Upland City Council
February 28, 2022

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29 Electronic Means (“Electronic Means” shall mean 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 Authority and City shall provide to the Trustee an incumbency certificate listing officers with the authority to provide such Instructions (“Authorized Officers”) and containing specimen signatures of such Authorized Officers, which incumbency certificate shall be amended by the Authority and City whenever a person is to be added or deleted from the listing. If the Authority and City elect 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 Authority and City understand and agree that the Trustee cannot determine the identity of the actual sender of such Instructions and that the Trustee shall conclusively presume that directions that purport to have been sent by an Authorized Officer listed on the incumbency certificate provided to the Trustee have been sent by such Authorized Officer. The Authority and City shall be responsible for ensuring that only Authorized Officers transmit such Instructions to the Trustee and that the Authority and City and all Authorized Officers are solely responsible to safeguard the use and confidentiality of applicable user and authorization codes, passwords and/or authentication keys upon receipt by the Authority and 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 the fact that such directions conflict or are inconsistent with a subsequent written instruction. The Authority and City agree: (i) to assume all risks arising out of the use of Electronic Means to submit Instructions to the Trustee, including without limitation the risk of the Trustee acting on unauthorized Instructions, and the risk of interception and misu se by third parties; (ii) that it is fully informed of the protections and risks associated with the various methods of transmitting Instructions to the Trustee and that there may be more secure methods of transmitting Instructions than the method(s) selected by the Authority and City; (iii) that the security procedures (if any) to be followed in connection with its transmission of Instructions provide to it a commercially reasonable degree of protection in light of its particular needs and circumstances; and (iv) to notify the Trustee immediately upon learning of any compromise or unauthorized use of the security procedures.
(o) The Trustee shall not be liable to the parties hereto or deemed in breach or default hereunder if and to the extent its performance hereunder is prevented by reason of force majeure.

The term “force majeure” means an occurrence that is beyond the control of the Trustee and could not have been avoided by exercising due care. Force majeure shall include but not be limited to acts of God, terrorism, war, riots, strikes, fire, floods, earthquakes, epidemics or other similar occurrences.
(p) The Trustee does not have a duty to review any financial statements or reports of the City, is not considered to have notice of the content of any such statements or reports and does not have a duty to verify the accuracy of such financial statements or reports. (q) The Trustee may consult with counsel, who may be 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 it hereunder in good faith and in accordance therewith.

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30 (r) The Trustee shall have no responsibility or liability with respect to any information, statements or recital in any offering memorandum or other disclosure material prepared or distributed with respect to the issuance of these Bonds. (s) Whenever in the administration of the trusts imposed upon it by this Indenture the Trustee shall deem 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, and such certificate 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, in lieu thereof, accept other evidence of such matter or may require such additional evidence as it may deem. (t) The Trustee’s rights to immunities and protection from liability hereunder and its rights to payment of its fees and expenses shal l survive its resignation or removal and final payment or defeasance of the Bonds.

SECTION 6.04. Fees, Charges and Expenses of Trustee. The Trustee shall be entitled to payment and reimbursement for reasonable fees for its services rendered hereunder and all reasonable advances, reasonable counsel fees (including expenses) and other expenses reasonably and necessarily made or incurred by the Trustee in connection with such services, but solely from Additional Payments made by the City under the Installment Purchase A greement.

Upon the occurrence of an Event of Default hereunder, but only upon an Event of Default, the Trustee shall have a first lien with right of payment prior to payment of any Bond upon the amounts held hereunder for the foregoing fees, charges and expenses incurred by it respectively.

SECTION 6.05. Notice to Bond Owners of Default. If an Event of Default hereunder occurs with respect to any Bonds, of which the Trustee has been given or is deemed to have notice, as provided in Section 6.03(h), then the Trustee shall promptly give written notice thereof by first-class mail to the Owner of each such Bond, unless such Event of Default shall have been cured before the giving of such notice; provided however, that unless such Event of Default consists of failure by the Authority to make any payment when due, the Trustee may elect not to give such notice if and so long as the Trustee in good faith determines that it in the best interests of the Owners not to give such notice.

SECTION 6.06. Intervention by Trustee. In any judicial proceeding to which the Authority is a party which, in the opinion of the Trustee and its counsel, has a substantial bearing on the interests of Owners of any of the Bonds, the Trustee may intervene on behalf of such Bond Owners, and subject to Section 6.03(l), shall do so if requested in writing by the Owners of a majority in aggregate principal amount of such Bonds then Outstanding.

SECTION 6.07. Removal of Trustee. The Owners of a majority in aggregate principal amount of the Outstanding Bonds, or the Authority (so long as no Event of Default has occurred or is continuing), may at any time upon thirty (30) days prior written notice remove the Trustee.

SECTION 6.08. Resignation by Trustee. The Trustee and any successor Trustee may at any time resign by giving thirty (30) days written notice by registered or certified mail to the

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31 City and the Authority. Upon receiving such notice of resignation, the Authority shall promptly appoint a successor Trustee in accordance with Section 6.09. Any resignation or removal of the Trustee and appointment of a successor Trustee shall become effective upon acceptance of appointment by the successor Trustee. Upon such acceptance, the successor Trustee shall mail notice thereof to the Bond Owners at their respective addresses set forth on the Registration Books. No resignation of the Trustee shall take effect until a successor is appointed.

SECTION 6.09. Appointment of Successor Trustee. In the event of the removal or resignation of the Trustee pursuant to Sections 6.07 or 6.08, respectively, the Authority shall promptly appoint a successor Trustee; provided that any such successor shall be a bank, national banking association or trust company meeting the requirements of Section 6.01. In the event the Authority shall for any reason whatsoever fail to appoint a successor Trustee within sixty (60) days following the delivery to the Trustee of the instrument described in Section 6.07 or within sixty (60) days following the receipt of a notice of resignation by the Trustee pursuant to Section

6.08, the Trustee may apply to a court of competent jurisdiction for the appointment of a successor Trustee meeting the requirements of Section 6.01. Any such successor Trustee appointed by such court shall become the successor Trustee hereunder notwithstanding any action by the Authority purporting to appoint a successor Trustee following the expiration of such thirty (30) day period. Notwithstanding any other provision of this Indenture, no removal, resignation or termination of the Trustee shall take effect until a successor shall be appointed; provided, however, that if for any reason whatsoever no successor Trustee shall have been appointed within thirty (30) days following receipt of notice by the City pursuant to Section 6.07 above, the Trustee may apply to a court of competent jurisdiction for the appointment of a successor Trustee which meets the requirements of Section 6.01 hereof.

SECTION 6.10. Merger or Consolidation. Any company into which the Trustee may be merged or converted or which it may be consolidated or any company resulting from any merger, conversion or consolidation to which it shall be a party or any company to which the Trustee may sell or transfer all or substantially all of its corporate trust business, provided that such company shall be eligible under Section 6.01, shall be the successor to the Trustee and vested with all of the title to the trust estate and all of the trusts, powers, discretions, immunities, privileges and all other matters as was its predecessor, without the execution or filing of any paper or further act, anything herein to the contrary notwithstanding.

SECTION 6.11. Concerning any Successor Trustee. Every successor Trustee appointed hereunder shall execute, acknowledge and deliver to its predecessor and also to the Authority an instrument in writing accepting such appointment hereunder and thereupon such successor, without any further act, deed or conveyance, shall become fully vested with all the estates, properties, rights, powers, trusts, duties and obligations of its predecessors; but such predecessor shall, nevertheless, on the Written Request of the Authority, or of its successor, execute and deliver an instrument transferring to such successor all the estates, properties, rights, powers and trusts of such predecessor hereunder; and ever y predecessor Trustee shall deliver all securities and moneys held by it as the Trustee hereunder to its successor. Should any instrument in writing from the Authority be required by any successor Trustee for more fully and certainly vesting in such successor the estate, rights, powers and duties hereby vested or intended to be vested in the predecessor, any and all such instruments in writing shall, on request, be executed, acknowledged and delivered by the Authority.

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32 SECTION 6.12. Appointment of Co-Trustee. It is the purpose of this Indenture that there shall be no violation of any law of any jurisdiction (including particularly the law of the State) denying or restricting the right of banking corporations or associations to transact business as Trustee in such jurisdiction. It is recognized that in the case of litigation under this Indenture, and in particular in case of the enforcement of the rights of the Trustee on default, or in the case the Trustee deems that by reason of any present or future law of any jurisdiction it may not exercise any of the powers, rights or remedies herein granted to the Trustee or hold title to the properties, in trust, as herein granted, or take any other action which may be desirable or necessary in connection therewith, it may be necessary that the Trustee appoint an additional individual or institution as a separate or co-trustee. The following provisions of this Section 6.12 are adopted to these ends.

If the Trustee appoints an additional individual or institution as a separate or co-trustee, each and every remedy, power, right, claim, demand, cause of action, immunity, estate, title, interest and lien expressed or intended by this Indenture to be exercised by or vested in or conveyed to the Trustee with respect thereto shall be exercisable by and vest in such separate or co-trustee but only to the extent necessary to enable such separate or co-trustee to exercise such powers, rights and remedies, and every covenant and obligation necessary to the exercise thereof by such separate or co-trustee shall run to and be enforceable by either of them.

Should any instrument in writing from the Authority be required by the separate trustee or co-trustee so appointed by the Trustee for more fully and certainly vesting in and confirming to it such properties, rights, powers, trusts, duties and obligations, any and all such instruments in writing shall, on request, be executed, acknowledged and delivered by the Authority. In case any separate trustee or co-trustee, or a successor to either, shall become incapable of acting, resign or be removed, all the estates, properties, rights, powers, trusts, duties and obligations of such separate trustee or co-trustee, so far as permitted by law, shall vest in and be exercised by the Trustee until the appointment of a new trustee or successor to such separate trustee or co-trustee.

SECTION 6.13. Indemnification; Limited Liability of Trustee. Except where due to the Trustee’s negligence or willful misconduct, the Authority shall indemnify and hold the Trustee harmless from and against all claims, losses, costs, expenses, liabilities and damages including legal fees and expenses arising from the exercise and performance of its duties hereunder and the termination of this Indenture. Such indemnity and fees and expenses pursuant to Section 6.04 shall survive the resignation or removal of the Trustee hereunder and the payment of the Bonds.

No provision in this Indenture shall require the Trustee to risk or expend its own funds or otherwise incur any financial liability hereunder if it shall have reasonable grounds for believing repayment of such funds or adequate indemnity against such liability or risk is not assured to it.

The Trustee shall not be liable for any action taken or omitted to be taken by it in accordance with the direction of a majority of the Owner of the principal amount of Bonds Outstanding relating to the time, method and place of conducting any proceeding or remedy available to the Trustee under this Indenture.

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33 ARTICLE VII

MODIFICATION AND AMENDMENT OF THIS INDENTURE
SECTION 7.01. Amendment by Consent of Bond Owners. This Indenture and the rights and obligations of the Authority and of the Owners of the Bonds may be modified or amended at any time by a Supplemental Indenture which shall become binding when the written consents of the Owners of a majority in aggregate principal amount of the Bonds then Outstanding, exclusive of Bonds disqualified as provided in Section 7.02 hereof, are filed with the Trustee. No such modification or amendment shall (a) extend the maturity of or reduce the interest rate on any Bond or otherwise alter or impair the obligation of the Authority to pay the principal, interest or redemption premiums at the time and place and at the rate and in the currency provided therein of any Bond without the express written consent of the Owner of such Bond, (b) reduce the percentage of Bonds required for the written consent to any such amendment or modification, or (c) without its written consent thereto, modify any of the rights, obligations, powers, privileges, indemnities, immunities or other security provided the Trustee herein.

This Indenture and the rights and obligations of the Authority and of the Owners of the Bonds may also be modified or amended at any time by a Supplemental Indenture which shall become binding upon adoption, without the consent of any Bond Owners, but only to the extent permitted by law and only for any one or more of the following purposes:
(a) to add to the covenants and agreements of the Authority in this Indenture contained, other covenants and agreements thereafter to be observed, or to limit or surrender any rights or power herein reserved to or conferred upon the Authority; or (b) to make such provisions for the purpose of curing any ambiguity, or of curing, correcting or supplementing any defective provision contained in this Indenture, or in any other respect whatsoever as the Authority may deem necessary or desirable, provided under any circumstances that such modifications or amendments shall not materially adversely affect the interests of the Owners of the Bonds, in the opinion of Bond Counsel; or (c) to make such additions, deletions or modifications as may be necessary or desirable to assure exemption from federal income taxation of interest on the Bonds.

The Trustee shall not be required to enter into or consent to any amendment or modification which, in the sole judgment of the Trustee, might adversely affect the rights, obligations, powers, privileges, indemnities, immunities or other security provided the Trustee herein.

Prior to the Trustee entering into any Supplemental Indenture hereunder, the Authority or the City shall deliver to the Trustee an opinion of Bond Counsel stating, in substance, that such Supplemental Indenture has been adopted in compliance with the requirements of this Indenture and that the adoption of such Supplemental Indenture will not, in and of itself, adversely affect the exclusion from gross income for purposes of federal income taxes of interest on the Bonds.

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34 SECTION 7.02. Disqualified Bonds. Bonds owned or held by or for the account of the City or the Authority (but excluding Bonds held in any employees’ retirement fund) shall not be deemed Outstanding for the purpose of any consent or other action or any calculation of Outstanding Bonds in this article provided for, and shall not be entitled to consent to, or take any other action in this article provided for, unless all of the Outstanding Bonds shall be owned or held by or for the account of the City or the Authority, provided however, that the Trustee shall not be deemed to have knowledge that any Bond is owned by the Authority or the City or for the account of the Authority or the City unless the Authority or the City is a Registered Owner or the Trustee has received written notice that any other Registered Owner is the Owner of a Bond for the account of the City or Authority.

SECTION 7.03. Endorsement or Replacement of Bonds After Amendment. After the effective date of any action taken as hereinabove provided, the Authority may determine that the Bonds shall bear a notation, by endorsement in form approved by the Authority, as to such action, and in that case upon demand of the Owner of any Bond Outstanding at such effective date and presentation of his Bond for that purpose at the Office of the Trustee, a suitable notation as to such action shall be made on such Bond. If the Authority shall so determine, new Bonds so modified as, in the opinion of the Authority, shall be necessary to conform to such Bond Owners’ action shall be prepared and executed, and in that case upon demand of the Owner of any Bond Outstanding at such effective date such new Bonds shall be exchanged at the Office of the Trustee, without cost to each Bond Owner, for Bonds then Outstanding, upon surrender of such Outstanding Bonds.

SECTION 7.04. Amendment by Mutual Consent. The provisions of this Article VII shall not prevent any Bond Owner from accepting any amendment as to the particular Bond held by such Owner, provided that due notation thereof is made on such Bond.

ARTICLE VIII

EVENTS OF DEFAULT AND REMEDIES OF BOND OWNERS
SECTION 8.01. Events of Default and Acceleration of Maturities. The following events shall be Events of Default hereunder:
(a) Default in the due and punctual payment of the principal of any Bond when and as the same shall become due and payable, whether at maturity as therein expressed, by proceedings for mandatory Sinking Account redemption, by declaration or otherwise. (b) Default in the due and punctual payment of any installment of interest on any Bond when and as such interest installment shall become due and payable. (c) Default by the Authority in the observance of any of the other covenants, agreements or conditions on its part in this Indenture or in the Bonds contained, if such default shall have continued for a period of thirty (30) days after written notice thereof, specifying such default and requiring the same to be remedied, shall have been given to the City and the Authority by the Trustee; provided, however, that if in the reasonable opinion of the Authority the default stated in the notice (other than a default in the payment of any fees and expenses

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35 owing to the Trustee) can be corrected, but not within such thirty (30) day period, such default shall not constitute an Event of Default hereunder if the Authority shall commence to cure such default within such thirty (30) day period and thereafter diligently and in good faith cure such failure in a reasonable period of time, which period shall not be longer than one hundred eighty (180) days from the date of such default notice.
(d) The filing by the Authority of a petition or answer seeking reorganization or arrangement under the Federal bankruptcy laws or any other applicable law of the United States of America, or if a court of competent jurisdiction shall approve a petition, filed with or without the consent of the Authority, seeking reorganization under the federal bankruptcy laws or any other applicable law of the United States of America, or if, under the provisions of any other law for the relief or aid of debtors, any court of competent jurisdiction shall assume custody or control of the Authority or of the whole or any substantial part of its property. (e) The occurrence and continuation of an Event of Default under and as defined in the Installment Purchase Agreement.

Upon the occurrence and during the continuance of any Event of Default the Trustee may, and at the written direction of the Owners of a majority in aggregate principal amount of the Bonds at the time Outstanding, the Trustee shall, declare the principal of all of the Bonds then Outstanding, and the interest accrued thereon, to be due and payable immediately, and upon any such declaration the same shall become and shall be immediately due and payable, anything in this Indenture or in the Bonds contained to the contrary notwithstanding. This provision, however, is subject to the condition that if, at any time after the principal of the Bonds shall have been so declared due and payable and before any judgment or decree for the payment of the moneys due shall have been obtained or entered, the Authority shall deposit with the Trustee a sum sufficient to pay all of the principal of and interest on the Bonds having come due prior to such declaration, with interest on such overdue principal and interest calculated at the net effective rate of interest per annum then borne by the Outstanding Bonds, and the reasonable fees and expenses of the Trustee, together with interest thereon at the prime rate of the Trustee then in effect, and any and all other defaults actually known to the Trustee (other than in the payment of the principal of and interest on the Bonds having come due and payable solely by reason of such declaration) shall have been made good or cured to the satisfaction of the Trustee or provision deemed by the Trustee to be adequate shall have been made therefor, then, and in every such case, the Trustee or the Owners of a majority in aggregate principal amount of the Bonds at the time Outstanding may, by written notice to the Authority and to the Trustee, on behalf of the Owners of all of the Outstanding Bonds, rescind and annul such declaration and its consequences. However, no such rescission and annulment shall extend to or shall affect any subsequent default, or shall impair or exhaust any right or power consequent thereon.

SECTION 8.02. Application of Funds Upon Acceleration. All amounts received by the Trustee pursuant to any right given or action taken by the Trustee under the provisions of this Indenture shall be applied by the Trustee in the following order upon presentation of the several Bonds, and the stamping thereon of the amount of the payment if only partially paid, or upon the surrender thereof if fully paid -

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36 First, to the payment of the fees, costs and expenses of the Trustee in declaring such Event of Default, including reasonable compensation to its agents, attorneys and counsel, and to the payment of the fees, costs and expenses of the Trustee, if any, in carrying out the provisions of this Article VIII, including reasonable compensation to its agents, attorneys and counsel and any outstanding fees and expenses of the Trustee, then to the payment of the fees, costs and expenses of the Owner in declaring such Event of Default, including reasonable compensation to its agents, attorneys and counsel; and
Second, 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:
(a) 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; and
(b) To the payment to the persons entitled hereto 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 entitle thereto, without any discrimination or preference.

SECTION 8.03. Other Remedies: Rights of Bond Owners. Upon the occurrence of an Event of Default, the Trustee may pursue any available remedy, in addition to the remedy specified in Section 8.01, at law or in equity to enforce the payment of the principal of, premium, if any, and interest on the Outstanding Bonds, and to enforce any rights of the Trustee under or with respect to this Indenture.

If an Event of Default shall have occurred and be continuing and if requested so to do by the Owners of at least twenty-five percent (25%) aggregate principal amount of Outstanding Bonds and indemnified as provided in Section 6.03(l), the Trustee shall be obligated to exercise such one or more of the rights and powers conferred by this Article VIII, as the Trustee, being advised by counsel, shall deem most expedient in the interests of the Bond Owners.

No remedy by the terms of this Indenture conferred upon or reserved to the Trustee (or to the Bond Owners) is intended to be exclusive of any other remedy, but each and every such remedy shall be cumulative and shall be in addition to any other remedy given to the Trustee or to the Bond Owners hereunder or now or hereafter existing at law or in equity.

No delay or omission to exercise any right or power accruing upon any Event of Default shall impair any such right or power or shall be construed to be a waiver of any such Event of Default or acquiescence therein; such right or power may be exercised from time to time as often as may be deemed expedient.

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37 Nothing herein shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Owner any plan of reorganization, arrangement, adjustment, or composition affecting the Bonds or the rights of any Owner thereof, or to authorize the Trustee to vote in respect of the claim of any Owner in any such proceeding without the approval of the Owners so affected.

SECTION 8.04. Power of Trustee to Control Proceeding. If the Trustee, upon the happening of an Event of Default, shall have taken any action, by judicial proceedings or otherwise, pursuant to its duties hereunder, whether upon its own discretion or upon the request of the Owners of a majority in principal amount of the Bonds then Outstanding, it shall have full power, in the exercise of its discretion for the best interests of the Owners of the Bonds, with respect to the continuance, discontinuance, withdrawal, compromise, settlement or other disposal of such action; provided, however, that the Trustee shall not, unless there no longer continues an Event of Default, discontinue, withdraw, compromise or settle, or otherwise dispose of any litigation pending at law or in equity, if at the time there has been filed with it a written request signed by the Owners of a majority in principal amount of the Outstanding Bonds hereunder opposing such discontinuance, withdrawal, compromise, settlement or other disposal of such litigation and the Trustee has been indemnified to its satisfaction. Any suit, action or proceeding which any Owner of Bonds shall have the right to bring to enforce any right or remedy hereunder may be brought by the Trustee for the equal benefit and protection of all Owners of Bonds similarly situated and the Trustee is hereby appointed (and the successive respective Owners of the Bonds issued hereunder, by taking and holding the same, shall be conclusively deemed so to have appointed it) the true and lawful attorney-in-fact of the respective Owners of the Bonds for the purpose of bringing any such suit, action or proceeding and to do and perform any and all acts and things for and on behalf of the respective Owners of the Bonds as a class or classes, as may be necessary or advisable in the opinion of the Trustee as such attorney-in-fact.

SECTION 8.05. Appointment of Receivers. Upon the occurrence of an Event of Default hereunder, and upon the filing of a suit or other commencement of judicial proceedings to enforce the rights of the Trustee and of the Bond Owners under this Indenture, the Trustee shall be entitled, as a matter of right, to the appointment of a receiver or receivers of the Revenues and other amounts pledged hereunder, pending such proceedings, with such powers as the court making such appointment shall confer.

SECTION 8.06. Non-Waiver. Nothing in this Article VIII or in any other provision of this Indenture, or in the Bonds, shall affect or impair the obligation of the Authority, which is absolute and unconditional, to pay the interest on and principal of the Bonds to the respective Owners of the Bonds at the respective dates of maturity, as herein provided, out of the Revenues and other moneys herein pledged for such payment.

A waiver of any default or breach of duty or contract by the Trustee or any Bond Owners shall not affect any subsequent default or breach of duty or contract, or impair any rights or remedies on any such subsequent default or breach. No delay or omission of the Trustee or any Owner of any of the Bonds to exercise any right or power accruing upon any default shall impair any such right or power or shall be construed to be a waiver of any such default or an acquiescence therein; and every power and remedy conferred upon the Trustee or Bond Owners

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38 by the Bond Law or by this Article VIII may be enforced and exercised from time to time and as often as shall be deemed expedient by the Trustee or the Bond Owners, as the case may be.

SECTION 8.07. Rights and Remedies of Bond Owners. No Owner of any Bond issued hereunder shall have the right to institute any suit, action or proceeding at law or in equity, for any remedy under or upon this Indenture, or the Installment Purchase Agreement, unless (a) such Owner shall have previously 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 all the Bonds then Outstanding shall have made written request upon the Trustee to exercise the powers hereinbefore granted or to institute such action, suit or proceeding in its own name; (c) said Owners shall have tendered to the Trustee indemnity reasonably acceptable to the Trustee against the costs, expenses and liabilities to be incurred in compliance with such request; (d) the Trustee shall have refused or omitted to comply with such request for a period of sixty (60) days after such written request shall have been received by, and said tender of indemnity shall have been made to, the Trustee; and (e) the Trustee has not received any inconsistent direction during such 60-day period from the Owners of a majority in aggregate principal amount of the Outstanding Bonds.

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; 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 enforce any right under this Indenture, or the Installment Purchase Agreement, except in the manner herein provided, and that all proceedings at law or in equity to enforce any provision of this Indenture shall be instituted, had and maintained in the manner herein provided and for the equal benefit of all Owners of the Outstanding Bonds.

The right of any Owner of any Bond to receive payment of the principal of and interest and premium (if any) on such Bond as herein provided or to institute suit for the enforcement of any such payment, shall not be impaired or affected without the written consent of such Owner, notwithstanding the foregoing provisions of this Section or any other provision of this Indenture.

SECTION 8.08. Termination of Proceedings. In case the Trustee shall have proceeded to enforce any right under this Indenture by the appointment of a receiver or otherwise, and such proceedings shall have been discontinued or abandoned for any reason, or shall have been determined adversely, then and in every such case, the Authority, the Trustee and the Bond Owners shall be restored to their former positions and rights hereunder, respectively, with regard to the property subject to this Indenture, and all rights, remedies and powers of the Trustee shall continue as if no such proceedings had been taken.

ARTICLE IX

MISCELLANEOUS
SECTION 9.01. Limited Liability of Authority. Notwithstanding anything in this Indenture contained, the Authority shall not be required to advance any moneys derived from any source of income other than the Revenues for the payment of the principal of or interest on

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39 the Bonds, or any premiums upon the redemption thereof, or for the performance of any covenants herein contained (except to the extent any such covenants are expressly pa yable hereunder from the Revenues). The Authority may, however, advance funds for any such purpose, provided that such funds are derived from a source legally available for such purpose and may be used by the Authority for such purpose without incurring indebtedness.

SECTION 9.02. Benefits of Indenture Limited to Parties. Nothing in this Indenture, expressed or implied, is intended to give to any person other than the City, the Authority, the Trustee, and the Owners of the Bonds, any right, remedy or claim under or by reason of this Indenture. Any covenants, stipulations, promises or agreements in this Indenture contained by and on behalf of the Authority shall be for the sole and exclusive benefit of the Trustee, and the Owners of the Bonds.

SECTION 9.03. Discharge of Indenture. If the Authority shall pay and discharge each Outstanding Bond in any one or more of the following ways – (a) by well and truly paying or causing to be paid the principal of and interest and premium (if any) on such Bonds, as and when the same become due and payable; (b) by irrevocably depositing with the Trustee, in trust, at or before maturity, money which, together with the available amounts then on deposit in the funds and accounts established pursuant to this Indenture, is fully sufficient to pay such Bonds, including all principal, interest and redemption premiums;
(c) by irrevocably depositing with the Trustee, in trust, Permitted Investments described in paragraph (a) of the definition thereof in such amount as Bond Counsel or an Independent Accountant shall determine as evidenced by an opinion or report, respectively, delivered to the Trustee (the “Verification Report”) will, together with the interest to accrue thereon and available moneys then on deposit in the funds and accounts established pursuant to this Indenture, be fully sufficient to pay and discharge the indebtedness on such Bonds (including all principal, interest and redemption premiums) at or before their respective maturity dates; and if such Bonds are to be redeemed prior to the maturity thereof notice of such redemption shall have been mailed pursuant to Section 2.03(c) or provision satisfactory to the Trustee shall have been made for the mailing of such notice; or (d) by delivering such Bonds to the Trustee for cancellation – then, at the election of the Authority, and notwithstanding that any of such Bonds shall not have been surrendered for payment, the assignment of the Installment Purchase Agreement and pledge of the Revenues and other funds provided for in this Indenture securing its performance with respect to such Bonds, and all other pecuniary obligations of the Authority under this Indenture with respect to such Bonds, shall cease and terminate, except only the obligation of the Authority to pay or cause to be paid to th e Owners of such Bonds not so surrendered and paid all sums due thereon from amounts set aside for such purpose as aforesaid, and all expenses and costs of the Trustee. Notice of such election shall be filed with the Trustee.

Any funds thereafter held by the Trustee, which are not required for said purposes, shall be paid over to the City.

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40 SECTION 9.04. Successor Is Deemed Included in All References to Predecessor.

Whenever in this Indenture or any Supplemental Indenture either the Authority is named or referred to, such reference shall be deemed to include the successor to the powers, duties and functions, with respect to the management, administration and control of the affairs of the Authority, that are presently vested in the Authority, and all the covenants, agreements and provisions contained in this Indenture by or on behalf of the Authority shall bind and inure to the benefit of its successors whether so expressed or not.

SECTION 9.05. Execution of Documents by Bond Owners. Any request, consent or other instrument required by this Indenture to be signed and executed by Bond Owners may be in any number of concurrent writings of substantially similar tenor and may be signed or executed by such Bond Owners in person or by agent or agents duly appointed in writing. Pro of of the execution of any such request, consent or other instrument or of a writing appointing any such agent, shall be sufficient for any purpose of this Indenture and shall be conclusive in favor of the Trustee and of the Authority if made in the manner provided in this Section 9.05.

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 affidavit of a witness of such execution or 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 or writing acknowledged to him the execution thereof.

The ownership of Bonds shall be proved by the Registration Books.

Any request, consent or vote of the Owner shall bind every future Owner with respect to the same Bond and the Owner with respect to any 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 pursuance of such request, consent or vote. In lieu of obtaining any demand, request, direction, consent or waiver in writing, the Trustee may call and hold a meeting of the Owners upon such notice and in accordance with such rules and obligations as the Trustee considers fair and reasonable for the purpose of obtaining any such action.

SECTION 9.06. Waiver of Personal Liability. No member of the Authority’s Board of Directors or officer, agent or employee of the Authority shall be individually or personally liable for the payment of the interest on or principal of the Bonds; but nothing herein contained shall relieve any such officer, agent or employee from the performance of any official duty provided by law.

SECTION 9.07. Partial Invalidity. If any one or more of the covenants or agreements, or portions thereof, provided in this Indenture on the part of the Authority (or of the Trustee) to be performed should be contrary to law, then such covenant or covenants, such agreement or agreements, or such portions thereof, shall be null and void and shall be deemed separable from the remaining covenants and agreements or portions thereof and shall in no way affect the validity of this Indenture or of the Bonds; but the Bond Owners shall retain all rights and benefits accorded to them under the Bond Law or any other applicable provisions of law. The Authority hereby declares that it would have entered into this Indenture and each and every other section, paragraph, subdivision, sentence, clause and phrase hereof and would have authorized the

46708.00807\34757905.3

41 issuance of the Bonds pursuant hereto irrespective of the fact that any one or more sections, paragraphs, subdivisions, sentences, clauses or phrases of this Indenture or the application thereof to any person or circumstance may be held to be unconstitutional, unenforceable or invalid.

SECTION 9.08. Destruction of Canceled Bonds. Whenever in this Indenture provision is made for the surrender to the Authority of any Bonds which have been paid or canceled pursuant to the provisions of this Indenture, the Trustee shall destroy such Bonds and furnish to the Authority upon the Authority’s Written Request a certificate of such destruction.

SECTION 9.09. Funds and Accounts. Any fund or account required by this Indenture to be established and maintained by the Authority or the Trustee may be established and maintained in the accounting records of the Authority or the Trustee, as the case may be, either as a fund or an account, and may, for the purpose of such records, any au dits thereof and any reports or statements with respect thereto, be treated either as a fund or as an account. All such records with respect to all such funds and accounts held by the Authority shall at all times be maintained in accordance with generally accepted accounting principles and all such records with respect to all such funds and accounts held by the Trustee shall be at all times maintained in accordance with corporate trust industry practices; in each case with due regard for the protection of the security of the Bonds and the rights of every Owner thereof.

SECTION 9.10. Notices. All written notices 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, (b) upon receipt after deposit in the United States mail, postage prepaid, or (c) in the case of personal delivery to any person, upon actual receipt. The City, the Authority or the Trustee may, by written notice to the other parties, from time to time modify the address or number to which communications are to be given hereunder.

If to the Authority: City of Upland Financing Authority 460 North Euclid Avenue
Upland, CA 91785-0460
Attention: Executive Director

If to the City: City of Upland
460 North Euclid Avenue
Upland, CA 91785-0460
Attention: City Manager

If to the Trustee: U.S. Bank Trust Company, National Association 633 West 5th Street
Los Angeles, CA 90071
Attn: Vice President

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42 SECTION 9.11. Unclaimed Moneys. Anything in this Indenture to the contrary notwithstanding, any moneys held by the Trustee in trust for the payment and discharge of any of the Bonds which remain unclaimed for two (2) years after the date when such Bonds or interest thereon have become due and payable, either at their stated maturity dates or by call for earlier redemption, if such moneys were held by the Trustee at such date, or for two (2) years after the date of deposit of such moneys if deposited with the Trustee after said date when such Bonds become due and payable, shall be repaid by the Trustee (without liability for interest) to the Authority, as its absolute property and free from trust, and the Trustee shall thereupon be released and discharged with respect thereto and the Bond Owners shall look only to the Authority for the payment of such Bonds; provided, however, that before being required to make any such payment to the Authority, the Trustee shall, at the Written Request of the Authority (and of its expense), cause to be mailed to the Owners of all such Bonds, at their respective addresses appearing on the Registration Books, a notice that said moneys remain unclaimed and that, after a date named in said notice, which date shall not be less than thirty (30) days after the date of mailing of such notice, the balance of such moneys then unclaimed will be returned to the Authority.

SECTION 9.12. 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.

SECTION 9.13. Governing Law. This Indenture shall be governed by and construed in accordance with the laws of the State.
(Signature page follows)

46708.00807\34757905.3

S-1

IN WITNESS WHEREOF, the CITY OF UPLAND FINANCING AUTHORITY and the CITY OF UPLAND have caused this Indenture to be signed in their names by their respective authorized officers, and U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION, in token of its acceptance of the trust created hereunder, has caused this Indenture to be signed in its corporate name by its officer identified below, all as of the day and year first above written.

CITY OF UPLAND FINANCING

AUTHORITY

By:

Michael Blay
Executive Director

CITY OF UPLAND

By:

Michael Blay
City Manager

U.S. BANK TRUST COMPANY,
NATIONAL ASSOCIATION, as Trustee

By:

Authorized Officer

-Signature Page-
Indenture of Trust

46708.00807\34757905.3

A-1

EXHIBIT A

[FORM OF BOND]

UNLESS THIS BOND IS PRESENTED BY AN AUTHORIZED OFFICIAL OF THE

DEPOSITORY (AS DEFINED IN THE INDENTURE OF TRUST) TO THE TRUSTEE FOR

REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY BOND AUTHENTICATED AND DELIVERED IS REGISTERED IN THE NAME OF CEDE & CO.

OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED OFFICIAL OF THE DEPOSITORY (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH

OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED OFFICIAL OF THE

DEPOSITORY), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR

OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INAS MUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

No. R- **$**

UNITED STATES OF AMERICA

STATE OF CALIFORNIA

COUNTY OF SAN BERNARDINO

CITY OF UPLAND FINANCING AUTHORITY

WATER REVENUE BONDS
SERIES 2022

INTEREST RATE

MATURITY DATE

DATED DATE

CUSIP
% October 1, ____

REGISTERED OWNER: CEDE & CO.

PRINCIPAL AMOUNT: DOLLARS

The CITY OF UPLAND FINANCING AUTHORITY, a joint powers authority organized and existing under the laws of the State of California (the “Authority”) for value received, hereby promises to pay (but only out of the Revenues and other assets pledged therefor as hereinafter mentioned) to the Registered Owner stated above, or registered assigns, on the Maturity Date stated above (subject to any right of prior redemption hereinafter mentioned), the Principal Amount stated above, in lawful money of the United States of America; and to pay interest thereon in like lawful money from the Interest Payment Date next preceding the date of

46708.00807\34757905.3

A-2

authentication of this Bond (unless this Bond is authenticated as of a day during the period commencing after the fifteenth day of the month preceding an Interest Payment Date and ending on or before such Interest Payment Date, in which event it shall bear interest from such Interest Payment Date, or unless this Bond is authenticated on or before September 15, 2022, in which event it shall bear interest from the Issue Date stated above) until payment of such principal sum shall be discharged as provided in the Indenture hereinafter mentioned, at the Interest Rate per annum stated above, payable semiannually on each October 1 and April 1, commencing October 1, 2022 (each, an “Interest Payment Date”).

The principal (or redemption price) hereof is payable at the Office (as defined in the Indenture referred to below) of U.S. Bank Trust Company, National Association (together with any successor trustee under the Indenture, the “Trustee”). Interest hereon is payable by check of the Trustee mailed on each Interest Payment Date to the Registered Owner as of the fifteenth (15th) day of the month preceding each Interest Payment Date at the address shown on the registration books maintained by the Trustee; provided however, that payment of interest will be made by wire transfer in immediately available funds to an account in the United States of America to any Owner of Bonds in the aggregate principal amount of $1,000,000 or more who shall furnish written wire instructions to the Trustee before the fifteenth day of the month preceding the applicable Interest Payment Date.

It is hereby certified and recited that any and all things, conditions and acts required to exist, to have happened and to have been performed precedent to and in the issuance of this Bond do exist, have happened and have been performed in due time, form and manner as required by the Bond Law and by 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 by the Constitution and 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.

This Bond is one of a duly authorized issue of bonds of the Authority designated as its “City of Upland Financing Authority Water Revenue Bonds, Series 2022” (the “Bonds”), in the aggregate principal amount of _______________ Dollars ($____________), authorized pursuant to the provisions of Article 4 of Chapter 5 of Division 7 of Title 1 (commencing with Section 6584) of the California Government Code (the “Bond Law”), and issued pursuant to an Indenture of Trust, dated as of __________, 2022 (the “Indenture”), by and among the Authority, the City of Upland, California (the “City”), and the Trustee. Reference is hereby made to the Indenture (a copy of which is on file at such Office of the Trustee) and all indentures supplemental thereto and to the Bond Law for a description of the rights thereunder of the owners of the Bonds, of the nature and extent of the security, of the rights, duties and immunities of the Trustee and of the rights and obligations of the Authority thereunder. The Registered Owner of this Bond, by acceptance hereof, assents and agrees to all the provisions of the Indenture.

The Bonds have been issued by the Authority to assist the City in financing certain improvements to the Water System. Pursuant to an Installment Purchase Agreement, dated as of

46708.00807\34757905.3

A-3

__________, 2022, by and between the City and the Authority, the Authority will sell to the City such improvements and the City will pay, in consideration therefor, Installment Payments, secured by the Revenues, as defined in the Indenture. The scheduled Installment Payments are equal to the debt service payments on the Bonds.

The Bonds and the interest thereon are payable from Revenues (as such term is defined in the Indenture), consisting primarily of Installment Payments to be made by the City under the Installment Purchase Agreement as consideration for the purchase of the Improvements, and are secured by a pledge and assignment of such Revenues, subject only to the provisions of the Indenture permitting the application thereof for the purposes and on the terms and conditions set forth in the Indenture. The Bonds are special obligations of the Authority and are not a lien or charge upon the funds or property of the Authority, except to the extent of the aforesaid pledge and assignment.

The Bonds maturing on or before October 1, 20__ shall not be subject to optional redemption prior to maturity. The Bonds maturing on October 1, 20__ shall be subject to redemption prior to their maturity date, at the option of the Authority, at random within a maturity on any date on or after October 1, 20__, from prepayment of Installment Payments made at the option of the City at the redemption price equal to the principal amount of the Bonds to be redeemed, plus accrued interest thereon to the date of redemption, without premium.

The Bonds maturing on October 1, 20__ are also subject to redemption prior to their stated maturity, on October 1 in each year, commencing October 1, 20__, in part by lot, from mandatory Sinking Account payments at a redemption price equal to the principal amount thereof, plus accrued interest, if any, to the redemption date, without premium, as set forth below in the aggregate respective principal amounts and on the respective dates as set forth in the following table; provided, however, that if some but not all of Bonds have been redeemed pursuant to optional or special mandatory redemption provisions of the Indenture, the total amount of all future Sinking Account payments shall be reduced by the aggregate principal amount of such Bonds so redeemed, to be allocated among such Sinking Account payments on a pro rata basis as nearly as possible in integral multiples of $5,000.

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A-4

Schedule of Mandatory Sinking Account Redemptions
2022 Term Bonds Maturing October 1, 20__
Redemption Date
(October 1)
Principal
Amount

(1)
______________________
(1) Maturity.

The Bonds maturing on October 1, 20__ are also subject to redemption prior to their stated maturity, on October 1 in each year, commencing October 1, 20__, in part by lot, from mandatory Sinking Account payments at a redemption price equal to the principal amount thereof, plus accrued interest, if any, to the redemption date, without premium, as set forth below in the aggregate respective principal amounts and on the respective dates as set forth in the following table; provided, however, that if some but not all of such Bonds have been redeemed pursuant to optional or special mandatory redemption provisions of the Indenture, the total amount of all future Sinking Account payments will be reduced by the aggregate principal amount of such Bonds so redeemed, to be allocated among such Sinking Account payments on a pro rata basis in integral multiples of $5,000.

Schedule of Mandatory Sinking Account Redemptions
2022 Term Bonds Maturing October 1, 20__
Redemption Date
(October 1)
Principal
Amount

(1)
________________________
____________________
(1) Final Maturity.

The Bonds are issuable as fully registered Bonds in denominations of $5,000 and any integral multiple thereof. Subject to the limitations provided in the Indenture, Bonds may be exchanged, at said Office of the Trustee, for a like aggregate principal amount of Bonds of other authorized denominations of the same maturity.

46708.00807\34757905.3

A-5

The Trustee has no obligation or liability to the Registered Owners to make payments of principal of or interest on the Bonds, except from amounts on deposit for such purposes with the Trustee. The Trustee’s sole obligations are to administer for the benefit of the Registered Owners the various funds and accounts established under the Indenture and, to the extent provided in the Indenture, to enforce the rights of the Authority under the Installment Purchase Agreement.

This Bond is transferable by the Registered Owner hereof, in person or by his or her attorney duly authorized in writing, at said Office of the Trustee, but only in the manner, subject to the limitations provided in the Indenture, and upon surrender and cancellation of this Bond.

Upon such transfer, a new Bond or Bonds, of authorized denomination or denominations, of the same maturity and for the same aggregate principal amount, will be issued to the transferee in exchange herefor.

If an Event of Default, as defined in the Indenture, shall occur, the principal of all outstanding Bonds may be declared due and payable upon the conditions, in the manner and with the effect provided in the Indenture, but such declaration and its consequences may be rescinded and annulled as further provided in the Indenture.

The 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 in the manner, to the extent, and upon the terms provided in the Indenture; provided that no such modification or amendment shall (a) extend the maturity of or reduce the interest rate on any Bond or otherwise alter or impair the obligation of the Authority to pay the principal, interest or redemption premiums at the time and place and at the rate and in the currency provided therein of any Bond without the express written consent of the owner of such Bond, (b) reduce the percentage of Bonds required for the written consent to any such amendment or modification, or (c) without its written consent thereto, modify any of the rights or obligations of the Trustee, all as more fully set forth in the Indenture.

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.
(Balance of this page intentionally left blank)

46708.00807\34757905.3

A-6

IN WITNESS WHEREOF, the City of Upland Financing Authority has caused this Bond to be executed in its name and on its behalf by the facsimile signature of its Chairman and attested to by the facsimile signature of its Secretary, all as of the Issue Date stated above.

CITY OF UPLAND FINANCING

AUTHORITY

By:

Bill Velto
Chairman

ATTEST:

By:

Keri Johnson
Secretary

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A-7

CERTIFICATE OF AUTHENTICATION
This is one of the Bonds described in the within-mentioned Indenture.

Dated: ____________________

U.S. BANK TRUST COMPANY,
NATIONAL ASSOCIATION, as Trustee
By:

Authorized Signatory

46708.00807\34757905.3

A-8

FORM OF ASSIGNMENT
For value received the undersigned do(es) hereby sell, assign and transfer unto_________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ (Name, Address and Tax Identification or Social Security Number of Assignee) the within Bond and do(es) hereby irrevocably constitute and appoint ______________________ _________________________________________ attorney, to transfer the same on the books of the Trustee, with full power of substitution in the premises.

Dated: _______________________

Signature Guaranteed:

Note: Signature guarantee shall be made by a
guarantor institution participating in the
Securities Transfer Agents Medallion
Program or in such other guarantee
program acceptable to the Trustee.

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.

46708.00807\34757905.3

B-1

EXHIBIT B
$____________

CITY OF UPLAND FINANCING AUTHORITY

WATER REVENUE BONDS
SERIES 2022
(Issue Dated Date: ________, 2022)
Requisition of the Authority
(Costs of Issuance Fund)
(Section 3.04 of the Indenture)
The undersigned hereby states and certifies:
(i) That I am the duly appointed [_________________] of the City of Upland Financing Authority, a public body, corporate and politic, duly organized and existing under the laws of the State of California (the “Authority”), and as such, is familiar with the facts herein certified and is authorized and qualified to execute and deliver this certificate; (ii) I have been authorized to execute this requisition pursuant to the Indenture of Trust, dated as of __________, 2022 (the “Indenture”), by and among the Authority, the City of Upland and U.S. Bank Trust Company, National Association, as Trustee (the “Trustee”) for the Authority’s Water Revenue Bonds, Series 2022 (the “Bonds”); and (iii) The Trustee is hereby directed to disburse this date from the Costs of Issuance Fund established pursuant to the Indenture to the payees, designated on Exhibit A attached hereto and by this reference incorporated herein, at the address set forth below such payee name, the respective sums set forth opposite such payees, in payment of the Costs of Issuance related to the Bonds described on said Exhibit A; and
(iv) That each obligation shown on said Exhibit A has been properly incurred and is a proper charge against the Costs of Issuance Fund;
(v) That no item to be paid pursuant to this requisition has been previously paid or reimbursed from the Costs of Issuance Fund; and

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B-2

(vi) That capitalized terms used herein and not otherwise defined shall have the meanings ascribed thereto in the Indenture.

Dated: _______, 20__ CITY OF UPLAND FINANCING

AUTHORITY

By:

Authorized Official

46708.00807\34757905.3

B-3

EXHIBIT A TO WRITTEN REQUISITION NO. 1

COSTS OF ISSUANCE

TO BE PAID AT CLOSING

1. Immediately upon release of the Bonds by DTC, or as soon thereafter as practicable, pay the following amounts to the following parties from the Costs of Issuance Fund held under the Indenture:

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C-1

EXHIBIT C
$_________

CITY OF UPLAND FINANCING AUTHORITY

WATER REVENUE BONDS
SERIES 2022
(Issue Dated Date: _________, 2022)
Requisition of the City
(Acquisition and Construction Fund)
(Section 3.05 of the Indenture)
U.S. Bank Trust Company, National Association
Attention: Corporate Trust Department

Request No.: P-___ (to be sequentially numbered)

Project Component
Amount of
This Draw
Aggregate Amount
Draws Including
This Draw

(Continue on Additional Sheet if Necessary)

46708.00807\34757905.3

C-2

Name and Address of party to whom payment is to be made:

Purpose for which the obligation was incurred:

The undersigned _____________ of the City of Upland (the “City”) hereby certifies that (i) each such cost or expense constitutes a proper charge against the Acquisition and Construction Fund for services rendered, and has not been the subject of any other payment request filed with you; and (ii) if the payment is to be made to the City for amounts that it has paid or will pay to third parties, then the City has either made payment or will make payment within three (3) business days of receipt of moneys requisitioned hereunder and that the aggregate number of business days during this calendar year during which it has held such amounts before making payment does not exceed twenty (20).

Date: ________________________

CITY OF UPLAND

By:___________________________
Title:_________________________

Stradling Yocca Carlson & Rauth
Draft of 2/22/22

4871-8795-0860v6/200448-0007
PRELIMINARY OFFICIAL STATEMENT DATED MARCH __, 2022
NEW ISSUE – BOOK-ENTRY ONLY Rating: S&P: [__]
See the caption “RATING”
In the opinion of Best Best & Krieger LLP, Riverside, California, Bond Counsel, subject to certain qualifications described h erein, under existing statutes, regulations, rules and court decisions, and assuming certain representations and compliance with ce rtain covenants and requirements described herein, the interest on the Bonds is excluded from gross income for federal income tax purposes an d is not an item of tax preference for purposes of the federal alternative minimum taxes. In the further opinion of Bond Counsel, interest on the Bonds is exempt from California personal income taxes. See the caption “TAX MATTERS” herein.

4871-8795-0860v6/200448-0007
$_______*

4871-8795-0860v6/200448-0007

CITY OF UPLAND FINANCING AUTHORITY
WATER REVENUE BONDS, SERIES 2022

Dated: Date of Delivery Due: October 1, as shown on inside front cover page The Bonds are being issued in fully registered form and, when issued, will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York. Individual purchases will be made in denominations of $5,000 and integral multiples thereof and will be in book-entry form only. Purchasers of the Bonds will not receive certificates representing their beneficial ownership in the Bonds but will receive credit balances on the books of their respective nominees. Interest on the Bonds is payable on [October 1, 2022] and each April 1 and October 1 thereafter. Payment of the principal of and interest on the Bonds is to be made to Cede & Co., which is to disburse said payments to the Beneficial Owners of the Bonds through their nominees.

The Bonds are subject to optional, mandatory sinking fund and special mandatory redemption prior to maturity, all as more fully described herein.

The Bonds are being issued to provide funds: (i) to finance certain capital improvements to the City’s municipal water system; and (ii) to pay costs incurred in connection with the issuance of the Bonds.

The Bonds are being issued pursuant to the Indenture of Trust, dated as of March 1, 2022, by and among the City of Upland Financing Authority, the City of Upland and U.S. Bank Trust Company, National Association, as trustee. THE BONDS ARE A SPECIAL LIMITED OBLIGATION OF THE AUTHORITY PAYABLE SOLELY FROM REVENUES, WHICH CONSIST OF 2022 INSTALLMENT

PAYMENTS TO BE MADE BY THE CITY TO THE AUTHORITY PURSUANT TO THE INSTALLMENT PURCHASE AGREEMENT, DATED AS OF MARCH 1, 2022, BY AND BETWEEN THE CITY AND THE AUTHORITY, AND FROM CERTAIN OTHER FUNDS AND ACCOUNTS HELD BY THE TRUSTEE PURSUANT TO THE INDENTURE. NEITHER THE FULL FAITH AND CREDIT NOR

ANY OTHER REVENUES OR FUNDS OF THE AUTHORITY ARE PLEDGED TO OR AVAILABLE FOR THE PAYMENT OF DEBT SERVICE ON THE BONDS. THE OBLIGATION OF THE AUTHORITY TO MAKE PAYMENTS OF PRINCIPAL AND INTEREST ON

THE BONDS DOES NOT CONSTITUTE AN OBLIGATION FOR WHICH THE AUTHORITY IS OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION OR FOR WHICH THE AUTHORITY HAS LEVIED OR PLEDGED ANY FORM OF TAXATION. THE AUTHORITY HAS NO TAXING POWER.

No debt service reserve fund or account has been established under the Indenture or the Installment Purchase Agreement in connection with the issuance of the Bonds.

The 2022 Installment Payments are payable from Net Revenues of the City’s Water System on a parity with: (i) certain obligati ons which are currently outstanding in the aggregate principal amount of $6,553,000; and (ii) an obligation upon which the City has not yet drawn, but under which the City may borrow up to a maximum principal amount of $16,500,000. The City may incur additional obligations payable from Net Revenues on a parity with the obligation to pay 2022 Installment Payments, subject to the terms and conditions of the Installment Purchase Agreement, as more fully described herein.

THE OBLIGATION OF THE CITY TO MAKE 2022 INSTALLMENT PAYMENTS PURSUANT TO THE INSTALLMENT

PURCHASE AGREEMENT DOES NOT CONSTITUTE AN OBLIGATION FOR WHICH THE CITY IS OBLIGATED TO LEVY

OR PLEDGE ANY FORM OF TAXATION OR FOR WHICH THE CITY HAS LEVIED OR PLEDGED ANY FORM OF TAXATION. THE OBLIGATION OF THE CITY TO MAKE THE 2022 INSTALLMENT PAYMENTS IS A SPECIAL LIMITED OBLIGATION OF THE CITY PAYABLE SOLELY FROM NET REVENUES OF THE CITY’S WATER SYSTEM AND DOES NOT

CONSTITUTE A DEBT OF THE CITY OR OF THE STATE OF CALIFORNIA OR OF ANY POLITICAL SUBDIVISION THEREOF IN CONTRAVENTION OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMITATION OR RESTRICTION. ____________________________________
THIS COVER PAGE CONTAINS CERTAIN INFORMATION FOR REFERENCE ONLY. IT IS NOT A SUMMARY OF THIS ISSUE. INVESTORS MUST READ THE ENTIRE OFFICIAL STATEMENT TO OBTAIN INFORMATION ESSENTIAL TO THE MAKING OF AN INFORMED INVESTMENT DECISION.

MATURITY SCHEDULE
(See inside front cover page)
The Bonds are offered when, as and if issued and received by the Underwriter, subject to the approval of the valid, legal and binding nature of the Bonds by Best Best & Krieger LLP, Riverside, California, Bond Counsel, and certain other conditions. Certain matters will be passed upon for the City and the Authority by Best Best & Krieger LLP, Ontario, California, as City Attorney and General Counsel to the Authority, and by Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California, as Disclosure Counsel, for the Underwriter by its counsel, Kutak Rock LLP, Irvine, California, and for the Trustee by its counsel. It is anticipated that the Bonds will be available for delivery through the facilities of The Depository Trust Company on or about March 24, 2022.

J.P. Morgan
Dated: March __, 2022

4871-8795-0860v6/200448-0007
$_______*

CITY OF UPLAND FINANCING AUTHORITY
WATER REVENUE BONDS, SERIES 2022

MATURITY SCHEDULE
BASE CUSIP† _____
Maturity
(October 1)
Principal
Amount Interest Rate Yield Price CUSIP†
2022 $ % %
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035

$_____ ____% Term Bond due October 1, 2037, Yield: ____%, Price: _____, 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© 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 ser ve in any way as a substitute for the CGS database. CUSIP® numbers are provided for convenience of reference only. None of the Authority, the City, the Underwriter or their agents or counsel assume responsibility for the accuracy of such numbers.

4871-8795-0860v6/200448-0007

CITY OF UPLAND FINANCING AUTHORITY

BOARD OF DIRECTORS
Bill Velto, Chair
Shannan Maust, Vice Chair
Janice Elliott, Director
Carlos Garcia, Director
Rudy Zuniga, Director

CITY OF UPLAND

CITY COUNCIL
Bill Velto, Mayor
Shannan Maust, Councilmember, District 1 and Mayor Pro Tem Janice Elliott, Councilmember, District 2
Carlos Garcia, Councilmember, District 3
Rudy Zuniga, Councilmember, District 4
STAFF
Michael D. Blay, City Manager
Greg Bradley, City Treasurer
Stephen Parker, Assistant City Manager
Londa Bock-Helms, Finance Officer
Braden Yu, Public Works Director/City Engineer

SPECIAL SERVICES
City Attorney
Best Best & Krieger LLP
Ontario, California
Municipal Advisor
Urban Futures, Inc.

Tustin, California
Bond Counsel
Best Best & Krieger LLP
Riverside, California
Disclosure Counsel
Stradling Yocca Carlson & Rauth,
a Professional Corporation
Newport Beach, California
Trustee
U.S. Bank National Association
Los Angeles, California
Dissemination Agent
Willdan Financial Services
Temecula, California

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No dealer, broker, salesperson or other person has been authorized by the City or the Authority to give any information or to make any representations in connection with the offer or sale of the Bonds other than those contained herein and, if given or made, such other information or representations must not be relied upon as having been authorized by the City or the Authority. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the Bonds by a pe rson in any jurisdiction in which it is unlawful for such person to make such an offer, solicitation or sale.

This Official Statement is not to be construed as a contract with the purchasers or Owners of the Bonds. Statements containe d in this Official Statement which involve estimates, forecasts or matters of opinion, whether or not expressly so described herein, are intended solely as such and are not to be construed as representations of fact.

The Underwriter has provided the following sentence for inclusion in this Official Statement:

The Underwriter has reviewed the information in this Official Statement in accordance with, and as 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.

This Official Statement and the information that is contained herein are subject to completion or amendment without notice, a nd neither delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the City or the Authority or any other parties that are described herein since the date hereof. These securities may not be sold, nor may an offer to buy them be accepted, prior to the time that the Official Statement is delivered in final form.

This Official Statement is being submitted in connection with the sale of the Bonds referred to herein and may not be reprodu ced or used, in whole or in part, for any other purpose, unless authorized in writing by the City. All summaries of documents and laws are made subject to the provisions thereof and do not purport to be complete statements of any or all such provisions.

Certain statements which are included or incorporated by reference in this Official Statement constitute “forward-looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995, Section 21E of the United States Securities Exchange Act of 1934, as amended, and Section 27A of the United States Securities Act of 1933, as amended. Such statements are generally identifiable by the terminology used, such as “plan,” “expect,” “estimate,” “project,” “budget,” “intend” or similar words.

Such forward-looking statements include, but are not limited to, certain statements contained under the captions “THE CITY,” “THE WATER SYSTEM” AND “FINANCIAL INFORMATION.”

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. THE CITY DOES NOT PLAN TO ISSUE ANY UPDATES OR REVISIONS TO THE FORWARD-LOOKING STATEMENTS SET FORTH IN THIS OFFICIAL STATEMENT. IN

EVALUATING SUCH STATEMENTS, POTENTIAL INVESTORS SHOULD SPECIFICALLY CONSIDER THE VARIOUS

FACTORS WHICH COULD CAUSE ACTUAL EVENTS OR RESULTS TO DIFFER MATERIALLY FROM THOSE INDICATED BY SUCH FORWARD-LOOKING STATEMENTS.

IN CONNECTION WITH THE OFFERING OF THE BONDS, THE UNDERWRITER MAY OVERALLOT OR

EFFECT TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. THE UNDERWRITER MAY OFFER AND SELL THE BONDS

TO CERTAIN DEALERS, DEALER BANKS, BANKS ACTING AS AGENT AND OTHERS AT PRICES LOWER THAN THE

PUBLIC OFFERING PRICE STATED ON THE COVER PAGE HEREOF, AND SAID PUBLIC OFFERING PRICES MAY BE CHANGED FROM TIME TO TIME BY THE UNDERWRITER.

THE BONDS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, IN

RELIANCE UPON AN EXEMPTION CONTAINED IN SUCH ACT, AND HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE.

The City maintains a website; however, information presented on such website is not a part of this Official Statement and should not be relied upon in making an investment decision with respect to the Bonds .

TABLE OF CONTENTS
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INTRODUCTION ................................................................................................................................................ 1 THE 2022 PROJECT ............................................................................................................................................ 2 ESTIMATED SOURCES AND USES OF FUNDS ............................................................................................ 2 THE BONDS ........................................................................................................................................................ 2 General Provisions ......................................................................................................................................... 2 Book-Entry Only System ............................................................................................................................... 3 Transfers and Exchanges Upon Termination of Book-Entry Only System ................................................... 3 Redemption .................................................................................................................................................... 4 Selection of Bonds for Redemption ............................................................................................................... 4 Notice of Redemption .................................................................................................................................... 5 Effect of Redemption ..................................................................................................................................... 5 DEBT SERVICE SCHEDULE............................................................................................................................. 6 SECURITY FOR THE BONDS ........................................................................................................................... 7 General ........................................................................................................................................................... 7 2022 Installment Payments Payable From Net Revenues .............................................................................. 7 Rate Covenant ................................................................................................................................................ 9 No Reserve Fund ............................................................................................................................................ 9 Additional Bonds and Contracts .................................................................................................................... 9 THE CITY .......................................................................................................................................................... 10 General ......................................................................................................................................................... 10 Land Use and Service Area .......................................................................................................................... 11 Seismic Considerations ................................................................................................................................ 11 Governance and Management ...................................................................................................................... 12 Employees .................................................................................................................................................... 14 Budget Process ............................................................................................................................................. 14 City Insurance .............................................................................................................................................. 15 Outstanding Parity Obligations .................................................................................................................... 15 Financial Statements .................................................................................................................................... 16 COVID-19 Outbreak .................................................................................................................................... 16 THE WATER SYSTEM ..................................................................................................................................... 19 General ......................................................................................................................................................... 19 Treatment Plants .......................................................................................................................................... 20 Water Quality ............................................................................................................................................... 20 Water Supply ............................................................................................................................................... 21 Drought Declarations ................................................................................................................................... 29 Historical Water System Supply .................................................................................................................. 31 Historical Water System Deliveries ............................................................................................................. 31 Historical Water System Connections ......................................................................................................... 32 Historical Water System Sales Revenues .................................................................................................... 32 Largest Water System Customers ................................................................................................................ 33 Water System Rates and Charges ................................................................................................................ 33 Water System Collection Procedures ........................................................................................................... 36 Future Water System Improvements ............................................................................................................ 36 Projected Water System Supply ................................................................................................................... 37 Projected Water System Deliveries .............................................................................................................. 37 Projected Water System Connections .......................................................................................................... 38

TABLE OF CONTENTS
(continued)
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Projected Water System Sales Revenues ..................................................................................................... 38 FINANCIAL INFORMATION .......................................................................................................................... 39 Available Cash ............................................................................................................................................. 39 Historical Operating Results and Debt Service Coverage............................................................................ 39 Projected Operating Results and Debt Service Coverage ............................................................................ 40 Employee Benefits ....................................................................................................................................... 41 CONSTITUTIONAL LIMITATIONS ON APPROPRIATIONS AND CHARGES ......................................... 49 Article XIIIB ................................................................................................................................................ 49 Proposition 218 ............................................................................................................................................ 49 Proposition 26 .............................................................................................................................................. 51 Future Initiatives .......................................................................................................................................... 51 CERTAIN RISKS TO BONDHOLDERS .......................................................................................................... 51 Limited Obligations ..................................................................................................................................... 51 Accuracy of Assumptions ............................................................................................................................ 52 Water System Demand................................................................................................................................. 52 System Expenses .......................................................................................................................................... 52 Limited Recourse on Default ....................................................................................................................... 52 Rate-Setting Process under Proposition 218 ................................................................................................ 53 Statutory and Regulatory Compliance ......................................................................................................... 53 Natural Disasters .......................................................................................................................................... 53 Limitations on Remedies ............................................................................................................................. 54 Loss of Tax Exemption ................................................................................................................................ 54 Secondary Market ........................................................................................................................................ 54 Parity Obligations ........................................................................................................................................ 55 Climate Change ............................................................................................................................................ 55 Cyber Security ............................................................................................................................................. 55 Rate Covenant Not a Guarantee ................................................................................................................... 55 THE AUTHORITY ............................................................................................................................................ 56 APPROVAL OF LEGAL PROCEEDINGS ....................................................................................................... 56 LITIGATION ..................................................................................................................................................... 56 City ............................................................................................................................................................... 56 Authority ...................................................................................................................................................... 56 TAX MATTERS................................................................................................................................................. 57 CONTINUING DISCLOSURE .......................................................................................................................... 58 RATING ............................................................................................................................................................. 58 MUNICIPAL ADVISOR ................................................................................................................................... 59 UNDERWRITING ............................................................................................................................................. 59 FINANCIAL INTERESTS ................................................................................................................................. 60 MISCELLANEOUS ........................................................................................................................................... 61

TABLE OF CONTENTS
(continued)
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APPENDIX A - CITY FINANCIAL STATEMENTS .................................................................................... A-1

APPENDIX B - DEFINITIONS AND SUMMARY OF CERTAIN PROVISIONS OF THE INSTALLMENT PURCHASE AGREEMENT AND THE INDENTURE .......................... B-1 APPENDIX C - FORM OF OPINION OF BOND COUNSEL ....................................................................... C-1 APPENDIX D - INFORMATION CONCERNING DTC ............................................................................... D-1 APPENDIX E - FORM OF CONTINUING DISCLOSURE AGREEMENT ................................................. E-1

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SUMMARY STATEMENT
This Summary Statement is subject in all respects to the more complete information contained in this Official Statement, and the offering of the Bonds to potential investors is made only by means of the entire Official Statement. Capitalized terms that are used and not otherwise defined in this Summary Statement have the meanings ascribed to them in this Official Statement.

Purpose. The Bonds are being issued to provide funds: (i) to finance certain capital improvements to the City’s Water System, as described under the caption “THE 2022 PROJECT;” and (ii) to pay costs incurred in connection with the issuance of the Bonds. See the caption “ESTIMATED SOURCES AND USES OF FUNDS.”
Security for the Bonds. The Bonds are a special limited obligation of the Authority payable solely from Revenues, which consist of 2022 Installment Payments to be made by the City to the Authority pursuant to the Installment Purchase Agreement and amounts on deposit in certain funds and accounts established by the Indenture. Neither the full faith and credit nor any other revenues or funds of the Authority are pledged to or available for the payment of debt service on the Bonds. THE OBLIGATION OF THE AUTHORITY TO MAKE

PAYMENTS OF PRINCIPAL AND INTEREST ON THE BONDS DOES NOT CONSTITUTE AN

OBLIGATION FOR WHICH THE AUTHORITY IS OBLIGATED TO LEVY OR PLEDGE ANY FORM OF

TAXATION OR FOR WHICH THE AUTHORITY HAS LEVIED OR PLEDGED ANY FORM OF TAXATION. THE AUTHORITY HAS NO TAXING POWER.

The obligation of the City to make 2022 Installment Payments is a special limited obligation of the City payable solely from Net Revenues of the City’s Water System, which consist of Gross Revenues of the Water System remaining after payment of Maintenance and Operation Costs of the Water System. See the caption “SECURITY FOR THE BONDS.”
The obligation of the City to make the 2022 Installment Payments under the Installment Purchase Agreement is absolute and unconditional, and until such time as all payments that are required thereunder have been paid in full (or provision for the payment thereof has been made as provided for in the Installment Purchase Agreement), the City will not discontinue or suspend any 2022 Installment Payments required to be made by it under the Installment Purchase Agreement when due, whether or not the Water System or any part thereof is operating or operable, or its use is suspended, interfered with, reduced or curtailed or terminated in whole or in part, and such payments will not be subject to reduction whether by offset or otherwise and will not be conditional upon the performance or nonperformance by any party of any agreement for any cause whatsoever.

THE OBLIGATION OF THE CITY TO MAKE 2022 INSTALLMENT PAYMENTS PURSUANT TO

THE INSTALLMENT PURCHASE AGREEMENT DOES NOT CONSTITUTE AN OBLIGATION FOR

WHICH THE CITY IS OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION OR FOR WHICH THE CITY HAS LEVIED OR PLEDGED ANY FORM OF TAXATION. THE OBLIGATION OF THE CITY TO MAKE THE 2022 INSTALLMENT PAYMENTS IS A SPECIAL LIMITED OBLIGATION OF THE CITY

PAYABLE SOLELY FROM NET REVENUES AND DOES NOT CONSTITUTE A DEBT OF THE CITY

OR OF THE STATE OF CALIFORNIA OR OF ANY POLITICAL SUBDIVISION THEREOF IN

CONTRAVENTION OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMITATION OR RESTRICTION.

No Reserve Fund. No debt service reserve fund or account has been established under the Indenture or the Installment Purchase Agreement in connection with the issuance of the Bonds.

Rate Covenant. The City has covenanted in the Installment Purchase Agreement to fix, prescribe, revise and collect charges for the Water System (inclusive of all Gross Revenues) during each Fiscal Year which are sufficient to yield Net Revenues of the Water System at least equal to 125% of Debt Service in such Fiscal Year

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for Bonds and Additional Bonds and Contracts which have a lien on such Net Revenues. See the caption “SECURITY FOR THE BONDS—Rate Covenant.”
Parity Obligations. The 2022 Installment Payments are payable from Net Revenues of the City’s Water System on a parity with: (i) certain obligations which are currently outstanding in the aggregate principal amount of $6,553,000; and (ii) an obligation upon which the City has not yet drawn, but under which the City may borrow up to a maximum principal amount of $16,500,000. See the caption “THE CITY—Outstanding Parity Obligations.”
Additional Indebtedness. The Installment Purchase Agreement does not permit the City to make any additional pledge of, or to place any additional lien on, the Gross Revenues, or any portion thereof, which is senior to the pledge and lien securing the payment of the 2022 Installment Payments. The Installment Purchase Agreement does permit the City to incur Additional Bonds and Contracts payable on a parity with the 2022 Installment Payments provided that certain conditions are satisfied as described herein. Nothing in the Installment Purchase Agreement precludes the City from entering into obligations which are Maintenance and Operation Costs and, therefore, payable from Gross Revenues prior to the 2022 Installment Payments, or from issuing any bonds or executing any contracts the payments under which are payable from Net Revenues on a subordinate basis to the 2022 Installment Payments, Additional Bonds and Contracts of the City. See the caption “SECURITY FOR THE BONDS—Additional Bonds and Contracts.” Redemption. The Bonds are subject to optional, mandatory sinking fund and special redemption prior to maturity. See the caption “THE BONDS—Redemption.”
The City and the Water System. The City, which was incorporated in 1906 under the general laws of the State, is located in southwestern San Bernardino County, approximately 40 miles east of downtown Los Angeles. The City provides water, wastewater, solid waste collection, library, planning and zoning, recreation and parks, development and housing and police services to residents, with fire service provided by the County Fire Department. The current population within the Water System’s 15.2 square mile service area, which generally coincides with City limits, is estimated to be approximately 78,500 residents. Land use in the City’s service area is primarily residential, with areas of commercial and institutional/governmental development. See the caption “THE CITY.”
The City provides potable and recycled water service to residential, commercial, governmental, institutional and other customers. As of June 30, 2021, the City had approximately: (a) 15,756 single family residential, 2,088 multi-family residential, 1,136 commercial and 667 governmental, institutional and other potable water accounts; and (b) 42 recycled water accounts.

The City has six sources of water: (i) imported water that is purchased from and treated by the Water Facilities Authority, a joint powers authority of which the City is a member; (ii) groundwater that is pumped from City wells pursuant to City groundwater entitlements; (iii) groundwater that is pumped from City wells or wells maintained by the West End Consolidated Water Company, a private water company; (iv) groundwater that is purchased from the San Antonio Water Company, a private water company; (v) untreated surface water that is purchased from San Antonio Water Company; and (vi) recycled water that is purchased from the Inland Empire Utilities Agency, a member agency of The Metropolitan Water District of Southern California. See the caption “THE WATER SYSTEM—Water Supply” for a detailed description of the City’s water sources.

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$_______*

CITY OF UPLAND FINANCING AUTHORITY
WATER REVENUE BONDS, SERIES 2022

INTRODUCTION
This Official Statement, including the front cover page, the inside front cover page and the appendices, provides certain information concerning the sale and delivery of the City of Upland Financing Authority Water Revenue Bonds, Series 2022 (the “Bonds”). Descriptions and summaries of various documents that are set forth in this Official Statement do not purport to be comprehensive or definitive, and reference is made to each document for complete details of all terms and conditions. All statements herein are qualified in their entirety by reference to each such document. Capitalized terms that are used and not otherwise defined in this Official Statement have the meanings ascribed thereto in Appendix B.

The Bonds are being issued to provide funds: (i) to finance certain capital improvements to the Water System of the City of Upland, California (the “City”), as described under the caption “THE 2022 PROJECT;” and (ii) to pay costs incurred in connection with the issuance of the Bonds. See the caption “ESTIMATED SOURCES AND USES OF FUNDS.”
The Bonds are being issued pursuant to an Indenture of Trust, dated as of March 1, 2022 (the “Indenture”), by and among the City of Upland Financing Authority (the “Authority”), the City and U.S. Bank Trust Company, National Association, as trustee (the “Trustee”). The Bonds are limited obligations of the Authority payable solely from Revenues, which consist of payments (the “2022 Installment Payments”) to be made by the City to the Authority pursuant to an Installment Purchase Agreement, dated as of March 1, 2022 (the “Installment Purchase Agreement”), by and between the City and the Authority, and amounts on deposit in certain funds and accounts established by the Indenture.

The obligation of the City to make 2022 Installment Payments is a special limited obligation of the City payable solely from Net Revenues of the City’s Water System, which consist of Gross Revenues of the City’s Water System remaining after payment of Maintenance and Operation Costs of the City’s Water System. See the caption “SECURITY FOR THE BONDS.” The term “Water System” is defined in Appendix B under the caption “INSTALLMENT PURCHASE AGREEMENT—DEFINITIONS” and includes the City’s potable water and recycled water systems.

The Bonds are subject to optional, mandatory sinking fund and special mandatory redemption prior to maturity. See the caption “THE BONDS—Redemption.”
The 2022 Installment Payments are payable from Net Revenues of the City’s Water System on a parity with: (i) the City of Upland Water Revenue Refunding Bonds, Series 2021 (the “2021 Bonds”), which are currently outstanding in the aggregate principal amount of $6,553,000; and (ii) Agreement No. 190200800 (Project No. 3610050-001C) with the State of California Water Resources Control Board (the “2019 SWRCB Agreement”) upon which the City has not yet drawn, but under which the City may borrow up to a maximum principal amount of $16,500,000. See the caption “THE CITY—Outstanding Parity Obligations.” The Installment Purchase Agreement does not permit the City to make any additional pledge of, or to place any additional lien on, the Gross Revenues, or any portion thereof, which is senior to the pledge and lien securing the payment of the 2022 Installment Payments. The Installment Purchase Agreement does permit the City to incur Additional Bonds and Contracts payable on a parity with the 2022 Installment Payments provided that certain conditions are satisfied as described herein. Nothing in the Installment Purchase Agreement precludes the City from entering into obligations which are Maintenance and Operation Costs and, therefore,

* Preliminary, subject to change.

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payable from Gross Revenues prior to the 2022 Installment Payments, or from issuing any bonds or executing any contracts the payments under which are payable from Net Revenues on a subordinate basis to the 2022 Installment Payments, Additional Bonds and Contracts of the City. See the caption “SECURITY FOR THE BONDS—Additional Bonds and Contracts.”
No debt service reserve fund or account has been established under the Indenture or the Installment Purchase Agreement in connection with the issuance of the Bonds.

The City has undertaken to provide annual reports to the Municipal Securities Rulemaking Board’s Electronic Municipal Market Access System (“EMMA”) pursuant to a continuing disclosure agreement. See the caption “CONTINUING DISCLOSURE” and Appendix E.

THE 2022 PROJECT
The City intends to undertake the following capital improvements to the Water System (collectively, the “2022 Project”): (i) upgrades, replacements and refurbishments of water storage reservoirs (approximately $6,475,000); (ii) building upgrades and other replacements and refurbishments of the San Antonio Canyon Surface Water Treatment Plant (approximately $6,025,000); (iii) pipeline replacements (approximately $3,000,000); and (iv) and any other qualifying project in the City’s capital improvement plan for the Water System.

The City intends to apply proceeds of the Bonds to pay for the costs of the 2022 Project. The City expects to comply with all governmental approval, environmental review, public bidding and other permitting requirements for each component of the 2022 Project as required by law, and to complete the 2022 Project by early 2025.

ESTIMATED SOURCES AND USES OF FUNDS
The following table sets forth the estimated sources and uses of funds in connection with the issuance of the Bonds:

Sources(1)
Principal Amount of Bonds $
Plus/Less Net Original Issue Premium/Discount
Total Sources $

Uses(1)
Deposit to Acquisition and Construction Fund $
Costs of Issuance(2)
Total Uses $

(1) Amounts rounded to the nearest dollar. Totals may not add due to rounding. (2) Includes certain legal, municipal advisory, financing, rating agency and Trustee fees, Underwriter’s discount and printing costs.

THE BONDS
General Provisions
The Bonds will bear interest from and be dated the date of initial issuance, and will be payable upon maturity on the dates set forth on the inside front cover page hereof. Interest on the Bonds will be payable on [October 1, 2022] and each April 1 and October 1 thereafter. Interest will be calculated at the rates set forth on the inside front cover page hereof on the basis of a year of 360 days comprised of twelve 30 day months.

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The Bonds will be delivered only in fully registered form and, when issued, will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York (“DTC”). DTC will act as securities depository for the Bonds. Ownership interests in the Bonds may be purchased in book-entry form only in denominations of $5,000 or any integral multiple thereof. See the caption “—Book-Entry Only System” and Appendix D.

In the event that the book-entry only system that is described below is discontinued, the principal of and interest on any Bond will be payable by check or draft of the Trustee upon presentation and surrender thereof at maturity or upon prior redemption at the Office of the Trustee in Los Angeles, California. Such principal and interest will be payable in lawful money of the United States of America.

Book-Entry Only System
One fully-registered Bond will be issued for each maturity of the Bonds in the principal amount of the Bonds of such maturity. Each such Bond will be registered in the name of Cede & Co. and will be deposited with DTC. As long as the ownership of the Bonds is registered in the name of Cede & Co., the term “Owner” as used in this Official Statement will refer to Cede & Co. and not to the actual purchasers of the Bonds (the “Beneficial Owners”).

The Authority may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository). In that event, the Bonds will be printed and delivered and will be governed by the provisions of the Indenture with respect to payment of principal and interest and rights of exchange and transfer.

The Authority cannot and does not give any assurances that DTC participants or others will distribute payments with respect to the Bonds received by DTC or its nominee as the registered Owner, or any redemption or other notices, to the Beneficial Owners, or that they will do so on a timely basis. See Appendix D for additional information concerning DTC.

Transfers and Exchanges Upon Termination of Book-Entry Only System In the event that the book-entry system that is described above is discontinued, the Bonds will be printed and delivered as provided in the Indenture. Thereafter, the registration of 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 his or her duly authorized attorney, upon surrender of such Bond for cancellation at the Office of the Trustee, accompanied by delivery of a written instrument of transfer in a form acceptable to the Trustee, duly executed.

Whenever any Bond or Bonds are surrendered for registration of transfer, the Trustee will execute and deliver a new Bond or Bonds of the same series, maturity, interest rate and aggregate principal amount, in any authorized denominations. The Authority will pay all costs of the Trustee incurred in connection with any such transfer, except that the Trustee may require the payment by the Bond Owner of any tax or other governmental charge required to be paid with respect to such transfer.

Prior to any transfer of the Bonds outside of the book-entry system (including, but not limited to, the initial transfer outside the book-entry system) the transferor will provide or cause to be provided to the Trustee all information necessary to allow the Trustee to comply with any applicable tax reporting obligations, including without limitation any cost basis reporting obligations under Internal Revenue Code Section 6045 as amended.

The Trustee will conclusively rely on the information provided to it and has no responsibility to verify or ensure the accuracy of such information.

Bonds may be exchanged at the Office of the Trustee, for a like aggregate principal amount of Bonds of other authorized denominations of the same series, interest rate and maturity. The Authority will pay all costs of the Trustee incurred in connection with any such exchange, except that the Trustee may require the payment

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by the Bond Owner requesting such exchange of any tax or other governmental charge required to be paid with respect to such exchange.

The Trustee may refuse to transfer or exchange either: (i) any Bond during the period established by the Trustee for the selection of Bonds for redemption pursuant to the Indenture; or (ii) the portion of any Bond which the Trustee has selected for redemption pursuant to the provisions of the Indenture.

Redemption
Optional Redemption. The 2022 Bonds maturing on or before October 1, 20__ are not subject to optional redemption prior to maturity. The 2022 Bonds maturing on October 1, 20__ are subject to redemption prior to their maturity date, at the option of the Authority, at random within a maturity on any date on or after October 1, 20__, from prepayment of 2022 Installment Payments made at the option of the City at the redemption price equal to the principal amount of the 2022 Bonds to be redeemed, plus accrued interest thereon to the date of redemption, without premium.

Mandatory Sinking Fund Redemption. The 2022 Bonds maturing on October 1, 20__ are also subject to redemption prior to their stated maturity, on October 1 in each year, commencing October 1, 20__, in part by lot, from mandatory Sinking Account payments at a redemption price equal to the principal amount thereof, plus accrued interest, if any, to the redemption date, without premium, as set forth below; provided, however, that if some but not all of such 2022 Bonds have been redeemed pursuant to optional or special mandatory redemption provisions of the Indenture, the total amount of all future Sinking Account payments will be reduced by the aggregate principal amount of such 2022 Bonds so redeemed, to be allocated among such Sinking Account payments on a pro rata basis as nearly as possible in integral multiples of $5,000. The City will provide the Trustee with a revised Sinking Account schedule:

Redemption Date
(October 1)
Principal
Amount
20__ $
20__
20__*

* Maturity.

Special Mandatory Redemption. The Bonds are subject to special mandatory redemption as a whole or in part, on any date, from proceeds of an eminent domain award or proceeds of insurance not used to repair or rebuild the Water System, which proceeds may be used for such purpose pursuant to the Installment Purchase Agreement, at a redemption price equal to the principal amount of the Bonds to be redeemed plus interest accrued thereon to the date fixed for redemption, without premium.

Partial Redemption of Bonds. In the event only a portion of any Bond is called for redemption, then upon surrender of such Bond the Authority will execute and the Trustee will authenticate and deliver to the Owner thereof, at the expense of the Authority, a new Bond or Bonds of the same series and maturity date, of authorized denominations in aggregate principal amount equal to the unredeemed portion of the Bond to be redeemed.

Selection of Bonds for Redemption
Whenever provision is made for the redemption of Bonds of more than one maturity, the Bonds to be redeemed will be selected among series of Bonds in a manner determined in writing by the Authority and in inverse order of maturity or, at the election of the Authority evidenced by a Written Request of the Authority filed with the Trustee at least 60 days prior to the date of redemption, on a pro rata basis among maturities as nearly as possible given authorized denominations (provided that, in any event, the principal and interest due on

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the Bonds Outstanding following such redemption will be equal in time and amount to the unpaid payments due under the Installment Purchase Agreement); and in each case, the Trustee will select the Bonds to be redeemed within any maturity at random in any manner which the Trustee in its sole discretion deems appropriate. For purposes of such selection, all Bonds will be deemed to be comprised of separate $5,000 portions and such portions will be treated as separate Bonds which may be separately redeemed.

Notice of Redemption
The Trustee on behalf and at the expense of the Authority will send (by first class mail or other means acceptable to the recipient thereof) notice of any redemption to: (i) the respective Owners of any Bonds designated for redemption, at least 20 but not more than 60 days prior to the redemption date, at their respective addresses appearing on the Registration Books; and (ii) the Securities Depositories and to one or more Information Services, at least 20 but not more than 60 days prior to the redemption; provided, however, that neither failure to receive any such notice so mailed nor any defect therein will affect the validity of the proceedings for the redemption of such Bonds or the cessation of the accrual of interest thereon. In addition to mailed notice, the notice to the Securities Depositories and Information Service will be given by telephonically confirmed facsimile transmission or overnight delivery service or by such other means approved by such institutions. Such notice will state the series of Bonds to be redeemed, the date of the notice, the redemption date, the redemption place and the redemption price and designate the CUSIP numbers, the bond numbers and the maturity or maturities (in the event of redemption of all of the Bonds of such maturity or maturities in whole) of the Bonds to be redeemed, and require that such Bonds be then surrendered at the Office of the Trustee for redemption at the redemption price, giving notice also that further interest on such Bonds will not accrue from and after the redemption date. Neither the Authority nor the Trustee have any responsibility for any defect in the CUSIP number that appears on any Bond or in any redemption notice with respect thereto, and any such redemption notice may contain a statement to the effect that CUSIP numbers have been assigned by an independent service for convenience of reference and that neither the Authority nor the Trustee will be liable for any inaccuracy in such CUSIP numbers.

Any notice given pursuant to the foregoing paragraph may be conditional and/or rescinded by written notice given to the Trustee by the Authority, and the Trustee will provide notice of such rescission as soon thereafter as practicable in the same manner, and to the same recipients, as notice of such redemption was given pursuant to the Indenture.

Effect of Redemption
From and after the date fixed for redemption, if funds available for the payment of the principal of and interest (and premium, if any) on the Bonds so called for redemption have been duly provided, such Bonds so called will cease to be entitled to any benefit under the Indenture other than the right to receive payment of the redemption price, and no interest will accrue thereon from and after the redemption date specified in such notice.

All Bonds redeemed pursuant to the Indenture will be canceled and destroyed by the Trustee.

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DEBT SERVICE SCHEDULE
Set forth below is a schedule of debt service on the Bonds, which equals the 2022 Installment Payments for each annual period ending on June 30 in the years indicated, as well as Additional Bonds and Contracts. The below table assumes that there are no optional or special mandatory redemptions of the Bonds. 2022 Installment Payments
Period
Ending
June 30
Additional
Bonds and
Contracts(1) Principal Interest Total Total Debt Service 2022 604,923 $ $ $ $
2023 123,108
2024 849,365
2025 1,379,977
2026 1,433,112
2027 1,434,700
2028 1,434,137
2029 1,433,440
2030 1,430,622
2031 1,436,632
2032 1,430,492
2033 1,429,255
2034 1,429,867
2035 726,632
2036 726,632
2037 726,632
2038 726,632
2039 726,632
2040 726,632
2041 726,632
2042 726,632
2043 726,632
2044 726,632
2045 726,632
2046 726,632
2047 726,632
2048 726,632
2049 726,632
2050 726,632
2051 726,632
2052 726,632
2053 726,632
TOTAL $29,655,646 $ $ $ $

(1) Includes debt service on the 2021 Bonds and the 2019 SWRCB Agreement, assuming that the full available principal amount of $16,500,000 is drawn upon. See the caption “THE CITY—Outstanding Parity Obligations.” Source: Underwriter.

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SECURITY FOR THE BONDS
General
Each Bond is a special limited obligation of the Authority payable solely from Revenues, which consist of 2022 Installment Payments to be made by the City under the Installment Purchase Agreement and certain other funds and accounts established pursuant to the Indenture. NEITHER THE FULL FAITH AND CREDIT

NOR ANY OTHER REVENUES OR FUNDS OF THE AUTHORITY ARE PLEDGED TO OR AVAILABLE FOR THE PAYMENT OF DEBT SERVICE ON THE BONDS. THE OBLIGATION OF THE AUTHORITY

TO MAKE PAYMENTS OF PRINCIPAL AND INTEREST ON THE BONDS DOES NOT CONSTITUTE

AN OBLIGATION FOR WHICH THE AUTHORITY IS OBLIGATED TO LEVY OR PLEDGE ANY FORM

OF TAXATION OR FOR WHICH THE AUTHORITY HAS LEVIED OR PLEDGED ANY FORM OF TAXATION. THE AUTHORITY HAS NO TAXING POWER.

The Authority has assigned substantially all of its right, title and interest in the Installment Purchase Agreement to the Trustee pursuant to the Indenture, for the benefit of the Owners of the Bonds, including its right to receive 2022 Installment Payments and its rights as may be necessary to enforce payment of the 2022 Installment Payments when due.
2022 Installment Payments Payable From Net Revenues
Pledge of Net Revenues. All Net Revenues have been irrevocably pledged to the payment of the 2022 Installment Payments as provided in the Installment Purchase Agreement and Net Revenues shall not be used for any purpose other than as permitted therein while any of the 2022 Installment Payments remain unpaid. The foregoing pledge constitutes a lien on Net Revenues, including Net Revenues in the Revenue Fund established in the Installment Purchase Agreement, subject to the terms thereof, for the payment of the 2022 Installment Payments and all other obligations in accordance with the terms thereof and of the Indenture. “Net Revenues” means, for any period of computation, the amount of the Gross Revenues received from the Water System during such period, less the amount of Maintenance and Operation Costs of the Water System becoming payable during such period.

The term “Gross Revenues” means, for any period of computation, all gross charges received for, and all other gross income and revenues derived by the City from, the ownership or operation of the Water System or otherwise arising from the Water System during such period, including but not limited to: (a) all charges received by the City for use of the Water System; (b) all receipts derived from the investment of funds held by the City or by the Trustee under the Indenture; (c) transfers from (but exclusive of any transfers to) any rate stabilization reserve accounts; (d) property taxes, to the extent permitted by law; and (e) all moneys received by the City from other public entities whose inhabitants are served pursuant to contracts with the City, but excluding in all cases: (x) development impact fees imposed pursuant to California Government Code § 66000 et seq.; (y) customers’ deposits or any other deposits or advances subject to refund until such deposits or advances have become the property of the City; and (z) proceeds of taxes or benefit assessments restricted by law to be used by the City to pay amounts due on bonds or other obligations later incurred.

The term “Maintenance and Operation Costs” means the reasonable and necessary costs spent or incurred by the City for maintaining and operating the Water System, calculated in accordance with sound accounting principles, and all reasonable and necessary expenses of management and repair and other expenses to maintain and preserve the Water System in good repair and working order, and including all reasonable and necessary administrative costs of the City attributable to the Water System and the Bonds, such as salaries and wages and the necessary contribution to retirement of employees, overhead, insurance, taxes (if any), expenses, compensation and indemnification of the Trustee, and fees of auditors, accountants, attorneys or engineers, and including all other reasonable and necessary costs of the City or charges required to be paid by it to comply with the terms of the Bonds or the Installment Purchase Agreement or the Indenture, but excluding: (i) depreciation,

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replacement and obsolescence charges or reserves therefor and amortization of intangibles or other bookkeeping entries of a similar nature; (ii) payment of debt service on Additional Bonds and Contracts or Subordinate Bonds; and (iii) capital additions, replacements, betterments, extensions, or improvements to the Water System.

Notwithstanding anything contained in the Installment Purchase Agreement, the City is not required to advance any moneys derived from any source of income other than the Net Revenues, the Revenue Fund and the other funds provided in the Installment Purchase Agreement and the Indenture for the payment of the 2022 Installment Payments or for the performance of any agreements or covenants that are required to be performed by it contained therein. The City may, however, advance moneys for any such purpose so long as such moneys are derived from a source legally available for such purpose and may be legally used by the City for such purpose.

THE OBLIGATION OF THE CITY TO MAKE 2022 INSTALLMENT PAYMENTS PURSUANT TO

THE INSTALLMENT PURCHASE AGREEMENT DOES NOT CONSTITUTE AN OBLIGATION FOR

WHICH THE CITY IS OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION OR FOR WHICH THE CITY HAS LEVIED OR PLEDGED ANY FORM OF TAXATION. THE OBLIGATION OF THE CITY TO MAKE THE 2022 INSTALLMENT PAYMENTS IS A SPECIAL LIMITED OBLIGATION OF THE CITY PAYABLE SOLELY FROM NET REVENUES OF THE CITY’S WATER SYSTEM AND DOES NOT

CONSTITUTE A DEBT OF THE CITY OR OF THE STATE OR OF ANY POLITICAL SUBDIVISION

THEREOF IN CONTRAVENTION OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMITATION OR RESTRICTION.

Allocation of Net Revenues. To carry out and effectuate the pledge and lien contained in the Installment Purchase Agreement, the City agrees and covenants that all Gross Revenues will be received by the City in trust under the Installment Purchase Agreement and deposited when and as received in a special fund designated as the “Revenue Fund,” which fund has been created and established and which fund the City has agreed and covenanted to maintain and to hold in trust separate and apart from other funds so long as the 2022 Installment Payments and any Additional Bonds or Contracts remain unpaid. Moneys in the Revenue Fund will be used and applied by the City as provided in the Installment Purchase Agreement. Investment earnings received by the Trustee from the investment of moneys on deposit in the Debt Service Fund are to be retained by the Trustee and applied by it as provided for in the Indenture.

The City will, first from the moneys in the Revenue Fund, pay all Maintenance and Operation Costs (including amounts reasonably required to be set aside in contingency reserves for Maintenance and Operation Costs, the payment of which is not then immediately required) as they become due and payable. Thereafter, all remaining moneys in the Revenue Fund will be set aside by the City at the following times for the transfer to the following respective special funds in the following order of priority; and all moneys in each of such funds will be held in trust and applied, used and withdrawn only for the purposes set forth in the Installment Purchase Agreement.
(a) Debt Service Fund. On or before each 2022 Installment Payment Date until the 2022 Bonds have been paid or provision for their payment has been made as provided in the Indenture, the City will, from the moneys in the Revenue Fund, transfer to the Trustee for deposit in the Debt Service Fund the 2022 Installment Payment due and payable on that 2022 Installment Payment Date. Such deposit to the Debt Service Fund will be reduced to the extent amounts on deposit therein are available for application to the 2022 Installment Payment due and payable on such 2022 Installment Payment Date. The City will also, from the moneys in the Revenue Fund, transfer to the trustee for deposit in the respective payment fund, without preference or priority, and in the event of any insufficiency of such moneys ratably without any discrimination or preference, to pay any other debt service in accordance with the provisions of any Bond or Contract. (b) Surplus. As long as all of the foregoing payments, allocations and transfers are made at the times and in the manner set forth above, any moneys remaining in the Revenue Fund may at any time be treated as surplus and applied by the City for any lawful purpose.

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Rate Covenant
(a) The City has covenanted in the Installment Purchase Agreement to fix, prescribe, revise and collect charges for the Water System during each Fiscal Year which are at least sufficient, after making allowances for contingencies and error in the estimates, to pay the following amounts in the following order:
(i) all Maintenance and Operation Costs of the Water System estimated by the City to become due and payable in such Fiscal Year;
(ii) all Installment Payments and payments of principal of and interest on the Bonds and any Additional Bonds and Contracts as they become due and payable during such Fiscal Year, without preference or priority, except to the extent Installment Payments or interest on the Bonds and any Additional Bonds and Contracts are payable from proceeds of such Bonds or Additional Bonds or Contracts deposited for such purpose; (iii) all other payments required for compliance with this Installment Purchase Agreement and the Additional Bonds Instruments pursuant to which any Additional Bonds and Contracts relating to the Water System shall have been issued as they become due and payable during such Fiscal Year; and (iv) all payments required to meet any other obligations of the City which are charges, liens, encumbrances upon or payable from the Gross Revenues of the Water System or the Net Revenues of the Water System during such Fiscal Year.
(b) In addition, the City will fix, prescribe, revise and collect charges for the Water System (exclusive of connection fees and transfers to the Revenue Fund from a rate stabilization fund) during each Fiscal Year which are sufficient to yield Net Revenues of the Water System at least equal to 100% of the amounts payable under the preceding clause (a)(ii) in such Fiscal Year for Bonds and Additional Bonds and Contracts which have a lien on such Net Revenues.
(c) In addition, the City will fix, prescribe, revise and collect charges for the Water System (inclusive of all Gross Revenues) during each Fiscal Year which are sufficient to yield Net Revenues of the Water System at least equal to 125% of the amounts payable under the preceding clause (a)(ii) in such Fiscal Year for Bonds and Additional Bonds and Contracts which have a lien on such Net Revenues.

No Reserve Fund
No debt service reserve fund or account has been established under the Indenture or the Installment Purchase Agreement in connection with the issuance of the Bonds.

Additional Bonds and Contracts
The City may, by Additional Bonds Instrument, issue Additional Bonds or enter into Contracts, to provide financing for the Water System, in such principal amount as is determined by the City. The City may issue or incur any such Additional Bonds or Contracts subject to the following specific conditions, which have been made conditions precedent to the issuance and delivery of such Additional Bonds and Contracts:
(a) The City is in compliance with all covenants set forth in the Installment Purchase Agreement. (b) The Net Revenues of the Water System, calculated on sound accounting principles, as shown by the books of the City for the latest Fiscal Year or a 12-month period in the prior 18 months plus, at the option of the City, any or all of the items in clauses (i) and (ii) below, are at least equal to 125% of Debt Service for such Fiscal Year or 12-month period. The items any or all of which may be added to such Net Revenues for the purpose of issuing or incurring Additional Bonds or Contracts are the following:

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(i) Based on the report of an Independent Certified Public Accountant, an allowance for Net Revenues from any additions to or improvements or extensions of the Water System to be made with the proceeds of such Additional Bonds or Contracts, and also for Net Revenues from any such additions, improvements or extensions which have been made from moneys from any source but in any case which, during all or any part of such Fiscal Year were not in service, all in an amount equal to 75% of the estimated additional average annual Net Revenues to be derived from such additions, improvements and extensions for the first 36- month period in which each addition, improvement or extension is respectively to be in operation; and (ii) Based on the report of an Independent Certified Public Accountant, an allowance for earnings arising from any increase in the charges which has become effective prior to the incurring of such additional indebtedness but which, during all or any part of such Fiscal Year was not in effect, in an amount equal to the amount by which the Net Revenues would have been increased if such increase in charges had been in effect during the whole of such Fiscal Year.
(c) The Additional Bonds Instrument providing for the issuance of such Additional Bonds or the Contract must provide that:
(i) The proceeds of such Additional Bonds or Contracts will be applied to the acquisition, construction, improvement, financing or refinancing of additional facilities, improvements or extensions of existing facilities within the Water System, or otherwise for facilities, improvements or property which the City determines are of benefit to the Water System, or for the purpose of refunding any Bonds, Additional Bonds or Contracts in whole or in part, including all costs (including costs of issuing such Additional Bonds or Contracts and including capitalized interest on such Additional Bonds or Contracts during any period which the City deems necessary or advisable) relating thereto;
(ii) Interest on such Additional Bonds or Contracts must be payable on an Interest Payment Date unless such Additional Bonds or Contracts are owed to an agency of the State of California, in which case they may be payable on any date;
(iii) The principal of such Additional Bonds or Contracts must be payable on October 1 in any year in which principal is payable unless such Additional Bonds or Contracts are owed to an agency of the State of California, in which case they may be payable on any date; and (iv) Money or a surety bond may be, but shall not be required to be, deposited in a reserve account for such Additional Bonds or Contracts from the proceeds of the sale of such Additional Bonds or Contracts or otherwise in such amount as may be determined by the City.

THE CITY
General
The City, which was incorporated in 1906 under the general laws of the State, is located in southwestern San Bernardino County (the “County”), approximately 40 miles east of downtown Los Angeles. The City provides water, wastewater, solid waste collection, library, planning and zoning, recreation and parks, development and housing and police services to residents, with fire service provided by the County Fire Department.

The current population within the Water System’s 15.2 square mile service area, which generally coincides with City limits, is estimated to be approximately 78,500 residents. Land use in the City’s service area is primarily residential, with areas of commercial and institutional/governmental development. See the caption “—Land Use and Service Area.”

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The City provides potable and recycled water service to residential, commercial, governmental, institutional and other customers. As of June 30, 2021, the City had approximately: (a) 15,756 single family residential, 2,088 multi-family residential, 1,136 commercial and 667 governmental, institutional and other potable water accounts; and (b) 42 recycled water accounts.

The City has six sources of water:
(i) imported water that is purchased from and treated by the Water Facilities Authority (“WFA”), a joint powers authority of which the City is a member; (ii) groundwater that is pumped from City wells pursuant to City groundwater entitlements; (iii) groundwater that is pumped from City wells or wells maintained by the West End Consolidated Water Company (“WECWC”), a private water company, pursuant to the City’s ownership of WECWC stock; (iv) groundwater that is purchased from the San Antonio Water Company (“SAWCO”), a private water company, pursuant to the City’s ownership of SAWCO stock; (v) untreated surface water that is purchased from SAWCO pursuant to the City’s ownership of SAWCO stock; and
(vi) recycled water that is purchased from the Inland Empire Utilities Agency (“IEUA”), a member agency of The Metropolitan Water District of Southern California (“MWD”).

See the caption “THE WATER SYSTEM—Water Supply” for a detailed description of the City’s water sources.

Imported water purchases from WFA are treated at the Agua de Lejos Water Treatment Plant (the “WFA Treatment Plant”), which is owned and operated by WFA. Untreated surface water purchases from SAWCO are treated at the San Antonio Canyon Surface Water Treatment Plant (the “City Treatment Plant”), which is owned and operated by the City. See the caption “THE WATER SYSTEM—Treatment Plants.” Land Use and Service Area
The City is located in the southwestern corner of the County, near the Los Angeles County line. Its 15.2 square mile Water System service area roughly coincides with City limits and is relatively flat, rising from approximately 1,175 feet above sea level in the southern portion of the City to approximately 2,000 feet above sea level in the northern portion of the City. Interstate 10 is directly south of City limits provides easy access to Los Angeles to the west and employment centers in the cities of Riverside and San Bernardino to the east and southeast. State Route 210 also passes through the northern portion of the City. The San Gabriel Mountains are directly north of the City, and the highest peak in that range (the 10,064 foot Mount Baldy) is approximately 9.5 miles from the City’s northern boundary.

The City is predominantly developed with single family and multi-family residential uses, although there are also areas of commercial and institutional/governmental development. The City is largely built out and the population within the City’s service area is expected to increase, primarily through in-fill development, from approximately 78,500 in 2021 to approximately 92,862 in 2045.

Seismic Considerations
The City is located in a seismically active region. Significant faults in or near the City’s service area include the San Andreas, Chino, Red Hill, Rialto-Colton, Cucamonga, Elsinore and Whittier Faults. There is potential for destructive ground shaking during the occurrence of a major seismic event and land along fault

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lines may be subject to liquefaction. In the event of a severe earthquake, there may be significant damage to both property and infrastructure within the City, including the Water System. The City has an emergency operations center that would be activated under such circumstances.

The City does not currently maintain earthquake insurance coverage. Newer facilities comprising part of the Water System are designed to withstand earthquakes with minimal damage, as earthquake loads are taken into consideration in the design of project structures. The City has also undertaken a vulnerability assessment of critical Water System facilities. The vulnerability assessment ranks the City’s infrastructure by importance, builds redundancy into existing operations and includes contingency plans in the event of damage to assets and succession plans for critical staff. The impact of lesser magnitude events is expected by the City to be temporary, localized and repairable. The Water System has never sustained major damage to its facilities or experienced extended incidences of service interruptions as a result of seismic disturbances. See the caption “CERTAIN RISKS TO BONDHOLDERS—Natural Disasters.”
Governance and Management
General. The City is governed by a Mayor who is elected at large and a four-person City Council that is elected by district for staggered four-year terms. The City Council selects a Mayor Pro Tem from among its members, each of whom serves in such capacity for a one-year term. The current Mayor and City Council members are listed below:

City of Upland
Mayor and City Council Members
Name Occupation Expiration of Term
Bill Velto, Mayor Real Estate Brokerage Manager 2024
Shannan Maust, Councilmember, District
1 and Mayor Pro Tem
Business Owner 2024
Janice Elliott, Councilmember, District 2 Retired Educator 2022 Carlos Garcia, Councilmember, District 3 Business Owner 2022 Rudy Zuniga, Councilmember, District 4 Business Owner 2022

The City also has an elected Treasurer, currently Greg Bradley, whose term expires in 2024. Mr.

Bradley was elected as City Treasurer in 2020 and owns a technology consulting business. He has a Bachelor of Science Degree from California State Polytechnic University, Pomona, and is a Certified Public Accountant.

Day-to-day management of the City is delegated to Michael D. Blay, City Manager since November 2021. Prior to coming to the City, Mr. Blay was Assistant City Manager for the City of Hesperia, a Sergeant with the San Bernardino County Sheriff’s Department, an Adjunct Professor of Criminal Justice at Victor Valley College and a Senior Security Specialist for the Federal Express Corporation. Mr. Blay has a Bachelor of Science Degree in Business Management from California State Polytechnic University, Pomona, and a Master of Business Administration Degree from Mississippi State University Graduate School.

Stephen Parker, Assistant City Manager, has been with the City since 2020 in that capacity, and also served as Acting City Manager from April 2021 to November 2021. Prior to coming to the City, Mr. Parker served as the Assistant City Manager and Director of Administrative Services for the City of Stanton, California, Finance Director for Yorba Linda Water District and as a certified public accountant in private practice. Mr.

Parker has a Bachelor of Science Degree in Business Administration with an emphasis in Accounting from Biola University and is a Certified Public Accountant.

Londa Bock-Helms serves as the Finance Officer of the City. Ms. Bock-Helms has been with the City since 2017. Prior to coming to the City, Ms. Bock-Helms served as the Finance Manager of the City of Murrieta, California, was a Principal Accountant for the City of Pomona and served as Director of Administrative Services

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for CareLine Health Services Corporation. Ms. Bock-Helms has a Bachelor of Science Degree in Accounting from the California State Polytechnic University, Pomona, and is a Certified Public Accountant.

Braden Yu has served as Public Works Director/City Engineer since February 2021. Mr. Yu has over 29 years of engineering experience in both the private and public sectors. Prior to coming to the City, Mr. Yu served as the Public Works Director for the City of El Monte and as the Planning and Development Manager for Cucamonga Valley Water district. Mr. Yu has a Bachelor of Science Degree in Civil Engineering from California State Polytechnic University, Pomona, and is a registered Professional Civil Engineer.

Management Policies. The City has adopted several policies which are designed to ensure the prudent and effective management of its operations, including a Debt Management Policy, an Investment Policy, a General Fund Reserve Policy and a Pension Funding Policy. Further information about these policies is set forth below.

Debt Management Policy. The City has adopted a Debt Management Policy in accordance with California Government Code Section 8855 to establish guidelines and parameters for the effective governance, management and administration of debt issued by the City and its related entities and to ensure compliance with legislation, statutes and laws that place regulations on local agency debt. The following elements have been incorporated into this policy:
 The purposes for which debt may be incurred;
 The types of debt that may be issued;
 The relationship of the debt to, and integration with, the City’s capital improvement program or budget;
 Policy goals related to the City’s planning goals and objectives; and  Debt management practices, including the investment of proceeds and post-issuance compliance.

Investment Policy. The City invests its funds in accordance with the City’s investment policy (the “Investment Policy”), which was most recently reviewed and revised by the City Council in December 2021. The Investment Policy: (a) describes the policies and procedures to be utilized in the City’s investment management system; (b) establishes guidelines for the prudent investment of the City’s funds, and (c) lists and describes suitable investments. The goals of the Investment Policy and investment management function are compliance with law, enhancement of the economic status of the City and protection of the City’s funds by limiting credit and market risks.

In accordance with Section 53600 et seq. of the California Government Code, idle cash management and investment transactions are the responsibility of the City Treasurer. Under the Investment Policy, investment authorizations are also delegated to the Assistant City Manager and Finance Officer. Eligible investments are generally limited to the Local Agency Investment Fund, which is operated by the California State Treasurer, State and local agency bonds (limited to 5-year maximum maturities), money market mutual funds (limited to 20% of the portfolio), medium-term corporate notes (limited to 5-year maximum maturities and 30% of the portfolio), United States Treasury bills, notes and bonds (limited to 5-year maximum maturities), obligations issued by United States Government agencies (limited to 5-year maximum maturities and 50% of the portfolio), negotiable certificates of deposit (limited to 5-year maximum maturities and 30% of the portfolio), banker’s acceptances (limited to 180-day maximum maturities and 40% of the portfolio) and commercial paper (limited to 270-day maximum maturities and 15% of the portfolio).

In addition, the Investment Policy permits the City to purchase obligations with maturities of up to 20 years from other City funds, including the General Fund. See the caption “FINANCIAL INFORMATION— Available Cash” for a discussion of an expected investment by the Water Fund under this provision.

Funds are invested in the following order of priority:

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 Safety of Principal;
 Liquidity; and
 Return on Investment.

Staff provides a report to the City Council’s Finance Committee at each Finance Committee meeting (which generally occurs quarterly). The report shows the type of investment, date of maturity, amount invested, current market value, rate of interest and other such information as may be requested by the Finance Committee.

See the caption “FINANCIAL INFORMATION—Available Cash” for current information with respect to the City investments.

General Fund Reserve Policy. Under the City’s Reserve Policy adopted in June 2021, the City established an Economic Uncertainty Reserve at 22.5% of General Fund operating expenditures. The Economic Uncertainty Reserve can be used if an economic impact resulting in a decrease of 5% or more in property or sales taxes occurs. The City also established an Emergency Disaster Contingency Reserve at $1,000,000 that can be used in the instance where a declaration of emergency (as defined by the Upland Municipal Code) is made. The Economic Uncertainty Reserve and Emergency Disaster Contingency Reserve are intended provide liquidity to the City in the event of economic uncertainties, local disasters and other hardships or downturns in the local economy. Once the 22.5% Economic Uncertainty Reserve is met, any year-end operating surplus will be distributed to other reserves established by the General Fund Reserve Policy in the percentages as follows:

Pension Stabilization Reserve (45%), Infrastructure Improvement Reserve (30%), Building Replacement and Maintenance Reserve (15%), General Plan Update Reserve (5%) and Unallocated Fund Balance (5%).

The City notes that the General Fund reserve is not available for Water System expenses or payment of the 2022 Installment Payments. The City does not have a reserve policy specifically for Water System reserves.

See the caption “FINANCIAL INFORMATION—Available Cash” for a discussion of available Water System reserves.

Pension Funding Policy. The City adopted a Pension Funding Policy in June 2021, and later revised it in December 2021. The policy outlines the City’s approach toward addressing its long-term employee pension unfunded accrued liability. It provides narrative background on the California Public Employees Retirement System and explains key terms and features, including amortization bases, discount rates, additional discretionary payments, normal costs and unfunded accrued liability. The Pension Funding Policy also outlines financial objectives and establishes a target funding level of 100%, with a minimum funding level of 80%.

Specific funding strategies include the use of Internal Revenue Code Section 115 Trust funds and pension obligation bonds. The Pension Funding Policy further provides that 50% of any budgetary cash savings realized from any pension funding strategy must be placed into Internal Revenue Code Section 115 Trust for use to accelerate the payoff or funding of new amortization bases (liabilities). See the caption “FINANCIAL INFORMATION—Employee Benefits—Pension Obligations” for a discussion of the City’s pension plan and pension benefits for employees serving the Water System.

Employees
As of June 30, 2021, the City had 251 full-time equivalent employees, of whom 33 are budgeted in water operations. City employees who serve the Water System are represented by two bargaining units: (a) the Upland Mid-Management Employees Association, relations with which are governed by a memorandum of understanding that expires on June 30, 2022; and (b) the Upland City Employees Association, relations with which are governed by a memorandum of understanding that expires on June 30, 2022. The City has never experienced a strike, slowdown or work stoppage.

Budget Process
The City prepares and adopts a balanced budget for each Fiscal Year which includes proposed expenditures and the means of financing such expenditures. The City’s budget cycle begins with a budget

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kickoff meeting in mid-January, which the City Manager, Finance Department staff and department heads and their budget staff attend. The City Manager briefs the participants on policy directives and general budgeting guidelines. Finance Department staff follow with a discussion of the technical and procedural aspects of preparing the budget. Departments submit their proposed budgets to the City Manager in February. The City Manager, Assistant City Manager, Finance Department staff and department heads then hold meetings to discuss the proposed budgets.

Once the City Manager reviews have taken place and all departmental budget issues are resolved, Finance Department staff prepares the preliminary budget at a special meeting of the City Council’s Finance Committee. Following the Finance Committee’s review, the Finance Department presents the proposed budget to the City Council, at which time the City Manager will recommend to the City Council the adoption of the budget with any necessary revisions made between the time of publication of the preliminary budget and the date of adoption. Prior to June 30 of each year, one or more public hearings are conducted to obtain public comments and the budget is legally enacted through the passage of a resolution.

The City Council adopted the budget for Fiscal Year 2022 on June 14, 2021.

City Insurance
The City is exposed to various risks of loss related to torts, theft of, damage to and destruction of assets, errors and omissions, injuries to employees and natural disasters. The City maintains a self-funded Insurance internal service fund to insure for losses and purchases excess insurance from the Municipal Insurance Cooperative (“MIC”), non-profit, member-owned joint powers authority which provides insurance coverage and risk management services for its members. Through MIC, the City maintains the following coverages:
 General Liability: $10,000,000, with excess coverage provided by commercial insurers up to an additional $20,000,000;
 Workers Compensation: up to statutory limits;
 Property: $140,000,000; and
 Fiduciary Liability: self-insurance only.

Certain portions of the Water System, including water pipelines that are not in the vicinity of the City Treatment Plant, are not covered by the City’s property insurance. No assurance can be given as to the adequacy of the insurance maintained now or in the future by the City to fund necessary repairs or replacement of any portion of the Water System, and the City does not have any obligation under the Installment Purchase Agreement to maintain earthquake coverage or to maintain other coverages in the current coverage amounts.

Significant damage to the Water System could affect the City’s ability to generate sufficient Net Revenues to pay the 2022 Installment Payments. See the caption “CERTAIN RISKS TO BONDHOLDERS—Natural Disasters.”
The City has not settled any claims that exceeded its insurance coverage in the past three years.

See Appendix B under the caption “INSTALLMENT PURCHASE AGREEMENT—Covenants of the Purchaser—Insurance” for a description of insurance coverages that are required to be maintained while the Bonds are outstanding.

Outstanding Parity Obligations
2019 SWRCB Agreement. The City entered into the 2019 SWRCB Agreement to finance certain capital improvements to the Water System. As of June 30, 2021, the City had drawn $666,627 under the 2019 SWRCB

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Agreement. The City may draw up to a maximum amount of $16,500,000 under the 2019 SWRCB Agreement, which bears interest at the rate of 1.90% and will have a final maturity 30 years after repayment begins (currently expected to occur in Fiscal Year 2024). The City is obligated to pay principal of and interest on the 2019 SWRCB Agreement from Net Revenues of the Water System on a parity with the obligation of the City to pay the 2022 Installment Payments.
2021 Bonds. The City issued the 2021 Bonds to refinance certain capital improvements to the Water System. The 2021 Bonds, which bear interest at the rate of 1.50% per annum, are currently outstanding in the aggregate principal amount of $6,553,000 and have a final maturity on October 1, 2033. The City is obligated to pay principal of and interest on the 2021 Bonds from Net Revenues of the Water System on a parity with the obligation of the City to pay the 2022 Installment Payments.

The City is permitted to incur additional obligations that are payable from Net Revenues on a parity with the 2022 Installment Payments in the future upon satisfaction of the conditions that are described under the caption “SECURITY FOR THE BONDS—Additional Bonds and Contracts.” Financial Statements
A copy of the most recent audited financial statements of the City prepared by Van Lant & Fankhanel, LLP, Loma Linda, California (the “Auditor”) is set forth in Appendix A. The Auditor’s letter dated January 31, 2022 is located at the beginning of the Financial Section therein.

The summary operating results that are contained under the caption “FINANCIAL INFORMATION— Historical Operating Results and Debt Service Coverage” are derived from these financial statements and audited financial statements for prior Fiscal Years (excluding certain non-cash items and after certain other adjustments), and are qualified in their entirety by reference to such statements, including the notes thereto.

The City accounts for moneys received and expenses paid in accordance with generally accepted accounting principles applicable to public entities (“GAAP”). Generally, the City recognizes Water System revenues and expenses on the full accrual basis of accounting, meaning that revenues are recognized in the accounting period in which they are earned and expenses are recognized in the period in which they are incurred, regardless of when the related cash flows take place. However, in certain cases, GAAP requires or permits moneys that are collected in one Fiscal Year to be recognized as revenue in a subsequent Fiscal Year and requires or permits expenses that are paid or incurred in one Fiscal Year to be recognized as expenses in a subsequent Fiscal Year. See Note 1 to the financial statements that are set forth in Appendix A. Except as otherwise expressly noted herein, all financial information that has been derived from the City’s audited financial statements reflects the application of GAAP.

The City’s enterprise funds (including the Water System fund) each have a separate set of self-balancing accounts and are accounted for as proprietary fund types using the economic resources measurement focus. In governmental accounting, enterprise funds are used to account for operations that are financed and operated in a manner similar to private business enterprises, where the intent is that the costs (expenses, including depreciation) of providing goods or services to the general public on a continuing basis are to be financed or recovered primarily through user charges, or where periodic determination of revenues earned, expenses incurred and/or net income is deemed appropriate for capital maintenance, public policy, management control, accountability or other purposes.

COVID-19 Outbreak
The spread of the novel strains of coronavirus which are collectively called SARS-CoV-2, which cause the disease known as COVID-19 (“COVID-19”), and local, State and federal actions in response to COVID-19, have impacted the City’s operations and finances. In response to the increasing number of COVID-19 infections and fatalities, health officials and experts recommended, and some governments mandated, a variety of responses

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ranging from travel bans and social distancing practices to complete shutdowns of certain services and facilities.

The World Health Organization has declared the COVID-19 outbreak to be a pandemic and, on March 4, 2020, as part of the State’s response to address the outbreak, the Governor declared a state of emergency. On March 13, 2020, the President declared a national emergency, freeing up funding for federal assistance to state and local governments. The City also declared a state of emergency in March 2020 in response to the COVID-19 outbreak.

Many school districts across the State temporarily closed some or all school campuses (including schools within the City) in response to local and State directives or guidance.

On March 19, 2020, the Governor issued Executive Order N-33-20, a mandatory Statewide shelter-in- place order applicable to all non-essential services. Certain aspects of the shelter-in-place directives were extended indefinitely until indicators for modifying the stay-at-home order were met. The County also declared a state of emergency in response to the COVID-19 outbreak. On May 4, 2020, the Governor issued an executive order informing local health jurisdictions and industry sectors that they could gradually re-open under new modifications and guidance provided by the State. A phased re-opening of various sectors was underway beginning in mid-2020 in accordance with a four-stage re-opening plan that ended with a full reopening of the economy on June 15, 2021. Although pursuant to the re-opening plan certain restrictions on activities were eased, restrictions were also re-imposed in various jurisdictions (including Los Angeles County to the west of the City) as local conditions warranted, and such restrictions may be renewed as the pandemic continues.

On March 27, 2020, the President signed the $2.2 trillion Coronavirus Aid, Relief, and Economic Stabilization Act (the “CARES Act”) which provided, among other measures, $150 billion in financial aid to states, tribal governments and local governments for the purpose of funding emergency assistance to those most significantly impacted by COVID-19. Under the CARES Act, local governments are eligible for reimbursement of certain costs which were expended to address the impacts of the pandemic. The City received a total reimbursement of approximately $2.5 million under the CARES Act. The funds received by the City under the CARES Act are not available for payment of the 2022 Installment Payments and cannot be used to backfill any revenue losses related to COVID-19.

On December 27, 2020, the President signed the $900 billion Coronavirus Response and Relief Supplemental Appropriations Act. Although the act did not provide additional financial assistance to state and local governments, it did extend the deadline (to October 2021) for them to use unspent funds that were previously approved under the CARES Act.

On March 11, 2021, the President signed the American Rescue Plan Act of 2021 (the “ARP Act”), a $1.9 trillion economic stimulus package that was designed to help the United States’ economy recover from the adverse impacts of the COVID-19 pandemic. The ARP Act includes approximately $350 billion in aid to state and local governments such as the City, consisting of both direct funding from the United States Department of Treasury and program moneys that will flow from other federal agencies. Half of the aid to state and local governments was distributed in spring 2021, with the other half following in 2022. The City received approximately $7.6 million under the ARP Act in spring 2021 and expects to receive an additional $7.6 million in June 2022. ARP Act funds received by the City must be used: (i) to assist households, small businesses, nonprofit entities and impacted industries including hospitality, travel and tourism; (ii) to pay a salary premium to essential workers up to $13 an hour with an annual cap of $25,000; (iii) to cover for lost revenue in providing services; and (iv) to make investments in water, sewer or broadband infrastructure.

The effects of the COVID-19 outbreak and governmental actions responsive to it have altered the behavior of businesses and people in a manner that has had significant negative impacts on global and local economies. In addition, financial markets in the United States and globally have experienced significant volatility attributed to COVID-19 concerns. The outbreak resulted in increased pressure on State finances as budgetary resources were directed towards containing the pandemic and tax revenues sharply declined in early 2020. Identified cases of COVID-19 and deaths attributable to the COVID-19 outbreak continue to occur throughout the United States, including the County.

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Potential impacts to the City associated with the COVID-19 outbreak include, but are not limited to, increasing costs and challenges to the public health system in and around the City, cancellations of public events and disruption of the regional and local economy, with corresponding decreases in the City’s revenues, including as a result of reduced water use (particularly among commercial and hotel establishments).

In addition, the Governor suspended utility service shutoffs and the collection (although not the imposition) of late fees and penalties for residential customers (including Water System customers) through December 31, 2021. The City also extended the shutoff moratorium to non-residential customers, which was not required by the Governor’s order, and continues (pursuant to City Council direction) to refrain from imposing late fees and penalties or shutting off delinquent customers. As a result of the foregoing actions, the City has written off the collection of approximately $195,330 in late fees for delinquent Water System accounts that would otherwise have accrued between March 18, 2020 and June 30, 2021. See the caption “THE WATER SYSTEM—Water System Collection Procedures.” Considering the continuing potential impacts of the pandemic, the City anticipates that its allowance for the write-off of uncollectible accounts for the period from July 1, 2021 through December 31, 2021 (when the shutoff moratorium ended) is approximately $100,000, and that the full Fiscal Year 2022 write-off will be approximately $200,000, representing less than 1% of projected Gross Revenues. Notwithstanding the aforementioned projected write-offs, the City reports that Fiscal Year 2020 and 2021 Water System revenues and expenses were not materially affected by the COVID-19 outbreak, and the City does not expected a material effect on Fiscal Year 2022 Water System revenues and expenses.

In response to the COVID-19 outbreak, the City modified its operations to implement remote work opportunities for certain employees and provide services online, closed the City’s administrative building to the public and deferred several non-essential capital improvement projects. In order to transition City employees to working from home, the City procured additional hardware, established secure access to City computer systems and remote access to City telephone systems and deployed tele-conferencing applications. With improvements in local case rates, the City has phased in the resumption of normal operations and activities while complying with public health orders and California Occupational Safety and Health Administration COVID-19 Prevention Plan mandates. Large gatherings of City personnel at any one time were prohibited for much of 2020 and early 2021 per health officer orders. City Council meetings occurred via teleconference, and public comment and participation for City Council meetings were also undertaken via teleconference and electronic means for several months to accommodate residents’ health concerns. The City also continues to allow the public to comment by telephone.

The City has not experienced and does not at this time foresee a future negative impact on the execution of City services as a result of the COVID-19 outbreak. The City has worked diligently to provide its employees with personal protective equipment and voluntary access to screening and vaccinations and is prepared to allow certain employees to work from home if the pandemic worsens. However, there can be no assurance that absences of employees or City leadership due to COVID-19 will not adversely impact City operations as the pandemic continues.

The COVID-19 outbreak is ongoing, and the duration and severity of the outbreak and the economic and other actions that may be taken by governmental authorities to contain the outbreak or to treat its impact are uncertain. The ultimate impact of COVID-19 on the operations and finances of the City and the Water System is unknown. The City continues to actively monitor Water System usage, payment delinquencies, revenues and expenditures so that any further impacts of the COVID-19 pandemic can be anticipated. The City does not currently expect that the COVID-19 outbreak will have a material adverse effect on the City’s ability to pay the 2022 Installment Payments. See the caption “THE WATER SYSTEM—General” for a discussion of the impact of the COVID-19 outbreak on the Water System to date.

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THE WATER SYSTEM
General
The City provides potable and recycled water service to residential, commercial, governmental, institutional and other customers. As of June 30, 2021, the City had approximately: (a) 15,756 single family residential, 2,088 multi-family residential, 1,136 commercial and 667 governmental, institutional and other potable water accounts; and (b) 42 recycled water accounts. All of the City’s water service connections are metered.

The Water System, including the recycled water distribution system, includes 8 City-owned groundwater wells (of which 6 are currently in service), approximately 438 miles of water mains, 5 pressure zones, 2 pressure reducing stations and 12 storage reservoirs that are owned or by the City or in which the City holds storage rights. The City’s collective storage capacity in such reservoirs is approximately 50 million gallons.

The City has six sources of water:
(i) imported water that is purchased from and treated by WFA; (ii) groundwater that is pumped from City wells pursuant to City groundwater entitlements; (iii) groundwater that is pumped from City wells or wells maintained by WECWC, a private water company, pursuant to the City’s ownership of WECWC stock; (iv) groundwater that is purchased from SAWCO, a private water company, pursuant to the City’s ownership of SAWCO stock;
(v) untreated surface water that is purchased from SAWCO pursuant to the City’s ownership of SAWCO stock; and
(vi) recycled water that is purchased from IEUA.

See the caption “—Water Supply” for a detailed description of the City’s water sources.

Imported water purchases from WFA are treated at the WFA Treatment Plant, which is owned and operated by WFA. Untreated surface water purchases from SAWCO are treated at City Treatment Plant, which is owned and operated by the City. See the caption “—Treatment Plants.” The Water System has several interconnections with adjacent agencies that can be utilized in the event of a water supply emergency. Turnout valve connections are in place with SAWCO, Cucamonga Valley Water District, Monte Vista Water District, the City of Ontario and Golden State Water Company.

The City reports that Fiscal Year 2020 and 2021 Water System revenues and expenses were not materially affected by the COVID-19 outbreak, the impact of which on the City is described in detail under the caption “THE CITY—COVID-19 Outbreak.” The City’s customer base is primarily residential and its water rate structure consists of variable and fixed rate components, which partially mitigates the effect of any reduced water usage by non-residential customers. See the captions “—Historical Water System Connections” and “— Water System Rates and Charges.”
The projected Water System operating results which are set forth under the caption “FINANCIAL INFORMATION—Projected Operating Results and Debt Service Coverage” include the following assumptions:
(i) projected water sales are assumed to increase by 1% per year; and (ii) Water System write-offs for Fiscal

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Year 2022 are projected to total approximately $200,000 (roughly the same as the City experienced in Fiscal Year 2021) to account for delinquencies.

Treatment Plants
WFA Treatment Plant. WFA operates the WFA Treatment Plant, which is located in the northwestern area of the City, for the benefit of the City and other WFA members. Untreated State Water Project (“SWP”) water is treated and disinfected at the WFA Treatment Plant prior to delivery to WFA members. The WFA Treatment Plant commenced operations in 1988 and has a total capacity of up to 81 million gallons per day (“mgd”), with the City holding rights to 17.8 mgd (22%) of this capacity.

WFA obtains untreated water from IEUA, which is a member agency of MWD, which in turn is an SWP contractor. SWP water originates in northern California. See the caption “—Water Supply—Imported Water” for a discussion of WFA, IEUA and the SWP. All water purchased by WFA is treated at the WFA Treatment Plant prior to delivery to the City and other WFA members.

City Treatment Plant. The City operates the City Treatment Plant, which is also located just outside the northwestern boundary of the City, in order to treat untreated surface water purchases from SAWCO. See the caption “—Water Supply—SAWCO Surface Water Supplies.” The City Treatment Plant commenced operations in 1989 and has a total capacity of up to 6 mgd. The City also maintains a 5 mgd water storage reservoir at the site.

The City Treatment Plant is located at the base of San Antonio Dam, a flood control and water conservation project on San Antonio Creek which is owned and maintained by the United States Army Corps of Engineers. San Antonio Dam was constructed in 1956 and is 3,850 feet long, 160 feet high above the foundation and 130 feet (40 m) above the riverbed. The reservoir behind the dam is usually dry and is intended to control runoff when precipitation flows into the San Antonio Creek from the San Gabriel Mountains.

Water Quality
General. The City purchases imported water from WFA as well as untreated surface water from SAWCO. See the caption “—Water Supply.” WFA supplies are treated to potable water standards at the WFA Treatment Plant, while untreated supplies from SAWCO are treated to potable water standards at the City Treatment Plant. See the caption “—Treatment Plants.”
The City’s groundwater supplies are periodically subject to water quality problems, particularly in the Chino Basin (including nitrates, dibromo-3-chloropropane (which was previously used as a soil fumigant and insecticide), perchlorate and 1,2,3-Trichloropropane (“TCP”)) in the southern part of the City. The City has previously made use of ion exchange facilities to treat such supplies to potable water standards. However, the City more commonly blends water from its Chino Basin supplies with other groundwater supplies; in particular, water that is extracted from the northern portion of the Cucamonga Basin is of particularly high quality and suitable for blending. In addition, groundwater supplies from Six Basins are subject to minimal treatment (primarily the infusion of chlorine and ammonia). See the caption “—Water Supply” for a description of the various groundwater basins in which the City has extraction rights.

In spring 2021, the City received $10,250,000 from Dow Chemical Company and Shell Oil Company (with the City’s attorneys entitled to approximately one-third of such amount) in settlement of an action for TCP contamination that the City filed in 2019. The City expects to apply the settlement funds to construct granular activated carbon treatment facilities at City wells that are affected by TCP contamination and to construct and acquire other capital improvements.

The City’s recycled water supplies, which are purchased from IEUA, are suitable for landscape irrigation under Title 22 of the California Code of Regulations.

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PFAS. In 2019, the SWRCB’s Division of Drinking Water (the “Division”) lowered the Notification Levels (the “NLs”) for Perfluorooctanoic acid (“PFOA”) and Perfluorooctanesulfonic acid (“PFOS”) to 5.1 and

6.5 parts per trillion (“PPT”), respectively. NLs are non-regulatory, precautionary health-based measures for concentrations of chemicals in drinking water that warrant notification and further monitoring and assessment.

In 2020, the Division lowered the Response Levels (the “RLs”) for PFOA and PFOS from 70 PPT, combined, to 10 and 40 PPT, respectively. RLs are non-regulatory, precautionary health-based measures that are set at higher levels than NLs and represent thresholds at which the Division recommends that water systems remove a water source from use or treat it.

PFOA and PFOS are fluorinated organic chemicals which are part of a family of synthetic compounds referred to as per- and polyfluoroalkyl substances (“PFAS”). PFAS are water and lipid resistant substances that were previously used in a variety of manufacturing processes and industrial applications. They are often present in water supplies which are impacted by wastewater treatment plant effluent or active or former military installations. The City understands that recent technological advances have enabled water agencies to detect PFAS compounds at very low concentrations.

To date, PFAS has not been detected in the City’s groundwater wells in concentrations above the NLs for PFOA and PFOS. The City’s goal is to ensure that all drinking water served to customers does not contain PFAS in amounts which are above the NLs (which are lower than the RLs). The City has tested the water within its distribution system for PFAS under the UCMR3 (Unregulated Contaminant Monitoring Rule) and the Division’s 2018 Monitoring Order, resulting in a “non-detect” determination.

Imported treated water that the City purchases from MWD has been tested for PFAS by MWD for many years. MWD has not detected PFAS in such supplies. Similarly, local surface water supplies have not been found to contain PFAS.

The City does not anticipate that implementation of the lowered PFAS RLs by the Division will have a material adverse effect on the operation of the Water System or the costs thereof. The projected operating results which are set forth under the caption “FINANCIAL INFORMATION—Projected Operating Results and Debt Service Coverage” do not assume significant increases in water treatment or other Water System operating costs to meet State regulations relating to PFAS.

Water Supply
The City has six sources of water:
(i) imported water that is purchased from and treated by WFA, as discussed under the subcaption “—Imported Water;”
(ii) groundwater that is pumped from City wells pursuant to City groundwater entitlements, as discussed under the subcaption “—City Groundwater Supplies;” (iii) groundwater that is pumped from City wells or wells maintained by WECWC, a private water company, pursuant to the City’s ownership of WECWC stock, as discussed under the subcaption “—WECWC Supplies;”
(iv) groundwater that is purchased from SAWCO, a private water company, pursuant to the City’s ownership of SAWCO stock, as discussed under the subcaption “—SAWCO Groundwater Supplies;” (v) untreated surface water that is purchased from SAWCO pursuant to the City’s ownership of SAWCO stock, as discussed under the subcaption “—SAWCO Surface Water Supplies;” and

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(vi) recycled water that is purchased from IEUA, as discussed under the subcaption “—Recycled Water.”
See the captions “—Historical Water System Supply” and “—Projected Water System Supply” for historical and projected information with respect to the City’s sources of potable and recycled water supplies.

Imported Water. Approximately 23% (4,424 acre feet) of the City’s potable water supply in Fiscal Year 2021 consisted of imported untreated water that the City purchased from WFA, with such water treated at the WFA Treatment Plant prior to delivery to City customers. See the caption “—Treatment Plants—WFA Treatment Plant.”
WFA was created on February 19, 1980 pursuant to a joint powers agreement (the “WFA Joint Powers Agreement”) by and among the City, Monte Vista Water District and the cities of Chino, Chino Hills and Ontario. WFA is located in the City and is governed by a five-member board to which the City is entitled to appoint one representative. The City owns a 17.8 mgd (22%) capacity interest in the WFA Treatment Plant, which is operated by WFA.

Under the terms of the WFA Joint Powers Agreement, WFA collects from the City: (i) fixed and variable operating costs of WFA (primarily related to the SWP, as discussed below), which costs are not limited in amount; and (ii) certain fixed project costs allocable to the City, including debt service on WFA bonds. The current cost of water from WFA is approximately $856 per acre foot. In Fiscal Year 2022, the City projects that payments to WFA under the WFA Joint Powers Agreement will be approximately $7.6 million, including approximately $770,000 in fixed costs attributable to the SWP and WFA. The obligation of the City to make payments under the WFA Joint Powers Agreement is payable as a Maintenance and Operation Cost of the Water System.

The source of water that is treated at the WFA Treatment Plant is untreated water purchased from IEUA.

IEUA is a member agency of MWD. MWD was created in 1928 by vote of the electorates of a number of Southern California cities to provide a supplemental supply of water for domestic and municipal uses at wholesale to its member agencies. The MWD service area comprises approximately 5,200 square miles and includes portions of the six counties of Los Angeles, Orange, Riverside, San Bernardino, San Diego and Ventura.

There are 26 member agencies of MWD, consisting of 14 cities, 11 municipal water districts (including IEUA) and one county water authority. MWD is governed by a Board of Directors (the “MWD Board”), which currently has 38 members. Each member agency has at least one representative on the MWD Board.

Representation and voting rights are based upon each member agency’s assessed valuation. IEUA is among MWD’s largest customers and has four representatives on the MWD Board. The total population of the MWD service area is approximately 19 million.

MWD member agencies request water from MWD at various delivery points within MWD’s service area and pay for such water at uniform rates that are established by the MWD Board for each class of service.

For planning purposes, each MWD member agency advises MWD annually in December of its anticipated delivery requirements for each of the five following fiscal years. Charges for water delivered are billed monthly and payable by the end of the second month following delivery.

MWD’s principal sources of water are Colorado River supplies which are imported through the Colorado River Aqueduct and supplies from the Lake Oroville watershed in northern California which are imported through the SWP. The same water rate is charged for water provided from each source.

MWD’s water rates are established by majority vote of the MWD Board and are not subject to regulation by the California Public Utilities Commission or any other local, State or federal agency. Rates must be uniform for any class of service, and no water may be provided free of charge. Under the Metropolitan Water District Act, California Statutes 1969, Chapter 209, as amended (the “MWD Act”), MWD is required, so far as practicable, to fix such rate or rates for water as will result in revenue which, together with revenue from any

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water standby or availability charge or assessment, will pay the operating expenses of MWD, provide for repairs and maintenance, provide for payment of the purchase price or other charges for property or services or other rights acquired by MWD and provide for the payment of the interest and principal of the bonded debt of MWD, subject to the applicable provisions of the MWD Act authorizing the issuance and retirement of such bonds.

Reductions in water deliveries through the SWP and the Colorado River could affect the availability of water for the City. In March 2021, the State of California Department of Water Resources (“DWR”), which operates the SWP, announced that SWP allocations for water year 2020-21 would be limited to 5% of requested supplies and, in January 2022, DWR announced preliminary allocations for water year 2021-22 of 15% of requested supplies. Allocations represent the amount of SWP water that DWR will deliver for the year and are reviewed monthly based on several factors, including water in storage, environmental requirements and rain and snow runoff projections.
[CONFIRM PRIOR TO POSTING] MWD has water supplies in storage and neither MWD nor IEUA announced supply cutbacks based on the DWR allocation announcement for water year 2020-21. In addition, to date, neither MWD nor IEUA have announced supply cutbacks based on the preliminary DWR allocation announcement for water year 2021-22, although there can be no assurance that they will not do so later in 2022.

The City Council has not considered imposing any restrictions on water use by Water System customers. See the caption “—Drought Declarations.”
DWR, which operates the SWP, as well as WFA, IEUA and MWD, face various challenges in the continued supply of water for the City, including a prolonged drought in northern California that is affecting water supplies. A description of these challenges as well as a variety of other operating information with respect to DWR, IEUA and MWD is included in certain disclosure documents prepared by such entities. DWR, IEUA and MWD have certain publicly available documents and have entered into certain continuing disclosure agreements pursuant to which they are contractually obligated for the benefit of owners of certain of their outstanding obligations to file annual reports, notices of certain events as defined under Rule 15c2-12 adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time (“Rule 15c2-12”), and annual audited financial statements (collectively, the “SWP Information”) with the Municipal Securities Rulemaking Board’s Electronic Municipal Market Access System (“EMMA”), which is accessible on the Internet at https://emma.msrb.org/ . None of the SWP Information is incorporated into this Official Statement by reference thereto, and the City make no representation as to the accuracy or completeness of such information. NONE OF DWR, WFA, IEUA OR MWD HAS ENTERED

INTO ANY CONTRACTUAL COMMITMENT WITH THE CITY, THE TRUSTEE OR THE OWNERS OF THE BONDS TO PROVIDE SWP INFORMATION TO THE CITY OR THE OWNERS OF THE BONDS.

NONE OF DWR, WFA, IEUA OR MWD HAS REVIEWED THIS OFFICIAL STATEMENT OR

MADE REPRESENTATIONS OR WARRANTIES WITH RESPECT TO THE ACCURACY OR

COMPLETENESS OF THE INFORMATION CONTAINED OR INCORPORATED HEREIN, INCLUDING INFORMATION WITH REGARD TO THE SWP. NONE OF DWR, WFA, IEUA OR MWD IS

CONTRACTUALLY OBLIGATED, AND NONE HAS UNDERTAKEN, TO UPDATE SUCH

INFORMATION FOR THE BENEFIT OF THE CITY OR THE OWNERS OF THE BONDS UNDER RULE 15c2-12.

City Groundwater Supplies. Approximately 16% (3,044 acre feet) of the City’s potable water supply in Fiscal Year 2021 consisted of groundwater that was pumped from City wells pursuant to City groundwater entitlements.

The City maintains a total of 8 groundwater wells, of which 6 are currently in service. The City’s active wells have a combined maximum production capacity of approximately 6.5 mgd. The City’s wells are located in the Chino Groundwater Basin (the “Chino Basin”) and the Six Basins Watershed (“Six Basins”). The City also maintains one well in the Cucamonga Groundwater Basin (the “Cucamonga Basin”), which is used to

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pump groundwater pursuant to entitlements held by WECWC and SAWCO. See the subcaptions “—WECWC Supplies” and “—SAWCO Groundwater Supplies.”
Chino Basin. The City overlies the northwestern portion of the Chino Basin. The City is entitled to pump approximately 2,124 acre feet of groundwater per year as a party to the Appropriative Pool (as discussed below) from the Chino Basin without paying a replenishment assessment. The actual amount that is available to be pumped in any year varies based on the safe yield of the Chino Basin and other factors as described below. Groundwater is extracted from five currently active City-owned wells in the Chino Basin.

Under a program known as the Conjunctive Use Program, the City has entered into water storage agreements which permit storage of imported surface water and recycled water in the Chino Basin, with such water to be extracted during dry hydrological years in lieu of importing SWP water. The City did not extract any water under the Conjunctive Use Program in Fiscal Year 2021 and does not expect to extract any water under the Conjunctive Use Program in Fiscal Year 2022.

The Chino Basin is managed by the Chino Basin Watermaster (the “Watermaster”), which seeks to optimize the Chino Basin’s safe yield, provide replenishment supplies to offset overproduction and levy and collect administrative and replenishment assessments. The Watermaster was created pursuant to the terms of a January 27, 1978 judgment (the “Judgment”) entered in Superior Court of California, County of San Bernardino (the “Court”) Case No. RCV 51010 (formerly Case No. SCV 164327) entitled Chino Basin Municipal Water District v. City of Chino, et al. The Watermaster administers the Judgment and provides a forum for Chino Basin stakeholders to work cooperatively in managing the Chino Basin to meet regional water supply needs.

The Judgment established the following three pool committees:
(1) the Agricultural Pool, which includes the State and all overlying producers of water for uses other than industrial or commercial purposes; allocations to this pool are expected to decrease over time as formerly agricultural land is developed for non-agricultural uses; (2) the overlying Non-Agricultural Pool, which represents producers of water for industrial or commercial purposes; and
(3) the Appropriative Pool, which represents the City and other cities, special districts, public and private utilities and certain other users; the City currently has annual base extraction rights of approximately 2,124 acre feet of water per year from the Appropriative Pool, or approximately 5.202% of the total extraction rights; allocations to this pool are expected to increase over time as formerly agricultural land is developed for non-agricultural uses; currently, the City does not have any additional rights to water as a result of such land use conversions, although it may gain entitlements thereto as land continues to be developed.

The representatives of the pool committees constitute an Advisory Committee that advises the Watermaster’s nine member board, which is comprised of representatives of each of the three pools as well as representatives from the wholesale water agencies within the Chino Basin.

The Judgment was amended in 2000 through the signing of the Peace Agreement, which, among other things, established procedures to implement an Optimum Basin Management Program (the “OBMP”) to preserve and enhance the Chino Basin’s safe yield and water quality through the construction of desalters and other measures, and again in 2007 through the signing of the Peace II Agreement, which, among other things, provided for the expansion of desalters to treat groundwater that had been degraded by past agricultural practices.

Watermaster staff provide accounting services for water appropriations and groundwater storage, groundwater monitoring services, services related to the implementation of special projects within the Chino Basin service area and services related to the purchase of replenishment water, when available. The Watermaster’s operations are governed by the Judgment, the OBMP, the Peace Agreement, the Peace II

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Agreement and rules and regulations approved by the Watermaster’s board. The Watermaster is considered an arm of the Court and reports to the Court on a regular basis as part of the Court’s ongoing jurisdiction to enforce the Judgment.

The Watermaster estimates that the Chino Basin, which is approximately 235 square miles in area, currently holds approximately 5,000,000 acre feet of water and has an additional 1,000,000 acre feet of unused capacity. The amount of groundwater held in the Chino Basin fluctuates depending upon precipitation, pumping demand and the availability of replenishment water. Replenishment water has not been available in every year, resulting in limitations on the Watermaster’s ability to recharge the Chino Basin. However, local replenishment supplies have been available in the form of purchases of water held in local storage accounts to offset overproduction. In addition, individual agencies, including the City, have the ability to purchase recycled water to offset their overproduction.

For Fiscal Year 2021, the amount of native groundwater available for pumping was approximately 131,000 acre feet. If the City’s production is in excess of the City’s appropriative rights, the City may utilize water that it has stored in the Chino Basin, purchase water from another Chino Basin groundwater producer or pay the Watermaster a replenishment assessment fee in the current amount of $789 per acre foot. In addition, the City pays the Watermaster administrative and OBMP assessments based on prior year production. Such assessments were equal to $21.20 and $60.80 per acre foot, respectively, for Fiscal Year 2021. The assessments provide funding for Watermaster staffing, administrative overhead costs and the Watermaster’s implementation of the OBMP.

Pursuant to the Judgment, the City’s current annual Chino Basin base extraction rights are approximately 2,124 acre feet of groundwater as a party to the Appropriative Pool. However, the City’s total annual appropriative rights in the Chino Basin vary based on the safe yield of the Chino Basin, the Watermaster’s allocation of unused Agricultural Pool rights, the City’s annual purchases from other producers and other factors.

Based on the foregoing factors, the amount that is actually available for pumping is currently approximately 3,663 acre feet per year. The City usually underproduces its available appropriative rights in any given year.

As of June 30, 2021, the City had a total of 42,262 acre feet of water in its Chino Basin storage account, including recycled water and imported supplies, stormwater recharge credits, rights arising from the City’s ownership of WECWC shares (as discussed under the subcaption “—WECWC Supplies” below) and purchases of stored water from other Chino Basin groundwater producers.

As an adjudicated groundwater basin, the Chino Basin is not subject to the provisions of Assembly Bill No. 1739 and Senate Bill Nos. 1168 and 1319 (collectively, the Sustainable Groundwater Management Act, or “SGMA”), which was enacted on September 16, 2014. The SGMA constitutes a legislative effort to regulate groundwater on a Statewide basis.

See the caption “—Water Quality—General” for a discussion of certain contaminants in the City’s Chino Basin groundwater supplies.

Six Basins. The northwestern portion of the City adjacent to the foothills of the San Gabriel Mountains overlies Six Basins. Six Basins is a group of adjacent adjudicated groundwater basins that are located south of the San Gabriel Mountains in the eastern portion of Los Angeles County and the western portion of the County. The City has four active and two inactive groundwater wells in Six Basins.

The City is entitled to pump groundwater from Six Basins in accordance with a stipulated court judgment that was approved in 1998 (the “Six Basins Stipulated Judgment”). Pursuant to the Six Basins Stipulated Judgment, the City received an entitlement, subject to the conditions set forth in the Six Basins Stipulated Judgment, to pump approximately 1,842 acre feet of the aggregate rights in Six Basins (established at 19,300 acre feet per year), or 9.544% of the total extraction rights.

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Pursuant to the Six Basins Stipulated Judgment, Six Basins is managed by a Watermaster (the “Six Basins Watermaster”), which seeks to optimize Six Basins’ safe yield, provide replenishment supplies to offset overproduction and levy and collect administrative and replenishment assessments. The Six Basins Watermaster administers the Six Basins Stipulated Judgment and provides a forum for Six Basins stakeholders to work cooperatively in managing Six Basins to meet regional water supply needs. Six Basins stakeholders include the City and the cities of La Verne, Pomona and Claremont, SAWCO, Golden State Water Company, Pomona College and Three Valleys Municipal Water District
WECWC and SAWCO have also groundwater entitlements in Six Basins. See the subcaptions “— WECWC Supplies” and “—SAWCO Groundwater Supplies.”
As an adjudicated groundwater basin, Six Basins is not subject to the provisions of the SGMA.

WECWC Supplies. Approximately 14% (2,778 acre feet) of the City’s potable water supply in Fiscal Year 2021 consisted of groundwater that the City purchased from WECWC or extracted pursuant to WECWC entitlements.

WECWC is a mutual water company in which the City owns 3,308 shares, which entitles the City to purchase up to approximately 91% of WECWC’s total water entitlement.

WECWC is located in the City and was formed in 1929. It sells water at wholesale only and has no retail customers. Currently, WECWC’s largest shareholder is the City, which holds approximately 91% of outstanding shares. WECWC is governed by a 5-member board that is elected by shareholders each year. Three City Council Members currently sit on WECWC’s board.

WECWC’s water system includes three active wells (all in Six Basins). Over the last ten years, WECWC entitlements have enabled its shareholders to produce an average of 2,728 acre feet of water per year.

WECWC water supplies include groundwater from three sources: the Chino Basin (in which WECWC does not maintain any wells), the Cucamonga Basin (in which WECWC does not maintain any wells) and Six Basins (in which WECWC maintains three wells). WECWC’s production rights from such sources total an average of approximately 9,475.5 acre feet of water per year. See the subcaption “—Groundwater Supplies” for a description of the Chino Basin and Six Basins.

WECWC currently has annual base extraction rights of approximately 1.728% of the total Chino Basin Appropriative Pool extraction rights of 54,834 acre feet per year and approximately 15.399% of the total Six Basins extraction rights of 19,300 acre feet per year.

The northeastern portion of the City adjacent to the foothills of the San Gabriel Mountains overlies the Cucamonga Basin. Although the City owns and maintains one well (Well 15) in the Cucamonga Basin, the City does not itself have any groundwater extraction rights in the Cucamonga Basin and pumping from Well 15 is undertaken (pursuant to the City’s ownership of WECWC shares) based on WECWC’s entitlement.

WECWC’s groundwater rights in the Cucamonga Basin arise from a stipulated court judgment that was approved by the Court in April 1958 (the “Cucamonga Basin Stipulated Judgment”). Pursuant to the Cucamonga Basin Stipulated Judgment, WECWC is currently entitled, subject to the conditions set forth in the Cucamonga Basin Stipulated Judgment, to pump 750 acre feet of the aggregate base extraction rights in the Cucamonga Basin (established at 22,721 acre feet under the Cucamonga Basin Stipulated Judgment in 1958) in each year. SAWCO and Cucamonga Valley Water District are entitled to pump the remaining safe yield from the Cucamonga Basin. See the subcaption “—SAWCO Groundwater Supplies.” As an adjudicated groundwater basin, the Cucamonga Basin is not subject to the provisions of the SGMA.

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As a WECWC shareholder, the City can pump water from its own groundwater wells (including Well 15 in the Cucamonga Basin) pursuant to WECWC entitlements in each of the Chino Basin, Cucamonga Basin and Six Basins.

The City expects to receive its full entitlement of approximately 2,500 acre feet of WECWC water in calendar year 2022 at a rate of $96.53 per acre foot.

SAWCO Groundwater Supplies. Approximately 31% (5,977 acre feet) of the City’s potable water supply in Fiscal Year 2021 consisted of groundwater that the City purchased from SAWCO.

SAWCO is a mutual water company in which the City owns 4,515 shares, which entitles the City to purchase up to approximately 20,630 acre feet of water per year (or approximately 70.6% of SAWCO’s total water production), including groundwater and surface water. SAWCO’s surface water rights are discussed below under the subcaption “—SAWCO Surface Water Supplies.” SAWCO is located in unincorporated San Bernardino County north of the City. SAWCO was formed in 1882 to provide a source of water to residents in what is today the City and the nearby City of Ontario. Over time, SAWCO’s shareholders came to include local municipalities, golf courses and other private entities.

Currently, SAWCO’s largest shareholders are the City, which holds approximately 70.6% of outstanding shares, Monte Vista Water District, which holds approximately 5% of outstanding shares, and the City of Ontario, which holds approximately 4% of outstanding shares. Individual domestic water customers constitute less than 10% of current shareholders. SAWCO is governed by a 7-member board that is elected by shareholders each year.

The City’s Mayor and Council Member Zuniga currently sit on SAWCO’s board, with three other board members having close ties to the City and/or residing in the City.

SAWCO’s water system includes 9 reservoirs holding approximately 9.45 million gallons of water for both domestic and irrigation use, 3 active wells used to supply domestic water and 7 active wells used to supply irrigation water, 9 booster stations, 19 booster pumps and 46 miles of pipeline. Over the last ten years, SAWCO supplied an average of 11,500 acre feet of water per year to its shareholders.

SAWCO water supplies include groundwater and surface water from five sources: the San Antonio Creek, the San Antonio Tunnel, the Chino Basin (in which SAWCO maintains two wells), the Cucamonga Basin (in which SAWCO maintains five wells) and Six Basins (in which SAWCO maintains three wells). SAWCO’s production rights from such sources total an average of approximately 29,221 acre feet of water per year. With the exception of the San Antonio Creek, SAWCO’s average annual production from such sources is at or near its full production rights. See the subcaption “—Groundwater Supplies” and “—WECWC Supplies” for a description of the Chino Basin, Six Basins and Cucamonga Basin. See the subcaption “—SAWCO Surface Water Supplies” for a discussion of the City’s entitlement to a portion of SAWCO’s untreated surface water supplies.

SAWCO currently has annual base extraction rights of approximately 2.748% of the total Chino Basin Appropriative Pool extraction rights of 54,834 acre feet per year.

SAWCO currently has base water extraction rights of 4,500 acre feet per year from the Cucamonga Basin. SAWCO also has an obligation to recharge 2,000 acre feet of imported water per year (except for years of high water levels) over rolling ten year periods into the Cucamonga Basin. Failure to meet this obligation will result in a reduction of SAWCO’s allowable pumping rights by the amount of recharge deficit.

SAWCO currently has annual base extraction rights of approximately 7.166% of the total Six Basins extraction rights of 19,300 acre feet per year.

SAWCO’s water system is interconnected with the Water System. Accordingly, the City can receive water that has been extracted from SAWCO-maintained wells directly from SAWCO’s distribution system.

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Alternatively, as a SAWCO shareholder, the City can pump water from its own groundwater wells (including Well 15 in the Cucamonga Basin) pursuant to SAWCO entitlements in each of the Chino Basin, Cucamonga Basin and Six Basins.

The City expects to receive its full entitlement of 9,188 acre feet of SAWCO water in calendar year 2022 at a rate of $296.208 per acre foot. A portion of this entitlement is expected to be stored in the Chino Basin for credit to the City’s Chino Basin storage account. See the subcaption “—City Groundwater Supplies—Chino Basin” above.

SAWCO Surface Water Supplies. Approximately 12% (2,223 acre feet) of the City’s potable water supply in Fiscal Year 2021 consisted of untreated surface water that the City purchased from SAWCO and treated at the City Treatment Plant prior to delivery to customers. See the caption “—Treatment Plants—City Treatment Plant.”
As discussed above under the subcaption “—SAWCO Groundwater Supplies,” SAWCO water supplies include surface water from the San Antonio Creek and the San Antonio Tunnel. SAWCO has pre-1914 surface water rights to the San Antonio Creek, reflecting one of the highest levels of priority under the State’s water rights jurisprudence. Water is released from an outlet from upstream Southern California Edison power generation facilities and conveyed to the “40/60 split,” where the flow is divided through a weir, with 60% of the flow diverted to SAWCO and 40% of the flow diverted to the City of Pomona.

The San Antonio Tunnel is located upstream from the San Antonio Dam (as discussed under the caption “—Treatment Plants—City Treatment Plant”) and consists of a deep rock 4’ by 4’ rectangular tunnel situated approximately 100 feet below the ground surface and supported by redwood beams and solid rock. The San Antonio Tunnel captures water that naturally percolates through the soil.

SAWCO’s production rights from the San Antonio Creek and the San Antonio Tunnel constitute a percentage of available flow and are therefore subject to annual variations depending on hydrological conditions each year. Production from the San Antonio Creek in 2021 was approximately 1,300 acre feet (approximately

7.5% of SAWCO’s production rights to 17,460 acre feet of San Antonio Creek water) because of the limitations of SAWCO’s infrastructure.

Recycled Water. The City supplied approximately 772 acre feet of recycled water to customers in Fiscal Year 2021. The City’s source of recycled water is treated wastewater produced by IEUA at four regional tertiary wastewater treatment plants that are owned and operated by IEUA. The City has two interconnections to the IEUA recycled water distribution system. Under a 1972 agreement, the City is entitled to purchase recycled water in an amount up to its pro rata share of sewage contributed to the regional wastewater treatment system.

The 1972 agreement expires in January 2023 and the City, IEUA and other IEUA member agencies are currently negotiating a renewal of such agreement. The City does not currently expect the renewed agreement to include material changes in the City’s recycled water entitlement.

Recycled water customers are primarily located in the southeastern portion of the City (where the IEUA distribution system is most developed) and include golf courses, homeowners associations, schools, parks and green belts. Recycled water deliveries offset higher cost purchases or production of potable water and represent an additional reliable source of local water supply.

The City also uses recycled water to recharge the Chino Basin in accordance with the OBMP. Such purchases are credited to the City’s Chino Basin storage account and thereby increase the amount of groundwater that is available for pumping from the Chino Basin. See the subcaption “—Groundwater Supplies—Chino Basin.”

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Drought Declarations
State and Federal Orders. On January 17, 2014, the Governor declared a drought state of emergency (the “Declaration”) with immediate effect. The Declaration included an order encouraging local urban water suppliers, such as the City, to implement their local water shortage contingency plans; the City’s plan is discussed under the subcaption “—City Response to Drought.” On April 7, 2017, after significant improvement in water supply conditions across California, the Governor issued Executive Order B-40-17, which rescinded mandatory conservation measures for most California counties (including the County).

In 2018, the California Governor signed Senate Bill 606 and Assembly Bill 1668 into law. These bills relate to water conservation and drought planning and empower DWR and the SWRCB to adopt long-term standards for the following: (i) indoor residential water use; (ii) outdoor residential water use; (iii) commercial, industrial and institutional water use for landscape irrigation; and (iv) water loss. The indoor water use standard has been defined as 55 gallons per person per day (“GPCD”) until January 2025; the standard will decrease over time to 50 GPCD in January 2030. Standards for outdoor residential water use and commercial, industrial and institutional water use for landscape irrigation are still being developed. Urban water suppliers will be required to stay within annual water budgets, based on these standards, for their service areas.

The City is unable to predict the effect on the Water System of the implementation of Senate Bill 606 and Assembly Bill 1668 or any future legislation with respect to water conservation. However, the City is meeting and believes that it will be continue to be able to meet the 55 GPCD standard for indoor water use, along with annual State-mandated water use efficiency standards, based on the City’s current water demands and ongoing efforts to encourage conservation, as described below under the subcaption “—City Response to Drought.” The City also has a tiered rate structure for residential customers that further promotes water use efficiency by charging a higher rate for water use in excess of maximum amounts within each tier. See the caption “—Water System Rates and Charges—Current Rates and Charges.” On October 19, 2021, the Governor declared a Statewide drought state of emergency and requested that all water users voluntarily reduce water use by 15%. The declaration encouraged water agencies to draw upon supplies other than groundwater and to implement their water shortage contingency plans and authorized the SWRCB to adopt regulations that prohibit wasteful water use (such as the use of potable water to wash paved surfaces or to irrigate landscaping during the two days following rainfall). There can be no assurance that subsequent State or MWD declarations will not impose mandatory water use restrictions should dry conditions persist in 2022 or future years.

In August 2021, the federal government declared a water shortage at Lake Mead, which is a major storage reservoir on the Colorado River. As discussed under the caption “—Water Supply—Imported Water,” Colorado River supplies are among the water sources for MWD, which provides water to IEUA, which in turn sells water to WFA. The water shortage declaration triggered mandatory cuts in water allocations for water users in Arizona and Nevada, although not for MWD or other users in California. Notwithstanding the foregoing, in December 2021, water users in California (including MWD), Arizona and Nevada agreed to voluntary cuts of 500,000 acre feet of water from the Colorado River in both 2022 and 2023, and MWD agreed to pay up to $20 million to certain agricultural rightsholders that leave their land fallow. There can be no assurance that subsequent declarations with respect to the Colorado River will not require mandatory water cuts to MWD should dry conditions persist in 2022 or future years.

Water Shortage Contingency Plan. The City’s water shortage contingency plan, which is referred to as the Water Shortage Conservation Ordinance (the “WSCO”) and which meets State guidelines for such plans, calls for the City to respond to a water shortage in stages as follows:

Under Shortage Level 1, the City seeks voluntary reductions in water usage of up to 10%. Shortage Level 1 is in effect at all at times and includes measures to reduce water waste, including a prohibition on washing

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sidewalks, driveways and other paved surfaces, an obligation to fix water leaks within 72 hours of notification and a prohibition on outdoor irrigation between 10:00 a.m. and 6:00 p.m.

Under Shortage Level 2, the City seeks to reduce water usage by up to 30%. Shortage Level 2 includes the restrictions of Shortage Level 1 and additional measures, such limiting outdoor irrigation to every other day, a prohibition on the washing of vehicles without a shutoff nozzle, a prohibition on the provision of water at restaurants except upon request, a prohibition on running water through ornamental water features and a prohibition on irrigation of golf course fairways.

Under Shortage Level 3, the City seeks to reduce water usage by up to 50%. Shortage Level 3 includes the restrictions of Shortage Levels 1 and 2 and additional measures, such limiting outdoor irrigation to twice a week and a prohibition on irrigation golf course tee areas.

Under Shortage Level 4, the City seeks to reduce water usage by over 50%. Shortage Level 4 includes the restrictions of Shortage Levels 1, 2 and 3 and additional measures, such limiting outdoor irrigation to once a week, limiting the washing of vehicles to morning hours only and only at designated businesses.

The City is empowered to enforce its water shortage contingency plan with successively increasing fines and, if necessary to assure compliance, the installation of flow restriction devices and the termination of water service.

Since the 2014-2017 Statewide drought (as discussed under the subcaption “—State and Federal Orders” above), the City has implemented Shortage Level 3 of the WSCO. Approximately 75% of the City’s water supplies consist of local groundwater and surface water rights. See the caption “—Water Supply.” Such supplies are dependent on local precipitation. Accordingly, the City Council believes that it is prudent to continue to encourage Water System customers to conserve water until groundwater levels in the basins in which the City has entitlements are significantly replenished and the City remains in Shortage Level 3.

Notwithstanding the foregoing, the City is not actively enforcing compliance with Shortage Level 3 and has not seen significant conservation by individual customers since the end of the Statewide drought. See Table 2 under the caption “—Historical Water System Deliveries.”
The projected Water System operating results that are set forth under the caption “FINANCIAL INFORMATION—Projected Operating Results and Debt Service Coverage” reflect increases of approximately 1% per annum in water deliveries. See Table 10 under the caption “—Projected Water System Deliveries.” The City does not currently expect that the implementation of the WSCO in the future will have a material adverse effect on its ability to pay the 2022 Installment Payments from Net Revenues. As discussed under the caption “—Water System Rates and Charges,” the City’s rate structure consists of variable and fixed rate components.

Decreased water consumption is partially offset by a decrease in related variable costs, while fixed water charges largely cover the Water System’s fixed operating and maintenance costs. In addition, the City has covenanted to set Water System rates and charges in amounts that it expects to be sufficient to pay the Bonds from Net Revenues. See the caption “SECURITY FOR THE BONDS—Rate Covenant.” If a water shortage should arise again in the future, legal issues exist as to whether different California Water Code provisions or State regulations will be invoked to manage the allocation of water. Any curtailment pursuant to State orders could necessitate an increase in the City’s water rates to Water System customers. See the caption “CONSTITUTIONAL LIMITATIONS ON APPROPRIATIONS AND CHARGES—Proposition 218” for a discussion of certain restrictions on the City’s ability to raise water rates.

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Historical Water System Supply
The following table shows sources of supply for the Water System for the last five Fiscal Years.

Table 1
City of Upland
Historical Water Supply in Acre Feet
Fiscal Year
Ended
June 30
Imported
Water
Local
Water(1)
Recycled
Water Total
Percentage
Increase/
(Decrease)
2017 5,377 12,769 654 18,800 N/A%
2018 6,073 13,279 705 20,057 6.69
2019(2) 5,552 11,963 709 18,224 (9.14)
2020 3,390 15,040 699 19,129 4.97
2021 _4,424 14,097 772 19,293 0.86

(1) Includes groundwater and surface water supplies. See the caption “—Water Supply.” (2) Decrease reflects wet hydrological year.

Source: City.

Historical Water System Deliveries
The following table shows potable and recycled water deliveries to Water System customers for the last five Fiscal Years.

Table 2
City of Upland
Historical Water System Deliveries in Acre Feet(1)
Fiscal Year
Ended
June 30
Single
Family
Residential
Customers
Multi-
Family
Residential
Customers
Commercial/
Industrial
Customers
Water Sold
to Other
Agencies Landscape(2) Total
Percentage
Increase/
(Decrease)
2017 9,480 2,891 2,087 545 2,202 17,205 N/A%
2018 9,871 3,028 2,200 573 2,789 18,461 7.30
2019(3) 8,622 2,850 2,024 506 2,612 16,614 (10.00)
2020 9,611 3,034 1,818 515 2,497 17,475 5.18
2021 10,243 2,888 1,822 653 2,869 18,475 5.72

(1) Differences between water deliveries and water supplies set forth under the caption “—Historical Water System Supply” reflect unaccounted for water, including water losses and inaccuracies in water meter readings. (2) Includes recycled water deliveries.
(3) Decrease reflects wet hydrological year.

Source: City.

Historical water deliveries reflect connections to the Water System as well as water demand, which can be affected by weather conditions, State mandates and other factors.

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Historical Water System Connections
The following table shows the number of connections to the Water System for the last five Fiscal Years.

Table 3
City of Upland
Historical Water System Connections
Connection Type
Fiscal Year
2017
Fiscal Year
2018
Fiscal Year
2019
Fiscal Year
2020
Fiscal Year
2021
Single Family Residential 15,180 15,278 15,451 15,594 15,756 Multi-Family Residential 2,067 2,070 2,075 2,084 2,088
Commercial/Industrial 1,349 1,265 1,271 1,276 1,136 Other(1) 485 509 517 520 667
TOTAL 19,081 19,122 19,314 19,474 19,647
Percentage Increase/(Decrease) N/A 0.21% 1.00% 0.83% 0.88%

(1) Includes institutional, government, recycled water and other customers.

Source: City.

Historical Water System Sales Revenues
The following table shows the sales revenues of the Water System for the last five Fiscal Years.

Connection fees are not included in the below numbers.

Table 4
City of Upland
Historical Water System Sales Revenues
Fiscal Year
Ended
June 30
Single
Family
Residential
Customers
Multi-
Family
Residential
Customers
Commercial/
Industrial
Customers
Recycled
Water
Customers Total
Percentage
Increase/
(Decrease)
2017 $16,363,941 $2,228,212 $1,931,764 $45,276 $20,569,193 N/A% 2018 21,819,067 2,956,242 2,473,532 59,982 27,308,823 32.77 2019(1) 20,373,704 2,736,097 2,302,277 55,381 25,467,460 6.74 2020 21,907,764 2,927,779 2,464,167 59,005 27,358,715 7.43 2021 22,827,718 3,025,669 2,550,329 59,773 28,463,489 4.04

(1) Decrease reflects wet hydrological year.

Source: City.

Water System sales revenues reflect water deliveries as well as adopted rates and charges. See the captions “—Historical Water System Deliveries” and “—Water System Rates and Charges.”

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Largest Water System Customers
The following table shows the largest Water System customers (including recycled water customers) for the Fiscal Year ended June 30, 2021, as determined by annual consumption.

Table 5
City of Upland
Ten Largest Water System Customers
Customer Customer Type
Annual
Consumption
(gallons)
Percentage of Total Water
System Consumption
City of Upland Public Agency 294,854,120 4.8%
Upland Development LLC Apartments 146,222,032 2.4 Upland Unified School District Public Agency 126,229,488 2.1 Mountain View Land Co Industrial 79,652,276 1.3 San Antonio Community Hospital Hospital 50,209,500 0.8 Upland Hills Estates Homeowners Association
Homeowners
Association 46,764,960 0.8
Upland Hills CC COA Golf Course 39,942,452 0.7
State of California Department of Transportation Public Agency 31,903,696 0.5 Upland Meadows Management Co LP
Mobilehome
Park 27,607,184 0.5
College Park Apartment Homes Apartments 26,215,156 0.4 Total 869,600,864 14.3%

Source: City.

Water System Rates and Charges
General. The Water System’s rates and charges are set by the City Council and are not subject to the jurisdiction of, or regulation by, the California Public Utilities Commission or any other regulatory body. The City is, however, required to comply with the notice, hearing and majority protest provisions of Article XIIID of the State Constitution, which is popularly known as Proposition 218, as to Water System rates and charges.

See the caption “CONSTITUTIONAL LIMITATIONS ON APPROPRIATIONS AND CHARGES — Proposition 218” for further information with respect to Proposition 218.

The City annually determines the adequacy of the charge structure for water service in the service area after full consideration of expected operations, maintenance, capital costs and capital repayment obligations of the Water System. The City Council sets water rates and charges at a level that it determines is sufficient to pay all Maintenance and Operation Costs of the Water System, to make debt service payments and to maintain appropriate reserves for the Water System.

On November 22, 2021, the City Council adopted rates effective December 1, 2021 (the “Rate Plan”) in accordance with the provisions of Proposition 218. The adopted Rate Plan remains in place as of the date hereof. There can be no assurance that the City Council will not repeal or modify the rates that are set forth in the Rate Plan in the future or that the City’s ratepayers will not approve an initiative to repeal or modify any increase in water rates and charges approved by the City Council.

The projected operating results which are set forth under the caption “FINANCIAL INFORMATION— Projected Operating Results and Debt Service Coverage” assume Water System rate increases of approximately

4.5% per annum in Fiscal Years 2023, 2025 and 2026 which have not yet been approved, with no rate increase projected for Fiscal Year 2024. There can be no assurance that Water System rates will be increased as projected

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herein. In the event that the City Council does not adopt such rate increase as currently contemplated, Water System operating results could be materially different from the projections in this Official Statement.

The City is subject to certain covenants which require the City to set Water System rates and charges in amounts that it expects to be sufficient to pay the 2022 Installment Payments from Net Revenues. See the caption “SECURITY FOR THE BONDS—Rate Covenant.”
Adopted Rates and Charges. The City’s water rates and charges include: (1) a commodity rate; and (2) a fixed monthly charge.
(1) Commodity Rates. The City imposes commodity rates for single family residential customers on a tiered basis per hundred cubic feet of water (“HCF”) used in each billing cycle. The first tier (0-20 HCF per monthly billing cycle for single family residential customers) generally reflects indoor use, the second tier (21-50 HCF per monthly billing cycle for single family residential customers) generally reflects outdoor use, while the third tier (51+ HCF per monthly billing cycle for single family residential customers) generally reflect inefficient water use. Commodity rates for other customers are imposed on a non-tiered per-HCF basis. Current commodity rates are set forth below.

Table 6
City of Upland
Water Commodity Rates per HCF
Water Use Type Rate
Single Family Residential First Tier $2.07
Single Family Residential Second Tier 2.73
Single Family Residential Third Tier 3.26
Multi-family Residential 2.54
Landscape 2.81
Commercial 2.44
School 2.97
Government 3.09
Recycled 2.25

Source: City.

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(2) Fixed Monthly Charge. The City imposes the following fixed monthly water service charges based on water meter size:

Table 7
City of Upland
Fixed Monthly Water Service Charges
Meter Size Monthly Charge
5/8” $ 57.85
3/4” 73.30
1” 104.20

1.5” 181.50
2” 274.20
3” 521.50
4” 799.75
6” 1,572.55
8” 2.499.95

Source: City.

Connection Fees. The City charges a connection fee to customers for connecting to the Water System.

Current connection fees are as follows:

City of Upland
Water System Connection Fees
Meter Size Connection Fee
5/8” $ 213
3/4” 243
1” 309

1.5” 647
2” turbine 1,594
2” compound 2,639
3” 3,260
4” 4,958

Source: City.

Comparison to Nearby Service Providers. The table below sets forth a comparison of the City’s typical water bill for a single family residential user to those of certain nearby water purveyors.

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Table 8
City of Upland
Water Rate Comparison
Service Provider Monthly Charge(1)
Golden State Water Company (City of San Dimas; City of Claremont) $92.60 Fontana Water Company (City of Fontana) 82.98
City of Chino Hills (zone average) 81.70
Monte Vista Water District (budget based) 76.10
City of Chino 74.62
City of Ontario 71.50
City of Upland 69.64
Jurupa Community Services District 69.10
City of Pomona 66.65
Cucamonga Valley Water District 58.48
City of Corona 53.10

(1) Based on 18 units of water use and 5/8” meter size.

Source: City.

Water System Collection Procedures
The City is on an alternating bi-monthly billing cycle for Water System and sanitation customers. A consolidated bill which includes one billing cycle of water charges and the following month’s sanitation charges is sent to customers every month for services rendered in the prior two months. Accounts that remain unpaid after the due date do not currently incur a penalty since the onset of the COVID-19 pandemic. However, the following billing statement includes past due balances. Since the onset of the COVID-19 pandemic, the City is also not shutting off water service due to nonpayment. Beginning in June 2022, the City intends to send notices to delinquent customers requiring payment of past due amounts within 30 days, and to initiate property lien procedures with respect to such customers through the County thereafter.

As of June 30, 2021, less than 2.5% of the City’s Water System customers are delinquent in the payment of their bills. The higher delinquencies are likely the result of the COVID-19 outbreak and the suspension of water shutoffs during the outbreak. This figure reflects an aging report and reflects the total of all bills not paid during prior Fiscal Years, including amounts shown as delinquent prior to the COVID-19 outbreak, and includes delinquent sanitation amounts. The City reports that most customers pay their bills in full, including late charges, prior to shutoff.

See the caption “THE CITY—COVID-19 Outbreak” for a discussion of the suspension of the imposition of late payment penalties and water shutoffs for delinquent accounts. As a result of the foregoing actions, the City has written off the collection of approximately $195,330 in late fees for delinquent Water System accounts that would otherwise have accrued between March 18, 2020 and June 30, 2021. Considering the continuing potential impacts of the pandemic, the City anticipates that its allowance for the write-off of uncollectible accounts for Fiscal Year 2022 will be similar to Fiscal Year 2021, or approximately $200,000, representing less than 1% of projected Gross Revenues.

Future Water System Improvements
The City projects total capital improvements to the Water System of approximately $19.5 million during calendar years 2022 through 2025, including the 2022 Project (as discussed under the caption “THE 2022 PROJECT”) and other improvements as detailed below.

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City of Upland
Water System Projected Capital Improvements
Improvement Category
Calendar
Year 2022
Calendar
Year 2023
Calendar
Year 2024
Calendar
Year 2025 Total
Water Main Improvements $3,300,000 $3,400,000 $3,400,000 $3,400,000 $13,500,000 Recycled Water Main
Improvements 25,000 25,000 25,000 25,000 100,000
Pressure Reducing Valves 25,000 25,000 25,000 25,000 100,000 Storage 200,000 200,000 200,000 200,000 800,000
Well Facilities 500,000 500,000 500,000 500,000 2,000,000 Generators 250,000 250,000 250,000 250,000 1,000,000
Miscellaneous 500,000 500,000 500,000 500,000 2,000,000 TOTAL $4,800,000 $4,900,000 $4,900,000 $4,900,000 $19,500,000

Source: City.

Such capital improvements are expected to be financed by a combination of the Bonds, the 2019 SWRCB Agreement, Water System reserves and Revenues remaining after the payment of debt service on the Bonds. Other than the Bonds, the City does not currently anticipate that it will issue Additional Bonds or Contracts to finance such capital improvements.

Projected Water System Supply
The following table shows the sources of supply for the Water System that are projected by the City for the current and next four Fiscal Years.

Table 9
City of Upland
Projected Water Supply in Acre Feet
Fiscal Year
Ending
June 30
Imported
Water
Local
Water(1)
Recycled
Water Total
Percentage
Increase/
(Decrease)
2022 5,500 14,000 703 20,203 4.72%
2023 5,500 14,500 703 20,703 2.47
2024 5,500 15,100 703 21,303 2.90
2025 5,500 15,740 703 21,943 3.00
2026 5,500 16,400 703 22,603 3.01

(1) Includes groundwater and surface water supplies. See the caption “—Water Supply.” Source: City.

Projected Water System Deliveries
The following table shows potable and recycled deliveries to Water System customers that are projected by the City for the current and next four Fiscal Years.

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Table 10
City of Upland
Projected Water System Deliveries in Acre Feet
Fiscal Year
Ending
June 30
Single
Family
Residential
Customers
Multi-
Family
Residential
Customers
Commercial/
Industrial
Customers
Water Sold
to Other
Agencies Landscape(1) Total
Percentage
Increase/
(Decrease)
2022 10,345 2,917 1,840 660 2,898 18,660 1.00%
2023 10,448 2,946 1,858 667 2,927 18,847 1.00
2024 10,553 2,976 1,877 673 2,956 19,035 1.00
2025 10,658 3,006 1,898 680 2,986 19,228 1.00
2026 10,765 3,036 1,915 _687 3,016 19,419 1.00

(1) Includes recycled water deliveries.

Source: City.

Water System deliveries can be affected by a number of factors, including connections to the Water System, State mandates and weather conditions. See the caption “—Projected Water System Connections” below.

Projected Water System Connections
The following table shows the number of retail connections to the Water System that are projected by the City for the current and next four Fiscal Years.

Table 11
City of Upland
Projected Water System Connections
Connection Type
Fiscal Year
2022
Fiscal Year
2023
Fiscal Year
2024
Fiscal Year
2025
Fiscal Year
2026
Single Family Residential 15,756 15,756 15,756 15,756 15,756 Multi-Family Residential 2,088 2,088 2,088 2,088 2,088
Commercial/Industrial 1,136 1,136 1,136 1,136 1,136 Other(1) 667 667 667 667 667
TOTAL 19,647 19,647 19,647 19,647 19,647
Percentage Increase/(Decrease) 0.00% 0.00% 0.00% 0.00% 0.00%

(1) Includes institutional, government, recycled water and other customers.

Source: City.

Projected Water System Sales Revenues
The following table shows the sales revenues of the Water System that are projected by the City for the current and next four Fiscal Years. The projections: (i) are based on the increases in projected water deliveries that are described under the caption “—Projected Water System Deliveries;” and (ii) assume Water System rate increases of approximately 4.5% per annum in Fiscal Years 2023, 2025 and 2026 which have not yet been approved, with no rate increase projected for Fiscal Year 2024. All rate increases are subject to the notice, hearing and protest provisions of Proposition 218, and there can be no assurance that rate increases which are projected herein will be approved. See the caption “CONSTITUTIONAL LIMITATIONS ON APPROPRIATIONS AND CHARGES—Proposition 218.”

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Table 12
City of Upland
Projected Water System Sales Revenues
Fiscal Year
Ending
June 30
Single
Family
Residential
Customers
Multi-
Family
Residential
Customers
Commercial/
Industrial
Customers
Recycled
Water
Customers Total
Percentage
Increase/
(Decrease)
2022 $23,854,965 $3,161,824 $2,665,093 $62,463 $29,744,346 4.50% 2023 24,928,439 3,304,106 2,785,023 65,274 31,082,842 4.50 2024 24,928,439 3,304,106 2,785,023 65,274 31,082,842 0.00 2025 26,050,219 3,452,791 2,910,349 68,211 32,481,570 4.50 2026 27,222,479 3,608,167 3,041,314 71,281 33,943,241 4.50

Source: City.

FINANCIAL INFORMATION
Available Cash
As of December 31, 2021, the Water System had approximately $20 million in available cash and investments, reflecting the application of approximately $9.1 million in reserves in December 2021 to pay down the Water Fund’s portion of the City’s unfunded accrued liability with respect to its Miscellaneous pension plan.

See the caption “—Employee Benefits—Pension Obligations.” Shortly after the issuance of the Bonds, the City also expects to apply an additional amount (currently estimated at approximately $15,500,000) of available Water System cash to make an interfund loan to the City’s General Fund. The loan will be structured as the Water System’s purchase of a lease revenue bond which will be repaid from the General Fund. The City expects to use the loaned proceeds to pay down an additional amount of the General Fund’s portion of the City’s unfunded accrued liability with respect to its Miscellaneous pension plan. The General Fund will repay the obligation over a 15-year period at an interest rate that matches the interest rate on the Bonds.

Historical Operating Results and Debt Service Coverage
The following table is a summary of operating results of the Water System for the last five Fiscal Years.

These results have been derived from the audited financial statements of the City but exclude certain receipts which are not included as Gross Revenues under the Installment Purchase Agreement and certain non-cash items and include certain other adjustments.

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Table 13
City of Upland
Historical Operating Results and Debt Service Coverage
Fiscal Year Ended June 30
2017 2018 2019 2020 2021
Gross Revenues
Charges for Services(1) $ 20,569,193 $ 27,308,823 $ 25,467,460 $ 27,358,715 $ 28,463,489 Licenses and Permits 553,617 486,581 422,174 611,690 690,512 Investment Income 80,600 195,469 372,907 613,802 21,210 Share of Joint Venture Net Income(2) (496,491) 1,161,497 375,646 1,919,880 1,908,828 Other(3) 393,027 280,932 313,941 177,040 316,661 Total Gross Revenues $ 21,099,946 $ 29,433,302 $ 26,952,128 $ 30,681,127 $ 31,400,700

Maintenance and Operation Costs
Administrative Costs $ 1,779,949 $ 4,194,768 $ 3,398,269 $ 4,696,293 $ 4,272,513 Maintenance and Operations 11,408,833 13,938,926 15,460,201 14,666,783 17,355,663 Contractual Services 1,438,077 194,581 172,259 185,502 238,650 Customer Service 974,440 651,542 659,800 215,732 170,209 Total Maintenance and Operation Costs $ 15,601,299 $ 18,979,817 $ 19,690,529 $ 19,764,310 $ 22,037,035

Net Revenues $ 5,498,647 $ 10,453,485 $ 7,261,599 $ 10,916,817 $ 9,363,665

Debt Service
2011 Bonds $ 1,210,075 $ 717,750 $ 720,550 $ 716,150 $ 716,250 2019 SWRCB Agreement(4) - - - _- - Total Debt Service $ 1,210,075 $ 717,750 $ 720,550 $ 716,150 $ 716,250

Debt Service Coverage 4.54 14.56 10.08 15.24 13.07

Remaining Revenues $ 4,288,572 $ 9,735,735 $ 6,541,049 $ 10,200,667 $ 8,647,415

(1) Increase in Fiscal Year 2018 reflects a combination of hydrological factors, the termination of Statewide conservation restrictions (as discussed under the caption “THE WATER SYSTEM—Drought Declarations”) as well as rate increases in May 2018. (2) Fiscal Year 2017 loss reflects [investment in capital facilities by WECWC and SAWCO]. See the caption “—Water Supply.” (3) Includes gains and losses from disposal of assets and other miscellaneous revenues. (4) Repayment of this obligation is expected to commence in 2024. See the caption “THE CITY—Outstanding Parity Obligations—2019 SWRCB Agreement.”
Source: City.

Projected Operating Results and Debt Service Coverage
Estimated projected operating results for the Water System for the current and next four Fiscal Years, reflecting certain significant assumptions concerning future events and circumstances (including those set forth in the footnotes to the table and the projected impacts of the COVID-19 pandemic as discussed under the caption “THE CITY—COVID-19 Outbreak”), are set forth below. All of such assumptions are material in the development of the City’s financial projections, and variations in the assumptions may produce substantially different financial results. Actual operating results achieved during the projection period may vary from those presented in the forecast and such variations may be material.

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Table 14
City of Upland
Projected Operating Results and Debt Service Coverage
Fiscal Year Ending June 30
2022(1) 2023 2024 2025 2026
Gross Revenues
Charges for Services(2) $ 29,744,346 $ 31,082,842 $ 31,082,842 $ 32,481,570 $ 33,943,241 Licenses and Permits(3) 704,322 718,408 732,776 747,432 762,381 Investment Income(4) 21,634 22,067 22,508 22,958 23,417 Share of Joint Venture Net Income(5) 1,947,005 1,985,945 2,025,664 2,066,177 2,107,501 Other(6)* 322,994 940,004 1,551,093 1,556,064 1,559,669 Total Gross Revenues $ 32,740,301 $ 34,749,266 $ 35,414,883 $ 36,874,201 $ 38,396,209

Maintenance and Operation Costs
Administrative Costs(7) $ 4,357,963 $ 3,667,634 $ 3,709,155 $ 3,747,020 $ 3,804,007 Maintenance and Operations(8) 18,136,668 18,952,818 19,805,695 20,696,951 21,628,314 Contractual Services(9) 243,423 248,291 253,257 258,322 263,488 Customer Service(10) 173,613 177,085 180,627 184,240 187,925 Total Maintenance and Operation Costs $ 22,911,667 $ 23,045,828 $ 23,948,734 $ 24,886,533 $ 25,883,734

Net Revenues $ 9,828,634 $ 11,703,438 $ 11,466,149 $ 11,987,668 $ 12,512,475

Debt Service
2011 Bonds(11) $ 559,325 $ - $ - $ - $ -
2019 SWRCB Agreement(12) - - 726,632 726,632 726,632
2021 Bonds 45,598 123,108 122,733 653,345 706,480
2022 Bonds* - 610,550 1,215,050 1,213,300 1,210,050 Total Debt Service* $ 604,923 $ 733,658 $ 2,064,415 $ 2,593,277 $ 2,643,162

Debt Service Coverage* 16.25 15.95 5.55 4.62 4.73

Remaining Revenues* $ 9,223,711 $ 10,969,780 $ 9,401,734 $ 9,394,391 $ 9,869,313

(1) Reflects budgeted amounts with certain adjustments. (2) Includes projected revenues from commodity rates and fixed monthly charges. Assumes rate increases of approximately 4.5% per annum in Fiscal Years 2023, 2025 and 2026 which have not yet been approved, with no rate increase projected for Fiscal Year 2024. All rate increases are subject to the notice, hearing and protest provisions of Proposition 218, and there can be no a ssurance that the rate increases which are projected herein will be approved. See the caption “CONSTITUTIONAL LIMITATIONS ON APPROPRIATIONS AND CHARGES — Proposition 218.”
(3) Projected to increase by approximately 2% per annum. (4) Projected to increase by approximately 2% per annum. (5) Projected to increase by approximately 2% per annum. (6) Projected to increase by approximately 2% per annum. Includes revenues from projected repayment by the City’s General Fund of an interfund loan beginning in Fiscal Year 2023. See the caption “—Available Cash.” (7) Projected to increase by approximately 2% per annum. Reflects projected annual savings resulting from an additional discretionary payment of the Water Fund’s portion of the unfunded accrued liability for the City’s Miscellaneous pension plan on December 21, 2021. Such savings are projected in the amounts of $777,488, $824,869, $877,684 and $913,191 in Fiscal Years 2023 through 2026, respectively. See the caption “—Employee Benefits—Water System UAL Allocation.”
(8) Includes costs of imported water purchases. Projected to increase by approximately 4.5% per annum. (9) Projected to increase by approximately 2% per annum. (10) Projected to increase by approximately 2% per annum. (11) These obligations were refunded from proceeds of the 2021 Bonds. (12) Assumes borrowing of full available principal amount of $16,500,000. See the caption “THE CITY—Outstanding Parity Obligations—2019 SWRCB Agreement.”
Source: City.

Employee Benefits
Pension Obligations.

General. The following information is primarily derived from the City’s most recent actuarial report dated June 30, 2020, which has been produced by the California Public Employees Retirement System (“CalPERS”), its staff, independent accountants and actuaries. Actuarial assessments are “forward-looking”

* Preliminary, subject to change.

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statements that reflect the judgment of the fiduciaries of the pension plans, and are based upon a variety of assumptions, one or more of which may not materialize or be changed in the future. The City has not independently verified such information and neither makes any representations nor expresses any opinion as to the accuracy of the information that has been provided by CalPERS.

The City participates in a Miscellaneous Plan, Safety Police Plan and Fire Safety Plan, each of which is administered by CalPERS, to fund pension benefits for current employees and retirees. The Miscellaneous Plan includes all employees who work on behalf of the Water System.

CalPERS administers an agent multiple-employer public employee defined benefit pension plan for all of the City’s full-time and certain part-time employees. CalPERS provides retirement, disability and death benefits to plan members and beneficiaries and acts as a common investment and administrative agent for participating public entities within the State, including the City. CalPERS plan benefit provisions and all other requirements are established by State statute and approved by the City Council.

City employees are subject to different benefit levels based on their hire date. Benefit provisions for current City employees are set forth below.

City of Upland
CalPERS Miscellaneous Pension Plan – Summary of Benefit Provisions Employees Hired Before
January 1, 2013 (First Tier – Classic)
Employees Hired On and After
January 1, 2013 (PEPRA Tier)
Benefit Formula 2.5% @ age 55 2.0% @ age 62
Benefit Vesting 5 years of service 5 years of service
Benefit Payments Monthly for life Monthly for life
Retirement Age 50-63 52-67
Monthly Benefits
(as % of Salary)
Varies depending upon years of
service
Varies depending upon years of
service
Employee Paid Matching
Contribution Rate

8.0%(1) 7.25%(2)

(1) Classic employees who were hired after January 1, 2020 are also required to pay a 1.4% portion of the City’s (employer) share of Normal Costs, resulting in a total 9.4% contribution toward Normal Costs. (2) PEPRA employees who were hired on and after January 1, 2013 and who were not previously CalPERS members are required to make the full employee contribution themselves. Such employees must pay 50% of the Normal Cost rate (including employee and employer contributions), as detailed below under the subcaption “—Assembly Bill 340 (AB 340) – California Public Employees’ Pension Reform Act of 2013 (PEPRA).”
Source: City.

Pension benefits are funded in part by employee contributions and in part by City contributions.

Assembly Bill 340 (AB 340) – California Public Employees’ Pension Reform Act of 2013 (PEPRA). California Public Employees’ Pension Reform Act of 2013 (“PEPRA”), which was signed by the State Governor on September 12, 2012, establishes a new pension benefits for employees who were hired on and after January 1, 2013 who were not previously CalPERS members or who have left employment with a CalPERS agency for more than 6 months. Employees hired prior to January 1, 2013 and have remained under continuous employment with a CalPERS agency are considered “Classic” employees.

PEPRA adjusted the benefit formulas, required employee contributions, calculations of benefits and maximum pay, as well as other benefits. PEPRA employees receive a 2.0% at age 62 formula for Miscellaneous Plan employees. Employees are required to pay 50% of the total (annual) normal cost rate. PEPRA employees are required to make the full amount of required employee contributions themselves. Benefits for such employees are calculated on the highest average annual compensation over a consecutive 36-month period. In

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addition, retroactive benefits increases, contribution holidays, and purchases of additional non-qualified service credit are also prohibited.

PEPRA also capped pensionable income as noted below. Maximum amounts are set annually, subject to adjustment in accord with the Consumer Price Index.

City of Upland
Pensionable Income Caps for 2022 (PEPRA and Non-PEPRA Employees)

Before January 1, 2013
(Non-PEPRA Employees)
After January 1, 2013
(PEPRA Employees)
Maximum Pensionable Income $305,000 $161,969
Maximum Pensionable Income if
also Participating in Social Security N/A 134,974

Source: CalPERS – Payroll Circular Letter January 3, 2022.

Additional employee contributions, limits on pensionable compensation and higher retirement ages for new members as a result of the passage of PEPRA are expected to reduce the City’s unfunded pension lability and potentially reduce City pension contribution levels in the long term.

CalPERS Actuarial Reports. CalPERS generates actuarial reports for the City’s pension plans.

The actuarial report for the Miscellaneous Plan incorporates both the Classic and PEPRA plans. The most recent actuarial valuation performed by CalPERS was on June 30, 2020.

There is a two-year lag between the valuation date and the start of the required pension contributions in the reports. The unfunded accrued liability (the “UAL”) of the Miscellaneous Plan was determined in the June 30, 2020 actuarial valuation, but the corresponding UAL payments commence two years after the valuation date in Fiscal Year 2023. This two-year lag is necessary due to the amount of time needed to extract and test the membership and financial data and the need to provide public agencies with their required employer contributions well in advance of the start of each Fiscal Year.

The CalPERS website contains the City’s most recent actuarial valuation reports and other information that concerns benefits and other administrative matters. The comprehensive annual financial reports of CalPERS are also available on CalPERS’ Internet website at www.calpers.ca.gov . The textual reference to such Internet website is provided for convenience only. None of the information on such Internet website is incorporated by reference herein. The City cannot guarantee the accuracy of such information.

Annual CalPERS Contributions. The City is required to contribute the actuarially determined amounts necessary to fund benefits for its members. Employer contribution rates for all public employers are determined on an annual basis by the CalPERS actuary and are effective on July 1 following the notice of a change in the rate. Total plan contributions are determined through the CalPERS annual actuarial valuation process. The required employer contribution is comprised of a Normal Cost component and a component equal to an amortized amount of the annual UAL payment.

The Normal Cost is the annual cost of service earned by active employees for the upcoming Fiscal Year, which is expressed as a percentage of payroll. The annual UAL payment is the amortized dollar amount needed to fund past service credit earned (or accrued) for: (i) members who are currently receiving benefits; (ii) active members; and (iii) members who are entitled to deferred benefits as of the valuation date. The UAL is a fixed dollar annual payment, billed monthly. All CalPERS agencies have the option to “pre-pay” the required monthly UAL payments up-front in July to receive an approximately 3.5% discount. The City takes advantage of this “pre-pay” option each year. The City’s required pension contributions to CalPERS fluctuate each year.

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Normal Costs. The employer normal cost contributions are based on a percentage of payroll.

Actual Normal Cost contributions are based on the employer contribution rate for each pension plan and the actual payroll for employees covered under each plan.

The Normal Cost contribution for Fiscal Year 2023 is summarized in the table below and is based on projected payroll estimated by CalPERS.

City of Upland
CalPERS Miscellaneous Pension Plan – Fiscal Year 2023 Normal Cost Contribution as a Percentage of Payroll
Total Normal Cost Rate(1) 18.67%
Employee Contribution Rate(2) 7.71%
Employer Contribution Rate 10.96%
Projected Payroll $9,896,446
Employer Normal Costs Contribution $1,084,650

(1) The Normal Cost is a blended rate for the Classic and PEPRA groups in the City’s Miscellaneous Plan. A breakout of Normal Cost by each benefit group is set forth under the heading “Normal Cost by Benefit Group” in the “Liabilities and Contributions” section of each actuarial report.
(2) Does not reflect the portion of the Normal Costs paid by City employees. Classic Miscellaneous Plan employees hired after January 1, 2020 pay 1.4% of the employer share of Normal Costs, resulting in a total 9.4% contribution toward Normal Costs, while PEPRA Miscellaneous Plan employees must pay 50% of the Normal Cost rate (including employee and employer contributions), as detailed above under the subcaption “—Assembly Bill 340 (AB 340) – California Public Employees’ Pension Reform Act of 2013 (PEPRA).”
Source: CalPERS Actuarial Valuation as of June 30, 2020.

Unfunded Accrued Liability. Beginning in Fiscal Year 2016, CalPERS began collecting employer contributions toward a pension plan’s UAL as dollar amounts instead of the prior method of a percentage of payroll. According to CalPERS, this change was intended to address potential funding issues that could arise from a declining payroll or a reduction in the number of active members in the plan. Funding the unfunded liability as a percentage of payroll could lead to underfunding of pension plans. Due to stakeholder feedback regarding internal needs for total contributions expressed as an estimated percentage of payroll, the CalPERS reports include such results in the contribution projection for informational purposes only.

Contributions toward a pension plan’s unfunded liability will continue to be collected as set dollar amounts.

City of Upland
CalPERS Miscellaneous Pension Plan – Unfunded Accrued Liability as of June 30, 2020 Accrued Liability $141,047,435
Market Value of Assets 95,249,032
Unfunded Accrued Liability $ 45,798,403
Funded Ratio 67.5%

Source: CalPERS Actuarial Valuation as of June 30, 2020.

The UAL is comprised of a series of Amortization Bases. The Miscellaneous Plan has 27 amortization bases. Each amortization base has as stated balance/(credit), amortization period and discount and escalation rate, which results in an individual amortization schedule.

Recent Changes in Actuarial Assumptions. The CalPERS Board of Administration has adjusted certain assumptions used in the CalPERS actuarial valuations, which adjustments may impact the City’s required contributions in future years. Accordingly, the City’s required contributions to CalPERS in future years may significantly increase (or otherwise vary) from any past or current projected levels of contributions.

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Investment Performance. CalPERS earnings for Fiscal Years 2010 through 2021 are varied:

13.3%, 21.7%, 0.1%, 13.2%, 18.4%, 2.4%, 0.6%, 11.2%, 8.6%, 6.7%, 4.7%, and 21.3% respectively. Future earnings performance may increase or decrease future contribution rates for each plan. CalPERS reported a

21.3% return for the Fiscal Year ended June 30, 2021; as a result, the City is expected to receive a significant credit toward its UAL.

Change in Discount Rate. On December 21, 2016, the CalPERS Board of Administration voted to lower its discount rate from the current rate of 7.50% to 7.00% over a three-year period. The change was reflected in the June 30, 2016 actuarial report, which lowered the discount rate from 7.50% to 7.375%, in the June 30, 2017 actuarial report, which lowered the discount rate from 7.375% to 7.25%, and in the June 30, 2018 actuarial report, which lowered the discount rate from 7.25% to 7.00%. CalPERS recorded a 21.3% return for the Fiscal Year ended June 30, 2021. The excess return (14.2%) above the discount rate of 7.00%, automatically triggered a reduction in the discount rate to 6.80% in accordance with the CalPERS Funding Risk Mitigation Policy. CalPERS has not announced any plans to further reduce the discount rate at this time.

Change in Assumptions. Under the Public Employees’ Retirement Law, an experience study to review economic and demographic assumptions is required at least every four years. The prior experience study was conducted in 2017. On November 17, 2021 the CalPERS Board of Administration met to review CalPERS asset allocation and to take into consideration changes to CalPERS current actuarial and demographic assumptions.

Many demographic and actuarial assumptions were changed, the most notable of which were a reduction of the price inflator from 2.50% to 2.30% and an increase in the wage inflator from 2.75% to 2.80%. As a result of these changes, the CalPERS Asset Liability Management Committee maintained the required real rate of return at 4.50%. The result of these changes in assumptions, when combined with the investment credit for the

21.3% investment return, is a significant net “credit” toward the UAL. All newly adopted assumptions will be implemented in the June 30, 2021 actuarial valuation, setting contribution requirements for Fiscal Year 2023, which is expected to be released in late August 2022.

COVID-19. It is possible that CalPERS’ earnings will be reduced in Fiscal Year 2022 or later Fiscal Years as a result of stock market declines in the wake of the COVID-19 outbreak, which could increase future contribution rates for plan participants, including the City. See the caption “THE CITY—COVID-19 Outbreak.”
The following information has been derived from the City’s audited financial statements. This information has been produced by CalPERS, its independent accountants and its actuaries for the purposes of GASB 68 reporting. The financial figures reported in the audited financial statements are different from the CalPERS actuarial reports. The City has not attempted to reconcile the difference between the pension figures used for GASB 68 reporting requirements and the information provided in the most recent June 30, 2020 CalPERS actuarial report.

GASB 68. Accounting and financial reporting by state and local government employers for defined benefit pension plans is governed by Governmental Accounting Standards Board (“GASB”) Statement No. 68 (“GASB 68”). GASB 68 governs the accounting treatment of defined benefit pension plans, including how expenses and liabilities are calculated and reported by state and local government employers in their financial statements. GASB 68 includes the following components: (i) unfunded pension liabilities are included on the employer’s balance sheet; (ii) pension expense incorporates rapid recognition of actuarial experience and investment returns and is not based on the employer’s actual contribution amounts; (iii) lower actuarial discount rates are required to be used for underfunded plans in certain cases for purposes of the financial statements; (iv) closed amortization periods for unfunded liabilities are required to be used for certain purposes of the financial statements; and (v) the difference between expected and actual investment returns will be recognized over a closed five-year smoothing period. GASB 68 affects the City’s accounting reporting and disclosure requirements, but it does not change the City’s pension plan funding obligations.

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A summary of principal assumptions and methods used to determine the total pension liability for Fiscal Year 2021 is shown below.

City of Upland
Actuarial Assumptions for CalPERS Miscellaneous Pension Plan Actuarial Cost Method Entry Age Normal in accordance with the requirements of GASB 68 Asset Valuation Method Market Value of Assets
Actuarial Assumptions:

Discount Rate 7.15%
Inflation 2.75%
Salary Increases Varies depending upon years of service, age and employment type Investment Rate of Return 7.15% net of pension plan investment and administrative expenses; includes projected inflation rate of 2.50%
Mortality Rate Table(1) Derived using CalPERS’ membership data for all funds

(1) The mortality table used was developed based on CalPERS-specific data. The table includes 15 years of mortality improvements using Society of Actuaries Scale 90% of Scale MP 2016.

Source: City.

The City’s net pension liability was recorded in the City’s most recent audited financial statements for the Fiscal Year ended June 30, 2021. The table below presents the net pension liability of the City’s UAL calculated using the discount rate of 7.15% and other GASB 68 assumptions listed in the prior table.

City of Upland
Changes in CalPERS Miscellaneous Pension Plan Net Pension Liability Increase / (Decrease)

Total
Pension Liability
Plan Fiduciary
Net Position
Net Pension
Liability / (Asset)
Balance at June 30, 2019 $134,227,077 $93,733,090 $40,493,987 Balance at June 30, 2020 137,564,842 95,534,898 42,029,944 Net Changes for period
from July 1, 2019 through
June 30, 2020
$ 3,337,765 $ 1,801,808 $ 1,535,957

Source: City.

Water System UAL Allocation. The City’s Fiscal Year 2021 audited financial statements recorded the Water Fund’s share of the UAL as $9,090,983, which is allocated fully to the Miscellaneous Plan and constitutes approximately 7.1% of the total UAL of $127,706,516.

The Water Fund’s share of the City’s pension obligations constitutes a Maintenance and Operation Cost of the Water System and is payable prior to the 2022 Installment Payments.

On December 21, 2021, the City paid the Water Fund’s and Wastewater Fund’s current share of the UAL in full from available reserves by sending an additional discretionary payment (the “ADP”) to CalPERS in the amount of $15,255,448. The payoff of the Water Fund’s share of the UAL ($9,090,983) resulted in an estimated $19.6 million in UAL savings over the next 26 years. The City also sent CalPERS an additional ADP in the amount of $10,000,000 from its Pension Stabilization Fund on December 23, 2021. As discussed under the caption “—Available Cash,” the City also expects to apply approximately $15,500,000 of available Water System cash to pay down an additional portion of the UAL shortly after the issuance of the Bonds.

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Future changes in funding policies and assumptions may result in an increase to the City’s UAL. The Water Fund’s share of any new amortization bases that are added will be approximately 7.1%. Future increases in the City’s UAL could therefore be material to the finances of the Water Fund. No assurance can be provided that such expenses will not increase significantly in the future. See the caption “THE CITY—Governance and Management—Management Policies—Pension Funding Policy” for a discussion of the City’s Pension Funding Policy.

For additional information relating to the City’s CalPERS Pension Plan, see Note 10 to the City’s audited financial statements, set forth in Appendix A.

Other Post-Employment Benefits. The City administers a single-employer defined benefit healthcare plan which provides other post-employment benefits (“OPEB”), including medical insurance benefits, to eligible City retirees and their spouses. As of June 30, 2019, there were 198 active City employees (144 of whom were enrolled in the medical program and 54 of whom were waiving coverage) and 229 retirees receiving medical benefits.

GASB 75. Governmental Accounting Standards Board Statement No. 75 (“GASB 75”) requires governmental agencies that provide OPEB, such as the City, to account for and report such outstanding obligations and commitments in essentially the same manner as for pensions. While the City is required to disclose the unfunded actuarial accrued liability and the annual required contribution (the actuarial value of benefits earned during a Fiscal Year plus costs to amortize the unfunded actuarial accrued liability, or “OPEB ARC”) in its financial statements, GASB 75 does not require the City to fund the OPEB ARC.

GASB 75 requires that a valuation of the City’s post-employment benefit liability include the value of the “implied subsidy” of older retired participants by a younger active workforce in a pooled rate medical plan.

Unlike pension plans, which utilize different assumptions and reporting periods in CalPERS actuarial reports and GASB 68 Reports, resulting in different reported amounts in annual financial reports compared to CalPERS actuarial report, OPEB benefits are reported based on the results of a GASB 75 report.

GASB 75 Report. The City engaged MacLeod Watts (the “Actuary”) to calculate the funding status of the City’s OPEB liability and provide a GASB 75 actuarial report for the Fiscal Year ended June 30, 2021. The results of this report are based on the OPEB liability recorded for a measurement period between June 30, 2019 and June 30, 2020, or a measurement date of June 30, 2020. No benefit changes and no material changes were reported to the Actuary during the measurement period. The report is therefore a roll forward of the valuation performed as of June 30, 2019.

The results of the GASB 75 actuarial report will be incorporated into the City’s audited financial statements for the period ending June 30, 2022. The following is a summary of the report:

As of the measurement date (June 30, 2020), the City’s OPEB plan had a total OPEB liability equal to $14,813,883 and a fiduciary net position (based on the market value of assets) of $1,165,050, resulting in a net OPEB liability of $13,648,833, or a 7.68% funding percentage.

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Changes in the net liability for the City’s post-employment benefit plan were as follows.

City of Upland
Changes in OPEB Plan Liability
Increase/(Decrease)

Total
OPEB Plan
Liability
OPEB Plan
Fiduciary
Net Position
Net OPEB Plan
Liability/(Asset)
Funding
Percentage(1)
Balance at June 30, 2019 $13,050,100 $1,119,235 $11,930,865 8.58% Balance at June 30, 2020 14,813,883 1,165,050 13,648,833 7.86 Net Changes for period
from July 1, 2019 through
June 30, 2020
$ 1,763,783 $ 45,815 $ 1,717,968

(1) The City funds post-employment benefits on a pay-as-you-go basis.

Source: City.

The above values were calculated based upon a blended discount rate of 2.23%, comprised of the 20- year high grade municipal bond rate of 2.21% and the expected long-term trust rate of 5.91%, as of the measurement date of June 30, 2020. The discount rate used to calculate liability in the prior report, dated June 30, 2019, was 3.51%.

Benefit Payments and OPEB Expense. The City’s contributions are made on a pay-as-you-go basis. Total benefit payments were equal to $853,875, which includes $607,181 in benefits paid by the employer and $246,694 in implied subsidy (as discussed above under the subcaption “—GASB 75”), which was as determined by the Actuary. The City recorded a OPEB expense of $738,532, for the period ending June 30, 2021.

Actuarial Determined Contribution (ADC). The City has been prefunding its OPEB liability by contributing 100% or more of the actuarially determined contribution (the “ADC”) each year. The ADC for June 30, 2021 was developed based on the June 30, 2019 actuarial valuation using a 5.91% discount rate. The ADC is comprised of the amortization of the net OPEB liability over a 20-year period, plus the normal costs and the interest accrued during the Fiscal Year. The Total ADC for the Fiscal Year ended June 30,2021 was $880,095.

Water Fund Share of OPEB Liability. On average, the Water System is responsible for approximately 7.1% of the City OPEB contributions, and the City does not expect significant changes in this percentage in the future.

The City’s projections of Maintenance and Operation Costs under the caption “—Projected Operating Results and Debt Service Coverage” do not assume unusual increases in post-employment benefit funding expenses in the future. However, future changes in funding policies and assumptions, including those related to assumed rates of investment return and healthcare cost inflation, could trigger increases in the City’s annual required contributions, and such increases could be material to the finances of the City. No assurance can be provided that such expenses will not increase significantly in the future. The City does not expect that any increased funding of post-employment benefits will have a material adverse effect on the ability of the City to pay the 2022 Installment Payments.

See Note 6 to the City’s audited financial statements set forth in Appendix A for further information with respect to post-employment benefits.

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CONSTITUTIONAL LIMITATIONS ON APPROPRIATIONS AND CHARGES Article XIIIB
Article XIIIB of the State Constitution limits the annual appropriations of the State and of any city, county, school district, authority, special district or other political subdivision of the State to the level of appropriations of the particular governmental entity for the prior fiscal year, as adjusted for changes in the cost of living and population. The “base year” for establishing such appropriation limit is the 1978-79 State fiscal year and the limit is to be adjusted annually to reflect changes in population and consumer prices. Adjustments in the appropriations limit of an entity may also be made if: (a) the financial responsibility for a service is transferred to another public entity or to a private entity; (b) the financial source for the provision of services is transferred from taxes to other revenues; or (c) the voters of the entity approve a change in the limit for a period of time not to exceed four years.

Appropriations that are subject to Article XIIIB generally include the proceeds of taxes levied by or for the State or other entity of local government, exclusive of certain State subventions, refunds of taxes and benefit payments from retirement, unemployment, insurance and disability insurance funds. “Proceeds of taxes” include, but are not limited to, all tax revenues and the proceeds to an entity of government from: (i) regulatory licenses, user charges, and user fees (but only to the extent that such proceeds exceed the cost reasonably borne by the entity in providing the service or regulation); and (ii) the investment of tax revenues. Article XIIIB includes a requirement that if an entity’s revenues in any year exceed the amounts that are permitted to be spent, the excess would have to be returned by revising tax rates or fee schedules over the subsequent two years.

Certain expenditures are excluded from the appropriations limit, including payments of indebtedness that were existing or legally authorized as of January 1, 1979, or of bonded indebtedness thereafter approved by the voters, and payments that are required to comply with court or federal mandates which without discretion require an expenditure for additional services or which unavoidably make the provision of existing services more costly.

The City is of the opinion that its charges for the Water System do not exceed the costs that it reasonably bears in providing such service and therefore are not subject to the limits of Article XIIIB. See the caption “SECURITY FOR THE BONDS—Rate Covenant” for a description of the City’s covenant to set rates and charges for the Water System.

Proposition 218
General. An initiative measure entitled the “Right to Vote on Taxes Act” (the “Initiative”) was approved by the voters of the State at the November 5, 1996 general election. The Initiative added Articles XIIIC and XIIID to the State Constitution. According to the “Title and Summary” of the Initiative prepared by the State Attorney General, the Initiative limits “the authority of local governments to impose taxes and property-related assessments, fees and charges.”
Article XIIID. Article XIIID defines the terms “fee” and “charge” to mean “any levy other than an ad valorem tax, a special tax or an assessment, imposed by an agency upon a parcel or upon a person as an incident of property ownership, including user fees or charges for a property-related service.” A “property-related service” is defined as “a public service having a direct relationship to property ownership.” Article XIIID further provides that reliance by an agency on any parcel map (including an assessor’s parcel map) may be considered a significant factor in determining whether a fee or charge is imposed as an incident of property ownership.

Article XIIID requires that any agency which imposes or increases any property-related fee or charge must provide written notice thereof to the record owner of each identified parcel upon which such fee or charge is to be imposed and must conduct a public hearing with respect thereto. The proposed fee or charge may not be imposed or increased if a majority of owners of the identified parcels file written protests against it. As a

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result, because fees for water service are a “fee” or “charge” as defined in Article XIIID, the local government’s ability to increase such fees or charges may be limited by a majority protest.

In addition, Article XIIID includes a number of limitations that are applicable to existing fees and charges, including provisions to the effect that: (a) revenues that are derived from the fee or charge may not exceed the funds which are required to provide the property-related service; (b) such revenues may not be used for any purpose other than that for which the fee or charge was imposed; (c) the amount of a fee or charge that is imposed upon any parcel or person as an incident of property ownership may not exceed the proportional cost of the service attributable to the parcel; and (d) no such fee or charge may be imposed for a service unless that service is actually used by, or immediately available to, the owner of the property in question. Property-related fees or charges based on potential or future use of a service are not permitted.

Based upon the California Court of Appeal decision in Howard Jarvis Taxpayers Association v. City of Los Angeles, 85 Cal. App. 4th 79 (2000), which was denied review by the State Supreme Court, it was generally believed that Article XIIID did not apply to charges for water and wastewater services that are “primarily based on the amount consumed” (i.e., metered water or wastewater rates), which had been held to be commodity charges related to consumption of the service, not property ownership. The State Supreme Court ruled in Bighorn-Desert View Water Agency v. Verjil, 39 Cal. 4th 205 (2006) (the “Bighorn Case”), however, that fees for ongoing water service through an existing connection were property-related fees and charges. The State Supreme Court specifically disapproved the holding in Howard Jarvis Taxpayers Association v. City of Los Angeles that metered water rates are not subject to Proposition 218. The City complies with the notice, hearing and protest procedures in Article XIIID, as further explained by the State Supreme Court in the Bighorn Case, with respect to the water rate increases.

On April 20, 2015, the California Court of Appeal, Fourth District, issued an opinion in Capistrano Taxpayers Association, Inc. v. City of San Juan Capistrano, 235 Cal. App. 4th 1493 (2015) upholding tiered water rates under Proposition 218 provided that the tiers correspond to the actual cost of furnishing service at a given level of usage. The opinion included a finding that the City of San Juan Capistrano did not attempt to calculate the actual costs of providing water at various tier levels. The City’s water rates, which are described under the caption “THE WATER SYSTEM—Water System Rates and Charges—Adopted Rates and Charges,” include tiered rates. The City worked with an independent rate consultant and legal counsel to prepare a comprehensive administrative record with respect to its tiered rates that the City believes complies with the provisions of Proposition 218. The City believes that its current water rates comply with the requirements of Proposition 218 and expects that any future water rates will comply with Proposition 218’s procedural and substantive requirements to the extent applicable thereto.

Article XIIIC. Article XIIIC provides that the initiative power may not be prohibited or otherwise limited in matters of reducing or repealing any local tax, assessment, fee or charge and that the power of initiative to affect local taxes, assessments, fees and charges is applicable to all local governments. Article XIIIC does not define the terms “local tax,” “assessment,” “fee” or “charge,” so it was unclear whether the definitions set forth in Article XIIID referred to above are applicable to Article XIIIC. Moreover, the provisions of Article XIIIC are not expressly limited to local taxes, assessments, fees and charges imposed after November 6, 1996.

On July 24, 2006, the State Supreme Court held in the Bighorn Case that the provisions of Article XIIIC applied to rates and fees charged for domestic water use. In the decision, the Court noted that the decision did not address whether an initiative to reduce fees and charges could override statutory rate setting obligations.

On August 3, 2020, the State Supreme Court issued an opinion in Wilde v. City of Dunsmuir (9 Cal. 5th 1105 (2020)) holding that taxpayers do not have the right under Proposition 218 to challenge water rates by referendum, and the City does not believe that Article XIIIC grants to the voters within the City the power (whether by initiative under Article XIIIC or otherwise, or by referendum, which is not authorized under Article XIIIC) to repeal or reduce rates and charges for the water service provided by the Water System in a manner which would be inconsistent with the contractual obligations of the City. However, there can be no assurance of the availability of particular remedies adequate to protect the Beneficial Owners of the Bonds. Remedies

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available to Beneficial Owners of the Bonds in the event of a default by the City are dependent upon judicial actions which are often subject to discretion and delay and could prove both expensive and time consuming to obtain. So long as the Bonds are held in book-entry form, DTC (or its nominee) will be the sole registered owner of the Bonds and the rights and remedies of the Bond Owners will be exercised through the procedures of DTC.

Proposition 26
On November 2, 2010, voters in the State approved Proposition 26. Proposition 26 amends Article XIIIC of the State Constitution to expand the definition of “tax” to include “any levy, charge, or exaction of any kind imposed by a local government” except the following: (a) a charge imposed for a specific benefit conferred or privilege granted directly to the payor that is not provided to those not charged, and which does not exceed the reasonable costs to the local government of conferring the benefit or granting the privilege; (b) a charge imposed for a specific government service or product provided directly to the payor that is not provided to those not charged, and which does not exceed the reasonable costs to the local government of providing the service or product; (c) a charge imposed for the reasonable regulatory costs to a local government for issuing licenses and permits, performing investigations, inspections, and audits, enforcing agricultural marketing orders, and the administrative enforcement and adjudication thereof; (d) a charge imposed for entrance to or use of local government property, or the purchase, rental or lease of local government property; (e) a fine, penalty or other monetary charge imposed by the judicial branch of government or a local government as a result of a violation of law; (f) a charge imposed as a condition of property development; and (g) assessments and property-related fees imposed in accordance with the provisions of Article XIIID. Proposition 26 applies to charges imposed or increased after November 2, 2010 and provides that the local government bears the burden of proving by a preponderance of the evidence that a levy, charge, or other exaction is not a tax, that the amount is no more than necessary to cover the reasonable costs of the governmental activity, and that the manner in which those costs are allocated to a payor bear a fair or reasonable relationship to the payor’s burdens on, or benefits received from, the governmental activity. The City believes that its water rates and charges meet the exception that is described in clause (g) above and are not taxes under Proposition 26.

Future Initiatives
Articles XIIIB, XIIIC and XIIID and Proposition 26 were adopted as measures that qualified for the ballot pursuant to the State’s initiative process. From time to time other initiatives could be proposed and adopted affecting the City’s revenues or ability to increase revenues.

CERTAIN RISKS TO BONDHOLDERS
The following information, in addition to the other matters that are described in this Official Statement, should be considered by prospective investors in evaluating the Bonds. However, the following does not purport to be comprehensive, definitive or an exhaustive listing of risks and other considerations that may be relevant to making an investment decision with respect to the Bonds. In addition, the order in which the following information is presented is not intended to reflect the relative importance of any such risks. If any risk factor materializes to a sufficient degree, it alone could delay or preclude payment of principal of or interest on the Bonds.

Limited Obligations
The obligation of the City to pay the 2022 Installment Payments is a limited obligation of the City and is not secured by a legal or equitable pledge or charge or lien upon any property of the City or any of its income or receipts, except Net Revenues of the Water System. The obligation of the City to pay the 2022 Installment Payments does not constitute an obligation of the City to levy or pledge any form of taxation or for which the City has levied or pledged any form of taxation.

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Accuracy of Assumptions
To estimate the Net Revenues available to pay the 2022 Installment Payments, the City has made certain assumptions with regard to various matters, including but not limited to future development within the City and increases in revenues resulting therefrom, the rates and charges to be imposed in future years, the expenses associated with operating the Water System and the interest rate at which funds will be invested. The City believes these assumptions to be reasonable, but to the extent that any of such assumptions fail to materialize, the Net Revenues available to pay the 2022 Installment Payments will, in all likelihood, be less than those projected herein. The City may choose, however, to maintain compliance with the rate covenant that is set forth in the Indenture in part by means of contributions from other available reserves or resources. In such event, Net Revenues may generate amounts which are less than 125% of Debt Service in any given Fiscal Year. See the captions “SECURITY FOR THE BONDS—Rate Covenant,” and “FINANCIAL INFORMATION—Projected Water System Operating Results and Debt Service Coverage.” Water System Demand
There can be no assurance that the demand for Water Service will occur as described in this Official Statement. Reduction in levels of demand could require an increase in rates or charges in order to comply with the rate covenant. See the caption “SECURITY FOR THE BONDS—Rate Covenant.” Demand for Water Service could be reduced or may not occur as projected by the City as a result of reduced levels of development in the City’s service area, hydrological conditions, an economic downturn (including as a result of the COVID- 19 outbreak that is discussed under the caption “THE CITY—COVID-19 Outbreak”), voluntary conservation efforts or mandatory State conservation orders in response to drought conditions and other factors.

System Expenses
There can be no assurance that the City’s expenses will be consistent with the descriptions in this Official Statement. Maintenance and Operation Costs may vary with labor costs (including costs related to pension liabilities and the costs of retaining qualified personnel with the proper certifications to operate Water System treatment and other facilities), water treatment costs, energy costs, regulatory compliance costs, increased imported water purchase costs (including as a result of drought restrictions) and other factors.

Much of the City’s water supply is sold to the City by WFA, which in turn purchases a large portion of its water from IEUA, the source of which is MWD. Increases in IEUA’s or MWD’s costs or changes in such agencies’ operations over which the City has no control could impact the City’s cost of water to supply its customers. See the caption “THE WATER SYSTEM—Water Supply—Imported Water.” In addition, continued drought conditions and State or federal orders in response thereto could increase the cost of water for MWD and/or IEUA, which increases would be expected to be passed on to the City. See the caption “THE WATER SYSTEM—Drought Declarations.” Increases in Maintenance and Operation Costs could require an increase in rates or charges in order to comply with the rate covenant. See the caption “SECURITY FOR THE BONDS—Rate Covenant.” Rate increases are subject to the provisions of Proposition 218 and there can be no assurance that the City will be able to increase rates as needed to address increases in Water System expenses.

See the caption “—Rate-Setting Process under Proposition 218.” Limited Recourse on Default
If the City defaults on its obligation to pay the 2022 Installment Payments, the Trustee, as assignee of the Authority, has the right to declare the total unpaid principal amount of the 2022 Installment Payments, together with the accrued interest thereon, to be immediately due and payable. However, in the event of a default and such acceleration, there can be no assurance that the City will have sufficient funds to pay such accelerated amounts from Net Revenues.

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Rate-Setting Process under Proposition 218
Proposition 218, which added Articles XIIIC and XIIID to the State Constitution, affects the City’s ability to maintain existing Water System rates and impose rate increases, and no assurance can be given that future proposals to increase Water System rates will not encounter majority protest opposition or be challenged by initiative action authorized under Proposition 218. In the event that future proposed Water System rate increases cannot be imposed as a result of majority protest or initiative, the City might thereafter be unable to generate Net Revenues in the amounts required by the Installment Purchase Agreement to pay the 2022 Installment Payments. The City believes that its current Water System rates approved by the City Council were effected in accordance with the public hearing and majority protest provisions of Proposition 218. See the caption “CONSTITUTIONAL LIMITATIONS ON APPROPRIATIONS AND CHARGES—Proposition 218.” Statutory and Regulatory Compliance
Laws and regulations governing treatment and delivery of water are enacted and promulgated by federal, State and local government agencies. Compliance with these laws and regulations is and will continue to be costly, and, as more stringent standards are developed, such costs will likely increase.

Claims against the Water System for failure to comply with applicable laws and regulations could be significant. Such claims may be payable from assets of the Water System and constitute Maintenance and Operation Costs or from other legally available sources. In addition to claims by private parties, changes in the scope and standards for municipal water systems such as that operated by the City may also lead to administrative orders issued by federal or State regulators. Future compliance with such orders can also impose substantial additional costs on the City. No assurance can be given that the cost of compliance with such laws, regulations and orders would not adversely affect the ability of the City to generate Net Revenues in amounts that are sufficient to pay the Bonds.

Natural Disasters
The occurrence of any natural disaster in the City, including, without limitation, earthquake, wildfire, drought, high winds, landslide or flood, could have an adverse material impact on the economy within the City and the revenues available for the payment of the Bonds and result in substantial damage to and interference with the operations of the Water System.

Significant earthquake faults are located in the region surrounding the City. See the caption “THE CITY—Seismic Considerations.” Seismic activity could subject areas of the City and Water System infrastructure to significant damage or destruction.

In addition, wildfires have burned structures in and near the City in recent years and the City experienced a windstorm in January 2022 which caused an estimated $1,200,000 in damage, primarily to private property.

The Installment Purchase Agreement does not require the City to maintain earthquake insurance and the City currently does not maintain such insurance. The City maintains liability insurance for the Water System and property casualty insurance (for losses other than from seismic events) for certain portions of the Water System. See the caption “THE CITY—City Insurance.” However, there can be no assurance that specific losses will be covered by insurance or, if covered, that claims will be paid in full by the applicable insurers.

Furthermore, significant portions of the Water System, including underground pipelines, are not covered by property casualty insurance. Damage to such portions of the Water System as a result of natural disasters would result in uninsured losses to the City.

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Limitations on Remedies
The ability of the City to comply with its covenants under the Installment Purchase Agreement and to generate Net Revenues in amounts that are sufficient to pay the 2022 Installment Payments may be adversely affected by actions and events that are outside of the control of the City and may be adversely affected by actions taken (or not taken) by voters, property owners, taxpayers or persons obligated to pay assessments, fees and charges. See the caption “CONSTITUTIONAL LIMITATIONS ON APPROPRIATIONS AND CHARGES— Proposition 218.” Furthermore, the remedies that are available to the owners of the Bonds upon the occurrence of an event of default under the Indenture are in many respects dependent upon judicial actions, which are often subject to discretion and delay and could prove both expensive and time-consuming to obtain.

In addition, usual equity principles may limit the specific enforcement under State law of certain remedies, as may the exercise by the United States of America of the powers delegated to it by the federal Constitution and the reasonable and necessary exercise, in certain exceptional situations, of the police power inherent in the sovereignty of the State and its governmental bodies in the interest of serving a significant and legitimate public purpose. Bankruptcy, insolvency, reorganization, arrangement, fraudulent conveyance, moratorium proceedings and other laws relating to or affecting creditors’ rights, or the exercise of powers by the federal or State government, if initiated, could subject the Beneficial Owners of the Bonds to judicial discretion and interpretation of their rights in bankruptcy or otherwise, and consequently may entail risks of delay, limitations or modification of their rights. Remedies may be limited because the Water System serves an essential public purpose.

The opinion to be delivered by Bond Counsel concurrently with the issuance of the Bonds will be subject to such limitations and the various other legal opinions to be delivered concurrently with the issuance of the Bonds will be similarly qualified. See Appendix C. In the event that the City fails to comply with its covenants under the Installment Purchase Agreement or fails to pay the 2022 Installment Payments, which secure the payments of principal of and interest on the Bonds, there can be no assurance of the availability of remedies adequate to protect the interest of the holders of the Bonds.

Loss of Tax Exemption
In order to maintain the exclusion from gross income for federal income tax purposes of the interest on the Bonds, the Authority and the City have covenanted in the Indenture and the Installment Purchase Agreement, respectively, to comply with the applicable requirements of the Internal Revenue Code of 1986, as amended (the “Code”), and not to take any action or fail to take any action if such action or failure to take such action would adversely affect the exclusion from gross income of interest on the Bonds thereunder. Interest on the Bonds could become includable in gross income for purposes of federal income taxation retroactive to the date of issuance of such Bonds as a result of acts or omissions of the Authority or the City in violation of this or other covenants in the Indenture or the Installment Purchase Agreement. The Bonds are not subject to redemption or any increase in interest rates should an event of taxability occur and will remain outstanding until maturity or prior redemption in accordance with the provisions contained in the Indenture. See the caption “TAX MATTERS.”
Secondary Market
There can be no guarantee that there will be a secondary market for the Bonds or, if a secondary market exists, that the Bonds can be sold for any particular price. Occasionally, because of general market conditions or because of adverse history or economic prospects connected with a particular issue, secondary marketing practices are suspended or terminated. Additionally, prices of issues for which a market is being made will depend upon then prevailing circumstances. Such prices could be substantially different from the original purchase price.