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SECTION 2.05. Registration Books. 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 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, register or transfer or cause to be registered or transferred, on such records, the ownership of the Bonds as hereinbefore provided.
SECTION 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 Treasurer of the Authority or other Authorized Representative with authority to do so 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.
SECTION 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 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.
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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.
ARTICLE III
ISSUANCE OF BONDS; APPLICATION OF
PROCEEDS
SECTION 3.01. Issuance of the 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 Bonds to the Original Purchaser upon receipt of payment of the purchase price for the Bonds.
SECTION 3.02. Application of Proceeds of Sale of Bonds . Upon the receipt of payment for the Bonds on the Closing Date in the amount of $_____________ (representing the aggregate principal amount thereof ($_____________), plus original issuance premium of $_____________, less an Underwriter’s discount of $_____________), the Trustee shall deposit the proceeds thereof into a temporary account, which shall be disbursed in full on the Closing Date (whereupon said temporary account shall be closed) as follows:
(a) The Trustee shall wire transfer to the City the amount of $_____________, constituting the remainder of such proceeds, to be held by the City in the Project Fund.
(b) The Trustee shall deposit the amount of $_____________into the Reserve Fund.
(c) The Trustee shall deposit the amount of $_____________ into the Costs of Issuance Fund.
SECTION 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 Bonds under Section 3.02(c). 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. The Trustee may conclusively rely on such Written Requisitions and shall be fully protected in relying thereon. On 120 days following issuance of the Bonds, or upon the earlier Written Request of the Authority, the Trustee shall transfer all amounts remaining in the Costs of Issuance Fund to the Bond Fund and shall thereupon close the Costs of Issuance Fund.
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SECTION 3.04. Establishment and Application of Project Fund. There is hereby established in trust a special fund designated the “Project Fund,” which will be held by the Trustee and which will be kept separate and apart from all other funds and moneys held by the Trustee into which the Trustee shall deposit a portion of the proceeds of sale of the Bonds under Section 3.02(b). The Trustee shall disburse amounts in the Project Fund from time to time to pay the Project Costs 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. The Trustee may conclusively rely on such Written Requisitions and shall be fully protected in relying thereon.
Upon the receipt of a Written Certificate of the City stating that the Project has been completed and that no further amounts are required to be disbursed from the Project Fund to pay Project Costs, the Trustee will close the Project Fund and transfer any remaining amounts to the Principal Account of the Bond Fund, to be applied as a credit towards the Lease Payments next coming due and payable.
SECTION 3.05. Validity of Bonds. The recital contained in the Bonds that the same are issued under the laws of the State of California shall be conclusive evidence of their validity and of compliance with the provisions of law in their issuance.
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ARTICLE IV
REDEMPTION OF BONDS
SECTION 4.01. Terms of Redemption.
(a) Optional Redemption. The Bonds maturing on or before April 1, 2029, are not subject to redemption prior to their respective stated maturities. The Bonds maturing on or after April 1, _____, are subject to redemption in whole, or in part at the at the election of the Authority among maturities on such basis as shall be designated by the Authority and by lot within a maturity, at the option of the Authority, on any date on or after April 1, _____, from any available source of funds, at a redemption price equal to the principal amount thereof to be redeemed together with accrued interest thereon to the redemption date, without premium.
The Authority shall give the Trustee written notice of its intention to redeem Bonds under Section 4.01(a) and Section 4.01(c), and the manner of selecting such Bonds for redemption from among the maturities thereof, in sufficient time to enable the Trustee to give notice of such redemption in accordance with Section 4.03. (b) The Term Bonds are subject to mandatory redemption in part by lot, 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 April 1 in the respective years as set forth in the following table; provided, however, that if some but not all of such Term Bonds have been redeemed pursuant to an optional redemption or special mandatory redemption from insurance or condemnation proceeds, the total amount of all future sinking fund payments shall be reduced by the aggregate principal amount of such Bonds so redeemed, to be allocated among such sinking fund payments on a pro rata basis in integral multiples of $5,000 (as set forth in a schedule provided by the Authority to the Trustee).
Term Bonds Maturing April 1, _________
Sinking Fund
Redemption Date
(April 1)
Principal Amount
To Be Redeemed
(maturity)
(c) Extraordinary Mandatory Redemption. The Bonds are subject to mandatory redemption prior to maturity in whole or in part among maturities as determined by the Authority, on any date, at a redemption price equal to 100% of the principal amount thereof to be redeemed (plus accrued but unpaid interest to the redemption date), without premium, from Net Proceeds received under Section 5.5 of the Lease Agreement and from amounts deposited in the Insurance and Condemnation Fund pursuant to Section
5.07 hereof, and any other funds available for such purpose under this Indenture.
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SECTION 4.02. Selection of Bonds for Redemption. Whenever provision is made in this Indenture for the redemption of less than all of the Bonds, the Bonds shall be selected for redemption on a pro-rata basis among outstanding maturities or as otherwise directed by the Authority. 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.
SECTION 4.03. Notice of Redemption; Rescission. The Trustee shall mail notice of redemption of the 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 Bonds designated for redemption at their addresses appearing on the Registration Books and to one or more Securities Depositories and to the Information Services. 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 Bonds (or all Bonds of a single maturity) are to be redeemed, the CUSIP numbers and (in the event that not all Bonds within a maturity are called for redemption) Bond numbers of the Bonds to be redeemed and the maturity or maturities of the Bonds to be redeemed, and in the case of Bonds to be redeemed in part only, the respective portions of the principal amount thereof to be redeemed. Each such notice shall also state that on the redemption date there will become due and payable on each of said Bonds the redemption price thereof, and that from and after such redemption date interest thereon shall cease to accrue, and shall require that such Bonds be then surrendered. 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 Bonds shall be given by the Trustee, at the expense of the Authority, for and on behalf of the Authority.
The Authority has the right to rescind any notice of the redemption of Bonds under Section 4.01(a) by written notice to the Trustee on or prior to the dated fixed for redemption. Any notice of optional 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 the payment in full of the 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 Bond Owners 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.
SECTION 4.04. Partial Redemption of Bonds. Upon surrender of any 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 Bond or Bonds of authorized denominations equal in aggregate principal amount to the unredeemed portion of the 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 Bonds (or portions thereof) so called for redemption being held by the Trustee, on the redemption date designated in such notice, the Bonds (or portions thereof) so called for redemption shall become due and payable, interest on the Bonds so called for redemption shall cease to accrue, said Bonds (or portions thereof) shall cease to be entitled to any benefit or security under this Indenture, and the Owners of said Bonds shall have no rights in respect thereof except to receive payment of the redemption price thereof.
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All 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 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 (including proceeds of the sale of the Bonds) held in any fund or account established under this Indenture are hereby pledged to secure the payment of the principal of and interest and premium (if any) on the Bonds in accordance with 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). 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 shall, 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. (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 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.
SECTION 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:
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(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 principal amount of the Bonds coming due and payable on such Interest Payment Date.
SECTION 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).
SECTION 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 amount of the Bonds at their respective maturity dates.
SECTION 5.05. Reserve Fund. he Trustee shall establish a special fund designated as the “Reserve Fund” to be held by the Trustee in trust for the benefit of the Authority and the Owners of the Bonds, and applied solely as provided herein. Moneys in the Reserve Fund in the amount of the Reserve Requirement as calculated from time to time shall be held in trust as a reserve for the payment when due of the Lease Payments on behalf of the Authority. The Authority may replace moneys in the Reserve Fund may be replaced by a Qualified Reserve Fund Credit Instrument at any time.
In the event the Reserve Fund is at any time maintained in cash rather than in the form of a Qualified Reserve Fund Credit Instrument, the Trustee shall retain in the Reserve Fund all earnings on the investment of amounts therein to the extent required to maintain the full amount of the Reserve Requirement on deposit in the Reserve Fund. All amounts on deposit in the Reserve Fund in excess of the Reserve Requirement as calculated from time to time, and all amounts derived from the investment of amounts in the Reserve Fund which are not required to be retained therein to maintain the Reserve Requirement, shall be transferred by the Trustee to the Bond Fund semiannually on the sixth (6th) Business Day prior to each Interest Payment Date.
(b) Application of Reserve Fund. If five (5) Business Days prior to any Interest Payment Date the moneys available in the Bond Fund do not equal the amount of the Lease Payment then coming due and payable, the Trustee shall apply the moneys available in the Reserve Fund to make such payments on behalf of the Authority by transferring the amount necessary for this purpose to the Bond Fund.
If there is no Qualified Reserve Fund Credit Instrument, then the Trustee shall apply the moneys available in the Reserve Fund to make such payments on behalf of the Authority by transferring the amount necessary for this purpose to the Bond Fund. Upon receipt of any delinquent Lease Payment with respect to which moneys have been advanced from the Reserve Fund, such Lease Payment shall be deposited in the Reserve Fund as needed to provide the Reserve Requirement, to the extent of such advance.
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If on any Interest Payment Date, the moneys on deposit in the Reserve Fund and the Bond Fund are sufficient to pay or prepay all Outstanding Bonds, including all principal, interest and prepayment premiums (if any) thereon, the Trustee shall, upon the written request of the Authority, transfer all amounts then on deposit in the Reserve Fund to the Bond Fund to be applied for such purpose to the payment of the Lease Payments on behalf of the Authority. Any amounts remaining in the Reserve Fund (including any account therein) on the date of payment in full, or provision for such payment as provided in Section 10.01, of all obligations represented by the Outstanding Bonds and upon all amounts then due and owing to the Trustee, shall be withdrawn by the Trustee and at the written request of the Authority applied towards such payment or paid to the Authority.
SECTION 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, amounts 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 (c); 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, 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, 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) Deposit of Proceeds. Any Net Proceeds of insurance and eminent domain awards with respect to the Leased Property collected by the City or the Authority in accordance with Article VI of the Lease will be deposited by the Trustee promptly upon receipt thereof in the Insurance and Condemnation Fund. (c) Application of Proceeds. Net Proceeds deposited in the Insurance and Condemnation Fund will be used, as directed by the City, either (i) to replace, repair, restore, modify or improve the Leased Property if the City determines that such is economically feasible or in the best interests of the City, or (ii) to the extent not so used, to prepay the Lease Payments on the next optional prepayment date, and thereby redeem outstanding Bonds pursuant to optional redemption.
Any proceeds of an insurance or eminent domain award deposited in the Insurance and Condemnation Fund to be applied to the prompt replacement, repair, restoration, modification or improvement of the damaged or destroyed portions of the Leased Property by the City, or to replace any Leased Property taken in eminent domain proceedings, shall be applied 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 Attachment 5
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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 (c) of this Section 5.07 and in each case, shall be fully protected in relying thereon.
Notwithstanding the foregoing, however, in the event of condemnation, damage or destruction of the Leased Property in full, the Net Proceeds of such insurance are required to be used by the City to redeem the Bonds in full; except that, if such proceeds and other amounts available under this Indenture are not sufficient to redeem outstanding Bonds in full, the City is required to rebuild or replace the Leased Property.
SECTION 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 two Business Days in advance of the making of such investments. In the absence of any such directions from the Authority, the Trustee shall hold such funds 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 Permitted Investments must be registered in the name of the Trustee.
All amounts in any of the funds or accounts established with the City under this Indenture shall be invested by the City solely in investments which are authorized for the investment of such funds under the applicable laws of the State of California and under the adopted investment policy of the City.
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, provided, however, that earnings on the investment of the amount in the Project Fund shall be retained therein.
For purposes of acquiring any investments hereunder, the Trustee may commingle funds held by it 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.
The Trustee may make any investments hereunder through its own bond or investment department or trust investment department, or those of its parent or any affiliate. The Trustee or any of its affiliates may act as sponsor, advisor or manager 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 Authority acknowledges that to the extent regulations of the Comptroller of the Currency or other applicable regulatory entity grant the Authority the right to receive Attachment 5
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brokerage confirmations of security transactions as they occur, the Authority will not receive such confirmations to the extent permitted by law. The Trustee will furnish the Authority a periodic cash transaction statements which shall include detail for all investment transactions made by the Trustee hereunder.
Except as otherwise provided hereunder or agreed in writing among the parties hereto, the Authority shall retain the authority to institute, participate and join in any plan or reorganization, readjustment, merger or consolidation with respect to the issuer of any securities held hereunder, and, in general, to exercise each and every other power or right with respect to each such asset or investment as individuals generally have and enjoy with respect to their own assets and investment, including power to vote upon any securities.
Unless the Authority notifies the Trustee otherwise in writing, the Trustee will provide the obligatory information to the registrant/issuer of any U.S. securities upon their request. Any objection will apply to all securities held in any trust account now and in the future unless the Authority notifies the Trustee in writing of such objection.
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 (as of the date that valuation is required by this Indenture or the Tax Code) 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) Investments in funds or accounts (or portions thereof) that are subject to a yield restriction under applicable provisions of the Tax Code shall be valued at cost thereof, (consisting of present value thereof within the meaning of Section 148 of the Tax Code); provided that the Authority shall inform the Trustee which funds are subject to a yield restriction.
(c) Except for any funds or accounts described in subsection (b), 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 January 1. 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 Attachment 5
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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, (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, or (iv) the investment is any commingled investment fund in which the Authority and related parties do not own more than a 10% beneficial interest therein if the return paid by the fund is without regard to the source of the investment. To the extent required by the applicable regulations under the Tax Code, the term “investment” will include a hedge. (e) To the extent of any valuations made by the Trustee hereunder, the Trustee may utilize and rely upon computerized securities pricing services that may be available to it, including those available through its regular accounting system.
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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 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.
SECTION 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 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.
SECTION 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 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.
SECTION 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.
SECTION 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 trust industry standards, in which 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 account available for inspection by the Authority and the City, during business hours, upon reasonable notice, and under reasonable circumstances.
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SECTION 6.06. Limitation on Additional Obligations. The Authority covenants that no additional bonds, notes or other indebtedness shall be issued or incurred which are payable out of the Revenues in whole or in part.
SECTION 6.07. Tax Covenants.
(a) Private Business Use Limitation. The Authority shall assure that the proceeds of the Bonds are not used in a manner which would cause the 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 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 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 Bonds to be “arbitrage bonds” within the meaning of Section 148(a) of the Tax Code. (d) Maintenance of Tax Exemption. The Authority shall take all actions necessary to assure the exclusion of interest on the Bonds from the gross income of the Owners of the 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. (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 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 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 Bonds, records of the determinations made under this subsection (e). (f) Record Retention. Without limiting the requirements of subsection (e) above, 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. (g) Compliance with Tax Certificate. The Authority will comply with the provisions of the Tax Certificate 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 Section will survive payment in full or defeasance of the Bonds.
SECTION 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 Attachment 5
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under the Lease. Subject to the provisions of Article VIII, the Trustee shall enforce, and take all steps, actions and proceedings which the Trustee determines 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 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.
SECTION 6.10. Further Assurances. The Authority shall make, execute and deliver any and all such further indentures, instruments and assurances as may be reasonably necessary or proper to carry out the intention or to facilitate the performance of this Indenture and for the better assuring and confirming unto the Owners of the Bonds of the rights and benefits provided in this Indenture.
SECTION 6.11. Maintenance of Existence. The Authority shall maintain its existence as a joint exercise of powers agency while any Bonds are Outstanding, including by substituting a new member for the Successor Agency to the Redevelopment Agency of the City of Desert Hot Springs if determined to be necessary for compliance with this covenant..
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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 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 the 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 such 30- day period and thereafter diligently and in good faith cures the failure in a reasonable period of time.
(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.
SECTION 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 in its discretion may, and upon the written request of the Owners of a majority in aggregate principal amount of the Bonds then outstanding, and upon being indemnified to its satisfaction therefor, the Trustee shall, proceed to protect or enforce its rights or the rights of such Owners by such appropriate action, suit, mandamus or other proceedings as it deems most effectual to protect and enforce any such right, at law or in equity, including but not limited to enforcement of any and all rights granted to the Authority or the Trustee under the Lease.
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 of and installments of interest on the Bonds payment of which is overdue, with interest on such overdue principal 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 known to the Trustee (other than in the payment Attachment 5
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of principal 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.
SECTION 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 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 and fees and expenses of its agents and advisors) incurred in and about the performance of its powers and duties under this Indenture;
(b) To the payment of the principal of and interest then due on the Bonds (upon presentation of the 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 of any Bonds which shall have become
due, whether at maturity or by acceleration or redemption, with interest on the overdue principal 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 due on such date to the persons entitled thereto, without any discrimination or preference; and
SECTION 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 Attachment 5
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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, this Indenture and applicable provisions of any law. All rights of action under this Indenture or the Bonds or otherwise 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 Trustee for the benefit and protection of all the Owners of such Bonds, subject to the provisions of this Indenture.
SECTION 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.
SECTION 7.06. Absolute Obligation of Board. Nothing herein or in the Bonds contained affects or impairs the obligation of the Authority, which is absolute and unconditional, to pay the principal 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.
SECTION 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 Attachment 5
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their former positions and rights hereunder, severally 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.
SECTION 7.08. Remedies Not Exclusive. No remedy herein conferred upon or reserved to the Trustee or 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.
SECTION 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 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.
SECTION 7.10. Notice to the Bond Owners of Default. 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 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. Duties, Immunities and Liabilities of Trustee. (a) The Trustee shall, prior to the occurrence of an Event of Default, and after the curing or waiving of all Events of Default which may have occurred, perform such duties and only such duties as are specifically set forth in this Indenture and no implied covenants or duties will be read into this Indenture against the Trustee. The Trustee shall, during the existence of any Event of Default (which has not been cured or waived), exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a reasonable corporate trustee would exercise or use.
(b) The City may remove the Trustee at any time, and shall remove the Trustee (i) if at any time requested to do so by an instrument or concurrent instruments in writing signed by the Owners of not less than a majority in aggregate principal amount of the Bonds then Outstanding (or their attorneys duly authorized in writing) or (ii) if at any time (A) the Trustee ceases to be eligible in accordance with subsection (e) of this Section
8.01, (B) becomes incapable of acting, (C) is adjudged a bankrupt or insolvent, (D) a receiver of the Trustee or its property is appointed, or (E) any public officer takes control or charge of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation. The City may accomplish such removal by giving 30 days written notice to the Trustee, whereupon the City will appoint a successor Trustee by an instrument in writing.
(c) The Trustee may at any time resign and be discharged from its duties and obligations hereunder by giving written notice of such resignation to the Authority and the City, and by giving the Bond Owners notice of such resignation by electronic notice. (d) Any removal or resignation of the Trustee and appointment of a successor Trustee becomes effective upon acceptance of appointment by the successor Trustee. If no successor Trustee has been appointed and accepted appointment within 30 days following giving notice of removal or notice of resignation as aforesaid, the resigning Trustee, at the expense of the City, or any Owner (on behalf of such Owner and all other Owners) may petition any federal or state court 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 shall signify its acceptance of such appointment by executing and delivering to the City and to its predecessor Trustee a written acceptance thereof, and to the predecessor Trustee an instrument indemnifying the predecessor Trustee for any costs or claims arising during the time the successor Trustee serves as Trustee hereunder, and 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, upon the receipt by the predecessor Trustee of the Request of the City 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 Attachment 5
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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 any property held by it 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 City will 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 City will mail or cause the successor Trustee to mail, by first class mail postage prepaid, a notice of the succession of such Trustee to the trusts hereunder to each rating agency which then maintains a rating on the Bonds and to the Owners at the addresses shown on the Registration Books. If the City 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 City. (e) Any Trustee appointed under the provisions of this Section in succession to the Trustee shall (i) be a company or bank having trust powers, (ii) have a corporate trust office in the State of California, (iii) have (or be part of a bank holding company system whose bank holding company has) a combined capital and surplus of at least $50,000,000, and (iv) be subject to supervision or examination by federal or state authority.
If such bank or company publishes a report of condition at least annually, under law or to the requirements of any supervising or examining authority above referred to, then for the purpose of this subsection the combined capital and surplus of such bank or company is deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. In case at any time the Trustee shall cease 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 subsection (c) of this Section.
SECTION 8.02. Merger or Consolidation. Any bank or company into which the Trustee may be merged or converted or with which either of them may be consolidated or any bank or company resulting from any merger, conversion or consolidation to which it shall be a party or any bank or company to which the Trustee may sell or transfer all or substantially all of its corporate trust business, provided such bank or company shall be eligible under subsection (e) of Section 8.01, 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.
SECTION 8.03. Liability of Trustee.
(a) The recitals of facts herein and in the Bonds contained shall be taken as statements of the City, and the Trustee assumes no responsibility for the correctness of the same, nor does it have any liability whatsoever therefor, nor does it make any representations as to the validity or sufficiency of this Indenture or of the Bonds nor does it incur any responsibility in respect thereof, other than as expressly stated herein. The Trustee is, however, be responsible for its representations contained in its certificate of authentication on the Bonds. The Trustee is not liable in connection with the performance of its duties hereunder, except for its own negligence or willful misconduct. The Trustee is not liable for the acts of any agents of the Trustee selected by it with due care. The Trustee may become the Owner of Bonds with the same rights it would have if they were Attachment 5
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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 the Owners, whether or not such committee shall represent the Owners of a majority in principal amount of the Bonds then Outstanding. The Trustee, either as principal or agent, may engage in or be entrusted in any financial or other transaction with the City.
(b) 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. (c) The Trustee is not liable for any action taken by it in good faith and believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Indenture, except for actions arising from the negligence or willful misconduct of the Trustee. The permissive right of the Trustee to do things enumerated hereunder shall not be construed as a mandatory duty.
(d) The Trustee will not be deemed to have knowledge of any Event of Default hereunder unless and until a responsible officer of the Trustee has actual knowledge thereof, or unless and until a responsible officer of the Trustee has received written notice thereof at its Office. Except as otherwise expressly provided herein, the Trustee shall not be bound to ascertain or inquire as to the performance or observance of any of the terms, conditions, covenants or agreements herein or of any of the documents executed in connection with the Bonds, or as to the existence of an Event of Default hereunder or thereunder. The Trustee shall not be responsible for the City’s payment of principal and interest on the Bonds, the City’s observance or performance of any other covenants, conditions or terms contained herein, or the validity or effectiveness of any collateral given to or held by it. Without limiting the generality of the foregoing, and notwithstanding anything herein to the contrary, the Trustee is not responsible for reviewing the contents of any financial statements furnished to the Trustee and may rely conclusively on the Certificate of the City accompanying such financial statements to establish the City’s compliance with its financial covenants hereunder.
(e) No provision in this Indenture requires the Trustee to risk or expend its own funds or otherwise incur any financial liability hereunder. The Trustee is entitled to receive interest on any moneys advanced by it hereunder, at the maximum rate permitted by law. (f) The Trustee may establish additional accounts or subaccounts of the funds established hereunder as the Trustee deems necessary or prudent in furtherance of its duties under this Indenture.
(g) The Trustee has no responsibility or liability whatsoever 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, nor shall the Trustee have any obligation to review any such material, and any such review by the Trustee will not be deemed to create any obligation, duty or liability on the part of the Trustee.
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(h) Before taking any action under Article VIII hereof the Trustee may require indemnity satisfactory to the Trustee be furnished to it to hold the Trustee harmless from any expenses whatsoever and to protect it against any liability it may incur hereunder. (i) The immunities extended to the Trustee also extend to its directors, officers, employees and agents.
(j) The permissive right of the Trustee to do things enumerated in this Indenture shall not be construed as a duty.
(k) The Trustee may execute any of the trusts or powers hereof and perform any of its duties through attorneys, agents and receivers and shall not be answerable for the conduct of the same if appointed by it with reasonable care. (l) The Trustee will not be considered in breach of or in default in its obligations hereunder or progress in respect thereto in the event of delay in the performance of such obligations due to unforeseeable causes beyond its control and without its fault or negligence, including, but not limited to, acts of God or of the public enemy or terrorists, acts of a government, acts of civil or military authority, acts of the other party, fires, floods, epidemics, pandemics, quarantine restrictions, strikes, freight embargoes, earthquakes, explosion, mob violence, riot, inability to procure or general sabotage or rationing of labor, equipment, facilities, sources of energy, material or supplies in the open market, litigation or arbitration involving a party or others relating to zoning or other governmental action or inaction pertaining to any project refinanced with the proceeds of the Bonds, malicious mischief, condemnation, and unusually severe weather or delays of suppliers or subcontractors due to such causes or any similar event and/or occurrences beyond the control of the Trustee.
(m) The Trustee shall not be accountable for the use or application by the Borrower of any of the Bonds or the proceeds thereof or for the use or application of any money paid over by the Trustee in accordance with the provisions of this Indenture or for the use and application of money received by any paying agent. (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” means the following 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 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 City, whenever a person is to be added or deleted from the listing. If the 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 understanding of such Instructions shall be deemed controlling. The City understands and agrees 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 City shall be responsible for ensuring that only Authorized Officers transmit Attachment 5
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such Instructions to the Trustee and that the 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 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 City agrees: (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 City; (iii) that 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. The Trustee may rely conclusively upon the investment direction of the District as to the suitability and legality of the directed investments.
SECTION 8.04. Right to Rely on Documents. The Trustee is protected in acting upon any notice, resolution, requisition, request, consent, order, certificate, report, opinion or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties. The Trustee may consult with counsel, including, without limitation, Bond Counsel or other counsel of or to the City, 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 the Trustee hereunder in accordance therewith.
The Trustee is not bound to recognize any person as the Owner of a Bond unless and until such Bond is submitted for inspection, if required, and such person’s title thereto is established to the satisfaction of the Trustee.
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 Certificate of the City, which shall be full warrant to the Trustee for any action taken or suffered in good faith under the provisions of this Indenture in reliance upon such Certificate, but in its discretion the Trustee may (but has no duty to), in lieu thereof, accept other evidence of such matter or may require such additional evidence as to it may deem reasonable. The Trustee may conclusively rely on any certificate or report of any Independent Accountant appointed by the City.
SECTION 8.05. Preservation and Inspection of Documents. The Trustee shall retain in its possession all documents received by it under the provisions of this Indenture, which are subject during normal business hours, and upon reasonable prior written notice, to the inspection of the City and any Owner, and their agents and representatives duly authorized in writing.
SECTION 8.06. Compensation and Indemnification. Absent any agreement to the contrary, the City shall pay to the Trustee from time to time compensation for all services Attachment 5
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rendered under this Indenture and also all expenses, charges, legal and consulting fees and other disbursements and those of its attorneys (including any allocated costs of internal counsel), agents and employees, incurred in and about the performance of its powers and duties under this Indenture.
The City further covenants to indemnify the Trustee and its officers, directors, agents and employees, against any loss, expense (including legal fees and expenses), suits, claims, judgments, damages and liabilities, whether or not litigated, which it may incur arising out of or in the exercise and performance of its powers and duties hereunder, including the costs and expenses of defending against any claim of liability and of enforcing any remedies hereunder and under any related documents, but excluding any and all losses, expenses and liabilities which are due to the negligence or willful misconduct of the Trustee, its officers, directors, agents or employees. The obligations of the City under this Section 8.06 shall survive resignation or removal of the Trustee under this Indenture and payment of the Bonds and discharge of this Indenture.
When the Trustee incurs expenses or renders services after the occurrence of an Event of Default, 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.
Upon an Event of Default, and only upon an Event of Default, the Trustee shall have a first lien with right of payment prior to payment on account of principal of and premium, if any, and interest on any Bond, upon the trust estate for the foregoing fees, charges and expenses incurred by it.
SECTION 8.07. Accounting Records and Financial Statements. The Trustee shall at all times keep, or cause to be kept, proper books of record and account, prepared in accordance with corporate trust industry standards, in which complete and accurate entries shall be made of all transactions made by it relating to the proceeds of the Bonds and all funds and accounts established and held by the Trustee under this Indenture. Such books of record and account shall be available for inspection by the City at reasonable hours, during regular business hours, with reasonable prior notice and under reasonable circumstances. The Trustee shall furnish to the City, at least semiannually, an accounting (which may be in the form of its customary account statements) of all transactions relating to the proceeds of the Bonds and all funds and accounts held by the Trustee under this Indenture.
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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 1939, Attachment 5
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as amended, or any similar federal statute hereafter in effect, and to add such other terms, conditions and provisions as may be permitted by said act or similar federal statute;
(iv) to facilitate the issuance of additional obligations which are payable from additional rental payments under the Lease; or
(v) to modify, amend or supplement this Indenture in such manner as to assure that the interest on the Bonds remains excluded from gross income under the Tax Code.
(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.
(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.
SECTION 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.
SECTION 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 Owner, for Bonds then Outstanding, upon surrender for cancellation of such Bonds, in equal aggregate principal amount of the same maturity.
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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.
Attachment 5
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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 of and interest on such Bonds, as and when the same become due and payable;
(b) by depositing with the Trustee or an escrow agent, 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. 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.
SECTION 10.02. Discharge of Liability on Bonds. Upon the 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 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 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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SECTION 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 of and interest and premium (if any) on the Bonds to be paid or redeemed, as such principal, interest and premium become due, provided that in the case of Bonds which are to be redeemed 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 or escrow agent shall have been irrevocably instructed (by the terms of this Indenture or otherwise) to apply such money to the payment of such principal of and interest on 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 entitled to conclusively rely on such Written Request or opinion and shall be fully protected, in each case, in relying thereon.
SECTION 10.04. Unclaimed Funds. Notwithstanding any provisions of this Indenture, any moneys held by the Trustee in trust for the payment of the principal of, or interest on, any Bonds and remaining unclaimed for 2 years after the principal 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 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.
Attachment 5
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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 and other assets pledged under this Indenture for any of the purposes in this Indenture mentioned, whether for the payment of the principal 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 purposes hereof any funds of the Authority which may be made available to it for such purposes.
SECTION 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.
SECTION 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 with respect to all such funds and accounts shall at all times be maintained in accordance with 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.
SECTION 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 may, in lieu of such cancellation and delivery, destroy such Bonds as may be allowed by law, and at the written request of the Authority the Trustee shall deliver a certificate of such destruction to the Authority.
SECTION 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 Attachment 5
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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 irrespective of the fact that any one or more Sections, paragraphs, sentences, clauses or phrases of this Indenture may be held illegal, invalid or unenforceable.
SECTION 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 City City of Ukiah
or the Authority: Attention: Finance Director
300 Seminary Avenue
Ukiah, CA 95482
If to the Trustee: The Bank of New York Mellon Trust Company, N.A.
Attention: Corporate Trust Administration
333 S. Hope Street, Suite #2525
Los Angeles, California 90071
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.
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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.
SECTION 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 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. 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 specify to the Trustee those Bonds disqualified under this Section 11.09.
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 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.
SECTION 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 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.
SECTION 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.
SECTION 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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SECTION 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.
SECTION 11.15. Governing Law. This Indenture shall be governed by and construed in accordance with the laws of the State of California. [Remainder of page intentionally left blank. Signatures on next page.] Attachment 5
[Signature Page to Indenture of Trust dated as of February 1, 2022] IN WITNESS WHEREOF, the UKIAH PUBLIC FINANCING AUTHORITY has caused this Indenture to be signed in its name by its Treasurer and attested to by its Secretary, and THE BANK OF NEW YORK MELLON TRUST COMPANY, 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.
UKIAH PUBLIC FINANCING
AUTHORITY
By:
Daniel Buffalo
Treasurer
THE BANK OF NEW YORK MELLON
TRUST COMPANY,
as Trustee
By:
Authorized Officer
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APPENDIX A
DEFINITIONS
“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 February 1, 2022, between the Authority as assignor and the Trustee as assignee, as originally executed or as thereafter amended.
“Authority” means the Ukiah Public Financing Authority, a joint powers authority duly organized and existing under the Joint Exercise of Powers Agreement, dated as of May 5, 2020, by and between the City and the Industrial Development Authority of the City of Ukiah, creating the Authority, together with any amendments thereof and supplements thereto, and under the laws of the State of California. “Authorized Representative” (a) with respect to the Authority, the Executive Director, Assistant Executive Director, Treasurer or any other person designated as an Authorized Official of the Authority by its Executive Director, Assistant Executive Director, Treasurer and notified to the City and the Trustee; and (b) with respect to the City, the City Manager, Assistant City Manager, Finance Director, or any other person designated as an Authorized Official the City Manager, Assistant City Manager, Finance Director and notified to 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 nationallyrecognized 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 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, as in effect on the Closing Date or as thereafter amended in accordance with its terms. “Bond Year” means each twelve-month period extending from June 2 in one calendar year to April 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 April 1, 2022.
“Bonds” means the $_______________ aggregate principal amount of Ukiah Public Financing Authority Lease Revenue Bonds, Series 2022 (Capital Projects) authorized by and at any time Outstanding under the Bond Law and this Indenture. “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.
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“City” means the City of Ukiah, a municipal corporation organized and existing under the laws of the State of California.
“Closing Date” means ___________, 2022, being 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 and the Authority relating to the authorization, issuance, sale and delivery of the Bonds, including but not limited to: Authority formation and administration costs, 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, financial advisors, accounting firms, consultants and other professionals; fees and charges for preparation, execution and safekeeping of the Bonds; title insurance and other insurance costs, and any other cost, charge or fee in connection with the original issuance of the 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 bookentry system. “DTC” means The Depository Trust Company, 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 Bonds at a yield in excess of the yield on the 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 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.
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“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 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.
“Information Services” means in accordance with then-current guidelines of the Securities and Exchange Commission, the Electronic Municipal Market Access System (referred to as “EMMA”), a facility of the Municipal Securities Rulemaking Board (at http://emma.msrb.org), or such service or services as the Authority may designate in a certificate delivered to the Trustee.
“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 October 1 and April 1, commencing April 1, 2022 so long as any Bonds remain unpaid.
“Lease” means the Lease Agreement dated as of February 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 5th 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. “Moody’s” means Moody’s Investors Service, its successors and assigns. “Net Proceeds” means amounts derived from any policy of property 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 Attachment 5
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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 and operations business is conducted. “Original Purchaser” means Hilltop Securities, Incorporated, as original purchaser of the 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 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) if a title insurance policy covers the Leased Property, exceptions disclosed therein; 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 instrumentality of the United States of America, the timely payment of principal and interest on which are directly or indirectly secured or guaranteed by the full faith 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 at the time of purchase.
(d) Interest-bearing deposit accounts (including certificates of deposit) in federal or State chartered savings and loan associations or in federal or State of California banks (including the Trustee and its affiliates), Attachment 5
A-5
provided that: (i) the unsecured obligations of such commercial bank or savings and loan association are rated A or better by S&P at the time of purchase; or (ii) such deposits are fully insured by the Federal Deposit Insurance Corporation.
(e) Commercial paper rated “A-1+” or better by S&P at the time of purchase.
(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 at the time of purchase. (g) Money market 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 at the time of purchase, which funds may include funds for which the Trustee, its affiliates, parent or subsidiaries receives and retains a fee for services provided to the fund, whether as custodian, transfer agent, investment advisor or otherwise.
(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 at the time of purchase, 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 at the time of purchase.
(j) Bonds or notes issued by any state or municipality which are rated A or better by S&P at the time of purchase.
(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.
(m) Ratings of Permitted Investments referred to herein shall be determined at the time of purchase of such Permitted Investments and without regard to rating subcategories. The Trustee shall have no responsibility to monitor the ratings of Permitted Investments after the initial purchase of such Permitted Attachment 5
A-6
Investments, or the responsibility to validate Permitted Investments the ratings of Permitted Investments prior to the initial purchase. “Principal Account” means the account by that name established and held by the Trustee in the Bond Fund under Section 5.02.
“Project” means energy efficiency improvements to various City facilities, and incidental expenses related to the foregoing, as such project may be modified by the City Council from time to time.
“Project Costs” means, with respect to the Project, all costs of the acquisition, 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 the purchase of the Project or otherwise relating to the acquisition, construction and installation of the Project; (b) obligations incurred for labor and materials in connection with the acquisition, construction and installation of the Project; (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 Project;
(d) preliminary costs of the Project, including but not limited to design, environmental, engineering and architectural services, costs for testing, surveys, estimates, plans and specifications and preliminary investigations therefor, development fees and costs 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 Project;
(e) costs of equipping and furnishing the Project, and costs of taking occupancy of the Project including costs incurred in connection with the relocation of City functions and personnel into the Project; (f) 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 Project;
(g) all financing costs incurred in connection with the acquisition, construction and installation of the Project; and
(h) the Lease Payments coming due during the period of construction of the Project.
“Project Fund” means the fund by that name established and held by the City under Section 3.04.
Attachment 5
A-7
“Qualified Reserve Fund Credit Instrument” means an irrevocable standby or direct-pay letter of credit or surety bond issued by a commercial bank or insurance company and deposited with the Trustee pursuant to Section 5.05, provided that all of the following requirements are met: (a) the long-term credit rating of such bank or insurance company is rated in the “AA” category or higher by S&P or Moody’s at the time of issuance; (b) such letter of credit or surety bond has a term of at least twelve (12) months; (c) such letter of credit or surety bond has a stated amount at least equal to the portion of the Reserve Requirement with respect to which funds are proposed to be released pursuant to Section 5.05; and (d) the Trustee is authorized pursuant to the terms of such letter of credit or surety bond to draw thereunder an amount equal to any deficiencies which may exist from time to time in the Bond Fund for the purpose of making payments required pursuant to Section 5.05.
“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.
“Redemption Fund” means the fund by that name established and held by the Trustee under Section 5.01.
“Registration Books” means the records maintained by the Trustee under Section
2.05 for the registration and transfer of ownership of the Bonds. “Reserve Fund” means the fund by that name established and held by the Trustee pursuant to Section 5.05.
“Reserve Requirement” means, as of any date of calculation thereof by the Authority, an amount equal to the lesser of (a) 10% of the original principal amount of such series of Bonds, (b) the maximum amount of debt service coming due in the current or any future Bond Year with respect to such series of Bonds, or (c) 125% of average annual debt service for such series of Bonds. The initial Reserve Requirement is $___________ and the Reserve Requirement may be recalculated by the Authority on any date. “Revenues” means all amounts received by the Authority or the Trustee under or with respect to the Lease 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 relating to permitted amendments that provide for additional rental to be pledged or assigned for the payment of bonds or obligations 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), and 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.
Attachment 5
A-8
“Site Lease” means the Site Lease dated as of February 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 division of Standard & Poor’s Financial Services LLC, and its successors or assigns, except that if such entity shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, then the term “S&P” shall be deemed to refer to any other nationally recognized securities rating agency selected by the City.
“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 proposed, 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.
“Trustee” means The Bank of New York Mellon Trust Company, 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. “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.
Attachment 5
B-1
APPENDIX B
BOND FORM
No. R-____ ***$________***
UNITED STATES OF AMERICA
STATE OF CALIFORNIA
UKIAH PUBLIC FINANCING AUTHORITY
LEASE REVENUE BONDS, SERIES 2022
(Capital Projects)
INTEREST RATE: MATURITY DATE: ORIGINAL ISSUE DATE: CUSIP:
______% April 1, ____ __________, 2022 _______
REGISTERED OWNER: CEDE & CO.
PRINCIPAL AMOUNT: ***_______________ DOLLARS***
The UKIAH PUBLIC FINANCING AUTHORITY, a joint exercise of powers authority 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 15th day of the month 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 March 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 April 1 and October 1 in each year, commencing April 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 corporate trust office of The Bank of New York Mellon Trust Company, in San Francisco, California (the “Trust Office”), as trustee Attachment 5
B-2
(the “Trustee”). Interest hereon is payable by check of the Trustee mailed on the Interest Payment Date 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 preceding 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 Ukiah (the “City”), the County of Mendocino, 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 “Ukiah Public Financing Authority Lease Revenue Bonds, Series 2022 (Capital Projects) (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 (the “Bond Law”), and under an Indenture of Trust dated as of February 1, 2022, between the Authority and the Trustee (the “Indenture”) and a resolution of the Authority adopted on __________, 2021, 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 the 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 finance the acquisition and construction of capital improvements of the City. 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 February 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 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 interest thereon, or extend the time of payment of interest thereon, without the consent of the owner of each Bond so affected.
Attachment 5
B-3
The Bonds maturing on or after April 1, _____, are subject to redemption in whole, or in part at the at the election of the Authority among maturities on such basis as shall be designated by the Authority and by lot within a maturity, at the option of the Authority, on any date on or after April 1, ____, from any available source of funds, at a redemption price equal to the principal amount thereof to be redeemed together with accrued interest thereon to the redemption date, without premium.
The Bonds are subject to mandatory redemption in part by lot, 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 April 1 in the respective years as set forth in the following table; provided, however, that if some but not all of such Bonds have been redeemed pursuant to an optional redemption or special mandatory redemption from insurance or condemnation proceeds, the total amount of all future sinking fund payments shall be reduced by the aggregate principal amount of such Bonds so redeemed, to be allocated among such sinking fund payments on a pro rata basis in integral multiples of $5,000 (as set forth in a schedule provided by the Authority to the Trustee).
Bonds Maturing April 1, _________
Sinking Fund
Redemption Date
(April 1)
Principal Amount
To Be Redeemed
(maturity)
The Bonds are subject to mandatory redemption prior to maturity in whole or in part among maturities as determined by the Authority on any date, at a redemption price equal to 100% of the principal amount thereof to be redeemed (plus accrued but unpaid interest to the redemption date), without premium, from Net Proceeds of certain damage and condemnation awards deposited in the Insurance and Condemnation Fund, Net Proceeds of title insurance, if any, and from any other funds available for such purpose under this Indenture.
As provided in the Indenture, notice of redemption will be mailed by the Trustee by first class mail not less than 20 or 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 notice 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 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 Attachment 5
B-4
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 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 Bond Law 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 Bond Law 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.
IN WITNESS WHEREOF, the Ukiah Public Financing Authority has caused this Bond to be executed in its name and on its behalf with the facsimile signature of its Treasurer and attested to by the facsimile signature of its Secretary, all as of the Original Issue Date specified above.
UKIAH PUBLIC FINANCING AUTHORITY
By:
Authorized Officer
Attest:
Secretary
Attachment 5
B-5
CERTIFICATE OF AUTHENTICATION
This is one of the Bonds described in the within-mentioned Indenture.
Dated:
THE BANK OF NEW YORK MELLON
TRUST COMPANY,
as Trustee
By:
Authorized Signatory
Attachment 5
B-6
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 alteration or
enlargement or any change whatsoever.
Attachment 5
Jones Hall Draft 1.11.22
ASSIGNMENT AGREEMENT
This ASSIGNMENT AGREEMENT (this “Agreement”), dated for convenience as of February 1, 2022, is between the UKIAH PUBLIC FINANCING AUTHORITY, a joint exercise of powers authority organized and existing under the laws of the State of California (the “Authority”), and THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A., a national banking association organized and existing under the laws of the United States of America, as trustee (the “Trustee”).
BACKGROUND:
1. The City is proceeding to reconstruct its corporation yard and construct improvements to various City streets (collectively, the “Project”).
2. In order to provide funds to finance a portion of the costs of the Project, the City has agreed to lease the real property more particularly described in Appendix A attached hereto and by this reference incorporated herein, consisting of streets in the City (the “Leased Property”) to the Authority under a Site Lease dated as of February 1, 2022 which has been executed concurrently herewith (the “Site Lease”), under which the Authority agrees to make an initial rental payment (the “Site Lease Payment”) which is sufficient to provide funds for such purposes.
3. The Authority has authorized the issuance of its Ukiah Public Financing Authority Lease Revenue Bonds, Series 2022 (Capital Projects) in the aggregate principal amount of $_______________ (the “Bonds”) under an Indenture of Trust dated as of February 1, 2022 (the “Indenture”), between the Authority and The Bank of New York Mellon Trust Company, N.A., as trustee (the “Trustee”), and 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 (the “Bond Law”), 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.
4. In order to provide revenues which are sufficient to enable the Authority to pay debt service on the Bonds, the Authority has agreed to lease the Leased Property back to the City under the Lease Agreement dated as of February 1, 2022 (the “Lease Agreement”), which has been executed concurrently herewith, under which the City agrees to pay semiannual Lease Payments as the rental for the Leased Property thereunder.
5. The Authority has requested the Trustee to enter into this Agreement for the purpose of assigning certain of its rights under the Lease to the Trustee for the benefit of the Bond owners.
Attachment 6
-2-
AGREEMENT:
In consideration of the material covenants contained in this Agreement, the parties hereto hereby formally covenant, agree and bind themselves as follows:
SECTION 1. Defined Terms. All capitalized terms not otherwise defined herein have the respective meanings given those terms in the Indenture.
SECTION 2. Assignment. The Authority hereby assigns to the Trustee, for the benefit of the Owners of all Bonds which are issued and Outstanding under the Indenture, all of the Authority’s rights under the Lease (excepting only the Authority’s rights under Sections 4.5, 5.10, 7.3 and 8.4 of the Lease), including but not limited to:
(a) the right to receive and collect all of the Lease Payments from the City under the Lease,
(b) the right to receive and collect any proceeds of any insurance maintained thereunder with respect to the Leased Property, or any eminent domain award (or proceeds of sale under threat of eminent domain) paid with respect to the Leased Property, and
(c) the right to exercise such rights and remedies conferred on the Authority under the Lease as may be necessary or convenient (i) to enforce payment of the Lease Payments and any amounts required to be deposited in the Insurance and Condemnation Fund
established under Section 5.07 of the Indenture, or (ii) otherwise to protect the interests of the Bond Owners in the event of a default by the City under the Lease.
The Trustee shall administer all of the rights assigned to it by the Authority under this Agreement in accordance with the provisions of the Indenture, for the benefit of the Owners of Bonds. The assignment made under this Section 2 is absolute and irrevocable, and without recourse to the Authority.
SECTION 3. Acceptance. The Trustee hereby accepts the assignments made herein for the purpose of securing the payments due under the Lease and Indenture to, and the rights under the Lease and Indenture of, the Owners of the Bonds, all subject to the provisions of the Indenture. The recitals contained herein are those of the Authority and not of the Trustee, and the Trustee assumes no responsibility for the correctness thereof.
SECTION 4. Conditions. This Agreement confers no rights and imposes no duties upon the Trustee beyond those expressly provided in the Indenture. The assignment hereunder to the Trustee is solely in its capacity as Trustee under the Indenture.
SECTION 5. Execution in Counterparts. This Agreement may be executed in any number of counterparts, each of which is an original and all together constitute one and the same agreement. Separate counterparts of this Agreement may be separately executed by the Trustee and the Authority, both with the same force and effect as though the same counterpart had been executed by the Trustee and the Authority.
Attachment 6
-3-
SECTION 6. Binding Effect. This Agreement inures to the benefit of and binds the Authority and the Trustee, and their respective successors and assigns, subject, however, to the limitations contained herein.
SECTION 7. Governing Law. This Agreement is governed by the laws of the State of California.
Attachment 6
[Signature Page to Assignment Agreement dated as of February 1, 2022] IN WITNESS WHEREOF, the parties have executed this Agreement by their duly authorized officers as of the day and year first written above.
UKIAH PUBLIC FINANCING
AUTHORITY
By:
Daniel Buffalo
Treasurer
THE BANK OF NEW YORK MELLON
TRUST COMPANY,
as Trustee
By:
Authorized Officer
Attachment 6
A-1
APPENDIX A
DESCRIPTION OF THE LEASED PROPERTY
The Leased Property consists of that certain real property, together with all fixtures, equipment or other improvements located upon the real property, except as to the library as excluded below, situated in the City of Ukiah, County of Mendocino, State of California, described as follows:
[[All City Streets]]
Attachment 6
Jones Hall Draft 1.12.22
PRELIMINARY OFFICIAL STATEMENT DATED FEBRUARY ___, 2022 NEW ISSUE - FULL BOOK-ENTRY RATING: S&P: “___”
See “RATING”
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 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.” $________*
UKIAH PUBLIC FINANCING AUTHORITY
Lease Revenue Bonds, Series 2022
(Capital Projects)
Dated: Date of Delivery Due: April 1, as shown on inside cover Authority for Issuance. The bonds captioned above (the “Bonds”) are being issued by the Ukiah Public Financing Authority (the “Authority”) an Indenture of Trust dated as of February 1, 2022 (the “Indenture”) by and between the Authority and The Bank of New York Mellon Trust Company, N.A., as trustee (the “Trustee”) and pursuant a resolution adopted by the Board of Directors of the Authority. See “THE BONDS – Authority for Issuance.”
Use of Proceeds. The Bonds are being issued to renovate the Corporation Yard, construct improvements to various City streets and pay issuance costs. See “FINANCING PLAN.”
Security for the Bonds. Under the Indenture, the Bonds are payable from and secured by a first pledge of and lien on (“Revenues”) (as defined in this Official Statement) received by the Authority under the Lease Agreement dated as of February 1, 2022, by and between the Authority, as lessor, and the City, as lessee (the “Lease”), consisting primarily of semi-annual lease payments (the “Lease Payments”) made by the City under the Lease with respect to the lease of certain real property, as further described in this Official Statement. The Bonds are also secured by certain funds on deposit under the Indenture. See “SECURITY FOR THE BONDS.” Bond Terms; Book-Entry Only. The Bonds will bear interest at the rates shown on the inside cover page, payable semiannually on April 1 and October 1 of each year, commencing on October 1, 2022, and will be issued in fully registered form without coupons in the denomination of $5,000 or any integral multiple of $5,000. The Bonds will be issued in book-entry only form, initially registered in the name of Cede & Co., as nominee of The Depository Trust Company (“DTC”). Purchasers of the Bonds will not receive certificates representing their interests in the Bonds. Payments of the principal of, premium, if any, and interest on the Bonds will be made to DTC, which is obligated in turn to remit such principal, premium, if any, and interest to its DTC Participants for subsequent disbursement to the beneficial owners of the Bonds. See “THE BONDS – General Provisions.”
Reserve Fund. The Authority will establish a debt service reserve fund for the Bonds from proceeds of the Bonds, as described herein.
See “SECURITY FOR THE BONDS.”
Redemption. The Bonds are subject to redemption prior to maturity. See “THE BONDS – Redemption.”
NEITHER THE 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 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.
MATURITY SCHEDULE
(see inside cover)
THIS COVER PAGE CONTAINS CERTAIN INFORMATION FOR GENERAL REFERENCE ONLY. IT IS NOT A SUMMARY OF THIS ISSUE OF BONDS. INVESTORS MUST READ THE ENTIRE OFFICIAL STATEMENT TO OBTAIN INFORMATION ESSENTIAL TO THE MAKING OF AN INFORMED INVESTMENT DECISION WITH RESPECT TO THE PURCHASE OF THE BONDS.
The Bonds are offered when, as and if issued and received by the Underwriter and subject to the approval as to their legality by Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel. 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. Certain legal matters will be passed upon for the Underwriter by its counsel, _____________, California.
It is anticipated that the Bonds will be delivered in book-entry form through the facilities of DTC on or about ________, 2022*. [Piper logo]
The date of this Official Statement is: ______, 22.
* 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 7
MATURITY SCHEDULE
$_________ Serial Bonds
(Base CUSIP†: ______)
Maturity Principal Interest
(April 1) Amount Rate Yield Price CUSIP†
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043
2044
2045
2046
2047
2048
2049
2050
2051
$___________ ____% Term Bonds due April 1, 20___; Price: _____%; Yield: ______; CUSIP†: _______
* Preliminary, subject to change.
† CUSIP® is a registered trademark of the American Bankers Association. CUSIP Global Services (CGS) is managed on behalf of the American Bankers Association by S&P Global Market Intelligence. Copyright© 2022 CUSIP Global Services. All rights reserved. CUSIP® data herein is provided by CUSIP Global Services. This data is not intended to create a database and does not serve in any way as a substitute for the CGS database.
CUSIP® numbers are provided for convenience of reference only. None of the City, the Authority nor the Underwriter takes any responsibility for the accuracy of such numbers.
Attachment 7
UKIAH PUBLIC FINANCING AUTHORITY
Ukiah, California
_______________________
AUTHORITY BOARD / CITY COUNCIL
Douglas Crane, Chair/Mayor
Juan Orozco, Vice Chair/Vice Mayor
Steve Scalmanini, Authority Member/Councilmember
Jim Brown, Authority Member/Councilmember
Maureen Mulheren, Authority Member/Councilmember
CITY / AUTHORITY STAFF
Sage Sangiacomo, City Manager/Executive Director
Allen Carter, City Treasurer
Daniel Buffalo, Finance Director/Authority Treasurer
Mel Grandi, P.E., Electric Utility Director
Tim Eriksen, Public Works Director/City Engineer
Kristine Lawler, City Clerk/Secretary
David Rapport, Esq., City Attorney/Authority Counsel
PROFESSIONAL SERVICES
Bond Counsel and Disclosure Counsel
Jones Hall, A Professional Law Corporation
San Francisco, California
Municipal Advisor
NHA Advisors, LLC
San Rafael, California
Trustee
The Bank of New York Mellon Trust Company, N.A.
Los Angeles, California
Attachment 7
GENERAL INFORMATION ABOUT THIS OFFICIAL STATEMENT
No dealer, broker, salesperson or other person has been authorized to give any information or to make any representations with respect to the Bonds other than as contained in this Official Statement, and if given or made, such other information or representation must not be relied upon as having been authorized.
This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy in any state in which such offer or solicitation is not authorized or in which the person making such offer or solicitation is not qualified to do so or to any person to whom it is unlawful to make such offer or solicitation.
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 Bonds will, under any circumstances, create any implication that there has been no change in the affairs of the City or any other parties described in this Official Statement, or in the condition of the security for the Bonds since the date of this Official Statement.
This Official Statement is submitted in connection with the sale of the Bonds referred to in this Official Statement and may not be reproduced or used, in whole or in part, for any other purpose. This Official Statement is not a contract with the purchasers of the Bonds. Prospective investors should not construe the contents of this Official Statement as legal, tax or investment advice.
The information contained in this Official Statement has been obtained from sources that are believed to be reliable, but this information is not guaranteed as to accuracy or completeness.
The Underwriter has submitted the following statement for inclusion in this Official Statement: The Underwriter has reviewed the information in this Official Statement in accordance with, and as a part of, its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information.
All references to and summaries of the Indenture or other documents contained in this Official Statement are subject to the provisions of those documents and do not purport to be complete statements of those documents.
The Bonds have not been registered under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, in reliance upon exemptions for the issuance and sale of municipal securities provided under Section 3(a)(2) of the Securities Act of 1933 and Section 3(a)(12) of the Securities Exchange Act of 1934.
Certain statements included or incorporated by reference in this Official Statement constitute forward-looking statements. Such statements are generally identifiable by the terminology used such as “plan,” “expect,” “estimate,” “project,” “budget” or other similar words. The achievement of certain results or other expectations contained in such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements described to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. No assurance is given that actual results will meet the forecasts of the City in any way, regardless of the level of optimism communicated in the information. The City is not obligated to issue any updates or revisions to the forward-looking statements if or when its expectations, or events, conditions or circumstances on which such statements are based occur.
The references to internet websites in this Official Statement are shown for reference and convenience only; unless explicitly stated to the contrary, the information contained within the websites and any links contained within those websites are not incorporated herein by reference and do not constitute part of this Official Statement.
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TABLE OF CONTENTS
INTRODUCTION............................................... 1 FINANCING PLAN ............................................ 3 Estimated Sources and Uses ........................ 4
THE LEASED PROPERTY ............................... 5
Leased Property ............................................ 5 Substitution and Release............................... 5 DEBT SERVICE SCHEDULE ........................... 7
THE BONDS ..................................................... 8 Authority for Issuance.................................... 8 General Provisions ........................................ 8 Transfer, Registration and Exchange............ 9
Redemption ................................................. 10 Book-Entry Only System ............................. 11 SECURITY FOR THE BONDS........................ 12
Revenues; Pledge of Revenues.................. 12
Assignment to Trustee................................. 12 Allocation of Funds by Trustee.................... 13
Lease Payments.......................................... 13 Limited Obligation........................................ 15 No Additional Bonds.................................... 16 Source of Lease Payments; Covenant to
Budget and Appropriate .......................... 16
Abatement ................................................... 16 Remedies on Default................................... 17 Property Insurance ...................................... 18 THE AUTHORITY ........................................... 19 THE CITY........................................................ 19 General........................................................ 19 City Government.......................................... 20 Labor Relations ........................................... 21 CITY FINANCIAL INFORMATION .................. 21
Accounting and Financial Reporting............ 21
COVID-19 Pandemic................................... 23 General Fund, the Budget Process and
Information .............................................. 23 Sales and Use Taxes .................................. 27 Other Sources of Revenues ........................ 30
Transient Occupancy Tax............................ 30
Property Taxes ............................................ 31 Financial Statements................................... 37 General Fund Historical Financial Data .......37
Relevant Fiscal Policies...............................39 Employee Retirement System; CalPERS....41
General Fund Long-Term Indebtedness......47
OVERLAPPING DEBT OF THE CITY.............49
Direct and Overlapping Bonded Debt ..........49
CONSTITUTIONAL AND STATUTORY
LIMITATIONS ON TAXES AND
APPROPRIATIONS.....................................50
Article XIIIA of the State Constitution...........50
Article XIIIB of the State Constitution...........50
Articles XIIIC and XIIID of the State
Constitution..............................................51 Proposition 1A; Proposition 22 ....................52
Unitary Property...........................................53 Possible Future Initiatives............................53 BOND OWNERS’ RISKS.................................53
No Pledge of Taxes .....................................53 Additional Obligations of the City.................55
Default .........................................................56 Abatement ...................................................56 Sales Taxes .................................................56 Property Taxes ............................................57 Natural Calamities .......................................58 COVID-19 Pandemic ...................................59 Cyber Security .............................................59 Limitations on Remedies Available to Bond
Owners ....................................................59 Secondary Market for Bonds .......................60
TAX MATTERS................................................60 CERTAIN LEGAL MATTERS ..........................62
LITIGATION.....................................................62 RATING ...........................................................63 CONTINUING DISCLOSURE..........................63
MUNICIPAL ADVISOR....................................63 UNDERWRITING ............................................64 PROFESSIONAL SERVICES..........................64
EXECUTION...............................................65 APPENDIX A: AUDITED FINANCIAL STATEMENTS OF THE CITY FOR FISCAL YEAR ENDED JUNE 30, 2021 APPENDIX B: GENERAL INFORMATION ABOUT THE CITY OF UKIAH AND THE COUNTY OF MENDOCINO APPENDIX C: SUMMARY OF PRINCIPAL LEGAL DOCUMENTS
APPENDIX D: FORM OF CONTINUING DISCLOSURE CERTIFICATE
APPENDIX E: FORM OF OPINION OF BOND COUNSEL
APPENDIX F: DTC AND THE BOOK-ENTRY ONLY SYSTEM
Attachment 7
[Insert Regional Location Map]
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__________________________________
OFFICIAL STATEMENT
__________________________________
$________*
UKIAH PUBLIC FINANCING AUTHORITY
Lease Revenue Bonds, Series 2022
(Capital Projects)
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, including the cover page and appendices hereto, and the documents summarized or described herein. A full review should be made of the entire Official Statement.
The offering of the Bonds to potential investors is made only by means of the entire Official Statement. Capitalized terms used but not defined in this Official Statement have the meanings set forth in the Indenture (as defined below). See “APPENDIX C – SUMMARY OF PRINCIPAL LEGAL DOCUMENTS.”
Authority for Issuance. The Ukiah Public Financing Authority (the “Authority”) is issuing the bonds captioned above (the “Bonds”) under the Marks-Roos Local Bond Pooling Act of 1985, constituting Article 4 (commencing with Section 6584) of Chapter 5, Division 7, Title 1 of the California Government Code (the “Bond Law”), resolutions adopted by the Board of Directors (the “Board”) of the Authority on [January 19], 2022 (the “Authority Resolution”), and by the City Council (the “City Council”) of the City of Ukiah (the “City”) on [January 19], 2022 (the “City Resolution”), and an Indenture of Trust (the “Indenture”) dated as of February 1, 2022, by and between the Authority and The Bank of New York Mellon Trust Company, N.A., as trustee (the “Trustee”).
Purpose of the Bonds. The Bonds are being issued to (i) renovate the Corporation Yard and, (ii) construct improvements to various City streets (collectively, the “Project”), (ii) provide for a deposit to a debt reserve fund for the Bonds, and (iii) pay costs of issuance of the Bonds. See “FINANCING PLAN.”
The Authority and the City. The Authority is a joint powers authority established pursuant to that certain Joint Exercise of Powers Agreement dated May 5, 2020 The Authority is governed by a five-member Board of Directors (the “Board”), which consists of the members of the City Council of the City. The Authority was created for the purpose of assisting the financing or refinancing of certain public capital facilities within the City. Under the Bond Law, the Authority has the power to lease real property in furtherance of the acquisition of public improvements necessary or convenient for the operation of the City, or to purchase bonds issued by any local * Preliminary; subject to change.
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agency at public or negotiated sale and may sell such bonds to public or private purchasers at public or negotiated sale. See “THE AUTHORITY” herein.
The City encompasses approximately five square miles and is located in Mendocino County (the “County”), approximately 100 miles north of San Francisco in the northern coastal region of the State on U.S. Highway 101. The area is centrally located between the San Francisco Bay area, Eureka and Sacramento. The City was incorporated in 1876 and is a general law city operating under a City Council/City Manager form of government. The City has an estimated population of approximately 16,061 people. For additional background, and certain demographic and economic information regarding the City and the County, see APPENDIX B.
Bond Terms; Book-Entry Only. The Bonds will bear interest at the rates shown on the inside cover page, payable semiannually on April 1 and October 1 of each year, commencing on ________ 1, 2022. The Bonds will be issued in fully registered form, registered in the name of The Depository Trust Company (“DTC”), or its nominee, which will act as securities depository for the Bonds. Purchasers of the Bonds will not receive certificates representing the Bonds that are purchased. See “THE BONDS – Book-Entry Only System” and “APPENDIX F – DTC AND THE BOOK-ENTRY ONLY SYSTEM.”
Security for the Bonds. The City and the Authority will enter into a Site Lease dated as of February 1, 2022 (the “Site Lease”), under which the City will lease certain real property to the Authority, consisting of all of the City’s streets (the “Leased Property”), to the Authority as further described herein under the caption “THE LEASED PROPERTY.” Proceeds of the Bonds are used by the Authority to fund the payment obligation under the Site Lease.
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 the Authority will assign substantially all of its rights under the Lease Agreement to The Bank of New York Mellon Trust Company, N.A. as trustee for the Bonds. The Bonds are payable from and secured by a first pledge of and lien on (“Revenues”) (defined herein) received by the Authority under the Lease Agreement, consisting primarily of the Lease Payments. To provide an additional source of funds for payment of the Bonds, the Authority will establish a debt service reserve fund for the Bonds from proceeds of the Bonds, as described herein. See “SECURITY FOR THE BONDS” below.
Redemption. The Bonds are subject to redemption prior to their stated maturity dates.
See “THE BONDS – 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, the Bond Owners may receive less than the full amount of principal of and interest on the Bonds.
See “SECURITY FOR THE BONDS – Abatement” and “BOND OWNERS’ RISKS.” Additional Obligations. Under the Indenture, the Authority covenants that no additional bonds, notes or other indebtedness shall be issued or incurred by the Authority which are payable out of the Revenues in whole or in part. The City is permitted to enter into other obligations which constitute additional charges against its revenues without the consent of Owners of the Bonds.
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Risks of Investment. Debt service on the Bonds is payable only from Lease Payments and other amounts payable by the City to the Authority under the Lease. The Lease Payments are payable from revenues available in the City’s general fund, which revenues may be materially adversely affected by numerous factors outside the City’s control, including the ongoing COVID19 pandemic and the governmental responses to the pandemic. For a discussion of some of the risks associated with the purchase of the 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.
FINANCING PLAN
The Bonds are being issued to rebuild the City’s corporation yard and, (ii) construct improvements to various City streets.
The Corporation Yard is located at 1320 Airport Road and is the base of operations for the City Fleet and Plant Maintenance Facility, Street Maintenance Crew, Water and Wastewater Maintenance Crew, and Electric Utility Maintenance Crew. The expenses for the Corporation Yard are divided respectively based on the amount of square feet that each department occupies. The estimated cost is $15 million.
The streets projects primarily consist of improvements to certain streets, rights-of-way reconstruction, and utility projects, as follows: Dora Street: reconstruct Mill to Grove streets and overlay Upper Luce Avenue to Mill Street; Gobbi Street: reconstruct from Highway 101 to Dora Street; Main Street: reconstruct from Gobbi to Norton streets; Perkins Street: Main Street to Hwy. 101; Dora and State streets: overlay Beacon Lane to Washington Avenue; Clara Avenue:
reconstruct/overlay from State Street to North Orchard Avenue; and Low Gap Road:
reconstruct/overlay from State to Bush streets. The estimated cost is $30 million.
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Estimated Sources and Uses
The estimated sources and uses of funds relating to the Bonds are as follows:
Sources:
Principal Amount of Bonds $
TOTAL SOURCES $
Uses:
Deposit to Project Fund
Deposit to Reserve Fund(1)
Costs of Issuance(2)
TOTAL USES $
(1) Represents the initial Reserve Requirement for the Bonds. (2) Represents funds to be used to pay Costs of Issuance, which include rating agency fees, bond counsel, disclosure counsel, Trustee fees, Underwriter’s discount and other costs of issuing the Bonds.
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THE LEASED PROPERTY
Leased Property
The Leased Property consist of all of the City streets [and ______(?)], which total approximately 355 City streets constituting an estimated 113 lane miles. Simultaneously with the delivery of the Bonds, the Authority will acquire a leasehold interest in the Leased Property from the City. The Authority will sublease the Leased Property to the City pursuant to the Lease. Under the Lease, the City has agreed to maintain the Leased Property in good working condition.
The Leased Property is also subject to a lease entered into by the City (the “2020 Lease”) in connections with the Authority’s Lease Revenue Bonds, Series 2020A and Taxable Lease Revenue Bonds, Series 2020B, outstanding in the combined principal amount of $52,250,000 (the “2020 Bonds”). The City estimates that the Leased Property has a value of at least the aggregate principal amount of the Bonds and the remaining principal balance of the 2020 Bonds.
The City and the Authority, based on records they maintain, estimate the current annual fair rental value of the Leased Property to be not less than the amount of the annual Lease Payments and the annual payments due under the 2020 Lease.
Bondholders do not have a mortgage on any portion of the Leased Property. The Trustee does not have the right to resell, relet or take possession of the Leased Property in the Event of Default. See “BOND OWNERS’ RISKS – Limited Recourse on Default; No Right to Repossess; No Acceleration of Lease Payments” and “SECURITY FOR THE BONDS – Remedies on Default” herein.
Substitution and Release
Substitution of Lease Property. Under the Lease, 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 conditions set forth in the Lease, which include (among others) the following:
• The City must file with the Authority and the Trustee, and cause to be recorded in the office of the Mendocino County Recorder sufficient memorialization of, an amendment of the Site Lease, Lease and Assignment Agreement that adds the legal description of the Substitute Property and deletes therefrom the legal description of the Former Property.
• The City must certify 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 important to the proper, efficient and economic operation of the City and to serve a proper governmental function of the City. • The City must file with the Authority and the Trustee a written certificate of the City or other written evidence stating that the estimated fair rental value of the Leased Property following the substitution will be at least equal to the aggregate principal amount of the Bonds then outstanding, and that the useful life of the Substitute Property at least extends to the stated termination date of the Lease.
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Upon the satisfaction of all the conditions precedent contained in the Lease, the term of the Lease will 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.
Release of Leased Property. Under the Lease, the City has the option at any time and from time to time to release any portion of the Leased Property from the Lease (the “Released Property”) provided that the City has satisfied all of the requirements under the Lease that are conditions precedent to such removal, which include (among others) the following:
• The City must file with the Authority and the Trustee, and cause to be recorded in the office of the Mendocino County Recorder sufficient memorialization of, an amendment of the Lease, the Site Lease and the Assignment Agreement that removes the Released Property from the Site Lease, the Lease and the Assignment Agreement.
• The City must certify in writing to the Authority and the Trustee that the value of the property that remains subject to the Lease following such release is at least equal to the then outstanding principal amount of the Bonds, and the fair rental value of the property that remains subject to the Lease following such release is at least equal to the Lease Payments thereafter coming due and payable thereunder.
Upon the satisfaction of all the conditions precedent set forth in the Lease, the term of the Lease will 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.
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DEBT SERVICE SCHEDULE
The table below shows annual debt service payments on the Bonds.
Year Ending
April 1 Principal Interest
Total
Debt Service
Total:
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THE BONDS
This section provides summaries of the Bonds and certain provisions of the Indenture.
See APPENDIX C for a more complete summary of the Indenture. Capitalized terms used but not defined in this section have the meanings given in APPENDIX C.
Authority for Issuance
The Bonds are being issued under the Bond Law, the Indenture, the Authority Resolution adopted by the Board of the Authority on [January 19], 2022, and the City Resolution adopted by the City Council on [January 19], 2022.
General Provisions
Bond Terms. The Bonds will be dated their date of delivery and issued in fully registered form without coupons in denominations of $5,000 or any integral multiple of $5,000. The Bonds will mature in the amounts and on the dates, and bear interest at the annual rates, set forth on the inside cover page of this Official Statement.
Payments of Principal and Interest. Interest on the Bonds will be payable on April 1 and October 1 in each year, beginning October 1, 2022 (each an “Interest Payment Date”).
Interest on the Bonds is payable from the Interest Payment Date next preceding the date of its authentication unless: a 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, a Bond is authenticated on or before 15 days prior to the first Interest Payment Date, in which event interest thereon will be payable from the Closing Date, or interest on any 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 computed on the basis of a 360-day year composed of 12 months of 30 days each and 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.
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.
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While the Bonds are subject to the book-entry system, the principal, interest and any redemption premium with respect to the Bonds will be paid by the Trustee to DTC for subsequent disbursement to beneficial owners of the Bonds. See “– Book-Entry Only System” below.
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.
Transfer, Registration and Exchange
The following provisions regarding the exchange and transfer of the Bonds apply only during any period in which the Bonds are not subject to DTC’s book-entry system. While the Bonds are subject to DTC’s book-entry system, their exchange and transfer will be affected through DTC and the Participants and will be subject to the procedures, rules and 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 Bonds, which will 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 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 Bonds as provided in the Indenture.
Transfer and Exchange. 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 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 Bond is or Bonds are surrendered for transfer, the Authority will execute and the Trustee will authenticate and deliver to the transferee a new Bond or Bonds of like series, interest rate, maturity and aggregate principal amount. The Authority will pay the cost of printing Bonds and any services rendered or expenses incurred by the Trustee in connection with any transfer of Bonds.
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 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 Bonds and any services rendered or expenses incurred by the Trustee in connection with any exchange of Bonds.
The Trustee may refuse to transfer or exchange, under the provisions of the Indenture described above, any Bonds selected by the Trustee for redemption under the Indenture, or any Bonds during the period established by the Trustee for the selection of Bonds for redemption.
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Redemption*
Optional Redemption. The Bonds maturing on or before April 1, ____, are not subject to redemption prior to their respective stated maturities. The Bonds maturing on or after April 1, _____, are subject to redemption in whole, or in part at the 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 any date on or after April 1, _____, from any available source of funds, at a redemption price equal to 100% of the principal amount thereof to be redeemed together with accrued interest thereon to the redemption date, without premium.
Mandatory Sinking Fund Redemption. The Bonds maturing April 1, _____ (the “Term Bonds”) are subject to mandatory redemption in part by lot, 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 April 1 in the respective years as set forth in the following table; provided, however, that if some but not all of the Term Bonds have been optionally redeemed, the total amount of all future sinking fund payments shall be reduced by the aggregate principal amount of the Term Bonds so redeemed, to be allocated among such sinking fund payments in integral multiples of $5,000 as determined by the Authority (as set forth in a schedule provided by the Authority to the Trustee).
Term Bonds Maturing April 1, ______
Sinking Fund
Redemption Date
(April 1)
Principal Amount
To Be Redeemed
Extraordinary Mandatory Redemption. The Bonds are subject to mandatory redemption prior to maturity in whole or in part, among maturities as determined by the Authority, on any date, at a redemption price equal to 100% of the principal amount thereof to be redeemed (plus accrued but unpaid interest to the redemption date), without premium, from Net Proceeds received under from amounts deposited in the Insurance and Condemnation Fund under the Indenture, and any other funds available under the Indenture for purposes of that fund and/or Surplus Bond Proceeds.
Selection of Bonds for Redemption. Whenever provision is made in the Indenture for the redemption of less than all of the Bonds of a single maturity, the Trustee will select the 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 Bond as consisting of separate $5,000 portions and each such portion will be subject to redemption as if such portion were a separate Bond.
Notice of Redemption. The Trustee will give notice of redemption of the 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 Bonds designated for redemption at their addresses appearing * Preliminary; subject to change.
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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. Notice of redemption of Bonds will be given by the Trustee, at the expense of the Authority, for and on behalf of the Authority.
However, while the Bonds are subject to DTC’s book-entry system, the Trustee will be required to give notice of redemption only to DTC as provided in the letter of representations executed by the Authority and received and accepted by DTC. DTC and the Participants will have sole responsibility for providing any such notice of redemption to the beneficial owners of the Bonds to be redeemed. Any failure of DTC to notify any Participant, or any failure of Participants to notify the Beneficial Owner of any Bonds to be redeemed, of a notice of redemption or its content or effect will not affect the validity of the notice of redemption, or alter the effect of redemption set forth in the Indenture.
Rescission of Redemption Notice. The Authority has the right to rescind any notice of the redemption of Bonds under the Indenture by written notice to the Trustee on or prior to the dated 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 Bonds then called for redemption, and such cancellation will not constitute an Event of Default. The Authority and the Trustee have no liability to the Bond Owners 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.
Effect of Redemption. When notice of redemption has been duly given as set forth in the Indenture, 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 Bonds (or portions thereof) so called for redemption being held by the Trustee, on the redemption date designated in such notice, the Bonds (or portions thereof) so called for redemption will become due and payable, interest on the Bonds so called for redemption will cease to accrue, those Bonds (or portions thereof) will cease to be entitled to any benefit or security under the Indenture, and the Owners of those Bonds will have no rights in respect thereof except to receive payment of the redemption price thereof.
Book-Entry Only System
The Bonds 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 Bonds are subject to the book-entry system, the principal, interest and any redemption premium with respect to a 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 Bonds. Purchasers of the Bonds will not receive certificates representing their interests therein, which will be held at DTC.
See “APPENDIX F – DTC AND THE BOOK-ENTRY ONLY SYSTEM” for further information regarding DTC and the book-entry system.
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SECURITY FOR THE BONDS
The principal of and interest on the 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 Bonds and certain provisions of the Indenture, the Lease and the Site Lease. See “APPENDIX C – Summary of Principal Legal Documents” for a more complete summary of the Indenture, the Lease, the Site Lease and the Assignment Agreement. Capitalized terms used but not defined in this section have the meanings given in APPENDIX C.
Revenues; Pledge of Revenues
Pledge of Revenues and Other Amounts. Under the Indenture, 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 Bonds) held in any fund or account established under the Indenture are pledged to secure the payment of the principal 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.
“Revenues” are defined in the Indenture as all amounts received by the Authority or the Trustee under or with respect to the Lease, 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 the City is obligated to pay under the Lease or under another lease as additional amounts of rental for the use and occupancy of the Leased Property if such additional amounts of rental are pledged or assigned for the payment of any bonds, notes, leases or obligations other than the Bonds, (ii) any Additional Rental Payments (described below); and all interest, profits or other income derived from the investment of amounts in any fund or account established under the Indenture. (a) Assignment to Trustee
Under the Assignment Agreement, the Authority will transfer to the Trustee all of the rights of the Authority in the Lease (other than the rights of the Authority under the provisions of the Lease regarding Additional Rental Payments, repayment of advances, indemnification, and the payment of 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 immediately be paid by the Authority to the Trustee. The Trustee is also entitled to and will, subject to the provisions of the Indenture regarding duties 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.
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Allocation of Funds by Trustee
Deposit of Revenues into 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 under the Indenture 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 the Indenture. Any surplus remaining in the Bond Fund, after payment in full of (i) the principal of and interest on the Bonds or provision therefore under the Indenture, and (ii) any applicable fees and expenses to the Trustee, shall be withdrawn by the Trustee and remitted to the City.
Transfers from the Bond Fund. 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:
Deposit to Interest Account. The Trustee will 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.
Deposit to Principal Account. The Trustee will deposit in the Principal Account an amount required to cause the aggregate amount on deposit in the Principal Account to equal the principal amount of the Bonds coming due and payable on such Interest Payment Date.
Application of Accounts within Bond Fund.
Application of Interest Account. All amounts in the Interest Account will 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).
Application of Principal Account. All amounts in the Principal Account will be used and withdrawn by the Trustee solely to pay the principal amount of the Bonds at their respective maturity dates.
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, amounts in which shall be used and withdrawn by the Trustee solely for the purpose of paying the principal and premium (if any) of any Bonds to be optionally redeemed under the Indenture.
Reserve Fund. Upon delivery of the Bonds, the Trustee will establish a special fund designated as the “Reserve Fund” which the Trustee shall maintain and hold in trust; and deposit there in an amount of the proceeds equal to the “Reserve Requirement,” which means, as of any date of calculation thereof by the Authority, an amount equal to the lesser of (a) 10% of the original principal amount of such series of Bonds, (b) the maximum amount of debt service coming due in the current or any future Bond Year with respect to such series of Bonds, or (c) 125% of Attachment 7
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average annual debt service for such series of Bonds. The initial Reserve Requirement may be recalculated by the Authority on any date; all amounts on deposit in the Reserve Fund in excess of the Reserve Requirement as calculated from time to time, and all amounts derived from the investment of amounts in the Reserve Fund which are not required to be retained therein to maintain the Reserve Requirement, will be available for transfer by the Trustee to the Bond Fund.
The Authority has the right to either meet the Reserve Requirement at the time of issuance of a series of Bonds or at any time thereafter to cause the Fiscal Agent to release cash from the Reserve Fund, in whole or in part, by tendering to the Fiscal Agent: (1) a Qualified Reserve Fund Credit Instrument, as defined in the Indenture.
If five Business Days prior to any Interest Payment Date the moneys available in the Bond Fund do not equal the amount of the Lease Payment then coming due and payable, the Trustee shall apply the moneys available in the Reserve Fund to make such payments on behalf of the Authority by transferring the amount necessary for this purpose to the Bond Fund. Upon receipt of any delinquent Lease Payment with respect to which moneys have been advanced from the Reserve Fund, such Lease Payment shall be deposited in the Reserve Fund to the extent of such advance, as needed to provide the Reserve Requirement.
If on any Interest Payment Date, the moneys on deposit in the Reserve Fund and the Bond Fund are sufficient to pay or prepay all Outstanding Bonds, including all principal, interest and prepayment premiums (if any) thereon, the Trustee shall, upon the written request of the Authority, transfer all amounts then on deposit in the Reserve Fund to the Bond Fund to be applied for such purpose to the payment of the Lease Payments on behalf of the Authority.
Lease Payments
Requirement to Make Lease Payments. Under the Lease, subject to the provisions of the Lease concerning rental abatement (see – “Abatement,” below) and prepayment of Lease Payments, the City agrees to pay to the Authority, its successors and assigns, the Lease Payments in the respective amounts specified in the 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 the Lease, and to be deposited by the City with the Trustee on each of the Lease Payment Dates specified in the Lease (defined as the 5th Business Day immediately preceding each Interest Payment Date).
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 the Lease, 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.
Rate on Overdue Lease Payments. If the City fails to make any of the payments of Lease Payments required in the Lease, the payment in default will continue as an obligation of Attachment 7
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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.
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 Authority and the City 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, 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.
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:
(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 the Lease or the Indenture;
(d) Amounts coming due and payable as Excess Investment Earnings in accordance with the Lease; and
(e) The reasonable out-of-pocket expenses of the Authority in connection with the execution and delivery of the 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 the Lease, the Bonds, the Indenture or any of the other documents contemplated thereby, or otherwise incurred in connection with the administration of the Lease.
Limited 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 OBLIGATED TO LEVY OR PLEDGE ANY FORM OF Attachment 7
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TAXATION OR FOR WHICH THE CITY HAS LEVIED OR PLEDGED ANY FORM OF TAXATION.
No Additional Bonds
Under the Indenture, the Authority covenants that no additional bonds, notes or other indebtedness will be issued or incurred which are payable out of the Revenues in whole or in part.
The Lease provides that the Lease may be amended to obligate the City to pay additional amounts of rental for the use and occupancy of the Leased Property, but only if (a) such additional amounts of rental are pledged or assigned for the payment of any bonds, notes, leases or other obligations the proceeds of which are applied to finance or refinance the acquisition or construction of any real or personal property for which the City is authorized to expend funds subject to its control,
(b) the City has obtained and filed with the Trustee an appraisal or other written evidence that the value of the Leased Property is at least equal to the aggregate principal amount of the Outstanding Bonds and all such other bonds, notes, leases or other obligations, and (c) the City has filed with the Trustee written evidence that the amendments made for this purpose will not of themselves cause a reduction or withdrawal of any rating then assigned to the Bonds.
Source of Lease 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 the Lease regarding abatement. See “– Abatement” herein.
Under the Lease, the City covenants to take all actions required to include the Lease Payments in each of its budgets during the Term of the Lease 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 in the Lease agreed to be carried out and performed by the City.
Abatement
Termination or Abatement Due to Eminent Domain. Under the Lease, 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 thereupon ceases as of the day possession is taken. If less than all of the Leased Property is taken permanently, or if the Leased Property is taken temporarily, under the power of eminent domain, then:
(a) the Lease will continue in full force and effect with respect thereto and does not terminate by virtue of such taking, and the parties 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.
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Abatement Due to Damage or Destruction. 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.
In the case of damage or destruction of only a portion of the Leased Property, 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.
If any such damage or destruction occurs, the Lease continues in full force and effect and the City waives any right to terminate this Lease by virtue of any such damage and destruction.
The City must maintain title insurance on the Leased Property during the term of the Lease, which proceeds would be available to pay Lease Payments in the event of a title defect.
Remedies on Default
Failure by the City to make Lease Payments, or failure to pay Additional Rental Payments or to observe and perform any other terms, covenants or conditions contained in the Lease or in the Indenture for a period of 30 days after written notice of such failure and request that it be remedied has been given to the City by the Authority or the Trustee, constitute Events of Default under the Lease. Such events permit the Trustee or the Authority to pursue any and all available remedies. However, notwithstanding anything in the Lease or in the Indenture to the contrary, neither the Authority nor the Trustee have any right, under the Lease, the Site Lease or otherwise, to sell, repossess or re-lease the Leased Property, nor is there any right under any circumstances to accelerate the Lease Payments or otherwise declare any Lease Payments that are not then in default to be immediately due and payable. See “BOND OWNERS’ RISKS – Limited Recourse on Default; No Right to Repossess; No Acceleration of Lease Payments” herein.
Following an event of default, the Authority or the Trustee may elect either to terminate the Lease and seek to collect damages from the City or to maintain the Lease in effect and seek to collect the Lease Payments as they become due. Under the Assignment Agreement, the Authority assigns all of its rights with respect to remedies in an Event of Default to the Trustee, so that all such remedies will be exercised by the Trustee and the Bond Owners as provided in the Indenture. See “BOND OWNERS’ RISKS – Limited Recourse on Default; No Right to Repossess; No Acceleration of Lease Payments” herein.
In the Event of Default, there is no remedy of acceleration of the total Lease Payments due over the term of the Lease and neither the Authority nor the Trustee are empowered to sell or re-let the Leased Property and use the proceeds of such sale or re-letting to redeem the Certificates or pay debt service with respect thereto.
The City will be liable only for Lease Payments on an annual basis and, in the Event of Default, the Authority or 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 California, 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.
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Property Insurance
Liability and Property Damage Insurance. Under the Lease, the City is required to maintain or cause to be maintained throughout the Term of the 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.
Such 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. 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 selfinsurance by the City, subject to the provisions of the Lease regarding self-insurance, 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.
Casualty Insurance. Under the Lease, the City is required to procure and maintain, or cause to be procured and maintained, throughout the Term of the Lease, casualty 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, fire and such other hazards as are normally covered by such insurance, and must include earthquake insurance if available at 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.
Insurance Net Proceeds; Form of Policies. Each policy of casualty insurance, rental interruption insurance, and title insurance if any, maintained under the Lease must name the Trustee as loss payee so as to provide that all proceeds thereunder are payable to the Trustee.
The City shall pay or cause to be paid when due the premiums for all insurance policies required by the Lease. All such policies shall provide that the Trustee is given 30 days’ notice of each expiration, any intended cancellation thereof or reduction of the coverage provided thereby.
The City must file with the Trustee annually, within 90 days following the close of each Fiscal Year, a certificate of the City stating that all policies of insurance required under the Lease are then in full force and effect. The Trustee has no responsibility for the sufficiency, adequacy Attachment 7
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or amount of any insurance or self-insurance herein required and is fully protected in accepting payment on account of such insurance or any adjustment, compromise or settlement of any loss.
If any liability and property damage insurance maintained under the Lease is provided in the form of self-insurance, the City must file with the Trustee annually, within 90 days following the close of each Fiscal Year, a statement of the risk manager of the City or an independent insurance adviser engaged by the City identifying the extent of such self-insurance and stating the determination that the City maintains sufficient reserves with respect thereto. If any such insurance is provided in the form of self-insurance by the City, the City has no obligation to make any payment with respect to any insured event except from those reserves.
THE AUTHORITY
The Authority is a joint exercise of powers authority duly organized and existing under and pursuant to that Joint Exercise of Powers Agreement dated as of May 5, 2020, by and between the City and the Industrial Development Authority of the City of Ukiah, and under the provisions of Articles 1 through 4 (commencing with Section 6500) of Chapter 5 of Division 7 of Title 1 of the California Government Code.
The Authority was formed for the purpose, among others, of assisting the City in the acquisition, construction and financing of public improvements that are of public benefit to the City. Under the Law, the Authority has the power to lease real property in furtherance of the acquisition of public improvements necessary or convenient for the operation of the City, or to purchase bonds issued by any local agency at public or negotiated sale and may sell such bonds to public or private purchasers at public or negotiated sale.
The Authority is governed by a five-member Board of Directors (the “Board”), which consists of the members of the City Council of the City. The Mayor and the Vice Mayor of the City serve as the Chair and Vice Chair, respectively, the City Manager serves as the Executive Director, the City Clerk serves as the Secretary, and the City’s Finance Director serves as the Treasurer of the Authority.
The Authority covenants in the Indenture to maintain its existence as a joint exercise of powers agency while any Bonds are Outstanding, including by substituting a new member for the Successor Agency if determined to be necessary for such purpose.
THE CITY
General
The City of Ukiah is the county seat and largest city in Mendocino County. City Hall is located at 300 Seminary Avenue, Ukiah, California. The Ukiah Police Department is also located at City Hall. The City encompasses approximately five square miles and is located in Mendocino County, approximately 100 miles north of San Francisco in the northern coastal region of the State on U.S. Highway 101. The area is centrally located between the San Francisco Bay area, Eureka and Sacramento.
The City was incorporated in 1876 and is a general law city operating under a City Council/City Manager form of government. The City has an estimated population of approximately Attachment 7
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15,526 people, with approximately 104,452 people living within a 30-minute drive radius. The City’s Fiscal Year begins on July 1 and ends June 30 of the following year. The City enjoys a moderate climate, with summers that are long, comfortable, arid, and mostly clear and the winters that are short, cold, wet, and partly cloudy.
With both City and County administrative offices within the City, Ukiah boasts a large number of public sector employment opportunities, particularly in education and social services.
Outside the public sector, the City is known for strong retail and service industries and a tourism industry catering to travelers and adventurers looking to explore the Ukiah Valley. Additionally, the City is surrounded by mineral rich agricultural lands capable of supporting viticulture operations. In recent years, the region has seen an increase in local vineyards opening adjacent to the City. The increase in local wine production and processing reflects the increasing popularity of the Ukiah Valley as a wine region and destination.
The City provides police, fire, street and infrastructure maintenance, storm drain, park and community recreation, museum, community development and other services to residents. The City also provides water, wastewater and electric services through the operations of its utility enterprises and operates an airport, golf course and civic center.
For additional background, and certain demographic and economic information regarding the City and the County, see APPENDIX B. Historical information set forth in this Official Statement, including Appendix B hereto, is not intended to be predictive of future results.
City Government
The City operates under a Council-City Manager structure of government. Policy making and legislative authority are vested in the City Council, which is responsible, among other matters, for passing resolutions and ordinances, adopting the City budget, appointing committees, and hiring the City Manager. The City Council is comprised of five members elected by the voters citywide, serving in staggered 4-year terms.
The Mayor is appointed by the City Council to one-year terms, and the Council is elected to four- year staggered terms, with members elected every two years. The City Manager is responsible for carrying out the policies and ordinances of the City Council, for overseeing the day-to-day operations of the City, and for appointing the heads of the various departments.
The City Council of the City currently consists of the following persons:
Name and Office Current Term Expires
Juan Orozco, Mayor November 2022
Jim Brown, Vice-Mayor November 2022
Douglas Crane, Council Member November 2024
Josefina Duenas, Council Member November 2024
Mari Rodin, Council Member November 2022
Following are short biographies of the City Manager and Finance Director:
Sage Sangiacomo, City Manager. Mr. Sangiacomo serves as the City Manager of the City and the Executive Director of the Authority. Mr. Sangiacomo has served as the City Manager of the City since June 2015 and has over 22 years of experience in municipal administration. In his role as City Manager, Mr. Sangiacomo serves as the administrative head of the City and is Attachment 7
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responsible for the operation of all City departments. Prior to becoming City Manager, Mr.
Sangiacomo served the City as a Community Services Supervisor from 1998 to 2005, the Community Services Director from 2005 to 2009 and an Assistant City Manager from 2009 to 2015. Mr. Sangiacomo is a credentialed city manager by the International City/County Managers Association and holds a bachelor’s degree from the University of California, Davis.
Kristine Lawler, City Clerk. The City Clerk is the local official who administers democratic processes such as elections, access to city records, and all legislative actions ensuring transparency to the public. The City Clerk acts as a compliance officer for the federal, state, and local statutes including the Political Reform Act, the Brown Act, and the Public Records Act. The City Clerk manages public inquiries and relationships and arranges for ceremonial and official functions.
Labor Relations
The City had approximately 205 full and part-time employees as of June 30, 2021. City employees are represented by seven labor organizations. The City characterizes labor relations as being good, stable and productive. All seven labor organizations are currently operating under 1-year extensions of respective labor agreements. All of the agreements (inclusive of the one year extension) are effective through September 18, 2022. The City has not experienced a major work stoppage by City employees in the last five years.
CITY FINANCIAL INFORMATION
Accounting and Financial Reporting
The City maintains its accounting records in accordance with Generally Accepted Accounting Principles (“GAAP”) and the standards established by the Governmental Accounting Standards Board (“GASB”).
The Governmental Accounting Standards Board published its Statement No. 34, Basic Financial Statements – and Management’s Discussion and Analysis – for State and Local Governments, on June 30, 1999 (“GASB Statement No. 34”). GASB 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) government-wide financial statements prepared using the economic measurement focus and the accrual basis of accounting and fund financial statements prepared using both the current financial resources measurement focus and the modified accrual method of accounting (governmental funds) and funds using the economic measurement focus and the accrual basis of accounting (proprietary funds) and (iii) required supplementary information. The City’s financial statements are prepared in conformance with the requirements of GASB Statement No. 34.
In the government-wide Statement of Net Position and Statement of Activities in the City’s audited financial statements for the Fiscal Year ending June 30, 2021, both governmental and proprietary activities are presented using the accrual basis of accounting. Under the accrual basis of accounting, revenues are recognized when earned and expenses are recorded when the liability is incurred or economic asset is used.
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Revenues, expenses, gains, losses, assets and liabilities resulting from exchange and exchange-like transactions are recognized when the exchange takes place.
In the fund financial statements, governmental funds are presented on the modified accrual basis of accounting. Under the modified accrual basis of accounting, revenues are recognized when “measurable and available.” Measurable means knowing or being able to reasonably estimate the amount. Available means collectible within the current period or soon enough thereafter to pay current liabilities. The City defines available to be within 60 days of yearend. Expenditures (including capital outlay) are recorded when the related fund liability is incurred, except for principal and interest on long-term liabilities, claims and judgments, and compensated absences, which are reported when due. Governmental capital asset acquisitions are reported as expenditures in governmental funds. Proceeds for governmental long-term liabilities and acquisitions under capital leases are reported as other financing sources.
Those revenues susceptible to accrual include taxes and intergovernmental revenues. All other revenue items are considered to be measurable and available only when cash is received by the government. Impact fees are received and recognized as revenue upon project completion and inspection. Certain indirect costs are included in program expenses reported for individual functions and activities.
Grant revenues are recognized in the Fiscal Year in which all eligibility requirements are met. Under the terms of grant agreements, the City may fund certain programs with a combination of cost-reimbursement grants, categorical block grants, and general revenues. Thus, both restricted and unrestricted net position are available to finance program expenditures. The City’s policy is to first apply restricted grant resources to such programs, followed by general revenues if necessary.
All proprietary funds utilize the accrual basis of accounting. Under the accrual basis of accounting, revenues are recognized when earned and expenses are recorded when the liability is incurred or economic asset is used. Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary funds’ principal operations. The principal operating revenues of the enterprise and internal service funds are charges for services. Operating expenses for proprietary funds include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as non-operating revenues and expenses. When both restricted and unrestricted resources are available for use, it is the City’s policy to use restricted resources first, then unrestricted resources as they are needed.
The City’s fiduciary funds consist of a private-purpose trust fund, which is reported using the economic resources measurement focus, and agency funds, which have no measurement focus, but utilizes the accrual basis for reporting assets and liabilities.
The City Council employs, at the beginning of each Fiscal Year, an independent certified public accounting firm which, at such time or times as specified by the City Council, at least annually, at such other times as such firm shall determine, examines the books, records, inventories and reports of all officers and employees who receive, control, handle or disburse public funds and of all such other officers, employees or departments as the City Council may direct. As soon as practicable after the end of the Fiscal Year, a final audit and report is submitted by such firm to the City Council and a copy of the financial statements as of the close of the Fiscal Year is published.
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COVID-19 Pandemic
The City continues to monitor the spread of COVID-19 and is working with local, state, and national agencies to address the potential impact of the pandemic upon the City. There can be no assurances that the spread of COVID-19 and/or responses intended to slow the spread of COVID-19 such as declining business and travel activity, will not materially adversely impact the state and national economies and, accordingly, materially adversely impact the financial condition of the City and the City’s General Fund. In addition, the City may experience increased personnel costs and/or reduced revenues due to the COVID-19 situation and the related impact on economic and other activity in and around the City. See the references to COVID-19 in the following subsection in connection with the unknown impacts on the City’s budgeting process.
General Fund, the Budget Process and Information
The City’s General Fund is its primary operating fund, and is where the City accounts for all its general-purpose revenues. It is distinguished from the City’s other governmental funds that are used to account for special purpose revenues, capital projects, debt service activities, and monies held for the benefit of others.
The City operates on a Fiscal Year basis that begins on the first day of July of each year and ends on the thirtieth day of June the following year. The annual budget adopted by the City Council provides for the general operation of the City. Development of the City’s annual budget is a process which generally begins in February and March and continues until the budget is adopted by the City Council in June. The General City Budget includes programs which are provided on a largely city-wide basis. The programs and services are financed primarily by the City’s share of sales tax, property tax, revenues from the State and/or federal government, and charges for services provided.
The City Council approves total budgeted appropriations and any amendments to appropriations throughout the Fiscal Year. Appropriations lapse at Fiscal Year-end. The City Council generally reauthorizes appropriations for continuing projects and activities. The City Council has the legal authority to amend the budget of any fund at any time during the Fiscal Year. The budgetary level of control (the level on which expenditures may not legally exceed appropriations) is generally at the fund level. The City Manager is authorized to transfer budgeted amounts within departments within any fund; however, any revisions that alter the total expenditures of any fund must be approved by the City Council.
Long-Term Financial Planning. The City incorporates long-term financial planning into its budget process in several ways.
First, the City has established a set of financial policies that establish goals for the allocation of public resources in the manner best suited to the efficient provision of City services to citizens and visitors present within the City. Some of these policies call for maintaining adequate cash reserves and providing on-going maintenance of infrastructure and buildings, which are vital to sound fiscal management.
Second, the Council undertakes a strategic planning process to establish goals and priorities for the organization after taking into account public input. Specifically, the Council engaged the community at a public hearing and by soliciting ideas and input through a variety of Attachment 7
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means. Based on this input, the City Council adopts goals, objectives, and resources permit objectives.
Third, the City maintains a long-range capital planning process that helps drive annual capital funding decisions as well as periodic bond issues for larger investments.
Finally, all Governmental Accounting Standards Board pronouncements are monitored and implemented into the City’s financial statements.
Budgetary Control Policy. The City maintains budgetary controls. The objective of these budgetary controls is to ensure compliance with legal provisions embodied in the annual appropriated budget approved by the City Council. Activities of the general fund, special revenue funds, debt service funds, capital projects funds, enterprise funds, and internal service funds are included in the annual appropriated budget. A Five- Year Capital Improvement Plan is also adopted for the capital projects. The level of budgetary control (the level at which expenditures cannot legally exceed the appropriated amount) is established by function and activity within an individual fund.
The City’s budgetary records are maintained on a modified accrual basis. Revenues are recorded when measurable and available and expenditures are recorded when goods or services are received and the liability incurred. Based on the City’s financial management policies, the City is required to maintain a balanced operating budget, which is adopted by resolution on or before June 30th for the ensuing Fiscal Year.
Following the adoption of the budget, it is sometimes necessary to amend the budget.
Appropriations in the budget may be adjusted by recommendation of the Finance Director and approval by the City Manager when the budget is not increased in total amount. Savings from appropriations in one section of a department budget may be used to fund another section of a department budget. Any increase in appropriations that increases the total adopted budget must be approved by the City Council. The City Council formally reviews the City’s fiscal condition and amends appropriations, if necessary, six months after the beginning of each fiscal year.
The adopted budget for fiscal year 2021-22 was approved on June 16, 2021 (the “Adopted Budget”). The Adopted Budget projects General Fund revenues in fiscal year 2021-22 to be approximately $33 million.
Understanding COVID-19 will impact directly the City’s finances for fiscal years 2021-22, the City adopted a conservative budget for fiscal year 2020-21. The City’s economic health depends largely on the economic health of our local businesses. Nearly 75% of the City’s General Fund revenue is comprised of taxes--sales tax, transient occupancy (lodging) tax, gas tax, etc. all of which were significantly impacted during the pandemic. The City also anticipated that the utility operations would be impacted by revenue declines ranging from 5% -8%. The City budgeted accordingly. The actual impacts varied tremendously. While some businesses grounded to a halt during the shelter-in-place, others adapted and even thrived. Although the City’s revenues shifted significantly in some areas, the overall impact has not been as devastating as was anticipated.
The City expects to consider an update and revision to the Adopted Budget quarterly, as the City receives more data about COVID-19’s impacts on the local economy and the City’s Attachment 7
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operations and finances. The City does not currently believe that the COVID-19 outbreak will materially adversely affect its ability to pay Base Rental Payments. See the caption “– COVID-19 Pandemic” above for a discussion of the potential impact of COVID-19 on the City’s operations and finances.
Current Budget and Historical Budget Information. Set forth in Table 1 are the General Fund budgets that were adopted for Fiscal Years 2020-21 and 2021-22 compared to the estimated actual results for Fiscal Years 2020-21. During each Fiscal Year, the budget may be amended and revised as necessary by the City Council.
TABLE 1
City of Ukiah General Fund Budget Summary
Fiscal Years 2020-21 and 2021-22
2020-21
Adopted Budget
2020-21
Estimated Actuals
2021-22
Adopted Budget
Revenues
Taxes $18,977,091 $19,478,520 $19,957,835
Charges for service 2,250,271 1,874,847 1,789,801
Grants and subventions 2,734,988 2,173,760 751,533
Use of money and property 157,122 102,317 92,916
Fines, forfeitures and penalties 60,691 77,500 55,000
Licenses, permits and franchises 2,089,845 2,158,401 2,167,625 Other revenues 366,200 53,576 1,719,937
Other financing sources 120,000 259,000 6,603,560
Total Revenues $26,765,207 $26,177,921 $33,138,207
Expenditures
Non-departmental 3,427,457 3,767,157 7,487,793
Legislative -- -- --
City manager 129,766 184,172 200,136
Finance 6,820 -- --
City attorney -- -- --
City treasurer -- -- --
Human resources/risk management 1 520 --
Police 9,000,509 9,072,190 9,718,427
Fire authority 3,176,460 3,868,051 6,285,013
Community services 3,070,582 3,316,024 3,386,998
Community development 1,142,970 1,134,271 1,302,174
Public works 4,146,960 3,213,755 1,716,377
Total Expenditures $24,101,524 $24,556,139 $30,096,918
____________________
Source: City of Ukiah - 2020-21 and 2021-22 Adopted Budgets.
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General Fund Key Revenue Sources. The four major general fund revenue sources of the City, which together accounted in Fiscal Year 2020-21 for approximately 82% of the general fund revenues (collectively, the “Key Revenue Sources”), are Sales Tax (approximately 57.9% of total general fund revenue), Property Tax (approximately 12.7% of total general fund revenue), Franchise Taxes (approximately 6.7% of total general fund revenue) and Transient Occupancy Tax (approximately 5.1% of total general fund revenues). Also see “APPENDIX A – AUDITED FINANCIAL STATEMENTS OF THE CITY FOR FISCAL YEAR 2020-21” herein.
The City’s receipt of taxes and other revenue will likely be impacted by the economic effects of the coronavirus. See “RISK FACTORS – COVID-19 Pandemic” and “– General Fund, the Budget Process and Information” for a description of the projected impact that COVID-19 will have on the City’s finances.
The following Table 2 sets forth the audited revenues received by the City for each of the Key Revenue Sources for Fiscal Years 2016-17 through 2020-21, which have been totaled and compared to the prior Fiscal Year to illustrate the amount and percent of change.
Table 2
CITY OF UKIAH
Fiscal Years 2016-17 through 2020-21
General Fund Key Revenue Sources and Change From Prior Year(1) Fiscal
Year Sales Taxes
Property
Taxes
Franchise
Taxes
Transient
Occupancy
Total of Key
Tax Sources
Taxes
%
Change
From
Prior
Year
2016-17 $9,805,225 $1,470,323 $1,551,794 $1,302,336 $14,129,678 --% 2017-18 10,802,364 2,838,902 1,653,146 1,406,417 16,700,829 18.2 2018-19 11,974,379 2,984,192 1,781,141 1,496,473 18,236,185 9.2 2019-20 13,313,206 3,139,960 1,742,671 1,365,477 19,561,314 7.3 2020-21 15,535,021 3,408,846 1,815,271 1,362,134 22,121,272 13.1 (1) Includes transfers in from other funds.
Source: City of Ukiah
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The following Table 3 sets forth the audited revenues received by the City for the total of Key Revenue Sources and total of Other General Fund Revenue Sources for Fiscal Years 2018- 19 through 2020-21.
TABLE 3
City of Ukiah
General Fund Revenues by Revenue Source
Fiscal Years 2018-19 through 2020-21
2018-19 2019-20 2020-21
Category Revenues
% of
Total Revenues
% of
Total Revenues
% of
Total
Taxes and revenues
Property tax $2,984,192 14% $3,139,960 14% $3,408,846 13% Sales Tax 11,974,379 56% 13,313,206 60% 15,535,021 58%
Transient occupancy 1,496,473 7% 1,365,477 6% 1,362,134 5% Business license tax 293,706 1% 389,829 2% 484,533 2%
Other taxes 462 0% 888 0% 1,136 0%
Franchise fees 1,781,141 8% 1,742,671 8% 1,815,271 7%
Charges for services 1,615,737 8% 1,340,123 6% 2,434,204 9% Licenses and permits 211,113 1% 259,533 1% 276,752 1%
Grants and contributions and donations 375,300 2% 170,187 1% 1,226,237 5% Intergovernmental 142,885 1% 79,192 0% 77,668 0%
Fines, penalties and forfeitures 33,588 0% 29,716 0% 25,933 0% Use of money and property -- 0% 203,726 1% 52,427 0%
Miscellaneous(2) 426,525 2% 197,566 1% 138,952 1%
Total Revenues(1) $21,335,501 100% $22,232,074 100% $26,839,114 100% ________________
(1) Totals may not add due to rounding.
(2) Includes facility rental, interest, rent and concessions.
Source: City of Ukiah - audited financial statements 2018-19 through 2020-21.
Sales and Use Taxes
Sales & Use Taxes represents the largest source of tax revenues to the City’s General Fund, accounting for approximately 13% of total General Fund revenues over the past three fiscal years. Sales & uses taxes are less stable sources of revenues to the City, given that they are based on consumer spending within the City which is impacted by a variety of factors including the overall economy and other factors.
Measure P. Measure P, passed by a simple majority (50 percent plus 1) of Ukiah voters in November of 2014, is a general (unrestricted) transaction and use tax. A general, unrestricted tax is one that can be used to fund any program, function, service, or project at the discretion of the City Council. It is not a special, restricted tax, which would require approval of two-thirds of the voting public. It continued a sun-set transaction and use tax, known as Measure S (2005), accompanied by an advisory Measure T (2005). Measure P, however, was passed with no advisory measure. The purpose of Measure P is to augment public safety expenditures to provide a higher level of police and fire service to the community. Amounts collected from the tax are to be used in addition to the commitment of the General Fund and not in replacement of.
Measure Y. Measure Y, passed by a simple majority (50 percent plus 1) of Ukiah voters in November of 2016, is a general (unrestricted) transaction and use tax. A general, unrestricted tax is one that can be used to fund any program, function, service, or project at the discretion of the City Council. It is not a special, restricted tax, which would require approval of two-thirds of the voting public. Measure Z, passed in conjunction with Measure Y, was a distinctly separate, Attachment 7
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advisory Measure Y, indicating the voting public's preference for the use of Measure Y proceeds.
Language for the two ballot measures was as follows:
Ballot Measure “Y”: Shall Ordinance No. 1165 be adopted to impose as a general tax an additional transaction (sales) and use tax of on-half of one percent within the city limits of the City of Ukiah to fund essential City services, including street repair and maintenance. Such tax increase is estimated to raise $2,470,000 annually at a rate of 0.5 percent. The duration of the tax will continue unless or until the tax is repealed by majority vote in a municipal election.
Advisory Measure “Z”: Shall street repair and maintenance and related public infrastructure improvements be the exclusive use of the revenues from an additional 0.5 percent sales tax int eh City of Ukiah and add to and not replace current spending for street maintenance and repair.
Historic Taxable Transactions. The following table shows historical taxable transactions in the City for the most recent five years available.
TABLE 4
City of Ukiah
Taxable Transactions
Fiscal Years 2017 through 2021
(In Thousands)
2017 2018 2019 2020 2021
Motor Vehicle and Parts Dealers $61,547,375 $58,793,138 $59,115,235 $79,937,692 $93,853,086 Home Furnishings and Appliances 9,449,811 8,609,539 8,660,568 8,238,280 10,243,291 Building Materials 88,519,926 86,685,046 91,786,663 106,592,154 119,366,619 Food and beverage stores 29,212,992 30,329,807 26,556,784 26,372,363 27,655,252 Gasoline stations 35,627,317 40,000,948 34,945,103 33,131,882 36,755,912 Apparel stores 19,654,152 20,371,221 20,163,571 17,217,727 23,112,175 General merchandise stores 72,734,989 71,525,092 128,360,894 140,726,173 157,291,672 Food services and drinking places 52,145,413 51,439,050 51,886,300 47,727,976 50,930,270 Other retail stores 44,195,545 42,733,113 42,800,805 45,717,519 56,752,376 All other outlets 51,353,437 52,641,884 53,929,660 59,811,423 64,735,234 Total All Outlets $464,440,957 $463,128,838 $518,205,583 $565,473,189 $640,695,887 ____________________
Source: California Department of Tax and Fee Administration (as of January 11, 2022).
State-Wide Sales Tax Law. Taxable transactions in the City are currently subject to the following sales and use tax, of which the City’s share is only a portion. The City collects a percentage of taxable sales in the City (minus certain administrative costs) pursuant to the Bradley-Burns Uniform Local Sales and Use Tax (the “Sales Tax Law”). The State collects and administers the sales tax under the Sales Tax Law, and makes distributions on taxes collected within the City, as shown in the following table.
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TABLE 5
City of Ukiah
Sales Tax Rate
Effective July 1, 2021
Statewide Rate 7.250%
Mendocino County Mental Health Treatment Act Tax 0.500
Mendocino Library Special Transactions and Use Tax 0.125 City of Ukiah Transactions and Use Tax 0.500
City of Ukiah Transactions and Use Tax 0.500
Total 8.875%
____________
Source: City of Ukiah Finance Department.
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. 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 where the use will occur within the State. The sales tax is imposed upon the same transactions and items as the statewide sales tax and the statewide use tax.
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 (February 2017) entitled “Sales and Use Taxes: Exemptions and Exclusions,” which can be found on the State Board of Equalization’s website at http://www.boe.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 (the “CDTFA”). This process was formerly administered by the State Board of Equalization. The Taxpayer Transparency and Fairness Act of 2017, which took effect July 1, 2017, restructured the State Board of Equalization and separated its functions among three separate entities: the State Board of Equalization, the CDTFA and the Office of Tax Appeals. The State Board of Equalization will continue to perform the duties assigned to it by the State Constitution, while all other duties will be transferred to the newly established CDTFA and the Office of Tax Appeals. CDTFA will handle most of the taxes and fees previously collected by the State Board of Equalization, including sales and use tax.
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Under the Sales and Use Tax Law, all sales and use taxes collected by the CDTFA under a contract with any city, city and county, or county are required to be transmitted by the CDTFA to such city, city and county, or county periodically as promptly as feasible. These transmittals are required to be made at least twice in each calendar quarter.
Under its procedures, the 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 the CDTFA’s quarterly projection.
During the last month of each quarter, the CDTFA adjusts the amount remitted to reflect the actual receipts of the sales and use tax for the previous quarter.
The CDTFA receives an administrative fee based on the cost of services provided by the Board 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.
As part of the State government’s response to the COVID-19 pandemic, certain businesses were able to defer the payment of their sales taxes due to the City.
Other Sources of Revenues
City Utility Franchise Fees. This revenue source is a charge to the City’s electric utility.
Franchise fees are not taxes; rather, they are rents paid by utility providers to operate on or in City rights-of-way and City property, such as roads, sidewalks, parklands, etc. The rents are established by the City Council and typically are correlated to gross revenues generated by the utility provider. Revenues from this source remain stable albeit lower than otherwise would be due to the economic effects of the pandemic on the utility commercial customer base.
Business License Tax. Businesses that operate within City limits are required to obtain a business license. The fees are based on the type of business and an estimate of their gross receipts. The proceeds from the tax collected are available for unrestricted use in the General Fund. As mentioned earlier, receipts were higher in 2020 than in the prior year due to late payments. Before the onset of the pandemic in March 2020, business license activity was trending positively.
Refuse Disposal Franchise Fees. This revenue source is a charge to the City’s franchise solid waste hauler. As discussed earlier, franchise fees are not taxes; rather, in the case of refuse disposal franchise fees they are rents paid by the refuse hauler for the use of rights-of-way to provide and distribute its services. Refuse hauler vehicles used to haul refuse are utilized more frequently and wear roads more significantly than other commercial or non-commercial vehicles.
Revenues from this source were higher in FY 2019-20 than in the preceding year due to increased sales and rate adjustments by the hauler, Ukiah Waste Solutions.
Transient Occupancy Tax
Transient occupancy tax (“TOT”) revenues are typically one of the largest sources of General Fund revenues. Commonly referred to as a “bed,” “hotel,” or “room” tax this revenue source was performing strongly over the last two years up until March. Travel restriction brought on by the pandemic will continue to negatively affect this revenue source. However, driven by increased tourism in the greater Ukiah Valley area and a larger volume of travelers heading north, this revenue source is poised to continue its growth trend for several more years after the pandemic has abated. Visitors are stopping in Ukiah as a final layover before making the trek to Attachment 7
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Fort Bragg and Humboldt County. The TOT rate in Ukiah currently is 10 percent; however, 1 percentage point has been committed by the Ukiah City Council to fund the Visit Ukiah Program.
Property Taxes
Property Taxes represents the second-largest sources of taxes to the City’s General Fund, after sales/use taxes. Property taxes represent a very stable source of revenue to the City, and are based in large part on assessed valuations of property located in the City.
Property Tax Delinquencies; Teeter Plan. Certain counties in the State of California, including Mendocino, offer a statutory program entitled Alternate Method of Distribution of Tax Levies and Collections and of Tax Sale Proceeds (the “Teeter Plan”). Under the Teeter Plan local taxing entities receive 100% of their tax levies net of delinquencies, but do not receive interest or penalties on delinquent taxes collected by the county. The County includes the City’s property tax collections in its Teeter Plan. Consequently, the City’s receipt of property taxes is equal to 100% of the amount levied. There is no assurance that the County will continue the Teeter Plan or that the City will continue to participate in the Teeter Plan. Delinquencies in the payment of property taxes could have an adverse effect on the ability of the City to make Lease Payments should the County discontinue the Teeter Plan or the City withdraw from or not be able to continue in the Teeter Plan.
General Method of Property Tax Calculations. Proposition 13, passed in 1978, established the current property tax regime for local agencies, including the City, throughout the State. Under Proposition 13, subject to voter-approved debt and certain other exceptions, the base property tax rate on a parcel is limited to 1% of its assessed value and the property tax collected by this 1% County-wide rate is shared by the local agencies eligible to receive property taxes within the applicable County pursuant to applicable State law. 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 also established whenever a property, or portion thereof, has had a change in ownership or has been newly constructed. See “CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS – Article XIIIA of the State Constitution” for additional information.
Proposition 8, enacted in 1978, allows for a temporary reduction in assessed value when a property suffers a “decline-in-value.” As of the 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.
The California Tax on Commercial and Industrial Properties for Education and Local Government Funding Initiative has qualified to appear on the ballot in California as an initiated Constitutional amendment on November 3, 2020. The ballot initiative would amend the State Constitution to require commercial and industrial properties, except those zoned as commercial agriculture, to be taxed based on their market value. The proposal to assess taxes on commercial and industrial properties at market value, while continuing to assess taxes on residential properties based on purchase price as described above, is known as “split roll.” At this time, the Attachment 7
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City is unable to determine the likelihood of passage of the measure or the impact on the City’s property tax receipts from passage.
Levy and Collection of Property Taxes. 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 have a viable tax lien, 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% 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 is deeded to the State and 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% 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 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.
Beginning in 1978-79, Proposition 13 and its implementing legislation shifted the function of property tax allocation to the counties, except for levies to support prior voted debt, and prescribed how levies on county-wide property values are to be shared with local taxing entities within each county.
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Historical Assessed Valuations. The table below presents the assessed valuation of taxable property in the City from fiscal year 2012-13 through fiscal year 2021-22.
TABLE 6
City of Ukiah
Assessed Valuations of All Taxable Property
Fiscal Years 2012-13 through 2021-22
Fiscal Year Local Secured Utility Unsecured Total
2012-13 $1,171,599,083 $0 $78,474,614 $1,250,073,697
2013-14 1,195,466,105 0 70,234,083 1,265,700,188
2014-15 1,224,746,468 0 69,743,046 1,294,489,514
2015-16 1,267,903,229 0 68,336,666 1,336,239,895
2016-17 1,304,711,495 0 68,027,482 1,372,738,977
2017-18 1,364,333,801 0 72,072,094 1,436,405,895
2018-19 1,424,497,607 0 74,628,367 1,499,125,974
2019-20 1,491,766,585 0 76,242,235 1,568,008,820
2020-21 1,542,790,339 0 68,242,957 1,611,033,296
2021-22 1,580,161,957 0 71,086,938 1,651,248,895
Source: California Municipal Statistics Inc.
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Assessed Valuations and Parcels by Land Use. The following table shows secured assessed valuations and parcels by land use for fiscal year 2021-22. As shown in the table, approximately 80% of the parcels in the City, representing almost 69% of the assessed valuation in the City, has residential uses.
Table 7
City of Ukiah
Secured Assessed Valuation and Parcels by Land Use
Fiscal Year 2021-22
2021-22 % of No. of % of
Non-Residential: Assessed Valuation (1) Total Parcels Total Agricultural/Rural $890,499 0.06% 7 0.14%
Commercial/Office 417,438,043 26.42 598 11.75
Vacant Commercial 16,876,526 1.07 81 1.59
Industrial 27,538,364 1.74 32 0.63
Vacant Industrial 8,209,754 0.52 12 0.24
Recreational 3,529,605 0.22 3 0.06
Government/Social/Institutional 10,368,916 0.66 208 4.09 Miscellaneous 3,162,701 0.20 55 1.08
Subtotal Non-Residential $488,014,408 30.88% 996 19.57% Residential:
Single Family Residence $915,865,347 57.96% 3,569 70.13% Mobile Home 4,710,222 0.30 91 1.79
Mobile Home Park 17,677,313 1.12 10 0.20
2 Residential Units/Duplex 36,317,513 2.30 148 2.91
3+ Residential Units/Apartments 101,690,439 6.44 168 3.30 Miscellaneous Residential 4,415,211 0.28 12 0.24
Vacant Residential 11,465,453 0.73 95 1.87
Subtotal Residential $1,092,141,498 69.12% 4,093 80.43% Total $1,580,155,906 100.00% 5,089 100.00%
_________________
(1) Local Secured Assessed Valuation, excluding tax exempt property.
Source: California Municipal Statistics, Inc.
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Per Parcel Assessed Valuation of Single-Family Homes. Table 8 below shows the per parcel assessed valuation for improved single-family homes (according to 2021-22 assessed valuation) in the City. The average assessed valuation is $257,266, and the median assessed valuation is $247,364.
Table 8
CITY OF UKIAH
Fiscal Year 2021-22
Per Parcel Assessed Valuation of Single-Family Homes
No. of 2021-22 Average Median
Parcels Assessed Valuation Assessed Valuation Assessed Valuation Single Family Residential 3,560 $915,865,347 $257,266 $247,364 2021-22 No. of % of Cumulative Total % of Cumulative
Assessed Valuation Parcels (1) Total % of Total Valuation Total % of Total $0 - $49,999 157 4.410% 4.410% $5,204,211 0.568% 0.568% $50,000 - $99,999 372 10.449 14.860 27,649,205 3.019 3.587 $100,000 - $149,999 383 10.758 25.618 48,128,619 5.255 8.842 $150,000 - $199,999 471 13.230 38.848 82,971,129 9.059 17.901 $200,000 - $249,999 426 11.966 50.815 95,418,461 10.418 28.320 $250,000 - $299,999 418 11.742 62.556 114,954,945 12.552 40.871 $300,000 - $349,999 450 12.640 75.197 145,837,993 15.924 56.795 $350,000 - $399,999 391 10.983 86.180 146,302,439 15.974 72.769 $400,000 - $449,999 212 5.955 92.135 89,530,108 9.775 82.545 $450,000 - $499,999 99 2.781 94.916 46,801,728 5.110 87.655 $500,000 - $549,999 63 1.770 96.685 32,937,241 3.596 91.251 $550,000 - $599,999 41 1.152 97.837 23,491,049 2.565 93.816 $600,000 - $649,999 25 0.702 98.539 15,513,673 1.694 95.510 $650,000 - $699,999 19 0.534 99.073 12,683,519 1.385 96.895 $700,000 - $749,999 7 0.197 99.270 5,016,608 0.548 97.442 $750,000 - $799,999 8 0.225 99.494 6,230,527 0.680 98.123 $800,000 - $849,999 8 0.225 99.719 6,558,092 0.716 98.839 $850,000 - $899,999 1 0.028 99.747 853,767 0.093 98.932 $900,000 - $949,999 3 0.084 99.831 2,762,954 0.302 99.234 $950,000 - $999,999 2 0.056 99.888 1,953,573 0.213 99.447 $1,000,000 and greater 4 0.112 100.000 5,065,506 0.553 100.000 3,560 100.000% $915,865,347 100.000%
(1) Improved single-family residential parcels. Excludes condominiums and parcels with multiple family units.
Source: California Municipal Statistics, Inc.
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Principal Property Taxpayers. The top twenty largest local secured property taxpayers in the City, as shown on the 2021-22 secured tax roll, are listed in the table below. For fiscal year 2021-22, the total assessed valuation of the twenty largest local secured taxpayers is 12.30% of the total City fiscal year 2021-22 assessed valuation of $194,428,281. See “–Property Taxes” above for additional information on the levy and collection of property taxes in the City.
TABLE 9
City of Ukiah
Principal Property Taxpayers (Secured Roll)
Fiscal Year 2021-22
2021-22 % of
Property Owner Primary Land Use Assessed Valuation Total (1)
1. Costco Wholesale Corporation Commercial $ 23,290,334 1.47%
2. Pear Tree REH LLC Shopping Center 19,781,704 1.25
3. Pear Orchard Associates Commercial 14,782,803 0.94
4. Savings Bank of Mendocino County Bank 13,746,382 0.87
5. S & K Inns of America Inc. Hotel/Motel 12,271,310 0.78
6. Skycrest Properties LP Commercial 10,835,477 0.69
7. Wal Mart Real Estate Business Trust Commercial 10,589,103 0.67
8. Redwood Business Park of Ukiah Commercial 10,565,332 0.67
9. Robert S. Sherwood Apartments 8,921,039 0.56
10. Marina Bay Crossing LLC Industrial 8,264,745 0.52
11. RCI Sierra Sunset LLC Apartments 7,627,928 0.48
12. Safeway Inc. Supermarket 7,244,239 0.46
13. FC Ranger RE Mountain View LLC Convalescent Hospital 6,316,857 0.40
14. Legacy Four Ukiah LLC Commercial 6,092,737 0.39
15. Manor Oaks Mobile Estates LLC Mobile Home Park 5,948,993 0.38
16. Rancho Del Rey Asset Partners LP Mobile Home Park 5,933,839 0.38
17. Arthur McChesney Industrial 5,901,948 0.37
18. Echelon Communities LLC Apartments 5,732,808 0.36
19. Shami Enterprises LLC Shopping Center 5,326,831 0.34
20. Willcon LLC Commercial 5,253,872 0.33
$194,428,281 12.30%
_________________________________
(1) The total City secured assessed valuation for fiscal year 2021-22 is $1,580,155,906.
Source: California Municipal Statistics, Inc.
[Remainder of Page Intentionally Left Blank]
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Financial Statements
The City’s accounting policies conform to generally accepted accounting principles and reporting standards set forth by the State Controller. The audited financial statements also conform to the principles and standards for public financial reporting established by GASB.
Basis of Accounting and Financial Statement Presentation. The government-wide financial statements are reported using the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met.
Governmental fund financial statements are reported using the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available.
Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures are recorded only when payment is due.
Audited Financial Statements. Set forth in the following tables is the City’s General Fund balance sheets and statements of revenues, expenditures and changes in General Fund Balance for fiscal years 2016-17 through 2020-21, which are based on the City’s audited financial statements. The balance sheets and statements presented in this Official Statement are subject to the various notes attached to the City’s financial statements for the respective years. The City’s Comprehensive Annual Financial Report (“CAFR”) for Fiscal Year 2020-21, including the City’s audited financial statements, is set forth in Appendix A.
General Fund Historical Financial Data
The following Tables 10 and 11 provide a five-year history of (i) the City’s General Fund revenues, expenditures, and changes in fund balances for Fiscal Years 2016-17 through 2020- 21 and (ii) the City’s Comparative Balance Sheet for Fiscal Years 2016-17 through 2020-21.
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TABLE 10
City of Ukiah
Statements of Revenues, Expenditures and Changes in General Fund Balance Fiscal Years 2016-17 through 2020-21
2016-17 2017-18 2018-19 2019-20 2020-21
Revenues
Taxes:
Property tax $1,470,323 $2,836,902 $2,984,192 $3,139,960 $3,408,846 Sales Tax 9,805,225 10,802,364 11,974,379 13,313,206 15,535,021 Transient occupancy 1,302,336 1,406,417 1,496,473 1,365,477 1,362,134 Business license tax 382,825 358,610 293,706 389,829 484,533 Other taxes 249 51,389 462 888 1,136
Franchise fees -- 1,653,146 1,781,141 1,742,671 1,815,271 Charges for services 1,427,085 1,679,034 1,615,737 1,340,123 2,434,204 Licenses and permits 1,792,595 548,627 211,113 259,533 276,752 Grants and contributions and donations 83,390 -- 375,300 170,187 1,226,237 Intergovernmental -- 34,296 142,885 79,192 77,668
Fines, penalties and forfeitures 73,835 113,139 33,588 29,716 25,933 Use of money and property 95,016 -- -- 203,726 52,427
Facility rental -- -- 73,362 -- --
Interest, rent and concessions -- 170,939 91,154 -- --
Miscellaneous 7,519 110,223 262,009 197,566 138,952
Total Revenues 16,440,398 19,765,086 21,335,501 22,232,074 26,839,114 Expenditures
Current:
General Government 430,390 282,860 45,889 283,477 60,132 Public safety 11,200,362 12,571,245 11,768,069 12,188,198 12,701,313 Housing and community development 822,166 1,019,061 1,107,911 1,130,666 1,044,627 Public works 1,158,550 1,643,691 1,518,533 1,470,613 1,487,609 Parks, buildings, and grounds 1,312,208 1,412,291 26 -- 1,189,386 Recreation and culture 1,036,260 1,250,665 2,753,995 3,199,032 2,435,717 Economic development and redevelopment 181,387 -- 178,493 203,508 256,392 Debt Service:
Interest -- 49,925 142,679 91,304 90,242
Principal -- 14,055 80,070 55,523 56,392
Capital lease principal 16,243 -- 101,727 104,282 127,291 Capital lease interest -- -- 26,232 23,678 26,949
Capital outlay 44,479 7,904,131 2,152,947 389,016 1,877,910 Total expenditures 16,202,045 26,147,924 19,876,571 19,139,297 21,353,960 Excess (deficiency) of revenues over (under)
expenditures 238,353 (6,380,838) 1,458,930 3,092,777 5,485,154 Other financing sources(uses)
Transfers in 415,601 851,338 166,699 375,712 129,001
Transfers out (544,719) (748,546) (2,959,541) (3,285,876) (3,687,933) Debt proceeds -- -- -- 227,607 --
Issuance of debts -- 5,125,731 -- -- --
Gain (loss) from sale of assets -- -- -- 57,078 --
Total other financing sources (129,118) 5,228,523 (2,792,842) (2,625,479) (3,558,932) Extraordinary item
Restatement of loan from former Ukiah
Redevelopment agency -- -- 6,000,000 -- --
Total -- -- 6,000,000 -- --
Net Change in fund balances 109,235 (1,152,315) 4,666,088 467,298 1,926,222 Beginning of year 5,213,001 5,322,236 4,169,921 8,836,009 9,303,307 End of year $5,322,236 $4,169,921 $8,836,009 $9,303,307 $11,229,529 ____________
Source: City Finance Department and City of Ukiah - audited financial statements for fiscal years 2016-17 through 2020-21.
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TABLE 11
City of Ukiah
General Fund Balance Sheets
Fiscal Years 2016-17 through 2020-21
2016-17 2017-18 2018-19 2019-20 2020-21
Assets
Cash and investments $1,943,148 $4,183,781 $140,160 $1,176,360 $3,596,165 Restricted cash and investments -- 4,035,436 797,531 780,302 -- Receivables:
Taxes 2,019,378 2,133,052 1,801,306 2,641,624 2,898,954 Accounts 13,608 150,830 645,439 260,277 1,663,429
Notes 725 -- 216 61 3,924
Interest 17,033 11,247 34,381 2,856 1,915
Intergovernmental -- -- -- -- --
Grants and subventions -- -- -- 97,421 910,106
Prepaid expenditures 15,901 14,290 216 195,446 207,097
Loans to employees -- -- -- -- --
Due from other funds 935,266 -- 48,772 1,291,737 678,260 Long-term notes receivable -- 825 -- -- --
Advances to other funds 1,115,967 1,778,132 1,590,370 1,262,811 2,013,542 Land held for resale -- -- -- -- --
Due from other agencies -- -- 103,091 -- 121,175
Advance to successor agency -- -- 6,000,000 3,923,857 2,000,000 Total Assets 6,061,026 12,307,593 11,161,482 11,632,752 14,094,567 Deferred Inflow of Resources
Unavailable revenues - Grants -- -- 29,017 102,061 910,106 Total Deferred Outflow of Resources -- -- 29,017 102,061 910,106 Liabilities
Accounts payable 294,875 5,886,763 874,063 476,943 1,069,402 Accrued payroll 443,915 502,733 500,924 841,918 885,530 Due to other funds -- -- -- -- --
Advances from other funds -- 1,748,176 921,469 908,523 -- Total Liabilities 738,790 8,137,672 2,296,456 2,227,384 1,954,932 Fund Balances
Nonspendable 1,131,868 1,793,247 5,514,226 6,673,912 4,224,563 Restricted -- 4,000,000 -- -- --
Committed -- -- -- 194,655 --
Assigned 4,190,368 -- -- -- 186,134
Unassigned -- (1,623,326) 3,321,783 2,434,740 6,818,832 Total Fund Balance 5,322,236 4,169,921 8,836,009 9,303,307 11,229,529 Total Liabilities & Fund Balance $6,061,026 $12,307,593 $11,161,482 $11,632,752 $14,094,567 _____________
Source: City of Ukiah - Audited Financial Statements for fiscal years 2016-17 through 2020-21.
Relevant Fiscal Policies
The City has adopted a comprehensive set of fiscal policies to provide guidance for all fiscal activities and resource allocation decisions as defined in the Adopted Budget. The policies set forth guidelines for both current activities and long-range planning. In addition, the City Council approved or adopted several other fiscal policies including:
• Investment Policy.
• Debt Management Policy.
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• Reserve Policy
The following are certain highlighted aspects of the adopted policies.
City Investment Policy. The City invests its funds in accordance with the City’s Investment Policy, in accordance with Section 53600 et seq. of the State Government Code. Idle cash management and investment transactions are the responsibility of the City Manager and City Treasurer. The Investment Policy sets forth the policies and procedures applicable to the investment of City funds and designates eligible investments. The Investment Policy’s stated overarching purpose is to (i) ensure that public funds are invested in such a manner as to comply with state and local laws; (ii) ensure prudent money management; (iii) provide for daily cash flow requirements; and (iv) meet the objectives of the Investment Policy (per California Government Code Section 53600.5) in the following order of priority:
1. Safety of Principal: Safety of principal is the foremost objective of the investment program. Investments of the City shall be undertaken in a manner that seeks to ensure the preservation of capital in the overall portfolio. To attain this objective, the City strives to diversify its investments by investing funds among a variety of securities with independent returns.
2. Liquidity: The City’s investment portfolio will remain sufficiently liquid to enable the City to meet all operating requirements which might be reasonably anticipated. Maturities of investments are selected in anticipation if disbursement needs, thereby obviating the need for forced liquidation or lost interest penalties.
3. Return on Investments: The City’s investment portfolio shall have the objective of attaining a comparative performance measurement or an acceptable rate of return throughout budgetary and economic cycles. These measurements should be commensurate with the City’s investment risk constraints identified in the Investment Policy and the cash flow characteristics of the portfolio.
Debt Management Policy. The City’s Debt Management Policy sets forth parameters for issuing debt and managing the City’s debt portfolio and generally sets forth the following: (i) the purposes for which the debt proceeds may be used, (ii) the types of debt that may be issued, (iii) the relationship of the debt to, and integration with, the issuer’s capital improvement program or budget, if applicable, (iv) policy goals related to the City’s planning goals and objectives, and (v) the internal control procedures that the City has implemented, or will implement, to ensure that the proceeds of the proposed debt issuance will be directed to the intended use. This policy will also assist the City in pursuing and maintaining quality credit ratings in addition to providing guidance to decision makers.
Reserve Policy. The City’s Reserve Policy provides that the City strive to maintain a fund balance in the General Fund, including the General Fund’s Strategic Reserve Fund, of at least twenty-five percent (25%) of budgeted General Fund operating expenditures. A 25% fund balance is equivalent to approximately three months of operating expenditures. The Reserve Policy’s stated purpose of a 25% minimum fund balance is to meet cash flow requirements, to protect the City’s essential service programs and funding requirements during periods of economic uncertainty, local disasters, other financial hardships or downturns in the local economy, and to provide for unforeseen operating or capital needs. The Operating Reserve contained approximately $7.7 million as of June 30, 2021.
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Risk Management. The City is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; and natural disasters for which the City participates The City is a member of the Redwood Empire Municipal Insurance Fund (“REMIF”), a public entity pool comprised of fifteen northern California charter and associate member cities. REMIF is organized under a Joint Powers Agreement pursuant to the California Government Code. The purpose of REMIF is to arrange and administer programs of insurance for the pooling of self-insured losses and to purchase excess insurance coverage. The City pays an annual premium to REMIF for its workers’ compensation, general liability and property coverage.
The City of Ukiah participates in the following three REMIF programs:
General Liability Insurance. Annual premiums are paid by the member cities and are adjusted retrospectively to cover costs. The City of Ukiah self-insures for the first $25,000 of each loss and pays 100 percent of all losses incurred under $25,000. The City does not share or pay for losses of other cities under $5,000, depending on the entity’s deductible amount. Participating cities then share in the next $5,000 to $750,000 per loss occurrence. Specific coverage includes comprehensive and general automotive liability, personal injury, contractual liability, professional liability, and certain other coverage. REMIF is a member of the California Joint Powers Risk Management Authority, which provides REMIF with an additional $39,250,000 liability insurance coverage over and above REMIF retention level of $750,000.
Worker’s Compensation. Periodic deposits are paid by member cities and are adjusted retrospectively to cover costs. The City of Ukiah is self-insured for the first $10,000 of each loss and pays 100 percent of all losses incurred under $10,000. The City does not share or pay for losses of other cities under $5,000.
Property Insurance. The City participates in REMIF’s property insurance program. The annual deposits paid by participating member cities are based upon deductibility levels and are not subject to retroactive adjustments. The City of Ukiah has a deductible level of $500,000 for high-risk flood zones and $100,000 for all wildfire and property related claims, and a coverage limit of $400,000,000 declared value. Separate internal service funds are maintained by the City for the City’s deductibles and allocated share of pooled costs noted above. The total cash and investments held in these funds at June 30, 2021, was $383,075.
See APPENDIX A Note 10 for additional details regarding the City’s pension and other employee benefits, including as relates to Risk Management.
Employee Retirement System; CalPERS
This caption contains certain information relating to California Public Employees’ Retirement System (“CalPERS”). The information is primarily derived from 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 comprehensive annual 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 Underwriter can guarantee the accuracy of such information. Actuarial assessments are Attachment 7
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“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.
General Information about the Pension Plans. All qualified permanent and probationary employees are eligible to participate in the Public Agency Cost-Sharing MultipleEmployer Defined Benefit Pension Plan (“Plan”), administered by CalPERS. The Plan’s benefit provisions are established by statute. The Plan is included as a pension trust fund in the CalPERS Comprehensive Annual Financial Report, which is available online at www.calpers.ca.gov.
The Plan consists of a miscellaneous pool and a safety pool (referred to as “risk pools”), which are comprised of individual employer miscellaneous and safety rate plans, respectively, including those of the City. The City does not have any rate plans in the miscellaneous risk pool.
The City’s employer rate plans in the safety risk pool include the Safety Fire plan (“Fire”), the Safety Police plan (“Police”), the PEPRA Safety Fire plan (“PEPRA Safety Fire”) and the PEPRA Safety Police plan (“PEPRA Police”).
PEPRA. On September 12, 2012, the California Governor signed AB 340, a bill that enacted the California Public Employees’ Pension Reform Act of 2012 (“PEPRA”) and that also amended various sections of the California Education and Government Codes, including the County Employees Retirement Law of 1937. Effective January 1, 2013, PEPRA: (i) requires public retirement systems and their participating employers to share equally with employees the normal cost rate for such retirement systems; (ii) prohibits employers from paying employer paid member contributions to such retirement systems for employees hired after January 1, 2013; (iii) establishes a compulsory maximum non safety benefit formula of 2.5% at age 67; (iv) defines final compensation as the highest average annual pensionable compensation earned during a 36 month period; and (v) caps pensionable income at $110,100 ($132,120 for employees not enrolled in Social Security) subject to Consumer Price Index increases. Other provisions reduce the risk of the City incurring additional unfunded liabilities, including prohibiting retroactive benefits increases, generally prohibiting contribution holidays, and prohibiting purchases of additional nonqualified service credit.
Benefits Provided. The Plan provides service retirement and disability benefits, annual cost of living adjustments and death benefits to plan members, who must be public employees and beneficiaries. Benefits are based on years of credited service, equal to one year of full-time employment. Classic members and PEPRA Safety members with five years of total service are eligible to retire at age 50 with statutorily reduced benefits. PEPRA Miscellaneous members with five years of total service are eligible to retire at age 52 with statutorily reduced benefits. All members are eligible for non-duty disability benefits after five years of service. The death benefit is the Basic Death Benefit. The cost of living adjustments for each plan are applied as specified by the Public Employees’ Retirement Law.
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The provisions and benefits of each Plan that were in effect at June 30, 2021, are summarized as follows:
Employer Rate Plans in the Safety Risk Pool
Fire Police
Hire Date Prior to January 1, 2013 On or after January 1, 1900 Benefit Formula 3.0% @ 55 3.0% @ 50
Benefit Vesting Schedule 5 years of service 5 years of service Benefit Payments Monthly for life Monthly for life
Retirement Age 50 50
Monthly Benefits, As a % of Eligible
Compensation 2.4% to 3.0% 3.0%
Required Employee Contribution Rates 8.987% 8.99%
Required Employer Contributions Rates 23.558% 25.540%
PEPRA Plans
PEPRA Fire PEPRA Police
Hire Date On or after January 1, 2013 On or after January 1, 2013 Benefit 2.7% @ 57 2.7% @ 57
Benefit Vesting Schedule 5 years of service 5 years of service Benefit Payments Monthly for life Monthly for life
Retirement Age 50 50
Monthly Benefits, As a % of Eligible
Compensation 2.0% to 2.7% 2.0% to 2.7%
Required Employee Contribution Rates 13.75% 13.75%
Required Employer Contributions Rates 13.884% 13.884%
Miscellaneous Plan
Miscellaneous
Hire Date
Prior to
January 1, 2013
On or after
January 1, 2013
Benefit formula 2.70% @ 55 2.00% @ 62
Benefit vesting schedule 5 years’ service 5 years’ service Benefit payments Monthly for life Monthly for life
Retirement age 55 62
Monthly benefits, as a % of eligible 2.00% to 2.50% 1.00% to 2.50% Required employee contribution rates 8.00% 7.00%
Required employer contribution rates 12.859% 6.750%
_____________
Source: City of Ukiah Audit Fiscal Year ended June 30, 2021.
Contributions. Section 20814(c) of the California Public Employees’ Retirement Law requires that the employer contribution rates for all public employers be determined on an annual basis by the CalPERS actuary and shall be effective on the July 1 following notice of a change in the rate. Contribution rates for the employer rate plans are determined through the CalPERS’ annual actuarial valuation process. Each employer rate plan’s actuarially determined rate is based on the estimated amount necessary to pay the employer rate plan’s allocated share of the cost of benefits earned by employees during the year, and any unfunded accrued liability. The City of Ukiah is required to contribute the difference between the actuarially determined rate and the contribution rate of employees. For the year ended June 30, 2021 the contributions recognized as part of pension expense for each Plan were $0 for Miscellaneous Risk Pools and $15,338,474 for Safety Risk Plans.
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The City is required to contribute at an actuarially determined rate of annual covered payroll, plus a fixed payment of unfunded liability. The actuarially determined rates and amounts for each Pension Plan for the fiscal years ended June 30, 2021 and June 30, 2021, are as follows:
CITY’S REQUIRED EMPLOYER CONTRIBUTION RATES & PAYMENTS
Fiscal Year 2020-21 Fiscal Year 2021-22
Pension Plan
Employer
Normal
Cost Rate
Employer
Normal
Cost
Payment
Employer
Payment of
Unfunded
Liability
Employer
Normal
Cost Rate
Employer
Normal
Cost
Payment
Employer
Payment of
Unfunded
Liability
Miscellaneous 12.764% $1,247,475 $2,498,680 12.180% $1,291,806 $2,816,117 Safety (Fire) 23.558 316,961 558,118 23.620 323,254 637,213 Safety (Police) 25.540 487,220 1,020,305 25.590 491,469 1,163,139 Safety (Fire) - PEPRA 13.884 8,635 687 13.980 80,836 2,125 Safety (Police) - PEPRA 13.884 131,697 8,293 13.980 163,289 12,270 Totals $2,191,988 $4,086,083 $2,350,654 $4,630,864
Source: CalPERS Annual Valuation Report as of June 30, 2020.
Funding History. The funding history for the Miscellaneous Pension Plan, the Safety (Fire) Pension Plan and the Safety (Police) Pension Plan is shown in the tables below, listing for each plan the actuarial accrued liability, share of the pool’s market value of assets, share of the pool’s unfunded liability, funded ratio, and annual covered payroll.
MISCELLANEOUS PLAN
Valuation
Date
Accrued
Liability (AL)
Market Value
of Assets
(MVA)
Unfunded
Liability
Funded
Ratio
Annual
Covered
Payroll
06/30/18 $93,050,082 $56,829,079 $36,221,003 61.1% $9,009,487 06/30/19 97,517,888 59,864,803 37,653,085 61.4 9,776,975 06/30/20 101,857,734 62,156,109 39,701,625 61.0 10,654,408 Source: CalPERS Annual Valuation Report as of June 30, 2020.
SAFETY PLAN (FIRE) PLAN
Valuation
Date
Accrued
Liability (AL)
Market Value
of Assets
(MVA)
Unfunded
Liability
Funded
Ratio
Annual
Covered
Payroll
06/30/18 $22,124,489 $15,535,281 $6,589,208 70.2% $1,240,287 06/30/19 22,910,724 16,095,947 6,814,777 70.3 1,261,589 06/30/20 24,589,568 17,315,683 7,273,885 70.4 932,777
Source: CalPERS Annual Valuation Report as of June 30, 2020.
SAFETY PLAN (POLICE) PLAN
Valuation
Date
Accrued
Liability (AL)
Market Value
of Assets
(MVA)
Unfunded
Liability
Funded
Ratio
Annual
Covered
Payroll
06/30/18 $42,141,491 $30,036,825 $12,104,666 71.3% $1,758,566 06/30/19 42,902,629 30,377,909 12,524,720 70.8 1,770,437 06/30/20 43,807,080 30,477,910 13,329,170 69.6 1,473,487 Source: CalPERS Annual Valuation Report as of June 30, 2020.
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PEPRA SAFETY PLAN (FIRE) PLAN
Valuation
Date
Accrued
Liability (AL)
Market Value
of Assets
(MVA)
Unfunded
Liability
Funded
Ratio
Annual
Covered
Payroll
06/30/18 $19,545 $18,289 $1,256 93.6% $57,335
06/30/19 82,588 78,983 3,605 95.6 340,912
06/30/20 211,540 202,278 9,262 95.6 545,518
Source: CalPERS Annual Valuation Report as of June 30, 2020.
PEPRA SAFETY PLAN (POLICE) PLAN
Valuation
Date
Accrued
Liability (AL)
Market Value
of Assets
(MVA)
Unfunded
Liability
Funded
Ratio
Annual
Covered
Payroll
06/30/18 $711,686 $648,252 $63,434 91.1% $874,409
06/30/19 871,071 771,847 99,224 88.6 834,929
06/30/20 1,185,772 1,046,399 139,373 88.2 1,101,945
Source: CalPERS Annual Valuation Report as of June 30, 2020.
Payable to the Pension Plan. At June 30, 2021, the City reported a payable of $ -0- for the outstanding amount of contributions to the pension plan required for the year ended June 30, 2021.
For the year ended June 30, 2021, the City recognized a total pension expense for both plans was $3,551,524 for Safety and $5,103,809 for Misc.. See Note 11 to the City’s audited financial statements for the fiscal year ending June 30, 2021 attached hereto as Appendix A for more information.
Actions Taken by CalPERS Related to Discount Rate and Other Assumptions. In 2013, the CalPERS’ Board of Administration (the “Board of Administration”) approved a recommendation to change the CalPERS amortization and smoothing policies. In 2018, the Board of Administration voted to shorten the period over which CalPERS will amortize actuarial gains and losses from 30 years to 20 years for new pension liabilities. In 2014, the Board of Administration approved new demographic actuarial assumptions based on a 2013 study of recent experience. The largest impact, applying to all benefit groups, is a new 20-year mortality projection reflecting longer life expectancies and that longevity will continue to increase. Because retirement benefits will be paid out for more years, the cost of those benefits will increase as a result. In 2015, the Board of Administration adopted a funding risk mitigation policy intended to incrementally lower its discount rate – its assumed rate of investment return – in years of good investment returns, help pay down the pension fund’s unfunded liability, and provide greater predictability and less volatility in contribution rates for employers. In 2016, the Board of Administration voted to lower its discount rate for local agencies per the following schedule:
Fiscal Year
Discount
Rate
2018-19 7.375%
2019-20 7.250
2020-21 7.000
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On July 12, 2021, CalPERS announced it had achieved a preliminary investment return of 21.3% for the 12-month period ending June 30, 2021. Under the Funding Risk Mitigation Policy approved by the CalPERS Board of Administration in 2015, the double-digit return will trigger a reduction in the discount rate from 7.00% to 6.80%. The CalPERS Board may further reduce the discount rate in the near future. The final discount rate (and other assumptions) will be determined at the Asset Liability Management meeting that occurs in November 2021. CalPERS may lower the discount rate beyond the trigger set forth in the Funding Risk Mitigation Policy or make other changes.
Lowering the discount rate means employers that contract with CalPERS to administer their pension plans will see increases in their normal costs and unfunded actuarial liabilities.
Active members hired after January 1, 2013, under PEPRA will also see their contribution rates rise. PEPRA included certain other provisions to try to minimize pension costs for covered employees. The three-year reduction of the discount rate will result in average employer rate increases of about 1 percent to 3 percent of normal cost as a percent of payroll for most miscellaneous retirement plans, and a 2 percent to 5 percent increase for most safety plans.
Additionally, many CalPERS employers will see a 30 to 40 percent increase in their current unfunded accrued liability payments. These payments are made to amortize unfunded liabilities over 20 years to bring the pension fund to a fully funded status over the long-term.
Fiscal Year 2020-21 investment returns and changes to the discount rate and other assumptions, including demographic changes, will be reported on the June 30, 2021 CalPERS actuarial reports. These changes, including the newly determined discount rate, will be reflected in contribution levels for cities, counties, and special districts in Fiscal Year 2023-24.
Asset Volatility Ratio (AVR). Plans that have higher asset-to-payroll ratios experience more volatile employer contributions (as a percentage of payroll) due to investment return. For example, a plan with an asset-to-payroll ratio of 8 may experience twice the contribution volatility due to investment return volatility, than a plan with an asset-to-payroll ratio of 4. Shown below is the asset volatility ratio for the Miscellaneous Plan, the Safety Plan (Fire), the Safety Plan (Police), the PEPRA Safety (Fire) and the PEPRA Safety (Police) plan which a measure of each plan’s current contribution volatility. It should be noted that this ratio is a measure of the current situation.
It increases over time but generally tends to stabilize as the plan matures.
Liability Volatility Ratio (LVR). Plans that have higher liability-to-payroll ratios experience more volatile employer contributions (as a percentage of payroll) due to investment return and changes in liability. For example, a plan with a liability-to-payroll ratio of 8 is expected to have twice the contribution volatility of a plan with a liability-to-payroll ratio of 4. The liability volatility ratio is also shown in the table below. It should be noted that this ratio indicates a longerterm potential for contribution volatility. The AVR, described above, will tend to move closer to the LVR as the plan matures. Since the liability volatility ratio is a long- term measure, it is shown below at the current discount rate (7 percent) as well as the discount rate the Board has adopted to determine the contribution requirement in the June 30, 2020 actuarial valuation (7.00 percent).
Rate Volatility
Miscellaneous
Plan*
Safety Plan
(Fire)*
Safety Plan
(Police)*
PEPRA Safety
Plan (Police)*
PEPRA Safety
Plan (Fire)*
1. Market Value of Assets $62,085,040 $17,315,683 $30,477,910 $1,046,399 $202,278
2. Payroll 10,654,408 932,777 1,473,487 1,101,945 545,518
3. Asset Volatility Ratio (AVR) [(1) / (2)] 5.8 18.6 20.7 0.9 0.4
4. Accrued Liability $101,857,734 $24,589,568 $43,807,080 $1,185,772 $211,540
5. Liability Volatility Ratio (LVR) [(4) / (2)] 9.6 26.4 29.7 1.1 0.4 Attachment 7
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* As of June 30, 2020
Source: CalPERS Annual Valuation Report as of June 30, 2020.
Deferred Compensation Plan. City employees may defer a portion of their compensation under a City sponsored Deferred Compensation Plan created in accordance with Internal Revenue Code Section 457. Under this plan, participants are not taxed on the deferred portion of their compensation until distributed to them; distributions may be made only at termination, retirement, death or in an emergency defined by the plan. The laws governing deferred compensation plan assets require plan assets to be held by a trust for the exclusive benefit of plan participants and their beneficiaries. Since the assets held under these plans are not the City’s property and are not subject to City control, they are excluded from the City’s financial statements.
General Fund Long-Term Indebtedness
The following is a summary of changes in long-term liabilities for the year ended June 30, 2021.
2017 Fire Engine Lease (direct borrowing). In October 2017, the City entered a capital lease with Umpqua Bank for the purchase of two Type-1 fire engine totaling $1,125,731. Principal and interest payments are due semi-annually on May 1 and November 1 of each year with an interest rate of 2.45 percent. Lease payments are made by the General Fund. The total combined amount of accumulated depreciation on both fire engines is $296,419. 2017 Computer Equipment Lease (direct borrowing). In July 2017, the City entered into a capital lease with IBM Credit LLC for the purchase of computer equipment and software totaling $285,663. Principal is paid annually on September 1 and interest payments are due monthly with interest rates ranging from 2.15 percent to 2.37 percent. Lease payments are made primarily by the Information Technology internal service fund. The total combined amount of accumulated depreciation on this computer equipment is $171,156.
2017 I-Bank Financing Lease (direct borrowing). In August 2017, the City entered into an agreement for $4,000,000 with the California Infrastructure and Economic Development Bank (IBank) to finance roadway and other right-of-way improvements related to the Redwood Business Park. Principal is paid annually commencing on August 1,2018, and interest payments are made semi-annually on August 1 and February 1 at an interest rate of 3.30 percent. Lease payments are made primarily by the General Fund. The total combined amount of accumulated depreciation on the roadway improvements is $240,000.
2020 Fire Brush Truck Lease (direct borrowing). In February 2020, the City entered a capital lease with Umpqua Bank for the purchase of one Skeeter fire brush truck totaling $227,606. Principal and interest payments are due semi-annually on March 1 and September 1 of each year with an interest rate of 2.8 percent. Lease payments are made by the General Fund.
The total combined amount of accumulated depreciation on this truck is $11,380. 2020 Self Contained Breathing Apparatus Lease (direct borrowing). In November 2020, the City entered an equipment lease with Umpqua Bank for the purchase of one self contained breathing apparatus system totaling $343,762.85. Principal and interest payments are due on June 1 and December 1 of each year with an interest rate of 2.39 percent. Lease payments are made by both the General Fund and the Ukiah Valley Fire District at an even 50 percent split.
Series 2020A Lease Revenue Bonds (Community Facilities Improvement Project). Dated December 1, 2020 the original amount of the obligation was $2,530,000 and is secured with a Attachment 7