications. Sewer improvements shall include but not limited to, replacing asphalt concrete pavement, reconstructing curb, gutter and sidewalk, restoring pavement marking and striping, and other improvements that are disturbed as a result of installing the Project’s permanent sewer connection. Developer shall submit improvement plans that include the design of the sewer line from the Property to the point of connection. Developer shall also construct the recommended mitigations from the sanitary sewer technical memorandum.
C.5.1.g. Water Distribution - Developer shall design and construct domestic and irrigation water service that comply with the City Regulations.
Water line sizing, layout and looping requirements for this Project shall comply with City Regulations. During the construction of the Project, the Developer is responsible for providing water infrastructure (temporary or permanent) capable of delivering Conditions of Approval Exhibit 1
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adequate fire flows and pressure appropriate to the various stages of cons
truction and as approved by the Fire Marshal.
Inte
rruption to the water supply to the existing businesses and other users will not be allowed to facilitate construction of improvements related to the Project. Developer shall be responsible for notifying business owner(s) and users, regarding construction work. The written notice, as approved by the City Engineer, shall be delivered to the affected residents or business owner(s) at least seventy-two (72) hours before start of work. Prior to starting the work described in this section, the Developer shall submit a Work Plan acceptable to the City that demonstrates no interruptions to the water supply, and Traffic Control Plan to be used during the installation of the off-site water mains and connections.
The Pr
oject’s water service connections shall use a remote -read (radio-read) master water meter (the water meter to be located within City's right- of-way) and a Reduced Pressure Type back - flow protection device in accordance with City Regulations. The domestic and irrigation water service c onnection(s) must be completed before the inspection of the building. The location of the meters shall be approved by the City Engineer.
Aft
er improvement acceptance, repair and maintenance of the water service from the water meter to the point of conne ction with the water distribution main in the street shall be the responsibility of the City. Water service repairs after the water meter is the responsibility of the Developer or individual lot owner(s).
Pri
or to improvement acceptance, repair and maintenance of all on-site water lines, laterals, sub -water meters, valves, fittings, fire hydrant and appurtenances shall be the responsibility of the Developer or the individual lot owner(s).
Conditions of Approval Exhibit 1
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All costs associated with the installation of the Project’s water connection(s) including the cost of removing and replacing asphalt concrete pavement, pavement marking and striping such as crosswalk lines and lane line markings on existing street or parking area(s) that may be disturbed with the installation of the permanent water connection(s), or domestic water service, and other improvements shall be paid by the Developer.
Fire Service Line – Location and construction details of fire service line including fire hydrant(s) that are to serve the Project shall be approved by the Fire Marshal. Prior to the approval of the Improvement Plans by the City Engineer, the Developer shall obtain written approval from the Fire Marshal, for the design, location and construction details of the fire service connection to the Project, and for the location and spacing of fire hydrants that are to be installed or planned to serve the Project.
C.5.1.h. Streets – Developer shall construct their frontage improvements.
Frontage improvements include but are not limited to the following:
curb, gutter, sidewalk, street widening, landscaping, street lighting, undergrounding of overhead utilities and other improvements.
All
streets and utilities improvements within City right-of-way shall be designed and constructed in accordance with City
Regulations, and City’s Design Standards including the City’s Facilities Master Plan for storm drainage, roadways, wastewater, and water as adopted, amended, and updated by the City, or as otherwise specifically approved by the City.
All proposed public street widths and cross sections shall conform to the 2012 Transportation Master Plan (TMP).
Corral Hollow Road
Developer will construct the new commercial driveways per Standard Detail 133. Developer shall dedicate a ten (10) feet wide Public Utility Easement on all public streets if the easement is not present.
Conditions of Approval Exhibit 1
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Devel
oper shall construct driveways that conform to Section
3.09(F) of the 2008 Design Standards. Driveways shall have one and half (1.5) feet of full-height (i.e. six (6) inches) of vertical curb from the driveway’s edge. Driveways shall be fire truck accessible to the satisfaction of the City Engineer.
Devel
oper shall use existing utility stubs. If the stubs are not present or unusable or additional utility connections are required, the pavement restoration shall conform to C.8.1 of these Conditions.
On t
he west side of Corral Hollow Road, Developer shall landscape and irrigate the existing area as per current adopted City landscape standards. Landscape and irrigation plans shall be prepared on a 24-inch x 36-inch size 4-millimeter thick mylar that incorporate all requirements described in the documents described in these Conditions of Approval, the City’s Design Documents as defined in Title 12 of the Tracy Municipal Code. Developer shall use the latest title block. Said landscape and irrigation plan shall be prepared by a California licensed landscape architect. Developer can either protect-in-place the existing sidewalk and repair any cracked, settled, and/or damaged sidewalk or remove and replace the sidewalk so long as the replacement sidewalk is similar to the current sidewalk, i.e. similar width, meanders, etc. Developer shall also install street trees in the landscaped area between the existing meandering sidewalk and the curb and gutter. On the opposite side of the sidewalk, Developer shall install additional street trees, shrubs, ground cover, and other landscaping as required. The landscaping and irrigation shall conform to MWELO standards. If recommended, Developer shall use structural soil if the street trees’ well is narrower than five (5) feet wide. Developer shall also remove existing sign monument and its appurtenances, and any other existing items such as bollards, mailboxes, etc.
C.5.
2. Joint Trench Plans and Composite Utility Plans, prepared on a twenty-four (24) inch x thirty-six (36) inch size four (4) millimeter thick mylar for the installation of dry utilities such as electric, gas, TV cable, telephone, and Conditions of Approval Exhibit 1
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others that will be located wit hin the twenty-four (24) feet wide to forty-six (46) feet wide [the width varies) PUE to be installed to serve the Project. All private utility services to serve Project must be installed underground or relocated to be underground, and to be installed at the location approved by the respective owner(s) of the utilities from the street or an existing or proposed utility easement to the building(s). If necessary, the Developer shall dedicate twenty-two (22) feet wide PUE for access to these new utilities for re-installation, replacement, repair, and maintenance work to be performed by the respective utility owner(s) in the future.
C.5.
3. Signed and stamped Engineer’s Estimate that summarizes the cost of constructing all the public improvements shown on the Improvement Plans.
The cost estimate shall show the cost of designing the public improvements.
Paym
ent of applicable fees required by these Conditions of Approval and City Regulations, including but not limited to, plan checking, grading and encroachment permits and agreement processing, construction inspection, and testing fees. The engineering review fees will be calculated based on the fee rate adopted by the City Council on September 2, 2014, per Resolution 2014-141 and on May 16, 2017, per Resolution 2017-098. Developer shall submit payment in the form of a check for the aforementioned fees.
C.5.5. Traffic Control Plan - Prior to starting the work for any work within City’s right- of-way, the Developer shall submit a Traffic Control Plan (TCP). TCP can be split among the different construction phases. TCP will show the method and type of construction signs to be used for regulating traffic at the work areas within these streets. TCP shall conform to the Manual on Uniform Traffic Control Devices as amended by the State of California, latest edition (MUTCD-CA). TCP shall be prepared under the supervision of, signed and stamped by a Registered Civil Engineer or Registered Traffic Engineer.
Access and Traffic Circulation to Existing Businesses/Residents - Developer shall take all steps necessary to plan and construct site improvements such that construction operations do not impact safety and access (including emergency vehicles) to the existing businesses and residents throughout the duration of construction. Developer shall coordinate with the owners and cooperate to minimize impacts on existing businesses. All costs of measures needed to provide safe and functional access shall be borne by the Developer.
Conditions of Approval Exhibit 1
Tracy Assisted Living and Memory Care Facility
April 5, 2022
C.5.6. No street trench shall be left open, uncovered, and/or unprotected during night hours and when the Developer’s contractor is not performing construction activities. Appropriate signs and barricades shall be installed on the street and on all trenches during such times. If the Developer or its contractor elects to use steel plates to cover street trenches, said steel plates will be skid-resistance, and shall be ramped on all sides. Ramps will be a minimum two-foot wide and will run the entire length of each side.
C.5.7. If at any point during utility installation or construction in general that the Developer, its contractor, its engineers, and their respective officials, employees, subcontractor, and/or subconsultant
exposes/encounters/uncovers any archeological, historical, or other paleontological findings, the Developer shall address the findings as required per the General Plan Cultural Resource Policy and General Plan EIR; and subsequent Cultural Resource Policy or mitigation in any applicable environmental document.
C.5.8 On-site Private Improvements - Prior to the Developer commencing construction of on-site, in-tract public and private improvements, Developer shall possess a fully executed Grading Permit. Developer shall also complete all of the following requirements to the satisfaction of the City Engineer:
Developer has received City signed improvement plans.
Developer has paid all required processing fees including plan check and inspection fees.
Improvement Security - Developer shall provide improvement security for all public facilities, as required by the Improvement Agreement. The form of the improvement security may be a bond, or other form in accordance with the Government Code, and the TMC. The amount of the improvement security shall be in accordance with Title 12 of the TMC. Monumentation Bonds shall be seven hundred fifty ($750.00) dollars multiplied by the total number of street centerline monuments plus one hundred twenty-five ($125) dollars multiplied by the total number of legal lots that are shown on the Final Map.
Conditions of Approval Exhibit 1
Tracy Assisted Living and Memory Care Facility
April 5, 2022
Insurance –Developer shall provide written evidence of insurance coverage that meets the terms of the Improvement Agreement.
C.5.9 Off-site Public Improvements - Prior to the Developer commencing construction of off-site public improvements, Developer shall possess a fully executed Off-site Improvement Agreement (OIA. Developer shall also complete all of the following requirements to the satisfaction of the City Engineer:
Devel
oper has received City signed improvement plans.
Devel
oper has paid all required processing fees including plan check and inspection fees.
Improvement Security - Developer shall provide improvement security for all public facilities, as required by the Improvement Agreement. The form of the improvement security may be a bond, or other form in accordance with the Government Code, and the TMC. The amount of the improvement security shall be in accordance with Title 12 of the TMC.
Insurance – Developer shall provide written evidence of insurance coverage that meets the terms of the Improvement Agreement.
C.6. Building Permit
No buil
ding permit within the Project boundaries will be approved by the City until the Developer demonstrates, to the satisfaction of the City Engineer, compliance with all required Conditions of Approval, including, but not limited to, the following:
C.6.1 D
eveloper has completed all requirements set forth in Condition C.1, through C.5, above.
Conditions of Approval Exhibit 1
Tracy Assisted Living and Memory Care Facility
April 5, 2022
C.6.2 D
eveloper pays the applicable development impact fees as required in the TMC, these Conditions of Approval, and City Regulations.
C.7 Acceptance of Public Improvements
Publi
c improvements will not be considered for City Council’s acceptance until after the Developer demonstrates to the reasonable satisfaction of the City Engineer, completion of the following:
C.7.1 D
eveloper has satisfied all the requirements set forth in these Conditions of Approval.
C.7.2 D
eveloper submitted the Storm Water Treatment Facilities Maintenance Agreement (STFMA) to the Utilities Department.
C.7.3 D
eveloper has satisfactory completed construction of all required/conditioned improvements. Unless specifically provided in these Conditions of Approval, or some other applicable City Regulations, the Developer shall use diligent and good faith efforts in taking all actions necessary to construct all public facilities required to serve the Project, and the Developer shall bear all costs related to construction of the public facilities (including all costs of design, construction, construction management, plan check, inspection, land acquisition, program implementation, and contingency).
C.7.4 Ce
rtified “As-Built” Improvement Plans (or Record Drawings). Upon completion of the construction by the Developer, the City, at its sole discretion, temporarily release the original mylars of the Improvement Plans to the Developer so that the Developer will be able to document revisions to show the "As-Built" configuration of all improvements. Developer shall also provide the Project’s CADD files to the City.
Conditions of Approval Exhibit 1
Tracy Assisted Living and Memory Care Facility
April 5, 2022
C.7.5 Developer shall be responsible for any repairs or reconstruction of street pavem
ent, curb, gutter and sidewalk and other public improvements along the frontage of the Project, if determined by the City Engineer to be in poor condition or damaged by construction activities related to the Project.
C.7.6 D
eveloper has completed the ninety (90) day public landscaping maintenance period.
C.7.7 P
er Section 21107.5 of the California Vehicle Code, Developer shall install signs at all entrance(s) of the Project stating that the streets are privately owned and maintained and are not subject to the public traffic regulations or control. Said signs must be conspicuously placed, plainly visible, and legible during daylight hours from a distance of one hundred (100) feet.
C.7.8 Release of Security – Release of improvement security shall be in accordance with the requirements of Title 12 of the TMC. Monumentation Bond will be released to the Developer after City Council’s acceptance of the public improvements and if the Developer meets the terms set in Section 66497(c) of the Subdivision Map Act. All survey monuments shown on the Final Map must be installed. Any altered, damaged, or destroyed survey monuments and/or benchmarks shall be re-established. Developer shall submit centerline tie sheets or a record of survey for the following: new public streets; re-established survey monuments, and/or benchmarks. If the Developer destroyed, altered, and/or reconstructed any existing curb returns, Developer shall also submit corner records. Any survey document will be submitted the City and to the San Joaquin County Surveyor to comply with California Business and Professions Code Section 8771(c). Said work shall be executed by a California licensed Land Surveyor at the Developer’s sole expense.
C.8 Special Conditions
C.8.1 W
hen street cuts are made for the installation of utilities, the Developer shall conform to Section 3.14 of the 2008 Design Standards and is required install a two (2) inch thick asphalt concrete (AC) overlay with reinforcing fabric at least twenty-five (25) feet from all sides of each utility trench. A two (2) inch Conditions of Approval Exhibit 1
Tracy Assisted Living and Memory Care Facility
April 5, 2022
deep grind on the existing AC pavement will be required where the AC overl
ay will be applied and shall be uniform thickness in order to maintain current pavement grades, cross and longitudinal slopes. This pavement repair requirement is when cuts/trenches are perpendicular and parallel to the street’s direction.
C.8.2 N
othing contained herein shall be construed to permit any violation of relevant ordinances and regulations of the City of Tracy, or other public agency having jurisdiction. This Condition of Approval does not preclude the City from requiring pertinent revisions and additional requirements to the improvement plans, prior to the City Engineer’s signature on the improvement plans, and prior to issuance of Grading Permit, Encroachment Permit, Building Permit, if the City Engineer finds it necessary due to public health and safety reasons, and it is in the best interest of the City. The Developer shall bear all the cost for the inclusion, design, and implementations of such additions and requirements, without reimbursement or any payment from the City.
C.8.3 I
f water is required for the project, the Developer shall obtain an account for the water service and register the water meter with the Finance Department.
Developer shall pay all fees associated with obtaining the account number for the water service.
C.8.4 D
eveloper shall obtain an account for the water service to the Project and register the water meter with the Finance Department. Developer shall prepare and submit a map depicting the location of the water meter on a 8.5-inch X 11- inch sheet to Finance Department.
C.8.5 Project Entrance: As stipulated by Section 5.17 of the 2008 Design Standards, a PCC valley gutter is prohibited in the City’s right-of-way.
April 5, 2022
AGENDA ITEM 3.E
REQUEST
WITH R
ESPECT TO THE PROPOSED FINANCING OF LEGACY FIELDS SPORTS COMPLEX, PHASE 1E:
1) CITY COUNCIL HOLD A PUBLIC HEARING RELATING TO THE ISSUANCE OF
LEASE REVENUE BONDS BY THE TRACY PUBLIC FINANCING AUTHORITY 2) CITY COUNCIL ADOPT A RESOLUTION APPROVING THE ISSUANCE OF
LEASE REVENUE BONDS BY THE TRACY PUBLIC FINANCING AUTHORITY
AND RELATED DOCUMENTS AND ACTIONS
3) TRACY PUBLIC FINANCING AUTHORITY BOARD OF DIRECTORS ADOPT A
RESOLUTION AUTHORIZING THE ISSUANCE AND SALE OF LEASE REVENUE
BONDS, AND APPROVING RELATED DOCUMENTS AND ACTIONS
EXECUTIVE
SUMMARY
On Marc
h 22, 2022, the City Council awarded a construction contract for the Legacy Fields Sports Complex, Phase 1E Project CIP 78185 (the “Phase 1E Project”).
Staff
recommends that the City Council and the Board of Directors of the Tracy Public Financing Authority (the "Authority") take the steps required for the Authority to issue lease revenue bonds to finance the Phase 1E Project. The debt service on the lease revenue bonds will be paid from lease payments made by the City, and the lease payments are expected to be paid from Measure V funds.
DISCUSSI
ON
MEASURE
V FUNDING; PHASE 1E PROJECT
City vote
rs approved a general sales tax measure (Measure V) on November 8, 2016, resulting in an additional 0.5% sales tax for 20 years.
On Marc
h 23, 2021, the City Council gave direction to staff to fully fund the Phase 1E Project through public financing and Measure V. On November 2, 2021, City Council approved increasing the budget of the Phase 1E Project to $21 million based on inflationary cost increases, and staff received direction to proceed with public financing for a 15-year term.
On March
22, 2022, the City Council awarded a construction contract for the Phase 1E Project.
With co
mpletion of the Phase 1E Project, Legacy Fields will consist of 72 acres of baseball, softball and soccer fields. The first phase of Legacy Fields broke ground in April of 2012 and since that time three additional phases have been completed as funding has been available. The Phase 1E Project will complete Phase 1 of Legacy Fields and will help attract the regional, state and national events that Council envisions for the complex.
Agenda Item 3.E
April 5, 2022
LEASE FINANCINGS
Califor
nia cities commonly use lease financing to pay for capital improvements through their general fund without first holding a city-wide election. Lease financings are commonly structured as lease revenue bonds issued by a joint powers authority (a separate public agency formed to provide assistance with financings). Under a lease revenue bond financing, the city is obligated to make lease payments to the joint powers authority for the right to use and occupy a public building, and the joint powers authority assigns its right to receive the lease payments to a bond trustee; the bond trustee uses the lease payments to pay debt service on lease revenue bonds that are sold to investors. In lease financing structures, cities covenant to annually budget and appropriate from the general fund for the lease payments.
TRACY PU
BLIC FINANCING AUTHORITY
The City
and the Tracy Industrial Development Authority (the “Industrial Development Authority”) are parties to a First Amended and Restated Joint Powers Agreement, dated as of October 17, 2018 (the “Joint Powers Agreement”), pursuant to which the Authority was established as a joint exercise of powers authority under the Joint Exercise of Powers Act (Government Code §6500 et seq.) (the “Joint Powers Law”) for the purpose of providing assistance to the City and the Industrial Development Authority with their financing programs, and for any other purposes authorized under Article 4 of the Joint Powers Law (the “Bond Law”).
PROPOSED L
EASE REVENUE BONDS
Staff re
commends the following actions:
Public H
earing. Staff recommends that the City Council hold a public hearing on the proposed issuance of lease revenue bonds by the Authority, as required by the Bond Law.
City and Author
ity Approvals. Staff recommends that the City Council and the Board of Directors of the Authority adopt resolutions:
(i) approving t
he issuance by the Authority of its Tracy Public Financing Authority Lease Revenue Bonds, Series 2022A (Legacy Fields Phase 1E) (the “Lease Revenue Bonds”),
(ii) approving
the sale of the Lease Revenue Bonds to Piper Sandler & Co. (the “Underwriter”),
(iii) approving the documents related to the Lease Revenue Bonds, including a Preliminary Official Statement, and
(iv) authoriz
ing staff to take all necessary actions related to issuance of the Lease Revenue Bonds.
Agenda Item 3.E
April 5, 2022
TERMS OF THE LEASE REVENUE BONDS
Pursuant
to the resolutions, the true interest cost of the Lease Revenue Bonds cannot exceed 5.00% and the principal amount of the Lease Revenue Bonds cannot exceed $22,000,000.
Governm
ent Code Section 5852.1 requires the City to obtain and disclose a good faith estimate of certain information about the Lease Revenue Bonds, including the true interest cost, the financing costs, the use of proceeds and the total payment amount, and this information is included in Appendix A of the proposed resolutions. Based upon current market conditions, the Lease Revenue Bonds are estimated to be issued in the amount of $18,330,000, which does not include approximately $2,000,000 of net premium estimated to be generated, for total gross bond proceeds of $20,330,000. Net premium is generated when, on a net aggregate basis for a single issuance of bonds, the price paid for such bonds is higher than the face value of such bonds. At current market conditions, the Lease Revenue Bonds are expected to carry a true interest cost of approximately 2.66%. The final interest rate on the Lease Revenue Bonds will not be determined until the bonds price in mid-April 2022.
DOCUMENTS
RELATED TO THE LEASE REVENUE BONDS
The proposed Lease
Revenue Bonds require the following documents:
• Site Lease
: Under a Site Lease, the City will lease the land and improvements constituting Phase 1 of Legacy Fields (the “Leased Property”) to the Authority to facilitate the lease financing.
• Lease Agreem
ent: Under a Lease Agreement, the Authority will sublease the Leased Property to the City. The City will covenant in the Lease Agreement to budget and appropriate for the scheduled lease payments – in an amount sufficient to pay debt service on the Lease Revenue Bonds – on an annual basis.
If the City fails to make the scheduled lease payments, the trustee for the Lease Revenue Bonds (the “Trustee”) could sue the City to make the scheduled lease payments or the Trustee could take possession of and re-let the Leased Property. During construction of the Phase 1E Project, Phase 1 of Legacy Fields will continue to be substantially available for use. The City will confirm in the Lease Agreement that the lease payments made by the City under the Lease Agreement represent fair rental value for the Leased Property. • Indenture
of Trust; Assignment Agreement: Under an Assignment Agreement and an Indenture of Trust, each between the Authority and U.S. Bank Trust Company, National Association, as Trustee, the Authority will assign to the Trustee its right to receive the lease payments that are payable by the City under the lease agreement. Under the Indenture of Trust, the Authority will issue the Lease Revenue Bonds; the Trustee will use the lease payments assigned to it to pay debt service on the Lease Revenue Bonds.
• Prelim
inary Official Statement. The Official Statement is the primary disclosure document for investors in the Lease Revenue Bonds. A Preliminary Official Statement will be circulated to potential investors prior to the pricing of the Lease Agenda Item 3.E
April 5, 2022
Revenue Bonds. After the Lease Revenue Bonds have been priced, a final Official Statement will be circulated to investors; the final Official Statement should be identical to the Preliminary Official Statement except for the addition of pricing information (principal amount, interest rates, redemption terms).
The Prelimin
ary Official Statement is prepared by Jones Hall, serving the City as Bond Counsel and Disclosure Counsel for this transaction, with the assistance of the remainder of the financing team, including City staff; CSG Advisors Incorporated, the City’s municipal advisor (“Municipal Advisor”); and the Underwriter.
The Prelimin
ary Official Statement has been reviewed and approved for transmittal to the City Council by the City’s financing team. The distribution of the Preliminary Official Statement by the City is subject to federal securities laws, including the Securities Act of 1933 and the Securities Exchange Act of 1934.
These laws require the Preliminary Official Statement to include all facts that would be material to an investor in the Lease Revenue Bonds. Material information is information that there is a substantial likelihood would have actual significance in the deliberations of the reasonable investor when deciding whether to buy or sell the bonds. If the City Council concludes that the Preliminary Official Statement includes all facts that would be material to an investor in the Lease Revenue Bonds, it must adopt a resolution that authorizes staff to execute a certificate to the effect that the Preliminary Official Statement has been “deemed final.”
The Securit
ies and Exchange Commission (the “SEC”), the agency with regulatory authority over the City’s compliance with the federal securities laws, has issued guidance as to the duties of the City Council with respect to its approval of the Preliminary Official Statement. In its “Report of Investigation in the Matter of County of Orange, California as it Relates to the Conduct of the Members of the Board of Supervisors” (Release No. 36761 / January 24, 1996) (the “Release”), the SEC stated that, if a member of the City Council has knowledge of any facts or circumstances that an investor would want to know about prior to investing in the Lease Revenue Bonds, whether relating to their repayment, tax-exempt status, undisclosed conflicts of interest with interested parties, or otherwise, he or she should endeavor to discover whether such facts are adequately disclosed in the Preliminary Official Statement. In the Release, the SEC stated that the steps that a member of the City Council could take include becoming familiar with the Preliminary Official Statement and questioning staff and consultants about the disclosure of such facts.
The key sect
ions of the Preliminary Official Statement are summarized below:
• “THE 2022 BO
NDS”: This section summarizes the key terms of the Lease Revenue Bonds, including payment dates and redemption provisions. • “SECURITY FOR THE 2022 BONDS”: This section summarizes key security terms, including the lease payments made by the City under the Lease Agreement described above.
Agenda Item 3.E
April 5, 2022
• “ CITY FINANCIAL INFORMATION”: This section summarizes financial and operating data that is material to the City’s ability to pay the lease payments.
• “BOND OWNERS’ RISKS”: This section highlights the primary risks associated with the Lease Revenue Bonds, most of which relate to the financial health of the City’s general fund.
• “ TAX MATTERS”: This section describes the tax-exempt nature of interest on the Lease Revenue Bonds.
• Continuing
Disclosure Certificate. Under SEC Rule 15c2-12, the underwriter of the Lease Revenue Bonds may only purchase the Lease Revenue Bonds if it has determined that the City is obligated to provide continuing disclosure, including annual updates of the financial and operating data included in the Official Statement and notices of certain specified events. The City will execute a Continuing Disclosure Certificate to provide ongoing information consistent with SEC Rule 15c2-12, and a form of the Continuing Disclosure Certificate is attached to the Preliminary Official Statement.
• Bond Purchas
e Agreement. At the time the Lease Revenue Bonds are sold, the City and the Authority will enter into a Bond Purchase Agreement with the Underwriter, who will agree to underwrite the Lease Revenue Bonds subject to satisfaction of the conditions described in the Bond Purchase Agreement. The resolution provides the Underwriter’s discount on the purchase of the Lease Revenue Bonds may not exceed 1.00% of the par amount of the Lease Revenue Bonds.
STRATEGI
C PLAN
This agenda item supports the City of Tracy’s Quality of Life Strategic Priority, and specifically implements the following goals:
Goal 2: Faci
litate the Completion of Measure V Amenities; Objective 3: Implement design of Measure V amenity and Objective 4: Break ground on Measure V amenity.
FISCAL IMPACT
The lease paym
ents to be made by the City under the Lease Agreement are expected to be paid with Measure V revenues (F307).
The fees and expens
es of the financing team, including Bond Counsel, Disclosure Counsel, Underwriter and Municipal Advisor are paid from proceeds of the Lease Revenue Bonds.
RECOMME
NDATION
That the
City Council hold a public hearing, and that the City Council and the Authority’s Board of Directors approve the resolutions described above.
Agenda Item 3.E
April 5, 2022
Prepared by: Karin Schnaider, Finance Director
Christopher
Lynch, Jones Hall
Scott Smith, CSG Advisors Incorporated
Reviewed by: Midori Lichtwardt, Assistant City Manager Approved by: Mi
chael Rogers, City Manager
ATTACHME
NTS
A. City of Tracy Resolution
B. Authority Board of Directors Resolution
C. Preliminary Official Statement (including Continuing Disclosure Certificates) D. Indenture of Trust
E. Lease Agreement
F. Site Lease
G. Assignment
Agreement
H. Bond Purchase Agreement
RESOLUTION NO. 2022-___
A RESOLUTION APPROVING DOCUMENTS AND ACTIONS
RELATING TO THE ISSUANCE AND SALE OF BONDS IN THE
AGGREGATE PRINCIPAL AMOUNT OF NOT TO EXCEED $22,000,000
BY THE TRACY PUBLIC FINANCING AUTHORITY TO PROVIDE
FINANCING FOR PUBLIC IMPROVEMENTS TO BE OWNED AND
OPERATED BY THE CITY, APPROVING RELATED DOCUMENTS AND
DIRECTING RELATED ACTIONS
RESOLVED, by the City Council (the “Council”) of the City of Tracy (the “City”), State of California that:
WHEREAS, the City wishes to finance the acquisition and construction of Phase 1E of the Legacy Fields Sports Complex (the “Project”); and WHEREAS, pursuant to Resolution No. 2019 -012 adopted on February 5, 2019, the Council previously declared its intention to reimburse itself for expenditures related to the Project with proceeds of tax-exempt obligations to be issued in a maximum principal amount of $10,000,000, and the City wishes to amend such Resolution to increase the maximum principal amount to $22,000,000; and WHEREAS, the City and the Tracy Industrial Development Authority (the “Industrial Development Authority”) are parties to a First Amended and Restated Joint Powers Agreement, dated as of October 17, 2018 (the “Joint Powers Agreement”), pursuant to which the Tracy Public Financing Authority (the “Authority”) was established as a joint exercise of powers authority under the Joint Exercise of Powers Act (Government Code §6500 et seq.) (the “Joint Powers Law”) for the purpose of providing assistance to the City and the Indus
trial Development Authority with their financing
programs, and for any other purposes authorized under Article 4 of the Joint Powers Law (the “Bond Law”); and
WHEREAS, the City has proposed to lease to the Authority the land and improvements constituting Phase 1 of the Legacy Fields Sports Complex (the “Leased Property”) under a Site Lease (the “Site Lease”), in consideration of the payment by the Authority of an upfront rental payment (the “Site Lease Payment”) that is sufficient to provide funds to finance the Project; and
WHEREAS, in order to raise funds to pay the Site Lease Payment, the Authority proposes to issue and sell its Tracy Public Financing Authority Lease Revenue Bonds, Series 2022A (Legacy Fields) (the “Bonds”) under the Bond Law; and WHEREAS, in order to secure the payments of principal of and interest on the Bonds, the Authority proposes to lease the Leased Property back to the City under a Lease Agreement (the “Lease Agreement”), under which the City is obligated to pay semiannual lease payments (the “Lease Payments”) as rental for the Leased Property, and, pursuant to an Assignment Agreement (the “Assignment Agreement”), the Authority will assign substantially all of its rights under the Lease Agreement to U.S. Bank Trust Company, National Association, as trustee for the Bonds; and
ATTACHMENT A
WHEREA
S, there has been submitted to the Council a form of prelim inary Official Statement in connection with the marketing of the Bonds and the Council, with the aid of its staff, has reviewed the preliminary Official Statement to assure proper disclosure of all material facts relating to the Bonds that are in the personal knowledge of the members of the Council and the City staff; and
WHEREAS,
the Authority and the City propose to sell the Bonds to Piper Sandler & Co. (the “Underwriter”) pursuant to a Bond Purchase Agreement (the “Bond Purchase Agreement”) among the City, the Authority and the Underwriter, the form of which is on file with the City Clerk; and
WHEREAS,
in order to assist the Underwriter in complying with Rule 15c2- 12 of the Securities and Exchange Commission, the City will undertake certain continuing disclosure obligations with respect to the Bonds pursuant to a continuing disclosure certificate to be executed by the City (the "Continuing Disclosure Certificate"), the form of which is on file with the City Clerk; and
WHEREAS, in
order to comply with Government Code Section 5852.1, certain information relating to the Bonds is set forth in Appendix A attached to this Resolution, and such information is hereby disclosed and made public; and
WHEREAS,
as a condition precedent to the issuance of the Bonds, Section 6586.5 of the California Government Code requires that the City approve the Authority’s issuance of the Bonds and make certain findings, and Section 6586.5 further requires that the City give the approval and make the findings only after holding a noticed public hearing; and
WHEREAS,
as required by Section 6586.5, the City has caused publication of a notice of a public hearing once at least five days prior to the hearing in a newspaper of general circulation in the City; and
WHEREAS, on
the date hereof, t he Council held a public hearing at which all interested persons were provided the opportunity to speak on the subject of the proposed issuance of Bonds by the Authority to provide financing for the Project; and WHEREAS, t
he Council wishes at this time to approve all proceedings to which it is a party relating to the issuance and sale of the Bonds; NOW, T
HEREFORE, BE IT RESOLVED as follows:
1. Recitals. The
foregoing recitals are true and correct.
2. Findings.
(a) Pursuant
to the Bond Law, and based on the information provided to the Council by City staff and consultants, all as set forth in the proceedings and documents providing for the issuance and delivery of the Bonds, the Council hereby finds and determines that the issuance of the Bonds and the transactions related thereto will result in significant public benefits within the contemplation of Section 6586 of the Bond Law, namely, demonstrable savings in bond preparation, bond underwriting and bond issuance costs.
Resolution 2022-
(b) The Ci
ty Council hereby finds that the fair rental value of the Leased Property is equal to or greater than the Lease Payments to be paid by the City under the Lease Agreement. The Council further hereby finds that the Leased Property will be substantially available for use and occupancy by the City during construction of the Project.
3. Issuance of B
onds. The Council hereby approves the issuance of the
Bonds by the Authority under the Bond Law in the maximum principal amount set forth in Section 5, for the purpose of providing funds to finance the Project.
4. Approval
of Related Financing Agreements . The Council hereby
approves each of the following agreements required for the issuance and sale of the Bonds, in substantially the respective forms on file with the City Clerk together with any changes therein or additions thereto deemed advisable by the Mayor, Vice-Mayor, City Manager, Assistant City Manager , City Attorney, Finance Director, or an authorized representative thereof (each, an “Authorized Officer”) ; execution of the agreements by an Authorized Officer shall be conclusive evidence of the approval of any such changes or additions. An Authorized Officer, acting alone, is hereby authorized and directed for and on behalf of the City to execute, and the City Clerk is hereby authorized and directed to attest, if applicable, the final form of each such agreement, as follows:
• Site Lease, between the City as lessor and the Authority as lessee, under which the City leases the Leased Property to the Authority in consideration of the payment of an amount which will be applied by the Authority to finance the Project.
• Lease Agreement, between the Authority as lessor and the City as lessee, under which the Authority leases the Leased Property back to the City and the City agrees to pay semiannual lease payments which are sufficient to provide revenues with which to pay principal of and interest on the Bonds when due.
• Bond Purchase Agreement, among the City, the Authority and the Underwriter, which establishes the terms under which the Underwriter will purchase the Bonds from the Authority.
• Continuing Disclosure Certificate, to be executed by the City for the purpose of providing continuing disclosure to owners of the Bonds.
The Council her
eby authorizes the delivery and performance of each of the foregoing agreements.
5. Negotiat
ed Sale of Bonds. The Council hereby approves the sale of the Bonds by the Authority to the Underwriter pursuant to the terms and provisions of the Bond Purchase Agreement, provided that the aggregate principal amount of the Bonds may not exceed $22,000,000, the true interest cost may not exceed 5.00% and the underwriter's discount (exclusive of any original issue discount) may not exceed 1.00%.
6. Officia
l Statement. The Council hereby approves the preliminary Official Statement describing the Bonds in substantially the form on file with the City Clerk. An Authorized Officer is hereby authorized and directed to approve any changes in or additions to the preliminary Official Statement and to execute an appropriate certificate Resolution 2022-
stat
ing the Authorized Officer’s determination that the preliminary Official Statement (together with any changes therein or additions thereto) has been deemed final within the meaning of Rule 15c2-12 of the Securities Exchange Act of 1934. Distribution of the preliminary Official Statement by the Underwriter is hereby approved. An Authorized Officer is hereby authorized and directed to approve any changes in or additions to a final form of said Official Statement, and the execution thereof by the Authorized Officer shall be conclusive evidence of approval of any such changes and additions. The Council hereby authorizes the distribution of the final Official Statement by the Underwriter. The final Official Statement shall be executed on behalf of the City by an Authorized Officer.
7. Am
endment of Resolution No. 2019- 012. The City Council hereby amends Resolution No. 2019- 012 to increase the maximum amount of the Obligations described in such Resolution to $22,000,000.
8. Off
icial Actions. The Authorized Officers, the City Clerk and all other officers of the City are each authorized and directed on behalf of the City to make any and all leases, assignments, certificates, requisitions, agreements, notices, consents, instruments of conveyance or termination, warrants and other documents, which they or any of them deem necessary or appropriate in order to consummate any of the transactions contemplated by the agreements and documents approved under this Resolution, including any agreements required to purchase a debt service reserve fund insurance policy or a municipal bond insurance policy. An Authorized Officer may revise the identity of the Leased Property as necessary in order to accomplish the purposes of this Resolution. Whenever in this Resolution any officer of the City is authorized to execute or countersign any document or take any action, such execution, countersigning or action may be taken on behalf of such officer by any person designated by such officer to act on his or her behalf in the case such officer is absent or unavailable.
9. Appr
oval of Professional Services. The Council hereby appoints the firm of Jones Hall, A Professional Law Corporation, as bond counsel and disclosure counsel to the City in connection with the issuance of the Bonds, and the City Attorney is authorized to execute an agreement with said firm in substantially the form of the agreement on file with the City Clerk.
The Counc
il hereby appoints the firm s of CSG Advisors Incorporated, as municipal advisor to the City in connection with the issuance of the Bonds, and the Finance Director is authorized to execute an agreement with said firm in substantially the form of the agreement on file with the City Clerk.
10. Ef
fective Date . This Resolution shall take effect immediately upon its passage and adoption.
* * * *
* * * * * * *
Resolution 2022-
The foregoing Resolution ____________ was adopted by the Tracy City Council on the 5th day of April, 2022, by the following vote:
AYES: COUNCI
L MEMBERS:
NOES: COUNCIL MEMBERS:
ABSENT: COUNCIL MEMBERS:
ABSTAIN: COUNCIL MEMBERS:
MAYOR
ATTEST
:
CITY CLERK
Resolution 2022-
APPEND
IX A
Govern
ment Code Section 5852.1 Disclosure
The foll
owing information consists of estimates that have been provided in good faith by the Municipal Advisor:
(A)
True Interest Cost of the Bonds: 2.66%
(B)
Finance Charge of the Bonds (Sum of all fees/charges paid to third parties , but excluding potential bond insurance or debt service reserve fund insurance premiums): $331,000
(C)
Net Proceeds to be Received (net of finance charges, reserves and capitalized interest, if any): $20,000,000
(D) T otal
Payment Amount Through Maturity: $24,804,000
The for
egoing estimates constitute good faith estimates only. The principal amount of the Bonds, the true interest cost of the Bonds, the finance charges thereof, the amount of proceeds received therefrom and total payment amount with respect thereto may differ from such good faith estimates due to (a) the actual date of the sale of the Bonds being different than the date assumed for purposes of such estimates, (b) the actual principal amount of Bonds sold being different from the estimated amount used for purposes of such estimates, (c) the actual amortization of the Bonds being different than the amortization assumed for purposes of such estimates, (d) the actual market interest rates at the time of sale of the Bonds being different than those estimated for purposes of such estimates, (e) other market conditions, or (f) alterations in the City’s financing plan, or a combination of such factors. The actual date of sale of the Bonds and the actual principal amount of Bonds sold will be determined by the City based on the timing of the need for proceeds of the Bonds and other factors. The actual interest rates borne by the Bonds will depend on market interest rates at the time of sale thereof. The actual amortization of the Bonds will also depend, in part, on market interest rates at the time of sale thereof. Market interest rates are affected by economic and other factors beyond the control of the City.
TRACY
PUBLIC FINANCING AUTHORITY
RESOLUTION NO. 2022-___
A RESOLUTION AUTHORIZING THE ISSUANCE AND SALE OF LEASE
REVENUE BONDS TO PROVIDE FINANCING FOR PUBLIC
IMPROVEMENTS TO BE OWNED AND OPERATED BY THE CITY OF
TRACY, APPROVING RELATED DOCUMENTS AND DIRECTING
RELATED ACTIONS
WHEREA
S, the City of Tracy (the “City”) wishes to finance the acquisition and construction of Phase 1E of the Legacy Fields Sports Complex (the “Project”); and WHEREA
S, pursuant to Resolution No. 2019-012 adopted on February 5, 2019, the City Council previously declared its intention to reimburse itself for expenditures related to the Project with proceeds of tax-exempt obligations to be issued in a maximum principal amount of $10,000,000; and
WHEREA
S, the City and the Tracy Industrial Development Authority (the “Industrial Development Authority”) are parties to a First Amended and Restated Joint Powers Agreement, dated as of October 17, 2018 (the “Joint Powers Agreement”), pursuant to which the Tracy Public Financing Authority (the “Authority”) was established as a joint exercise of powers authority under the Joint Exercise of Powers Act (Government Code §6500 et seq.) (the “Joint Powers Law”) for the purpose of providing assistance to the City and the Industrial Development Authority with their financing programs, and for any other purposes authorized under Article 4 of the Joint Powers Law (the “Bond Law”); and
WHEREA
S, the City has proposed to lease to the Authority the land and improvements constituting Phase 1 of the Legacy Fields Sports Complex (the “Leased Property”) under a Site Lease (the “Site Lease”), in consideration of the payment by the Authority of an upfront rental payment (the “Site Lease Payment”) that is sufficient to provide funds to finance the Project; and
WHEREA
S, in order to raise funds to pay the Site Lease Payment, the Authority proposes to issue and sell its Tracy Public Financing Authority Lease Revenue Bonds, Series 2022A (Legacy Fields) (the “Bonds”) under the Bond Law; and WHEREA
S, in order to secure the payments of principal of and interest on the Bonds, the Authority proposes to lease the Leased Property back to the City under a Lease Agreement (the “Lease Agreement”), under which the City is obligated to pay semiannual lease payments (the “Lease Payments”) as rental for the Leased Property, and, pursuant to an Assignment Agreement (the “Assignment Agreement”), the Authority will assign substantially all of its rights under the Lease Agreement to U.S. Bank Trust Company, National Association, as trustee for the Bonds; and WHEREA
S, there has been submitted to the City Council a form of preliminary Official Statement in connection with the marketing of the Bonds and the City Council, with the aid of its staff, has reviewed the preliminary Official Statement to assure pr oper
ATTACHMENT B
- 2 -
disclosure of all material facts relating to the Bonds that are in the personal knowledge of the members of the City Council and the City staff; and WHERE
AS, the Authority and the City propose to sell the Bonds to Piper Sandler & Co. (the “Underwriter”) pursuant to a Bond Purchase Agreement (the “Bond Purchase Agreement”) among the City, the Authority and the Underwriter , the form of which is on file with the City Clerk; and
WHERE
AS, in order to assist the Underwriter in complying with Rule 15c2- 12 of the Securities and Exchange Commission, the City will undertake certain continuing disclosure obligations with respect to the Bonds pursuant to a continuing disc losure certificate to be executed by the City (the "Continuing Disclosure Certificate"), the form of which is on file with the City Clerk; and
WHERE
AS, in order to comply with Government Code Section 5852.1, certain information relating to the Bonds is set forth in Appendix A attached to this Resolution, and such information is hereby disclosed and made public; and WHERE
AS, as a condition precedent to the issuance of the Bonds, Section 6586.5 of the California Government Code requires that the City approv e the Authority’s issuance of the Bonds and make certain findings, and Section 6586.5 further requires that the City give the approval and make the findings only after holding a noticed public hearing; and
WHERE
AS, as required by Section 6586.5, the City has caused publication of a notice of a public hearing once at least five days prior to the hearing in a newspaper of general circulation in the City; and
WHERE
AS, on the date hereof, the City Council held a public hearing at which all interested persons were provided the opportunity to speak on the subject of the proposed issuance of Bonds by the Authority to provide financing for the Project; and WHERE
AS, the Authority wishes at this time to approve all proceedings to which it is a party relating to t he issuance and sale of the Bonds and assist the City in the financing the Project;
NOW
, THEREFORE, BE IT RESOLVED as follows:
1. Recit
als. The foregoing recitals are true and correct and the Authority hereby so finds and determines.
2. Issuance
of Bonds . The Authority hereby authorizes the issuance of the Bonds under the Bond Law in the maximum principal amount of $22,000,000, for the purpose of providing funds to finance the Proje ct. The Bonds shall be issued under the Bond Law and the Indenture of Trust that is approved below.
3. App
roval of Related Financing Agreements . The Authority hereby approves each of the following agreements required for the issuance and sale of the Bonds, in substantially the respective forms on file with the Secretary together with any changes therein or additions thereto deemed advisable by the Chair, Vice -Chair, Executive Director , Treasurer, Auditor or General Counsel of the Authority, or an authorized representative thereof (each, an “Authorized Officer”) ; execution of the - 3 -
agreements by an Authorized Officer, acting alone, shall be conclusive evidence of the approval of any such changes or additions. An Authorized Officer is hereby authorized and directed for and on behalf of the Authority to execute, and the Secretary is hereby authorized and directed to attest, the final form of each such agreement, as follows:
• Indentu
re of Trust, between the Authority and U.S. Bank Trust
Company, National Association, as trustee (the “Trustee”), setting forth the terms and provisions relating to the Bonds.
• Sit
e Lease, between the City as lessor and the Authority as lessee, under which the City leases the Leased Property to the Authority in consideration of the payment of an amount which will be applied by the Authority to finance the Project.
• Lease A
greement, between the Authority as lessor and the City as lessee, under which the Authority leases the Leased Property back to the City and the City agrees to pay semiannual lease payments which are sufficient to provide revenues with which to pay principal of and interest on the Bonds when due.
• Bond Pur
chase Agreement, among the City, the Authority and the
Underwriter, which establishes the terms under which the Underwriter will purchase the Bonds from the Authority.
• Ass
ignment Agreement, between the Authority and the Trustee, whereby the Authority assigns certain of its rights under the Lease Agreement to the Trustee for the benefit of the Bond owners.
The Chair o
f the Authority (or a designee thereof) is hereby authorized and directed for and in the name and on behalf of the Authority to execute, and the Secretary of the Authority is hereby authorized and directed to attest and affix the seal of the Authority to, the final form of each of the foregoing agreements , if applicable . The Governing Body hereby authorizes the delivery and performance of each of the foregoing agreements.
4. Negot
iated Sale of Bonds. The Council hereby approves the sale of the Bonds by the Authority to the Underwriter pursuant to the terms and provisions of the Bond Purchase Agreement, provided that the aggregate principal amount of the Bonds may not exceed $22,000,000, the true interest cost may not ex ceed 5.00% and the underwriter's discount (exclusive of any original issue discount) may not exceed 1.00%.
5. Of
ficial Statement. The Authority hereby approves the preliminary Official Statement describing the Bonds in substantially the form on file with the Secretary. An Authorized Officer is hereby authorized and directed to approve any changes in or additions to said preliminary Official Statement and to execute an appropriate certificate stating the Authorized Officer’s determination that the preliminary Official Statement (together with any changes therein or additions thereto) has been deemed final within the meaning of Rule 15c2-12 of the Securities Exchange Act of 1934. Distribution of the preliminary Official Statement by the underwriter is hereby approved. An Authorized Officer is hereby authorized and directed to approve any changes in or additions to a final form of said Official Sta tement, and the execution thereof by the Authorized Officer shall be conclusive evidence of approval of any such changes and additions. The - 4 -
Authority hereby authorizes the distribution of the final Official Statement by the underwriter. The final Official Statement shall be executed on behalf of the Authority by an Authorized Officer.
6. Off
icial Actions. The Chair of the Authority (the “ Chair”) and the Vice Chair of the Authority (the “Vice Chair”) or their designees are each authorized and directed on behalf of the Authority to make any and all assignments, certificates, requisitions, agreements, notices, consents, instruments of conveyance and other documents, which they or any of them deem necessary or appropriate in order to consummate any of the transactions contemplated by the agreements and documents approved under this Resolution, including any agreements required to purchase a debt service insurance policy or a municipal bond insurance policy . An Authorized Officer may revise the identity of the Leased Property as necessary in order to accomplish the purposes of this Resolution. Whenever in this resolution any officer of the Authority is authorized to execute or countersign any document or take any action, such execution, countersigning or action may be taken on behalf of such officer by any person designated by such officer to act on his or her behalf if such officer is absent or unavailable.
7. Appr
oval of Professional Services. The Board of Directors hereby appoints the firm of Jones Hall, A Professional Law Corporation, as bond counsel and disclosure counsel to the Authority in connection with the issuance of the Bonds, and the General Counsel is authorized to execute an agreement with said firm in substantially the form of the agreement on file with the Secretary.
The Board
of Directors hereby appoints the firms of CSG Advisors Incorporated, as municipal advisor to the Authority in connection with the issuance of the Bonds, and the Treasurer is authorized to execute an agreement with said firm in substantially the form of the agreement on file with the Secretary.
8. Effec
tive Date . This Resolution shall take effect immediately upon its passage and adoption.
* * * *
* * * * * * *
The foregoi
ng Resolution ____________ was adopted by the Board of Directors of the Tracy Public Financing Authority on the __ th day of _________, 2022, by the following vote:
AYES: BOAR
D MEMBERS:
NOES: BOARD MEMBERS:
ABSENT: BOARD MEMBERS:
ABSTAIN: BOARD MEMBERS:
CHAIR
- 5 -
ATTEST
:
SECRETARY
- 6 -
APPENDIX A
Govern
ment Code Section 5852.1 Disclosure
Govern
ment Code Section 5852.1 Disclosure
The foll
owing information consists of estimates that have been provided in good faith by the Municipal Advisor:
(A)
True Interest Cost of the Bonds: 2.66%
(B)
Finance Charge of the Bonds (Sum of all fees/charges paid to third parties, but excluding potential bond insurance or debt service reserve fund insurance premiums): $331,000
(C)
Net Proceeds to be Received (net of finance charges, reserves and capitalized interest, if any): $20,000,000
(D)
Total Payment Amount Through Maturity: $24,804,000
The for
egoing estimates constitute good faith estimates only. The principal amount of the Bonds, the true interest cost of the Bonds, the finance charges thereof, the amount of proceeds received therefrom and total payment amount with respect thereto may differ from such good faith estimates due to (a) the actual date of the sale of the Bonds being different than the date assumed for purposes of such estimates, (b) the actual principal amount of Bonds sold being different from the estimated amount used for purposes of such estimates, (c) the actual amortization of the Bonds being different than the amortization assumed for purposes of such estimates, (d) the actual market interest rates at the time of sale of the Bonds being different than those estimated for purposes of such estimates, (e) other market conditions, or (f) alterations in the City’s financing plan, or a combination of such factors. The actual date of sale of the Bonds and the actual principal amount of Bonds sold will be determined by the City based on the timing of the need for proceeds of the Bonds and other factors.
The actual interest rates borne by the Bonds will depend on market interest rates at the time of sale thereof. The actual amortization of the Bonds will also depend, in part, on market interest rates at the time of sale thereof. Market interest rates are affected by economic and other factors beyond the control of the City. 60329-03 Jones Hall 3/21/2022
PRELI MINARY OFFICIAL STATEMENT DATED ____________, 2022 NEW ISSUE - FULL BOOK-ENTRY RATING: Standard & Poor’s: “___” See “RATING” herein.
In the opinion of Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel, subject, however to certain qualifications described herein, under existing law, the interest on the 2022 Bonds is excluded from gross income for federal income tax purposes and such interest is not an item of tax preference for purposes of the federal alternative minimum tax. In the further opinion of Bond Counsel, such interest is exempt from California personal income taxes. See “TAX MATTERS.” $_______________*
TRACY PUBLIC FINANCING AUTHORITY
LEASE REVENUE BONDS, SERIES 2022A
(Legacy Fields)
Dated:
Date of Delivery Due: November 1, as shown on inside cover Authority for Issuance. The bonds captioned above (the “ 2022 Bonds”) are being issued by the Tracy Public Financing Authority (the “Authority”) under a resolution adopted by the Board of Directors of the Authority on ____________, 2022, and an Indenture of Trust dated as of May 1, 2022 (the “Indenture”) by and between the Authority and U.S. Bank Trust Company, National Association, as trustee (the “Trustee”).
See “THE 2022 BONDS – Authority for Issuance.”
Purpose. The 2022 Bonds are being issued primarily to finance the acquisition and construction of public capital improvements of the City of Tracy (the “City”), consisting of Phase 1E of the Legacy Fields Sports Complex and such other improvements that may be identified from time to time by the City. In addition, the proceeds of the 2022 Bonds will be used to (i) if elected by the Authority, pay the premium for a municipal bond insurance policy and (ii) pay the costs of issuing the 2022 Bonds. See “FINANCING PLAN.” Security. Under the Indenture, the 2022 Bonds are payable from and secured by a first pledge of and lien on “Revenues” consisting primarily of lease payments (the “Lease Payments”) made by the City for the lease of property under a Lease Agreement dated as of May 1, 2022, between the Authority, as lessor, and the City, as lessee, concerning the leaseback of certain real property and improvements, as further described in this Official Statement. The 2022 Bonds are also secured by certain funds on deposit under the Indenture. [Neither the Authority nor the City is establishing a reserve fund for the 2022 Bonds. ] The Authority is considering the use of a municipal bond insurance policy that guarantees the scheduled payment of principal of and interest on all or a portion of the 2022 Bonds when due. The Authority will decide whether or not to utilize a municipal bond insurance policy depending on market conditions at the time of sale of the 2022 Bonds. See “SECURITY FOR THE 2022 BONDS.”
Book-Entry Only. The 2022 Bonds will be issued in book-entry form only, and will be initially issued and registered in the name of Cede & Co. as nominee of The Depository Trust Company, New York, New York (“DTC”). The 2022 Bonds are issuable as fully registered securities in denominations of $5,000 or any integral multiple of $5,000. Purchasers of the 2022 Bonds (the “Beneficial Owners”) will not receive physical certificates representing their interest in the 2022 Bonds. See “THE 2022 BONDS” and “APPENDIX F - DTC AND THE BOOK-ENTRY ONLY SYSTEM.”
Payments. Interest on the 2022 Bonds accrues from the date of delivery and is payable semiannually on May 1 and November 1 of each year, commencing November 1, 2022. Payments of principal and interest on the 2022 Bonds will be paid by the Trustee to DTC for subsequent disbursement to DTC Participants, which will remit such payments to the Beneficial Owners of the 2022 Bonds. See “THE 2022 BOND S - General Provisions.”
Redemption. The 2022 Bonds are subject to optional redemption, mandatory sinking fund payment redemption and special mandatory redemption from insurance or condemnation proceeds prior to maturity. See “THE 2022 BONDS – Redemption.” NEITHER THE 2022 BONDS, NOR THE OBLIGATION OF THE AUTHORITY TO PAY PRINCIPAL OF OR INTEREST THEREON, NOR
THE OBLIGATION OF THE CITY TO MAKE THE LEASE PAYMENTS, CONSTITUTE A DEBT OR A LIABILITY OF THE AUTHORITY, THE
CITY, THE STATE OF CALIFORNIA OR ANY OF ITS POLITICAL SUBDIVISIONS WITHIN THE MEANING OF ANY CONSTITUTIONAL LIMITATION ON INDEBTEDNESS, OR A PLEDGE OF THE FULL FAITH AND CREDIT OF THE CITY. THE 2022 BONDS ARE SECURED SOLELY BY THE PLEDGE OF REVENUES AND CERTAIN FUNDS HELD UNDER THE INDENTURE. THE 2022 BOND S ARE NOT SECURED BY A PLEDGE OF THE TAXING POWER OF THE CITY.
MATURITY SCHEDULE
(see inside cover)
Cover Page. This cover page contains certain information for general reference only. It is not a summary of all the provisions of the 2022 Bonds. Prospective investors must read the entire Official Statement to obtain information essential to making an informed investment decision.
The 2022 Bonds are offered when, as and if issued and accepted by the Underwriter, subject to approval as to their legality by Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel, and subject to certain other conditions. Certain legal matters will also be passed upon for the Authority and the City by Jones Hall, A Professional Law Corporation, as Disclosure Counsel. Certain legal matters will be passed upon for the City by the City Attorney. Stradling Yocca Carlson & Rauth, P.C., Newport Beach, California, is serving as counsel to the Underwriter. It is anticipated that the 2022 Bonds will be delivered in book-entry form through the facilities of DTC on or about May ___, 2022.
[Piper Sandler Logo]
The dat
e of this Official Statement is: _____________, 2022
* Preliminary; subject to change.
This Preliminary Official Statement and the information contained herein are subject to completion or amendment. These securities may not be sold nor may offers to buy be accepted prior to the time the Official Statement is delivered in final form. Under no circumstances will this Preliminary Official Statement constitute an offer to sell or a solicitation of an offer to buy nor will there be any sale of these securities in any jurisdiction in which such offer solicitation or sale would be unlawful.
ATTACHMENT C
TRACY PUBLIC FINANCING AUTHORITY
LEASE REVENUE BONDS, SERIES 2022A
(Legacy Fields)
MATURITY SCHEDULE*
(Base CUSIP:† _______)
$_________
_ Serial Bonds
Maturity Date Principal Interest
(November 1) Amount Rate Yield Price CUSIP†
$__________
___% Term Bond Due November 1, ____, Yield ___%, Price: ____%, CUSIP: ________ * Preliminary; subject to change.
† CUS
IP Copyright 2022, CUSIP Global Services, and a registered trademark of American Bankers Association. CUSIP data herein is provided by CUSIP Global Services, which is managed on behalf of American Bankers Association by S&P Capital IQ. None of the Authority, the City nor the Underwriter takes any responsibility for the accuracy of the CUSIP data.
TRACY PUBLIC FINANCING AUTHORITY
CITY OF TRACY
BOARD OF DIRECTORS OF THE AUTHORITY
AND MEMBERS OF THE CITY COUNCIL
Nancy
Young, Chair and Mayor
Veronica Vargas, Vice Chair and Mayor Pro Tem
Dan Arriola, Member and Council Member
Eleassia Davis, Member and Council Member
Mateo Bedolla, Member and Council Member
CIT
Y STAFF
Mic
hael Rogers, City Manager
Ray McCray, City Treasurer
Karin Schnaider, Finance Director
Adrienne Richardson, City Clerk
Nancy Ashjian, City Attorney
PROF
ESSIONAL SERVICES
BOND AND DISCLOSURE COUNSEL
Jones
Hall, A Professional Law Corporation
San Francisco, California
MUNICIPAL ADVISOR
CSG A
dvisors Incorporated
San Francisco, California
Trus
tee
U.S.
Bank Trust Company, National Association
San Francisco, California
GENERAL INFORMATION ABOUT THIS OFFICIAL STATEMENT
Use of Official Statement . This Official Statement is submitted in connection with the sale of the 2022 Bonds referred to herein and may not be reproduced or used, in whole or in part, for any other purpose. This Official Statement is not a contract between any bond owner and the Authority or the Underwriter.
No Offering Except by This Official Statement. No dealer, broker, salesperson or other person has been authorized by the Authority or the Underwriter to give any information or to make any representations other than those contained in this Official Statement and, if given or made, such other information or representation must not be relied upon as having been authorized by the Authority or the Underwriter.
No Unlawful Offers or Solicitations. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy nor may there be any sale of the 2022 Bonds by a person in any jurisdiction in which it is unlawful for such person to make such an offer, solicitation or sale.
Preparation of Official Statement. The information set forth in this Official Statement has been furnished by the Authority and other sources which are believed to be reliable, but it is not guaranteed as to accuracy or completeness.
The Underwriter has provided the following sentence for inclusion in this Official Statement: The Underwriter has reviewed the information in this Official Statement in accordance with, and as part of, its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information.
Estimates and Forecasts. When used in this Official Statement and in any continuing disclosure by the Authority in any press release and in any oral statement made with the approval of an authorized officer of the City or the Authority or any other entity described or referenced herein, the words or phrases “will likely result,” “are expected to”, “will continue”, “is anticipated”, “estimate”, “project”, “forecast”, “expect”, “intend” and similar expressions identify “forward looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated in such forward- looking statements. Any forecast is subject to such uncertainties. Inevitably, some assumptions used to develop the forecasts will not be realized and unanticipated events and circumstances may occur. Therefore, there are likely to be differences between forecasts and actual results, and those differences may be material. The information and expressions of opinion herein are subject to change without notice, and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, give rise to any implication that there has been no change in the affairs of the City , Authority or any other entity described or referenced herein since the date hereof.
Stabilization of and Changes to Offering Prices. The Underwriter may overallot or take other steps that stabilize or maintain the market prices of the 2022 Bonds at levels above that which might otherwise prevail in the open market. If commenced, the Underwriter may discontinue such market stabilization at any time. The Underwriter may offer and sell the 2022 Bonds to certain securities dealers, dealer banks and banks acting as agent at prices lower than the public offering prices stated on the inside cover page of this Official Statement, and those public offering prices may be changed from time to time by the Underwriter.
Document Summaries . All summaries of the Indenture or other documents referred to in this Official Statement are made subject to the provisions of such documents and qualified in their entirety to reference to such documents, and do not purport to be complete statements of any or all of such provisions.
No Securities Laws Registration. The 2022 Bonds have not been registered under the Securities Act of 1933, as amended, in reliance upon exceptions therein for the issuance and sale of municipal securities. The 2022 Bonds have not been registered or qualified under the securities laws of any state.
Effective Date. This Official Statement speaks only as of its date, and the information and expressions of opinion contained in this Official Statement are subject to change without notice. Neither the delivery of this Official Statement nor any sale of the 2022 Bonds will, under any circumstances, give rise to any implication that there has been no change in the affairs of the City, the Authority, the other parties described in this Official Statement, or the condition of the property within the City since the date of this Official Statement.
Website. The City maintains a website. However, the information presented on the website is not a part of this Official Statement and should not be relied upon in making an investment decision with respect to the 2022 Bonds.
-i-
TABLE OF CONTENTS
INTRODUCTION ................................................ 1 FINANCING PLAN ............................................. 4 The Project ..................................................... 4 Estimated Sources and Uses of Funds .......... 4
THE LEASED PROPERTY ................................ 5
Description and Location ................................ 5 Modification of Leased Property ..................... 5 Release of Leased Property ........................... 6 Addition of Property ........................................ 7 THE 2022 BONDS ............................................. 9 Authority for Issuance .................................... 9 General Provisions ......................................... 9 Redemption .................................................. 10 Book-Entry Only System .............................. 12 Transfer, Registration and Exchange .......... 12
DEBT SERVICE SCHEDULE .......................... 14
SECURITY FOR THE 2022 BONDS ............... 15
Revenues; Pledge of Revenues ................... 15
Allocation of Revenues by Trustee;
Application of Funds................................. 16 Lease Payments; Covenant to Appropriate . 16
Limited Obligation......................................... 17 Abatement .................................................... 17 Additional Bonds .......................................... 18 No Reserve Fund ......................................... 19 Property Insurance ....................................... 19 Remedies on Default .................................... 21 CITY FINANCIAL INFORMATION ................... 22
General ......................................................... 22 Management ................................................ 22 Budget Process ............................................ 23 General Fund Budgets ................................. 24 Budget Summary.......................................... 26 Financial Policies Summary ......................... 26 Fund Balance History ................................... 28 State Budget and Its Impact on the City ...... 28
Public Health Emergency – COVID-19 ........ 29
Financial Statements .................................... 30 Major Revenues ........................................... 35 Property Taxes ............................................. 35 Sales and Use Taxes ................................... 40 Other Taxes and Revenues ......................... 44
Long-Term Obligations ................................. 46 Employee Relations ..................................... 46 Risk Management ........................................ 48 Employee Retirement System ..................... 49
Other Post-Employment Benefits (“OPEB”) . 54
Investment Policies and Procedures ........... 56
CONSTITUTIONAL AND STATUTORY
LIMITATIONS ON TAXES AND
APPROPRIATIONS ..................................... 58 Article XIIIA of the State Constitution ........... 58
Legislation Implementing Article XIIIA ......... 58
Article XIIIB of the State Constitution ........... 59
Articles XIIIC and XIIID of the State
Constitution .............................................. 59 Proposition 1A; Proposition 22 .................... 61
Possible Future Initiatives ............................ 61 BOND OWNERS’ RISKS ................................. 62 No Pledge of Taxes ..................................... 62 Limitations on Taxes and Fees .................... 62
Additional Obligations .................................. 62 Default .......................................................... 63 Abatement .................................................... 63 No Debt Service Reserve Fund ................... 64
Property Taxes ............................................. 64 Natural Calamities ........................................ 65 Public Health Emergencies .......................... 66 Certain Risks Associated with Sales Tax
and Other Local Tax Revenues ............... 68
Limitations on Remedies Available to Bond
Owners ..................................................... 68 Loss of Tax-Exemption ................................ 69 Secondary Market for Bonds ....................... 69
Cyber Security ............................................. 69 IRS Audit of Tax-Exempt Bond Issues ........ 69
Impact of Legislative Proposals,
Clarifications of the Tax Code and Court
Decisions on Tax Exemption ................... 70
TAX MATTERS ................................................ 70 CERTAIN LEGAL MATTERS .......................... 71
LITIGATION ..................................................... 71 RATING ........................................................... 72 CONTINUING DISCLOSURE .......................... 72
UNDERWRITING ............................................. 73 MUNICIPAL ADVISOR .................................... 73 PROFESSIONAL FEES .................................. 74 EXECUTION .................................................... 75
APPENDIX A - GENERAL INFORMATION ABOUT THE CITY OF TRACY
AND SAN JOAQUIN COUNTY
APPENDIX B - SUMMARY OF PRINCIPAL LEGAL DOCUMENTS
APPENDIX C - FISCAL YEAR 2020-21 ANNUAL COMPREHENSIVE FINANCIAL REPORT
APPENDIX D - PROPOSED FORM OF OPINION OF BOND COUNSEL
APPENDIX E - FORM OF CONTINUING DISCLOSURE CERTIFICATE
APPENDIX F - DTC AND THE BOOK-ENTRY ONLY SYSTEM
1 __________________________________
OFFICIAL STATEMENT
__________________________________
$____________*
TRACY PUBLIC FINANCING AUTHORITY
LEASE REVENUE BONDS, SERIES 2022A
(Legacy Fields)
The purpose of this Official Statement, which includes the cover page, inside cover page and attached appendices, is to set forth certain information concerning the sale and delivery of the bonds captioned above (the “ 2022 Bonds”) by the Tracy Public Financing Authority (the “Authority”). All capitalized terms used in this Official Statement, unless noted otherwise, have the meanings set forth in the Indenture (as defined below).
INTRODUCTION
This introduction is not a summary of this Official Statement. It is only a brief description of and guide to, and is qualified by, more complete and detailed information contained in the entire Official Statement and the documents summarized or described herein. A full review should be made of the entire Official Statement. The offering of the 2022 Bonds to potential investors is made only by means of the entire Official Statement.
Authority for Issuance. The Authority is issuing the 2022 Bonds under the following:
(a) Article 4 of Chapter 5, Division 7, Title 1 of the California Government Code, as amended, commencing with Section 6584 (the “Law”),
(b) resolutions adopted by the Board of Directors (the “Board”) of the Authority on ____________, 2022 (the “Authority Resolution”), and by the City Council (the “City Council”) of the City of Tracy (the “City”) on ____________, 2022 (the “City Resolution”), and
(c) an Indenture of Trust (the “Indenture”) dated as of May 1, 2022 , by and between the Authority and U.S. Bank Trust Company, National Association, as trustee (the “Trustee”).
The Aut
hority. The Authority is a joint powers authority between the City and the Tracy Industrial Development Authority established under a First Amended and Restated Joint Powers Agreement, dated as of October 17, 2018, entered into under Articles 1 through 4 (commencing with Section 6500) of Chapter 5 of Division 7 of Title 1 of the California Government Code, as amended, for the purpose, among others, of issuing its bonds to be used to finance and refinance the acquisition, construction and improvement of certain public capital improvements in the City. * Preliminary; subject to change.
2 The City. The City is located on the western edge of the Central Valley in San Joaquin County (the “County”), approximately 60 miles east of San Francisco and approximately 70 miles south of Sacramento. See “CITY FINANCIAL INFORMATION – General.”
Purpose of the 2022 Bonds. The 2022 Bonds are being issued primarily to finance the acquisition and construction of public capital improvements of the City, consisting of Phase 1E of the Legacy Fields Sports Complex, and such other improvements that may be identified from time to time by the City. In addition, proceeds of the 2022 Bonds will be used to pay the costs of issuing the 2022 Bonds. See “FINANCING PLAN.”
Security for the 2022 Bonds and Pledge of Revenues. Under the Indenture, the 2022 Bonds are payable from and secured by a first pledge of and lien on “Revenues,” consisting primarily of lease payments (the “ Lease Payments”) made by the City for the lease of property under the Lease Agreement dated as of May 1, 2022, between the Authority, as lessor, and the City, as lessee (the “Lease Agreement”), concerning the leaseback of certain real property and improvements consisting of Phase 1 of the Legacy Fields Sports Complex (the “ Leased Property”).
The 2022 Bonds are also secured by certain funds on deposit under the Indenture. See “SECURITY FOR THE 2022 BONDS.”
In order to provide the upfront site lease payment to facilitate the financing plan, the City and the Authority will enter into a Site Lease dated as of May 1, 2022 (the “Site Lease”), under which the City will lease the Leased Property to the Authority . Concurrently, the City and the Authority will enter into the Lease Agreement, under which the Authority will lease the Leased Property back to the City. See “THE LEASED PROPERTY.”
Potential Bond Insurance Policy. The Authority is considering the use of a municipal bond insurance policy that guarantees the scheduled payment of principal of and interest on all or a portion of the 2022 Bonds when due. The Authority will decide whether or not to utilize a municipal bond insurance policy depending on market conditions at the time of sale of the 2022 Bonds.
Form of Bonds; Book- Entry Only. The 2022 Bonds will be issued in fully registered form, registered in the name of The Depository Trust Company, New York, New York (“DTC”), or its nominee, which will act as securities depository for the 2022 Bond s. Purchasers of the 2022 Bonds will not receive certificates representing the 2022 Bonds that are purchased. See “THE 2022 BONDS - Book-Entry Only System” and “APPENDIX F – DTC AND THE BOOK -ENTRY ONLY SYSTEM.”
Redemption. The 2022 Bonds are subject to optional redemption, mandatory redemption from sinking fund payments, and special mandatory redemption from the proceeds of insurance or condemnation proceeds prior to their stated maturity dates. See “THE 2022 BOND S – Redemption.”
Abatement. The Lease Payments are subject to complete or partial abatement in the event and to the extent that there is substantial interference with the City ’s use and possession of the Leased Property or any portion thereof. If the Lease Payments are abated under the Lease Agreement, the Owners of the 2022 Bonds would receive less than the full amount of principal of and interest on the 2022 Bonds. To the extent proceeds of rental interruption insurance are available (as described below), Lease Payments (or a portion thereof) may be made from those
3 proceeds during periods of abatement. See “SECURITY FOR THE 2022 BONDS – Abatement” and “BOND OWNERS’ RISKS.”
Additional Bonds. The Indenture permits the Authority, by supplemental indenture, to establish one or more other issues of additional bonds secured by a pledge of and payable from Revenues on a parity with the 2022 Bonds (the “Additional Bonds ”; the 2022 Bonds and any Additional Bonds are referred to in this Official Statement collectively as the “Bonds”), subject to certain conditions set forth in the Indenture. See “SECURITY FOR THE 2022 BONDS – Additional Bonds.”
Legal Opinion . Upon delivery of the 2022 Bonds, Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel (“ Bond Counsel”) will release its final approving legal opinion with respect to the 2022 Bonds, regarding the validity and tax -exempt status of the 2022 Bonds, in the form attached hereto as APPENDIX D.
Risks of Investment. Debt service on the 2022 Bonds is payable only from Lease Payments and other amounts payable by the City to the Authority under the Lease Agreement.
For a discussion of some of the risks associated with the purchase of the 2022 Bonds, see “BOND OWNERS’ RISKS.”
NEITHER THE BONDS, THE OBLIGATION OF THE AUTHORITY TO PAY PRINCIPAL
OF OR INTEREST THEREON, NOR THE OBLIGATION OF THE CITY TO MAKE THE LEASE
PAYMENTS, CONSTITUTE A DEBT OR A LIABILITY OF THE AUTHORITY, THE CITY, THE
STATE OR ANY OF ITS POLITICAL SUBDIVISIONS WITHIN THE MEANING OF ANY
CONSTITUTIONAL LIMITATION ON INDEBTEDNESS, OR A PLEDGE OF THE FULL FAITH AND CREDIT OF THE CITY. THE BONDS ARE SECURED SOLELY BY THE PLEDGE OF REVENUES AND CERTAIN FUNDS HELD UNDER THE INDENTURE. THE BONDS ARE NOT SECURED BY A PLEDGE OF THE TAXING POWER OF THE CITY.
4 FINANCING PLAN
The Project
A portion of the proceeds of the 2022 Bonds will be used to finance the acquisition and construction of public capital improvements of the City, consisting of Phase 1E of the Legacy Fields Sports Complex and such other improvements that may be identified from time to time by the City (the “Project”). The Legacy Fields Sports Complex is a youth sports facility in the northern part of the City that, at full build-out, will consist of 166 acres of sports areas. Phase 1E includes renovation of the eastern baseball/softball fields, eastern baseball/softball field lighting, a plaza with restroom/concession building, parking lot paving, a new exit road, maintenance yard expansion, installation of wayfinding signage, earthwork and drainage, irrigation, and landscape.
Construction of Phase 1E of the Legacy Fields Sports Complex, the portion of Legacy Fields Sports Complex that is expected to be financed with proceeds of the 2022 Bonds, is expected to commence in Spring 2022 and be completed in Fall 2023.
Estimated Sources and Uses of Funds
The estimated sources and uses of funds relating to the 2022 Bonds are as follows:
Sources of Funds:
Principal Amount of 2022 Bonds $
Plus: Net Original Issue Premium
TOTAL SOURCES $
Uses of Funds:
Deposit to Project Fund $
Deposit to Costs of Issuance Fund (1)
Underwriter’s Discount
TOTAL USES $
(1) Represents funds to be used to pay Costs of Issuance, which include legal fees, printing costs, rating agency fees, premiums for any municipal bond insurance policy, if obtained and other costs of issuing the 2022 Bonds.
5 THE LEASED PROPERTY
Description and Location
Lease Payments will be made by the City under the Lease Agreement for the use and occupancy of the Leased Proper ty, which consists of Phase 1 of the Legacy Fields Sports Complex, of which the Project constitutes a portion. Phase 1 of the Legacy Fields Sports Complex consists of 72 acres of land containing 10 baseball fields, 8 soccer fields, three restroom/concession buildings, one restroom building, paved parking lots and landscaping. The City has determined that the fair rental value of the Leased Property is commensurate with the annual Lease Payments with respect thereto. The City will continue to have access to and use of Phase 1 of the Legacy Fields Sports Complex during the construction of the Project.
Modification of Leased Property
Under the Lease Agreement, the City has the right, at its own expense, to make additions, modifications and improvements to the Leased Property or any portion thereof. All additions, modifications and improvements to the Leased Property will thereafter comprise part of the Leased Property and become subject to the provisions of the Lease Agreement.
Such additions, modifications and improvements may not in any way damage the Leased Property, or cause the Leased Property to be used for purposes other than those authorized under the provisions of state and federal law; and the Leased Property, upon completion of any additions, modifications and improvements made thereto under this provision of the Lease Agreement, must be of a value which is not substantially less than the value thereof immediately prior to the making of such additions, modifications and improvements.
The City will not permit any mechanic’s or other lien to be established or remain against the Leased Property for labor or materials furnished in connection with any remodeling, additions, modifications, improvements, repairs, renewals or replacem ents made by the City under this provision of the Lease Agreement; except that if any such lien is established and the City first notifies or causes to be notified the Authority of the City’s intention to do so, the City may in good faith contest any lien filed or established against the Leased Property, and in such event may permit the items so contested to remain undischarged and unsatisfied during the period of such contest and any appeal therefrom and will provide the Authority with full security against any loss or forfeiture which might arise from the nonpayment of any such item, in form satisfactory to the Authority. The Authority will cooperate fully in any such contest, upon the request and at the expense of the City.
Substitution
Under the Lease Agreement, the City has the option at any time and from time to time, to substitute other real property (the “Substitute Property”) for the Leased Property or any portion thereof (the “Former Property”), upon satisfaction of all of the requirements set forth in the Lease Agreement, which includes (among others) the following:
• The City has filed with the Authority and the Trustee, and caused to be recorded in the office of the County Recorder , sufficient memorialization of an amendment of the Lease Agreement that adds the legal description of the Substitute Property and deletes therefrom the legal description of the Former Property, and has filed
6 and caused to be recorded corresponding amendments to the Site Lease and Assignment Agreement.
• The City has obtained a CLTA policy of title insurance insuring the City’s leasehold estate under the Lease Agreement in the Substitute Property, subject only to Permitted Encumbrances (as defined in the Lease Agreement), in an amount at least equal to the estimated value thereof.
• The City has certified in writing to the Authority and the Trustee that the Substitute Property serves the municipal purposes of the City and constitutes property which the City is permitted to lease under the laws of the State of California, and has been determined to be essential to the proper, efficient and economic operation of the City and to serve an essential governmental function of the City. • The City has filed with the Authority and the Trustee a written certificate of the City or other written evidencing stating that the useful life of the Substitute Property at least extends to November 1, 20___, that the estimated value of the Leased Property, after substitution of the Substitute Property and release of the Former Property, is at least equal to the aggregate outstanding principal amount of the Bonds, and the fair rental value of the Leased Property, after substitution of the Substitute Property and release of the Former Property, is at least equal to the Lease Payments thereafter coming due and payable under the Lease Agreement.
See “APPENDIX B – SUMMARY OF PRINCIPAL LEGAL DOCUMENTS.”
Upon the satisfaction of all such conditions precedent, the Term of the Lease Agreement will thereupon end as to the Former Property and commence as to the Substitute Property, and all references to the Former Property will apply with full force and effect to the Substitute Property.
The City is not entitled to any reduction, diminution, extension or other modification of the Lease Payments whatsoever as a result of any substitution of property under this provision of the Lease Agreement.
Release of Leased Property
Under the Lease Agreement, the City has the option at any time and from time to time to release any portion of the Leased Property from the Lease Agreement (the “Released Property”) provided that the City has satisfied all of the requirements under the Lease Agreement that are conditions precedent to such release, which include (among others) the following:
• The City has filed with the Authority and the Trustee, and caused to be recorded in the office of the County Recorder , sufficient memorialization of an amendment of the Lease Agreement, Site Lease and Assignment Agreement which removes the Released Property from the Lease Agreement, Site Lease and Assignment Agreement.
• The City has certified in writing to the Authority and the Trustee that the value of the property which remains subject to the Lease Agreement following such release is at least equal to the aggregate outstanding principal amount of the Bonds, and the fair rental value of the property which remains subject to the Lease Agreement following such release is at least equal to the Lease Payments thereafter coming due and payable thereunder.
7 See “APPENDIX B – SUMMARY OF PRINCIPAL LEGAL DOCUMENTS.”
Upon the satisfaction of all such conditions precedent, the Term of the Lease Agreement will thereupon end as to the Released Property. The City is not entitled to any reduction, diminution, extension or other modification of the Lease Payments whatsoever as a result of such release.
Addition of Property
Under the Lease Agreement, the City may, at any time it deems it necessary or advisable, amend the Lease Agreement, and enter into any necessary or advisable site or ground lease, to add additional property to the property originally leased under the Lease Agreement.
If the addition to the Leased Property (the “Addition”) is being done in connection with the issuance of Additional Bonds, the following requirements will apply, among others:
• The City certifies in writing to the Authority and the Trustee that (i) the Addition serves the purposes of the City and constitutes property which the City is permitted to lease under the laws of the State of California, and has been determined to be essential to the proper, efficient and economic operation of the City and to serve an essential governmental function of the City,
(ii) the useful life of the Addition at least extends to the last day that precedes the final maturity of the Additional Bonds,
(iii) the estimated value of the Leased Property (including the Addition) is at least equal to the aggregate outstanding principal amount of the Bonds, and
(iv) the fair rental value of the Leased Property (including the Addition) is at least equal to the Lease Payments thereafter coming due and payable under the Lease Agreement.
For the purposes of the certification described in clause (iv) above, the City may, if necessary to make such certification, assume completion of construction of the Addition if the Addition is being constructed with proceeds of the Additional Bonds as long as capitalized interest has been deposited in accordance with the Indenture.
• The City delivers to the Authority and the Trustee an Opinion of Bond Counsel to the effect that the amendment to the Lease Agreement has been duly authorized, executed and delivered and the Lease Agreement as so amended represents a valid and binding obligation of the City and the Authority and that the Addition will not adversely affect the exclusion of interest on the Bonds from gross income for federal income tax purposes.
• The City causes to be recorded in the Office of the County Recorder sufficient memorialization of an amendment of the Lease Agreement that adds the legal
8 description of the Addition, and has filed and caused to be recorded corresponding amendments to the Site Lease and Assignment Agreement.
• The City delivers to the Authority and the Trustee a CLTA standard form policy of title insurance in substantially the same form as delivered in connec tion with the issuance and delivery of the Bonds in at least the amount of the aggregate principal amount of outstanding Bonds at the time of the Addition insuring the City’s leasehold interest in the Addition to the Leased Property under the Lease Agreement, together with an endorsement thereto making such policy payable to the Trustee for the benefit of the Owners, and also together with a certificate of the City to the effect that the exceptions, if any, contained in such policy do not interfere with the beneficial use and occupancy of the Leased Property by the City.
See “APPENDIX B – SUMMARY OF PRINCIPAL LEGAL DOCUMENTS.” Upon the satisfaction of all such conditions precedent, the Term of the Lease Agreement will thereupon commence as to the Addition, and all references to the Leased Property will apply with full force and effect to the Addition.
9 THE 2022 BONDS
This section provides summaries of the 2022 Bonds and certain provisions of the Indenture. See APPENDIX B for a more complete summary of the Indenture. Capitalized terms used but not defined in this section have the meanings given in APPENDIX B.
Authority for Issuance
The 2022 Bonds are being issued under the Law, the Authority Resolution (which was adopted by the Board of the Authority on __________, 2022), the City Resolution (which was adopted by the City Council on ____________, 2022), and the Indenture. Under the Authority Resolution and the City Resolution, the 2022 Bonds may be issued in a principal amount not to exceed $_______________.
General Provisions
Bond Terms. The 2022 Bonds will be dated their date of delivery and issued in fully registered form without coupons in integral multiples of $5,000, so long as no 2022 Bond has more than one maturity date.
The 2022 Bonds will mature on November 1 in each of the years and in the amounts, and bear interest at the rates, set forth on the inside cover page of this Official Statement.
Calculation of Interest. Interest on the 2022 Bonds will be payable on May 1 and November 1 in each year, commencing November 1, 2022 (each an “Interest Payment Date”).
Interest on the 2022 Bonds is payable from the Interest Payment Date next preceding the date of authentication thereof unless:
(a) a 2022 Bond is authenticated on or before an Interest Payment Date and after the close of business on the preceding Record Date, in which event it will bear interest from such Interest Payment Date,
(b) a 2022 Bond is authenticated on or before the first Record Date, in which event interest thereon will be payable from the Closing Date, or
(c) interest on any 2022 Bond is in default as of the date of authentication thereof, in which event interest thereon will be payable from the date to which interest has been paid in full, payable on each Interest Payment Date.
Interest with respect to the 2022 Bonds will be computed on the basis of a 360- day year composed of 12 months of 30 days each.
Record Date. Under the Indenture, “Record Date” means, with respect to any Interest Payment Date, the 15th calendar day of the month preceding such Interest Payment Date, whether or not such day is a Business Day.
Payments of Principal and Interest. Interest is payable on each Interest Payment Date to the persons in whose names the ownership of the 2022 Bonds is registered on the Registration Books at the close of business on the immediately preceding Record Date, except as provided below. Interest on any 2022 Bond which is not punctually paid or duly provided for on any Interest
10 Payment Date is payable to the person in whose name the ownership of such 2022 Bond is registered on the Registration Books at the close of business on a special record date for the payment of such defaulted interest to be fixed by the Trustee, notice of which is given to such Owner by first-class mail not less than 10 days prior to such special record date.
The Trustee will pay interest on the 2022 Bonds by check of the Trustee mailed by first class mail, postage prepaid, on each Interest Payment Date to the Owners of the 2022 Bonds at their respective addresses shown on the Registration Books as of the close of business on the preceding Record Date. At the written request of the Owner of 2022 Bonds in an aggregate principal amount of at least $1,000,000, which written request is on file with the Trustee as of any Record Date, the Trustee will pay interest on such 2022 Bonds on each succeeding Interest Payment Date by wire transfer in immediately available funds to such account of a financial institution within the United States of America as specified in such written request, which will remain in effect until rescinded in writing by the Owner.
The Trustee will pay principal of the 2022 Bond s (including the principal amount of any Term Bonds that is subject to mandatory sinking fund redemption) in lawful money of the United States of America by check of the Trustee upon presentation and surrender thereof at the Office of the Trustee.
While the 2022 Bonds are subject to the book-entry system, the principal, interest and any redemption premium with respect to the 2022 Bonds will be paid by the Trustee to DTC for subsequent disbursement to beneficial owners of the 2022 Bonds. See “ – Book-Entry Only System” below.
Redemption*
Optional Redemption. The 2022 Bonds maturing on or before November 1, 20__, are not subject to optional redemption prior to their stated maturity. The 2022 Bonds maturing on or after November 1, 20__, are subject to redemption, as a whole or in part at the election of the Authority among maturities on such basis as designated by the Authority and by lot within a maturity, at the option of the Authority, on May 1, 20__, and on any date thereafter, at a redemption price equal to 100% of the principal amount of 2022 Bonds to be redeemed, together with accrued interest thereon to the date fixed for redemption, without premium.
Special Mandatory Redemption From Insurance or Condemnation Proceeds. The 2022 Bonds are subject to redemption as a whole, or in part on a pro rata basis among maturities, on any date, from any Net Proceeds required to be used for such purpose as provided in the Indenture, at a redemption price equal to 100% of the principal amount thereof plus interest accrued thereon to the date fixed for redemption, without premium.
Mandatory Sinking Fund Redemption . The Term Bonds are subject to mandatory redemption in part by lot, from sinking fund payments made under the Indenture, at a redemption price equal to 100% of the principal amount thereof to be redeemed, without premium, in the aggregate respective principal amounts and on November 1 in the respective years as set forth in the following tables.
* Preliminary; subject to change.
11 Mandatory Sinking Fund Redemption of
Term Bonds Maturing Novem ber 1, 20__
Sinking Fund
Redemption Date
(November 1)
Principal Amount
To Be Redeemed
Mandatory Sinking Fund Redemption of
Term Bonds Maturing Novem ber 1, 20__
Sinking Fund
Redemption Date
(November 1)
Principal Amount
To Be Redeemed
However, if some but not all of the Term Bonds have been redeemed through an optional redemption or special mandatory redemption from insurance or condemnation proceeds, the total amount of all future sinking fund payments will be reduced by the aggregate principal amount of the Term Bonds so redeemed, to be allocated among such sinking fund payments on a pro rata basis as determined by the Authority, which shall notify the Trustee in writing of such determination.
Selection of Bonds for Redemption. Whenever provision is made in the Indenture for the redemption of less than all of the 2022 Bonds of a single maturity, the Trustee will select the 2022 Bonds of that maturity to be redeemed by lot in any manner which the Trustee in its sole discretion deems appropriate. For purposes of such selection, the Trustee will treat each 2022 Bond as consisting of separate $5,000 portions and each such portion will be subject to redemption as if such portion were a separate 2022 Bond.
Whenever less than all of the outstanding 2022 Bonds of more than one series are called for redemption at any one time, the Trustee will select the outstanding 2022 Bonds or portions thereof to be redeemed as directed by the Authority.
Notice of Redemption. The Trustee will mail notice of redemption of the 2022 Bonds by first class mail, postage prepaid, not less than 20 nor more than 60 days before any redemption date, to the respective Owners of any 2022 Bonds designated for redemption at their addresses appearing on the Registration Books and to one or more Securities Depositories and to the Municipal Securities Rulemaking Board.
Neither the failure to receive any notice nor any defect therein will affect the sufficiency of the proceedings for such redemption or the cessation of accrual of interest from and after the redemption date.
12 Conditional Redemption Notices; Rescission of Redemption. Redemption notices may be conditional. The Authority has the right to rescind any notice of optional redemption of the 2022 Bonds by written notice to the Trustee on or prior to the date fixed for redemption.
Any
notice of redemption will be cancelled and annulled if for any reason funds will not be or are not available on the date fixed for redemption for the payment in full of the 2022 Bonds then called for redemption, and such cancellation will not constitute an Event of Default under the Indenture.
The Autho
rity and the Trustee have no liability to the Owners of the 2022 Bonds or any other party related to or arising from such rescission of redemption. The Trustee will mail notice of such rescission of redemption in the same manner as the original notice of redemption was sent under the Indenture.
Part
ial Redemption of 2022 Bonds. Upon surrender of any 2022 Bonds redeemed in part only, the Authority will execute and the Trustee will authenticate and deliver to the Owner thereof, at the expense of the Authority, a new 2022 Bond or 2022 Bonds of authorized denominations equal in aggregate principal amount to the unredeemed portion of the 2022 Bonds surrendered.
Eff
ect of Redemption. If notice of redemption has been duly given as provided in the Indenture, and moneys for payment of the redemption price of, together with i nterest accrued to the date fixed for redemption on, including any applicable premium, the 2022 Bonds (or portions thereof) so called for redemption being held by the Trustee, on the redemption date designated in such notice, the 2022 Bonds (or portions thereof) so called for redemption will become due and payable, interest on the 2022 Bonds so called for redemption will cease to accrue, said 2022 Bonds (or portions thereof) will cease to be entitled to any benefit or security under the Indenture, and the Owners of said 2022 Bonds will have no rights in respect thereof except to receive payment of the redemption price thereof.
Book-E
ntry Only System
The 2022 Bond
s will be issued as fully registered bonds in book-entry only form, registered in the name of Cede & Co. as nominee of DTC, and will be available to ultimate purchasers in the denomination of $5,000 or any integral multiple of $5,000, under the book -entry system maintained by DTC. While the 2022 Bonds are subject to the book -entry system, the principal, interest and any redemption premium with respect to a 2022 Bond will be paid by the Trustee to DTC, which in turn is obligated to remit such payment to its DTC Participants for subsequent disbursement to Beneficial Owners of the 2022 Bonds. Purchasers of the 2022 Bonds will not receive certificates representing their interests therein, which will be held at DTC.
See “APPEND
IX F – DTC AND THE BOOK -ENTRY ONLY SYSTEM ” for further information regarding DTC and the book-entry system.
Tran
sfer, Registration and Exchange
The fol
lowing provisions regarding the exchange and transfer of the 2022 Bonds apply only during any period in which the 2022 Bonds are not subject to DTC’s book -entry system.
While the 2022 Bonds are subject to DTC’s boo k-entry system, their exchange and transfer will be effected through DTC and the Participants and will be subject to the procedures, rules and
13 requirements established by DTC. See “APPENDIX F – DTC AND THE BOOK -ENTRY ONLY SYSTEM.”
Bond Register. The Trustee will keep or cause to be kept, at the Office of the Trustee, sufficient records for the registration and transfer of ownership of the 2022 Bonds, which will upon reasonable notice as agreed to by the Trustee, be open to inspection during regular busi ness hours by the Authority; and, upon presentation for such purpose, the Trustee will, under such reasonable regulations as it may prescribe, register or transfer or cause to be registered or transferred, on such records, the ownership of the 2022 Bonds as provided in the Indenture.
Transfer of Bonds. Any 2022 Bond may, in accordance with its terms, be transferred, upon the Registration Books, by the person in whose name it is registered, in person or by a duly authorized attorney of such person, upon surrender of such 2022 Bond to the Trustee at its Office for cancellation, accompanied by delivery of a written instrument of transfer in a form acceptable to the Trustee, duly executed. The Trustee will require the Owner requesting such transfer to pay any tax or other governmental charge required to be paid with respect to such transfer.
Whenever any 2022 Bond is or 2022 Bonds are surrendered for transfer, the Authority will execute and the Trustee will authenticate and deliver to the transferee a new 2022 Bond or 2022 Bonds of like series, interest rate, maturity and aggregate principal amount. The Authority will pay the cost of printing 2022 Bonds and any services rendered or expenses incurred by the Trustee in connection with any transfer of 2022 Bonds.
Prior to any transfer of the 2022 Bonds outside the book -entry system (including, but not limited to, the initial transfer outside the book-entry system) the transferor will provide or cause to be provided to the Trustee all information necessary to allow the Trustee to comply with any applicable tax reporting obligations, including without limitation any cost basis reporting obligations under Internal Revenue Code Section 6045, as amended. The Trustee will conclusively rely on the information provided to it and have no responsibility to verify or ensure the accuracy of such information.
Exchange of Bonds. The 2022 Bonds may be exchanged at the Office of the Trustee for a like aggregate principal amount of 2022 Bonds of other authorized denominations and of the same series, interest rate and maturity. The Trustee will require the Owner requesting such exchange to pay any tax or other governmental charge required to be paid with respect to such exchange. The Authority will pay the cost of printing 2022 Bonds and any services rendered or expenses incurred by the Trustee in connection with any exchange of 2022 Bonds.
Limitations on Transfer and Exchange. The Trustee may refuse to transfer or exchange, under these provisions of the Indenture, any 2022 Bonds selected by the Trustee for redemption under the Indenture, or any 2022 Bonds during the period established by the Trustee for the selection of 2022 Bonds for redemption.
14 DEBT SERVICE SCHEDULE
The table below shows scheduled Lease Payments and annual debt service payments on the 2022 Bonds.
Year Ending
November 1
Lease
Payments
2022 Bonds
Principal
2022 Bonds
Interest
Total
Debt Service
Total:
15 SECURITY FOR THE 2022 BONDS
The principal of and interest on the 2022 Bonds are not a debt of the Authority or the City, nor a legal or equitable pledge, charge, lien or encumbrance, upon any of their respective property, or upon any of their income, receipts, or revenues except the Revenues and other amounts pledged under the Indenture.
This section provides summaries of the security for the 2022 Bonds and certain provisions of the Indenture, the Lease Agreement and the Site Lease. See “APPENDIX B – SUMMARY OF PRINCIPAL LEGAL DOCUMENTS” for a more complete summary of the Indent ure, the Lease Agreement and the Site Lease. Capitalized terms used but not defined in this section have the meanings given in APPENDIX B.
Revenues; Pledge of Revenues
Pledge of Revenues and Other Amounts. Subject only to the provisions of the Indenture permitting the application thereof for the purposes and on the terms and conditions set forth therein, all of the Revenues and all amounts (including proceeds of the sale of the 2022 Bonds) held in any fund or account established under the Indenture are pledged to secure the payment of the principal (including the principal amount of any Term Bonds that is subject to mandatory sinking fund redemption) of and interest and premium (if any) on the Bonds in accordance with their terms and the provisions of the Indenture.
This pledge constitutes a lien on and security interest in the Revenues and such amounts and will attach, be perfected and be valid and binding from and after the Closing Date, without the need for any physical delivery thereof or further act.
Definition of Revenues. “Revenues” are defined in the Indenture as follows:
(a) all amounts received by the Authority or the Trustee under or with respect to
the Lease Agreement, including, without limiting the generality of the foregoing, all of the Lease Payments (including both timely and delinquent payments, any late charges, and whether paid from any source), but excluding (i) any amounts described in the provisions of the Lease Agreement relating to permitted amendments that provide for additional rental to be pledged or assigned for the payment of bonds issued to finance or refinance projects for which the City is authorized to expend its funds, and (ii) any Additional Rental Payments (consisting of certain administrative costs due to the Authority and the Trustee under the Lease Agreement), and
(b) all
interest, profits or other income derived from the investment of amounts in any fund or account established under the Indenture.
Assignment to Trustee. Under the Assignment Agreement, the Authority has transferred to the Trustee all of the rights of the Authority in the Lease Agreement (other than the rights of the Authority under the provisions of the Lease Agreement regarding Additional Rental Payments, advances, release and indemnification covenants, and agreement to pay attorneys’ fees).
The Trustee is entitled to collect and receive all of the Revenues, and any Revenues collected or received by the Authority will be deemed to be held, and to have been collected or received, by the Authority as the agent of the Trustee and will forthwith be paid by the Authority to the Trustee.
16 The Trustee is also entitled to and required to, subject to the provisions of the Indenture regarding rights of the Trustee , take all steps, actions and proceedings which the Trustee determines to be reasonably necessary in its judgment to enforce, either jointly with the Authority or separately, all of the rights of the Authority and all of the obligations of the City under the Lease Agreement.
Allocation of Revenues by Trustee; Application of Funds
Deposit of Revenues in Bond Fund. All Revenues will be promptly deposited by the Trustee upon receipt thereof in a special fund designated as the “Bond Fund” which the Trustee will establish, maintain and hold in trust; except that all moneys received by the Trustee and required under the Indenture or under the Lease Agreement to be deposited in the Redemption Fund or the Insurance and Condemnation Fund will be promptly deposited in such funds.
All Revenues deposited with the Trustee will be held, disbursed, allocated and applied by the Trustee only as provided in th e Indenture. Any surplus remaining in the Bond Fund, after payment in full of the principal (including the principal amount of any Term Bonds that is subject to mandatory sinking fund redemption) of and interest on the Bonds or provision therefore under the Indenture, and any applicable fees and expenses to the Trustee, will be withdrawn by the Trustee and remitted to the City.
Allocation of Revenues. On or before each Interest Payment Date, the Trustee will transfer from the Bond Fund and deposit into the following respective accounts (each of which the Trustee will establish and maintain within the Bond Fund), the following amounts in the following order of priority:
(a) Deposit to Interest Account. The Trustee will depos it in the Interest
Account an amount required to cause the aggregate amount on deposit in the I nterest Account to be at least equal to the amount of interest becoming due and payable on such Interest Payment Date on all Bonds then Outstanding.
(b) Deposit to Principal Account. The Trustee will deposi t in the Principal Account an amount required to cause the aggregate amount on deposit in the Principal Account to equal the principal (including the principal amount of any Term Bonds that is subject to mandatory sinking fund redemption) amount of the Bonds coming due and payable on such Interest Payment Date.
Lease Payment
s; Covenant to Appropriate
Obligation to Pay. Under the Lease Agreement, subject to the provisions of the Lease Agreement regarding abatement and prepayment, the City agrees to pay to the Authority, its successors and assigns, the Lease Payments in the amounts specified in the Lease Agreement, to be due and payable in immediately available funds on the Interest Payment Date immediately following each Lease Payment Date specified in the Lease Agreement (as it may be amended in connection with the issuance of Additional Bonds), and to be deposited by the City with the Trustee on the Lease Payment Dates specified in the Lease Agreement (as it may be amended in connection with the issuance of Additional Bonds).
Any amount held in the Bond Fund, the Interest Account and the Principal Account on any Lease Payment Date (other than amounts resulting from the prepayment of the Lease Payments 17 in part but not in whole under the Lease Agreement, and amounts required for payment of past due principal or interest on any Bonds not presented for payment) will be credited towards the Lease Payment then required to be paid under the Lease Agreement. The City is not required to deposit any Lease Payment with the Trustee on any Lease Payment Date if the amounts then held in the Bond Fund, the Interest Account and the Principal Account are at least equal to the Lease Payment then required to be deposited with the Trustee under the Lease Agreement.
The Lease
Payments payable in any Rental Period are for the use of the Leased Property during that Rental Period.
Fair R
ental Value. The aggregate amount of the Lease Payments and Additional Rental Payments coming due and payable during each Rental Period constitute the total rental for the Leased Property for such Rental Period, and are payable by the City in each Rental Period for and in consideration of the right of the use and occupancy of, and the continued quiet use and enjoyment of, the Leased Property during each Rental Period.
The Cit
y and the Authority have agreed and determined that the total Lease Payments represent the fair rental value of the Leased Property. In making that determination, consideration has been given to the estimated value of the Leased Property, other obligations of the City and the Authority under the Lease Agreement, the uses and purposes which may be served by the Leased Property and the benefits therefrom which will accrue to the City and the general public.
Source o
f Payments; Covenant to Budget and Appropriate . Under the Lease Agreement, the Lease Payments are payable from any source of available funds of the City, subject to the provisions of the Lease Agreement regarding abatement. See “ – Abatement” below.
The Cit
y covenants in the Lease Agreement to take all actions required to include the Lease Payments in each of its budgets during the Term of the Lease Agreement and to make the necessary appropriations for all Lease Payments and Additional Rental Payments. This covenant of the City constitutes a duty imposed by law and each and every public official of the City is required to take all actions required by law in the performance of the official duty of such officials to enable the City to carry out and perform the covenants and agreements agreed to be carried out and performed by the City under the Lease Agreement.
Limit
ed Obligation
THE
OBLIGATION OF THE CITY TO MAKE THE LEASE PAYMENTS DOES NOT
CONSTITUTE A DEBT OF THE CITY, THE AUTHORITY OR THE STATE OR OF ANY
POLITICAL SUBDIVISION THEREOF WITHIN THE MEANING OF ANY CONSTITUTIONAL OR
STATUTORY DEBT LIMIT OR RESTRICTION, AND DOES NOT CONSTITUTE AN
OBLIGATION FOR WHICH THE CITY IS OBLIGAT ED TO LEVY OR PLEDGE ANY FORM OF
TAXATION OR FOR WHICH THE CITY HAS LEVIED OR PLEDGED ANY FORM OF TAXATION.
Abate
ment
Termi
nation or Abatement Due to Eminent Domain . Under the Lease Agreement, if the Leased Property is taken permanently under the power of eminent domain or sold to a government threatening to exercise the power of eminent domain, the Term of the Lease Agreement thereupon ceases as of the day possession is taken. If less than all of the Leased
18 Property is taken permanently, or if the Leased Property is taken temporarily, under the power of eminent domain, then:
(a) the Lease Agreement will continue in full force and effect with respect thereto and does not terminate by virtue of such taking, and the City and Authority waive the benefit of any law to the contrary; and
(b) the Lease Payments are subject to abatement in an amount determined by the City such that the resulting Lease Payments represent fair consideration for the use and occupancy of the remaining usable portions of the Leased Property.
Abatement Due to Damage or Destruction. Under the Lease Agreement, the Lease Payments are subject to abatement during any period in which by reason of damage or destruction (other than by eminent domain as described above) there is substantial interference with the use and occupancy by the City of the Leased Property or any portion thereof.
The Lease Payments are subject to abatement in an amount determined by the City such that the resulting Lease Payments represent fair consideration for the use and occupancy of the remaining usable portions of the Leased Property not damaged or destroyed. Such abatement will continue for the period commencing with such damage or destruction and ending with the substantial completion of the work of repair or reconstruction.
In the event of any such damage or destruction, the Lease Agreement continues in full force and effect and the City waives any right to terminate the Lease Agreement by virtue of any such damage and destruction.
Notwithstanding the foregoing, there will be no abatement of Lease Payments under the Lease Agreement to the extent that the proceeds of hazard insurance or rental interruption insurance are available to pay Lease Payments that would otherwise be abated under the Lease Agreement, it being declared that such proceeds and amounts constitute a special fund for the payment of the Lease Payments.
Additional Bonds
Under the Indenture, the Authority may, by Supplemental Indenture, establish one or more other issues of Additional Bonds secured by a pledge of and payable from Revenues on a parity with the 2022 Bonds, and may issue and deliver such Additional Bonds in such principal amount as shall be determined by the Authority, but only upon compliance by the Authority with the provisions of the Indenture, and subject to the following specific conditions which are conditions precedent to the issuance of such Additional Bonds:
(a) Such Additional Bonds must be authorized to finance additional capital improvements for the City, or to refund bonds previously issued to finance such capital improvements, and the issuance t hereof must be determined and declared by the Authority, in a Supplemental Indenture, to be necessary for that purpose.
(b) The Authority and the City must be in compliance with all covenants and undertakings set forth in the Indenture and in the Lease Agreement and the Site Lease.
19 (c) The aggregate principal amount of Bonds issued and at any time Outstanding under the Indenture may not exceed any limit imposed by law, by the Indenture or by any Supplemental Indenture.
(d) Such Additional Bonds must be equally and ratably secured by the Revenues with the 2022 Bonds authorized under the Indenture.
(e) The Authority must enter into an amendment to the Lease Agreement, in and by which the City obligates itself in the manner provided in the Lease Agreement to make Lease Payments for the lease of the Leased Property at the times and in the amounts sufficient to provide for the payment of the principal (including the principal amount of any Term Bonds that is subject to mandatory sinking fund redemption) of and interest on such Additional Bonds as such principal (including the principal amount of any Term Bonds that is subject to mandatory sinking fund redemption) and interest become due and to make all other payments in the manner provided in the Lease Agreement, and the City must certify in writing that such Lease Payments, as amended, in any Rental Period will not exceed the fair rental value of the Leased Property.
(f) If necessary to ensure that the Lease Payments payable after the issuance of Additional Bonds does not exceed the fair rental value of the Leased Property in any Rental Period, the Authority and the City must amend the Lease Agreement pursuant to the terms thereof to add additional property to the Leased Property.
(g) If the Additional Bonds are being issued to finance the construction of a to- be-built project, and such project is to be part of the Leased Property prior to its completion, the Supplemental Indenture authorizing the issuance of such Additional Bonds must require the deposit into a separate account (the “ Capitalized Interest Account”) in the Interest Account, or a subaccount therein, an amount sufficient to pay interest on such Additional Bonds through a date which is not less than six months after the anticipated completion date of the project, but only if such Additional Bonds are issued prior to the substantial completion of such project and only if the City is unable to make a finding that the fair rental value of the Leased Property prior to the completion of the project is equal to or greater than the aggregate amount of the Lease Payments and Additional Rental Payments coming due and payable during each Rental Period.
No Reserve Fund
No debt service reserve fund has been established with respect to the 2022 Bonds. See “BOND OWNERS’ RISKS – No Debt Service Reserve Fund.”
Property Insurance
Liability and Property Damage Insurance . Under the Lease Agreement, the City is required to maintain or cause to be maintained throughout the Term of the Lease Agreement, but only if and to the extent available from reputable insurers at reasonable cost in the reasonable opinion of the City, a standard commercial general liability insurance policy or policies in protection of the Authority, the City, and their respective members, officers, agents, employees and assigns. Said policy or policies must provide for indemnification of said parties against direct or contingent loss or liability for damages for bodily and personal injury, death or property damage occasioned by reason of the operation of the Leased Property.
20 Such policy or policies must provide coverage in such liability limits and be subject to such deductibles as the City deems adequate and prudent. Such insurance may be maintained as part of or in conjunction with any other insurance coverage carried by the City, and may be maintained in whole or in part in the form of self-insurance by the City, subject to the provisions of the Lease Agreement, or in the form of the participation by the City in a joint powers agency or other program providing pooled insurance.
The proceeds of such liability insurance must be applied toward extinguishment or satisfaction of the liability with respect to which paid.
Property Insurance. Under the Lease Agreement, the City is required to procure and maintain, or cause to be procured and maintained, throughout the Term of the Lease Agreement, property insurance against loss or damage to all buildings situated on the Leased Property, in an amount at least equal to the lesser of (a) 100% of the replacement value of the insured buildings, or (b) 100% of the aggregate principal amount of the Outstanding Bonds.
Such insurance must, as nearly as practicable, cover loss or damage by explosion, windstorm, riot, aircraft, vehicle damage, smoke and such other hazards as are normally covered by such insurance, and must include earthquake insurance if available at commercially reasonable cost from reputable insurers in the judgment of the City.
Such insurance may be subject to such deductibles as the City deems adequate and prudent. Such insurance may be maintained as part of or in conjunction with any other insurance coverage carried by the City, and may be maintained in whole or in part in the form of the participation by the City in a joint powers agency or other program providing pooled insurance; provided that such insurance may not be maintained by the City in the form of self-insurance. The Net Proceeds of such insurance must be applied as provided in the Lease Agreement and described below.
Rental Interruption Insurance. Under the Lease Agreement, the City is required to procure and maintain, or cause to be procured and maintained, throughout the Term of the Lease Agreement, rental interruption or use and occupancy insurance to cover loss, total or partial, of the use of any portion of the Leased Property constituting buildings or other improvements as a result of any of the hazards covered in the property insurance described above, in an amount at least equal to the maximum such Lease Payments coming due and payable during any consecutive two Fiscal Years.
Such insurance may be maintained as part of or in conjunction with any other insurance coverage carried by the City, and may be maintained in whole or in part in the form of the participation by the City in a joint powers agency or other program providing pooled insurance; provided that such insurance may not be maintained by the City in the form of self-insurance.
The Net Proceeds of such insurance, if any, must be paid to the Trustee and deposited in the Bond Fund, to be applied as a credit towards the payment of the Lease Payments allocable to the insured improvements as the same become due and payable.
Application of Net Proceeds. The Trustee, as assignee of the Authority under the Assignment Agreement, has the right to receive all Net Proceeds. As provided in the Indenture, the Trustee will deposit all Net Proceeds in the Insurance and Condemnation Fund to be applied to the redemption of Bonds as set forth in the Indenture.
21 Remedies on Default
Under the Lease Agreement, upon the occurrence and continuance of any Event of Default, the Authority may exercise the remedies set forth in the Lease Agreement, which include (a) enforcement of the Lease Payments without termination of the Lease Agreement, (b) termination of the Lease Agreement and re-leasing the Leased Property, and (c) taking whatever action at law or in equity may appear necessary or desirable to collect the amounts then due and thereafter to become due under the Lease Agreement or to enforce any other of its rights under the Lease Agreement. Under the Assignment Agreement, such remedies will be exercised by the Trustee and the Bond Owners as provided in the Indenture. Neither the Authority nor the Trustee may accelerate the Lease Payments or otherwise declare any Lease Payments not then in default to be immediately due and payable. See APPENDIX B – Summary of Principal Legal Documents.
22 CITY FINANCIAL INFORMATION
General
The City is located on the western edge of the Central Valley in San Joaquin County (the “County”). The City is 60 miles east of San Francisco and 70 miles south of Sacramento. The City is situated within a triangle formed by three interstate freeways: I-5, I-205 and I-580.
The City was founded in 1878 as a railroad center, incorporated as a city in 1910 and is currently composed of approximately 21 square miles. During the 1980s, the City experienced a period of major growth influenced by the East Bay area of the San Francisco Bay region with its high cost of housing. Population in the City has increased from 18,429 in 1980 to 98,601 in 2021.
The City operates under a Council -Manager form of government. Policymaking and legislative authority are vested in the City Council, which consists of a mayor and four council members. Council members are elected to four-year staggered terms, with two council members elected every two years. The mayor is also elected every two years. The City Council appoints the City Manager and the City Attorney.
Certain demographic information concerning the City is included in APPENDIX A.
Management
Michael Rogers, City Manager. Mr. Rogers has over 30 years of public and private sector experience delivering municipal strategic priorities, including the completion of multi - million-dollar transit, road, and water infrastructure projects in the Dallas, Texas area. He also served as the Deputy City Manager for the City of Glenn Heights, Texas and a policy board member for the National Association of City Transportation Officials. Michael previously served as Director of Transportation for both Dallas, Texas and Raleigh, North Carolina, where he created their first Departments of Transportation. As Director of the Dallas Department of Transportation, Mr. Rogers developed Dallas’s first Strategic Mobility Plan, “Connect Dallas,” a roadmap that rethinks how all the thoroughfares – from freeways to roads to bike trails – influence transit, zoning, housing, and economic development. While in North Carolina, Michael was involved in major transportation investments, including “smart” enhancements to on and off-street parking infrastructure and construction, as well as operation of the GoRaleigh transit hub and Union Station. He has also served as the Director of Public Works for City of Peoria, Illinois. Mr.
Rogers holds a master’s degree in Civil Engineering from Michigan State University and a bachelor’s degree in Construction Engineering from Lawrence Technology University.
Ray McCray, City Treasurer. Ray McCray is a graduate of local schools in Tracy, Delta College in Stockton, Whittier College in Southern California and has completed certificate courses at Wharton Business School, Kellogg Business School and Hass Business School.
Ray McCray was appointed by the City Council to serve the remaining term of the City Treasurer in 1995 and continues in that role as their elected Treasurer. He is a member of the California Municipal Treasurers Association. Ray was appointed by the San Joaquin County Board of Supervisors to serve on the County Employees' Retirement Board, has served as its Chairman and was elected President of the State Association of County Retirement Systems (SACRS). Mr. McCray is a Director of the Merchant Services Credit Bureau, a founding board member of the Community Foundation of San Joaquin, and San Joaquin County Schools' Foundation Board. Mr. McCray has a Series 6 securities license and life and disability license.
23 Karin Schnaider, Finance Director. Karin Schnaider has been a Finance Director for over 13 years and has been in governmental accounting for over 19 years. She has worked for the City of San Die go, Pasadena Unified School District, City of Sierra Madre, and the City of Benicia. Karin has experience providing budget management and financial reporting for a wide variety of community based services; ranging from Police, Fire, Public Works, Utilities, Libraries, Development Services, and Parks/Recreation.
Karin understands the complexity of providing sound fiscal policies to a wide range of full service agencies from small (10,000) population to medium (90,000+) population. In her first job as a Finance Director, she helped the City of Sierra Madre bring more than three years of late audits current and completed five audits within her first two years. She also has experience with Federal Emergency Management Agency, Gas Tax, Internal Revenue Services, and CalPERS audits, as well as, many others. These experiences provided the framework for two conference presentations and a professional development webinar for California State and Municipal Finance Officer (CSMFO). She has executed Enterprise Resource Planning (accounting software) conversions in her last four agencies and understands the implications it has on financial transactions and business processes. Karin has issued more than $100M in new and refinancing debt, both agency and community facilities districts; along with developing and maintaining sound maintenance/replacement, debt, and investment policies to support financial sustainability for asset and infrastructure management and planning. Karin has expanded her policy experience to include development of the City’s cannabis policy and ordinance, State and Federal lobbying activities, and completing the City’s Hazard Mitigation Plan for emergency management strategies.
She received her Bachelors of Science in Accountancy from San Diego State University and her Masters in Public Policy Administration from California State University Long Beach.
Budget Process
The Tracy Municipal Code requires that the City Council adopt a budget by no later than the close of the Fiscal Year (June 30). This annual budget serves as the foundation for the City’s financial planning and control. The budget is prepared by fund, by department, and by program.
The Finance Department maintains budgetary controls to ensure compliance with legal provisions embodied in the appropriated budget approved by the City Council. The level of budgetary control (the level at which expenditures cannot legally exceed the appropriated amount) is the department level and within a single fund. The City Manager may authorize transfers between administrative control accounts within a department or within a capital project. Supplemental appropriations during the year must be approved by the City Council. Any transfer of appropriations between departments in the operating budget or between capital projects in the capital budget also requires City Council approval. For further information concerning the City’s budgetary procedures, see the City’s audited financial statements attached hereto as APPENDIX C.
The City’s Fiscal Year runs from July 1 to June 30. The proposed Fiscal Year 2021-22 budget was released on April 20, 2021 . A public hearing was held on May 18, 2021, where the City Council reviewed and considered the proposed operating budget prepared by City staff. The public hearing provided the opportunity for City Council to discuss the budget and to modify the proposed budget to reflect the Council’s priorities. The workshop also permitted public comment and participation in the budget process. Copies of the budget are available for public viewing at the City’s Public Library and at City Hall. The City Council adopted the Fiscal Year 2021-22 budget on May 18, 2021.
24 In response to a set of strategic priorities, goals and objectives were adopted to carry out the vision of the City Council, the City prepares a ten- year fiscal plan annually as a tool for the Council to meet these strategic priorities. The City’s fiscal strategy includes the creation of a financial forecast to evaluate current and future fiscal conditions and is to guide policy and programmatic decisions. As part of building the multi -year forecast, the City uses information based on past, current, and projected financial conditions. The City has developed and maintains several tools to provide analytic measurements of future fiscal impacts. First, the ten- year forecast includes two separate actuarial studies to analyze the impacts of employee retirement benefits on the City’s finances over time. One is focused on the fiscal impacts of pension obligation and the other focuses on retiree medical costs obligations. Secondly, the City has three separate studies on revenue forecasts based on economic trends surrounding short and long- term retail and housing markets. The City overlays each of these studies into the planning documents to create a multi-faceted approach to fiscal analysis and planning.
This has helped identify future revenue and expenditure trends that may have an immediate or long-term influence on government policies, strategic goals, funding obligations, or community services. The City uses the five-year financial forecast as a management tool to best anticipate inflows and outflows of City resources in the short-term, then projects out these trends into the longer ten- year model to ensure budget sustainability. Modeling of long-term strategies also allows marginal shifts to occur over time to maintain healthy reserves while still actively improving services to the public. The forecast has become an integral part of the annual and mid- budget process.
General Fund Budgets
General. The following table provides the adopted General Fund budget comparisons for Fiscal Year 2020-21, plus the amended General Fund budget for Fiscal Year 2021-22.
25 Table 1
General Fund
Adopted Budget, Revised Budget and Audited Actuals for Fiscal Year 2020-21 Amended Budget for Fiscal Year 2021-22
Original
Budget
2020-21
Final
Budget
2020-21
Audited Actuals
2020-21
Amended
Budget
2021-22
Revenues
Taxes $60,104,338 $62,104,338 $86,616,285 $96,706,547
Licenses and permits 5,738,849 3,738,849 4,554,069 4,022,462 Fines and forfeitures 133,746 133,746 779,652 585,083
Investment income (loss) 436,811 432,826 253,920 650,368 Intergovernmental 1,188,451 1,011,802 861,444 11,585,827 Charges for current services 10,829,527 10,829,527 10,264,482 471,617 Special assessments 353,086 353,086 454,147 148,227
Contributions 145,859 145,859 155,698 40,921
Other revenues 328,977 328,977 1,020,172 --
Total Revenues 79,259,644 79,079,010 104,959,869 114,211,052 Expenditures
General Government
Economic Development 858,157 1,396,593 1,146,152 847,044 General Government 9,203,360 8,047,883 7,659,534 9,846,263 Finance 4,631,737 4,787,032 5,122,963 5,654,340
Non-departmental 449,764 481,220 1,498,300 439,211
Public Safety
Police 34,627,450 34,634,985 35,188,494 37,882,796
Fire
15,016,157 15,016,157
15,854,221
15,809,413
Public Ways And Facilities
Development and engineering 169,417 200,316 265,249 307,216 Public works 6,979,485 6,997,610 7,083,249 8,446,788
Community Development
Parks and community services 5,115,759 3,515,089 3,038,091 4,303,257 Capital outlay -- 4,165 -- --
Total Expenditures 77,051,286 75,081,050 76,856,253 83,536,327
Excess Revenues Over (Under) Expenditures 2,208,358 3,997,960 28,103,616 30,674,725
Other Financing Sources
Transfers in -- -- 56,230 60,000
Transfers out (1) (5,006,377) (3,364,093) (17,176,542) (14,173,464) Other Financing Sources Total (5,006,377) (3,364,093) (17,120,312) (14,113,646)
Net Change to Fund Balance $(2,798,019) $633,867 $10,983,304 $16,561,261 Fund Balance
Beginning of year 23,046,950 34,030,254
End of year $34,030,254 $50,591,515
(1) Transfers out primarily represent primarily capital, airport services, parks, and development services.
Sources: City of Tracy Annual Comprehensive Financial Report for Fiscal Year 2020-21; City of Tracy Adopted Budget for Fiscal Year 2021-22.
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Budget Summary
The initial proposed budget for Fiscal Year 2021 -22 expected a $5.4 million deficit . In response, the City implemented some budget correction measures, including a temporary hiring freeze of select vacant positions (approximately 15 full -time equivalent), limited purchases and services spending, delay replacement of vehicle and equipment funding, and use of the C ity’s Economic/Budget Stabilization reserves. The City had also adopted mitigation measures to deal with the financial uncertainty caused by the COVID- 19 pandemic. Shortly after adoption of the Fiscal Year 2021-22 budget, the City received the January -March 2021 sales tax disbursement from the State of California Department of Tax Franchise Administration, which resulted in a significant change in the City’s estimated revenues. Thereafter, on July 20, 2021, the City Council of the City adopted an amendment to the Fiscal Year 2021 -22 budget to reflect the increase in sales tax revenues. As a result, the City was able to restore the funding for vehicles and equipment and approximately half of the frozen positions. Additionally, the COVID -19-related mitigation measures have been rescinded.
Financial Policies Summary
The City Council has an adopted “Fund Balance Policy” that establishes the procedures for reporting fund balance in the City ’s financial statements. Certain commitments and assignments of fund balance will help ensure that there will be adequate financial resources to protect the City against unforeseen circumstances and events such as revenue shortfalls and unanticipated expenditures. Beginning in Fiscal Year 2014-15, the City Council, through budget adoption, approved a minimum fund balance in the General Fund to be equal to 30% of operating revenues, of which 10% is for Economic/Budget Stability Reserves and 20% is for Contingency Reserves (Emergency or Catastrophic Loss reserves). These fund balances have been carved out and represented in the table on the following page. The policy also authorizes and directs the Finance Director to prepare financial reports which accurately categorize fund balance as per Governmental Accounting Standards Board (GASB) Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions. This policy took effect for financial reports for Fiscal Year ending June 30, 2011.
The City Council has an adopted “Investment Policy” that establishes the procedures for investing public fund and reporting in the City’s financial statements. See “– Investment Policies and Procedures” below.
The City Council has an adopted “ Disclosure Policies and Procedures” and “ Debt Management Policy” that establish the procedures for reviewing, reporting, and issuing debt financing in the City. The Securities and Exchange Commission ( the "SEC") recommends that issuers of municipal bonds adopt policies and procedures to govern compliance with respect to their initial disclosure and continuing disclosure undertakings. The Debt Policy is intended to comply with Government Code Section 8855(i) effective on January 1, 2017, and shall govern all debt undertaken by the City.
In addition, the City has adopted several other policies and procedures to monitor and sustain the City’s fiscal health.
• Guiding Budget Principles: Sets 12 overarching principles that guide the budget process.
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• Interfund Loan Policy: Establishes the guidelines for borrowing short - term (Due To/From) and long-term (Advances To/From) within the City-managed funds.
• Grant Manage ment Policy : Establishes the guidelines for applying, reporting, and use of federal, State, or local grants funds.
• Equipment and Vehicle: Use, Purchase, and Replacement Policy :
Establishes the guidelines for the City’s fleet and equipment assets.
• Cost Recovery Policy: Establishes a citywide policy to set City fees at the full value of the services provided.
• Capital Improvement Projects Procedures: Establishes the guidelines for establishing, prioritizing, and funding capital infrastructure repairs, replacement, and construction.
• Purchasing Policy and Ordinances: Establishes the purchasing authority for department heads, the City Manager, and City Council; as well as, the guidelines for requesting supplies or services from outside vendors.
• Technology and Cyber -Security Policy: Establishes the guidelines for monitoring and reducing the risk technology cyber threats to the City.
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Fund Balance History
The table below sets forth a three-year history of fund balance allocations in the General Fund.
Table 2
General Fund
Three-Year General Fund Balance Allocations
(dollar amounts in thousands)
Fund Balance
Allocations
2018-19
Actuals
2019-20
Actuals
2020-21
Actuals
2021-22
Projected
Actuals
Revenues $80,058 $83,148 $104,960 $114,210
Expenditures (71,491) (72,410) (76,857) (83,536)
Net Transfers In/(Out) (16,326) (20,672) (17,120) (14,113) Net Change in Position (7,759) (9,934) 10,983 16,561
Unspendable Loans Receivable 470 40 40 40
Restricted Fire Med. Leave Bank(1) -- -- 975 975
Medical Leave Bank(1) -- -- 1,373 1,373
Committed Reserve Policy(2) 14,883 14,479 16,401 16,401 Assigned Reserve Policy(2) 7,441 5,760 10,934 10,934
Animal Control 22 22 22 22
Prior Year Reappropriations 2,105 420 321 321
Measure V Capital(3) 5,645 -- -- --
Uncommitted Uncommitted -- -- 3,964 20,525
Total General Fund $30,566 $20,631 $34,030 $50,591
(1) Restricted fund balances for Fire Medical Leave Bank and Medical Leave Bank added in Fiscal Year 2020-21 as part of GASB 84 implementation.
(2) In Fiscal Years 2018- 19 and 2019-20, the City maintained a combined 30% reserve policy, divided as 20% for Committed for emergencies and 10% Assigned for economic/budget stability. Starting in Fiscal Year 2020- 21, the combined reserve policy remained 30% while the Committed for emergencies amount decreased to 18% and the Assigned for economic/budget stability amount increased to 12%. (3) The fund balance for Measure V, which is the City’s 1/2 cent local sales tax measure, was included in the General Fund in Fiscal Year 2018-19 but in subsequent years is accounted for outside of the General Fund.
The Measure V Capital fund is projected to have a balance of approximately $36 million on June 30, 2022.
Source: City of Tracy.
State Budget and Its Impact on the City
General. Information about the Fiscal Year 2021-22 adopted State budget and other State budgets is regularly available at various State-maintained websites. An impartial analysis of the budget is posted by the Legislative Analyst Office at www.lao.ca.gov. In addition, various State official statements, many of which contain a summary of the current and past State budgets, may be found at the website of the State Treasurer, www.treasurer.ca.gov. The information referred to in this paragraph is prepared by the respective State agency maintaining each website and not by the City or the Underwriter, and the City and the Underwriter take no responsibility for the continued accuracy of the Internet addresses or for the accuracy or timeliness of information
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posted there, and such information is not incorporated in this Official Statement by these references.
Future State Budgets. The City cannot predict what actions will be taken in future years by the State Legislature and the Governor to address a State budget deficit. Future State budgets will be affected by national and state economic conditions and other factors over which t he City has no control. To the extent that the State budget process results in reduced revenues to the City, the City will be required to make adjustments to its budget.
Public Health Emergency – COVID-19
General. The spread of the novel strains of coronavirus that causes the disease known as COVID -19 (“ COVID-19”) and local, state and federal actions in response to COVID -19, is having a significant impact on the economy and on the City’s operations and finances. On February 11, 2020, the World Health Or ganization (“WHO”) announced the official name for the outbreak of COVID-19, an upper respiratory tract illness. COVID-19 has since spread across the globe. The COVID-19 pandemic has had an adverse effect on, among other things, the world economy, global supply chain, international travel and a number of travel-related industries. The temporary and permanent business closures caused by the COVID -19 pandemic have led to a stark increase in unemployment across the County and the nation. Depending on the length and the breadth of the impacts of the COVID-19 pandemic, the economic costs may be very significant for the City and the region’s economy. On June 8, 2020, the National Bureau of Economic Research announced that the United States of America officially entered into a recession in February 2020. In addition, capital markets in the United States and globally have been volatile.
Starting in mid-March 2020, based on guidance and directives from the State and public health agencies, Shelter -in-Place (“ Shelter-in-Place”) emergency orders or directives were initially imposed, which directed individuals to stay home, except for limited travel for the conduct of essential services. Most retail establishments (including restaurants, bars and nightclubs, entertainment venues and gyms) were closed in response to the Shelter -in-Place orders or directives.
In December 2020, two vaccines were approved for emergency use in the United States and vaccinations began in California. A third vaccine was approved for emergenc y use in February 2021.
On June 15, 2021, California fully reopened its economy ending capacity limits, physical distancing and certain mask requirements for individuals who are fully vaccinated in accordance with guidance from the Centers for Disease Control and Prevention (the “CDC”). Masks are still required on public transportation, in hospitals and jails, in schools and in other child care centers pending updated guidance from the CDC. Public health measures currently remain for events with 5,000 or more people indoors or 10,000 attendees or more outdoors, with vaccine verification recommended. Certain public health measures, including but not limited to mask, testing and/or vaccination requirements, remain in certain business settings and for certain industries.
Financial Impact on City. On March 27, 2020, the $2.2 trillion Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted which provides, among other measures, $150 billion in financial assistance to states, tribal governments and local governments to provide emergency assistance to those most significantly impacted by the COVID -19 pandemic. Under the CARES Act, local governments are eligible for reimbursement of certain costs which are expended to address the impacts of the pandemic. The City received
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approximately $1.1 million in Fiscal Year 2020-21 from the State from its share of funding under the CARES Act. Funds received by the City under the CARES Act are not available for payment of debt service on the Series Bonds and cannot be used to backfill City revenue losses related to the COVID-19 pandemic.
On March 11, 2021, the President of the United States signed the American Rescue Plan Act (“ARPA”), a $1.9 trillion economic stimulus package designed to help the United States’ economy recover from the adverse impacts of the COVID -19 pandemic. The ARPA includes $350 billion in unrestricted economic relief to states, counties, and local governments. On May 10, 2021, the U.S. Treasury Department released interim guidance for use of the ARPA funds, and specifically authorized, among other things, the use of funds to help offset revenue shortfalls caused by the pandemic. As of the date of this Official Statement, the City estimates it will receive approximately $13.5 million in funding under the ARPA. To date, the City has received approximately $7.4 million of such funds and anticipates receiving a second installment in 2022.
The City has not yet allocated such funding for specific purposes pending the release of final guidance from the United States government.
The COVID-19 pandemic is ongoing, and its dynamic nature leads to uncertainties. There are many variables that will continue to contribute to the economic impact of the COVID -19 pandemic and the recovery therefrom, including the length of time social distancing measures are in place, the effectiveness of State and Federal governments’ relief programs and the timing for the containment and treatment of COVID-19. Certain of the information in this Official Statement is dated prior to the onset of the COVID-19 pandemic, which has had a significant adverse impact on the nation, State and local economy, including, but not limited to, a dramatic increase in unemployment levels. Accordingly, such information is not necessarily indicative of the current financial condition or future prospects of the City and the region. The ultimate impact of COVID - 19 on the City’s operations and finances is not fully known, and it may be some time before the full impact of the COVID-19 pandemic is known. See “BOND OWNERS’ RISKS – Public Health Emergencies.”
Financial Statements
The accounting policies of the City conform to generally accepted accounting principles.
The Governmental Accounting Standards Board (“GASB”) published its Statement No. 34 “Basic Financial Statements – and Management’s Discussion and Analysis – for State and Local Governments” on June 30, 1999. Statement No. 34 provides guidelines to auditors, state and local governments and special purpose governments such as school districts and public utilities, on new requirements for financial reporting for all governmental agencies in the United States .
Generally, the basic financial statements and required supplementary information should include (i) Management’s Discussion and Analysis; (ii) financial statements prepared using the economic measurement focus and the accrual basis of accounting; (iii) fund financial statements prepared using the current financial resources measurement focus and the modified accrual method of accounting; and (iv) required supplementary information.
Accounts of the City are organized on the basis of funds, each of which is considered a separate accounting entity. There are three groups of funds: governmental funds (which include the General Fund), proprietary funds (which include internal service funds) and fiduciary funds (which are used to account for resources held for the benefit of parties outside the City).
Information is presented separately in the governmental statement of revenues, expenditures, and changes in fund balances for the General Fund and the other major funds. Data for the non- major funds are combined into a single aggregated presentation.
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All governmental funds and fiduciary funds use the modified accrual basis of accounting.
The proprietary funds use the accrual basis of accounting. The General Fund is the general operating fund of the City and is used to account for all financial resources except those required to be accounted for in a separate fund.
In Fiscal Year 2014-15, the City implemented GASB Statements No. 68 and 71. These statements establish standards for measuring and recognizing liabilities, deferred outflows of resources, deferred inflows of resources and pension plan expenses. GASB Statements No. 68 and No. 71 do not change the pension funding obligations of the City and have had no effect on the General Fund.
The City’s most recent audited financial statements are included in the Annual Comprehensive Financial Report for the Fiscal Year Ended June 30, 2021, which is attached as APPENDIX C to this Official Statement. The financial statements were prepared by the City and audited by The Pun Group, Walnut Creek, California (the “Auditor”).
The Financial Statements should be read in their entirety. The City has neither requested nor obtained permission from the Auditor to include the audited financial statements as an appendix to this Official Statement. Accordingly, the Auditor has not performed any post -audit review of the financial condition or operations of the City or General Fund. In addition, the Auditor has not reviewed this Official Statement.
Set forth on the following pages are (i) a general fund balance sheet for Fiscal Years 2016- 17 through 2020-21 and (ii) a statement of revenues, expenditures and changes in fund balances for the City’s general fund for the same period.
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Table 3
General Fund Balance Sheet
Audited
2016-17
Audited
2017-18
Audited
2018-19
Audited
2019-20
Audited
2020-21
Assets:
Cash and investments $19,678,857 $17,957,628 $17,927,009 $5,668,536 $12,032,304 Receivables:
Accounts receivable, net 7,742,385 7,502,054 8,415,783 9,174,498 18,638,260 Interest receivable 217,346 302,454 231,123 99,317 109,559 Prepaid items 5,847 -- -- -- --
Loans receivable 515,500 506,111 495,249 67,270 69,270 Due from other funds 10,209,715 13,510,793 8,193,988 8,427,230 2,869,971 Advances to other funds 4,616,954 1,042,000 -- -- --
Due from component unit -- 8,719,171
Total assets $42,986,604 $40,821,040 $35,263,152 $23,436,851 $42,438,535
Liabilities:
Accounts payable 1,865,986 2,214,888 1,840,494 1,726,320 2,908,630 Salary and employee benefits payable 520,144 795,912 5,201,160 Due to other funds -- -- 1,833,600 -- --
Deposits payable 119,421 182,066 401,907 176,035 189,139 Unearned revenue 209,090 75,927 76,194 80,082 80,082
Total liabilities 2,194,497 2,472,881 4,672,339 2,778,349 8,379,011
Deferred inflows of resources:
Unavailable revenue 21,270 23,270 25,270 27,270 29,270
Total Liabilities and Deferred Inflows of
Resources $2,215,767 $2,496,151 $4,697,609 $2,805,619 $8,408,281
Fund Balance:
Nonspendable:
Prepaid items 5,847 -- -- -- --
Advances 4,616,954 1,042,000 -- -- --
Loans receivable 494,230 482,841 469,979 40,000 40,000 Restricted -- -- -- -- 2,348,064
Committed 11,716,000 14,960,997 14,882,561 14,479,022 16,401,047 Assigned 11,455,470 20,996,942 15,213,003 6,112,210 11,277,089 Unassigned (1) 12,482,336 842,109 -- -- 3,964,054
Total fund balance 40,770,837 38,324,889 30,565,543 20,631,232 34,030,254 Total liabilities, deferred inflows of resources
and fund balance $42,986,604 $40,821,040 $35,263,152 $23,436,851 $42,438,535
(1) The City Council adopted a revised Fund Balance Policy in Fiscal Year 2015-16 that moved $25 million in Unassigned Reserves to Committed (20% Contingency Reserves) and Assigned (10% Economic/Stability Reserves); approximately. (See “–Fund Balance History” above for details). In F iscal Year 2017-18, the City Council used Unassigned Fund balance to fund various one-time capital projects totaling over $10 million, as well as funding temporary service enhancements.
Source: City of Tracy Annual Comprehensive Financial Reports.
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Table 4
Statement of General Fund Revenues, Expenditures
and Changes in Fund Balance
Audited
2016-17
Audited
2017-18
Audited
2018-19
Audited
2019-20
Audited
2020-21
Revenues:
Taxes (1) $46,173,331 $55,155,390 $62,924,050 $64,241,200 $86,616,285 Licenses 2,980,580 3,694,142 3,588,115 3,907,932 4,554,069 Fines and penalties 198,177 220,087 209,256 180,186 779,652 Use of money and property (2) 639,648 672,721 1,299,415 1,065,302 253,920 Intergovernmental 1,433,843 1,583,991 1,475,809 1,630,147 861,444 Charges for services (3) 4,333,327 11,340,010 9,824,853 11,525,274 10,264,482 Special assessments 404,207 421,006 463,527 452,110 454,147 Contributions 139,175 143,350 147,221 145,859 155,698
Other revenues (4) 3,375,741 1,574,278 125,463 -- 1,020,172 Total revenues 59,678,029 74,804,975 80,057,709 83,148,010 104,959,869
Expenditures:
Current:
General government
Economic Development 625,750 763,391 618,371 647,524 1,146,152 General Development 6,149,909 6,538,415 7,171,344 7,023,314 7,659,534 Finance 4,449,060 4,091,660 5,052,345 4,890,254 5,122,963 Non-departmental 861,455 268,301 433,091 599,975 1,498,300 Public Safety
Police 24,238,642 26,539,255 29,868,676 32,903,426 35,188,494 Fire 11,946,948 13,701,292 14,978,488 15,714,615 15,854,221 Public Safety
Development and engineering 882,145 972,497 1,217,572 201,974 265,249 Public works 5,646,319 6,249,178 6,886,803 7,043,632 7,083,249 Culture and leisure
Parks and community services 2,286,985 2,682,569 3,245,383 3,180,097 3,038,091 Capital outlay 453,978 660,507 2,018,668 205,540 --
Debt service:
Principal 63,279 68,552 -- -- --
Interest and fiscal charges -- -- -- -- --
Total expenditures 57,604,470 62,535,617 71,490,741 72,410,351 76,856,253
Excess of revenues over (under) expenditures 2,073,559 12,269,358 8,566,968 10,737,659 28,103,616
Other financing sources (uses):
Proceeds from sale of capital assets 5,158 500 2,034 33,298 -- Contributions -- -- -- 3,930,000 --
Transfers in 1,250,000 1,250,000 1,250,000 26,876 56,230 Transfers out (5) (3,976,247) (12,618,396) (17,578,348) (24,662,144) (17,176,542) Total other financing sources (uses) (2,721,089) (11,367,896) (16,326,314) (20,671,970) (17,120,312)
Net change in fund balance before special items 901,462 (7,759,346) (9,934,311) 10,983,304 Special Item-SCFA Loan Write-off (6) -- (3,347,410) -- -- -- Net change in fund balance (647,530) (2,445,948) (7,759,346) (9,934,311) 10,983,304
Fund balance - July 1 (7) 41,418,367 40,770,837 38,324,889 30,565,543 23,046,950 Fund balance - June 30 $40,770,837 $38,324,889 $30,565,543 $20,631,232 $34,030,254
[Footnotes appear on following page.]
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(1) Reflects two local ½ cent sales tax measures : Measure E had a sunset of March 2016 and Measure V began April 2017. The impacts of these revenues crossed over several historical years. The City experienced a one- time Sales Tax increase in Fiscal Year 2018-19 related to the State’s timing of the 4th Quarter Fiscal Year 2017- 18 distribution, which did not occur until F iscal Year 2018-19. Additionally, a change in the method of tax reporting by a prominent sales tax producer in the City in early 2021 resulted in a shift in the tax allocation form a statewide allocation through the County sales tax pool to a local sales tax allocation based upon the businesses’ point-of-sale or fulfillment of the sale, resulting in a significant increase in sales tax revenues. (2) The City has experienced fluctuation in earnings from its investments. (3) The City revised its overhead allocations in Fiscal Year 2017-18. (4) Other Revenue represents various one-time funds that may arise in a given year. (5) Transfers out primarily represent capital, airport services, parks, and development services. (6) In February 2018, the City and the Tracy Rural Fire Protection District established the South San Joaquin County Fire Authority with an effective date of March 1, 2018 and an implementation date of July 1, 2018. With the implementation the new authority, the City and the Tracy Rural Fire Protection District entered into an agreement to resolve the outstanding financial obligations of the South County Fire Authority and dissolve the South County Fire Authority on June 30, 2018. As a result, the loan receivable from the District and the advance payable to the General Fund in the South County Fire Authority Special Revenue Fund were written off. The reduction of the loan balance that had resulted from the City advancing operational funds to the South County Fire Authority in the amount of $3,347,410 was then reported as a special item in the General Fund as of June 30, 2018. (7) The General Fund balance at July 1, 2020 was restated to reflect implementation of GASB 84.
Source: City of Tracy Annual Comprehensive Financial Reports.
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Major Revenues
General. Taxes and other sources of revenue received by the City are listed in the table below, which presents the major revenues of the City’s General Fund for the last five audited Fiscal Years.
Combined, taxes comprise over 80% of the City’s General Fund revenues. Property Tax and Sales Tax contribute more than two-thirds of the total income for the General Fund (and 90% of the total taxes). The next largest income is received through Charges for Services at 14% of the total General Fund revenue. All other revenues, including taxes from Business License, Transient O ccupancy Tax, and Franchise Fees, comprise the remaining 15% of the total revenues. The City’s revenues are expected to continue to increase annually for the next several years; with an annual increase estimated at 2-3%. Although the City cannot foresee all economic trends, the City annually completes a ten-year forecast based upon historical collections, market trends and consumer demands. The City’s revenues are diversified among Property Tax, Sales Tax, and other revenues. Sales Tax is the most responsive to the volatility changes of the economy, while Property Tax tends to lag by 18-24 months. This allows the City to adjust more gradually to changes such as an economic downturn.
Certain general taxes currently imposed by the City are affected by Proposition 218. See “CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS – Article XIIIC and Article XIIID of the State Constitution.”
Table 5
Major Tax Revenues by Source – General Fund
Audited
2016-17
Audited
2017-18
Audited
2018-19
Audited
2019-20
Audited
2020-21
% of
2020-21
Total
Amended
Budget
2021-22
% of
2021-22
Total
Property Tax(1) $20,392,536 $20,736,206 $22,139,194 $23,511,605 $25,164,935 27.45% $26,797,441 26.60% Property Transfer 372,636 1,311,406 1,130,147 1,392,908 2,084,113 2.27 1,316,930 1.31 Business License 838,037 749,739 934,038 850,019 1,016,050 1.11 770,092 0.76 Sales Tax-Bradley
Burns(2) 21,080,287 21,724,052 26,229,439 26,291,238 43,141,994 47.05 54,222,084 53.83 Sales Tax-Local
Measure(2) 2,210,380 9,036,647 10,853,130 10,747,534 14,026,197 15.30 12,000,000 11.91 Franchise Tax 2,829,424 3,694,143 3,588,115 3,907,932 4,554,069 4.97 4,022,462 3.99 Transient Tax 1,507,518 1,597,341 1,638,102 1,447,897 1,702,313 1.86 1,600,000 1.59 Total $49,230,818 $58,849,533 $66,512,165 $68,149,133 $91,689,672 100.00% $100,729,009 100.00%
(1) Included in Property tax: Special Assessments $463,527 and Intergovernmental $120,112. (2) Measure E had a sunset of March 2016 and Measure V began April 2017. A change in sales tax allocation also increased Tracy’s sales tax revenues beginning in calendar year 2021. See “–Sales and Use Taxes” below.
Source: City of Tracy Annual Comprehensive Financial Reports, Statistical Table (does not include Gas Tax); Finance Department, City of Tracy.
Property Taxes
General. This section describes property tax levy and collection procedures and certain information regarding historical assessed values and major property tax payers in the City. See
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the Statistical Section of the City’s Fiscal Year 2020- 21 audited financial statements, which are attached to this Official Statement as APPENDIX C, for a table of direct and overlapping governmental activities debt of the City.
Property taxes represent one of the largest source of tax revenues to the City at approximately 28% in Fiscal Year 2019-20 and 24% in Fiscal Year 2020-21 of total General Fund revenues. The City received approximately $25.7 million in property tax revenue for Fiscal Year 2020-21 (7% growth over prior year) and such revenues are projected to increase to approximately $27.0 million in Fiscal Year 2021-22 (5% growth over Fiscal Year 2020-21). The revenue growth is attributable to the 2% statutory inflationary increase on Assessed Valuat ion related to Proposition 13, as well as a steady increase in home sales and new home construction that is expected to continue for several years. See “ – Assessed Valuation” below. The City uses the services of two consulting firms to assist in forecasting property tax revenues. In addition, these firms provide auditing services to ensure the County tax accurately reflect the City’s allocations.
See “ – Assessed Valuation” below.
Property taxes have historically been the primary revenue source affected by voter initiatives and legislative actions. The City has also adopted a growth management ordinance that limits annual building permits for residential construction. See “CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS” and “BOND OWNERS’ RISKS – Limitations on Taxes and Fees.”
ERAF Shift Legislation. Certain property taxes have been shifted from local government agencies to schools by the State Legislature for deposit in the Education Revenue Augmentation Fund (“ERAF”), a shift that has resulted in diversion of City property taxes since Fiscal Year 1992-
93. Levy and Collection. Property taxes are levied for each Fiscal Year on taxable real and personal property as of the preceding January 1. For assessment and collection purposes, property is classified either as “secured” or “unsecured” and is listed accordingly on separate parts of the assessment roll. The “secured roll” is that part of the assessment roll containing State- assessed public utilities property and real property the taxes on which are a lien sufficient, in the opinion of the County Assessor, to secure payment of the taxes. Other property is assessed on the “unsecured roll.”
Property taxes on the secured roll are due in two installments, on November 1 and February 1 of each Fiscal Year, and become delinquent on December 10 and April 10, respectively. A penalty of 10% attaches immediately to all delinquent payments. Property on the secured roll with respect to which taxes are delinquent become tax defaulted on or about June 30 of the Fiscal Year. Such property may thereafter be redeemed by payment of a penalty of 1.5% per month to the time of redemption, plus costs and a redemption fee. If taxes are unpaid for a period of five years or more, the property may be sold at public auction.
Property taxes on the unsecured roll are due as of the January 1 lien dates and become delinquent on August 31. A 10% penalty attaches to delinquent unsecured taxes. If unsecured taxes are unpaid at 5:00 p.m. on October 31, an additional penalty of 1.5% attaches to them on the first day of each month until paid. The County has four ways of collecting delinquent unsecured personal property taxes: (1) a civil action against the taxpayer; (2) filing a judgment in the office of the County Clerk specifying certain facts in order to obtain a lien on certain property
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of the taxpayer; (3) filing a certificate of delinquency for record in the County Recorder’s office in order to obtain a lien on certain property of the taxpayer; and (4) seizure and sale of personal property, improvements or possessory interests belonging or assessed to the assessee.
Assessed Valuation. All property is assessed using full cash value as defined by Article XIIIA of the State Constitution. State law provides exemptions from ad valorem property taxation for certain classes of property such as churches, colleges, non- profit hospitals, and charitable institutions. See “ CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS.”
Future assessed valuation growth allowed under Article XIIIA of the State Constitution (new construction, certain changes of ownership, 2% inflation) will be allocated on the basis of “situs” among the jurisdictions that serve the tax rate area within which the growth occurs. Local agencies and schools will share the growth of “base” revenues from the tax rate area. Each year’s growth allocation becomes part of each agency’s allocation in the following year.
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Assessed Valuation History. The following table shows a ten-year history of the City’s assessed valuation.
Table 6
Assessed Value of Taxable Property
Fiscal Years 2011-12 through 2020-21
Category 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 Residential $5,014,246,784 $4,941,891,425 $5,483,285,494 $6,338,819,597 $6,659,567,812 $7,068,856,191 $7,507,417,694 $8,039,865,942 $8,555,296,590 $9,143,911,871 Commercial 762,602,990 759,270,908 780,671,922 809,032,343 813,724,348 885,051,665 929,006,663 947,333,003 955,735,852 1,030,981,316 Industrial 707,411,399 710,743,366 643,307,116 731,830,268 729,448,654 985,768,269 1,096,123,367 1,174,162,150 1,317,064,070 1,497,816,029 Agricultural 12,121,912 12,310,276 15,845,815 50,838,834 64,987,156 16,157,722 16,512,544 14,680,140 13,112,309 9,954,085 Govt. Owned 51,637 52,669 53,723 1,213,712 1,096,359 55,884 57,001 58,141 383,006 390,665 Institutional 8,854,601 8,457,785 8,872,850 9,692,380 9,515,260 5,720,691 14,530,172 13,108,380 14,022,064 17,778,493 Miscellaneous 34,602,445 34,534,323 31,765,357 31,703,360 32,517,596 904,446 1,000,531 1,020,538 1,040,944 1,059,690 Recreational 14,887,781 14,215,180 16,461,155 16,557,457 16,769,125 12,877,684 13,135,180 13,397,875 13,655,823 13,907,241 Vacant 114,584,285 114,511,579 132,775,224 130,690,678 298,360,191 245,602,494 237,333,513 224,337,103 390,395,541 450,516,491 SBE Nonunitary 11,041,870 11,041,870 12,164,031 12,164,031 12,164,031 11,939,960 11,939,960 11,939,960 11,939,960 13,423,391 Cross Reference 5,062,316 5,128,442 5,285,640 5,447,560 6,166,763 6,326,367 6,436,773 6,538,593 6,625,995 7,908,510 Unsecured 283,655,648 285,483,775 283,642,728 362,915,054 385,687,795 514,650,372 577,931,679 537,094,969 558,315,419 608,053,111 Exempt (9,157,458) (9,614,948) (10,494,903) (11,108,238) (13,653,324) (14,691,821) (14,741,007) - - - Unknown - - 65,332,242 - - - - 692,500 336,600 305,883
TOTALS $6,969,123,668 $6,897,641,598 $7,479,463,297 $8,500,905,274 $9,030,005,090 $9,753,911,745 $10,411,425,077 $10,984,229,294 $11,837,934,173 $12,796,006,766
Source: City of Tracy Annual Comprehensive Financial Reports.
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Proposition 13 and Proposition 8 Property Value Adjustments . Proposition 13, adopted in 1978, established the base year value concept for property tax assessments. Under Proposition 13, the 1975-76 Fiscal Year serves as the original base year used in determining the assessment for real property. Thereafter, annual increases to the base year value are limited to the inflation rate, as measured by the California Consumer Price Index, or 2%, whichever is less.
A new base year value, however, is generally established whenever a property, or portion thereof, has had a change in ownership or has been newly constructed.
Proposition 8, enacted in 1978, allows for a temporary reduction in assessed value when a property suffers a “decline-in-value.” As of January 1st (lien date) each year, the Assessor must enroll either a property’s Proposition 13 value (adjusted annually for inflation by no more than 2%) or its current market value, whichever is less. When the current market value replaces the higher Proposition 13 value, the lower value is commonly referred to as a “Proposition 8 Value.” “Proposition 8 values” are temporary and, once enrolled, must be reviewed annually by the assessor until the Proposition 13 adjusted base year value is enrolled.
Major Property Taxpayers. The following table shows the principal property taxpayers in the City as determined by their taxable assessed valuations in Fiscal Year 2020-21.
Table 7
Principal Property Tax Payers
Fiscal Year 2020-21
Taxpayer
Taxable
Assessed
Value Rank
Percentage of
Total City
Taxable
Assessed
Value
Prologis LP $437,422,955 1 3.42%
Amazon Com Services Inc 162,933,210 2 1.31
Fedex Ground Package System In 136,915,550 3 1.08
IPT Tracy DC LP 132,891,830 4 0.85
West Valley Realty LLC 102,676,642 5 0.81
Leprino Foods Company Corp 88,926,962 6 0.75
Tracy 300 LP 76,014,490 7 0.57
Lennar Homes of California Inc 75,034,793 8 0.54
Medline Cordes Rach Eat LLC 65,707,561 9 0.54
PAC Corporate Center Tracy ET AL 60,417,885 10 0.50
Top Ten Total $1,338,941,878 10.37%
Source: City of Tracy Annual Comprehensive Financial Report; The HdL Company.
Teeter Plan. The Board of Supervisors of the County has approved the implementation of the Alternative Method of Distribution of Tax Levies and Collections and of Tax Sale Proceeds (the “Teeter Plan”), as provided for in Section 4701 et seq. of the California Revenue and Taxation Code. Under the Teeter Plan, the County apportions secured property taxes on an accrual basis when due (irrespective of actual collections) to local political subdivisions, including the City, for which the County acts as the tax-levying or tax-collecting agency.
The Teeter Plan is applicable to all tax levies on secured property for which the County acts as the tax-levying or tax -collecting agency, or for which the County treasury is the legal depository of the tax collections.
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The Teeter
Plan is to remain in effect unless the Board of Supervisors of the County orders its discontinuance or unless, prior to the commencement of any fiscal year of the County (which commences on July 1), the Board of Supervisors receives a petition for its discontinuance joined in by resolutions adopted by at least two-thirds of the participating revenue districts in the County, in which event the Board of Supervisors is to order discontinuance of the Teeter Plan effective at the commencement of the subsequent fiscal year. If the Teeter Plan is discontinued subsequent to its implementation, only those secured property taxes actually collected would be allocated to political subdivisions (including the City) for which the County acts as the tax -levying or tax - collecting agency.
Sales and
Use Taxes
Sales
taxes represent the largest source of tax revenue to the City at approximately 45% in Fiscal Year 2019-20 and 54% in Fiscal Year 2020-21 of total General Fund revenues. The City received approximately $57 million in Sales Tax revenue for Fiscal Year 2020-21 (54% growth over prior year) and such revenues are projected to increase to approximately $77 million in Fiscal Year 2021 -22 ( 35% increase over Fiscal Year 2020-21). Part of the increase in Sales Tax revenue reflects increased sales volumes, including growth in online sales, and an increase in the number of sales tax producers in the City. The City also continues to be successful in attracting large distribution centers to its industrial parks which not only increase the City’s base tax, but add to the City’s half-cent local Sales Tax revenue Measure V, which is described further below.
Addit
ionally, shortly after the adoption of the Fiscal Year 2021-22 budget, the City received the January-March 2021 Sales Tax (Bradley Burns State Sales Tax) disbursement from the State of California Department of Tax Franchise Administration, which significantly exceeded the City’s prior estimates. The increase was due to a recent change in tax reporting by a prominent sales tax producer in the City. This reporting change shifted the tax allocation from a statewide allocation through the County sales tax pool , where the tax was distributed pro -rata throughout the State, to a local sales tax allocation based upon the businesses’ point-of-sale or fulfillment of the sale. In Fiscal Year 2021-22, the City estimates that General Fund sales tax will be approximately $25 million above the originally adopted budget. With new e-commerce businesses expected to open in the City in Fiscal Year 2022-23, the City forecasts sales taxes to grow an additional approximately $12 million in Fiscal Year 2022- 23, in addition to general economic growth of approximately 5%. However, the allocation of sales taxes have from time to time been the subject of legislative change and there can be no assurances that the current allocation of sales tax revenues (including but not limited to the allocation of sales tax revenues from online sales) among the relevant tax-recipient agencies will continue in the future.
The Cit
y has two revenue streams for Sales Tax; Bradley Burns, the State’s Sales Tax and Measure V, the City’s local Sales Tax. The City receives a portion of the statewide Sales Tax, 1 cent per dollar transaction. In addition, the Tracy residents approved an additional ½ cent Sales Tax for goods bought or delivered to Tracy. From 2011 through 2016, the City’s local measure was known as Measure E. After it expired, the City placed a new measure on the November 2016 ballot with a 20-year term. Approved by the voters, Measure V went into effect in April 2017 and will sunset in March 2037. The local Sales Tax revenue generat es sufficient revenues to allow the City to fund a new aquatic center, mul ti-generational gymnasium, and additional improvements to Legacy Fields Sports Complex. These facilities are expected to have a regional draw, further improving sales tax revenues within the City.
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This section describes the current system for levying, collecting and distributing sales and use tax revenues in the State of California.
Sales Tax Rates. The City collects a percentage of taxable sales in the City (minus certain administrative costs imposed by the State) pursuant to the Bradley -Burns Uniform Local Sales and Use Tax (the “Sales Tax Law”), as shown below.
Local taxes are included in the statewide sales and use tax rate of 7.25%. Additional local taxes approved by voters (also referred to as district taxes or “transaction taxes”) are applied to purchases where the goods are delivered or placed into use in the City.
Currently, taxable transactions in the City are subject to the following sales and use tax, of which the City’s share is only a portion. The State collects and administers the tax, and makes distributions on taxes collected within the City, as follows:
Table 8
Sales Tax Rates
Fiscal Year 2021-22
Component Rate
State and County Sales Tax Rates
State General Fund 3.94%
County Realignment (Mental Health/Welfare/Public Safety) 1.56 City/County General Fund (Bradley-Burns) 1.00
County Public Safety (Prop 172) 0.50
Countywide Transportation Fund 0.25
Total 7.25%
District (Local) Sales Tax Rates
Tracy Transactions & Use Tax (Measure V) 0.50%
San Joaquin Transportation Authority (K) (SJTA) 0.50
Total 1.00%
Total Sales Tax Rate 8.25%
Source: City of Tracy, based on information provided by Hdl.
Sales and use taxes are complementary taxes; when one applies, the other does not. In general, the statewide sales tax applies to gross receipts of retailers from the sale of tangible personal property in the State of California. The use tax is imposed on the purchase, for storage, use or other consumption in the State of tangible personal property from any retailer. The use tax generally applies to purchases of personal property from a retailer outside the State of California where the use will occur within the State of California. The Sales Tax is imposed upon the same transactions and items as the statewide sales tax and the statewide use tax.
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Certain transactions are exempt from the State sales tax, including sales of the following products:
• food products for home consumption;
• prescription medicine;
• newspapers and periodicals;
• edible livestock and their feed;
• seed and fertilizer used in raising food for human consumption; and • gas, electricity and water when delivered to consumers through mains, lines and pipes.
This is not an exhaustive list of exempt transactions. A comprehensive list can be found in the State Board of Equalization’s Publication No. 61 entitled “Sales and Use Taxes: Exemptions and Exclusions,” which can be found on the California Department of Tax and Fee Administration (CDTFA) website at www.cdtfa.ca.gov. The reference to this Internet website is provided for reference and convenience only. The information contained within the website may not be current, has not been reviewed by the City and is not incorporated in this Official Statement by reference.
Sales Tax Collection Procedures. Collection of the sales and use tax is administered by the California Department of Tax and Fee Administration (“ CDTFA”) Retailers engaged in business in California must register with the CDTFA and pay the state's sales tax, which applies to all retail sales of goods and merchandise except those sales specifically exempted by law. The use tax generally applies to the storage, use, or other consumption in California of goods purchased from retailers in transactions not subject to the sales tax. Use tax may also apply to purchases shipped to a California consumer from another state, including purchases made by mail order, telephone, or Internet. The sales and use tax rate in a specific California location has three parts: the state tax rate, the local tax rate, and any district tax rate that may be in effect.
These transmittals are required to be made at least twice in each calendar quarter.
Under its procedures, CDTFA projects receipts of the sales and use tax on a quarterly basis and remits an advance of the receipts of the sales and use tax to the City on a monthly basis. The amount of each monthly advance is based upon CDTFA’s quarterly projection. During the last month of each quarter, CDTFA adjusts the amount remitted to reflect the actual receipts of the sales and use tax for the previous quarter.
According to CDTFA, it distributes quarterly tax revenues to cities, counties and special districts using the following method:
Using the prior year’s like quarterly tax allocation as a starting point, CDTFA first eliminates nonrecurring transactions such as fund transfers, audit payments and refunds, and then adjusts for growth, in order to establish the estimated base amount. CDTFA disburses 90% to each local jurisdiction in three monthly installments (advances) prior to the final computation of the quarter’s actual receipts. Ten percent is withheld as a reserve against unexpected occurrences that can affect tax collections (such as earthquakes, fire or other natural disaster) or distributions of revenue such as unusually large refunds or negative fund transfers. The first and second advances each represent 27% of the 90% distribution, while the third advance represents 46%.
One advance payment is made each month, and the quarterly reconciliation payment (clean-up)
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is distributed with the third payment. Statements showing total collections, administrative costs, prior advances and the current advance are provided with each quarterly clean-up payment.
CDTFA receives an administrative fee based on the cost of services provided by CDTFA to the City in administering the City’s sales tax, which is deducted from revenue generated by the sales and use tax before it is distributed to the City. In addition, the City receives auditing and forecasting services from HdL to ensure that the City receives the proper allocation of sales tax revenue.
Location Agreements.
In December 2015, the City entered into a Location Agreement with a manufacturer and distributor of healthcare products and services (the “ 2015 Company”) to make payments to the 2015 Company in return for the 2015 Company establishing, locating and operating a sales office in the City. Under the terms of the agreement, the City has agreed to pay the 2015 Company 50% of the quarterly local sales tax revenues attributable to the 2015 Company's taxable sales for each fiscal quarter, excluding penalty assessments, commencing with the quarter beginning January 1, 2017 and ending on December 31, 2036, unless otherwise extended in accordance with the agreement. The City paid $3,757,405 to the 2015 Company during the year ended June 30, 2021.
In December 2017, the City entered into a Location Agreement with a manufacturer and distributor of healthcare products and services (the “ 2017 Company”) to make payments to the 2017 Company in return for the 2017 Company establishing, locating and operating a sales office in the City. Under the terms of the agreement, the City has agreed to pay the 2017 Company 50% of the quarterly local sales tax revenues attributable to the 2017 Company's taxable sales for each fiscal quarter, excluding penalty assessments, commencing with the quarter beginning January 1, 2017 and ending on December 31, 2036, unless otherwise extended in accordance with the agreement. The City paid $2,115,565 to the 2017 Company during the year ended June 30, 2021.
In December 2019, the City entered into a Location Agreement with a manufacturer and distributor of general merchandise (the “ 2019 Company”) to make payments to the 2019 Company in return for the 2019 Company establishing, locating and operating a sales office in the City. Under the terms of the agreement, the City has agreed to pay the 2019 Company 50% of the quarterly local sales tax revenues attributable to the 2019 Company's taxable sales for each fiscal quarter, excluding penalty assessments, commencing with the quarter beginning January 1, 2020 and ending on December 31, 2040, unless otherwise extended in accordance with the agreement. Taxable sales under the Location Agreement with the 2019 Company have not commenced as of February 1, 2022; consequently, the City has paid $0 to the 2019 Company as of such date.
Historical Composition of Sales Tax Revenue. A historical summary of sales tax composition by category is shown in the following table. The data presented show the full value of the City’s 1.0% share of sales taxes under the Sales Tax Law, and do not reflect the State’s “triple-flip” adjustments, administrative fees, or the 5% of the City’s revenue allocable to San Joaquin County. The table below is provided by the City’s sales tax auditors (HdL) and reflects allocation on a calendar year basis.
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Table 9
Taxable Sales by Category
(calendar year basis)
($000s)
Category 2016 2017 2018 2019 2020
Apparel stores $42,756 $44,760 $48,498 $45,863 $29,843 General merchandise stores 203,460 210,820 212,792 215,649 211,080 Food and beverage stores 39,953 39,602 41,342 44,890 52,921 Eating and drinking places 155,560 162,261 169,434 176,257 156,555 Building maintenance and garden
supplies 140,715 159,799 180,713 190,441 202,652
Auto dealers and auto suppliers 343,861 379,058 369,499 349,716 367,471 Service stations 144,048 159,778 183,856 178,037 131,426 Other retail stores 160,573 155,252 163,611 156,467 150,368 All other outlets 601,684 1,091,917 1,344,089 1,807,673 2,063,972 Total $1,832,610 $2,403,247 $2,713,834 $3,164,993 $3,366,288
Source: City of Tracy, based on information provided by Hdl.
Other Taxes and Revenues
Business License Taxes. Business taxes are paid by individuals and entities for the privilege of conducting business in the City and to help play for public services that contribute to a favorable business environment. The tax rate depends upon the type and size of the business.
Some businesses pay a flat rate . Business tax receipts tend to fluctuate with economic cycles, though to a lesser degree than sales taxes.
Each person transacting and carrying on a business not specifically classified by other sections of the City municipal code is required to pay an annual business tax of $100 , which covers one owner, plus $20 for each additional employee or owner. Each business tax will be determined annually based upon the average number of employees of the business in the City's preceding year.
Exemptions are provided for the following:
• Nonprofit organizations.
• Disabled veterans.
• Disabled persons.
• Minimal income persons. Any person whose annual gross income from any such business is less than $2,000.
• Minors.
• Solicitors in interstate commerce.
The City received approximately $851,000 in Business License tax revenue for Fiscal Year 2019-20 and approximately $1,016,000 for Fiscal Year 2020-21.
Franchise Taxes. State law provides cities with the authority to grant franchises to privately-owned utility and other companies for their use of the public right -of-way. The City receives franchise fees from the electric and gas utility, the solid waste collection company, and local cable companies . The dominant franchise fees are calculated as a percentage of the
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respective franchisee’s gross revenues (subject to specified statutory adjustments) earned from services delivered or performed by the franchisee within the City.
Gas and electricity franchise: PG&E franchise fee revenues change because of changes to the cost of natural gas and other resources used to generate electricity, consumer power demands (which are affected by the economy), interstate energy contract pricing, and State and federal regulatory changes. Decreased demand (a factor of weather and price) or significant interstate cost decreases are factors that might negatively affect this revenue. Gas and electric franchise fee revenues were $756,329 in Fiscal Year 2019-20 and $828,830 in Fiscal Year 2020-21.
Cable franchise: AB 2987 was signed into California law and became effective January 1, 2007. This legislation transferred the franchising functions to the State and set a fixed franchise fee of 5%. Cable franchise fee revenues w ere $812,154 in Fiscal Year 2019-20 and $827,272 in Fiscal Year 2020-21.
Solid waste collection franchise: Solid waste collection franchise fee revenues were $2,295,852 in Fiscal Year 2019-20 and $2,430,932 in Fiscal Year 2020-21.
Transient Occupancy Taxes (TOT). The City’s transient occupancy tax rate of 10% is charged on hotel and motel room occupancies of 30 days or less. It is paid by hotel and motel customers in addition to the room rate. Fiscal Year 2020-21 transient occupancy tax revenues were $1.7 million, an increase of 18% from the prior Fiscal Year level.
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Long-Term Obligations
Genera
l Fund and Enterprise Obligations. Following is a summary schedule of the City’s outstanding debt, including both general fund obligations and enterprise (business -type) obligation.
Balance
June 30, 2021
Governmental Activities
Lease Revenue Bonds, Series 2020 $ 17,635,000
Total Governmental Activities 17,635,000
Business-Type Activities
2004 Wastewater Certificates of Participation $ 21,175,000 State of California Public Health Loan 7,554,235
Total Business-Type Activities 28,719,235
Successor Agency
Tax Allocation Refunding Bonds, Series 2016 $ 27,650,000 Total Successor Agency 27,650,000
Total $ 74,004,235
Sourc e: City of Tracy Fiscal Year 2020-21 Annual Comprehensive Financial Report.
The Cit
y also anticipates that it may within the next year incur additional lease revenue bonds of approximately $30 million in principal amount to finance a portion of a planned recreation center. However, there can no assurance as to the timing, the principal amount, or the interest rates that the City may obtain and the City may elect not to issue any such bonded indebtedness.
Special
Tax and Assessment Obligations. The City has financed certain infrastructure improvements through the issuance of long-term debt secured by special taxes and assessments.
The City has no direct or contingent liability or moral obligation for the payment of this debt from the general fund . The combined outstanding balance of this debt as of June 30, 2021, was $134,760,000.
Dir
ect and Overlapping Bonded Debt
Set
forth following is a direct and overlapping debt report (the “Debt Report”) prepared by California Municipal Statistics, Inc. and effective ________, 2022. The Debt Report is included for general information purposes only. The City has not reviewed the Debt Report for completeness or accuracy and makes no representation in connection therewith.
The Debt
Report generally includes long-term obligations sold in the public credit markets by public agencies whose boundaries overlap the boundaries of the City in whole or in part. Such long-term obligations generally are not payable from revenues of the City (except as indicated) nor are they necessarily obligations secured by land within the City. In many cases, long- term obligations issued by a public agency are payable only from the general fund or other revenues of such public agency.
The conten
ts of the Debt Report are as follows: (1) the first column indicates the public agencies which have outstanding debt as of the date of the Debt Report and whose territory overlaps the City; (2) the second column shows the percentage of the assessed valuation of the
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overlapping public agency identified in column 1 which is represented by property located within the City; and (3) the third column is an apportionment of the dollar amount of each public agency’s outstanding debt (which amount is not shown in the table) to property in the City, as determined by multiplying the total outstanding debt of each agency by the percentage of the City’s assessed valuation represented in column 2.
[Table to come]
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Employee Relations
There are approximately 548 full and part -time employees of the City, represented by formal labor organizations or not represented, as shown in the table below.
Labor Group
Number of
Employees
Contract
Expiration Date
Elected 6 N/A
Appointed 2 N/A
Department Heads 11 June 30, 2023
Confidential Mid-Managers 24 June 30, 2023
Mid-Managers Bargaining Unit 66 June 30, 2023
Tracy Technical & Support Services Employees Assn 76 June 30, 2023 Teamsters 185 June 30, 2023
Tracy Police Officers Assn 90 June 30, 2023
Tracy Police Managers Assn 9 June 30, 2023
Tracy Fire Fighters Assn 76 June 30, 2023
South County Fire Chiefs Assn 3 June 30, 2023
Total 548
Risk Management
The City is exposed to various risks related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. The city maintains the Insurance Internal Service Fund to account for and finance its risks of loss.
Coverage. The City participates in the Central San Joaquin Valley Risk Management Authority (“ CSJVRMA”), a public entity risk pool currently operating as a common risk management and insurance program for 54 cities. The purpose of CSJVRMA is to spread the adverse effect of losses among the members and to purchase excess insurance as a group, thereby reducing its expense. The CSJVRMA is governed by a Board of Directors elected by the member agencies; it is not a component unit of the City. Audited financial statements are available from the Central San Joaquin Risk Management Authority at 1750 Creekside Oaks Drive, Suite 200, Sacramento, CA 95833.
The City participates in the following pooled coverages through CSJVRMA:
Type of Coverage (Deductible) Coverage Limits
Liability ($100,000) $54,000,000
Property ($5,000 to $10,000) 1,000,000,000
Worker’s Compensation ($200,000) Statutory Limits
Boiler and Machinery ($1,000 to $10,000) 100,000,000
Automobile ($500 for vehicles valued above $25,000) 1,000,000,000
The CSJVRMA maintains separate records for each member for each year of participation. The records track cash paid to the CSJVRMA through deposit premium and assessments, the City’s self-insured retention portion of claims paid, and the City’s allocation of shared risks. Five years after the close of the workers’ compensation coverage year and five years after the close of the general liability coverage year, the CSJVRMA assesses the status of all members for the year, then either makes a refund to a member if it has positive balance (i.e. payout and reserve experience is less than premiums paid) or collects any deficit.
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During the Fiscal Year ended June 30, 20 21, the City contributed $5,191,306 for current year coverage. Settled claims have not exceeded insurance coverage in any of the past three Fiscal Years.
Liability for Uninsured Claims. The City provides for the uninsured portion of claims and judgments, including provisions for claims incurred but not reported, in the Insurance Internal Service Fund. Claims and judgments are recorded when a loss is deemed probable of asserting and the amount of the loss is reasonably determinable. As discussed above, the City has coverage for such claims, but it has retained the risk for the deductible, or uninsured portion of these claims. The City has estimated that claims will become due and payable in more than one year.
See Note 11 in the City’s Fiscal Year 2020-21 audited financial statements, which are attached to this Official Statement as APPENDIX C, for additional information about the City’s risk management practices.
Employee Retirement System
This caption contains certain information relating to California Public Employees’ Retirement System (“ CalPERS”). The information is primarily derived from the City’s Annual Comprehensive Financial Report and information produced by CalPERS, its independent accountants and actuaries. The City has not independently verified the information provided by CalPERS and makes no representations and expresses no opinion as to the accuracy of the information provided by CalPERS.
The Annual Comprehensive financial reports of CalPERS are available on its Internet website at www.calpers.ca.gov. The CalPERS website also contains CalPERS’ most recent actuarial valuation reports and other information concerning benefits and other matters. Such information is not incorporated by reference in this Official Statement. None of the Authority, City or Purchaser can guarantee the accuracy of such information. Actuarial assessments are “forward-looking” statements that reflect the judgment of the fiduciaries of the pension plans, and are based upon a variety of assumptions, one or more of which may not materialize or may be changed in the future. Actuarial assessments will change with the future experience of the pension plans.
Plan Descriptions. All qualified permanent and probationary employees are eligible to participate in the City’s separate Safety (police and fire) and Miscellaneous (all other) Plans, agent multiple-employer defined benefit pension plans administered by CalPERS, which acts as a common investment and administrative agent for its participating member employers. Benefit provisions under the Plans are established by State statute and City resolution. CalPERS issues publicly available reports that include a full description of the pension plans regarding benefit provisions, assumptions and membership information that can be found on the CalPERS website.
Benefits Provided. CalPERS provides service retirement and disability benefits, annual cost of living adjustments and death benefits to plan members, who must be public employees and beneficiaries. Classic CalPERS members become eligible for service retirement upon attainment of age 55 with at least 5 years of credited service. PEPRA miscellaneous members become eligible for service retirement upon attainment of age 62 with at least 5 years of service.
Benefits are based on years of credited service, equal to one year of full time employment. All members are eligible for non-duty disability benefits after 10 years of service. The death benefit
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is one of the following: the Basic Death Benefit, the 1957 Survivor Benefit, or the Optional Settlement 2W Death Benefit. The cost of living adjustments (“COLA”) for each plan are applied as specified by the Public Employees’ Retirement Law. The Pension Reform Act of 2013 (PEPRA), Assembly Bill 340, is applicable to employees new to CalPERS and hired after December 31, 2012.
A summary of the City’s benefit formulas as of June 30, 2021, is provided below:
Miscellaneous
Classic Tier I Classic Tier II PEPRA
Hire date Prior to October 9, 2011 After October 9, 2011 On or after January 1, 2013 Benefit formula 2.5% @ 55 2.0% @ 55 2.0%@62
Benefit vesting schedule 5 years service 5 years service 5 years service Benefit payments Monthly for life Monthly for life Monthly for life Retirement age 50 - 55 50 - 63 52-67
Monthly benefits, as of % of eligible compensation 2.0% - 2.5% 1.426% - 2.418% 1.0%-2.5% Required employee contribution rates 8% 7% 6.25%
Required employer contribution rates 9.838% 9.838% 9.838%
Required UAL contribution-Miscellaneous $3,442,778
Safety-Police
Classic Tier I Classic Tier II PEPRA
Hire date Prior to April 8, 2012 After April 8, 2012 On or after January 1, 2013 Benefit formula 3.0% @ 50 3.0% @ 55 2.7% @ 57
Benefit vesting schedule 5 years service 5 years service 5 years service Benefit payments Monthly for life Monthly for life Monthly for life Retirement age 50 50-55 50-57
Monthly benefits, as of % of eligible compensation 3.0% 2.4%-3.0% 2.0%-2.7% Required employee contribution rates 9% 9% 13%
Required employer contribution rates 21.845% 21.8458% 21.845%
Required UAL contribution-Police and Fire $3,259,512
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Safety-Fire
Classic Tier I PEPRA
Hire date Prior to January 1, 2013 On or after January 1, 2013 Benefit formula 3.0% @55 2.7% @57
Benefit vesting schedule 5 years service 5 years service Benefit payments Monthly for life Monthly for life
Retirement age 50-55 50-57
Monthly benefits, as of % of eligible compensation 2.4%-3.0% 2.0%-2.7% Required employee contribution rates 9% 13%
Required employer contribution rates 21.845% 21.845%
Required UAL contribution-Police and Fire Included in Safety-Police total in the prior table
Beginning in Fiscal Year 2018, CalPERS collects employer contributions for the Plans as a percentage of payroll for the normal cost portion as noted in the rates above and as a dollar amount for contributions toward the unfunded accrued liability (“ UAL”). The dollar amounts are billed on an annual basis. The City’s required contributions for the unfunded liability for Miscellaneous and Safety Plans were $3,442,778 and $3,259,512, respectively, in Fiscal Year 2020-21, as shown in the tables above.
Employees Covered. At the June 30, 2020 measurement date, the following employees were covered by the benefit terms for each plan:
Miscellaneous Safety
Active employees 331 165
Transferred and terminated employees 277 58
Retired employees and beneficiaries 338 169
Total 946 392
Required Contributions. The City is required to contribute at an actuarially determined rate of annual covered payroll for normal cost and an actuarially determined dollar amount to amortize the unfunded liability. The actuarially determined rates and contribution amounts for each plan for the Fiscal Years ended June 30, 2021, through June 30, 2023, are as follows:
Fiscal Year 2020-21 Fiscal Year 2021-22 Fiscal Year 2022-23
Employer
Normal
Cost Rate
Employer
Payment of
Unfunded
Liability
Employer
Normal
Cost Rate
Employer
Payment of
Unfunded
Liability
Employer
Normal
Cost Rate
Employer
Payment of
Unfunded
Liability
Safety Plan 21.845% $3,259,512 21.89% $4,122,136 21.73% $4,756,422 Miscellaneous Plan 9.838% $3,442,778 9.56% $4,226,040 9.10% $4,577,079
Source: CalPERS Actuarial Reports dated, July 2019, July 2020, and July 2021.
On July 12, 2021, CalPERS announced preliminary investment returns for the 12- month period ended June 30, 2021, of 21.3%. Such returns are higher than CalPERS’ current assumed rate of investment return (6.8%). See “–Recent Actions Taken by CalPERS” below.
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The City's total contributions to each plan in Fiscal Years 2018-19, 2019-20, and 2020-21 were as follows:
Miscellaneous Plan
Fiscal Year
Total City
Contribution
2018-19 $4,749,293
2019-20 5,566,882
2020-21 6,067,472
Safety Plan
Fiscal Year
Total City
Contribution
2018-19 $5,643,974
2019-20 6,437,044
2020-21 7,379,603
Projected Contributions. The table below shows the City’s required and projected contributions (before cost sharing) for the next six Fiscal Years, as projected by CalPERS.
Projected results reflect the adopted changes to the CalPERS discount rate. The projections also assume that all actuarial assumptions will be realized and that no further changes to assumptions, contributions, benefits, or funding will occur during the projection period. The projected normal cost percentages in these projections do not reflect that the normal cost will decline over time as new employees are hired into PEPRA or other lower cost benefit tiers.
Miscellaneous Plan
Required
Contribution
Projected Future Employer Contributions (Assumes
7.00% Return for Fiscal Year 2020-21)
Fiscal Year 2022-23 2023-24 2024-25 2025-26 2026-27 2027-28 Normal Cost % 9.10% 98.9% 8.7% 8.6% 8.4% 8.2%
UAL Payment $4,577,079 $4,915,000 $5,083,000 $4,930,000 $4,800,000 $4,912,000
Source: CalPERS Actuarial Report dated July 2021.
Safety Plan
Required
Contribution
Projected Future Employer Contributions (Assumes
7.00% Return for Fiscal Year 2020-21)
Fiscal Year 2022-23 2023-24 2024-25 2025-26 2026-27 2027-28 Normal Cost % 21.73% 21.4% 21.0% 20.5% 20.0% 19.6%
UAL Payment $4,756,422 $5,168,000 $5,586,000 $5,833,000 $5,817,000 $5,952,000
Source: CalPERS Actuarial Report dated July 2021.
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Funded Status. The following table sets forth the schedule of funding progress for the City’s Miscellaneous and Safety pension plans as of the three most recent actuarial valuation dates.
Miscellaneous Plan
Valuation
Date
(June 30) Accrued Liability
Market Value
of Assets
Unfunded
Liability
Funded
Ratio (1)
Annual
Covered
Payroll
2018 $159,190,541 $116,812,860 $42,377,681 73.4% $23,490,377 2019 171,530,366 124,601,929 46,928,437 72.6 26,700,001 2020 180,163,889 130,921,832 49,242,057 72.7 27,214,046
(1) Based on the market value of assets.
Source: CalPERS Actuarial Report Dated July 2021.
Safety
Valuation
Date
(June 30) Accrued Liability
Market Value
of Assets
Unfunded
Liability
Funded
Ratio (1)
Annual
Covered
Payroll
2018 $188,517,760 $139,620,656 $48,897,104 74.1% $17,089,085 2019 203,126,661 149,228,175 53,898,486 73.5 18,949,564 2020 216,226,719 157,292,202 58,934,517 72.7 20,190,098
(1) Based on the market value of assets.
Source: CalPERS Actuarial Report Dated July 2021.
In March 2022, in response to increases in projected General Fund revenues, the City Council of the City approved a plan to pre- fund a portion of the unfunded liability of the City’s pension plans, in the amount of $2 million per fiscal year for five fiscal years.
Potential Impacts on Future Required Contributions. The CalPERS Board of Administration has adjusted and may in the future further adjust certain assumptions used in the CalPERS actuarial valuations, which adjustments may increase the City’s required contributions to CalPERS in future years. Accordingly, the City cannot provide any assurances that the City’s required contributions to CalPERS in future years will not significantly increase (or otherwise vary) from any past or current projected levels of contributions.
Change in Assumptions/Discount Rate. On December 21,
2016, the CalPERS Board of
Administration voted to lower its discount rate from the then-current rate of 7.50% to 7.00% over a three- year period. The change was reflected in the June 30, 2016 actuarial report, which lowered the discount rate from 7.50% to 7.375%; in the June 30, 2017 actuarial report, which lowered the discount rate from 7.375% to 7.25%; and in the June 30, 2018 actuarial report, which lowered the discount rate from 7.25% to 7.00%. CalPERS further reduced the discount rate to
6.8% in September 2021.
Investment Performance. C alPERS earnings reports for Fiscal Years 2010 through 2020 report investment gains of approximately 13.3%, 21.7%, 0.1%, 13.2%, 18.4%, 2.4%, 0.6%,
11.2%, 8.6%, 6.7% and 4.7%, respectively. The CalPERS Fiscal Year 2019-20 investment gain of 4.7% is not included as an amortization base in the most recent CalPERS valuation report and is not reflected in the numbers included herein. Future earnings performance may increase or
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decrease future contribution rates for plan participants, including the City. CalP ERS has preliminarily reported a 21.3% investment return for Fiscal Year 2020-21.
The CalPERS website contains the most recent actuarial valuation reports for the City’s Miscellaneous Plan and Safety Plan and other information that concerns benefits and other matters. The Comprehensive Annual financial reports of CalPERS are also available on CalPERS’ Internet website at www.calpers.ca.gov. The textual reference to such Internet website is provided for convenience only. None of the information on such Internet website is incorporated by reference herein. Neither the Authority, the City, nor the Underwriter guarantee the accuracy of such information.
Other Post-Employment Benefits (“OPEB”)
This caption contains certain information relating to the City’s OPEB plan, and is primarily derived from the City’s Annual Comprehensive Financial Report.
Plan Description . The City administers a single employer defined benefit (implicit subsidy) healthcare plan. No assets have been accumulated in a trust for the payment of benefits that meets the criteria in paragraph 4 of Governmental Accounting Standards Board Statement No. 75.
The City offers medical, dental, vision and life insurance benefits to its employees, retirees, and their dependents. However, the City does not explicitly pay for the cost of retiree health premiums. The medical plans consist of a Kaiser HMO, a Kaiser POS, and a Kaiser PPO, all fully insured. Medical premiums for retirees under age 65 are the same as those charged for active employees.
Employees who retire with at least ten years of service may elect to convert all accrued sick leave at the time of retirement to a medical insurance bank that can be used for medical, dental and vision premiums. Miscellaneous employees except members of the Teamsters Bargaining Unit can bank their unused sick leave upon retirement. Members of the Teamsters can also bank their unused sick leave only if they have at least 10 years of employment with the City. Safety employees: Police employees can bank their unused sick leave if they have at least 10 years of employment. Fire employees have a choice to bank their unused sick leave. Fire employees also need at least 10 years of employment to receive this benefit. The value of the medical insurance bank is determined by multiplying the number of accrued sick leave hours by the employees’ hourly rate of pay at the time of retirement.
The retired employee and his/her dependents are entitled to continued group health insurance coverage currently in effect with premiums for such coverage being deducted from the medical leave bank until that bank is exhausted.
The cost of retiree health care benefits is recognized as an expenditure as health care premiums are paid. For the Fiscal Year ending June 30, 2021, those costs for 86 retirees totaled $602,580 and the total liability amount in the medical leave bank is $3,926,836.
After the account is exhausted, the retiree has the option either to terminate coverage or elect to continue paying the medical (but not dental or vision) premiums from personal funds.
Spouses and eligible dependent children of retirees may also be covered at the retiree’s expense.
While the City does not directly contribute towards the cost of premiums for retirees, the ability to obtain coverage at an active employee rate constitutes a significant economic benefit to the -55-
retirees, called an “implicit subsidy” under generally accepted accounting principles. The inclusion of the retirees increases the City’s overall health insurance rates; it is, in part, the purpose of this valuation to determine the amount of the subsidy.
The abil
ity to participate in the City’s health plan by self-paying the premiums extends for the lifetime of the retiree; however, upon attaining the age of Medicare eligibility (65), the retiree may enter a plan coordinated with Medicare. Standard actuarial practice assumes that Medicare supplement plans do not generally give rise to an implicit subsidy, and while we have included Medicare eligible retirees in this valuation, both their liability and their annual implicit subsidy are both $0. The Plan does not issue a separate financial report.
Membe
rship of the Plan consisted of the following as of June 30, 2020 , the date of the latest actuarial valuation:
Active employees 320
Transferred and terminated employees --
Retired employees and beneficiaries 18
Total 338
Funding Pol
icy. The contribution requirement of plan members and the City are established and may be amended by the City. The required contribution is based on projected pay-as-you-go financing requirements. Additionally, in March 2022, in response to increases in projected General Fund revenues, the City Council of the City approved a plan to pre -fund a portion of the City’s OPEB liability, in the amount of $2 million per fiscal year for five fiscal years.
Actuar
ial Methods and Assumptions. Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and the plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point.
The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short -term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations.
Valuation date June 30, 2020
Measurement date June 30, 2020
Actuarial cost method Entry Age Normal Cost Method
Actuarial assumptions
Discount rate 2.66%
Inflation 2.50%
Projected salary increase 3.00%
Healthcare trend 5.70% initially reduced by decrements to an ultimate of 4.0% in 2076
Mortality CalPERS 2017 Experience Study
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Changes in OPEB Liability of the City. The changes in OPEB liability of the City as of June 30, 2020, is shown in the following table:
CHANGES IN TOTAL OPEB LIABILITY
Total OPEB
Liability
Balance at June 30, 2019 $6,6 66,572
Service Cost 443,619
Interest on the total OPEB liability 195,454
Difference between expected and actual experience (356,446) Changes of Assumptions (388,970)
Benefit payments (209,3 70)
Net changes (315,713)
Balance at June 30, 2020 (Measurement Date) $6,350,859
Source: City of Tracy Fiscal Year 2020-21 Annual Comprehensive Financial Report.
The following presents the net OPEB liability of the City if it were calculated using a discount rate that is one percentage point lower or one percentage point higher than the current rate, for period ended June 30, 2021:
Discount Rate (1%)
1.66%
Current Discount Rate
2.66%
Discount Rate + 1%
3.66%
Net OPEB Liability $6,933,014 $6,350,859 $5,818,126
Source: City of Tracy Fiscal Year 2020-21 Annual Comprehensive Financial Report.
Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employ ment, mortality, and the healthcare cost trend.
Actuarially determined amounts are subject to revision at least biannually as results are compared to past expectations and new estimates are made about the future.
See Note 13 in the City’s Fiscal Year 2020-21 audited financial statements, which are attached to this Official Statement as APPENDIX C, for additional information about the City’s OPEB plan.
Investment Policies and Procedures
The City invests its funds in accordance with the City’s Investment Policy (the “Investment Policy”), which is subject to annual review and approval by the City Council. The purpose of the Investment Policy is to identify various policies and procedures that will foster a prudent and systematic investment program designed to seek the City objectives of safety, liquidity and return on investment through a diversified investment portfolio. The Investment Policy also serves to organize and formalize the City’s investment-related activities, while complying with all applicable statutes governing the investment of public funds. The Investment Policy is written to incorporate industry best practices and recommendations from sources such as the Government Finance Officers Association (GFOA), California Municipal Treasurers Association (CMTA), California Debt and Investment Advisory Commission (CDIAC) and the Association of Public Treasurers (APT).
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The City’s overall investment program is designed and managed with a degree of professionalism worthy of the public trust. The overriding objectives of the program are to preserve principal, provide sufficient liquidity, and manage investment risks, while seeking a market-rate of return.
The Ci
ty’s investments are governed by California Government Code, Sections 53600 et seq. Within the investments permitted by the Government Code, the City seeks to further restrict eligible investments to the guidelines listed below. In the event a discrepancy is found between the Investment Policy and the Government Code, the more res trictive parameters will take precedence.
Monthl
y transaction reports are submitted by the City Treasurer to the City Council within 30 days of the end of the reporting period in accordance with California Government Code Section 53607. In addition, the City Treasurer submits a quarterly investment report to the City Council which provides full disclosure of the City’s investment activities within 30 days after the end of the quarter.
As
of December 31, 2021, the City has invested funds as set forth in the table below.
Tabl
e 10
Investment Portfolio as of December 31, 2021
Market Value
Percentage of
Portfolio
Investments in City Pool:
Wells Fargo, Sweep $60,762,287 13.26%
Wells Fargo, Checking 4,358 0.00
Chandler Asset Management 143,711,118 31.37
J.P. Morgan Securities 71,374,589 15.58
Invesco 56,900,686 12.42
State of California Local Agency Investment Funds (LAIF) 68,586,361 14.97 CAMP 4,038,103 0.88
Total City Pool Investments 405,377,502 88.49
Investments Held by Trustees:
Money Market Funds 52,733,981 11.51
Total Investments $458,111,483 100.00%
Source: City of Tracy.
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CONSTITUTIONAL AND STATUTORY
LIMITATIONS ON TAXES AND APPROPRIATIONS
The cons
titutional and statutory provisions discussed in this section have the potential to affect the ability of the City to levy taxes and spend tax proceeds for operating and other purposes.
Art
icle XIIIA of the State Constitution
On Ju
ne 6, 1978, California voters approved Proposition 13, which added Article XIIIA to the State Constitution. Article XIIIA, as amended, limits the amount of any ad valorem tax on real property to one percent of the full cash value thereof, except that additional ad valorem taxes may be levied to pay debt service (i) on indebtedness approved by the voters prior to July 1, 1978, (ii) on bonded indebtedness approved by a two -thirds vote on or after July 1, 1978, for the acquisition or improvement of real property or (iii) bonded indebtedness incurred by a school district, community college district or county office of education for the construction, reconstruction, rehabilitation or replacement of school facilities, including the furnishing and equipping o f school facilities or the acquisition or lease of real property for school facilities, approved by 55 percent of the voters voting on the proposition. Article XIIIA defines full cash value to mean “the county assessor ’s valuation of real property as show n on the 1975- 76 tax bill under “full cash value, ” or thereafter, the appraised value of real property when purchased, newly constructed, or a change in ownership has occurred after the 1975 assessment. ” This full cash value may be increased at a rate not to exceed two percent per year to account for inflation.
Art
icle XIIIA has subsequently been amended to permit reduction of the “full cash value” base in the event of declining property values caused by damage, destruction or other factors, to provide that there would be no increase in the “full cash value” base in the event of reconstruction of property damaged or destroyed in a disaster, and in other minor or technical ways.
Legisla
tion Implementing Article XIIIA
Legisl
ation has been enacted and amended a number of times since 1978 to implement Article XIIIA. Under current law, local agencies are no longer permitted to levy directly any property tax ( except to pay voter -approved indebtedness). The one percent property tax is automatically levied by the County and distributed according to a formula among taxing agencies.
The formula apportions the tax roughly in proportion to the relative shares of taxes levied prior to 1989.
Incr
eases of assessed valuation resulting from reappraisals of property due to new construction, change in ownership or from the two percent annual adjustment are allocated among the various jurisdictions in the “taxing area” based upon their respective “situs.” Any such allocation made to a local agency continues as part of its allocation in future years.
All
taxable property is shown at full market value on the tax rolls. Consequently, the tax rate is expressed as $1 per $100 of taxable value. All taxable property value included in this Official Statement is shown at 100 percent of market value (unless noted differently) and all tax rates reflect the $1 per $100 of taxable value.
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Article XIIIB of the State Constitution
In addi
tion to the limits Article XIIIA imposes on property taxes that may be collected by local governments, certain other revenues of the State and most local governments are subject to an annual “appropriations limit” imposed by Article XIIIB which effectively limits the amount of such revenues those entities are permitted to spend. Article XIIIB, approved by the voters in June 1979, was modified substantially by Proposition 111 in 1990. The appropriations limit of each government entity applies to “proceeds of taxes, ” which consist of tax revenues, State subventions and certain other funds, including proceeds from regulatory licenses, user charges or other fees to the extent that such proceeds exceed “the cost reasonably borne by such entity in providing the regulation, product or service. ” “Proceeds of taxes ” excludes tax refunds and some benefit payments such as unemployment insurance. No limit is imposed on the appropriation of funds which are not “proceeds of taxes, ” such as reasonable user charges or fees, and certain other non- tax funds. Article XIIIB also does not limit appropriation of local revenues to pay debt service on bonds existing or authorized by January 1, 1979, or subsequently authorized by the voters, appropriations required to comply with mandates of courts or the federal government, appropriations for qualified capital outlay projects, and appropriation by the State of revenues derived from any increase in gasoline taxes and motor vehicle weight fees above January 1, 1990, levels. The appropriations limit may also be exceeded in case of emergency; however, the appropriations limit for the next three years following such emergency appropriation must be reduced to the extent by which it was exceeded, unless the emergency arises from civil disturbance or natural disaster declared by the Governor, and the expenditure is approved by two-thirds of the legislative body of the local government.
The Sta
te and each local government entity has its own appropriations limit. Each year, the limit is a djusted to allow for changes, if any, in the cost of living, the population of the jurisdiction, and any transfer to or from another government entity of financial responsibility for providing services. Proposition 111 requires that each agency’s actual appropriations be tested against its limit every two years.
If
the aggregate “proceeds of taxes ” for the preceding two- year period exceeds the aggregate limit, the excess must be returned to the agency ’s taxpayers through tax rate or fee reductions over the following two years.
The Cit
y has never exceeded its appropriations limit.
Art
icles XIIIC and XIIID of the State Constitution
Genera
l. On November 5, 1996, the voters of the State approved Proposition 218, known as the “Right to Vote on Taxes Act.” Proposition 218 adds Articles XIIIC and XIIID to the California Constitution and contains a number of interrelated provisions affecting the ability of the City to levy and collect both existing and future taxes, assessments, fees and charges.
On
November 2, 2010, California voters approved Proposition 26, entitled the “Supermajority Vote to Pass New Taxes and Fees Act.” Section 1 of Proposition 26 declares that Proposition 26 is intended to limit the ability of the State Legislature and local government to circumvent existing restrictions on increasing taxes by defining the new or expanded taxes as “fees.” Proposition 26 amended Articles XIIIA and XIIIC of the State Constitution. The amendments to Article XIIIA limit the ability of the State Legislature to impose higher taxes (as defined in Proposition 26) without a two-thirds vote of the Legislature. The amendments to Article -60-
XIIIC define “taxes” that are subject to voter approval as “any levy, charge, or exaction of any kind imposed by a local government,” with certain exceptions.
Taxes.
Article XIIIC requires that all new local taxes be submitted to the electorate before they become effective. Taxes for general governmental purposes of the City (“ general taxes”) require a majority vote; taxes for specific purposes (“special taxes”), even if deposited in the City’s General Fund, require a two-thirds vote.
Proper
ty-Related Fees and Charges. Article XIIID also adds several provisions making it generally more difficult for local agencies to levy and maintain property -related fees, charges, and assessments for municipal services and programs.
Reducti
on or Repeal of Taxes, Assessments, Fees and Charges. Article XIIIC also removes limitations on the initiative power in matters of reducing or repealing local taxes, assessments, fees or charges. No assurance can be given that the voters of the City will not, in the future, approve an initiative or initiatives which reduce or repeal local taxes, assessments, fees or charges currently comprising a substantial part of the City’s General Fund. If such repeal or reduction occurs, the City’s ability to pay debt service on the 2022 Bonds could be adversely affected.
Burden of
Proof . Article XIIIC provides that local government “bears the burden of proving by a preponderance of the evidence that a levy, charge, or other exaction is not a tax, that the amount is no more than necessary to cover the reasonable costs of the governmental activity, and that the manner in which those costs are allocated to a payor bear a fair or reasonable relationship to the payor ’s burdens on, or benefits received from, the governmental activity. ” Similarly, Article XIIID provides that in “any legal action contesting the validity of a fee or charge, the burden shall be on the agency to demonstrate compliance” with Article XIIID.
Judicia
l Interpretation of Proposition 218. The interpretation and application of Articles XIIIC and XIIID will ultimately be determined by the courts, and it is not possible at this time to predict with certainty the outcome of such determination.
Impac
t on City’s General Fund. The City does not believe that any material source of General Fund revenue is subject to challenge under Proposition 218 or Proposition 26.
The approval
requirements of Articles XIIIC and XIIID reduce the flexibility of the City to raise revenues for the General Fund, and no assurance can be given that the City will be able to impose, extend or increase the taxes, fees, charges or taxes in the future that it may need to meet increased expenditure needs.
Proposi
tion 62
Propos
ition 62 was adopted by the voters at the November 4, 1986, general election and (a) requires that any new or higher taxes for general governmental purposes imposed by local governmental entities such as the City be approved by a two -thirds vote of the governmental entity’s legislative body and by a majority vote of the voters of the governmental entity voting in an election on the tax, (b) requires that any special tax (defined as taxes levied for other than general governmental purposes) imposed by a local governmental entity be approved by a two- thirds vote of the voters of the governmental entity voting in an election on the tax, (c) restricts the use of revenues from a special tax to the purposes or for the service for which the special tax was imposed, (d) prohibits the imposition of ad valorem taxes on real property by local -61-
governmental entities except as permitted by Article XIIIA, (e) prohibits the imposition of transaction taxes and sales taxes on the sale of real property by local governmental entities, and (f) requires that any tax imposed by a local governmental entity on or after August 1, 1985, be ratified by a majority vote of the voters voting in an election on the tax within two years of the adoption of the initiative or be terminated by November 15, 1988.
Cali
fornia appellate court cases have overturned the provisions of Proposition 62 pertaining to the imposition of taxes for general government purposes. However, the California Supreme Court upheld Proposition 62 in its decision on August 28, 1995, in Fresno County Transportation Authority v. Guardino . This decision reaffirmed the constitutionality of Proposition 62. Certain matters regarding Proposition 62 were not addressed in the Supreme Court’s decision, such as what remedies exist for taxpayers subject to a tax not in compliance with Proposition 62, and whether the decision applies to charter cities. The City has not experienced any substantive adverse financial impact as a result of the passage of this initiative.
Proposi
tion 1A; Proposition 22
Proposi
tion 1A . Proposition 1A, proposed by the Legislature in connection with the State’s Fiscal Year 2004-05 Budget, approved by the voters in November 2004 and generally effective in Fiscal Year 2006-07, provided that the State may not reduce any local sales tax rate, limit existing local government authority to levy a sales tax rate or change the allocation of local sales tax revenues, subject to certain exceptions. Proposition 1A generally prohibited the State from shifting to schools or community colleges any share of property tax revenues allocated to local governments for any Fiscal Year , as set fo rth under the laws in effect as of November 3, 2004. Any change in the allocation of property tax revenues among local governments within a county had to be approved by two-thirds of both houses of the Legislature.
Proposi
tion 22. Proposition 22, entit led “The Local Taxpayer, Public Safety and Transportation Protection Act, ” was approved by the voters of the State in November 2010.
Proposition 22 eliminates or reduces the State’ s authority to (i) temporarily shift property taxes from cities, counties and special districts to schools, (ii) use vehicle license fee revenues to reimburse local governments for State-mandated costs (the State will have to use other revenues to reimburse local governments), (iii) redirect property tax increment from redevelopment agencies to any other local government, (iv) use State fuel tax revenues to pay debt service on State transportation bonds, or (v) borrow or change the distribution of State fuel tax revenues.
Possibl
e Future Initiatives
Arti
cles XIIIA, XIIIB, XIIIC and XIIID and Propositions 62, 111, 218 and 1A were each adopted as measures that qualified for the ballot pursuant to the State’s initiative process. From time to time other initiative measures could be adopted, further affecting revenues of the City or the City ’s ability to expend revenues. The nature and impact of these measures cannot be anticipated by the City.
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BOND OWNERS’ RISKS
The fol
lowing describes certain special considerations and risk factors affecting the payment of and security for the 2022 Bonds. The following discussion is not meant to be an exhaustive list of the risks associated with the purchase of any 2022 Bonds and does not necessarily reflect the relative importance of the various risks. Potential investors in the 2022 Bonds are advised to consider the following special factors along with all other information in this Official Statement in evaluating the 2022 Bonds. There can be no assurance that other considerations will not materialize in the future.
No Pl
edge of Taxes
General.
The obligation of the City to pay the Lease Payments and Additional Rental Payments does not constitute an obligation of the City for which the City is obligated to levy or pledge any form of taxation or for which the City has levied or pledged any form of taxation. The obligation of the City to pay Lease Payments and Additional Rental Payments does not constitute a debt or indebtedness of the Authority, the City, the State of California or any of its political subdivisions within the meaning of any constitutional or statutory debt limitation or restriction.
The Cit
y is currently liable on other obligations payable from general revenues, which are described above under “CITY FINANCIAL INFORMATION – Long-Term General Fund Obligations.”
Limi
tations on Taxes and Fees
Limi
tations on Taxes and Fees. Certain taxes, assessments, fees and charges presently imposed by the City could be subject to the voter approval requirements of Article XIIIC and Article XIIID of the State Constitution. Based upon the outcome of an election by the voters, such fees, charges, assessments and taxes might no longer be permitted to be imposed, or may be reduced or eliminated and new taxes, assessments fees and charges may not be approved.
The City has assessed the potential impact on its financial condition of the provisions of Article XIIIC and Article XIIID of the State Constitution respecting the imposition and increase of taxes, fees, charges and assessments and does not believe that an election by the voters to reduce or eliminate the imposition of certain existing fees, charges, assessments and taxes would substantially affect its financial condition. However, the City believes that if the initiative power was exercised so that all local taxes, assessments, fees and charges that may be subject to Article XIIIC and Article XIIID of the State Constitution are eliminated or substantially reduced, the financial condition of the City, including its General Fund, could be materially adversely affected.
Alt
hough the City does not currently anticipate that the provisions of Article XIIIC and Article XIIID of the State Constitution would adversely affect its ability to pay Lease Payments and its other obligations payable from the General Fund, no assurance can be given regarding the ultimate interpretation or effect of Article XIIIC and Article XIIID of the State Constitution on the City’s finances. See “CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS.”
Addit
ional Obligations
Under
the Indenture, the Authority may issue Additional Bonds payable on a parity with the 2022 Bonds, provided that the conditions set forth in the Indenture are met. See “SECURITY FOR THE 2022 BONDS – Additional Bonds.”
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The Cit
y has existing obligations payable from its General Fund. See “CITY FINANCIAL INFORMATION – Long-Term General Fund Obligations.” The City is permitted to enter into other obligations which constitute additional charges against its revenues without the consent of Owners of the 2022 Bonds. To the extent that additional obligations are incurred by the City, the funds available to pay Lease Payments may be decreased.
The Lease
Payments and other payments due under the Lease Agreement (including payment of costs of repair and maintenance of the Leased Property, taxes and other governmental charges levied against the Leased Property) are payable from funds lawfully available to the City. If the amounts that the City is obligated to pay in a fiscal year exceed the City’s revenues for such year, the City may choose to make some payments rather than making other payments, including Lease Payments and Additional Rental Payments, based on the perceived needs of the City. The same result could occur if, because of California Constitutional limits on expenditures, the City is not permitted to appropriate and spend all of its available revenues or is required to expend available revenues to preserve the public health, safety and welfare.
Defaul
t
Whenever
any event of default ref erred to in the Lease Agreement happens and continues, the Authority is authorized under the terms of the Lease Agreement to exercise any and all remedies available under law or granted under the Lease Agreement. See “APPENDIX B – SUMMARY OF PRINCIPAL LEG AL DOCUMENTS” for a detailed description of available remedies in the case of a default under the Lease Agreement.
If
a default occurs, there is no remedy of acceleration of the total Lease Payments due over the term of the Lease Agreement. The Trustee is not empowered to sell the Leased Property and use the proceeds of such sale to prepay the 2022 Bonds or pay debt service on the 2022 Bonds.
The
City will be liable only for Lease Payments on an annual basis and, in the event of a default, the Trustee would be required to seek a separate judgment each year for that year ’s defaulted Lease Payments. Any such suit for money damages would be subject to limitations on legal remedies against municipalities in the State, including a limitation on enforcement of judgments against funds of a fiscal year other than the fiscal year in which the Lease Payments were due and against funds needed to serve the public welfare and interest.
Abate
ment
Under cer
tain circumstances related to damage, destruction, condemnation, or title defects which cause a substantial interference with the use and possession of the Leased Property, the City’s obligation to make Lease Payments will be subject to full or partial abatement and could result in the Trustee having inadequate funds to pay the principal and interest on the 2022 Bonds as and when due. See “SECURITY FOR THE 2022 BONDS – Abatement” and “APPENDIX B – SUMMARY OF PRINCIPAL LEGAL DOCUMENTS.”
There will be no
abatement of Lease Payments under the Lease Agreement to the extent that the proceeds of hazard insurance or rental interruption insurance are available to pay Lease Payments that would otherwise be abated. See “SECURITY FOR THE 2022 BOND S – Abatement.” However, there is no assurance that the Authority will receive proceeds of hazard -64-
insurance or rental interruption insurance in time to make debt service payments on the 2022 Bonds when due.
Alt
hough the City is required under the Lease Agreement to maintain property and liability insurance with respect to the Leased Property, the required insurance coverage is subject to certain conditions and restrictions. See “SECURITY FOR THE 2022 BOND S – Property Insurance.”
No Debt
Service Reserve Fund
The Author
ity will not fund a debt service reserve fund for the 2022 Bonds. If Revenues are insufficient for the Authority to pay debt service on the 2022 Bonds when due, no debt service reserve will be available under the Indenture for the Authority to make such payments.
Proper
ty Taxes
Levy and Col
lection. The City does not have any independent power to levy and collect property taxes. Any reduction in the tax rate or the implementation of any constitutional or legislative property tax decrease could reduce the City’s property tax revenues, and accordingly, could have an adverse impact on the ability of the City to make Lease Payments. Likewise, delinquencies in the payment of property taxes could have an adverse effect on the City’s ability to pay principal of and interest on the 2022 Bonds when due.
Reducti
on in Inflationary Rate. Article XIIIA of the California Constitution provides that the full cash value base of real property used in determining assessed value may be adjusted from year to year to reflect the inflationary rate, not to exceed a 2% increase for any given year, or may be reduced to reflect a reduction in the consumer price index or comparable local data.
See “CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS.” Such measure is computed on a calendar year basis. Because Article XIIIA limits inflationary assessed value adjustments to the lesser of the actual inflationary rate or 2%, there have been years in which the assessed values were adjusted by actual inflationary rates, which were less than 2%. Since Article XIIIA was approved, the annual adjustment for inflation has fallen below the 2% limitation a limited number of times.
The Cit
y is unable to predict if any adjustments to the full cash value base of real property within the City, whether an increase or a reduction, will be realized in the future.
Appeals of
Assessed Values. There are two types of appeals of assessed values that could adversely impact property tax revenues:
Propos
ition 8 Appeals. Most of the appeals that might be filed in the City would be based on Section 51 of the Revenue and Taxation Code, which requires that for each lien date the value of real property must be the lesser of its base year value annually adjusted by the inflation f actor pursuant to Article XIIIA of the State Constitution or its full cash value, taking into account reductions in value due to damage, destruction, depreciation, obsolescence, removal of property or other factors causing a decline in value.
Under
California law, property owners may apply for a reduction of their property tax assessment by filing a written application, in form prescribed by the State Board of Equalization, with the appropriate county board of equalization or assessment appeals board. I n most cases, the appeal is filed because the applicant believes that present -65-
market conditions (such as residential home prices) cause the property to be worth less than its current assessed value. These market-driven appeals are known as Proposition 8 appeals.
Any
reduction in the assessment ultimately granted as a Proposition 8 appeal applies to the year for which application is made and during which the written application was filed. These reductions are often temporary and are adjusted back to their original values when market conditions improve. Once the property has regained its prior value, adjusted for inflation, it once again is subject to the annual inflationary factor growth rate allowed under Article XIIIA.
Base Year
Appeals. A second type of assessment appeal is called a base year appeal, where the property owners challenge the original (basis) value of their property.
Appeals for reduction in the “base year” value of an assessment, if successful, reduce the assessment for the year in which the appeal is taken and prospectively thereafter. The base year is determined by the completion date of new construction or the date of change of ownership. Any base year appeal must be made within four years of the change of ownership or new construction date.
No as
surance can be given that property tax appeals in the future will not significantly reduce the City’s property tax revenues.
Natur
al Calamities
From
time to time, the City could be subject to natural calamities that may adversely affect economic activity in the City, which could have a negative impact on the City’s finances.
Additionally, a natural calamity adversely affecting the Leased Property could have a negative impact of the City’s use of such property, which could result in abatement of Lease Payments.
See “– Abatement” above.
Seism
ic. Major earthquake fault zones in the vicinity of the City include the Greenville fault zone to the west and the San Joaquin fault to the south, among others. The City cannot predict how much damage may occur within the City to the Leased Property, specifically, and how much reduction in assessed valuation in the City may result from an earthquake.
Under
the Lease Agreement, the City is not required to obtain earthquake insurance on the Leased Property.
Flood.
According to Federal Emergency Management Agency maps, the majority of the City is outside the 100 ‐year flood zone . However, the Leased Property is located in Zone AE , which is subject to inundation by a 100- year flood. Most of the area of the Leased Property consists of fields without impervious improvements. Additionally, the permanent structures such as bathrooms and concessions stands have been constructed at an elevation above that of the 100-year floodplain. Nonetheless, in the event of a flood at the Leased Property, the Leased Property (including its permanent structures ) may be damaged and such damage may be material.
Fire H
azards. In recent years, wildfires have caused extensive damage throughout the State. Certain of these fires have burned thousands of acres and destroyed hundreds and in some cases thousands of homes. In some instances, entire neighborhoods have been destroyed.
Several fires which occurred in 2017 damaged or destroyed property in areas that were not -66-
previously considered to be at risk from such events. In November 2018, the Camp Fire occurred in Butte County, California. The Camp Fire is the deadliest and most destructive wildfire in the recorded history of the State burning more than 150,000 acres and destroying more than 11,500 structures, including most of the structures in the City of Paradise, California. Some commentators believe that climate change will lead to even more frequent and damaging wildfires in the future.
The land
within the City is susceptible to wildland fires due to a combination of factors including winds, temperatures, humidity levels, fuel moisture content of vegetation and topography. The risk to the community is increased in some areas because of the combustibility of building materials including roofs, adequacy of access roads, water supply duration, and pressure and maintenance of flammable vegetation surrounding structures.
To quantif
y this potential hazard, the California Department of Forestry and Fire Protection (“Cal Fire”) has developed a fire modeling and mapping process that utilizes three main criteria in order to evaluate and recommend potential fire hazards in wildland areas. The criteria are type of vegetation, fire weather, and topography. The maps developed by Cal Fire identify areas as Fire Hazard Severity Zones and include three severity classifications: moderate, high, and very high.
Fire
hazards in the City are usually created as the number of homes adjoining open space increases; therefore, much of the threat of wildland fires is due to open grasslands abutting residential developments. Many neighborhoods within the City are located in remote regions and are surrounded by grasslands. As the City continues to expand, more of these wildland urban interface areas are created. This situation creates extreme fire hazards, and the City is committed to planning development, with the help of fire protection agenc ies, that minimizes the risk of fire to the greatest extent possible. Because of an extended dry season with low humidity, the City has many days where fire danger is critical.
In t
he event taxable property within the City were destroyed by wildfires, the assessed valuation of such property would be reduced. Such reduction of assessed valuations could result in a reduction of property tax revenues to the City.
Drought
s. On October 19, 2021, the Governor declared a Statewide drought state of emergency and requested that all water users voluntarily reduce water use by 15%. The declaration encouraged water agencies to draw upon supplies other than groundwater and to implement their water shortage contingency plans and authorized the State Water Resources Control Board to adopt regulations that prohibit wasteful water use (such as the use of potable water to wash paved surfaces or to irrigate landscaping during the two days following rainfall).
There can be no assurance that subsequent declarations will not impose mandatory water use restrictions should dry conditions persist in future years.
Publi
c Health Emergencies
Genera
l. In recent years, public health authorities have warned of threats posed by outbreaks of disease and other public health threats. On February 11, 2020, the WHO announced the official name for the outbreak of COVID-19, an upper respiratory tract illness. COVID-19 has since spread across the globe. The spread of COVID-19 is having significant adverse health and financial impacts throughout the world, including the City. The WHO has declared the COVID-19 outbreak to be a pandemic, and states of emergency have been declared by the Governor of the State and the President of the United States.
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The COV
ID-19 outbreak is ongoing, and its duration and severity and its economic effects are uncertain in many respects. Uncertain too are the additional actions, if any, that may be taken by federal and State governmental authorities to contain or mitigate the effects of the outbreak.
The ultimate impact of COVID -19 on the City’s operations and finances and the economy, real estate market and development within the City is not fully known, and it may be some time before the full adverse impact of the COVID-19 outbreak is known. Certain reports providing preliminary information regarding the impact of the COVID -19 pandemic are described in this Official Statement. Further, there could be future COVID-19 outbreaks or other public health emergencies that could have material adverse effects on the City’s operations and finances.
Coll
ection of Taxes. On March 30, 2020, the Governor issued Executive Order N -40- 20, which delayed the deadline for the filing and payment of sales and use taxes by 90 days for all but the largest taxpayers. Under Executive Order N-40-20 and a subsequent notice form the California Department of Tax and Fee Administration, businesses with less than $5 million in taxable annual sales are authorized to defer up to $50,000 in sales tax and enter into a 12-month, zero interest payment plan. The Governor has also issued an Executive Order for waivers of late penalties on property taxes. Such efforts to relieve the financial impact of the COVID-19 pandemic on taxpayers have not resulted in significant delays in revenue collection by the City.
On M
ay 6, 2020 in response to the COVID-19 pandemic, the Governor issued Executive Order N-61-20 to allow qualified taxpayers to request relief of penalties on property taxes for owner occupied residential real property and real property owned and operated by a taxpayer that qualifies as a small business under the Small Business Administration’s Regulations, Code of Federal Regulations Title 13, section 121.201. To be eligible for penalty relief taxpayers must fall into one of two categories: (i) owner occupied residential real property; or (ii) real property owned and operated by a taxpayer qualified as a small business. For homeowners requesting penalty relief on property taxes for a residential real property that the homeowner occupies, the homeowner may qualify for penalty relief if all of the following are true: (i) taxes on real property were current as of March 4, 2020; (ii) the homeowner was unable to pay on time and that inability was due to a COVID-19 pandemic related impact; (iii) the homeowner was able to submit payment of the original tax amount due with the request for relief; and (iv) the homeowner’s request is received by the Treasurer -Tax Collector within 30 days after the circumstances that prevented payment have concluded. If the homeowner satisfies all of the criteria, they may submit a Request for Penalty Cancellation – COVID-19 Impact Form to request penalty relief and must provide documentation to support the request.
To be eligi
ble for penalty relief for real property owned and operated by a taxpayer as a qualified small business, the taxpayer may qualify for penalty relief if all of the following are true:
(i) taxes on the real property were current as of March 4, 2020; (ii) the business was unable to pay on time and that inability was due to a COVID-19 related impact; (iii) the taxpayer is able to submit payment of the original tax amount due with the request for relief; and (iv) the taxpayer’s request is received by the Treasurer -Tax Collector within 30 days after the circumstances that prevented payment have concluded. If the taxpayer satisfies all of the criteria, they may submit a Request for Penalty Cancellation – COVID-19 Impact Form to request penalty relief and will need to provide documentation to support their request.
The im
pacts from the COVID-19 pandemic are anticipated to continue in Fiscal Year 2021- 22 and future fiscal years and such impacts are unpredictable. See ”CITY FINANCIAL INFORMATION.”
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Certain Risks Associated with Sales Tax and Other Local Tax Revenues For fi
scal year 2020- 21, sales tax revenues were the largest source of revenue to the City. See “CITY FINANCIAL INFORMATION – Major Revenues” and “– Sales and Use Taxes.” Sales tax revenues are based upon the gross receipts of retail sales of tangible goods and products by retailers with taxable transactions in the City, which could be impacted by a variety of factors.
For ex
ample, the City may enter into an economic recession. In times of economic recession, the gross receipts of retailers often decline, and such a decline would cause the sales tax revenues received by the City to also decline.
In addit
ion, changes or amendments in the laws applicable to the City’s receipt of sales tax revenues or other local taxes, whether implemented by State legislative action or voter initiative, could have an adverse effect on sales tax revenues received by the City. See “CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS – Proposition 218 – Article XIIIC and Article XIIID.”
For exa
mple, many categories of transactions are exempt from the statewide sales tax, and additional categories could be added in the future. Currently, most sales of food products for human consumption are exempt; this exemption, however, does not apply to li quor or to restaurant meals. The rate of sales tax levied on taxable transactions in the City or the fee charged by the California Department of Tax and Fee Administration for administering the City’s sales tax could also be changed.
Limi
tations on Remedies Available to Bond Owners
The abili
ty of the City to comply with its covenants under the Lease Agreement may be adversely affected by actions and events outside of the control of the City, and may be adversely affected by actions taken (or not taken) by voters, property owners, taxpayers or payers of assessments, fees and charges. See “CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS” above. Furthermore, any remedies available to the owners of the 2022 Bonds upon the occurrence of an event of default under the Lease Agreement or the Indenture are in many respects dependent upon judicial actions, which are often subject to discretion and delay and could prove both expensive and time consuming to obtain.
In addit
ion to the limitations on Bondowner remedies contained in the Lease Agreement and the Indenture, the rights and obligations under the 2022 Bonds , the Lease Agreement and the Indenture may be subject to the following: the United States Bankruptcy Code and applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to or affecting the enforcement of creditors’ rights generally, now or hereafter in effect; usual equity principles which may limit the specific enforcement under State law of certain remedies; the exercise by the United States of America of the powers delegated to it by the Federal Constitution; and the reasonable and necessary exercise, in certain exceptional situations, of the police power inherent in the sovereignty of the State and its governmental bodies in the interest of serving a significant and legitimate public purpose. Bankruptcy proceedings, or the exercise of powers by the federal or state government, if initiated, could subject the Owners of the 2022 Bonds to judicial discretion and interpretation of their rights in bankruptcy or otherwise, and consequently may entail risks of delay, limitation or modification of their rights.
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The opinion to be delivered by Bond Counsel concurrently with the issuance of the 2022 Bonds will include a qualification that the rights of the owners of the 2022 Bonds and the enforceability of the 2022 Bonds and the Indenture, the Lease Agreement and the Site Lease may be subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors' rights heretofore or hereafter enacted and may also be subject to the exercise of judicial discretion in accordance with principles of equity or otherwise in appropriate cases.
See APPENDIX D — PROPOSED FORM OF OPINION OF BOND COUNSEL.
Loss of T
ax-Exemption
As
discussed under the caption “TAX MATTERS, ” interest on the 2022 Bonds could become includable in gross income for purposes of federal income taxation retroactive to the date the 2022 Bonds were issued, as a result of future acts or omissions of the Authority or the City in violation of their respective covenants in the Lease Agreement and the Indenture. Should such an event of taxability occur, the 2022 Bonds are not subject to special redemption and will remain Outstanding until maturity or until redeemed under other provisions set forth in the Indenture.
Secondary M
arket for Bonds
There c
an be no guarantee that there will be a secondary market for the 2022 Bonds or, if a secondary market exists, that any 2022 Bonds can be sold for any particular price.
Occasionally, because of general market conditions or because of adverse history or economic prospects connected with a particular issue, secondary marketing practices in connection with a particular issue are suspended or terminated. Additionally, prices of issues for which a market is being made will depend upon then-prevailing circumstances. Such prices could be substantially different from the original purchase price.
Cyber S
ecurity
The Cit
y, like many other public and private entities, relies on computer and other digital networks and systems to conduct its operations. As a recipient and provider of personal, private or other sensitive electronic information, the City is potentially subject to multiple cyber threats, including without limitation hacking, viruses, ransomware, malware and other attacks. No assurance can be given that the City’s efforts to manage cyber threats and attacks will be successful in all cases, or that any such attack will not materially impact the operations or finances of the City. The City is also reliant on other entities and service providers in connection with the administration of the 2022 Bonds, including without limitation the County tax collector for the levy and collection of property taxes, and the Trustee. No assurance can be given that the City and these other entities will not be affected by cyber threats and attacks in a manner that may affect the 2022 Bond owners.
IRS
Audit of Tax-Exempt Bond Issues
The Int
ernal Revenue Service (the “ IRS”) has initiated an expanded program for the auditing of tax-exempt bond issues, including both random and targeted audits. It is possible that the 2022 Bonds will be selected for audit by the IRS. It is also possible that the market value of such 2022 Bonds might be affected as a result of such an audit of such 2022 Bonds (or by an audit of similar bonds or securities).
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Impact of Legislative Proposals, Clarifications of the Tax Code and Court Decisions on Tax Exemption
Future
legislative proposals, if enacted into law, clarification of the Tax Code (defined herein) or court decisions may cause interest on the 2022 Bonds to be subject, directly or indirectly, to federal income taxation or to be subject to or exempted from state income taxation, or otherwise prevent 2022 Bond owners from realizing the full current benefit of the tax status of such interest.
TAX
MATTERS
Federal Tax S
tatus. In the opinion of Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel, subject, however to the qualifications set forth below, under existing law, the interest on the 2022 Bonds is excluded from gross income for federal income tax purposes and such interest is not an item of tax preference for purposes of the federal alternative minimum tax.
The opini
ons set forth in the preceding paragraph are subject to the condition that the Authority comply with all requirements of the Internal Revenue Code of 1986, as amended (the "Tax Code") that must be satisfied subsequent to the issuance of the 2022 Bonds in order that the interest thereon be, and continue to be, excludable from gross income for federal income tax purposes. The Authority has made certain representations and covenants in order to comply with each such requirement. Inaccuracy of those representations, or failure to comply with certain of those covenants, may cause the inclusion of such interest in gross income for federal income tax purposes, which may be retroactive to the date of issuance of the 2022 Bonds.
Tax Treat
ment of Original Issue Discount and Premium. If the initial offering price to the public at which a 2022 Bond is sold is less than the amount payable at maturity thereof, then such difference constitutes "original issue discount" for purposes of federal income taxes and State of California personal income taxes. If the initial offering price to the public at which a 2022 Bond is so ld is greater than the amount payable at maturity thereof, then such difference constitutes "bond premium" for purposes of federal income taxes and State of California personal income taxes.
Under
the Tax Code, original issue discount is treated as interest excluded from federal gross income and exempt from State of California personal income taxes to the extent properly allocable to each owner thereof subject to the limitations described in the first paragraph of this section. The original issue discount accrues over the term to maturity of the 2022 Bond on the basis of a constant interest rate compounded on each interest or principal payment date (with straight-line interpolations between compounding dates). The amount of original issue discount accruing during each period is added to the adjusted basis of such 2022 Bonds to determine taxable gain upon disposition (including sale, redemption, or payment on maturity) of such 2022 Bond. The Tax Code contains certain provisions relating to the accrual of original issue discount in the case of purchasers of the 2022 Bonds who purchase the 2022 Bonds after the initial offering of a substantial amount of such maturity. Owners of such 2022 Bonds should consult their own tax advisors with respect to the tax consequences of ownership of 2022 Bonds with original issue discount, including the treatment of purchasers who do not purchase in the original offering to the public at the first price at which a substantial amount of such 2022 Bonds is sold to the public.
Under
the Tax Code, bond premium is amortized on an annual basis over the term of the 2022 Bond (said term being the shorter of the 2022 Bond's maturity date or its call date). The -71-
amount of bond premium amortized each year reduces the adjusted basis of the owner of the 2022 Bond for purposes of determining taxable gain or loss upon disposition. The amount of bond premium on a 2022 Bond is amortized each year over the term to maturity of the 2022 Bond on the basis of a constant interest rate compounded on each interest or principal payment date (with straight-line interpolations between compounding dates). Amortized bond premium is not deductible for federal income tax purposes. Owners of premium 2022 Bonds, including purchasers who do not purchase in the original offering, should consult their own tax advisors with respect to State of California personal income tax and federal income tax consequences of owning such 2022 Bonds.
Cali
fornia Tax Status. In the further opinion of Bond Counsel, interest on the 2022 Bonds is exempt from California personal income taxes.
Othe
r Tax Considerations. Current and future legislative proposals, if enacted into law, clarification of the Tax Code or court decisions may cause interest on the 2022 Bonds to be subject, directly or indirectly, to federal income taxation or to be subject to or exempted from state income taxation, or otherwise prevent beneficial owners from realizing the full current benefit of the tax status of such interest. The introduction or enactment of any such legislative proposals, clarification of the Tax Code or court decisions may also affect the market price for, or marketability of, the 2022 Bonds. It cannot be predicted whether or in what form any such proposal might be enacted or whether, if enacted, such legislation would apply to bonds issued prior to enactment.
The opinions
expressed by Bond Counsel are based upon existing legislation and regulations as interpreted by relevant judicial and regulatory authorities as of the date of suc h opinion, and Bond Counsel has expressed no opinion with respect to any proposed legislation or as to the tax treatment of interest on the 2022 Bonds, or as to the consequences of owning or receiving interest on the 2022 Bonds, as of any future date. Prospective purchasers of the 2022 Bonds should consult their own tax advisors regarding any pending or proposed federal or state tax legislation, regulations or litigation, as to which Bond Counsel expresses no opinion.
Owner
s of the 2022 Bonds should also be aware that the ownership or disposition of, or the accrual or receipt of interest on, the 2022 Bonds may have federal or state tax consequences other than as described above. Other than as expressly described above, Bond Counsel expresses no opinion regarding other federal or state tax consequences arising with respect to the 2022 Bonds, the ownership, sale or disposition of the 2022 Bonds, or the amount, accrual or receipt of interest on the 2022 Bonds.
CERTAI
N LEGAL MATTERS
Jones
Hall, A Professional Law Corporation, Bond Counsel, will render an opinion with respect to the validity of the 2022 Bonds, the form of which is set forth in APPENDIX D.” Certain legal matters will also be passed upon for the City and the Authority by Jones Hall, A Professional Law Corporation, as Disclosure Counsel. Certain legal matters will be passed upon for the City and the Authority by the City Attorney.
LITIGA
TION
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To the best knowledge of the City, there is no action, suit, proceeding, inquiry or investigation before or by any court or federal, state, municipal or other governmental authority pending and notice of which has been served on and received by the City or, to the knowledge of the City, threatened against or affecting the City or the assets, properties or operations of the City which, if determined adversely to the City or its interests, would have a material and adverse effect upon the consummation of the transactions contemplated by or the validity of the Lease Agreement, the Site Lease or the Indenture, or upon the financial condition, assets, properties or operations of the City, and the City is not in default with respect to any order or decree of any court or any order, regulation or demand of any federal, state, municipal or other gover nmental authority, which default might have consequences that would materially adversely affect the consummation of the transactions contemplated by the Lease Agreement, the Site Lease or the Indenture, or the financial conditions, assets, properties or operations of the City, including but not limited to the payment and performance of the City’s obligations under the Lease Agreement.
RATIN
G
S&P
Global Ratings, a business unit of Standard & Poor's Financial Services LLC (“S&P”), has assigned its municipal bond rating of “____” to the 2022 Bonds.
This
rating reflects only the views of S&P, and an explanation of the significance of this rating, and any outlook assigned to or associated with this rating, should be obtained from S&P.
General
ly, a rating agency bases its rating on the information and materials furnished to it and on investigations, studies and assumptions of its own. The City has provided certain additional information and materials to the rating agency (some of which does not appear in this Official Statement).
There is
no assurance that this rating will continue for any given period of time or that this rating will not be revised downward or withdrawn entirely by the rating agency, if in the judgment of the rating agency, circumstances so warrant. Any such downward revision or withdrawal of any rating on the 2022 Bonds may have an adverse effect on the market price or marketability of the 2022 Bonds.
CONTI
NUING DISCLOSURE
The Cit
y (on behalf of the Authority and itself) will covenant for the benefit of owners of the 2022 Bonds to provide certain financial information and operating data relating to the City (the “Annual Report”), by not later than nine months after the end of the City's fiscal year (presently June 30) and commencing April 1, 2023, with the report for the fiscal year ending June 30, 2022, and to provide notices of the occurrence of certain listed events.
These c
ovenants have been made in order to assist the Underwriter in complying with Securities Exchange Commission Rule 15c2- 12(b)(5), as amended (the “Rule”). The specifi c nature of the information to be contained in the Annual Report or the notices of listed events is set forth in “APPENDIX E — FORM OF CONTINUING DISCLOSURE CERTIFICATE.” The Cit
y, on its own behalf and on behalf of related entities, has entered into a number of prior continuing disclosure undertakings under the Rule in connection with the issuance of long - term obligations, and has provided annual financial information and event notices in accordance
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with those undertakings. During the past five years, the City or its related entities have failed to comply with prior undertakings as follows:
• The audited financial statements for Fiscal Year 2015-16 were filed approximately 15 months late;
• Certain operating and financial data for Fiscal Years 2016-17, 2017-18, and 2018- 19 were filed up to 80 days late; and
• Certain information was omitted from the operating and financial data filed for Fiscal Years 2016-17 and 2017-18 because it was unavailable at the time the filing was due, but that information was subsequently filed when it became available.
The City has engaged Goodwin Consulting Group, Inc., to serve as its dissemination agent and assist the City in complying with its continuing disclosure undertakings. To further ensure such compliance, the City has adopted policies and procedures related thereto.
UNDERWRITING
The 2022 Bonds are being purchased by Piper Sandler & Co. (the “Underwriter”), at a purchase price of $________ (which represents the aggregate principal amount of the 2022 Bonds ($________), plus an original issue premium/less an original issue discount of $_________, less an Underwriter's discount of $________).
The purchase agreement relating to the 2022 Bonds provides that the Underwriter will purchase all of the 2022 Bonds, if any are purchased, the obligation to make such purchase being subject to certain terms and conditions set forth in such purchase agreement.
The Underwriter may offer and sell the 2022 Bonds to certain dealers and others at prices lower than the offering prices stated on the inside cover page hereof. The offering prices may be changed from time to time by the Underwriter.
Piper Sandler & Co. has entered into a distribution agreement with Charles Schwab & Co., Inc. (“CS&Co.”) for the retail distribution of certain securities offerings at the original issue prices.
Pursuant to the agreement, CS&Co. will purchase the 2022 Bonds from Piper Sandler & Co. at the original issue price less a negotiated portion of the selling concession applicable to any 2022 Bonds that CS&Co. sells.
MUNICIPAL ADVISOR
The Author ity has retained CSG Advisors Incorporated, San Francisco, California, as Municipal Advisor for the sale of the 2022 Bonds. The Municipal Advisor is not obligated to undertake, and has not undertaken to make, an independent verification or to assume any responsibility for the accuracy, completeness or fairness of the information contained in this Official Statement.
CSG Advisors Incorporated, is an independent advisory firm and is not engaged in the business of underwriting, trading or distributing municipal or other public securities.
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PROFESSIONAL FEES
In connection with the issuance of the 2022 Bonds, fees or compensation payable to certain professionals are contingent upon the issuance and delivery of the 2022 Bonds. Those professionals include:
• the Underwriter;
• Jones Hall, A Professional Law Corporation, as Bond Counsel and Disclosure Counsel;
• Stradling Yocca Carlson & Rauth, P.C., as Underwriter’s Counsel; • A portion of the fees of CSG Advisors Incorporated, as municipal advisor; and • U.S. Bank Trust Company, National Association, as Trustee.
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EXECUTION
The execution of this Official Statement and its delivery have been authorized by the Board of the Authority and the City Council of the City.
TRACY PUBLIC FINANCING AUTHORITY
By:
Chair
CITY OF TRACY
By:
Finance Director
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APPENDIX A
GENERAL INFORMATION ABOUT THE CITY OF TRACY
AND THE COUNTY OF SAN JOAQUIN
The following information concerning the City of Tracy (the “City”) and the County of San Joaquin (the “County”) is included only for the purpose of supplying general information regarding the area of the City. The 2022 Bonds are not a debt of the City, the County, the State of California (the “State”) or any of its political subdivisions (other than the Authority), and none of the City, the County, the State or any of its political subdivisions (other than the Authority) is liable therefor.
Population
Population figures for the City, the County and the State for the last five years are shown in the following table.
CITY OF TRACY, SAN JOAQUIN COUNTY AND THE STATE OF CALIFORNIA Population Estimates
Calendar Years 2017 through 2021 as of January 1
Calendar
Year
City of
Tracy
San Joaquin
County
State of
California
2017 90,488 744,843 39,352,398
2018 92,395 752,958 39,519,535
2019 94,326 752,958 39,605,361
2020 95,861 773,505 39,648,938
2021 98,601 773,505 39,466,855
Source: State Department of Finance estimates.
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Employment and Industry
The City is included in the Stockton Metropolitan Statistical Area (“MSA”), which includes all of San Joaquin County. The unemployment rate in the County was 6.6% in November 2021, down from a revised 7.3% in October 2021, and below the year -ago estimate of 8.7%. This compares with an unadjusted unemployment rate of 5.4% for the State and 3.9% for the nation during the same period.
Set forth below is data from calendar years 2016 to 2020 reflecting the County’s civilian labor force, employment and unemployment. These figures are county-wide statistics and may not necessarily accurately reflect employment trends in the City.
STOCKTON-LODI MSA
(San Joaquin County)
Annual Average Labor Force and Employment by Industry
Calendar Years 2016 through 2020
(March 2020 Benchmark)
2016 2017 2018 2019 2020
Civilian Labor Force (1) 318,300 323,200 324,200 326,500 331,800 Employment 292,400 300,400 304,300 306,900 294,500
Unemployment 25,900 22,800 19,900 19,600 37,400
Unemployment Rate 8.2% 7.0% 6.1% 6.0% 11.3%
Wage and Salary Employment: (2)
Agriculture 16,700 16,400 15,600 15,400 14,300
Mining and Logging 100 100 100 100 100
Construction 11,100 11,700 12,800 13,100 12,900
Manufacturing 19,800 20,300 20,600 20,600 20,500
Wholesale Trade 10,700 11,100 11,700 11,600 10,500
Retail Trade 26,500 26,800 26,700 26,200 24,600
Transportation, Warehousing and Utilities 23,000 26,200 28,400 31,300 38,300 Information 2,000 1,800 1,800 1,600 1,200
Financial Activities 7,500 7,800 7,800 7,900 7,800
Professional and Business Services 19,600 19,200 19,600 20,200 21,100 Educational and Health Services 36,400 38,200 38,800 39,100 37,100 Leisure and Hospitality 20,400 21,500 22,000 22,600 18,400 Other Services 7,500 7,600 7,600 7,800 6,700
Federal Government 3,000 3,100 3,100 3,200 3,300
State Government 6,400 6,600 6,700 6,800 6,800
Local Government 31,400 32,800 33,700 34,900 33,100
Total All Industries (3) 242,000 251,100 256,900 262,400 256,600
(1) Labor force data is by place of residence; includes self-employed individuals, unpaid family workers, household domestic workers, and workers on strike.
(2) Industry employment is by place of work; excludes self-employed individuals, unpaid family workers, household domestic workers, and workers on strike.
(3) Totals may not add due to rounding.
Source: State of California Employment Development Department.
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Largest Employers
The following table lists the major employers within the County, listed in alphabetical order without regard to the number of employees, as of January 2022.
SAN JOAQUIN COUNTY
Major Employers
As of January 2022
Employer Name Location Industry
A Sambado & Sons Inc Linden Nuts-Edible
Amazon Fulfillment Ctr Stockton Mail Order Fulfillment Service Ashley Lane LP Stockton Real Estate
Blue Shield of California Lodi Insurance
Dameron Hospital Stockton Hospitals
Deuel Vocational Instn Fire Tracy Fire Departments
Foster Care Svc Stockton Government Offices-County
Leprino Foods Co Tracy Cheese Processors (mfrs)
Lodi Health Home Health Agency Lodi Home Health Service Lodi Memorial Hospital Lodi Hospitals
NA Chaderjian Youth Stockton State Govt-Correctional Institutions Pacific Coast Producers Lodi Canning (mfrs)
Prima Frutta Packing Inc Linden Fruit & Produce Packers Safeway Distribution Ctr Tracy Distribution Centers (whls) San Joaquin County CA Pubc Stockton Government Offices-County San Joaquin County Human Svc Stockton Government Offices-County San Joaquin County Sch Stockton School Districts
San Joaquin General Hospital French Camp Hospitals
San Joaquin Sheriff's Office French Camp Government Offices-County Sjgov Stockton Government Offices-County
St Joseph's Cancer Ctr Stockton Cancer Treatment Centers St Joseph's Regional Health Stockton Hospitals
Stockton Police Dept Stockton Police Departments
Stockton Unified School Dist Stockton School Districts
Walmart Supercenter Stockton Department Stores
Source: State of California Employment Development Department, extracted from The America’s Labor Market Information System (ALMIS) Employer Database, 2022 1st Edition.
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The following table lists the twenty principal employers within the City, by number of employees, as of June 30, 2021.
CITY OF TRACY
Principal Employers
As of June 30, 2021
Employer Name Number of Employees
Amazon.com Services LLC 7,325
FedEx Ground Package System, Inc. 925
Taylor Farms Pacific Inc 795
Medline Industries Inc 651
Randstad Inhouse Services LLC 632
DHL Supply Chain 463
Walmart #2025 402
Leprino Foods 349
Costco Wholesale #658 240
Randstad Inhouse Services LP 234
Crate & Barrel 233
Pacific Medical Inc. 214
The Home Depot #5641 211
The Home Depot #1020 211
Ingram Micro Inc. 200
Randstad Inhouse Service LP 194
International Paper 185
Macy’s 179
Glassfab Tempering 177
Target Stores T738 173
Source: City of Tracy Comprehensive Financial Report for fiscal year ended June 30, 2021.
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Commercial Activity
Summaries of historic taxable sales within the City and the County during the past five years in which data is available are shown in the following tables.
Total taxable sales during the first three quarters of calendar year 2021 in the City were $4,265,018,759, a 108.98% increase over the total taxable sales of $2,040,914,977 reported during the first three quarters of calendar year 2020.
CITY OF TRACY
Taxable Retail Sales
Number of Permits and Valuation of Taxable Transactions (Dollars in Thousands)
Retail Stores Total All Outlets
Number
of Permits
Taxable
Transactions
Number
of Permits
Taxable
Transactions
2016 1,088 $1,280,961 1,715 $1,536,172
2017 1,150 1,371,679 1,803 2,042,411
2018 1,192 1,489,764 1,921 2,319,543
2019 1,224 1,472,148 2,000 2,692,497
2020 1,395 1,459,813 2,284 2,815,807
Source: State Department of Tax and Fee Administration.
Total taxable sales during the first three quarters of calendar year 2021 in the County were $16,201,722,121, a 44.88% increase over the total taxable sales of $11,182,961,549 reported during the first three quarters of calendar year 2020.
SAN JOAQUIN COUNTY
Taxable Retail Sales
Number of Permits and Valuation of Taxable Transactions (Dollars in Thousands)
Retail Stores Total All Outlets
Number
of Permits
Taxable
Transactions
Number
of Permits
Taxable
Transactions
2016 9,480 $7,380,226 14,682 $10,922,271
2017 9,506 7,994,473 14,758 12,153,268
2018 9,660 8,855,169 15,457 13,457,721
2019 9,978 9,058,063 16,144 14,311,068
2020 11,188 10,122,979 18,358 15,609,880
Source: State Department of Tax and Fee Administration.
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Effective Buying Income
“Effective Buying Income” is defined as personal income less personal tax and nontax payments, a number often referred to as “disposable” or “after -tax” income. Personal income is the aggregate of wages and salaries, other labor-related income (such as employer contributions to private pension funds), proprietor’s income, rental income (which includes imputed rental income of owner -occupants of non -farm dwellings), dividends paid by corporations, interest income from all sources, and transfer payments (such as pensions and welfare assistance).
Deducted from this total are personal taxes (federal, state and local), nontax payments (fines, fees, penalties, etc.) and personal contributions to social insurance. According to U.S. government definitions, the resultant figure is commonly known as “disposable personal income.”
The following table summarizes the median household effective buying income for the City, the County, the State and the United States for the period 2018 through 2022.
CITY OF TRACY AND SAN JOAQUIN COUNTY
Median Household Effective Buying Income
2018 through 2022
2018 2019 2020 2021 2022
City of Tracy $68,295 $73,172 $76,142 $78,492 $89,938
San Joaquin County 49,883 55,534 58,141 59,914 68,971
California 59,646 62,637 65,870 67,956 77,058
United States 50,735 52,841 55,303 56,790 64,448
Source: The Nielsen Company (US), Inc for 2018; Claritas, LLC for 2019 through 2022.
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Building Activity
The tables below summarize building activity in the City and the County for the past five available years.
CITY OF TRACY
Building Permit Activity
For Calendar Years 2016 through 2020
(Dollars in Thousands)
2016 2017 2018 2019 2020
Permit Valuation
New Single-family $87,820.2 $98,767.2 $214,928.9 $223,795.2 $239,658.3 New Multi-family 34,038.7 9,686.4 84,832.3 0.0 0.0
Res. Alterations/Additions 2,281.9 2,982.3 6,058.5 9,178.8 4,504.7 Total Residential $124,140.8 $111,435.9 $305,819.7 $232,974.0 $244,163.0
New Commercial $92,124.7 $184,438.3 $331,633.7 189,205.1 168,307.4 New Industrial 57,441.7 38,978.1 74,814.4 13,881.6 526,301.0 New Other 11,375.8 4,769.2 8,265.5 7,006.5 4,828.5
Com. Alterations/Additions 138,604.1 93,059.7 60,479.7 60,676.8 62,904.6 Total Nonresidential $299,546.3 $321,245.3 $475,193.3 $270,770.0 $762,341.5
New Dwelling Units
Single Family 216 236 534 551 692
Multiple Family 432 65 507 0 0
TOTAL 648 301 1,041 551 692
Source: Construction Industry Research Board, Building Permit Summary.
SAN JOAQUIN COUNTY
Building Permit Activity
For Calendar Years 2016 through 2020
(Dollars in Thousands)
2016 2017 2018 2019 2020
Permit Valuation
New Single-family $467,494.7 $652,308.1 $883,071.1 $843,700.9 $870,859.6 New Multi-family 66,794.5 62,635.8 99,601.4 57,271.1 38,411.8 Res. Alterations/Additions 99,049.9 86,516.1 95,073.4 98,681.9 40,144.4 Total Residential $633,339.1 $801,460.0 $1,077,745.9 $999,653.9 $949,415.8
New Commercial $205,510.1 $357,856.9 $498,359.0 $380,383.3 $255,761.2 New Industrial 61,687.0 179,728.4 240,073.7 120,003.8 534,199.5 New Other 42,074.7 27,794.7 31,904.4 61,991.7 33,112.3
Com. Alterations/Additions 298,721.9 269,172.8 249,142.4 363,840.9 135,285.4 Total Nonresidential $607,993.7 $834,552.8 $1,019,479.5 $926,219.7 $958,358.4
New Dwelling Units
Single Family 1,754 2,078 2,765 2,564 2,843
Multiple Family 550 516 293 461 245
TOTAL 2,304 2,594 3,358 3,025 3,088
Source: Construction Industry Research Board, Building Permit Summary.
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APPENDIX B
SUMMARY OF PRINCIPAL LEGAL DOCUMENTS
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APPENDIX C
FISCAL YEAR 2020-21 ANNUAL COMPREHENSIVE FINANCIAL REPORT
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APPENDIX D
PROP
OSED FORM OF OPINION OF BOND COUNSEL
_________, 2022
Tracy
Public Financing Authority
333 Civic Center Plaza
Tracy, California 95376
Cit
y of Tracy
333 Civic Center Plaza
Tracy, California 95376
OPINION: $_________ Tracy Public Financing Authority Lease Revenue Bonds, Series 2022A (Legacy Fields)
Membe
rs of the Board of Directors and City Council:
We have
acted as bond counsel to the Tracy Public Financing Authority (the “Authority”) and the City of Tracy (the “City”) in connection with the issuance by the Authority of the lease revenue bonds captioned above, dated the date hereof (the "Bonds"). In such capacity, we have examined such law and such certified proceedings, opinions, certifications and other documents as we have deemed necessary to render this opinion.
The Bonds
are issued pursuant to Article 4 of Chapter 5, Division 7, Title 1 of the Government Code of the State of California, the Indenture of Trust, dated as of May 1, 2022 (the “Indenture”), by and between the Authority and U.S. Bank Trust Company, National Association, as trustee (the "Trustee"), and a resolution (the "Resolution") of the Board of Directors of the Authority adopted on ______, 2022.
Under
the Indenture, the Authority has pledged certain revenues (the “Revenues”) for the payment of principal, premium (if any), and interest on the Bonds when due, including lease payments made by the City under a Lease Agreement dated as of May 1, 2022 (the “Lease Agreement”) between the Authority and the City.
Regardi
ng questions of fact material to our opinion, we have relied on representations of the Authority contained in the Indenture and the City contained in the Lease Agreement, and in the certified proceedings and other certifications of public officials furnished to us, without undertaking to verify the same by independent investigation.
Based
on the foregoing, we are of the opinion that, under existing law:
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1. The Authority is a duly created and validly existing joint exercise of powers authority with the power to adopt the Resolution, enter into the Indenture and the Lease Agreement, perform the agreements on its part contained therein, and issue the Bonds.
2. The Cit
y is a duly created and validly existing municipal corporation and general law city with the power to enter into the Lease Agreement and perform the agreements on its part contained therein.
3. The Indentu
re has been duly authorized, executed and delivered by the Authority, and constitutes a valid and binding obligation of the Authority, enforceable against the Authority.
4. The Lease Agr
eement has been duly authorized, executed and delivered by the Authority and the City, and constitutes a valid and binding obligation of the Authority and the City, enforceable against the Authority and the City.
5. The Indent
ure creates a valid lien on the Revenues and other funds pledged by the Indenture for the security of the Bonds on a parity basis with other bonds (if any) issued or to be issued in accordance with the Indenture.
6. The Bonds
have been duly authorized and executed by the Authority, and are valid and binding limited obligations of the Authority, payable solely from the Revenues and other funds provided therefor in the Indenture.
7. The inter
est on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax.
The opinions set forth in the preceding sentence are subject to the condition that the Authority and the City comply with all requirements of the Internal Revenue Code of 1986, as amended, that must be satisfied subsequent to the issuance of the Bonds in order that the interest thereon be, and continue to be, excludable from gross income for federal income tax purposes. The Authority and the City have made certain representations and covenants in order to comply with each such requirement. Inaccuracy of those representations, or failure to comply with those covenants, may cause the inclusion of such interest in gross income for federal income tax purposes which may be retroactive to the date of issuance of the Bonds. We express no opinion regarding other federal tax consequences arising with respect to the Bonds.
8. The inter
est on the Bonds is exempt from personal income taxation imposed by the State of California.
We ex
press no opinion regarding any other tax consequences arising with respect to the ownership, sale or disposition of, or the amount, accrual or receipt of interest on, the Bonds.
The righ
ts of the owners of the Bonds and the enforceability of the Bonds and the Indenture are limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors' rights generally, and by equitable principles, whether considered at law or in equity.
This
opinion is given as of the date hereof, and we assume no obligation to revise or supplement this opinion to reflect any facts or circumstances that may hereafter come to our attention, or any changes in law that may hereafter occur. Moreover, our opinions are not a guarantee of a particular result, and are not binding on the Internal Revenue Service or the courts; rather, our opinions represent our legal judgment based upon our review of existing law that we
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deem relevant to such opinions and in reliance upon the representations, covenants and opinions referenced above. Our engagement with respect to this matter has terminated as of the date hereof.
Respectfully submitted,
A Professional Law Corporation
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APPENDIX E
FORM
OF CONTINUING DISCLOSURE CERTIFICATE
$____________
TRA
CY PUBLIC FINANCING AUTHORITY
LEASE REVENUE BONDS, SERIES 2022A
(Legacy Fields)
This Continuing Disclosure Certificate (this “Disclosure Certificate”) is executed and delivered by the City of Tracy (the “City”) in connection with the issuance by the Tracy Public Financing Authority (the “Authority”) of the bonds captioned above (the “Bonds”). The Bonds are being issued under an Indenture of Trust dated as of May 1, 2022 (the “Indenture”), by and between the Authority and U.S. Bank Trust Company, National Association, as trustee (the “Trustee”). The City hereby covenants and agrees as follows:
Section 1. Purpose of the Disclosure Certificate . This Disclosure Certificate is being executed and delivered by the City on behalf of itself and the Authority for the benefit of the holders and beneficial owners of the Bonds and in order to assist the Participating Underwriter in complying with S.E.C. Rule 15c2-12(b)(5).
Section 2. Definitions. In addition to the definitions set forth above and in the Indenture, which apply to any capitalized term used in this Disclosure Certificate unless otherwise defined in this Section, the following capitalized terms shall have the following meanings:
“Annual
Report” means any Annual Report provided by the City pursuant to, and as described in, Sections 3 and 4 of this Disclosure Certificate. “Annual
Report Date” means nine months after the end of the City's fiscal year (currently April 1, based on the City’s fiscal year-end of June 30). “Dis
semination Agent ” means , initially, Goodwin Consulting Group, Inc., and any successor Dissemination Agent designated in writing by the City and which has filed with the City a written acceptance of such designation.
“List
ed Events” means any of the events listed in Section 5(a) of this Disclosure Certificate. “MSRB”
means the Municipal Securities Rulemaking Board, which has been designated by the Securities and Exchange Commission as the sole repository of disclosure information for purposes of the Rule, or any other repository of disclosure information that may be designated by the Securities and Exchange Commission as such for purposes of the Rule in the future. “Offic
ial Statement ” means the final official statement dated _____________, 2022, executed by the City and the Authority in connection with the issuance of the Bonds. “Part
icipating Underwriter” means Piper Sandler & Co., the original purchaser of the Bonds required to comply with the Rule in connection with offering of the Bonds. “Rule”
means Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time.
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Section 3. Provision of Annual Reports.
(a) The City shall, or shall cause the Dissemination Agent to, not later than the Annual Report Date, commencing April 1, 2023, with the report for the 2021-22 Fiscal Year, provide to the MSRB, in an electronic format as prescribed by the MSRB, an Annual Report that is consistent with the requirements of Section 4 of this Disclosure Certificate. Not later than 15 Business Days prior to the Annual Report Date, the City shall provide the Annual Report to the Dissemination Agent (if other than the City). If by 15 Business Days prior to the Annual Report Date the Dissemination Agent (if other than the City) has not received a copy of the Annual Report, the Dissemination Agent shall contact the City to determine if the City is in compliance with the previous sentence. The Annual Report may be submitted as a single document or as separate documents comprising a package, and may include by reference other information as provided in Section 4 of this Disclosure Certificate; provided that the audited financial statements of the City may be submitted separately from the balance of the Annual Report, and later than the Annual Report Date, if not available by that date. If the City’s Fiscal Year changes, it shall give notice of such change in the same manner as for a Listed Event under Section 5(c). The City shall provide a written general fund with each Annual Report furnished to the Dissemination Agent to the effect that such Annual Report constitutes the Annual Report required to be furnished by the City hereunder.
(b) If the City does not provide (or cause the Dissemination Agent to provide) an Annual Report by the Annual Report Date, the City shall provide (or cause the Dissemination Agent to provide) a notice to the MSRB, in an electronic format as prescribed by the MSRB.
(c) With respect to each Annual Report, the Dissemination Agent shall:
(i) determine each year prior to the Annual Report Date the then- applicable rules and electronic format prescribed by the MSRB for the filing of annual continuing disclosure reports; and
(ii) if the Dissemination Agent is other than the City, file a report w ith the City certifying that the Annual Report has been provided pursuant to this Disclosure Certificate, and stating the date it was provided.
Section 4. Content of Annual Reports. The City’s Annual Report shall contain or incorporate by reference the following:
(a
) Financial Statements. Audited financial statements of the City for the preceding fiscal year, prepared in accordance generally accepted accounting principles. If the City’s audited financial statements are not available by the time the Annual Report is required to be filed pursuant to Section 3(a), the Annual Report shall contain unaudited financial statements in a format similar to the financial statements contained in the final Official Statement, and the audited financial statements shall be filed in the same manner as the Annual Report when they become available.
(b) Other Annual Information. To the extent not included in the audited final statements of the City, the Annual Report shall also include financial and operating data with respect to the City for preceding fiscal year, substantially similar to that provided in the corresponding tables and charts in the Official Statement, as follows:
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(i) the principal amount of Bonds outstanding as of June 30 preceding the filing of the Annual Report;
(ii
) the balance in each fund under the Indenture as of June 30 preceding the filing of the Annual Report; and
(ii
i) updates as of June 30 preceding the filing of the Annual Report of the substance of the information contained in following tables in the Official Statement:
(1) Stat
ement of General Fund Revenues, Expenditures and Changes in Fund Balance, substantially in the form of Table 4 in the Official Statement; (2) Ass
essed Value of Taxable Property, substantially in the form of Table 6 in the Official Statement;
(3) Prin
cipal Property Tax Payers, substantially in the form of Table 7 in the Official Statement; and
(4) Majo
r Tax Revenues by Source — General Fund, substantially in the form of Table 5 in the Official Statement.
(c) Cros
s References. Any or all of the items listed above may be included by specific reference to other documents, including official statements of debt issues of the City or related public entities, which are available to the public through the MSRB. The City shall clearly identify each such other document so included by reference. If the document included by reference is a final official statement, it must be available from the MSRB.
Section 5. Reporting of Listed Events.
(a) The
City shall give, or cause to be given, notice of the occurrence of any of the following Listed Events with respect to the Bonds:
(1) Pr
incipal and interest payment delinquencies.
(2) Non-pay
ment related defaults, if material.
(3) Uns
cheduled draws on debt service reserves reflecting financial difficulties. (4) Uns
cheduled draws on credit enhancements reflecting financial difficulties. (5) Subs
titution of credit or liquidity providers, or their failure to perform. (6) Adv
erse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701 -TEB) or other material notices or determinations with respect to the tax status of the Bonds, or other material events affecting the tax status of the Bonds.
(7) M
odifications to rights of security holders, if material. (8) Bond
calls, if material, and tender offers.
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(9) Defeasances.
(10) Release, substitution, or sale of property securing repayment of the securities, if material.
(11) Rating changes.
(12) Bankruptcy, insolvency, receivership or similar event of the City.
(13) The consummation of a merger, consolidation, or acquisition involving the City, or the sale of all or substantially all of the assets of the City (other than in the ordinary course of business), the entry into a definitive agreement to undertake such an action, or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material.
(14) Appointment of a successor or additional Fiscal Agent or the change of name of the Fiscal Agent, if material.
(15) Incurrence of a financial obligation of the obligated person, if material, or agreement to covenants, events of default, remedies, priority rights, or other similar terms of a financial obligation of the obligated person, any of which affect security holders, if material.
(16) Default, event of acceleration, termination event, modification of terms, or other similar events under the terms of a financial obligation of the obligated person, any of which reflect financial difficulties.
(b) Upon the occurrence of a Listed Event, the City shall, or shall cause the Dissemination Agent (if not the City) to, file a notice of such occurrence with the MSRB, in an electronic format as prescribed by the MSRB, in a timely manner not in excess of 10 Business Days after the occurrence of the Listed Event. Notwithstanding the foregoing, notice of Listed Events described in subsection (a)(8) above need not be given under this subsection any earlier than the notice (if any) of the underlying event is given to holders of affected Bonds under the Fiscal Agent Agreement.
(c) The City acknowledges that the events described in subparagraphs (a)(2), (a)(7), (a)(8) (if the event is a bond call), (a)(10), (a)(13), (a)(14), and (a)(15) of this Section 5 contain the qualifier “if material” and that subparagraph (a)(6) also contains the qualifier "material" with respect to certain notices, determinations or other events affecting the tax status of the Bonds.
The City shall cause a notice to be filed as set forth in paragraph (b) above with respect to any such event only to the extent that it determines the event’s occurrence is material for purposes of U.S. federal securities law. Upon occurrence of any of these Listed Events, the City will as soon as possible determine if such event would be material under applicable federal securities law. If such event is determined to be material, the City will cause a notice to be filed as set forth in paragraph (b) above.
(d) For purposes of this Disclosure Certificate, any event described in paragraph (a)(12) above is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent, or similar officer for the City in a proceeding under the United States Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental E-5
authority has assumed jurisdiction over substantially all of the assets or business of the City, or if such jurisdiction has been assumed by leaving the existing governing body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement, or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the City.
(e) For
purposes of Section 5(a)(15) and (16), “financial obligation” means a (i) debt obligation; (ii) derivative instrument entered into in connection with, or pledged as security or a source of payment for, an existing or planned debt obligation; or (iii) guarantee of (i) or (ii). The term financial obligation shall not include municipal securities as to which a final official statement has been provided to the Municipal Securities Rulemaking Board consistent with the Rule.
Section 6. Identifying Information for Filings with the MSRB . All documents provided to the MSRB under the Disclosure Certificate shall be accompanied by identifying information as prescribed by the MSRB.
Section 7. Termination of Reporting Obligation. The City’s obligations under this Disclosure Certificate shall terminate upon the legal defeasance, prior redemption or payment in full of all of the Bonds. If such termination occurs prior to the final maturity of the Bonds, the City shall give notice of such termination in the same manner as for a Listed Event under Section 5(c).
Section 8. Dissemination Agent. The City may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Certificate, and may discharge any such Agent, with or without appointing a successor Dissemination Agent.
The initial Dissemination Agent will be the City. Any Dissemination Agent may resign by providing 30 days’ written notice to the City.
Section 9. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Certificate, the City may amend this D isclosure Certificate, and any provision of this Disclosure Certificate may be waived, provided that the following conditions are satisfied:
(a) if
the amendment or waiver relates to the provisions of Sections 3(a), 4 or 5(a), it may only be made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature, or status of an obligated person with respect to the Bonds, or type of business conducted; (b) the
undertakings herein, as proposed to be amended or waived, would, in the opinion of nationally recognized bond counsel, have complied with the requirements of the Rule at the time of the primary offering of the Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; and (c) the
proposed amendment or waiver either (i) is approved by holders of the Bonds in the manner provided in the Indenture for amendments to the Indenture with the consent of holders, or (ii) does not, in the opinion of nationally recognized bond counsel, materially impair the interests of the holders or beneficial owners of the Bonds.
If
the annual financial information or operating data to be provided in the Annual Report is amended pursuant to the provisions hereof, the first annual financial information filed pursuant hereto containing the amended operating data or financial information shall explain, in narrative E-6
form, the reasons for the amendment and the impact of the change in the type of operating data or financial information being provided.
If
an amendment is made to the undertaking specifying the accounting principles to be followed in preparing financial statements, the annual financial information for the year in which the change is made shall present a comparison between the financial statements or information prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. The comparison shall include a qualitative discussion of the differences in the accounting principles and the impact of the change in the accounting principles on the presentation of the financial information, in order to provide information to investors to enable them to evaluate the ability of the City t o meet its obligations. To the extent reasonably feasible, the comparison shall be quantitative.
A noti
ce of any amendment made pursuant to this Section 9 shall be filed in the same manner as for a Listed Event under Section 5(c).
Section 10. Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the City from disseminating any other information, using the means of dissemination set forth in this Disclosure Certificate or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Certificate. If the City chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Certificate, the City shall have no obligation under this Disclosure Certificate to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event.
Section 11. Default. In the event of a failure of the City to comply with any provision of this Disclosure Certificate, the Participating Underwriter or any holder or beneficial owner of the Bonds may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the City to comply with its obligations under this Disclosure Certificate. A default under this Disclosure Certificate shall not be deemed an Event of Default under the Indenture, and the sole remedy under this Disclosure Certificate in the event of any failure of the City to comply with this Disclosure Certificate shall be an action to compel performance.
Section 12. Duties, Immunities and Liabilities of Dissemination Agent. (a) The Di
ssemination Agent shall have only such duties as are specifically set forth in this Disclosure Certificate, and the City agrees to indemnify and save the Dissemination Agent, its officers, directors, employees and agents, harmless against any loss, expense and liabilities which it may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the costs and expenses (including attorneys fees) of defending against any claim of liabilit y, but excluding liabilities due to the Dissemination Agent’s negligence or willful misconduct. The Dissemination Agent shall have no duty or obligation to review any information provided to it hereunder and shall not be deemed to be acting in any fiduciary capacity for the City, the Bond owners or any other party. The obligations of the City under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds. (b) The Dis
semination Agent shall be paid compensation by the City for its services provided hereunder in accordance with its schedule of fees as amended from time to time, and
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shall be reimbursed for all expenses, legal fees and advances made or incurred by the Dissemination Agent in the performance of its duties hereunder.
Section 13. Notices. Any notice or communications to be among any of the parties to this Disclosure Certificate may be given as follows:
If t
o the Authority City of Tracy
or the City: 333 City Center Plaza
Tracy, California 95376
Attention: Finance Director
Any person may, by written notice to the other persons listed above, designate a different address to which subsequent notices or communications should be sent.
Section 14. Benef
iciaries. This Disclosure Certificate shall in ure solely to the benefit of the City, the Dissemination Agent, the Participating Underwriter and holders and beneficial owners from time to time of the Bonds, and shall create no rights in any other person or entity.
Section 15. Count erparts. This Disclosure Certificate may be executed in several counterparts, each of which shall be regarded as an original, and all of which shall constitute one and the same instrument.
Dat
e: ________________, 2022
CITY OF TRACY
By:
Karin Schnaider,
Finance Director
AGREED AND ACCEPTED:
Goodwin Consulting Group, Inc.,
as Dissemination Agent
By:
Name:
Title:
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APPENDIX F
DTC AND THE BOOK-ENTRY ONLY SYSTEM
The following description of the Depository Trust Company ( “DTC”), the procedures and record keeping with respect to beneficial ownership interests in the Bonds, payment of principal, interest and other payments on the Bonds to DTC Participants or Beneficial Owners, confirmation and transfer of beneficial ownership interest in the Bonds and other related transactions by and between DTC, the DTC Participants and the Beneficial Owners is based solely on information provided by DTC. Accordingly, no representations can be made concerning these matters and neither the DTC Participants nor the Beneficial Owners should rely on the foregoing information with respect to such matters, but should instead confirm the same with DTC or the DTC Participants, as the case may be.
Neither the Authority (the “Issuer”) nor the Trustee (the “Agent”) take any responsibility for the information contained in this Appendix.
No assurances can be given that DTC, DTC Participants or Indirect Participants will distribute to the Beneficial Owners (a) payments of interest, principal or premium, if any, with respect to the Bonds, (b) certificates representing ownership interest in or other confirmation or ownership interest in the Bonds, or (c) redemption or other notices sent to DTC or Cede & Co., its nominee, as the registered owner of the Bonds, or that they will so do on a timely basis, or that DTC, DTC Participants or DTC Indirect Participants will act in the manner described in this Appendix. The current “Rules” applicable to DTC are on file with the Securities and Exchange Commission and the current “Procedures” of DTC to be followed in dealing with DTC Participants are on file with DTC.
1. The Depository Trust Company (“DTC”), New York, NY, will act as securities depository for the securities (the “Securities”). The Securities will be issued as fully -registered securities registered in the name of Cede & Co. (DTC ’s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered Security certificate will be issued for each issue of the Securities, each in the aggregate principal amount of such issue, and will be deposited with DTC. If, however, the aggregate principal amount of any issue exceeds $500 million, one certificate will be issued with respect to each $500 million of principal amount, and an additional certificate will be issued with respect to any remaining principal amount of such issue.
2. DTC, the world’ s largest securities depository, is a limited- purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC ’s participants ( “Direct Participants ”) deposit with DTC. DTC also facilitates the post -trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book -entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates.
Direct Participants include both U.S. and non -U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly -owned subsidiary of The Depository Trust & C learing Corporation ( “DTCC”). DTCC is the holding
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company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). DTC has a Standard & Poor’s rating of AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com and www.dtc.org. The information contained on this Internet site is not incorporated herein by reference.
3. Purchases of Securities under the DTC system must be made by or through Direct Participants, which will receive a credit for the Securities on DTC’ s records. The ownership interest of each actual purchaser of each Security ( “Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants ’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Securities are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Securities, except in the event that use of the book-entry system for the Securities is discontinued.
4. To facilitate subsequent transfers, all Securities deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Securities with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owner s of the Securities; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Securities are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.
5. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Securities may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Securities, such as redemptions, tenders, defaults, and proposed amendments to the Security documents. For example, Beneficial Owners of Securities may wish to ascertain that the nominee holding the Securities for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them.
6. Redemption notices shall be sent to DTC. If less than all of the Securities within an issue are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed.
7. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Securities unless authorized by a Direct Participant in accordance with DTC ’s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to Issuer as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co. ’s consenting or voting F-3
rights to those Direct Participants to whose accounts Securities are credited on the record date (identified in a listing attached to the Omnibus Proxy).
8. Redemp
tion proceeds, distributions, and dividend payments on the Securities will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from Issuer or Agent, on payable date in accordance with their respective holdings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name, ” and will be the responsibility of such Participant and not of DTC, Agent, or Issuer, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of Issuer or Agent, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.
9. A Bene
ficial Owner shall give notice to elect to have its Securities purchased or tendered, through its Participant, to the Agent, and shall effect delivery of such Securities by causing the Direct Participant to transfer the Participant’s interest in the Securities, on DTC’s records, to the Agent. The requirement for physical delivery of Securities in connection with an optional tender or a mandatory purchase will be deemed satisfied when the ownership rights in the Securities are transferred by Direct Participants on DTC’s records and followed by a book - entry credit of tendered Securities to the Agent’s DTC account.
10. D
TC may discontinue providing its services as depository with respect to the Securities at any time by giving reasonable notice to Issuer or Agent. Under such circumstances, in the event that a successor depository is not obtained, Security certificates are required to be printed and delivered.
11. I
ssuer may decide to discontinue use of the system of book- entry-only transfers through DTC (or a successor securities depository). In that event, Security certificates will be printed and delivered to DTC.
12. The info
rmation in this section concerning DTC and DTC ’s book-entry system has been obtained from sources that Issuer believes to be reliable, but Issuer takes no responsibility for the accuracy thereof.
INDENTURE OF TRUST
Dated
as of May 1, 2022
between
U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION,
as Trustee
and the
TRACY PUBLIC FINANCING AUTHORITY
Authorizing the Issuance of
[$Pr
incipal Amount]
Tracy Public Financing Authority
Lease Revenue Bonds, Series 2022A
(Legacy Fields)
ATTACHMENT D
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TABLE OF CONTENTS
ARTICLE I
DEFINITIONS; RULES OF CONSTRUCTION
SECTION 1.01. Definitions ........................................................................................................... 2 SECTION 1.02. Authorization ....................................................................................................... 2 SECTION 1.03. Interpretation ....................................................................................................... 2
ARTICLE II
The 2022 Bonds
SECTION 2.01. Authorization of Bonds ........................................................................................ 3 SECTION 2.02. Terms of the 2022 Bonds .................................................................................... 3 SECTION 2.03. Transfer and Exchange of Bonds ........................................................................ 5 SECTION 2.04. Book-Entry System ............................................................................................. 6 SECTION 2.05. Registration Books .............................................................................................. 7 SECTION 2.06. Form and Execution of Bonds ............................................................................. 8 SECTION 2.07. Bonds Mutilated, Lost, Destroyed or Stolen ........................................................ 8 SECTION 2.08. Additional Bonds ................................................................................................. 9 SECTION 2.09. Proceedings for the Issuance of Additional Bonds ............................................ 10 SECTION 2.10. Applicability to Additional Bonds ....................................................................... 10
ARTICLE III
Issuance of Bonds; Application of Proceeds
SECTION 3.01. Issuance of the 2022 Bonds .............................................................................. 11 SECTION 3.02. Application of Proceeds of Sale of Bonds; Transfer of Prior Funds ................... 11 SECTION 3.03. Establishment and Application of Costs of Issuance Fund ................................ 11 SECTION 3.04. Establishment and Application of Project Fund ................................................. 11 SECTION 3.-5. Validity of Bonds ................................................................................................ 12
ARTICLE IV
Redemption of Bonds
SECTION 4.01. Terms of Redemption........................................................................................ 12 SECTION 4.02. Selection of Bonds for Redemption ................................................................... 14 SECTION 4.03. Notice of Redemption; Rescission..................................................................... 14 SECTION 4.04. Partial Redemption of 2022 Bonds .................................................................... 14 SECTION 4.05. Effect of Redemption ........................................................................................ 15
ARTICLE V
Revenues; Funds and Accounts; Payment of Principal and
Interest
SECTION 5.01. Security for the 2022 Bonds; Bond Fund ........................................................... 15 SECTION 5.02. Allocation of Revenues ..................................................................................... 16 SECTION 5.03. Application of Interest Account .......................................................................... 16 SECTION 5.04. Application of Principal Account ........................................................................ 16 SECTION 5.05. Reserved .......................................................................................................... 16 SECTION 5.06. Application of Redemption Fund ....................................................................... 16 SECTION 5.07. Insurance and Condemnation Fund .................................................................. 17 SECTION 5.08. Investments ...................................................................................................... 18 SECTION 5.09. Valuation and Disposition of Investments .......................................................... 19
ARTICLE VI
Covenants of the Authority
SECTION 6.01. Punctual Payment ............................................................................................. 21 SECTION 6.02. Extension of Payment of Bonds ........................................................................ 21 SECTION 6.03. Against Encumbrances ..................................................................................... 21
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SECTION 6.04. Power to Issue Bonds and Make Pledge and Assignment ................................ 21 SECTION 6.05. Accounting Records .......................................................................................... 21 SECTION 6.06. Reserved .......................................................................................................... 22 SECTION 6.07. Tax Covenants Applicable to the 2022 Bonds ................................................... 22 SECTION 6.08. Enforcement of Lease ....................................................................................... 23 SECTION 6.09. Waiver of Laws ................................................................................................. 23 SECTION 6.10. Further Assurances ........................................................................................... 23
ARTICLE VII
Events of Default and Remedies
SECTION 7.01. Events of Default ............................................................................................... 23 SECTION 7.02. Remedies Upon Event of Default ...................................................................... 24 SECTION 7.03. Application of Revenues and Other Funds After Default ................................... 24 SECTION 7.04. Trustee to Represent Bond Owners .................................................................. 25 SECTION 7.05. Limitation on Bond Owners' Right to Sue .......................................................... 26 SECTION 7.06. Absolute Obligation of Authority ........................................................................ 26 SECTION 7.07. Termination of Proceedings .............................................................................. 27 SECTION 7.08. Remedies Not Exclusive ................................................................................... 27 SECTION 7.09. No Waiver of Default ......................................................................................... 27 SECTION 7.10. Notice to Bond Owners of Default ..................................................................... 27
ARTICLE VIII
The Trustee
SECTION 8.01. Appointment of Trustee ..................................................................................... 28 SECTION 8.02. Acceptance of Trusts; Removal and Resignation of Trustee ............................. 28 SECTION 8.03. Merger or Consolidation .................................................................................... 30 SECTION 8.04. Liability of Trustee ............................................................................................. 30 SECTION 8.05. Right to Rely on Documents.............................................................................. 33 SECTION 8.06. Preservation and Inspection of Documents ....................................................... 33 SECTION 8.07. Compensation and Indemnification ................................................................... 34
ARTICLE IX
Modification or Amendment Hereof
SECTION 9.01. Amendments Permitted ..................................................................................... 35 SECTION 9.02. Effect of Supplemental Indenture ...................................................................... 36 SECTION 9.03. Endorsement of Bonds; Preparation of New Bonds .......................................... 36 SECTION 9.04. Amendment of Particular Bonds ........................................................................ 37
ARTICLE X
Defeasance
SECTION 10.01. Discharge of Indenture .................................................................................... 37 SECTION 10.02. Discharge of Liability on Bonds ....................................................................... 37 SECTION 10.03. Deposit of Money or Securities with Trustee ................................................... 38 SECTION 10.04. Unclaimed Funds ............................................................................................ 39
ARTICLE XI
Miscellaneous
SECTION 11.01. Liability of Authority Limited to Revenues ........................................................ 39 SECTION 11.02. Limitation of Rights to Parties and Bond Owners ............................................ 39 SECTION 11.03. Funds and Accounts ....................................................................................... 39 SECTION 11.04. Waiver of Notice; Requirement of Mailed Notice ............................................. 40 SECTION 11.05. Destruction of Bonds ....................................................................................... 40 SECTION 11.06. Severability of Invalid Provisions ..................................................................... 40 SECTION 11.07. Notices ............................................................................................................ 40 SECTION 11.08. Evidence of Rights of Bond Owners ................................................................ 41 SECTION 11.09. Disqualified Bonds .......................................................................................... 41
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SECTION 11.10. Money Held for Particular Bonds ..................................................................... 42 SECTION 11.11. Waiver of Personal Liability ............................................................................. 42 SECTION 11.12. Successor Is Deemed Included in All References to Predecessor .................. 42 SECTION 11.13. Execution in Several Counterparts .................................................................. 42 SECTION 11.14. Payment on Non-Business Day ...................................................................... 42 SECTION 11.15. Governing Law ................................................................................................ 42
APPENDIX A DEFINITIONS
APPENDIX B FORM OF BOND
APPENDIX C FORM OF PROJECT FUND REQUISITION
INDENTURE OF TRUST
This INDENTURE OF TRUST (this “Indenture”), dated for convenience as of May 1, 2022, is between the TRACY PUBLIC FINANCING AUTHORITY, a joint powers authority duly organized and existing under the laws of the State of California (the “ Authority”), and U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION, a national banking association organized and existing under the laws of the United States of America, with a corporate trust office in San Francisco, California, being qualified to accept and administer the trusts hereby created (the “Trustee”).
BACK
GROUND:
1. The Cit
y of Tracy (the “ City”) wishes to finance the acquisition and construction of public improvements (the “Project”) of the City, consisting of Phase 1E of the Legacy Fields Sports Complex and such other improvements that may be identified from time to time by the City.
2. The Ci
ty and the Tracy Industrial Development Authority (t he “ Industrial Development Authority”) are parties to a First Amended and Restated Joint Powers Agreement, dated as of October 17, 2018 (the “ Joint Powers Agreement”), pursuant to which the Authority was established as a joint exercise of powers authority under the Joint Exercise of Powers Act (Government Code §6500 et seq.) for the purpose of providing assistance to the City and the Industrial Development Authority with their financing programs, and for any other purposes authorized under the Bond Law (as defined herein).
3. The City has
proposed to lease to the Authority certain real property and improvements of the City, as more particularly described in Appendix A to the Site Lease (as defined below) and by this reference incorporated herein (the “ Leased Property”), under a Site Lease, dated as of the date hereof, by and between the City and the Authority (the “ Site Lease”) in consideration of the payment by the Authority of an upfront rental payment (the “ Site Lease Payment ”) which is sufficient to provide funds for the acquisition and construction of the Project.
4. The Author
ity wishes to issue its Tracy Public Financing Authority Lease Revenue Bonds, Series 2022A ( Legacy Fields ), in the aggregate principal amount of [$Principal Amount] (the “2022 Bonds”) under this Indenture for the purpose of providing the funds to enable the Authority to pay the Site Lease Payment to the City in accordance with the Site Lease.
5. In
order to provide revenues which are sufficient to enable the Authority to pay debt service on the 2022 Bonds, the Authority has leased the Leased Property back to the City under a Lease Agreement dated the date hereof (the “Lease”), under which the City has agreed to pay semiannual Lease Payments as the rental for the Leased Property thereunder.
6. The lease
payments made by the City under the Lease have been assigned by the Authority to the Trustee for the security of the 2022 Bonds under an Assignment Agreement, dated the date hereof, between the Authority as assignor and the Trustee as assignee.
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7. In order to provide for the authentication and delivery of the 2022 Bonds , to establish and declare the terms and conditions upon which the 2022 Bonds are to be issued and to secure the payment of the principal thereof (including the principal amount of any Term Bonds that is subject to mandatory sinking fund redemption) , premium (if any) and interest thereon, the Authority has authorized the execution and delivery of this Indenture.
8. The Authority has found and determined, and hereby affirms, that all acts and proceedings required by law necessary to make the 2022 Bonds, when executed by the Authority, authenticated and delivered by the Trustee and duly issued, the valid, binding and legal special obligations of the Authority, and to constitute this Indenture a valid and binding agreement for the uses and purposes herein set forth in accordance with its terms, have been done and taken, and the execution and delivery of this Indenture have been in all respects duly authorized.
AGREEMENT:
In order to secure the payment of the principal (including the principal amount of any Term Bond that is subject to mandatory sinking fund redemption) of and the interest and redemption premium (if any) on all the Outstanding Bonds under this Indenture according to their tenor, and to secure the performance and observance of all the covenants and conditions therein and herein set forth, and to declare the terms and conditions upon and subject to which the 2022 Bonds are to be issued and received, and in consideration of the premises and of the mutual covenants herein contained and of the purchase and acceptance of the 2022 Bonds by the Owners thereof, and for other valuable considerations, the receipt of which is hereby acknowledged, the Authority and the Trustee do hereby covenant and agree with one another, for the benefit of the respective Owners from time to time of the 2022 Bonds, as follows:
ARTICLE I
DEFINITIONS; RULES OF CONSTRUCTION
SECTION 1.01. Definitions. Unless the context clearly otherwise requires or unless otherwise defined herein, the capitalized terms defined in Appendix A attached to this Indenture have the respective meanings specified in that Appendix when used in this Indenture.
S
ECTION 1.02. Authorization. Each of the parties hereby represents and warrants that it has full legal authority and is duly empowered to enter into this Indenture, and has taken all actions necessary to authorize the execution hereof by the officers and persons signing it.
S
ECTION 1.03. Interpretation.
(a) Unless the context otherwise indicates, words expressed in the singular shall include the plural and vice versa and the use of the neuter, masculine, or feminine
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gender is for convenience only and shall be deemed to include the neuter, masculine or feminine gender, as appropriate.
(b) Headings of articles and sections herein and the table of contents hereof are solely for convenience of reference, do not constitute a part hereof and shall not affect the meaning, construction or effect hereof.
(c) All references herein to “Articles,” “Sections” and other subdivisions are to the corresponding Articles, Sections or subdivisions of this Indenture; the words “herein,” “hereof,” “hereby,” “hereunder” and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or subdivision hereof.
ARTICLE II
THE 2022 BONDS
SECTION 2.01. Authorization of Bonds . The Authority has reviewed all proceedings heretofore taken and has found, as a result of such review, and hereby finds and determines that all things, conditions and acts required by law to exist, happen or be performed precedent to and in connection with the issuance of the 2022 Bonds do exist, have happened and have been performed in due time, form and manner as required by law, and the Authority is now duly empowered, under each and every requirement of law, to issue the 2022 Bonds in the manner and form provided in this Indenture.
The Authority hereby authorizes the issuance of 2022 Bonds in the aggregate principal amount of [$Principal Amount] under the Bond Law for the purposes of providing funds to pay the Site Lease Payment to the City and thereby provide funds to finance the acquisition and construction of the Project. The 2022 Bonds are authorized and issued under, and are subject to the terms of, this Indenture and the Bond Law. The 2022 Bonds are designated the “ Tracy Public Financing Authority Lease Revenue Bonds, Series 2022A (Legacy Fields).”
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ECTION 2.02. Terms of the 2022 Bonds.
(a) Payment Provisions. The 2022 Bonds shall be issued in fully registered form without coupons in denominations of $5,000 or any integral multiple thereof, so long as no Bond has more than one maturity date. The 2022 Bonds shall mature on November 1 in each of the years and in the amounts, and bear interest (calculated on the basis of a 360-day year of twelve 30-day months) at the rates, as follows:
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Maturity Date
(November 1)
Principal
Amount
Interest
Rate
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
_______
(T): Term Bond
Interest on the 2022 Bonds is payable from the Interest Payment Date next preceding the date of authentication thereof unless:
(a) a 2022 Bond is authenticated on or before an Interest Payment Date and after the close of business on the preceding Record Date, in which event it will bear interest from such Interest Payment Date,
(b) a 2022 Bond is authenticated on or before the first Record Date, in which event interest thereon will be payable from the Closing Date, or
(c) interest on any 2022 Bond is in default as of the date of authentication thereof, in which event interest thereon will be payable from the date to which interest has been paid in full, payable on each Interest Payment Date.
Interest is payable on each Interest Payment Date to the persons in whose names the ownership of the Bonds is registered on the Registration Books at the close of business on the immediately preceding Record Date, except as provided below.
Interest on any Bond which is not punctually paid or duly provided for on any Interest Payment Date is payable to the person in whose name the ownership of such Bond is registered on the Registration Books at the close of business on a special record date for the payment of such defaulted interest to be fixed by the Trustee, notice of which is given to such Owner by first-class mail not less than 10 days prior to such special record date.
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The Trustee will pay interest on the Bonds by check of the Trustee mailed by first class mail, postage prepaid, on each Interest Payment Date to the Owners of the Bonds at their respective addresses shown on the Registration Books as of the close of business on the preceding Record Date. At the written request of the Owner of Bonds in an aggregate principal amount of at least $1,000,000, which written request is on file with the Trustee as of any Record Date, the Trustee will pay interest on such Bonds on each succeeding Interest Payment Date by wire transfer in immediately available funds to such account of a financial institution within the United States of America as specified in such written request, which written request will remain in effect until rescinded in writing by the Owner. The Trustee will pay principal of the Bonds (including the principal amount of any Term Bonds that is subj ect to mandatory sinking fund redemption) in lawful money of the United States of America by check of the Trustee or by wire upon presentation and surrender thereof at the Office of the Trustee.
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ECTION 2.03. Transfer and Exchange of Bonds.
(a) Transfer. Any Bond may, in accordance with its terms, be transferred, upon the Registration Books, by the person in whose name it is registered, in person or by a duly authorized attorney of such person, upon surrender of such Bond to the Trustee at its Office for cancellation, accompanied by delivery of a written instrument of transfer in a form acceptable to the Trustee, duly executed. The Trustee shall require the Owner requesting such transfer to pay any tax or other governmental charge required to be paid with respect to such transfer. Whenever any Bond or Bonds shall be surrendered for transfer, the Authority shall execute and the Trustee shall authenticate and deliver to the transferee a new Bond or Bonds of like series, interest rate, maturity and aggregate principal amount. The Authority shall pay the cost of printing Bonds and any services rendered or expenses incurred by the Trustee in connection with any transfer of Bonds.
Prior to any transfer of the Bonds outside the book -entry system (including, but not limited to, the initial transfer outside the book -entry system) the transferor shall provide or cause to be provided to the Trustee all information necessary to allow the Trustee to comply with any applicable tax reporting obligations, including without limitation any cost basis reporting obligations under Internal Revenue Code Section 6045, as amended. The Trustee shall conclusively rely on the information provided to it and shall have no responsibility to verify or ensure the accuracy of such information.
(b) Exchange. The Bonds may be exchanged at the Office of the Trustee for a like aggregate principal amount of Bonds of other authorized denominations and of the same series, interest rate and maturity. The Trustee shall require the Owner requesting such exchange to pay any tax or other governmental charge required to be paid with respect to such exchange. The Authority shall pay the cost of printing Bonds and any services rendered or expenses incurred by the Trustee in connection with any exchange of Bonds.
(c) Limitations. The Trustee may refuse to transfer or exchange, under the provisions of this Section 2.03, any Bonds selected by the Trustee for redemption under Article IV, or any Bonds during the period established by the Trustee for the selection of Bonds for redemption.
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SECTION 2.04. Book-Entry System.
(a) Original Delivery. Unless otherwise provided in a Supplemental Indenture, the Bonds will be initially delivered in the form of a separate single fully registered bond (which may be typewritten) for each maturity of the Bonds. Upon initial delivery, the Trustee shall register the ownership of each Bond on the Registration Books in the name of the Nominee. Except as provided in subsection (c), the ownership of all of the Outstanding Bonds shall be registered in the name of the Nominee on the Registration Books.
With respect to Bonds the ownership of which shall be registered in the name of the Nominee, the Authority and the Trustee has no responsibility or obligation to any Depository System Participant or to any person on behalf of which the Nominee holds an interest in the Bonds. Without limiting the generality of the immediately preceding sentence, the Authority and the Trustee has no responsibility or obligation with respect to (i) the accuracy of the records of the Depository, the Nominee or any Depository System Participant with respect to any ownership interest in the Bonds, (ii) the delivery to any Depository System Participant or any other person, other than a Bond Owner as shown in the Registration Books, of any notice with respect to the Bonds, including any notice of redemption, (iii) the selection by the Depository of the beneficial interests in the Bonds to be redeemed if the Authority elects to redeem the Bonds in part, (iv) the payment to any Depository System Participant or any other person, other than a Bond Owner as shown in the Registration Books, of any amount wit h respect to principal (including the principal amount of any Term Bonds that is subject to mandatory sinking fund redemption), premium, if any, or interest on the Bonds or (v) any consent given or other action taken by the Depository as Owner of the Bonds. The Authority and the Trustee may treat and consider the person in whose name each Bond is registered as the absolute owner of such Bond for the purpose of payment of principal (including the principal amount of any Term Bonds that is subject to mandatory sinking fund redemption) of and premium, if any, and interest on such Bond, for the purpose of giving notices of redemption and other matters with respect to such Bond, for the purpose of registering transfers of ownership of such Bond, and for all other purposes whatsoever.
The Trustee shall pay the principal (including the principal amount of any Term Bonds that is subject to mandatory sinking fund redemption) of and the interest and premium, if any, on the Bonds only to the respective Owners or their respective attorneys duly authorized in writing, and all such payments shall be valid and effective to fully satisfy and discharge all obligations with respect to payment of principal (including the principal amount of any Term Bonds that is subject to mandatory sinking fund redemption) of and interest and premium, if any, on the Bonds to the extent of the sum or sums so paid. No person other than a Bond Owner shall receive a Bond evidencing the obligation of the Authority to make payments of principal (including the principal amount of any Term Bonds that is subject to mandatory sinking fund redemption), interest and premium, if any, under this Indenture. Upon delivery by the Depository to the Authority of written notice to the effect that the Depository has determined to substitute a new Nominee in its place, and subject to the provisions herein with respect to Record Dates, such new nominee shall become the Nominee hereunder for all purposes; and upon receipt of such a notice the Authority shall promptly deliver a copy of the same to the Trustee.
(b) Representation Letter. In order to qualify the Bonds for the Depository’s book-entry system, the Authority shall execute and deliver to such Depository a letter in which the Authority will agree to the Depository’s operational arrangements. To the
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extent required to do so by the Depository, the Trustee shall also execute such representation letter and agree to the Depository’s operational arrangements. The execution and delivery of such letter shall not in any way limit the provisions of subsection (a) above or in any other way impose upon the Authority or the Trustee any obligation whatsoever with respect to persons having interests in the Bonds other than the Bond Owners. In addition to the execution and delivery of such letter, the Authority may take any other actions, not inconsistent with this Indenture, to qualify the Bonds for the Depository’s book-entry program.
(c) Transfers Outside Book -Entry System. If either (i) the Depository determines not to continue to act as Depository for the Bonds, or (ii) the Authority determines to terminate the Depository as such, then the Authority shall thereupon discontinue the book-entry system with such Depository. In such event, the Depository shall cooperate with the Authority and the Trustee in the issuance of replacement Bonds by providing the Trustee with a list showing the interests of the Depository System Participants in the Bonds, and by surrendering the Bonds, registered in the name of the Nominee, to the Trustee on or before the date such replacement Bonds are to be issued.
The Depository, by accepting delivery of the Bonds, agrees to be bound by the provisions of this subsection (c). If, prior to the termination of the Depository acting as such, the Authority fails to identify another Securities Depository to replace the Depository, then the Bonds shall no longer be required to be registered in the Registration Books in the name of the Nominee, and, upon transfer or exchange, shall be registered in whatever name or names the Owners transferring or exchanging Bonds shall designate, in accordance with the provisions hereof.
If the Authority determines that it is in the best interests of the beneficial owners of the Bonds that they be able to obtain certificated Bonds, the Authority may notify the Depository System Participants of the availability of such certificated Bonds through the Depository. In such event, the Trustee will issue, transfer and exchange Bonds as required by the Depository and others in appropriate amounts; and whenever the Depository requests, the Trustee and the Authority shall cooperate with the Depository in taking appropriate action (y) to make available one or more separate certificates evidencing the Bonds to any Depository System Participant having Bonds credited to its account with the Depository, or (z) to arrange for another Securities Depository to maintain custody of a single certificate evidencing such Bonds, all at the Authority’s expense.
(d) Payments to the Nominee. Notwithstanding any other provision of this Indenture to the contrary, so long as any Bond is registered in the name of the Nominee, all payments with respect to principal (including the principal amount of any Term Bonds that is subject to mandatory sinking fund redemption) of and interest and premium, if any, on such Bond and all notices with respect to such Bond shall be made and given, respectively, as provided in the letter described in subsection (b) of this Section or as otherwise instructed by the Depository.
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ECTION 2.05. Registration Books. The Trustee will keep or cause to be kept, at the Office of the Trustee, sufficient records for the r egistration and transfer of ownership of the Bonds, which shall upon reasonable notice as agreed to by the Trustee, be open to inspection during regular business hours by the Authority; and, upon presentation for such purpose, the Trustee shall, under such reasonable regulations as it may prescribe,
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register or transfer or cause to be registered or transferred, on such records, the ownership of the Bonds as hereinbefore provided.
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ECTION 2.06. Form and Execution of Bonds. The Bonds, the form of Trustee’s certificate of authentication, and the form of assignment to appear thereon, are set forth in Appendix B attached hereto and by this reference incorporated herein, with necessary or appropriate variations, omissions and insertions, as permitted or required by this Indenture.
The Chair of the Authority shall execute, and the Secretary of the Authority shall attest each Bond. Either or both of such signatures may be made manually or may be affixed by facsimile thereof. If any officer whose signature appears on any Bond ceases to be such officer before the Closing Date, such signature will nevertheless be as effective as if the officer had remained in office until the Closing Date. Any Bond may be signed and attested on behalf of the Authority by such persons as at the actual date of the execution of such Bond are the proper officers of the Authority, duly authorized to execute debt instruments on behalf of the Authority, although on the date of such Bond any such person was not an officer of the Authority.
Only those Bonds bearing a certificate of authentication in the form set forth in Appendix B, manually executed and dated by the Trustee, are valid or obligatory for any purpose or entitled to the benefits of this Indenture, and such certificate of the Trustee is conclusive evidence that such Bonds have been duly authenticated and delivered hereunder and are entitled to the benefits of this Indenture.
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ECTION 2.07. Bonds Mutilated, Lost, Destroyed or Stolen. If any Bond is mutilated, the Authority, at the expense of the Owner of such Bond, shall execute, and the Trustee shall thereupon authenticate and deliver, a new Bond of like tenor in exchange and substitution for the Bond so mutilated, but only upon surrender to the Trustee of the Bond so mutilated. The Trustee shall cancel every mutilated Bond surrendered to it and deliver such mutilated Bond to, or upon the order of, the Authority.
If any Bond is lost, destroyed or stolen, evidence of such loss, destruction or theft may be submitted to the Trustee and, if such evidence is satisfactory and if indemnity satisfactory to the Trustee and the Authority is given, the Authority, at the expense of the Owner, shall execute, and the Trustee shall thereupon authenticate and deliver, a new Bond of like tenor in lieu of and in substitution for the Bond so lost, destroyed or stolen.
The Trustee may require payment of a sum not exceeding the actual cost of preparing each new Bond issued under this Section and of the expenses which may be incurred by the Trustee in connection therewith. Any Bond issued under the provisions of this Section in lieu of any Bond alleged to be lost, destroyed or stolen will constitute an original additional contractual obligation on the part of the Authority whether or not the Bond so alleged to be lost, destroyed or stolen be at any time enforceable by anyone, and shall be equally and proportionately entitled to the benefits of this Indenture with all other Bonds issued under this Indenture.
Notwithstanding any other provision of this Section 2.07, in lieu of delivering a new Bond for which principal has become due for a Bond which has been mutilated, lost, destroyed or stolen, the Trustee may make payment of such Bond in accordance with its terms upon receipt of indemnity satisfactory to the Trustee.
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SECTION 2.08. Additional Bonds. In addition to the 2022 Bonds authorized to be issued pursuant to Section 2.01 of this Indenture, the Authority may, by Supplemental Indenture, establish one or more other issues of Additional Bonds secured by a pledge of and payable from Revenues on a parity with the 2022 Bonds, and may issue and deliver such Additional Bonds in such principal amount as shall be determined by the Authority, but only upon compliance by the Authority with the provisions of this Section
2.08 and Section 2.09, and subject to the following specific conditions which are hereby made conditions precedent to the issuance of such Additional Bonds:
(a) Such Additional Bonds shall have been authorized to finance additional capital improvements for the City, or to refund bonds previously issued to finance such capital improvements, and the issuance thereof shall have been determined and declared by the Authority, in a Supplemental Indenture, to be necessary for that purpose.
(b) The Authority and the City shall be in compliance with all covenants and undertakings set forth in this Indenture and in the Lease and the Site Lease.
(c) The aggregate principal amount of Bonds issued and at any time Outstanding hereunder shall not exceed any limit imposed by law, by this Indenture or by any Supplemental Indenture.
(d) Such Additional Bonds shall be equally and ratably secured by the Revenues with all other Bonds herein authorized.
(e) The Authority shall have entered into an amendment to the Lease, in and by which the City obligates itself in the manner provided in the Lease to make Lease Payments for the lease of the Leased Property at the times and in the amounts sufficient to provide for the payment of the principal (including the principal amount of any Term Bonds that is subject to mandatory sinking fund redemption) of and interest on such Additional Bonds as such principal (including the principal amount of any Term Bonds that is subject to mandatory sinking fund redemption) and interest become due and to make all other payments in the manner provided in the Lease, and the City shall certify in writing that such Lease Payments, as amended, in any Rental Period shall not exceed the f air rental value of the Leased Property.
(f) If necessary to ensure that the Lease Payments payable after the issuance of Additional Bonds does not exceed the fair rental value of the Leased Property in any Rental Period, the Authority and the City shall have amended the Lease pursuant to Section 3.4 thereof to add additional property to the Leased Property.
(g) In the event that the Additional Bonds are being issued to finance the construction of a to -be-built project, and such project is to be part of t he Leased Property prior to its completion, the Supplemental Indenture authorizing the issuance of such Additional Bonds shall require the deposit into a separate account (the “Capitalized Interest Account”) in the Interest Account , or a subaccount therein, an amount sufficient to pay interest on such Additional Bonds through a date which is not less than six months after the anticipated
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completion date of the project, but only if such Additional Bonds are issued prior to the substantial completion of such project and only if the City is unable to make a finding that the fair rental value of the Leased Property prior to the completion of the project is equal to or greater than the aggregate amount of the Lease Payments and Additional Rental Payments coming due and payable during each Rental Period.
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ECTION 2.09. Proceedings for the Issuance of Additional Bonds Whenever the Authority shall have determined to issue Additional Bonds pursuant to Section 2.08, the Authority shall enter into a Supplemental Indenture determining that the issuance of such Additional Bonds is necessary for the purposes specified in Section 2.08, specifying the principal amount of such Additional Bonds and prescribing the terms and conditions of such Additional Bonds and the funds to be established for the security and payment thereof. Before such Additional Bonds shall be issued and delivered, the Authority shall file the following documents with the Trustee:
(a) An executed copy of the Supplemental Indenture authorizing such Additional Bonds, together with a certified copy of the resolution of the Authority authorizing the issuance of such Additional Bonds and the execution of such Supplemental Indenture.
(b) An opinion of Bond Counsel stating: (i) that the execution and delivery of the Additional Bonds have been sufficiently and duly authorized by the Authority; (ii) that the issuance of the Additional Bonds is authorized by the Bond Law and this Indenture; (iii) that the Additional Bonds when duly executed and delivered, will be valid and binding obligations of the Authority, payable from Revenues in accordance with the terms of this Indenture and the Supplemental Indenture authorizing the issuance of such Additional Bonds; (iv) if the Additional Bonds are to be tax -exempt, that the interest on the Additional Bonds will be excluded from the gross income of the Owners thereof for federal income tax purposes; and ( v) that the issuance of such Additional Bonds will not, of itself, cause interest on the 2022 Bonds to become includable in gross income for federal income tax purposes.
(c) A Certificate of the Authority certifying that the requirements set forth in Section 2.08 have been either met or provided for, together with a copy of the amendment to the Lease required by Section 2.08, together with a certified copy of the resolutions of the Authority and the City authorizing the execution of such amendment to the Lease.
(d) A copy of a letter sen t by the City to each rating agency then rating the 2022 Bonds to notify each rating agency of the issuance of such Additional Bonds.
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ECTION 2.10. Applicability to Additional Bonds Unless otherwise specified in the Supplemental Indenture pursuant to which an issue of Additional Bonds is issued, the provisions of Sections 2.03 through 2. 09 shall apply to such issue of Additional Bonds.
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ARTICLE III
ISSUANCE OF BONDS; APPLICATION OF
PROCEEDS
SECTION 3.01. Issuance of the 2022 Bonds. At any time after the execution of this Indenture, the Authority may execute and the Trustee shall authenticate and, upon the Written Request of the Authority, deliver the 2022 Bonds to the Original Purchaser.
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ECTION 3.02. Application of Proceeds of Sale of Bonds . On the Closing Date, the Original Purchaser will pay a purchase price for the 2022 Bonds in the amount of $_________, which is equal to the original principal amount of the 2022 Bonds ($_________), plus a net original issue premium of $_________, less an underwriter’s discount of $______, and the Trustee shall apply such purchase price on the Closing Date in the following manner:
(a) the Trustee will deposit $_____ into the Project Fund, and
(b) the Trustee will deposit the remaining amount, equal to $_________, into the Costs of Issuance Fund.
The Trustee may establish a temporary fund or account in its records t o facilitate such deposits or transfers. The deposits described in paragraphs (a) and (b) represent the full amount of the Site Lease Payments under Section 3 of the Site Lease.
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ECTION 3.03. Establishment and Application of Costs of Issuance Fund. The Trustee shall establish, maintain and hold in trust a separate fund designated as the “Costs of Issuance Fund” into which the Trustee shall deposit a portion of the proceeds of sale of the 2022 Bonds under Section 3.02(b). The Trustee shall disburse amounts in the Costs of Issuance Fund from time to time to pay the Costs of Issuance upon submission of a Written Requisition of the Authority stating the person to whom payment is to be made, the amount to be paid, the purpose for which the obligation was incurred and that such payment is a proper charge against said fund. Each such Written Requisition of the Authority shall be sufficient evidence to the Trustee of the facts stated therein and the Trustee shall have no duty to confirm the accuracy of su ch facts. The Trustee may conclusively rely on such Written Requisitions and shall be fully protected in relying thereon. On the 180th day after the Closing Date, or upon the earlier Written Request of the Authority, the Trustee shall transfer all amounts remaining in the Costs of Issuance Fund to the Interest Account and shall thereupon close the Costs of Issuance Fund.
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ECTION 3.04. Establishment and Application of Project Fund. The Trustee shall establish, maintain and hold in trust a separate fund designated as the “ Project Fund” into which the Trustee shall deposit a portion of the proceeds of sale of the 2022 Bonds under Section 3.02(a).
The Trustee shall administer such fund as provided in this Section 3.04.
Amounts on deposit in the Project Fund shall be used, as provided below, to pay the Project Costs, and to reimburse the City for the same. Pending such use, amounts on deposit in the Project Fund shall be invested only in Permitted Investments, with interest
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earnings and other investment income thereon being retained therein. All moneys remaining in the Project Fund upon the completion of the Project (as determined by the City in its sole discretion with written notic e to the Trustee) shall be transferred by the Trustee as hereinafter provided.
The Trustee shall, from time to time, disburse money from the Project Fund to pay the Project Costs for the Project, as hereinafter provided, in each case promptly after receipt of, and in accordance with, a Written Certificate in the form attached hereto as Appendix C.
In making such payments, the Trustee may rely upon the representations made in the Written Certificate. If for any reason the City should decide prior to the payment of any item in said Written Certificate not to pay such item, then it shall give written notice of such decision to the Trustee and thereupon the Trustee shall not make such payment, and the Trustee shall have no liability to the City or the designated payee as a result of such nonpayment. In no event shall the Trustee be responsible for the adequacy or due performance of any contracts relating to the Project or for the use or application of money properly disbursed pursuant to requests made under this Section 3.04.
If, after payment by the Trustee of all Written Certificates theretofore tendered to the Trustee under the provisions of this Section 3.04 and after the City has notified the Trustee of the completion of the Project, there shall remain any balance of money in the Project Fund, all money so remaining (other than a reasonable retainage to pay Project Costs, as determined in the sole discretion of the City with written notice to the Trustee) shall be transferred to the Principal Account and shall be applied to the prepayment of Lease Payments under Section 9.3 of the Lease and the corresponding redemption of the 2022 Bonds under Section 4.01(a).
At such time as no moneys remain in the Project Fund, the Project Fund shall be closed.
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ECTION 3.05. Validity of Bonds . The recital contained in the 2022 Bonds that the same are issued under the Constitution and laws of the State of California shall be conclusive evidence of their validity and of compliance with the provisions of law in their issuance.
ARTICLE IV
REDEMPTION OF BONDS
SECTION 4.01. Terms of Redemption.
(a) Optional Redemption. The 2022 Bonds maturing on or before November 1, 20__, are not subject to optional redemption prior to their stat ed maturity. The 2022 Bonds maturing on or after November 1, 20__, are subject to redemption, as a whole or in part at the election of the Authority among maturities on such basis as designated by the Authority and by lot within a maturity, at the option of the Authority, on November 1, 20__, and on any date thereafter, at a redemption price equal to 100% of the principal
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amount of 2022 Bonds to be redeemed, together with accrued interest thereon to the date fixed for redemption, without premium.
The Authority must give the Trustee at least 10 days’ written notice of its intention to redeem 2022 Bonds under this subsection (a), and the manner of selecting such 2022 Bonds for redemption from among the maturities thereof, in sufficient time for the Trustee to give notice of such redemption in accordance with Section 4.03.
(b) Special Mandatory Redemption From Insurance or Condemnation Proceeds. The 2022 Bonds are subject to redemption as a whole, or in part on a pro rata basis among maturities, on any date, from any Net Proceeds required to be used for such purpose as provided in Section 5.07, at a redemption price equal to 100% of the principal amount thereof plus interest accrued thereon to the date fixed for redemption, without premium.
(c) Mandatory Sinking Fund Redemption of Term Bonds. The Term Bonds are subject to mandatory redemption in part by lot, from sinking fund payments made under Section 5.02(b) at a redemption price equal to the principal amount thereof to be redeemed, without premium, plus accrued interest to the date of redemption, in the aggregate respective principal amounts and on November 1 in the years as set forth in the following tables:
Term Bonds Maturing
November 1, ____
Payment Date
(November 1)
Payment
Amount
(Maturity)
Term Bonds Maturing
November 1, ____
Payment Date
(November 1)
Payment
Amount
(Maturity)
If some but not all of the Term Bonds have been redeemed under subsection (a) or subsection (b) of this Section, the total amount of all future sinking fund payments will be reduced by the aggregate principal amount of the Term Bonds so redeemed, to be
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allocated among such sinking fund payments on a pro rata basis as determined by the Authority, which shall notify the Trustee in writing of such determination.
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ECTION 4.02. Selection of Bonds for Redemption. Whenever provision is made in this Indenture for the redemption of less than all of the 2022 Bonds of a single maturity, the Trustee shall select the 2022 Bonds of that maturity to be redeemed by lot in any manner which the Trustee in its sole discretion deems appropriate. For purposes of such selection, the Trustee shall treat each Bond as consisting of separate $5,000 portions and each such portion shall be subject to redemption as if such portion were a separate Bond.
Whenever less than all of the Outstanding Bonds of more than one series are called for redemption at any one time, the Trustee will select the Outstanding Bonds or portions thereof to be redeemed as directed by the Authority.
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ECTION 4.03. Notice of Redemption; Rescission. The Trustee shall mail notice of redemption of the 2022 Bonds by first class mail, postage prepaid, not less than 20 nor more than 60 days before any redemption date, to the respective Owners of any 2022 Bonds designated for redemption at their addresses appearing on the Registration Books and to one or more Securities Depositories and to the Municipal Securities Rulemaking Board. Each notice of redemption shall state the date of the notice, the redemption date, the place or places of redemption, whether less than all of the 2022 Bonds (or all 2022 Bonds of a single maturity) are to be redeemed, the CUSIP numbers and (in the event that not all 2022 Bonds within a maturity are called for redemption) 2022 Bond numbers of the 2022 Bonds to be redeemed and the maturity or maturities of the 2022 Bonds to be redeemed, and in the case of 2022 Bonds to be redeemed in part only, the respective portions of the principal amount thereof to be redeemed. Each such notice shall also state that on the redemption date there will become due and payable on each of said 2022 Bonds the redemption price thereof, and that from and after such redemption date interest thereon shall cease to accrue, and shall require that such 2022 Bonds be then surrendered to the Trustee. Neither the failure to receive any notice nor any defect therein shall affect the sufficiency of the proceedings for such redemption or the cessation of accrual of interest from and after the redemption date. Notice of redemption of 2022 Bonds shall be given by the Trustee, at the expense of the Authority, for and on behalf of the Authority.
Redemption notices may be conditional. The Authority has the right to rescind any notice of the redemption of 2022 Bonds under Section 4.01(a) by written notice to the Trustee on or prior to the dated fixed for redemption. Any notice of redemption shall be cancelled and annulled if for any reason funds will not be or are not available on the date fixed for redemption for t he payment in full of the 2022 Bonds then called for redemption, and such cancellation shall not constitute an Event of Default. The Authority and the Trustee have no liability to the Owners of the 2022 Bonds or any other party related to or arising from such rescission of redemption. The Trustee shall mail notice of such rescission of redemption in the same manner as the original notice of redemption was sent under this Section.
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ECTION 4.04. Partial Redemption of 2022 Bonds . Upon surrender of any 2022 Bonds redeemed in part only, the Authority shall execute and the Trustee shall authenticate and deliver to the Owner thereof, at the expense of the Authority, a new
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2022 Bond or 2022 Bonds of aut horized denominations equal in aggregate principal amount to the unredeemed portion of the 2022 Bonds surrendered.
SECTION 4.05. Effect of Redemption. Notice of redemption having been duly given as aforesaid, and moneys for payment of the redemption price of, together with interest accrued to the date fixed for redemption on, including any applicable premium, the 2022 Bonds (or portions thereof) so called for redemption being held by the Trustee, on the redemption date designated in such notice, the 2022 Bonds (or portions thereof) so called for redemption shall become due and payable, interest on the 2022 Bonds so called for redemption shall cease to accrue, said 2022 Bonds (or portions thereof) shall cease to be entitled to any benefit or security under this Indenture, and the Owners of said 2022 Bonds shall have no rights in respect thereof except to receive payment of the redemption price thereof.
All 2022 Bonds redeemed under the provisions of this Article shall be canceled by the Trustee upon surrender thereof and destroyed in accordance with the retention policy of the Trustee then in effect.
ARTICLE V
REVENUES; FUNDS AND ACCOUNTS; PAYMENT OF
PRINCIPAL AND INTEREST
SECTION 5.01. Security for the 2022 Bonds; Bond Fund.
(a) Pledge of Revenues and Other Amounts. Subject only to the provisions of this Indenture permitting the application thereof for the purposes and on the terms and conditions set forth herein, all of the Revenues and all amounts held in any fund or account established under this Indenture (except the Project Fund and the Costs of Issuance Fund) are hereby pledged to secure the payment of the principal (including the principal amount of any Term Bonds that is subject to mandatory sinking fund redemption) of and interest and premium (if any) on the Bonds in accordance wi th their terms and the provisions of this Indenture. Said pledge constitutes a lien on and security interest in the Revenues and such amounts and shall attach, be perfected and be valid and binding from and after the Closing Date, without the need for any physical delivery thereof or further act.
(b) Assignment to Trustee. Under the Assignment Agreement, the Authority has transferred to the Trustee all of the rights of the Authority in the Lease (other than the rights of the Authority under Sections 4.5, 5.10, 7.3 and 8.4 thereof and its rights to give approvals and consents thereunder). The Trustee is entitled to collect and receive all of the Revenues, and any Revenues collected or received by the Authority shall be deemed to be held, and to have been collected or received, by the Authority as the agent of the Trustee and shall forthwith be paid by the Authority to the Trustee. The Trustee is also entitled to and may, subject to the provisions of Article VIII, take all steps, actions and proceedings which the Trustee determines to be reasonably necessary in its judgment to enforce, either jointly with the Authority or separately, all of the rights of the Authority and all of the obligations of the City under the Lease.
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(c) Deposit of Revenues in Bond Fund. All Revenues shall be promptly deposited by the Trustee upon receipt thereof in a special fund designated as the “Bond Fund” which the Trustee shall establish, maintain and hold in trust; except that all moneys received by the Trustee and required hereunder or under the Lease to be deposited in the Redemption Fund or the Insurance and Condemnation Fund shall be promptly deposited in such funds. All Revenues deposited with the Trustee shall be held, disbursed, allocated and applied by the Trustee only as provided in this Indenture.
Any surplus remaining in the Bond Fund, after payment in full of (i) the principal (including the principal amount of any Term Bonds that is subject to mandatory sinking fund redemption) of and interest on the Bonds or provision therefore under Article X, and (ii) any applicable fees and expenses to the Trustee, shall be withdrawn by the Trustee and remitted to the City.
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ECTION 5.02. Allocation of Revenues . On or before each Interest Payment Date, the Trustee shall transfer from the Bond Fund and deposit into the following respective accounts (each of which the Trustee shall establish and maintain within the Bond Fund), the following amounts in the following order of priority:
(a) Deposit to Interest Account. The Trustee shall deposit in the Interest Account an amount required to cause the aggregate amount on deposit in the Interest Account to be at least equal to the amount of interest becoming due and payable on such Interest Payment Date on all Bonds then Outstanding.
(b) Deposit to Principal Account. The Trustee shall deposit in the Principal Account an amount required to cause the aggregate amount on deposit in the Principal Account to equal the pri ncipal (including the principal amount of any Term Bonds that is subject to mandatory sinking fund redemption) amount of the Bonds coming due and payable on such Interest Payment Date.
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ECTION 5.03. Application of Interest Account. All amounts in the Interest Account shall be used and withdrawn by the Trustee solely for the purpose of paying interest on the Bonds as it comes due and payable (including accrued interest on any Bonds purchased or redeemed prior to maturity).
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ECTION 5.04. Application of Principal Account. All amounts in the Principal Account shall be used and withdrawn by the Trustee solely to pay the principal (including the principal amount of any Term Bonds that is subject to mandatory sinking fund redemption) amount of the Bonds at their respective maturity dates.
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ECTION 5.05. Reserved.
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ECTION 5.06. Application of Redemption Fund. The Trustee shall establish and maintain the Redemption Fund, into which the Trustee shall deposit a portion of the Revenues received, in accordance with a Written Request of the Authority, amount s in which shall be used and withdrawn by the Trustee solely for the purpose of paying the principal and premium (if any) of the Bonds to be redeemed under Section 4.01(a) or (b); provided, however, that at any time prior to the selection of Bonds for redemption, the Trustee may apply such amounts to the purchase of Bonds at public or private sale,
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when and at such prices (including brokerage and other charges, but excluding accrued interest, which is payable from the Interest Account) as shall be directed under a Written Request of the Authority, except that the purchase price (exclusive of accrued interest) may not exceed the redemption price then applicable to the Bonds. The Trustee shall be entitled to conclusively rely on any Written Request of the Authority received under this Section 5.06, and shall be fully protected in relying thereon.
SECTION 5.07. Insurance and Condemnation Fund.
(a) Establishment of Fund. Upon the receipt of proceeds of insurance or eminent domain with respect to the Leased Property, the Trustee shall establish and maintain an Insurance and Condemnation Fund, to be held and applied as hereinafter set forth in this Section 5.07.
(b) Application of Insurance Proceeds. Any Net Proceeds of insurance against accident to or destruction of the Leased Property collected by the City or the Authority in the event of any such accident or destruction shall be paid to the Trustee under Section
6.3 of the Lease and deposited by the Trustee promptly upon receipt thereof in the Insurance and Condemnation Fund. If the City fails to determine and notify the Trustee in writing of its determination, within 90 days following the date of such deposit, to replace, repair, restore, modify or improve the Leased Property which has been damaged or destroyed, then such Net Proceeds shall be promptly transferred by the Trustee to the Redemption Fund and applied to the redemption of Bonds under Section
4.01(b). Notwithstanding the foregoing sentence, however, if the Leased Property is damaged or destroyed in full, the Net Proceeds of such insurance shall be used by the City to rebuild or replace the Leased Property if such proceeds are not sufficient to redeem Outstanding Bonds equal in aggregate principal amount to the unpaid Lease Payments allocable to the Leased Property. All proceeds deposited in the Insurance and Condemnation Fund and not so transferred to the Redemption Fund shall be applied to the prompt replacement, repair, restoration, modification or improvement of the damaged or destroyed portions of the Leased Property by the City, upon receipt of a Written Request of the City which: (i) states with respect to each payment to be made (A) the requisition number, (B) the name and address of the person to whom payment is due, (C) the amount to be paid and (D) that each obligation mentioned therein has been properly incurred, is a proper charge against the Insurance and Condemnation Fund and has not been the basis of any previous withdrawal; and (ii) specifies in reasonable detail the nature of the obligation. Any balance of the proceeds remaining after such work has been completed as certified by the City under a Written Certificate to the Trustee shall be paid to the City. The Trustee shall be entitled to conclusively rely on any Written Request or Written Certificate received under this subsection (b) of this Section 5.07 and in each case, shall be fully protected in relying thereon.
(c) Application of Eminent Domain Proceeds . If all or any part of the Leased Property is taken by eminent domain proceedings (or sold to a government threatening to exercise the power of eminent domain) the Authority shall deposit or cause to be deposited with the Trustee the Net Proceeds therefrom, which the Trustee shall deposit in the Insurance and Condemnation Fund under Section 6.2(b) of the Lease and which shall be applied and disbursed by the Trustee as follows:
(i) If the City has not given written notice to the Trustee, within 90 days following the date on which such Net Proceeds are deposited with
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the Trustee, of its determination that such Net Proceeds are needed for the replacement of the Leased Property or such portion thereof, the Trustee shall transfer such Net Proceeds to the Redemption Fund to be applied towards the redemption of the Bonds under Section 4.01(b).
(ii) If the City has given written notice to the Trustee, within 90 days following the date on which such Net Proceeds are deposited with the Trustee, of its determination that such Net Proceeds are needed for replacement of the Leased Property or such portion thereof, the Trustee shall pay to the City, or to its order, from said proceeds such amounts as the City may expend for such replacement, upon the filing of Written Requisitions of the City as agent for the Authority.
In each case, the Trustee may conclusively rely upon any notice received under this subsection (c)(ii) of this Section and is protected in relying thereon.
(d) Reliance on Independent Advice. In making any such determination whether to repair, replace or rehabilitate the Leased Property under this Section 5.07, the City may obtain, but is not required to obtain, at its expense, the report of an independent engineer or other independent professional consultant, a copy of which must be filed with the Trustee. The Trustee shall have no duty to review or examine such report. Any such determination by the City is final.
Notwithstanding any other provision of this Section 5.07 or the Lease, the Trustee shall pay to the City all moneys in the Insurance and Condemnation Fund upon the Trustee’s receipt of Written Request of the City which states that, pursuant to Section 3.2 of the Lease, the City has substituted other real property for the Leased Property that was damaged or destroyed and that there will be no abatement of the Lease Payments as a result of such damage or destruction.
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ECTION 5.08. Investments. All moneys in any of the funds or accounts established with the Trustee under this Indenture shall be invested by the Trustee solely in Permitted Investments. Such investments shall be directed by the Authority in a Written Request of the Authority filed with the Trustee at least 2 Bus iness Days in advance of the making of such investments. In the absence of any such directions from the Authority, the Trustee shall invest any such moneys in Permitted Investments which constitute money market funds; provided, however, that any such investment shall be made by the Trustee only if, prior to the date on which such investment is to be made, the Trustee shall have received a Written Request of the Authority specifying a specific money market fund and, if no such Written Request of the Authority is so received, the Trustee shall hold such moneys uninvested. Permitted Investments purchased as an investment of moneys in any fund shall be deemed to be part of such fund or account.
To the extent Permitted Investments are registrable, such Permit ted Investments must be registered in the name of the Trustee.
All interest or gain derived from the investment of amounts in any of the funds or accounts established hereunder shall be deposited in the Bond Fund. For purposes of acquiring any investments hereunder, the Trustee may commingle funds held by it
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hereunder. The Trustee or any of its affiliates may act as principal or agent in the acquisition or disposition of any investment and may impose its customary charges therefor. The Trustee shall incur no liability for losses arising from any investments made under this Section 5.08.
Subject to applicable law, the Trustee may make any investments hereunder through its own bond or investment department or trust investment department, or those of its p arent or any affiliate. The Trustee or any of its affiliates may act as sponsor, advisor or manager to the investment provider in connection with any investments made by the Trustee hereunder. The Trustee is hereby authorized, in making or disposing of any investment permitted by this Section, to deal with itself (in its individual capacity) or with any one or more of its affiliates, whether it or such affiliate is acting as an agent of the Trustee or for any third person or is dealing as a principal for its own account. The Trustee may, from time to time, provide the City and the Authority with a list of investments that are available on the Trustee’s investment platform, but the Trustee will not give investment advice to the City or the Authority , and the City or the Authority may direct the Trustee to purchase investments that are not included on the list provided by the Trustee . The Trustee shall be entitled to rely conclusively on the Authority’s investment direction as to the suitability and legality of the directed investments.
The Trustee shall furnish the Authority periodic cash transaction statements which include detail for all investment transactions effected by the Trustee or brokers selected by the Authority. Upon the Authority’s election, s uch statements will be delivered via the Trustee’s Online Trust and Custody service and upon electing such service, paper statements will be provided only upon request. The Authority waives the right to receive brokerage confirmations of security transactions effected by the Trustee as they occur, to the extent permitted by law. The Authority further understands that trade confirmations for securities transactions effected by the Trustee will be available upon request and at no additional cost and other trade confirmations may be obtained from the applicable broker.
Under Section 10.5 of the Lease, the City may direct the Authority as to the investment of funds under this Section 5.08, subject to compliance with the provisions of this Article V and Section 6.07.
SECTION 5.09. Valuation and Disposition of Investments.
(a) Except as otherwise provided in subsection (b) of this Section, the Authority covenants that all investments of amounts deposited in any fund or account created by or under this Indenture, or otherwise containing gross proceeds of the Bonds (within the meaning of Section 148 of the Tax Code) shall be acquired, disposed of and valued at the Fair Market Value thereof as such term is defined in subsection (d) below. The Trustee shall have no duty in connection with the determination of Fair Market Value other than to follow the investment directions of the Authority in any Written Request of the Authority.
(b) The investments in certain funds or accounts (or portions thereof) may be subject to a yield restriction under applicable provisions of the Tax Code; the Authority shall inform the Trustee in writing which funds are subject to a yield restriction.
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(c) For the purpose of determining the amount in any fund or account established hereunder, the value of Permitted Investments credited to such fund shall be valued by the Trustee at least annually on or before July 15. The Trustee may sell or present for redemption, any Permitted Investment so purchased by the Trustee whenever it is necessary in order to provide moneys to meet any required payment, transfer, withdrawal or disbursement from the fund to which such Permitted Investment is credited, and the Trustee shall not be liable or responsible for any loss resulting from any such Permitted Investment.
(d) For purposes of this Section 5.09, the term “Fair Market Value” means the price at which a willing buyer would purchase the investment from a willing seller in a bona fide, arm’s length transaction (determined as of the date the contract to purchase or sell the investment becomes binding) if the investment is traded on an established securities market (within the meaning of Section 1273 of the Tax Code) and, otherwise, the term “Fair Market Value” means the acquisition price in a bona fide arm’s length transaction (as referenced above) if (i) the investment is a certificate of deposit that is acquired in accordance with applicable regulations under the Tax Code, (ii) the investment is an agreement with specifically negotiated withdrawal or reinvestment provisions and a specifically negotiated interest rate (for example, a guaranteed investment contract, a forward supply contract or other investment agreement) that is acquired in accordance with applicable regulations under the Tax Code, or (iii) the investment is a United States Treasury Security -- State and Local Government Series which is acquired in accordance with applicable regulations of the United States Bureau of Public Debt.
(e) To the extent of any valuations made by the Trustee hereunder, the Trustee may utilize and rely upon computerized or generally recognized securities pricing services that may be available to it, including those available through its regular accounting system (including brokers and dealers).
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ARTICLE VI
COVENANTS OF THE AUTHORITY
SECTION 6.01. Punctual Payment. The Authority shall punctually pay or cause to be paid the principal (including the principal amount of any Term Bonds that is subject to mandatory sinking fund redemption) of and interest and premium (if any) on all the Bonds in strict conformity with the terms of the Bonds and of this Indenture, according to the true intent and meaning thereof, but only out of the Revenues and other amounts pledged for such payment as provided in this Indenture.
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ECTION 6.02. Extension of Payment of Bonds . The Authority shall not directly or indirectly extend or assent to the extension of the maturity of any of the Bonds or the time of payment of any claims for interest by the purchase of such Bonds or by any other arrangement, and in case the maturity of any of the Bonds or the time of payment of any such claims for interest shall be extended, such Bonds or claims for interest shall not be entitled, in case of any default hereunder, to the benefits of this Indenture, except subject to the prior payment in full of the principal (including the principal amount of any Term Bonds that is subject to mandatory sinking fund redemption) of all of the Bonds then Outstanding and of all claims for interest thereon which have not been so extended.
Nothing in this Section 6.02 limits the right of the Authority to issue Bonds for the purpose of refunding any Outstanding Bonds, and such issuance does not constitute an extension of maturity of the Bonds.
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ECTION 6.03. Against Encumbrances. The Authority shall not create, or permit the creation of, any pledge, lien, charge or other encumbrance upon the Revenues and other assets pledged or assigned under this Indenture while any of the 2022 Bonds or any Additional Bonds are Outstanding, except the pledge and assignment created by this Indenture. Subject to this limitation, the Authority expressly reserves the right to enter into one or more other indentures for any of its corporate purposes, and reserves the right to issue other obligations for such purposes.
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ECTION 6.04. Power to Issue Bonds and Make Pledge and Assignment . The Authority is duly authorized under law to issue the Bonds and to enter into this Indenture and to pledge and assign the Revenues and other amounts purported to be pledged and assigned, respectively, under this Indenture and under the Assignment Agreement in the manner and to the extent provided in this Indenture and the Assignment Agreement.
The Bonds and the provisions of this Indenture are and will be the legal, valid and binding special obligations of the Authority in accordance with their terms, and the Authority and the Trustee shall at all times, subject to the provisions of Article VIII and to the extent permitted by law, defend, preserve and protect said pledge and assignment of Revenues and other assets and all the rights of the Bond Owners under this Indenture against all claims and demands of all persons whomsoever.
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ECTION 6.05. Accounting Records . The Trustee shall at all times keep, or cause to be kept, proper books of record and account, prepared in accordance with corporate industry standards, in which complete and accurate entries shall be made of all transactions made by it relating to the proceeds of Bonds and all funds and accounts established under this Indenture. The Trustee shall make such books of record and
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account available for inspection by the Authority and the City, during business hours, upon reasonable notice, and under reasonable circumstances.
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ECTION 6.06. Reserved.
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ECTION 6.07. Tax Covenants Applicable to the 2022 Bonds.
(a) Private Business Use Limitation. The Authority shall assure that the proceeds of the 2022 Bonds are not used in a manner which would cause the 2022 Bonds to satisfy the private business tests of Section 141(b) of the Tax Code or the private loan financing test of Section 141(c) of the Tax Code.
(b) Federal Guarantee Prohibition. The Authority may not take any action or permit or suffer any action to be taken if the result of the same would be to cause the 2022 Bonds to be “federally guaranteed” within the meaning of Section 149(b) of the Tax Code.
(c) No Arbitrage. The Authority may not take, or permit or suffer to be taken by the Trustee or otherwise, any action with respect to the proceeds of the 2022 Bonds or of any other obligations which, if such action had been reasonably expected to have been taken, or had been deliberately and intentionally taken, on the Closing Date, would have caused the 2022 Bonds to be “arbitrage bonds” within the meaning of Section 148(a) of the Tax Code.
(d) Maintenance of Tax Exemption; Record Retention; Compliance with Tax Certificate.
(i) The Authority shall take all actions necessary to assure the exclusion of interest on the 2022 Bonds from the gross income of the Owners of the 2022 Bonds to the same extent as such interest is permitted to be excluded from gross income under the Tax Code as in effect on the Closing Date.
(ii) The Authority will retain its records of all accounting and monitoring it carries out with respect to the Bonds for at least 3 years after the Bonds mature or are redeemed (whichever is earlier); however, if the Bonds are redeemed and refunded, the Authority will retain its records of accounting and monitoring at least 3 years after the earlier of the maturity or redemption of the obligations that refunded the Bonds.
(iii) The Authority will comply with the provisions of the Certificate as to Arbitrage and the Use of Proceeds Certificate with respect to the Bonds, which are incorporated herein as if fully set forth herein. The covenants of this subsection will survive payment in full or defeasance of the Bonds.
(e) Rebate of Excess Investment Earnings to United States. The Authority shall calculate or cause to be calculated all amounts of excess investment earnings with respect to the 2022 Bonds which are required to be rebated to the United States of America under Section 148(f) of the Tax Code, at the times and in the manner required under the Tax Code. The Authority shall pay when due an amount equal to excess investment earnings to the United States of America in such amounts, at such times and in such manner as may be required under the Tax Code, such payments to be made
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from amounts paid by the City for that purpose under Section 4.5(d) of the Lease. The Authority shall keep or cause to be kept, and retain or cause to be retained for a period of six years following the retirement of the 2022 Bonds, records of the determinations made under this subsection (e).
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ECTION 6.08. Enforcement of Lease . The Trustee shall promptly collect all amounts (to the extent any such amounts are available for collection) due from the City under the Lease. Subject to the provisions of Article VIII, the Trustee may enforce, and take all steps, actions and proceedings which are determined to be reasonably necessary for the enforcement of all of its rights thereunder as assignee of the Authority and for the enforcement of all of the obligations of the City under the Lease.
SECTION 6.09. Waiver of Laws. The Authority shall not at any time insist upon or plead in any manner whatsoever, or claim or take the benefit or advantage of, any stay or extension law now or at any time hereafter in force that may affect the covenants and agreements contained in this Indenture or in the 2022 Bonds, and all benefit or advantage of any such law or laws is hereby expressly waived by the Authority to the extent permitted by law.
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ECTION 6.10. Further Assurances. The Authority will make, execute and deliver any and all such further indentures, instruments and assurances as may be reasonably necessary or proper t o carry out the intention or to facilitate the performance of this Indenture and for the better assuring and confirming unto the Owners of the 2022 Bonds of the rights and benefits provided in this Indenture.
ARTICLE VII
EVENTS OF DEFAULT AND REMEDIES
SECTION 7.01. Events of Default . The following events constitute Events of Default hereunder:
(a) Failure to pay any installment of the principal (including the principal amount of any Term Bonds that is subject to mandatory sinking fund redemption) of any Bonds when due, whether at maturity as therein expressed, by proceedings for redemption, by acceleration, or otherwise.
(b) Failure to pay any installment of interest on the Bonds when due.
(c) Failure by the Authority to observe and perform any of the other covenants, agreements or conditions on its part contained in this Indenture or in the Bonds, if such failure has continued for a period of 30 days after written notice thereof, specifying such failure and requiring the same to be remedied, has been given to the Authority by the Trustee; provided, however, if in the reasonable opinion of the Authority the failure stated in t he notice can be corrected, but not within such 30- day period, such failure shall not constitute an Event of Default if the Authority institutes corrective action within
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such 30-day period and thereafter diligently and in good faith cures the failure in a reasonable period of time, which period shall end 180 days after the delivery of such default notice.
(d) The commencement by the Authority of a voluntary case under Title 11 of the United States Code or any substitute or successor statute.
(e) The occurrence and continuation of an event of default under and as defined in the Lease.
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ECTION 7.02. Remedies Upon Event of Default. If any Event of Default occurs, then, and in each and every such case during the continuance of such Event of Default, the Trustee may, and at the written direction of the Owners of a majority in aggregate principal amount of the Bonds at the time Outstanding shall, in each case, upon receipt of indemnification satisfactory to Trustee against the costs, expenses and liabilities to be incurred in connection with such action, upon notice in writing to the Authority, declare the principal of all of the Bonds then Outstanding, and the interest accrued thereon, to be due and payable immediately, and upon any such declaration the same shall become and shall be immediately due and payable, anything in this Indenture or in the Bonds contained to the contrary notwithstanding.
Any such declaration is subject to the condition that if, at any time after such declaration and before any judgment or decree for the payment of the moneys due shall have been obtained or entered, the Authority deposits with the Trustee a sum sufficient to pay all the principal (including the principal amount of any Term Bonds that is subject to mandatory sinking fund redemption) of and installments of interest on the Bonds payment of which is overdue, with interest on such overdue principal (including the principal amount of any Term Bonds that is subject to mandatory sinking fund redemption) at the rate borne by the respective Bonds to the extent permitted by law, and the reasonable fees, charges and expenses (including those of its legal counsel, including the allocated costs of internal attorneys) of the Trustee, and any and all other Events of Default actually known to the Trustee (other than in the payment of principal (including the principal amount of any Term Bonds that is subject to mandatory sinking fund redemption) of and interest on the Bonds due and payable solely by reason of such declaration) have been made good or cured to the satisfaction of the Trustee or provision deemed by the Trustee to be adequate has been made therefor, then, and in every such case, the Owners of a majority in aggregate principal amount of the Bonds then Outstanding, by written notice to the Authority, the City and the Trustee, may, on behalf of the Owners of all of the Bonds, rescind and annul such declaration and its consequences and waive such Event of Default; but no such rescission and annulment shall extend to or shall affect any subsequent Event of Default, or shall impair or exhaust any right or power consequent thereon.
Nothing herein shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Bondholder any plan of reorganization, arrangement, adjustment, or composition affecting the Bonds or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Bondholder in any such proceeding without the approval of the Bondholders so affected.
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ECTION 7.03. Application of Revenues and Other Funds After Default . If an Event of Default occurs and is continuing, all Revenues and any other funds then held or
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thereafter received by the Trustee under any of the provisions of this Indenture shall be applied by the Trustee in the following order of priority:
(a) To the payment of reasonable fees, charges and expenses of the Trustee (including reasonable fees and disbursements of its legal counsel including outside counsel and the allocated costs of internal attorneys) incurred in and about the performance of its powers and duties under this Indenture;
(b) To the payment of the principal (including the principal amount of any Term Bonds that is subject to mandatory sinking fund redemption) of and interest then due on the Bonds (upon presentation of t he Bonds to be paid, and stamping or otherwise noting thereon of the payment if only partially paid, or surrender thereof if fully paid) in accordance with the provisions of this Indenture, as follows:
First: To the payment to the persons entitled thereto of all installments of interest then due in the order of the maturity of such installments, and, if the amount available shall not be sufficient to pay in full any installment or installments maturing on the same date, then to the payment thereof ratably,
according to the amounts due thereon, to the persons entitled thereto, without any discrimination or preference;
Second: To the payment to the persons entitled thereto of the unpaid principal (including the principal amount of any Term Bonds that is subject to mandatory sinking fund redemption) of any Bonds which shall have become due, whether at maturity or by acceleration or redemption, with interest on the overdue principal (including the principal amount of any Term Bonds that is subject to mandatory sinking fund redemption) at the rate borne by the respective Bonds (to the extent permitted by law), and, if the amount available shall not be sufficient to pay in full all the Bonds, together with such interest, then to the payment thereof ratably, according to the amounts of principal (including the principal amount of any Term Bonds that is subject to mandatory sinking fund redemption) due on such date to the persons entitled thereto, without any discrimination or preference; and
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ECTION 7.04. Trustee to Represent Bond Owners . The Trustee is hereby irrevocably appointed (and the successive respective Owners of the Bonds, by taking and holding the same, shall be conclusively deemed to have so appointed the Trustee) as trustee and true and lawful attorney -in-fact of the Owners of the Bonds for the purpose of exercising and prosecuting on their behalf such rights and remedies as may be available to such Owners under the provisions of the Bonds, thi s Indenture and applicable provisions of any law. All rights of action under this Indenture or the Bonds may be prosecuted and enforced by the Trustee without the possession of any of the Bonds or the production thereof in any proceeding relating thereto, and any such suit, action or proceeding instituted by the Trustee shall be brought in the name of the
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Trustee for the benefit and protection of all the Owners of such Bonds, subject to the provisions of this Indenture. Notwithstanding anything contained herein or in the Lease to the contrary, upon the occurrence and continuance of an Event of Default, before taking any foreclosure action or any action which may subject the Trustee to liability under any federal, state or local environmental law, statute, r egulation or ordinance, the Trustee may require that a satisfactory indemnity bond, indemnity or environmental impairment insurance be furnished for the payment or reimbursement of all expenses to which it may be put and to protect it against all liability resulting from any claims, judgments, damages, losses, penalties, fines, liabilities (including strict liability) and expenses which may result from such foreclosure or other action. The Trustee shall not be required to take any foreclosure action if the approval of a government regulator shall be a condition precedent to taking such action, and such approval cannot be obtained.
Anything in the Indenture or Lease to the contrary notwithstanding, the Trustee shall not be required to enter, take possession of, or take any other action whatsoever with respect to the Leased Property unless the Trustee is satisfied that the Trustee wil l not be subject to any liability under any local, state, or federal environmental laws or regulations of any kind whatsoever or from any circumstances present at the Leased Property relating to the presence, use, management, disposal or contamination by any environmentally hazardous materials or substances of any kind whatsoever.
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ECTION 7.05. Limitation on Bond Owners’ Right to Sue. Notwithstanding any other provision hereof, no Owner of any Bonds has the right to institute any suit, action or proceeding at law or in equity, for the protection or enforcement of any right or remedy under this Indenture, the Lease or any other applicable law with respect to such Bonds, unless (a) such Owner has given to the Trustee written notice of the occurrence of an Event of Default; (b) the Owners of a majority in aggregate principal amount of the Bonds then Outstanding have requested the Trustee in writing to exercise the powers hereinbefore granted or to institute such suit, action or proceeding in its own name; (c) such Owner or Owners have tendered to the Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request; (d) the Trustee has failed to comply with such request for a period of 60 days after such written request has been received by, and said tender of indemnity has been made to, the Trustee; and (e) no direction inconsistent with such written request has been given to the Trustee during such 60 day period by the Owners of a majority in aggregate principal amount of the Bonds then Outstanding.
Such notification, request, tender of indemnity and refusal or omission are hereby declared, in every case, to be conditions precedent to the exercise by any Owner of Bonds of any remedy hereunder or under law; it being understood and intended that no one or more Owners of Bonds shall have any right in any manner whatever by his or their action to affect, disturb or prejudice the security of this Indenture or the rights of any other Owners of Bonds, or to enforce any right under the Bonds, this Indenture, the Lease or other applicable law with respect to the Bonds, except in the manner herein provided, and that all proceedings at law or in equity to enforce any such right shall be instituted, had and maintained in the manner herein provided and for the benefit and protection of all Owners of the Outstanding Bonds, subject to the provisions of this Indenture.
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ECTION 7.06. Absolute Obligation of Authority . Nothing herein or in the Bonds contained affects or impairs the obligation of the Authority, which is absolute and
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unconditional, to pay the principal (including the principal amount of any Term Bonds that is subject to mandatory sinking fund redemption) of and interest and premium (if any) on the Bonds to the respective Owners of the Bonds at their respective dates of maturity, or upon acceleration or call for redemption, as herein provided, but only out of the Revenues and other assets herein pledged therefor, or affect or impair the right of such Owners, which is also absolute and unconditional, to enforce such payment by virtue of the contract embodied in the Bonds.
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ECTION 7.07. Termination of Proceedings . In case any proceedings taken by the Trustee or by any one or more Bond Owners on account of any Event of Default have been discontinued or abandoned for any reason or have been determined adversely to the Trustee or the Bond Owners, then in every such case the Authority, the Trustee and the Bond Owners, subject to any determination in such proceedings, shall be restored to their former positions and rights hereunder, severall y and respectively, and all rights, remedies, powers and duties of the Authority, the Trustee and the Bond Owners shall continue as though no such proceedings had been taken.
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ECTION 7.08. Remedies Not Exclusive . No remedy herein conferred upon or reserved to the Trustee, to the Owners of the Bonds is intended to be exclusive of any other remedy or remedies, and each and every such remedy, to the extent permitted by law, shall be cumulative and in addition to any other remedy given hereunder or now or hereafter existing at law or in equity or otherwise.
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ECTION 7.09. No Waiver of Default. No delay or omission of the Trustee or any Owner of the Bonds to exercise any right or power arising upon the occurrence of any default or Event of Default shall impair any such right or power or shall be construed to be a waiver of any such default or Event of Default or an acquiescence therein; and every power and remedy given by this Indenture to the Trustee or to the Owners of the Bonds may be exercised from time to time and as often as may be deemed expedient by the Trustee or the Bond Owners.
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ECTION 7.10. Notice to Bond Owners of Default . Immediately upon becoming aware of the occurrence of an Event of Default, but in no event later than five Business Days following becoming aware of such occurrence, the Trustee shall promptly give written notice thereof by first class mail, postage prepaid, to the Owner of each Outstanding Bond, unless such Event of Default has been cured before the giving of such notice; provided, however that except in the case of an Event of Default described in Sections 7.01(a) or 7.01(b), the Trustee may elect not to give such notice to the Bond Owners if and so long as the Trustee in good faith determines that it is in the best interests of the Bond Owners not to give such notice.
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ARTICLE VIII
THE TRUSTEE
SECTION 8.01. Appointment of Trustee. U.S. Bank Trust Company, National Association is hereby appointed Trustee by the Authority for the purpose of receiving all moneys required to be deposited with the Trustee hereunder and to allocate, use and apply the same as provided in this Indenture. The Authority will maintain a Trustee which is qualified under the provisions of the foregoing provisions of this Article VIII, so long as any Bonds are Outstanding.
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ECTION 8.02. Acceptance of Trusts; Removal and Resignation of Trustee. The Trustee hereby accepts the express trusts imposed upon it by this Indenture, and agrees to perform said trusts, but only upon and subject to the following express terms and conditions:
(a) The Trustee shall, prior to an Event of Default, and after the curing or waiver of all Events of Default which may have occurred, perform such duties and only such duties as are expressly and specifically set forth in this Indenture and no implied duties or covenants shall be read into this Indenture against the Trustee. If an Event of Default has occurred (which has not been cured), the Trustee shall exercise such of the rights and powers vested in it by hereunder, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs.
(b) The Authority may remove the Trustee upon 30 days’ prior notice, unless an Event of Default has occurred and is then continuing, and shall remove the Trustee (a) if at any time requested to do so by the Owners of a majority in aggregate principal amount of the Bonds then Outstanding (or their attorneys duly authorized in writing) or (b) if at any time the Trustee ceases to be eligible in accordance with Section 8.02, or becomes incapable of acting, or is adjudged a bankrupt or insolvent, or a receiver of the Trustee or its property is appointed, or any public officer takes control or charge of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation.
(c) The Trustee may at any time resign by giving written notice of such resignation to the Authority and the City, and by giving the Bond Owners notice of such resignation by mail at the addresses shown on the Registration Books.
(d) Any removal or resignation of the Trustee and appointment of a successor Trustee shall become effective upon acceptance of appointment by the successor Trustee. In the event of the removal or resignation of the Trustee under subsections (b) or ( c), respectively, the Authority shall promptly appoint a successor Trustee.
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If no successor Trustee has been appointed and accepted appointment within 45 days of giving notice of removal or notice of resignation as aforesaid, the retiring Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee, and such court may thereupon, after such notice (if any) as it may deem proper, appoint such successor Trustee. Any successor Trustee appointed under this Indenture, must signify its acceptance of such appointment by executing and delivering to the Authority, to its predecessor Trustee a written acceptance thereof, and after payment by the Authority of all unpaid fees and expenses of the predecessor Trustee, and thereupon such successor Trustee, without any further act, deed or conveyance, shall become vested with all the moneys, estates, properties, rights, powers, trusts, duties and obligations of such predecessor Trustee, with like effect as if originally named Trustee herein; but, nevertheless at the Written Request of the Authority or the request of the successor Trustee, such predecessor Trustee shall execute and deliver any and all instruments of conveyance or further assurance and do such other things as may reasonably be required for more fully and certainly vesting in and confirming to such successor Trustee all the right, title and interest of such predecessor Trustee in and to the Leased Property held by such predecessor Trustee under this Indenture and shall pay over, transfer, assign and deliver to the successor Trustee any money or other property subject to the trusts and conditions herein set forth. Upon request of the successor Trustee, the Authority shall execute and deliver any and all instruments as may be reasonably required for more fully and certainly vesting in and confirming to such successor Trustee all such moneys, estates, properties, rights, powers, trusts, duties and obligations. Upon acceptance of appointment by a successor Trustee as provided in this subsection, the Authority shall promptly mail or cause the successor trustee to mail a notice of the succession of such Trustee to the trusts hereunder to each rating agency which is then rating the Bonds and to the Bond Owners at the addresses shown on the Registration Books. If the Authority fails to mail such notice within 15 days after acceptance of appointment by the successor Trustee, the successor Trustee shall cause such notice to be mailed at the expense of the Authority.
(e) Any Trustee appointed under this Indenture shall be a corporation or association organized and doing business under the laws of any state or the United States of America or the District of Columbia, shall be authorized under such laws to exercise corpor ate trust powers, shall have (or, in the case of a corporation or association that is a member of a bank holding company system, the related bank holding company has) a combined capital and surplus of at least $50,000,000, and shall be subject to supervision or examination by a federal or state agency, so long as any Bonds are Outstanding. If such corporation or association publishes a report of condition at least annually under law or to the requirements of any
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supervising or examining agency above referr ed to, then for the purpose of this subsection (e), the combined capital and surplus of such corporation or association shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If the Trustee at any time ceases to be eligible in accordance with the provisions of this subsection (e), the Trustee shall resign immediately in the manner and with the effect specified in this Section.
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ECTION 8.03. Merger or Consolidation. Any bank, national banking association, federal savings association, or trust company into which the Trustee may be merged or converted or with which it may be consolidated or any bank, national banking association, federal savings association, or trust company resulting from any merger, conversion or consolidation to which it shall be a party or any bank, national banking association, federal savings association, or trust company to which the Trustee may sell or transfer all or substantially all of its corporate trust business, provided such bank, national banking association, federal savings association, or trust company shall be eligible under subsection (e) of Section 8.02 shall be the successor to such Trustee, without the execution or filing of any paper or any further act, anything herein to the contrary notwithstanding.
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ECTION 8.04. Liability of Trustee.
(a) The recitals of facts herein and in the Bonds contained shall be taken as statements of the Authority, and the Trustee shall not assume responsibility for the correctness of the same, or make any representations as to the validity or sufficiency of this Indenture, the Bonds or the Lease (including any right to receive moneys thereunder or the value of or title to the premises upon which the Leased Property is located), nor shall the Trustee incur any responsibility in respect thereof, other than as expressly stated herein in connection with the respective duties or obligations of Trustee herein or in the Bonds assigned to or imposed upon it. The Trustee shall, however, be responsible for its representations contained in its certificate of authentication on the Bonds. The Trustee shall not be liable in connection with the performance of its duties hereunder, except for its own negligence or willful misconduct . The Trustee may become the Owner of Bonds with the same rights it would have if it were not Trustee, and, to the extent permitted by law, may act as depository for and permit any of its officers or directors to act as a member of, or in any other capacity with respect to, any committee formed to protect the rights of Bond Owners, whether or not such committee shall represent the Owners of a majority in principal amount of the Bonds then Outstanding.
(b) The Trustee is not liable for any error of judgment made by a responsible officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts.
(c) The Trustee is not liable with respect to any action taken or omitted to be taken by it in accordance with the direction of the Owners of a majority in aggregate principal amount of the Bonds at the time Outstanding relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee under this Indenture or assigned to it under the Assignment Agreement.
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(d) The Trustee is not liable for any action taken by it and believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Indenture.
(e) The Trustee shall not be deemed to have knowledge of any Event of Default hereunder, or any other event which, with the passage of time, the giving of notice, or both, would constitute an Event of Default hereunder unless and until it shall have actual knowledge thereof, or a corporate trust officer shall have received written notice thereof at its Office from the City, the Authority or the Owners of at least 25% in aggregate principal amount of the Outstanding Bonds. Except as otherwise expressly provided herein, the Trustee shall not be bound to ascertain or inquire as to the performance or observance by the Authority or the City of any of the terms, conditions, covenants or agreements herein, under the Lease or the Bonds or of any of the documents executed in connection with the Bonds, or as to the existence of a default or an Event of Default or an event which would, with the giving of notice, the passage of time, or both, constitute an Event of Default. The Trustee is not responsible for the validity, effectiveness or priority of any collateral given to or held by it. Without limiting the generality of the foregoing, the Trustee shall not be required to ascertain or inquire as to the performance or observance by the City or the Authority of the terms, conditions, covenants or agreements set forth in the Lease, other than the covenants of the City to make Lease Payments to the Trustee when due and to file with the Trustee when due, such reports and certifications as the City is required to file with the Trustee thereunder.
(f) No provision of this Indenture requires the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers.
(g) The Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or through agents, receivers or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent, receiver or attorney appointed with due care by it hereunder.
(h) The Trustee has no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of the Bond Owners under this Indenture, unless such Owners have offered to the Trustee security or indemnity satisfactory to it against the costs, expenses and liabilities (including but not limited to fees and expenses of its attorneys), including, without limitations, any liability arising under federal, state or local environmental laws which might be incurred by it in compliance with such request or direction. No permissive power, right or remedy conferred upon the Trustee hereunder shall be construed to impose a duty to exercise such power, right or remedy.
(i) Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee is subject to the provisions of Section 8.02(a), this Section 8.04 and Section
8.05, and shall be applicable to the assignment of any rights under the Lease to the Trustee under the Assignment Agreement.
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(j) The Trustee is not accountable to anyone for the subsequent use or application of any moneys (including the proceeds of the Bonds) which are released or withdrawn in accordance with the provisions hereof.
(k) The Trustee makes no representation or warranty, expressed or implied as to the title, value, design, compliance with specifications or legal requirements, quality, durability, operation, condition, merchantability or fitness for any particular purpose for the use contemplated by the Authority or the City of the Leased Property. In no event shall the Trustee be liable for incidental, indirect, special or consequential damages in connection with or arising from the Lease or this Indenture for the existence, furnishing or use of the Leased Property.
(l) The Trustee has no responsibility with respect to any information, statement, or recital in any official statement, offering memorandum or any other disclosure material prepared or distributed with respect to the Bonds.
(m) The Trustee is authorized and directed to execute the Assignment Agreement in its capacity as Trustee hereunder.
(n) The Trustee shall have the right to accept and act upon instructions, including funds transfer instructions (“Instructions”) given pursuant to this Indenture and delivered using Electronic Means ( "Electronic Means" shall mean the fol lowing communications methods: e-mail, facsimile transmission, secure electronic transmission containing applicable authorization codes, passwords and/or authentication keys issued by the Trustee, or another method or system specified by the Trustee as available for use in connection with its services hereunder) ; provided, however, that the Authority and/or City shall provide to the Trustee an incumbency certificate listing officers with the authority to provide such Instructions (“Authorized Officers”) and containing specimen signatures of such Authorized Officers, which incumbency certificate shall be amended by the Authority and/or the City whenever a person is to be added or deleted from the listing. If the Authority and/or City elects to give the Trustee Instructions using Electronic Means and the Trustee in its discretion elects to act upon such Instructions, the Trustee’s reasonable understanding of such Instructions shall be deemed controlling. The Authority and City understand and agree that the Trustee cannot determine the identity of the actual sender of such Instructions and that the Trustee shall conclusively presume that directions that purport to have been sent by an Authorized Officer listed on the incumbency certificate provided to the Trustee have been sent by such Authorized Officer. The Authority and City shall be responsible for ensuring that only Authorized Officers transmit such Instructions to the Trustee and that the Authority, City and all Authorized Officers are solely responsible to safeguard the use and confidentiality of applicable user and authorization codes, passwords and/or authentication keys upon receipt by the Authority and/or City . The Trustee shall not be liable for any losses, costs or expenses arising directly or indirectly from the Trustee’s reliance upon and compliance with such Instructions notwithstanding such directions conflict or are inconsistent with a subsequent written instruction. The Authority and City agree: (i) to assume all risks arising out of the use of Electronic Means to submit Instructions to the Trustee, including without limitation the risk of the Trustee acting on unauthorized Instructions, and the risk of interception and misuse by third parties; (ii) that it is fully informed of the protections and risks associated with the various methods of transmitting Instructions to the Trustee and that there may be more secure methods of transmitting Instructions than the method(s) selected by the Authority and City ; (iii) that
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the security procedures (if any) to be followed in connection with its transmission of Instructions provide to it a commercially reasonable degree of protection in light of its particular needs and circumstances; and (iv) to notify the Trustee immediately upon learning of any compromise or unauthorized use of the security procedures.
(o) In acting or omitting to act pursuant to the Assignment Agreement, the Lease or the Site Lease, the Trustee shall be entitled to all of the rights, immunities and indemnities accorded to it under this Indenture, including, but not limited to, this Article VIII. Notwithstanding the effective date of this Indenture or anything to the contrary in this Indenture, the Trustee shall have no liability or responsibility for any act or event relating to this Indenture which occurs prior to the date the Trustee formally executes this Indenture and commences acting as Trustee hereunder.
(p) The Trustee shall not be liable to the parties hereto or deemed in breach or default hereunder if and to the extent its performance hereunder is prevented by reason of force majeure. The term “force majeure” means an occurrence that is beyond the control of the Trustee and could not have been avoided by exercising due care. Force majeure shall include, but not be limited to, acts of God, terrorism, war, riots, strikes, fire, floods, earthquakes, epidemics or other similar occurrences.
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ECTION 8.05. Right to Rely on Documents. The Trustee shall be protected and shall incur no liability in acting or refraining from acting in reliance upon any notice, resolution, request, consent, order, certificate, report, opinion, bonds or other paper or document believed by them to be genuine and to have been signed or presented by the proper party or parties. The Trustee is under no duty to make any investigation or inquiry as to any statements contained or matter referred to in any paper or document but may accept and conclusively rely upon the same as conclusive evidence of the truth and accuracy of any such statement or matter and shall be fully protected in relying thereon. The Trustee may consult with counsel, who may be counsel of or to the Authority, with regard to legal questions, and the opinion of such counsel shall be full and complete authorization and protection in respect of any action taken or suffered by it hereunder in good faith and in accordance therewith.
The Trustee may treat the Owners of the Bonds appearing in the Registration Books as the absolute owners of the Bonds for all purposes and the Trustee shall not be affected by any notice to the contrary.
Whenever in the administration of the trusts imposed upon it by this Indenture the Trustee deems it necessary or desirable that a matter be proved or established prior to taking or suffering any action hereunder, such matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a Written Certificate, Written Request or Written Requisition of the Authority or the City, and such Written Certificate, Written Request or Written Requisition shall be full warrant to the Trustee for any action taken or suffered under the provisions of this Indenture in reliance upon such Written Certificate, Written Request or Wr itten Requisition, and the Trustee shall be fully protected in relying thereon, but in its discretion the Trustee may, in lieu thereof, accept other evidence of such matter or may require such additional evidence as to it may deem reasonable.
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ECTION 8.06. Preservation and Inspection of Documents . All documents received by the Trustee under the provisions of this Indenture shall be retained in its
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respective possession and in accordance with its retention policy then in effect and shall, upon reasonable notice to Trustee, be subject to the inspection of the Authority, the City and any Bond Owner, and their agents and representatives duly authorized in writing, during business hours and under reasonable conditions as agreed to by the Trustee.
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ECTION 8.07. Compensation and Indemnification. The Authority shall pay to the Trustee from time to time, on demand, the compensation for all services rendered under this Indenture and also all reasonable expenses, advances (including any interest on advances), charges, legal (including outside counsel and the allocated costs of internal attorneys) and consulting fees and other disbursements, incurred in and about the performance of its powers and duties under this Indenture.
The Authority shall indemnify the Trustee, its officers, directors, employees and agents against any cost, loss, liability, suit, claim, damages, judgment or expense whatsoever (including but not limited to fees and expenses of its attorneys) incurred without negligence or willful misconduct on its part, arising out of or in connection with the acceptance or administration of this trust and this Indenture , the Assignment Agreement, the Site Lease and the Lease, including costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers hereunder or under the Assignment Agreement or the Lease. As security for the performance of the obligations of the Authority under this Section 8.07 and the obligation of the Authority to make Additional Rental Payments to the Trustee, the Trustee shall have a lien prior to the lien of the Bonds upon all property and funds held or collected by the Trustee as such. The rights of the Trustee and the obligations of the Authority under this Section 8.07 shall survive the resignation or removal of the Trustee or the discharge of the Bonds and this Indenture and the Lease. When the Trustee incurs expenses or renders services after the occurrence of an Event of D efault, such expenses and the compensation for such services are intended to constitute expenses of administration under any federal or state bankruptcy, insolvency, arrangement, moratorium, reorganization or other debtor relief law.
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ARTICLE IX
MODIFICATION OR AMENDMENT HEREOF
SECTION 9.01. Amendments Permitted.
(a) Amendments With Bond Owner Consent. This Indenture and the rights and obligations of the Authority and of the Owners of the Bonds and of the Trustee may be modified or amended from time to time and at any time by Supplemental Indenture, which the Authority and the Trustee may enter into when the written consents of the Owners of a majority in aggregate principal amount of all Bonds then Outstanding are filed with the Trustee. No such modification or amendment may (i) extend the fixed maturity of any Bonds, or reduce the amount of principal thereof or extend the time of payment, or change the method of computing the rate of interest thereon, or extend the time of payment of interest thereon, without the consent of the Owner of each Bond so affected, or (ii) reduce the aforesaid percentage of Bonds the consent of the Owners of which is required to effect any such modification or amendment, or permit the creation of any lien on the Revenues and other assets pledged under this Indenture prior to or on a parity with the lien created by this Indenture except as permitted herein, or deprive the Owners of the Bonds of the lien created by this Indenture on such Revenues and other assets (except as expressly provided in this Indenture), without the consent of the Owners of all of the Bonds then Outstanding. It is not necessary for the consent of the Bond Owners to approve the particular form of any Supplemental Indenture, but it is sufficient if such consent approves the substance thereof.
(b) Amendments Without Owner Consent. This Indenture and the rights and obligations of the Authority, of the Trustee and the Owners of the Bonds may also be modified or amended from time to time and at any time by a Supplemental Indenture, which the Authority and the Trustee may enter into without the consent of any Bond Owners, if the Trustee has been furnished an opinion of counsel that the provisions of such Supplemental Indenture shall not materially adversely affect the interests of the Owners of the Bonds, including, without limitation, for any one or more of the following purposes:
(i) to add to the covenants and agreements of the Authority in this Indenture contained, other covenants and agreements thereafter to be observed, to pledge or assign additional security for the Bonds (or any portion thereof), or to surrender any right or power herein reserved to or conferred upon the Authority;
(ii) to cure any ambiguity, inconsistency or omission, or to cure or correct any defective provision, contained in this Indenture, or in regard to matters or questions arising under this Indenture, as the Authority deems necessary or desirable, provided that such modification or amendment does not materially adversely affect the interests of the Bond Owners, in the opinion of Bond Counsel filed with the Trustee;
(iii) to modify, amend or supplement this Indenture in such manner as to permit the qualification hereof under the Trust Indenture Act of
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1939, as amended, or any similar federal statute her eafter in effect, and to add such other terms, conditions and provisions as may be permitted by said act or similar federal statute;
(iv) to modify, amend or supplement this Indenture in such manner as to assure that the interest on the 2022 Bonds remains excluded from gross income under the Tax Code; or
(v) to provide for the issuance of Additional Bonds pursuant to Section
2.08 hereof.
(c) Limitation. The Trustee is not obligated to enter into any Supplemental Indenture authorized by subsections (a) or (b) of this Section 9.01 which materially adversely affects the Trustee’s own rights, duties or immunities under this Indenture or otherwise.
(d) Bond Counsel Opinion Requirement. Prior to the Trustee entering into any Supplemental Indenture hereunder, the Authority shall deliver to the Trustee an opinion of Bond Counsel stating, in substance, that such Supplemental Indenture has been adopted in compliance with the requirements of this Indenture and that the adoption of such Supplemental Indenture will not, in and of itself, adversely affect the exclusion from gross income for purposes of federal income taxes of interest on the Bonds.
(e) Notice of Amendments. The Authority shall deliver or cause to be delivered a draft of any Supplemental Indenture to each rating agency which then maintains a rating on the Bonds, at least 10 days prior to the effective date of such Supplemental Indenture under this Section 9.01.
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ECTION 9.02. Effect of Supplemental Indenture. Upon the execution of any Supplemental Indenture under this Article IX, this Indenture shall be deemed to be modified and amended in accordance therewith, and the respective rights, duties and obligations under this Indenture of the Authority, the Trustee and all Owners of Bonds Outstanding shall thereafter be determined, exercised and enforced hereunder subject in all respects to such modification and amendment, and all the terms and conditions of any such Supplemental Indenture shall be deemed to be part of the terms and conditions of this Indenture for any and all purposes.
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ECTION 9.03. Endorsement of Bonds; Preparation of New Bonds . Bonds delivered after the execution of any Supplemental Indenture under this Article may, and if the Authority so determines shall, bear a notation by endorsement or otherwise in form approved by the Authority as to any modification or amendment provided for in such Supplemental Indenture, and, in that case, upon demand on the Owner of any Bonds Outstanding at the time of such execution and presentation of his Bonds for the purpose at the Office of the Trustee or at such additional offices as the Trustee may select and designate for that purpose, a suitable notation shall be made on such Bonds. If the Supplemental Indenture shall so provide, new Bonds so modified as to conform, in the opinion of the Authority, to any modification or amendment contained in such Supplemental Indenture, shall be prepared and executed by the Authority and authenticated by the Trustee, and upon demand on the Owners of any Bonds then Outstanding shall be exchanged at the Office of the Trustee, without cost to any Bond
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Owner, for Bonds then Outstanding, upon surrender for cancellation of such Bonds, in equal aggregate principal amount of the same maturity.
SECTION 9.04. Amendment of Particular Bonds. The provisions of this Article IX do not prevent any Bond Owner from accepting any amendment as to the particular Bonds held by such Owner.
ARTICLE X
DEFEASANCE
SECTION 10.01. Discharge of Indenture . Any or all of the Outstanding Bonds may be paid by the Authority in any of the following ways, provided that the Authority also pays or causes to be paid any other sums payable hereunder by the Authority:
(a) by paying or causing to be paid the principal (including the principal amount of any Term Bonds that is subject to mandatory sinking fund redemption) of and interest and premium (if any) on such Bonds, as and when the same become due and payable;
(b) by depositing with the Trustee, in trust, at or before maturity, money or securities in the necessary amount (as provided in Section 10.03) to pay or redeem such Bonds; or
(c) by delivering all of such Bonds to the Trustee for cancellation.
If the Authority also pays or causes to be paid all other sums payable hereunder by the Authority, then and in that case, at the election of the Authority (evidenced by a Written Certificate of the Authority, filed with the Trustee, signifying the intention of the Authority to discharge all such indebtedness and this Indenture), and notwithstanding that any of such Bonds shall not have been surrendered for payment, this Indenture and the pledge of Revenues and other assets made under this Indenture with respect to such Bonds and all covenants, agreements and other obligations of the Authority under this Indenture with respect to such Bonds shall cease, terminate, become void and be completely discharged and satisfied, subject to Section 10.02, and except for Section 8.07 hereof, which shall survive. In such event, upon the Written Request of the Authority, the Trustee shall execute and deliver to the Authority all such instruments as may be necessary or desirable to evidence such discharge and satisfaction, and the Trustee shall pay over, transfer , assign or deliver to the City all moneys or securities or other property held by it under this Indenture which are not required for the payment or redemption of any of such Bonds not theretofore surrendered for such payment or redemption. The Trustee is entitled to conclusively rely on any such Written Certificate or Written Request and, in each case, is fully protected in relying thereon.
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ECTION 10.02. Discharge of Liability on Bonds . Upon t he deposit with the Trustee, in trust, at or before maturity, of money or securities in the necessary amount (as provided in Section 10.03) to pay or redeem any Outstanding Bonds (whether upon or prior to the maturity or the redemption date of such Bonds), provided that, if such Bonds are to be redeemed prior to maturity, notice of such redemption shall have been
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given as provided in Article IV or provision satisfactory to the Trustee shall have been made for the giving of such notice, then all liability of the Authority in respect of such Bonds shall cease, terminate and be completely discharged, and the Owners thereof shall thereafter be entitled only to payment out of such money or securities deposited with the Trustee as aforesaid for their payment, subject, however, to the provisions of Section 10.04.
The Authority may at any time surrender to the Trustee, for cancellation by the Trustee, any Bonds previously issued and delivered, which the Authority may have acquired in any manner whatsoever, and such Bonds, upon such surrender and cancellation, shall be deemed to be paid and retired.
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ECTION 10.03. Deposit of Money or Securities with Trustee. Whenever in this Indenture it is provided or permitted that there be deposited with or held in trust by the Trustee money or securities in the necessary amount to pay or redeem any Bonds, the money or securities so to be deposited or held may include money or securities held by the Trustee in the funds and accounts established under this Indenture and shall be:
(a) lawful money of the United States of America in an amount equal to the principal amount of such Bonds and all unpaid interest thereon to maturity, except that, in the case of Bonds which are to be redeemed prior to maturity and in respect of which notice of such redemption shall have been given as provided in Article IV or provision satisfactory to the Trustee shall have been made for the giving of such notice, the amount to be deposited or held shall be the principal amount of such Bonds, premium, if any, and all unpaid interest thereon to the redemption date; or
(b) non-callable Federal Securities, the principal of and interest on which when due will, in the written opinion of an Independent Accountant filed with the City, the Authority and the Trustee, provide money sufficient to pay the principal (including the principal amount of any Term Bonds that is subject to mandatory sinking fund redemption) of and interest and premium (if any) on the Bonds to be paid or redeemed, as such principal (including the principal amount of any Term Bonds that is subject to mandatory sinking fund redemption), interest and premium become due, provided that in the case of Bonds which are to be redee med prior to the maturity thereof, notice of such redemption shall have been given as provided in Article IV or provision satisfactory to the Trustee has been made for the giving of such notice;
provided, in each case, that (i) the Trustee shall have been irrevocably instructed (by the terms of this Indenture or by Written Request of the Authority) to apply such money to the payment of such principal (including the principal amount of any Term Bonds that is subject to mandatory sinking fund redemption), in terest and premium (if any) with respect to such Bonds, and (ii) the Authority shall have delivered to the Trustee an opinion of Bond Counsel to the effect that such Bonds have been discharged in accordance with this Indenture (which opinion may rely upon and assume the accuracy of the Independent Accountant’s opinion referred to above). The Trustee shall be
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entitled to conclusively rely on such Written Request or opinion and shall be fully protected, in each case, in relying thereon.
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ECTION 10.04. Unclaimed Funds . Notwithstanding any provisions of this Indenture, any moneys held by the Trustee in trust for the payment of the principal (including the principal amount of any Term Bonds that is subject to mandatory sinking fund redemption) of, or interest on, any Bonds and remaining unclaimed for 2 years after the principal (including the principal amount of any Term Bonds that is subject to mandatory sinking fund redemption) of all of the Bonds has become due and payable (whether at maturity or upon call for redemption or by acceleration as provided in this Indenture), if such moneys were so held at such date, or 2 years after the date of deposit of such moneys if deposited after said date when all of the Bonds became due and payable, shall be repaid (without liability for interest) to the Authority free from the trusts created by this Indenture, and all liability of the Trustee with respect to such moneys shall thereupon cease; provided, however, that before the repayment of such moneys to the Authority as aforesaid, the Trustee shall (at the cost of the Authority) first mail to the Owners of Bonds which have not yet been paid, at the addresses shown on the Registration Books, a notice, in such form as may be deemed appropriate by the Trustee with respect to the Bonds so payable and not presented and with respect to the provisions relating to the repayment to the Authority of the moneys held for the payment thereof.
ARTICLE XI
MISCELLANEOUS
SECTION 11.01. Liability of Authority Limited to Revenues . Notwithstanding anything in this Indenture or in the Bonds contained, the Authority is not required to advance any moneys derived from any source other than the Revenues, the Additional Rental Payments and other assets pledged under this Indenture for any of the purposes in this Indenture mentioned, whether for the payment of the principal (including the principal amount of any Term Bonds that is subject to mandatory sinking fund redemption) of or interest on the Bonds or for any other purpose of this Indenture.
Nevertheless, the Authority may, but is not required to, advance for any of the purpos es hereof any funds of the Authority which may be made available to it for such purposes.
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ECTION 11.02. Limitation of Rights to Parties and Bond Owners. Nothing in this Indenture or in the Bonds expressed or implied is intended or shall be construed to give to any person other than the Authority, the Trustee, the City and the Owners of the Bonds, any legal or equitable right, remedy or claim under or in respect of this Indenture or any covenant, condition or provision therein or herein contained; and all such covenants, conditions and provisions are and shall be held to be for the sole and exclusive benefit of the Authority, the Trustee, the City and the Owners of the Bonds.
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ECTION 11.03. Funds and Accounts . Any fund or account required by this Indenture to be established and maintained by the Trustee may be established and maintained in the accounting records of the Trustee, either as a fund or an account, and may, for the purposes of such records, any audits thereof and any reports or statements with respect thereto, be treated either as a fund or as an account; but all such records
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with respect to all such funds and accounts shall at all times be maintained in accordance with corporate industry standards to the extent practicable, and with due regard for the requirements of Section 6.05 and for the protection of the security of the Bonds and the rights of every Owner thereof. The Trustee may establish such funds and accounts as it deems necessary or appropriate to perform its obligations under this Indenture.
SECTION 11.04. Waiver of Notice; Requirement of Mailed Notice. Whenever in this Indenture the giving of notice by mail or otherwise is required, the giving of such notice may be waived in writing by the person entitled to receive such notice and in any such case the giving or receipt of such notice shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. Whenever in this Indenture any notice is required to be given by mail, such requirement may be satisfied by the deposit of such notice in the United States mail, postage prepaid, by first class mail.
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ECTION 11.05. Destruction of Bonds . Whenever in this Indenture provision is made for the cancellation by the Trustee, and the delivery to the Authority, of any Bonds, the Trustee shall destroy such Bonds as may be allowed by law and, upon the Authority’s request, deliver a certificate of such destruction to the Authority.
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ECTION 11.06. Severability of Invalid Provisions . If any one or more of the provisions contained in this Indenture or in the Bonds shall for any reason be held to be invalid, illegal or unenforceable in any respect, then such provision or provisions shall be deemed severable from the remaining provisions contained in this Indenture and such invalidity, illegality or unenforceability shall not affect any other provision of this Indenture, and this Indenture shall be construed as if such invalid or illegal or unenforceable provision had never been contained herein. The Authority hereby declares that it would have entered into this Indenture and each and every other Section, paragraph, sentence, clause or phrase hereof and authorized the issuance of the Bonds pursuant thereto ir respective of the fact that any one or more Sections, paragraphs, sentences, clauses or phrases of this Indenture may be held illegal, invalid or unenforceable.
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ECTION 11.07. Notices. All notices or communications to be given under this Indenture shall be given by first class mail or personal delivery to the party entitled thereto at its address set forth below, or at such address as the party may provide to the other party in writing from time to time. Notice shall be effective either (a) upon transmission by facsimile transmission or other form of telecommunication, confirmed by telephone, (b) 48 hours after deposit in the United States mail, postage prepaid, or (c) in the case of personal delivery to any person, upon actual receipt. The Authority, the City or the Trustee may, by written notice to the other parties, from time to time modify the address or number to which communications are to be given hereunder.
If to the Authority City of Tracy
or the City: 333 Civic Center Plaza
Tracy, California 95376
Attention: Finance Director
Fax: ____________
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If to the Trustee: U.S. Bank Trust Company, National Association Attn.: Global Corporate Trust Services
One California Street, Suite 1000
San Francisco, CA 94111
Fax: 415-677-3768
SECTION 11.08. Evidence of Rights of Bond Owners . Any request, consent or other instrument required or permitted by this Indenture to be signed and executed by Bond Owners may be in any number of concurrent instruments of substantially similar tenor and shall be signed or executed by such Bond Owners in person or by an agent or agents duly appointed in writing. Proof of the execution of any such request, consent or other instrument or of a writing appointing any such agent, or of the holding by any person of Bonds transferable by delivery, shall be sufficient for any purpose of this Indenture and shall be conclusive in favor of the Trustee and the Authority if made in the manner provided in this Section 11.08.
The fact and date of the execution by any person of any such request, consent or other instrument or writing may be proved by the certificate of any notary public or other officer of any jurisdiction, authorized by the laws thereof to take acknowledgments of deeds, certifying that the person signing such request, consent or other instrument acknowledged to him the execution thereof, or by an affidavit of a witness of such execution duly sworn to before such notary public or other officer.
The ownership of Bonds shall be proved by the Registration Books.
Any request, consent, or other instrument or writing of the Owner of any Bond shall bind every future Owner of the same Bond and the Owner of every Bond issued in exchange therefor or in lieu thereof, in respect of anything done or suffered to be done by the Trustee or the Authority in accordance therewith or reliance thereon.
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ECTION 11.09. Disqualified Bonds. In determining whether the Owners of the requisite aggregate principal amount of Bonds have concurred in any demand, request, direction, consent or waiver under this Indenture, Bonds which are actually known by the Trustee to be owned or held by or for the account of the Authority or the City, or by any other obligor on the Bonds, or by any person directly or indirectly controlling or controlled by, or under direct or indirect common control with, the Authority or the City or any other obligor on the Bonds, shall be disregarded and deemed not to be Outstanding for the purpose of any such determination unless all Bonds are so owned or held, in which case such Bonds shall be considered Outstanding for the purpose of such determination. .
Bonds so owned which have been pledged in good faith may be regarded as Outstanding for the purposes of this Section if the pledgee shall establish to the satisfaction of the Trustee the pledgee’s right to vote such Bonds and that the pledgee is not a person directly or indirectly controlling or controlled by, or under direct or indirect common control with, the Authority or the City or any other obligor on the Bonds. In case of a dispute as to such right, the Trustee shall be entitled to rely upon the advice of counsel in any decision by Trustee and shall be fully protected in relying thereon.
Upon request, the Authority shall certify to the Trustee those Bonds disqualified under this Section 11.09, and the Trustee may conclusively rely on such certifications.
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SECTION 11.10. Money Held for Particular Bonds . The money held by the Trustee for the payment of the interest, premium, if any, or principal (including the principal amount of any Term Bonds that is subject to mandatory sinking fund redemption) due on any date with respect to particular Bonds (or portions of Bonds in the case of Bonds redeemed in part only) shall, on and after such date and pending such payment, be set aside on its books and held in trust by it for the Owners of the Bonds entitled thereto, subject, however, to the provisions of Section 10.04 but without any liability for interest thereon.
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ECTION 11.11. Waiver of Personal Liability . No member, officer, agent or employee of the Authority shall be individually or personally liable for the payment of the principal (including the principal amount of any Term Bonds that is subject to mandatory sinking fund redemption) of or interest or premium (if any) on the Bonds or be subject to any personal liability or accountability by reason of the issuance thereof; but nothing herein contained shall relieve any such member, officer, agent or employee from the performance of any official duty provided by law or by this Indenture.
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ECTION 11.12. Successor Is Deemed Included in All References to Predecessor. Whenever in this Indenture either the Authority, the City or the Trustee is named or referred to, such reference shall be deemed to include the successors or assigns thereof, and all the covenants and agreements in this Indenture contained by or on behalf of the Authority, the City or the Trustee shall bind and inure to the benefit of the respective successors and assigns thereof whether so expressed or not.
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ECTION 11.13. Execution in Several Counterparts . This Indenture may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original; and all such counterparts, or as many of them as the Authority and the Trustee shall preserve undestroyed, shall together constitute but one and the same instrument.
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ECTION 11.14. Payment on Non- Business Day. In the event any payment is required to be made hereunder on a day which is not a Business Day, such payment shall be made on the next succeeding Business Day and with the same effect as if made on such preceding non-Business Day.
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ECTION 11.15. Governing Law . This Indenture shall be governed by and construed in accordance with the laws of the State of California.
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IN WITNESS WHEREOF, the TRACY PUBLIC FINANCING AUTHORITY has caused this Indenture to be signed in its name by its Treasurer and attested to by its Secretary, and U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION, in token of its acceptance of the trusts created hereunder, has caused this Indenture to be signed in its corporate name by its officer thereunto duly authorized, all as of the day and year first above written.
TRACY PUBLIC FINANCING AUTHORITY
By
Treasurer
Attest:
Secretary
U.S. BANK TRUST COMPANY, NATIONAL
ASSOCIATION,
as Trustee
By
Authorized Officer
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APPENDIX A
DEFINITIONS
“Additional Bonds” means Additional Bonds issued in accordance with Section
2.08 and Section 2.09 hereof.
“Additional Rental Payments” means the amounts of additional rental which are payable by the City under Section 4.5 of the Lease or which are otherwise identified as Additional Rental Payments under the Lease.
“Assignment Agreement” means the Assignment Agreement dated as of ________ 1, 2022, between the Authority as assignor and the Trustee as assignee, as originally executed or as thereafter amended.
“Authority” me ans the Tracy Public Financing Authority, a joint exercise of powers authority duly organized and existing under the laws of the State of California.
“Authorized Representative” means: (a) with respect to the Authority, its Chair, Vice Chair, Executive Director, Treasurer, Auditor or any other person designated as an Authorized Representative of the Authority by a Written Certificate of the Authority signed by its Chair and filed with the City and the Trustee; and (b) with respect to the City, its Mayor, City Manager, Finance Director, City Attorney or any other person designated as an Authorized Representative of the City by a Written Certificate of the City signed by its City Manager and filed with the Authority and the Trustee.
“Bond Counsel” means (a) Jones Hall, A Professional Law Corporation, or (b) any other attorney or firm of attorneys appointed by or acceptable to the Authority of nationally-recognized experience in the issuance of obligations the interest on which is excludable from gross income for federal income tax purposes under the Tax Code.
“Bond Fund” means the fund by that name established and held by the Trustee under Section 5.01.
“Bond Law” means Article 4 of Chapter 5, Division 7, Title 1 of the Government Code of the State of California, commencing with Section 6584 of said Code.
“Bond Year” means each twelve -month period extending from November 2 in one calendar year to November 1 of the succeeding calendar year, both dates inclusive; except that the first Bond Year commences on the Closing Date and extends to and including November 1, 20__.
“Bonds” means the 2022 Bonds and any Additional Bonds.
“Business Day ” means a day (other than a Saturday or a Sunday) on which banks are not required or authorized to remain closed in the City in which the Office of the Trustee is located.
“City” means the City of Tracy , a general law city and municipal corporation organized and existing under the Constitution and laws of the State of California.
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“Closing Date” means the date of delivery of the Bonds to the Original Purchaser.
“Costs of Issuance” means all items of expense directly or indirectly payable by or reimbursable to the City relating to the authorization, issuance, sale and delivery of the 2022 Bonds, including but not limited to: printing expenses; rating agency fees; filing and recording fees; initial fees, expenses and charges of the Trustee and their respective counsel, including the Trustee’s first annual administrative fee; fees, charges and disbursements of attorneys, municipal advisors, accounting firms, consultants and other professionals; fees and charges for preparation, execution and safekeeping of the 2022 Bonds; and any other cost, charge or fee in connection with the original issuance of the 2022 Bonds.
“Costs of Issuance Fund” means the fund by that name established and held by the Trustee under Section 3.03.
“Depository” means (a) initially, DTC, and (b) any other Securities Depositories acting as Depository under Section 2.04.
“Depository System Participant” means any participant in the Depository’s book - entry system.
“DTC” means The Depository Trust Company, New York, New York, and its successors and assigns.
“Event of Default” means any of the events specified in Section 7.01.
“Excess Investment Earnings” means an amount required to be rebated to the United States of America under Section 148(f) of the Tax Code due to investment of gross proceeds of the 2022 Bonds at a yield in excess of the yield on the 2022 Bonds.
“Federal Securities” means: (a) any direct general obligations of the United States of America (including obligations issued or held in book entry form on the books of the Department of the Treasury of the United States of America), for which the full faith and credit of the United States of America are pledged; (b) obligations of any agency, department or instrumentality of the United States of America, the timely payment of principal (including the principal amount of any Term Bonds that is subject to mandatory sinking fund redemption) and interest on which are directly or indirectly secured or guaranteed by the full faith and credit of the United States of America.
“Fiscal Year ” means any twelve-month period extending from July 1 in one calendar year to June 30 of the succeeding calendar year, both dates inclusive, or any other twelve-month period selected and designated by the Authority as its official fiscal year period.
“Indenture” means this Indenture of Trust, as originally executed or as it may from time to time be supplemented, modified or amended by any Supplemental Indenture under the provisions hereof.
“Independent Accountant” means any certified public accountant or firm of certified public accountants appointed and paid by the Authority or the City, and who, or
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each of whom (a) is in fact independent and not under domination of the Authority or the City; (b) does not have any substantial interest, direct or indirect, in the Authority or the City; and (c) is not connected with the Authority or the City as an officer or employee of the Authority or the City but who may be regularly retained to make annual or other audits of the books of or reports to the Authority or the City.
“Insurance and Condemnation Fund” means the fund by that name established and held by the Trustee under Section 5.07.
“Interest Account” means the account by that name established and held by the Trustee in the Bond Fund under Section 5.02.
“Interest Payment Date ” means each May 1 and November 1, commencing November 1, 2022, so long as any Bonds remain unpaid.
“Lease” means the Lease Agreement dated as of May 1, 2022, between the Authority as lessor and the City as lessee of the Leased Property, as originally executed and as it may from time to time be supplemented, modified or amended in accordance with the terms thereof and of this Indenture.
“Lease Payment Date” means, with respect to any Interest Payment Date, the Business Day immediately preceding such Interest Payment Date.
“Lease Payments” means the amounts payable by the City under Section 4.3(a) of the Lease, including any prepayment thereof and including any amounts payable upon a delinquency in the payment thereof.
“Leased Property” means the real property described in Appendix A to the Lease, together with all improvements and facilities at any time situated thereon.
“Net Proceeds” means amounts derived from any policy of casualty insurance or title insurance with respect to the Leased Property, or the proceeds of any taking of the Leased Property or any portion thereof in eminent domain proceedings (including sale under threat of such proceedings), to the extent remaining after payment therefrom of all expenses incurred in the collection and administration thereof.
“Nominee” means (a) initially, Cede & Co. as nominee of DTC, and (b) any other nominee of the Depository designated under Section 2.04(a).
“Office” means the corporate trust office of the Trustee in Los Angeles, California, or such other or additional offices as the Trustee may designate in writing to the Authority from time to time as the corporate trust office for purposes of the Indenture; except that with respect to presentation of Bonds for payment or for registration of transfer and exchange such term means the office or agency of the Trustee at which, at any particular time, its corporate trust agency business is conducted.
“Original Purchaser ” means Piper Sandler & Co., as original purchaser of the 2022 Bonds upon their delivery by the Trustee on the Closing Date.
“Outstanding”, when used as of any particular time with reference to Bonds, means all Bonds theretofore, or thereupon being, authenticated and delivered by the
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Trustee under this Indenture except: (a) Bonds theretofore canceled by the Trustee or surrendered to the Trustee for cancellation; (b) Bonds with respect to which all liability of the Authority shall have been discharged in accordance with Section 10.02, including Bonds (or portions thereof) described in Section 11.09; and (c) Bonds for the transfer or exchange of or in lieu of or in substitution for which other Bonds shall have been authenticated and delivered by the Trustee under this Indenture.
“Owner”, whenever used herein with respect to a Bond, means the person in whose name the ownership of such Bond is registered on the Registration Books.
“Permitted Encumbrances” means, as of any time: (a) liens for general ad valorem taxes and assessments, if any, not then delinquent, or which the City may permit to remain unpaid under Article V of the Lease; (b) the Site Lease, the Lease and the Assignment Agreement; (c) any right or claim of any mechanic, laborer, material man, supplier or vendor not filed or perfected in the manner prescribed by law; ( d) the exceptions disclosed in the title insurance policy with respect to the Leased Property issued as of the Closing Date by Stewart Title Guaranty; and ( e) easements, rights of way, mineral rights, drilling rights and other rights, reservations, covenants, conditions or restrictions which exist of record and which the City certifies in writing will not materially impair the use of the Leased Property for its intended purposes.
“Permitted Investments” means any of the following:
(a) any direct general obligations of the United States of America (including obligations issued or held in book entry form on the books of the Department of the Treasury of the United States of America), for which the full faith and credit of the United States of America are pledged.
(b) obligations of any agency, department or instrumentalit y of the United States of America, the timely payment of principal (including the principal amount of any Term Bonds that is subject to mandatory sinking fund redemption)and interest on which are directly or indirectly secured or guaranteed by the full fai th and credit of the United States of America.
(c) Any direct or indirect obligations of an agency or department of the United States of America whose obligations represent the full faith and credit of the United States of America, or which are rated A or better by S&P.
(d) Interest-bearing deposit accounts (including certificates of deposit placed by a third party pursuant to a separate agreement between the Authority and the Trustee ), time deposits, bank deposit products, trust funds, trust accounts, interest bearing deposits, overnight bank deposits or interest bearing money market accounts in federal or State chartered savings and loan associations or in federal or State of California banks (including the Trustee or any of its affiliates ), provided that: (i) the unsecured obligations of such commercial bank or savings and loan association are rated A or better by S&P; or (ii) such deposits are fully insured by the Federal
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Deposit Insurance Corporation or secured at all times by collateral described in (a) or (b) above.
(e) Commercial paper rated “A-1
+” or better by S&P.
(f) Federal funds or bankers acceptances with a maximum term of one year of any bank which an unsecured, uninsured and unguaranteed obligation rating of “A-1
+” or better by S&P.
(g) Money market mutual funds registered under the Federal Investment Company Act of 1940, whose shares are registered under the Federal Securities Act of 1933, and having a rating by S&P of at least AAAm -G, AAAm or AAm, which funds may include funds for which the Trustee, its affiliates, parent or subsidiaries provide investment advisory , custodial, transfer agency or other management services, and for which they receive and retain a fee for such services . Money market funds permitted under this paragraph shall not include funds with a floating net asset value.
(h) Obligations the interest on which is excludable from gross income pursuant to Section 103 of the Tax Code and which are either (a) rated A or better by S&P, or (b) fully secured as to the payment of principal and interest by Permitted Investments described in clauses (a) or (b).
(i) Obligations issued by any corporation organized and operating within the United States of America having assets in excess of $500,000,000, which obligations are rated A or better by S&P.
(j) Bonds or notes issued by any state or municipality which are rated A or better by S&P.
(k) Any investment agreement with, or guaranteed by, a financial institution the long- term unsecured obligations or the claims paying ability of which are rated A or better by S&P at the time of initial investment, by the terms of which all amounts invested thereunder are required to be withdrawn and paid to the Trustee in the event either of such ratings at any time falls below A.
(l) The Local Agency Investment Fund of the State of California, created pursuant to Section 16429.1 of the California Government Code, to the extent the Trustee is authorized to register such investment in its name.
“Principal Account” means the account by that name established and held by the Trustee in the Bond Fund under Section 5.02.
“Project” means the public capital improvements described in Appendix C attached to the Lease.
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“Project Costs” means, with respect to the Project, all costs of the acquisit ion, construction and installation thereof which are paid from moneys on deposit in the Project Fund, including but not limited to:
(a) all costs required to be paid to any person under the terms of any agreement for or relating to the acquisition, construction and installation of the Improvements;
(b) obligations incurred for labor and materials in connection with the acquisition, construction and installation of the Improvements;
(c) the cost of performance or other bonds and any and all types of insurance that may be necessary or appropriate to have in effect in connection with the acquisition, construction and installation of the Improvements;
(d) all costs of engineering and architectural services, including the actual out-of-pocket costs for test b orings, surveys, estimates, plans and specifications and preliminary investigations therefor, development fees, sales commissions, and for supervising construction, as well as for the performance of all other duties required by or consequent to the proper acquisition, construction and installation of the Improvements;
(e) any sums required to reimburse the City for advances made for any of the above items or for any other costs incurred and for work done which are properly chargeable to the acquisition, construction and installation of the Improvements;
(f) all Costs of Issuance of the Bonds and other financing costs incurred in connection with the acquisition, construction and installation of the Project; and
(g) the interest components of the Lease Payments allocable to the Project or any component thereof, which come due during the period of acquisition, construction and installation of the improvements or such component.
“Project Fund” means the fund by that name established and held by the Trustee under Section 3.04.
“Record Date” means, with respect to any Interest Payment Date, the 15 th
calendar day of the month preceding such Interest Payment Date, whether or not such day is a Business Day.
“Redemption Fund” means the fund by that name established and held by the Trustee under Section 5.06.
“Registration Books” means the records maintained by the Trustee under Section
2.05 for the registration and transfer of ownership of the 2022 Bonds.
“Revenues” means: (a) all amounts received by the Authority or the Trustee under or with respect to the Lease, including, wi thout limiting the generality of the foregoing, all of the Lease Payments (including both timely and delinquent payments, any late charges, and whether paid from any source), but excluding (i) any amounts described in Section 7.5(b)(v) of the Lease, and (ii) any Additional Rental Payments; and
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(b) all interest, profits or other income derived from the investment of amounts in any fund or account established under this Indenture.
“Securities Depositories” means DTC; and, in accordance with then current guidelines of the Securities and Exchange Commission, such other securities depositories as the Authority designates in written notice filed with the Trustee.
“Site Lease” means the Site Lease dated as of May 1, 2022, between the City as lessor and the Authority as lessee, as amended from time to time in accordance with its terms.
“Site Lease Payment” means the amount of $_______ which is payable by the Authority to the City on the Closing Date under Section 3 of the Site Lease.
“S&P” means S&P Global Ratings, a business unit of Standard & Poor’s Financial Services LLC business, its successors and assigns.
“Supplemental Indenture” means any indenture hereafter duly authorized and entered into between the Authority and the Trustee, supplementing, modifying or amending this Indenture; but only if and to the extent that such Supplemental Indenture is specifically authorized hereunder.
“Tax Code” means the Internal Revenue Code of 1986 as in effect on the Closing Date or (except as otherwise referenced herein) as it may be amended to apply to obligations issued on the Closing Date, together with applicable temporary and final regulations promulgated, and applicable official public guidance published, under said Code.
“Term” means, with reference to the Lease, the time during which the Lease is in effect, as provided in Section 4.2 thereof.
“Term Bonds” means the Bonds maturing on November 1 in each of the years ____ and ____.
“Trustee” means U.S. Bank Trust Company, National Association, a national banking association organized and existing under the laws of United States of America, or its successor or successors, as Trustee hereunder as provided in Article VIII.
“2022 Bonds” means the $________ aggregate principal amount of Tracy Public Financing Authority Lease Revenue Bonds, Series 2022A (Legacy Fields) authorized by and at any time Outstanding under this Indenture.
“Written Certificate,” “Written Request” and “ Written Requisition” of the Authority or the City mean, respectively, a written certificate, request or requisition signed in the name of the Authority or the City by its Authorized Representative. Any such instrument and supporting opinions or representations, if any, may, but need not, be combined in a single instrument with any other instrument, opinion or representation, and the two or more so combined shall be read and construed as a single instrument.
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APPENDIX B
BOND FORM
NO. R- ***$ ***
UNITED STATES OF AMERICA
STATE OF CALIFORNIA
TRACY PUBLIC FINANCING AUTHORITY
LEASE REVENUE BONDS, SERIES 2022A
(LEGACY FIELDS)
INTEREST RATE: MATURITY DATE: ORIGINAL ISSUE DATE: CUSIP:
______% November 1, ____ ________, 2022 _______
REGISTERED OWNER: CEDE & CO.
PRINCIPAL AMOUNT: *** ***
The TRACY
PUBLIC FINANCING AUTHORITY, a public body corporate and politic duly organized and existing under the laws of the State of California (the “Authority”), for value received, hereby promises to pay to the Registered Owner specified above or registered assigns (the “Registered Owner”), on the Maturity Date specified above (subject to any right of prior redemption hereinafter provided for), the Principal Amount specified above, in lawful money of the United States of America, and to pay interest thereon in like lawful money from the Interest Payment Date (as hereinafter defined) next preceding the date of authentication of this Bond unless (i) this Bond is authenticated on or before an Interest Payment Date and after the close of business on the 15
th day of the m onth preceding such interest payment date, in which event it shall bear interest from such Interest Payment Date, or (ii) this Bond is authenticated on or before October 15, 2022, in which event it shall bear interest from the Original Issue Date specified above; provided, however , that if at the time of authentication of this Bond, interest is in default on this Bond, this Bond shall bear interest from the Interest Payment Date to which interest has previously been paid or made available for payment on this Bond, at the Interest Rate per annum specified above, payable semiannually on May 1 and November 1 in each year, commencing November 1, 2022 (the “Interest Payment Dates”), calculated on the basis of a 360 -day year composed of twelve 30-day months.
Principal hereof and premium, if any, upon early redemption hereof are payable upon presentation and surrender hereof at the designated corporate trust office of U.S. Bank Trust Company, National Association (the “Trust Office”), as trustee (the
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“Trustee”). Interest hereon is payable by check of the Trustee mailed to the Registered Owner hereof at the Registered Owner’s address as it appears on the registration books of the Trustee as of the close of business on the fifteenth day of the month prec eding each Interest Payment Date (a “Record Date”), or, upon written request filed with the Trustee as of such Record Date by a registered owner of at least $1,000,000 in aggregate principal amount of Bonds, by wire transfer in immediately available funds to an account in the United States designated by such registered owner in such written request.
This Bond is not a debt of the City of Tracy (the “City”), the County of San Joaquin, the State of California, or any of its political subdivisions, and neither the City, said County, said State, nor any of its political subdivisions, is liable hereon nor in any event shall this Bond be payable out of any funds or properties of the Authority other than the Revenues.
This Bond is one of a duly authorized issue of bonds of the Authority designated as the “ Tracy Public Financing Authority Lease Revenue Bonds, Series 2022A (Legacy Fields)” (the “Bonds”), in an aggregate principal amount of $_________, all of like tenor and date (except for such variation, if any, as may be required to designate varying numbers, maturities, interest rates or redemption provisions) and all issued under the provisions of Article 4 of Chapter 5, Division 7, Title 1 of the Government Code of the State of California, commencing with Section 6584 of said Code, and under an Indenture of Trust dated as of May 1, 2022, between the Authority and the Trustee (the “Indenture”) and a resolution of the Authority adopted on _________ , 2022, authorizing the issuance of the Bonds. Reference is hereby made to the Indenture (copies of which are on file at the office of the Authority) and all supplements thereto for a description of the terms on which the Bonds are issued, the provisions with regard to the nature and extent of the Revenues, and the rights thereunder of the owners of the Bonds and the rights, duties and immunities of the Trustee and the rights and obligations of t he Authority thereunder, to all of the provisions of which the Registered Owner of this Bond, by acceptance hereof, assents and agrees.
The Bonds have been issued by the Authority to provide financing for the acquisition and construction of certain public improvements. This Bond and the interest and premium, if any, hereon are special obligations of the Authority, payable from the Revenues, and secured by a charge and lien on the Revenues as defined in the Indenture, consisting principally of lease payments made by the City under a Lease Agreement dated as of May 1, 2022, between the Authority as lessor and the City as lessee (the “Lease”). As and to the extent set forth in the Indenture, all of the Revenues are exclusively and irrevocably pledged in accordance with the terms hereof and the provisions of the Indenture, to the payment of the principal of and interest and premium (if any) on the Bonds.
The Authority has the authority to issue Additional Bonds under the Indenture that would be secured by and payable from Revenues on a parity basis with the Bonds.
The rights and obligations of the Authority and the owners of the Bonds may be modified or amended at any time in the manner, to the extent and upon the terms provided in the Indenture, but no such modification or amendment shall extend the fixed maturity of any Bonds, or reduce the amount of principal thereof or premium (if any) thereon, or extend the time of payment, or change the method of computing the rate of
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interest thereon, or extend the time of payment of interest thereon, without the consent of the owner of each Bond so affected.
The Bonds maturing on or before November 1, 20__, are not subject to optional redemption prior to their stated maturity. The Bonds maturing on or after November 1, 20__, are subject to redemption, as a whole or in part at the election of the Authority among maturities on such basis as designated by the Authority and by lot within a maturity, at the option of the Authority, on November 1, 20__, and on any date thereafter, at a redemption price equal to 100% of the principal amount of Bonds to be redeemed, together with accrued interest thereon to the date fixed for redemption, without premium.
The Bonds are subject to redemption as a whole, or in part by lot, on any date, to the extent of any net proceeds of hazard or title insurance with respect to the property which has been leased under the Lease (the “Leased Property”) or any portion thereof which are not used to repair or replace the Leased Property pursuant to the Lease, or to the extent of any net proceeds arising from the disposition of the Leased Property or any portion thereof in eminent domain proceedings which the City elects to be used for such purpose pursuant to the Lease, at a redemption price equal to the principal amount thereof plus interest accrued thereon to the date fixed for redemption, without premium.
The Term Bonds are subject to mandatory redemption in whole, or in part by lot, from sinking fund payments at a redemption price equal to the principal amount thereof to be redeemed, without premium, plus accrued interest to the date of redemption, in the aggregate respective principal amounts and on November 1 in the years as set forth in the following tables:
Term Bonds Maturing
November 1, ____
Payment Date
(November 1)
Payment
Amount
(Maturity)
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Term Bonds Maturing
November 1, ____
Payment Date
(November 1)
Payment
Amount
(Maturity)
If some but not all of the Term Bonds have been redeemed under the optional redemption provisions of the Indenture , the total amount of all future sinking fund payments will be reduced by the aggregate principal amount of the Term Bonds so redeemed, to be allocated among such sinking fund payments on a pro rata basis as determined by the Authority, which shall notify the Trustee in writing of such determination
As provided in the Indenture, notice of redemption will be mailed by the Trustee by first class mail not less than 20 nor more than 60 days prior to the redemption date to the respective owners of any Bonds designated for redemption at their addresses appearing on the registration books of the Trustee, but neither failure to receive such enotice nor any defect in the notice so mailed shall affect the sufficiency of the proceedings for redemption or the cessation of accrual of interest thereon from and after the date fixed for redemption. Notice of any optional redemption of the Bonds may be conditioned upon receipt of funds for the redemption, and may be rescinded under the circumstances set forth in the Indenture, upon notice to the owners of such Bonds.
If this Bond is called for redemption and payment is duly provided therefor as specified in the Indenture, interest shall cease to accrue hereon from and after the date fixed for redemption.
This Bond is transferable by the Registered Owner hereof, in person or by his attorney duly authorized in writing, at the Trust Office, but only in the manner, subject to the limitations and upon payment of the charges provided in the Indenture, and upon surrender and cancellation of this Bond. Upon registration of such transfer, a new Bond or Bonds, of authorized denomination or denominations, for the same aggregate principal amount and of the same maturity will be issued to the transferee in exchange herefor. This Bond may be exchanged at the Trust Office for Bonds of the same tenor, aggregate principal amount, interest rate and maturity, of other authorized denominations.
The Authority and the Trustee may treat the Registered Owner hereof as the absolute owner hereof for all purposes, and the Authority and the Trustee shall not be affected by any notice to the contrary.
Unless this Bond is presented by an authorized representative of The Depository Trust Company to the Authority or the Trustee for registration of transfer, exchange or payment, and any Bond issued is registered in the name of Cede & Co. or such other
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name as requested by an authorized representative of The Depository Trust Company and any payment is made to Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL since the registered owner hereof, Cede & Co., has an interest herein.
It is hereby certified by the Authority that all of the things, conditions and acts required to exist, to have happened or to have been performed precedent to and in the issuance of this Bond do exist, have happened or have been performed in due and regular time, form and manner as required by the Ordinance and the laws of the State of California and that the amount of this Bond, together with all other indebtedness of the Authority, does not exceed any limit prescribed by the Ordinance or any laws of the State of California, and is not in excess of the amount of Bonds permitted to be issued under the Indenture.
This Bond shall not be entitled to any benefit under the Indenture or become valid or obligatory for any purpose until the certificate of authentication hereon endorsed shall have been manually signed by the Trustee.
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IN WITNESS WHEREOF, the Tracy Public Financing Authority has caused this Bond to be executed in its name and on its behalf with the facsimile signature of its Chair and attested to by the facsimile signature of its Secretary, all as of the Original Issue Date specified above.
TRACY PUBLIC FINANCING AUTHORITY
By
Chair
Attest:
Secretary
CERTIFICATE OF AUTHENTICATION
This is one of the 2022 Bonds described in the within-mentioned Indenture.
Dated:
U.S. BANK TRUST COMPANY,
NATIONAL ASSOCIATION,
as Trustee
By
Authorized Signatory
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ASSIGNMENT
For value received the undersigned hereby sells, assigns and transfers unto __________________________________ whose address and social security or other tax identifying number is ____________________, the within -mentioned Bond and hereby irrevocably constitute(s) and appoint(s)
________________________________________ attorney, to transfer the same on the registration books of the Trustee with full power of substitution in the premises.
Dated:
Signature Guaranteed:
Note: Signature(s) must be guaranteed by an eligible
guarantor institution.
Note: The signature(s) on this Assignment must
correspond with the name(s) as written on the face of
the within Bond in every particular without alterat ion or enlargement or any change whatsoever.
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APPENDIX C
FORM OF PROJECT FUND REQUISITION
DISBURSEMENT REQUEST NO.: _______
U.S. Bank Trust Company, National Association
Attn.: Global Corporate Trust Services
One California Street, Suite 1000
San Francisco, CA 94111
Re: $_____________ Tracy Public Financing Authority Lease Revenue Bonds, Series 2022A (Legacy Fields)
Ladies and Gentlemen:
In accordance with the terms of an Indenture of Trust, by and between you and the undersigned, dated as of May 1, 2022 (the “Indenture”), I am an Authorized Representative and you are hereby authorized and requested to make immediate disbursement of funds held by you in the Project Fund for Project Costs relating to the Project (as such terms are defined in the Indenture) pursuant to Section 3. 04 of the Indenture.
You are hereby requested to pay from the Project Fund established by the Indenture, to the person(s), corporation(s) or other entity(ies) designated on Schedule A attached hereto, in payment of all or a portion of the Project Costs described on said Schedule.
The undersigned hereby certifies that (i) the amounts listed on Schedule A constitute Project Costs (as defined in the Indenture), (ii) no part of the amount requested herein has been included in any other request previously filed with you; (iii) to the knowledge of the undersigned, there has not been filed with or served upon the City any notice of any lien or attachment upon or claim (except for any preliminary notice of lien as may be filed in accordance with law) affecting the right of the person, corporation or other entity stated below to receive payment of the amount stated below, which lien has not been released or will not be released simultaneously with the payment requested hereunder; and (iv) the labor, services and/or materials covered hereby have been performed upon or furnished to the Improvements and the payment requested herein is due and payable under a purchase order, contract or other authorization;
Dated: __________, 20___.
CITY OF TRACY
By:
Designated Officer
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SCHEDULE A
Payee Description Project Costs
(include address) of Costs Amount
LEASE AGREEMENT
Dated
as of May 1, 2022
between
the
TRACY PUBLIC FINANCING AUTHORITY,
as lessor
and the
CITY OF TRACY,
as lessee
Relating to
$_________
_
Tracy Public Financing Authority
Lease Revenue Bonds, Series 2022A
(Legacy Fields)
ATTACHMENT E
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TABLE OF CONTENTS
ARTI
CLE I
Definitions; Rules of Interpretation
SECTION 1.1. Definitions ......................................................................................................................... 2 SECTION 1.2. Interpretation .................................................................................................................... 2
ARTICLE II
Covenants, Representations and Warranties
SECTION 2.1. Covenants, Representations and Warranties of the City ................................................. 3 SECTION 2.2. Covenants, Representations and Warranties of the Authority ......................................... 4
ARTICLE III
Deposit and Application of Funds; Substitution and
Release of Property
SECTION 3.1. Deposit of Moneys ............................................................................................................ 6 SECTION 3.2. Substitution of Property .................................................................................................... 6 SECTION 3.3. Release of Property .......................................................................................................... 7
ARTICLE IV
Lease of Leased Property; Term of This Lease; Lease
Payments:
SECTION 4.1. Lease of Leased Property ................................................................................................ 9 SECTION 4.2. Term ................................................................................................................................. 9 SECTION 4.3. Lease Payments ............................................................................................................. 10 SECTION 4.4. Source of Payments; Covenant to Budget and Appropriate .......................................... 11 SECTION 4.5. Additional Rental Payments ........................................................................................... 11 SECTION 4.6. Quiet Enjoyment ............................................................................................................. 11 SECTION 4.7. Title ................................................................................................................................. 12
ARTICLE V
Maintenance; Taxes; Insurance; and Other Matters
SECTION 5.1. Maintenance, Utilities, Taxes and Assessments ............................................................ 12 SECTION 5.2. Modification of Leased Property ..................................................................................... 13 SECTION 5.3. Liability and Property Damage Insurance ...................................................................... 13 SECTION 5.4. Property Insurance ......................................................................................................... 13 SECTION 5.5. Rental Interruption Insurance ......................................................................................... 14 SECTION 5.6. Recordation Hereof; Title Insurance .............................................................................. 14 SECTION 5.7. Insurance Net Proceeds; Form of Policies ..................................................................... 14 SECTION 5.8. Installation of City’s Personal Property .......................................................................... 15 SECTION 5.9. Liens ............................................................................................................................... 15 SECTION 5.10. Advances ...................................................................................................................... 15
ARTICLE VI
Damage, Destruction and Eminent Domain; Use of Net
Proceeds
SECTION 6.1. Application of Net Proceeds ........................................................................................... 15 SECTION 6.2. Termination or Abatement Due to Eminent Domain ...................................................... 15 SECTION 6.3. Abatement Due to Damage or Destruction .................................................................... 16
ARTICLE VII
Other Covenants of the City
SECTION 7.1. Disclaimer of Warranties ................................................................................................ 17 SECTION 7.2. Access to the Leased Property ...................................................................................... 17 SECTION 7.3. Release and Indemnification Covenants ........................................................................ 17 SECTION 7.4. Assignment and Subleasing by the City ......................................................................... 18 SECTION 7.5. Amendment Hereof ........................................................................................................ 18 SECTION 7.6. Tax Covenants ............................................................................................................... 19 SECTION 7.7. Continuing Disclosure .................................................................................................... 20 -ii-
ARTICLE VIII
Events of Default and Remedies
SECTION 8.1. Events of Default Defined ............................................................................................... 21 SECTION 8.2. Remedies on Default ...................................................................................................... 21 SECTION 8.3. No Remedy Exclusive .................................................................................................... 23 SECTION 8.4. Agreement to Pay Attorneys' Fees and Expenses ......................................................... 23 SECTION 8.5. No Additional Waiver Implied by One Waiver ................................................................ 24 SECTION 8.6. Application of Proceeds .................................................................................................. 24 SECTION 8.7. Trustee and Bond Owners to Exercise Rights ............................................................... 24
ARTICLE IX
Prepayment of Lease Payments
SECTION 9.1. Security Deposit ............................................................................................................. 24 SECTION 9.2. Optional Prepayment ...................................................................................................... 25 SECTION 9.3. Mandatory Prepayment From Net Proceeds of Insurance or Eminent Domain ....................................................................................................................... 25 SECTION 9.4. Credit for Amounts on Deposit ....................................................................................... 25
ARTICLE X
Miscellaneous
SECTION 10.1. Notices .......................................................................................................................... 25 SECTION 10.2. Binding Effect ............................................................................................................... 26 SECTION 10.3. Severability ................................................................................................................... 26 SECTION 10.4. Net-net-net Lease ......................................................................................................... 26 SECTION 10.5. Third Party Beneficiary ................................................................................................. 26 SECTION 10.6. Further Assurances and Corrective Instruments .......................................................... 26 SECTION 10.7. Execution in Counterparts. ........................................................................................... 26 SECTION 10.8. Applicable Law ............................................................................................................. 26 SECTION 10.9. Authority and City Representatives .............................................................................. 26 SECTION 10.10. Captions ..................................................................................................................... 26
APPENDIX A DESCRIPTION OF THE LEASED PROPERTY
APPENDIX B SCHEDULE OF LEASE PAYMENTS
APPENDIX C DESCRI PTION OF PROJECT
LEASE AGREEMENT
This LEASE AGREEMENT (this “ Lease”), dated for convenience as of _May 1, 2022, is between the TRACY PUBLIC FINANCING AUTHORITY, a joint powers authority duly organized and existing under the laws of the State of California, as lessor (the “Authority”), and the CITY OF TRACY, a general law city and municipal corporation duly organized and existing under the Constitution and laws of the State of California, as lessee (the “City”).
BACKGROUND:
1. The City wishes to finance the acquisition and construction of public improvements (the “ Project”) of the City, consisting of Phase 1E of the Legacy Fields Sports Complex and such other improvements that may be identified from time to time by the City.
2. The City and the Tracy Industrial Development Authority (the “Industrial Development Authority”) are parties to a First Amended and Restated Joint Powers Agreement, dated as of October 17, 2018 (the “ Joint Powers Agreement”), pursuant to which the Authority was established as a joint exercise of powers authority under the Joint Exercise of Powers Act (Government Code §6500 et seq.) for the purpose of providing assistance to the City and the Industrial Development Authority with their financing programs, and for any other purposes authorized under the Bond Law (as defined in the Indenture referenced below).
3. The City has proposed to lease to the Authority certain real property and improvements of the City, as more particularly described in Appendix A attached hereto and by this reference incorporated herein (the “ Leased Property”), under a Site Lease, dated the date hereof (the “Site Lease”) in consideration of the payment by the Authority of an upfront rental payment (the “ Site Lease Payment ”) which is sufficient to provide funds for the acquisition and construction of the Project . The Site Lease is being recorded concurrently with a memorandum of this Lease.
4. The Authority has authorized the issuance of its Tracy Public Financing Authority Lease Revenue Bonds, Series 2022A ( Legacy Fields ) in the aggregate principal amount of $________ (the “2022 Bonds”) under an Indenture of Trust dated as of May 1, 2022 (the “Indenture”), between the Authority and U.S. Bank Trust Company, National Association, as trustee (the “Trustee”), for the purpose of providing the funds to enable the Authority to pay the Site Lease Payment to the City in accordance with this Site Lease.
5. Under Section 2.08 and Section 2.09 of the Indenture, the Authority is authorized to issue Additional Bonds (as defined in the Indenture) payable from the Lease Payments payable by the City hereunder. Together, the 2022 Bonds and any Additional Bonds are defined as “Bonds” under this Lease and the Indenture.
6. In order to provide revenues that are sufficient to enable the Authority to pay debt service on the Bonds, the Authority has agreed to lease the Leased Property -2-
back
to the City under this Lease under which the City agrees to pay semiannual Lease Payments as the rental for the Leased Property.
7. The lease
payments made by the City under this Lease have been
assigned by the Authority to the Trustee for the security of the Bonds under an Assignment Agreement dated as of the date hereof, between the Authority as assignor and the Trustee as assignee, which has been recorded concurrently herewith.
8. The City and the Authority have found and determined that all acts and proceedings required by law necessary to make this Lease, when executed by the City and the Authority, the valid, binding and legal obligations of the City and the Authority, and to constitute this Lease a valid and binding agreement for the uses and purposes herein set forth in accordance with its terms, have been done and taken, and the execution and delivery of this Lease have been in all respects duly authorized.
AGREEM
ENT:
In cons
ideration of the material covenants contained in this Lease, the parties hereto hereby formally covenant, agree and bind themselves as follows:
ARTICLE I
DEFINITIONS; RULES OF INTERPRETATION
SECTION 1.1. Definitions. Unless the context clearly otherwise requires or unless otherwise defined herein, the capitalized terms in this Lease have the respective meanings given them in the Indenture.
SECTION 1.2. Interpretation.
(a) Unl
ess the context otherwise indicates, words expressed in the singular includes the plural and vice versa and the use of the neuter, masculine, or feminine gender is for convenience only and includes the neuter, masculine or feminine gender, as appropriate.
(b) Headi
ngs of articles and sections herein and the table of contents hereof are solely for convenience of reference, do not constitute a part hereof and do not affect the meaning, construction or effect hereof.
(c) Al
l references herein to “Articles,” “Sections” and other subdivisions are to the corresponding Articles, Sections or subdivisions of this Lease; the words “herein,” “hereof,” “hereby,” “hereunder” and other words of similar import refer to this Lease as a whole and not to any particular Article, Section or subdivision hereof. -3-
ARTICLE II
COVENANTS, REPRESENTATIONS AND WARRANTIES
SECTION 2.1. Covenants, Representations and Warranties of the City . The City makes the following covenants, representations and warranties to the Authority, the Trustee as of the date of the execution and delivery of this Lease:
(a) Due
Organization and Existence. The City is a general law city and municipal corporation duly organized and validly existing under the Constitution and laws of the State of California, has full legal right, power and authority under the laws of the State of California to enter into the Site Lease and this Lease and to carry out and consummate all transactions contemplated hereby, and by proper action the City has duly authorized the execution and delivery of the Site Lease and this Lease.
(b) Due
Execution. The representatives of the City executing the Site Lease and this Lease have been fully authorized to execute the same under a resolution duly adopted by the City Council of the City.
(c) Val
id, Binding and Enforceable Obligations. The Site Lease and this Lease have been duly authorized, executed and delivered by the City and constitute the legal, valid and binding obligations of the City enforceable against the City in accordance with their respective terms.
(d) No
Conflicts. The execution and delivery of the Site Lease and this Lease, the consummation of the transactions therein and herein contemplated and the fulfillment of or compliance with the terms and conditions thereof and hereof, do not and will not conflict with or constitute a violation or breach of or default (with due notice or the passage of time or both) under any applicable law or administrative rule or regulation, or any applicable court or administrative decree or order, or any indenture, mortgage, deed of trust, lease, contract or other agreement or instrument to which the City is a party or by which it or its properties are otherwise subject or bound, or result in the creation or imposition of any prohibited lien, charge or encumbrance of any nature whatsoever upon any of the property or assets of the City, which conflict, violation, breach, default, lien, charge or encumbrance would have consequences that would materially and adversely affect the consummation of the transactions contemplated by the Site Lease and this Lease or the financial condition, assets, properties or operations of the City. (e) Cons
ents and Approvals. No consent or approval of any trustee or holder of any indebtedness of the City or of the voters of the City , and no consent, permission, authorization, order or license of, or filing or registration with, any governmental authority is necessary in connection with the execution and delivery of the Site Lease and -4-
this
Lease, or the consummation of any transaction therein and herein contemplated, except as have been obtained or made and as are in full force and effect.
(f) No
Litigation. There is no action, suit, proceeding, inquiry or investigation before or by any court or federal, state, municipal or other governmental authority pending or, to the knowledge of the City after reasonable investigation, threatened against or affecting the City or the assets, properties or operations of the City which, if determined adversely to the City or its interests, would hav e a material and adverse effect upon the consummation of the transactions contemplated by or the validity of the Site Lease and this Lease, or upon the financial condition, assets, properties or operations of the City, and the City is not in default with r espect to any order or decree of any court or any order, regulation or demand of any federal, state, municipal or other governmental authority, which default might have consequences that would materially and adversely affect the consummation of the transactions contemplated by the Site Lease and this Lease or the financial conditions, assets, properties or operations of the City.
SECTION 2.2. Covenants, Representations and Warranties of the Authority . The Authority makes the following covenants, representations and warranties to the City, the Trustee as of the date of the execution and delivery of this Lease:
(a) Due
Organization and Existence. The Authority is a joint exercise of powers authority duly organized and existing under a joint powers agreement and the laws of the State of California; has power to enter into this Lease, the Site Lease, the Assignment Agreement and the Indenture; is possessed of full power to own and hold, improve and equip real and personal property, and to lease the same; and has duly authorized the execution and delivery of each of the aforesaid agreements and such agreements constitute the legal, valid and binding obligations of the Authority, enforceable against the Authority in accordance with their respective terms. (b) Due
Execution. The representatives of the Authority executing this Lease, the Site Lease, the Assignment Agreement and the Indenture are fully authorized to execute the same pursuant to official action taken by the governing body of the Authority. (c) Val
id, Binding and Enforceable Obligations. This Lease, the Site Lease, the Assignment Agreement and the Indenture have been duly authorized, executed and delivered by the Authority and constitute the legal, valid and binding agreements of the Authority, enforceable against the Authority in accordance with their respective terms.
(d) No
Conflicts. The execution and delivery of this Lease, the Site Lease, the Assignment Agreement and the Indenture, the
consummation of the transactions herein and therein contemplated -5-
and the f
ulfillment of or compliance with the terms and conditions hereof, do not and will not conflict with or constitute a violation or breach of or default (with due notice or the passage of time or both) under any applicable law or administrative rule or regulation, or any applicable court or administrative decree or order, or any indenture, mortgage, deed of trust, lease, contract or other agreement or instrument to which the Authority is a party or by which it or its properties are otherwise subject or bound, or result in the creation or imposition of any prohibited lien, charge or encumbrance of any nature whatsoever upon any of the property or assets of the Authority, which conflict, violation, breach, default, lien, charge or encumbrance would have consequences that would materially and adversely affect the consummation of the transactions contemplated by this Leas e, the Site Lease, the Assignment Agreement and the Indenture or the financial condition, assets, properties or operations of the Authority.
(e) Cons
ents and Approvals. No consent or approval of any trustee or holder of any indebtedness of the Authority, and no consent, permission, authorization, order or license of, or filing or registration with, any governmental authority is necessary in connection with the execution and delivery of this Lease, the Site Lease, the Assignment Agreement or the Indenture, or the consummation of any transaction herein or therein contemplated, except as have been obtained or made and as are in full force and effect. (f) No
Litigation. There is no action, suit, proceeding, inquiry or investigation before or by any court or federal, state, municipal or other governmental authority pending or, to the knowledge of the Authority after reasonable investigation, threatened against or affecting the Authority or the assets, properties or operations of the Authority which, if determined adversely to the Authority or its interests, would have a material and adverse effect upon the consummation of the transactions contemplated by or the validity of this Lease, the Site Lease, the Assignment Agreement or the Indenture, or upon the financial condition, assets, properties or operations of the Authority, and the Authority is not in default with respect to any order or decree of any court or any order, regulation or demand of any federal, state, municipal or other governmental authority, which default might have consequences that would materially and adversely affect the consummation of the transactions contemplated by this Lease, the Site Lease, the Assignment Agreement or the Indenture or the financial conditions, assets, properties or operations of the Authority.
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ARTICLE III
DEPOSIT AND APPLICATION OF FUNDS; SUBSTITUTION
AND RELEASE OF PROPERTY
SECTION 3.1. Deposit of Moneys; Acquisition and Construction of the Project . (a) Depos
it of Bond Proceeds. On the Closing Date, the Authority will cause the proceeds of sale of the 2022 B onds to be deposited with the Trustee. The Trustee shall deposit such proceeds in accordance with Section 3.02 of the Indenture. (b) Ac
quisition and Construction of the Project. The Authority hereby appoints the City as its agent to carry out all phases of the acquisition and construction of the Project under and in accordance with the provisions hereof. The City hereby accepts its appointment as agent of the Authority and assum es all rights, liabilities, duties and responsibilities of the Authority regarding the acquisition and construction of the Project. The City, as agent of the Authority hereunder, shall enter into, administer and enforce all purchase orders or other contracts relating to the acquisition and construction of the Project. The City shall requisition the payment of Project Costs from amounts held by the Trustee in the Project Fund, pursuant to and in accordance with Section 3.04 of the Indenture. All contracts for, and all work relating to, the acquisition and construction of the Project are subject to all applicable provisions of law relating to the acquisition, construction, improvement, and equipping of like facilities and property by the City.
As
agent of the Authority, the City hereby agrees to supervise and provide for, or cause to be supervised and provided for, the acquisition and construction of the Project in accordance with the plans and specifications, purchase orders, construction contracts and other documents relating thereto and approved by the City under all applicable requirements of law.
SECTION 3.2. Substitution of Property . The City has the option at any time and from time to time, to subst itute other real property (the “ Substitute Property”) for the Leased Property or any portion thereof (the “ Former Property”), upon satisfaction of all of the following requirements which are hereby declared to be conditions precedent to such substitution:
(a) No
Event of Default has occurred and is continuing, as certified in writing by the City.
(b) The Ci
ty has filed with the Authority and the Trustee, and caused to be recorded in the office of the San Joaquin County Recorder sufficient memorialization of an amendment hereof that adds the legal description of the Substitute Property to Appendix A and deletes therefrom the legal description of the Former Property, and has filed and caused to be recorded corresponding amendments to the Site Lease and Assignment Agreement.
(c) The Ci
ty has obtained a CLTA policy of title insurance insuring the City’s leasehold estate hereunder in the Substitute Property, subject -7-
only
to Permitted Encumbrances, in an amount at least equal to the estimated value thereof.
(d) The Ci
ty has certified in writing to the Authority and the Trustee that the Substitute Property serves the municipal purposes of the City and constitutes property which the City is permitted to lease under the laws of the State of California, and has been determined to be essential to the proper, efficient and economic operation of the City and to serve an essential governmental function of the City. (e) The Subs
titute Property does not cause the City to violate any of its covenants, representations and warranties made herein, as certified in writing by the City.
(g) The Ci
ty has filed with the Authority and the Trustee a written certificate of the City or other written evidence stating that the useful life of the Substitute Property at least extends to November 1, 20__, that the estimated value of the Leased Property, after substitution of the Substitute Property and release of the Former Property, is at least equal to the aggregate Outstanding principal amount of the Bonds, and the fair rental value of the Leased Property, after substitution of the Substitute Property and release of the Former Property, is at least equal to the Lease Payments thereafter coming due and payable hereunder.
(h) The Ci
ty has mailed written notice of such substitution to each rating agency which then maintains a rating on the Bonds.
Upon t
he satisfaction of all such conditions precedent, the Term of this Lease will thereupon end as to the Former Property and commence as to the Substitute Property, and all references to the Former Property will apply with full force and effect to the Substitute Property. The City is not entitled to any reduction, diminution, extension or other modification of the Lease Payments whatsoever as a result of any substitution of property under this Section. The Authority and the City will execute, deliver and cause to be recorded all documents required to discharge the Site Lease, this Lease and the Assignment Agreement of record against the Former Property and to cause the Substitute Property to become subject to all of the terms and conditions of the Site Lease, this Lease and the Assignment Agreement.
SECTION 3.3. Release of Property. The City has the option at any time and from time to time to rel ease any portion of the Leased Property from this Lease (the “Released Property”) provided that the City has satisfied all of the following requirements which are hereby declared to be conditions precedent to such release:
(a) No
Event of Default has occurred and is continuing, as certified in writing by the City.
(b) The Ci
ty has filed with the Authority and the Trustee, and caused to be recorded in the office of the San Joaquin County Recorder sufficient memorialization of an amendment hereof , the Site Lease and the Assignment Agreement which removes the Released -8-
Proper
ty from the Site Lease, the Assignment Agreement and this Lease.
(c) The Ci
ty has certified in writing to the Authority and the Trustee that the value of the property which remains subject to this Lease following such release is at least equal to the aggregate Outstanding principal amount of the Bonds, and the fair rental value of the property which remains subject to this Lease following such release is at least equal to the Lease Payments thereafter coming due and payable hereunder.
(d) The Ci
ty has mailed written notice of such release to each rating agency which then maintains a rating on the Bonds.
Upon t
he satisfaction of all such conditions precedent, the Term of this Lease will thereupon end as to the Released Property. The City is not entitled to any reduction, diminution, extension or other modification of the Lease Payments whatsoever as a result of such release. The Authority and the City shall execute, deliver and caus e to be recorded all documents required to discharge the Site Lease, this Lease and the Assignment Agreement of record against the Released Property.
SECTION 3.4. Addition of Property . The City may, at any time it deems it necessary or advisable, amend this Lease, and enter into any necessary or advisable site or ground lease, to add additional property to the property originally leased hereunder.
If
the addition to the Leased Property (the “ Addition”) is b eing done in connection with the issuance of Additional Bonds, the following requirements shall apply:
(a) The Ci
ty shall have certified in writing to the Authority and the Trustee that (i) the Addition serves the purposes of the City and constitutes property which the City is permitted to lease under the laws of the State of California, and has been determined to be essential to the proper, efficient and economic operation of the City and to serve an essential governmental function of the City, (ii) the useful life of the Addition at least extends to November 1, 20__ or such later date specified in Section 4.2, (iii) the estimated value of the Leased Property (including the Addition) is at least equal to the aggregate Outstanding principal amount of the Bonds, and (iv) the fair rental value of the Leased Property (including the Addition) is at least equal to the Lease Payments thereafter coming due and payable hereunder. For the purposes of the certification described in clause (iv), the City may, if necess ary to make such certification, assume completion of construction of the Addition if the Addition is being constructed with proceeds of the Additional Bonds as long as capitalized interest has been deposited in accordance with Section 2.08(h) of the Indenture. (b) The Ci
ty shall have delivered to the Authority and the Trustee an Opinion of Bond Counsel to the effect that the amendment hereto has been duly authorized, executed and delivered and the Lease as so amended represents a valid and binding obligation of the City and the Authority and that the Addition will not adversely affect the exclusion of interest on the Bonds from gross income for federal income tax purposes.
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(c) The City shall cause to be recorded in the Office of the San Joaquin County Recorder sufficient memorialization of an amendment hereof that adds the legal description of the Addition to Appendix A, and has filed and caused to be recorded corresponding amendments to the Site Lease and Assignment Agreement.
(d) The City shall have delivered to the Authority and the Trustee a CLTA standard form policy of title insurance in substantially the same form as delivered in connection with the issuance and delivery of the Bonds in at least the amount of the aggregate principal amount of outstanding Bonds at the time of the Addition insuring the City’s leasehold interest in the Addition to the Leased Property hereunder, together with an endorsement thereto making such policy payable to the Trustee for the benefit of the Owners, and also together with a certificate of the City to the effect that the exceptions, if any, contained in such policy do not interfere with the beneficial use and occupancy of the Leased Property by the City.
(e) The City shall have delivered to the Authority and the Trustee a copy of a written notice that the City mailed to each rating agency then rating the Bonds notifying the rating agency of the Addition.
Upon the satisfaction of all such conditions precedent, the Term of this Lease will thereupon commence as to the Addition, and all references to the Leased Property will apply with full force and effect to the Addition.
SECTION 3.5. Amendment of Site Lease and Assignment Agreement . The Authority and the City shall amend the Site Lease and the Assignment Agreement as necessary in order to accomplish any Substitution, Release or Addition of property pursuant to this Article III.
ARTICLE IV
LEASE OF LEASED PROPERTY; TERM OF THIS LEASE;
LEASE PAYMENTS
SECTION 4.1. Lease of Leased Property . The Authority hereby leases the Leased Property to the City and the City hereby leases the Leased Property from the Authority, upon the terms and conditions set forth in this Lease.
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ECTION 4.2. Term. The Term of this Lease commences on the Closing Date and ends on the date on which the Indenture is discharged in accordance with Section
10.03 thereof, but under any circumstances not later than November 1, 20__, or if Additional Bonds have been issued under the Indenture, the last day that precedes the final maturity of Additional Bonds (if later than November 1, 20__). The provisions of this Section are subject to the provisions of Sections 6.2 and 6.3 relating to the taking in eminent domain, damage and destruction of the Leased Property in whole or in part and interference with completion of construction of the Project.
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SECTION 4.3. Lease Payments.
(a) Obl
igation to Pay. Subject to the provisions of Sections 6.2 and 6.3 and the provisions of Article IX, the City agrees to pay to the Authority, its successors and assigns, the Lease Payments in the respective amounts specified in Appendix B attached to this Lease, to be due and payable in immediately available funds on the Interest Payment Dates immediately following each of the respective Lease Payment Dates specified in Appendix B (as it may be amended in connection with the issuance of Additional Bonds), and to be deposited by the City with the Trustee on each of the Lease Payment Dates specified in Appendix B (as it may be amended in connection with the issuance of Additional Bonds). Any amount held in the Bond Fund, the Interest Account and the Principal Account on any Lease Payment Date (other than amounts resulting from the prepayment of the Lease Payments in part but not in whole under Article IX, and amounts required for payment of past due principal or interest on any Bonds not presented for payment) will be credited towards the Lease Payment then required to be paid hereunder. The City is not required to deposit any Lease Payment with the Trustee on any Lease Payment Date if the amounts then held in the Bond Fund, the Interest Account and the Principal Account are at least equal to the Lease Payment then required to be deposited with the Trustee. The Lease Payments payable in any Rental Period are for the use of the Leased Property during that Rental Period. (b) Ef
fect of Prepayment. If the City prepays all Lease Payments in full under Sections 9.2 or 9.3, the City’s obligations under this Section will thereupon cease and terminate. If the City prepays the Lease Payments in part but not in whole under Sections 9.2 or 9.3, the principal components of the remaining Lease Payments will be reduced in integral multiples of $5,000 among Lease Payment Dates on a basis which corresponds to the principal maturities of the Bonds which are redeemed thereby; and the interest component of each remaining Lease Payment will be reduced by the aggregate corresponding amount of interest which would otherwise be payable wit h respect to the Bonds thereby redeemed under Section 4.01 of the Indenture. (c) Rat
e on Overdue Payments. If the City fails to make any of the payments required in this Section, the payment in default will continue as an obligation of the City until the amount in default has been fully paid, and the City agrees to pay the same with interest thereon, from the date of default to the date of payment at the highest rate of interest on any Outstanding Bond.
(d) Fair
Rental Value. The aggregate amount of the Lease Payments and Additional Rental Payments coming due and payable during each Rental Period constitute the total rental for the Leased Property for such Rental Period, and are payable by the City in each Rental Period for and in consideration of the right of the use and occupancy of, and the continued quiet use and enjoyment of , the Leased Property during each Rental Period. The parties hereto have agreed and determined that the total Lease Payments represent the fair rental value of the Leased Propert y. In making that determination, consideration has been given to the estimated value of the Leased Property, other obligations of the City and the Authority under this Lease, the uses and purposes which may be served by the Leased Property and the benefits therefrom which will accrue to the City and the general public.
(e) A
ssignment. The City understands and agrees that all Lease Payments have been assigned by the Authority to the Trustee in trust, under the Assignment -11-
Agr
eement, for the benefit of the Owners of the Bonds, and the City hereby assents to such assignment. The Authority hereby directs the City, and the City hereby agrees to pay to the Trustee at its Office, all payments payable by the City under this Section and all amounts payable by the City under Article IX.
SECTION 4.4. Source of Payments; Covenant to Budget and Appropriate. The Lease Payments are payable from any source of available funds of the City, subject to the provisions of Section 6.3. The City covenants to take all actions required to include the Lease Payments in each of its budgets during the Term of this Lease and to make the necessary appropriations for all Lease Payments and Additional Rental Payments.
The foregoing covenant of the City constitutes a duty imposed by law and each and every public official of the City is required to take all actions required by law in the performance of the official duty of such officials to enable the City to carry out and perform the covenants and agreements in this Lease agreed to be carried out and performed by the City.
SECTION 4.5. Additional Rental Payments . In addition to the Lease Payments, the City shall pay when due the following amounts of Additional Rental Payments in consideration of the lease of the Leased Property by the City from the Authority hereunder:
(a) all
fees and expenses incurred by the Authority in connection with or by reason of its leasehold estate in the Leased Property, when due, (b) all
reasonable compensation to the Trustee for all services rendered under the Indenture and for all reasonable expenses, charges, costs, liabilities, legal fees and other disbursements incurred in and about the performance of its powers and duties under the Indenture, (c) the
reasonable fees and expenses of such accountants,
consultants, attorneys and other experts as may be engaged by the Authority or the Trustee to prepare audits, financial statements, reports, opinions or provide such other services required under this Lease or the Indenture,
(d) amount
s coming due and payable as Excess Investment Earnings
in accordance with Section 7.6(e), and
(e) the
reasonable out- of-pocket expenses of the Authority in
connection with the execution and delivery of this Lease or the Indenture, or in connection with the issuance of the Bonds, including but not limited to any and all expenses incurred in connection with the authorization, sale and delivery of the Bonds, or incurred by the Authority in connection with any litigation which may at any time be instituted involving this Lease, the Bonds, the Indenture or any of the other documents contemplated hereby or thereby, or otherwise incurred in connection with the administration of this Lease.
SECTION 4.6. Quiet Enjoyment. Throughout the Term of this Lease, the Authority shall provide the City with quiet use and enjoyment of the Leased Property and the City will peaceably and quietly have and hold and enjoy the Leased Property, without suit,
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trouble or hindrance from the Authority, except as expressly set forth in this Lease. The Authority will, at the request of the City and at the City’s cost, join in any legal action in which the City asserts its right to such possession and enjoyment to the extent the Authority may lawfully do so. Notwithstanding the foregoing, the Authority has the right to inspect the Leased Property as provided in Section 7.2.
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ECTION 4.7. Title. Upon the termination of this Lease (other than under Section
8.2(b) hereof), all right, title and interest of the Authority in and to the Leased Property transfers to and vests in the City. The Authority shall take any and all steps and execute and record any and all documents reasonably required by the City to consummate any such transfer of title.
ARTICLE V
MAINTENANCE; TAXES; INSURANCE; AND OTHER MATTERS
SECTION 5.1. Maintenance, Utilities, Taxes and Assessments . Throughout the Term of this Lease, as part of the consideration for the rental of the Leased Property, all improvement, repair and maintenance of the Leased Property are the responsibility of the City, and the City will pay for or otherwise arrange for the payment of all utility services supplied to the Leased Property, which may include, without limitation, janitor service, security, power, gas, telephone, light, heating, water and all other utility services, and will pay for or otherwise arrange for the payment of the cost of the repair and replacement of the Leased Property resulting from ordinary wear and tear or want of care on the part of the City or any assignee or sublessee thereof. In exchange for the Lease Payments herein provided, the Authority agrees to provide only the Leased Property. The City waives the benefits of subsections 1 and 2 of Section 1932, Section 1933(4) and Sections 1941 and 1942 of the California Civil Code, but such waiver does not limit any of the rights of the City under the terms of this Lease.
The City shall also pay or cause to be paid all taxes and assessments of any type or nature, if any, charged to the Authority or the City affecting the Leased Property or the respective interests or estates therein; provided that with respect to special assessments or other governmental charges that may lawfully be paid in installments over a period of years, the City shall pay only such installments as are required to be paid during the Term of this Lease as and when the same become due.
The City may, at its expense and in its name, in good faith contest any such taxes, assessments, utility and other charges and, in the event of any such contest, may permit the taxes, assessments or other charges so contested to remain unpaid during the period of such contest and any appeal therefrom unless the Authority notifies the City that, in its reasonable opinion, by nonpayment of any such items the interest of the Authority in the Leased Property will be materially endangered or the Leased Property or any part thereof will be subject to loss or forfeiture, in which event the City shall promptly pay such taxes, assessments or charges or provide the Authority with full security against any loss which may result from nonpayment, in form satisfactory to the Authority and the Trustee.
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SECTION 5.2. Modification of Leased Property. The City has the right, at its own expense, to make additions, modifications and improvements to the Leased Property or any portion thereof. All additions, modifications and improvements to the Leased Property will thereafter comprise part of the Leased Property and become subject to the provisions of this Lease. Such additions, modifications and improvements may not in any way damage the Leased Property, or cause the Leased Property to be used for purposes other than those authorized under the provisions of state and federal law; and the Leased Property, upon completion of any additions, modifications and improvements made thereto under this Section, must be of a value which is not substantially less than the value thereof immediately prior to the making of such additions, modifications and improvements. The City will not permit any mechanic’s or other lien to be established or remain against the Leased Property for labor or materials furnished in connection with any remodeling, additions, modifications, improvements, repairs, renewals or replacements made by the City under this Section; except that if any such lien is established and the City first notifies or causes to be notified the Authority of the City’s intention to do so, the City may in good faith contest any lien filed or established against the Leased Property, and in such event may permit the items so contested to remain undischarged and unsatisfied during the period of such contest and any appeal therefrom and shall provide the Authority with full security against any loss or forfeiture which might arise from the nonpayment of any such item, in form satisfactory to the Authority. The Authority will cooperate fully in any such contest, upon the request and at the expense of the City.
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ECTION 5.3. Liability and Property Damage Insurance. The City shall maintain or cause to be maintained throughout the Term of this Lease, but only if and to the extent available from reputable insurers at reasonable cost in the reasonable opinion of the City, a standard commercial general liability insurance policy or policies in protection of the Authority, the City, and their respective members, officers, agents, employees and assigns. Said policy or policies shall provide for indemnification of said parties against direct or contingent loss or liability for damages for bodily and personal injury, death or property damage occasioned by reason of the operation of the Leased Property. Such policy or policies shall provide coverage in such liability limits and be subject to such deductibles as the City deems adequate and prudent. Such insurance may be maintained as part of or in conjunction with any other insurance coverage carried by the City, and may be maintained in whole or in part in the form of self -insurance by the City, subject to the provisions of Section 5.7, or in the form of the participation by the City in a joint powers agency or other program providing pooled insurance. The proceeds of such liability insurance must be applied toward extinguishment or satisfaction of the liability with respect to which paid.
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ECTION 5.4. Property Insurance. The City shall procure and maintain, or cause to be procured and maintained, throughout the Term of this Lease, property insurance against loss or damage to all buildings situated on the Leased Property, in an amount at least equal to the lesser of (a) 100% of the replacement value of the insured buildings, or (b) 100% of the aggregate principal amount of the Outstanding Bonds. Such insurance must, as nearly as practicable, cover loss or damage by explosion, windstorm, riot, aircraft, vehicle damage, smoke and such other hazards as are normally covered by such insurance, and must include earthquake insurance if available at commercially reasonable cost from reputable insurers in the judgment of the City. Such insurance may be subject to such deductibles as the City deems adequate and prudent. Such insurance may be maintained as part of or in conjunction with any other insurance