Agenda packet — Victorville City Council, April 19, 2022 (part 3 of 4)

The Series 2022 Bonds have not been registered under the Securities Act of 1933, as amended, in reliance upon an exemption contained in such act. The S eries 2022 Bonds have not been registered or qualified under the securities laws of any state. The Indenture has not been qualified under the Trust Indenture Act of 1939, as amended, in reliance upon an exemption contained in such act.

The City maintains a website and certain social media accounts. However, the information presented on the City’s website and such social media accounts is not incorporated into this Official Statement by any reference, and should not be relied upon in making investment decisions with respect to the Series 2022 Bonds.

MATURITY SCHEDULES*
$_________*

CITY OF VICTORVILLE

ELECTRIC REVENUE BONDS,
SERIES 2022A
$___________ Series 2022A Serial Bonds
Maturity
(May 1) Principal Amount
Interest
Rate
Price or
Yield CUSIP†

$__________ ____% Series 2022A Term Bonds due May 1, 20___; Price: _____; CUSIP† ______ $__________ ____% Series 2022A Term Bonds due May 1, 20___; Price: _____; CUSIP† ______

* Preliminary, subject to change.
† CUSIP® is a registered trademark of the American Bankers Association. CUSIP data herein are provided by CUSIP Global Services, managed on behalf of the American Bankers Association by FactSet Research Systems Inc. CUSIP numbers have been assigned by an independent company not affiliated with the City and are included solely for the convenience of the holders of the Series 2022 Bonds. None of the City, its Municipal Advisor or the Underwriter is responsible for the selection or use of these CUSIP numbers and no representation is made as to their correctness on the Series 2022 Bonds or as indicated above. The CUSIP number for a specific maturity is subject to being changed after the issuance of the Series 2022 Bonds as a result of various subsequent actions including, but not limited to, a refunding in whole or in part of such maturity or as a result of the procurement of secondary market portfolio insurance or other similar enhancement by investors that is applicable to all or a portion of the Series 2022 Bonds.

$_________*

CITY OF VICTORVILLE

ELECTRIC REVENUE BONDS,
SERIES 2022B (FEDERALLY TAXABLE)
$___________ Series 2022B Serial Bonds
Maturity
(May 1) Principal Amount
Interest
Rate
Price or
Yield CUSIP†

$__________ ____% Series 2022B Term Bonds due May 1, 20___; Price: _____; CUSIP† ______ $__________ ____% Series 2022B Term Bonds due May 1, 20___; Price: _____; CUSIP† ______

† CUSIP® is a registered trademark of the American Bankers Association. CUSIP data herein are provided by CUSIP Global Services, managed on behalf of the American Bankers Association by FactSet Research Systems Inc. CUSIP numbers have been assigned by an independent company not affiliated with the City and are included solely for the convenience of the holders of the Series 2022 Bonds. None of the City, its Municipal Advisor or the Underwriter is responsible for the selection or use of these CUSIP numbers and no representation is made as to their correctness on the Series 2022 Bonds or as indicated above. The CUSIP number for a specific maturity is subject to being changed after the issuance of the Series 2022 Bonds as a result of various subsequent actions including, but not limited to, a refunding in whole or in part of such maturity or as a result of the procurement of secondary market portfolio insurance or other similar enhancement by investors that is applicable to all or a portion of the Series 2022 Bonds.

4844-3753-2891v17/022726-0005

CITY OF VICTORVILLE, CALIFORNIA
14343 Civic Drive
P.O. Box 5001
Victorville, California 92393-5001
(760) 955-5000

CITY COUNCIL
Debra Jones, Mayor
Leslie Irving, Mayor Pro Tem
Elizabeth Becerra, Council Member
Blanca Gomez, Council Member
[Vacant], Council Member

CITY ADMINISTRATIVE OFFICERS
Keith C. Metzler
City Manager
Sophie Smith
Deputy City Manager
Jenele Davidson
Deputy City Manager
John Mendiola
Director of Finance and City Treasurer
Brenda Hampton
Director of Electric Utility Services
Jennifer Thompson
City Clerk

PROFESSIONAL SERVICES
City Attorney
Green de Bortnowsky, LLP
Agoura Hills, California
Bond Counsel
Orrick, Herrington & Sutcliffe LLP
Municipal Advisor
Urban Futures, Inc.

Disclosure Counsel
Stradling Yocca Carlson & Rauth,
A Professional Corporation
Trustee
The Bank of New York Mellon
Trust Company, N.A.

TABLE OF CONTENTS
Page
INTRODUCTION ................................................................................................................................................ 1 Authority for Issuance and Purpose ............................................................................................................... 1 The City of Victorville and the VMUS Electric System ................................................................................ 1 Security and Sources of Payment for the Bonds ............................................................................................ 2 Rate Covenant ................................................................................................................................................ 3 Bond Reserve Fund ........................................................................................................................................ 3 City Appropriations Relating to Certain Bond Reserve Fund Withdrawals .................................................. 4 Rate Stabilization Fund .................................................................................................................................. 4 Continuing Disclosure .................................................................................................................................... 5 Certain Risk Factors ....................................................................................................................................... 5 Other Matters ................................................................................................................................................. 5 ESTIMATED SOURCES AND USES OF FUNDS ............................................................................................ 6 PLAN OF FINANCE ............................................................................................................................................ 6 The 2022 Project ............................................................................................................................................ 6 Redemption of Refunded VJPFA Bonds ....................................................................................................... 7 THE SERIES 2022 BONDS ................................................................................................................................. 8 General ........................................................................................................................................................... 8 Redemption Provisions .................................................................................................................................. 8 SECURITY AND SOURCES OF PAYMENT FOR THE BONDS .................................................................. 12 General; Pledge of the Trust Estate .............................................................................................................. 12 Electric Utility Fund; Application of System Revenues .............................................................................. 14 Application of Funds Under the Indenture ................................................................................................... 14 Rate Covenant .............................................................................................................................................. 16 Bond Reserve Fund With Respect to Series 2022 Bonds ............................................................................ 16 City Appropriations Relating to Certain Bond Reserve Fund Withdrawals ................................................ 17 Outstanding Electric System Indebtedness .................................................................................................. 18 Additional Bonds and Other Obligations Payable from System Revenues ................................................. 18 Rate Stabilization Fund ................................................................................................................................ 21 DEBT SERVICE SCHEDULE ........................................................................................................................... 22 THE CITY OF VICTORVILLE AND VICTORVILLE MUNICIPAL UTILITY SERVICES ........................ 23 General History and Background ................................................................................................................. 23 Governance and Management ...................................................................................................................... 24 Employees and Employee Benefit Programs ............................................................................................... 26 City Insurance .............................................................................................................................................. 27 THE VMUS ELECTRIC SYSTEM ................................................................................................................... 27 General ......................................................................................................................................................... 27 Physical Assets; Interconnection and Distribution Facilities ....................................................................... 28 Customer Base; Metered Accounts, Retail Sales, Billed Revenues and Demand ........................................ 29 Largest Customers ....................................................................................................................................... 32 Energy Efficiency Programs ........................................................................................................................ 34 Power Supply Resources .............................................................................................................................. 34 Future Power Supply Resources .................................................................................................................. 37 VMUS Renewable Energy Resources Procurement Plan ............................................................................ 39 Developments Affecting Power Supply ....................................................................................................... 40 Wildfire Mitigation Measures ...................................................................................................................... 42 Energy Risk Management Policy ................................................................................................................. 43 Electric Rates ............................................................................................................................................... 44 Capital Requirements ................................................................................................................................... 49 Outstanding Debt Obligations ...................................................................................................................... 49 VMUS ELECTRIC SYSTEM FINANCIAL INFORMATION ......................................................................... 50

ii
Budget Process ............................................................................................................................................. 50 Financial Statements .................................................................................................................................... 50 Financial Policies ......................................................................................................................................... 51 Available Cash Reserves of the Electric System ......................................................................................... 51 Summary of Historical Operating Results ................................................................................................... 51 Projected Operating Results and Debt Service Coverage ............................................................................ 53 CERTAIN RISK FACTORS .............................................................................................................................. 56 General ......................................................................................................................................................... 56 Limited Obligation ....................................................................................................................................... 56 No Obligation of City to Appropriate Other Funds ..................................................................................... 56 System Net Revenues; Rate Covenant ......................................................................................................... 57 Limited Service Area; Concentration of Customers .................................................................................... 57 Increased Costs ............................................................................................................................................ 57 Pandemic; COVID-19 Considerations ......................................................................................................... 57 Uncertainties of Projections, Forecasts and Assumptions ........................................................................... 59 Seismic and Other Natural Disasters ............................................................................................................ 59 Wildfire Risks .............................................................................................................................................. 60 Climate Change ............................................................................................................................................ 60 Cybersecurity ............................................................................................................................................... 60 Changing Law and Requirements Generally ............................................................................................... 61 Effect of City Bankruptcy ............................................................................................................................ 61 Initiative and Referendum ............................................................................................................................ 63 Limitation on Remedies ............................................................................................................................... 63 OTHER FACTORS AFFECTING THE ELECTRIC UTILITY INDUSTRY ................................................... 63 CONSTITUTIONAL LIMITATIONS ON TAXES AND FEES IN CALIFORNIA ........................................ 64 Article XIIIA of the State Constitution ........................................................................................................ 64 Unitary Property ........................................................................................................................................... 65 Constitutional Limitations on Governmental Spending ............................................................................... 65 Propositions 218 and 26 ............................................................................................................................... 65 Other Initiatives ........................................................................................................................................... 66 SEC SETTLEMENT .......................................................................................................................................... 66 LITIGATION AND CERTAIN OTHER CITY MATTERS .............................................................................. 67 CONTINUING DISCLOSURE .......................................................................................................................... 67 TAX MATTERS................................................................................................................................................. 68 Series 2022A Bonds ..................................................................................................................................... 68 Series 2022B Bonds ..................................................................................................................................... 70 APPROVAL OF LEGALITY............................................................................................................................. 72 RATING ............................................................................................................................................................. 73 UNDERWRITING ............................................................................................................................................. 73 MUNICIPAL ADVISOR ................................................................................................................................... 74 AUDITED FINANCIAL STATEMENTS ......................................................................................................... 74 MISCELLANEOUS ........................................................................................................................................... 75 APPENDIX A THE CITY OF VICTORVILLE........................................................................................... A-1

APPENDIX B ANNUAL COMPREHENSIVE FINANCIAL REPORT OF THE CITY FOR THE FISCAL YEAR ENDED JUNE 30, 2021 ........................................................... B-1 APPENDIX C SUMMARY OF THE INDENTURE ................................................................................... C-1 APPENDIX D FORM OF CONTINUING DISCLOSURE CERTIFICATE ............................................... D-1 APPENDIX E PROPOSED FORM OF BOND COUNSEL OPINION ...................................................... E-1 APPENDIX F BOOK-ENTRY ONLY SYSTEM ........................................................................................ F-1

1 OFFICIAL STATEMENT
$_________*

CITY OF VICTORVILLE

ELECTRIC REVENUE BONDS,
SERIES 2022A
$_________*

CITY OF VICTORVILLE

ELECTRIC REVENUE BONDS,
SERIES 2022B (FEDERALLY TAXABLE)

INTRODUCTION
This introduction contains only a brief summary of certain of the terms of the City of Victorville Electric Revenue Bonds, Series 2022A (the “Series 2022A Bonds”) and City of Victorville Electric Revenue Bonds, Series 2022B (Federally Taxable) (the “Series 2022B Bonds” and, together with the Series 2022A Bonds, the “Series 2022 Bonds”) being offered hereby. All statements contained in this introduction are qualified in their entirety by reference to the entire Official Statement. References to, and summaries of, provisions of the Constitution and laws of the State of California (the “State”) and any documents referred to herein do not purport to be complete, and such references are qualified in their entirety by reference to the complete provisions .

Capitalized terms used in this Official Statement and not defined elsewhere herein have the meanings given such terms under the Indenture (defined below). See APPENDIX C – “SUMMARY OF THE INDENTURE.” Authority for Issuance and Purpose
The purpose of this Official Statement (which includes the cover page and Appendices hereto) is to set forth certain information concerning the issuance and sale by the City of Victorville (the “City”) of the Series 2022A Bonds in the aggregate principal amount of $_________ * and the Series 2022B Bonds in the aggregate principal amount of $_________*. The Series 2022 Bonds are being issued pursuant to Chapter 3.66 of Title 3 of the Municipal Code of the City (the “City Enterprise Revenue Bond Law ”) and an Indenture, dated as of May 1, 2022 (the “Master Indenture”), as supplemented by the First Supplemental Indenture, dated as of May 1, 2022 (the “First Supplemental Indenture” and collectively with the Master Indenture, the “Indenture”), each between the City and The Bank of New York Mellon Trust Company, N.A., as trustee (the “Trustee”). The Series 2022 Bonds are being issued by the City to (i) finance and refinance the costs of certain improvements to the electric system of the City (the “Electric System ”), (ii) refund $45,230,000 outstanding principal amount of the Victorville Joint Powers Financing Authority Variable Rate Lease Revenue Bonds, 2007 Series A (Cogeneration Facility Project) (the “Refunded VJPFA Bonds”), which were issued to finance certain facilities for the benefit of the Electric System, (iii) fund a deposit to the Bond Reserve Fund, and (iv) pay costs of issuance of the Series 2022 Bonds. See “ESTIMATED SOURCES AND USES OF FUNDS” and “PLAN OF FINANCE.”
The City of Victorville and the VMUS Electric System
The City is located in the County of San Bernardino, approximately 97 miles northeast of the City of Los Angeles and approximately 35 miles northeast of the City of San Bernardino. The City is situated just north of the San Bernardino Mountains, at the edge of the Mojave Desert, in the High Desert sub -region of San Bernardino County known as Victor Valley . The City has traditionally grown over the last 40 -years as a commuter city offering more affordable housing opportunities to residents of Southern California. Its affordable housing increased the dependency of residents on intrastate commuting into Riverside, Orange and Los Angeles counties for employment opportunities. Since the cl osure of George Air Force Base in December of 1992, the City has focused its economic efforts on attracting industrial development to two industrial parks located in the City, particularly the Southern California Logistics Airport (“SCLA”) and Foxborough Industrial Park. The City has become the business hub of the Victor Valley and the largest commercial center between San Bernardino and the Nevada border. As a result of these efforts , along with its access to multiple transportation modes and close proximi ty to southwestern markets, the City has experienced industrial growth in the manufacturing,

* Preliminary, subject to change.

2 aerospace and warehouse logistics centers at both of its industrial parks. As of January 1, 2021, the City had an estimated population of 127,170. See APPENDIX A – “THE CITY OF VICTORVILLE.” In January 2001, the City authorized and established a municipally-owned utility, Victorville Municipal Utility Services (“VMUS”), as a new department of the City. The Electric System is owned and operated by the City under the administration of VMUS. Through VMUS, the City provides electric service to commercial and industrial customers located within the City at SCLA, which includes an approximately 3,500-acre business and logistics park integrating ground transportation, manufacturing and aerospace industries. VMUS also serves the Foxborough Industrial Park which, in addition to ground transportation opportunities, provides rail access to customers within the established 200- acre industrial park. As of January 1, 2022, t he Electric System served approximately 36 customers (representing 81 separately metered accounts).

VMUS also administers the gas utility of the City which provides gas service to commercial and industrial customers located at SCLA . Prior to the Fiscal Year ended June 30, 2020, the activities of both the electric and gas enterprises of the City were accounted for in the Municipal Utility Services Fund of the City.

Commencing with the Fiscal Year ended June 30, 2020, the operations of the Electric System are accounted for in a separate enterprise fund established and maintained by the City on its books (the “Electric Utility Fund”).

All System Revenues (described below) will be accou nted for in the Electric Utility Fund. The System Net Revenues pledged to secure repayment of the Series 2022 Bonds consist only of revenues of the Electric System.

The Series 2022 Bonds are not payable from or secured by any revenues of the gas system of the City.

Security and Sources of Payment for the Bonds
The Series 2022 Bonds are limited obligations of the City, secured by a pledge of and payable solely from the Trust Estate, which primarily consists of (i) all System Net Revenues; and (ii) all funds and accounts held by the Trustee under the Indenture (other than the Rebate Fund and certain other funds specified in the Indenture) and (iii) all investments, money, instruments, and other property credited thereto or on deposit therein; subject to the provision of the Indenture permitting the application thereof for the purposes and on the terms and conditions set forth in the Indenture. “System Net Revenues” generally means System Revenues remaining after payment of Maintenance and Operation Costs then due and payable and Energy Payments then due and payable to the extent such Energy Payments are not included in Maintenance and Operation Costs. “System Revenues” consist primarily of all income, rents, rates, fees, charges and other moneys derived from the ownership or operation of the Electric System excluding certain moneys as more fully described herein. See “SECURITY AND SOURCES OF PAYMENT FOR THE BONDS.”
Upon their issuance, the Series 2022 Bonds will be the only outstanding bonds issued under the Indenture. Pursuant to the Indenture, the City may issue additional bonds (together with the Series 2022 Bonds, the “Bonds”) payable from and secured by the Trust Estate and incur other obligations ( “Parity Obligations”) payable from and secured by a pledge of System Net Revenues on a parity basis with the Bonds. See “SECURITY AND SOURCES OF PAYMENT FOR THE BONDS – Additional Bonds and Other Obligations Payable from System Revenues.”
If no Event of Default has occurred and is continuing under the Indenture, all Maintenance and Operation Costs and Energy Payments are being and have been paid and are then current, and all payments then due and payable with respect to the Outstanding Bonds and outstanding Parity Obligations have been paid, then the City may spend System Revenues for any lawful purpose of the Electric Utility Fund. Any System Net Revenues so spent by the City for a lawful purpose as described in the preceding sentence will no longer be subject to the lien of the Indenture.

The Indenture does not limit the ability of the City to issue or incur obligations which are payable from the Trust Estate or any portion thereof (including the System Net Revenues) on a basis junior and subordinate to the Bonds and Parity Obligations . The City, on behalf of the Municipal Utility Services Fund (the fund in which operations of the Electric System were previously accounted for), previously executed a Loan Repayment Agreement and Promissory Note (the “Interfund Loan Agreement”) for the repayment of funds that were

3 advanced from the City General Fund to the Municipal Utility Services Fund from Fiscal Year 2003-04 through 2007-08 for working capital, startup costs and operation funding shortfalls of VMUS in the early years of the Electric System operations. As of January 1, 2022, the outstanding principal balance under the Interfund Loan Agreement was $3,850,143. Amounts to be repaid to the City General Fund under the Interfund Loan Agreement will be payable out of the Electric Utility Fund from System Net Revenues on a basis junior and subordinate to the payment of the Bonds and any future obligations, liens, or encumbrances of the Electric Utility Fund. See “SECURITY AND SOURCES OF PAYMENT FOR THE BONDS – Outstanding Electric System Indebtedness.”
The Series 2022 Bonds are limited obligations of the City and are secured by a pledge of and payable, both as to principal and interest and as to any premiums upon the redemption thereof, solely from the Trust Estate as provided in the Indenture, and the City is not obligated to pay the Series 2022 Bonds except from the Trust Estate as provided in the Indenture . The General Fund of the City is not liable, and the credit or taxing power of the City is not pledged, for the payment of the Series 2022 Bonds or the interest or premium thereon. The Series 2022 Bonds are not secured by a legal or equitable pledge of, or charge, lien or encumbrance upon, any of the property of the City or any of its income or receipts, except the Trust Estate as provided in the Indenture.

Rate Covenant
Pursuant to the Indenture, the City has covenanted that it will during each Fiscal Year fix, prescribe and collect rates, fees and charges for the Electric Service that are reasonably estimated to yield System Net Revenues for such Fiscal Year equal, in each case, to at least ( 1) 115% of the Debt Service on all Outstanding Bonds and outstanding Parity Obligations for such Fiscal Year, and ( 2) 100% of all obligations of the City payable from System Net Revenues in such Fiscal Year . In fixing and prescribing such rates, fees and charges, the City may make reasonable assumptions concerning contingencies that may affect System Revenues and the timing and amount of payments on Bonds, Parity Obligations and any other obligations of the City that may become due and payable from System Revenues in such Fiscal Year . The City may make adjustments from time to time in such rates, fees and charges and may make such classification thereof as it deems necessary, but shall not reduce the rates, fees and charges then in effect unless the System Net Revenues from such reduced rates, fees and charges are reasonably estimated to be sufficient to meet the requirements of the Indenture as described in this paragraph. See “SECURITY AND SOURCES OF PAYMENT FOR THE BONDS – Rate Covenant. ” For purposes of the foregoing, as provided in the Indenture, the amount of System Revenues in any Fiscal Year may be reduced by the amount of current System Revenues allocated to the Rate Stabilization Fund and the amount of System Revenues may be increased by amounts allocated from the Rate Stabilization Fund to the Electric Utility Fund. See “– Rate Stabilization Fund” below.

Bond Reserve Fund
Upon the issuance of the Series 2022 Bonds, a Bond Reserve Fund is to be established under the Indenture. The Bond Reserve Fund will be funded from the proceeds of the Series 2022 Bonds in an amount equal to the Bond Reserve Requirement (initially, $ _________). The Bond Reserve Fund is to be held by the Trustee in trust for the benefit of the registered owners of the Series 2022 Bonds and any future Series of Bonds which the City specifies in the Supplemental Indenture relating to such future Series o f Bonds is to be secured by the Bond Reserve Fund (all such Bonds secured by the Bond Reserve Fund, including the Series 2022 Bonds, “Participating Bonds”). All money in the Bond Reserve Fund shall be used and withdrawn by the Trustee solely for the purpose of paying the interest on and principal of the Participating Bonds as such interest and principal becomes due and payable in the event the money in the Interest Fund or Principal Fund is at any time insufficient for such purpose or for the final payment, defeasance or redemption of such Participating Bonds as provided in the Indenture.

The Indenture provides that the City may at its sole discretion at the ti me of issuance of any Series of Bonds that are not Participating Bonds or at any time thereafter by Supplemental Indenture provide for the establishment of a Bond Series Reserve Fund as security for one or more Series of Bonds (all such Bonds being

4 referred to herein as “Non-Participating Bonds”) or may provide for no debt service reserve for any such Non- Participating Bonds. Any Bond Series Reserve Fund so established by the City may secure one or more Series of future Bonds as the City shall determine and shall specify in the Supplemental Indenture establishing such Bond Series Reserve Fund. Amounts on deposit in any Bond Series Reserve Fund established for any Series of Non-Participating Bonds shall be used and withdrawn as provided in the Supplemental In denture authorizing the issuance of such Non-Participating Bonds.

Amounts on deposit in the Bond Reserve Fund established in connection with the Series 2022 Bonds will secure only Participating Bonds and do not secure in any manner any future Series of Bonds that are Non- Participating Bonds or any other Parity Obligations of the City. Amounts on deposit in any Bond Series Reserve Fund for any one or more Series of Non -Participating Bonds or in any debt service reserve for any Parity Obligations will not sec ure in any manner the Series 2022 Bonds. See “SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2022 BONDS – Bond Reserve Fund With Respect to Series 2022 Bonds.” City Appropriations Relating to Certain Bond Reserve Fund Withdrawals In order to enhance the se curity of the Series 2022 Bonds, the City and the Trustee have agreed in the First Supplemental Indenture, for so long as any Series 2022 Bonds remain Outstanding, in the event of any withdrawal from the Bond Reserve Fund for the purpose of making up a def iciency in the Interest Fund or the Principal Fund, to follow certain procedures described herein to (1) request an appropriation from any available funds from the City, and (2) apply the funds, if any, so appropriated by the City to the replenishment of the Bond Reserve Fund. See “SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2022 BONDS – City Appropriations Relating to Certain Bond Reserve Fund Withdrawals.” Notwithstanding the foregoing or anything else in the Indenture to the contrary, the failure of C ity Council to budget and appropriate any amount requested by an Authorized Representative of the City for any reason shall not constitute a default or Event of Default under the Indenture and none of the Trustee, the owners or any other Person shall have any recourse against the City in the event the City Council does not budget and appropriate any such amount for any reason.

The City Council is not obligated by the City Enterprise Revenue Bond Law, any covenant made in the Indenture, or any other provision of law, to appropriate or otherwise make any funds available other than System Net Revenues and such other amounts comprising the Trust Estate to replenish the Bond Reserve Fund or to pay debt service on the Series 2022 Bonds. See “RISK FACTORS – No Obligation of City to Appropriate Other Funds.”
Information about the financial condition of the City General Fund, and other information concerning the City’s demographics and economy is provided in APPENDIX A – “THE CITY OF VICTORVILLE.” A copy of the City’s Annual Comprehensive Financial Report for the Fiscal Year ended June 30, 2021 is attached as APPENDIX B. See also “AUDITED FINANCIAL STATEMENTS.” Rate Stabilization Fund
Pursuant to the Indenture, the City may establish and maintain on the City’s books a Rate Stabilization Fund. The Rate Stabilization Fund is not being established or funded in connection with the issuance of the Series 2022 Bonds. Upon compliance with the terms of the Indenture, the City may, from time to time, allocate to the Rate Stabilization Fund , from current System Revenues , such amounts as the City shall determine, and the amount of available current System Revenues shall be reduced by the amount so allocated . The City may, from time to time, also allocate to the Rate Stabilization Fund amounts from any other lawfully available source.

The City may allocate amounts accounted for in the Rate Stabilization Fund to the Electric Utility Fund, and any amounts so allocated not later than February 28 follow ing the end of a Fiscal Year may be deemed System Revenues for such Fiscal Year. The City may also apply moneys on deposit in the Rate Stabilization Fund for any other lawful purpose of the Electric Utility Fund. All interest or other earnings upon amounts allocated to the Rate Stabilization Fund may be allocated to the Electric Utility Fund and accounted for as System Revenues

5 in accordance with the terms of the Indenture or may be used for other lawful purposes of the Electric Utility Fund. See “SECURITY AND SOURCES OF PAYMENT FOR THE BONDS – Rate Stabilization Fund.” Continuing Disclosure
The City has covenanted for the benefit of the holders and Beneficial Owners of the Series 2022 Bonds to provide certain financial information and operating data relating to the Electric System by not later than the February 28 next succeeding the end of each Fiscal Year of the City (or in the event of any change in the Fiscal Year of the City, which as of the date of this Official Statement ends on June 30 of each year, the end of the eighth month next succeeding the end of each F iscal Year of the City ) (the “Annual Report”), commencing with the Annual Report for Fiscal Year 2021-22, and to provide notices of the occurrence of certain enumerated events. The Annual Report and notices of the enumerated events will be filed by or on behalf of the City with the Municipal Securities Rulemaking Board (the “MSRB”) through its Electronic Municipal Market Access (“EMMA”) system. The specific nature of the information to be contained in the Annual Report and the notices of enumerated events is set forth in APPENDIX D – “FORM OF CONTINUING DISCLOSURE CERTIFICATE.” This covenant has been made in order to assis t the Underwriter (as defined herein) in complying with S ecurities and Exchange Commission Rule 15c2-12(b)(5) (the “Rule”). See “CONTINUING DISCLOSURE” for additional information, including information regarding the City’s history of compliance with previous continuing disclosure undertakings.

Certain Risk Factors
See “CERTAIN RISK FACTORS” for a description of certain risks associated with an investment in the Series 2022 Bonds.

Other Matters
Copies of the Indenture will be available for inspection at the City’s offices in Victorville, California, and will be available upon request and payment of duplication costs from the Trustee.

[Remainder of page intentionally left blank.]

6 ESTIMATED SOURCES AND USES OF FUNDS
The estimated sources and uses of funds for the Series 2022 Bonds, rounded to the nearest dollar, are as follows:

Series 2022A Bonds Series 2022B Bonds
Sources:

Principal Amount ....................................................... $ $ Original Issue [Premium/Discount] ...........................

Amounts on deposit in the funds and
accounts for the Refunded VJPFA Bonds (1) ...........

VMUS Contribution ...................................................

Total Sources ................................................ $ $

Uses:

Series 2022 Project Fund (2) ....................................... $ $ Bond Reserve Fund ....................................................

Redemption of the Refunded VJPFA Bonds (3) .........

Costs of Issuance (4) ...................................................

Total Uses ..................................................... $ $

(1) Represents amounts on deposit in the Reserve Fund for the Refunded VJPFA Bonds available to be applied on the Redemption Date (defined below) for the retirement of the Refunded VJPFA Bonds. (2) Includes amounts to be reimbursed to the City upon the issuance of the Series 2022 Bonds. (3) Represents the principal amount of the Refunded VJPFA Bonds plus estimated accrued interest thereon to the Redemption Date for the Refunded VJPFA Bonds at an assumed interest rate of 1.0% per annum. (4) Includes fees of Bond Counsel, Disclosure Counsel, the Municipal Advisor and the Trustee, Underwriter’s discount, rating agency fees, printing costs, and certain miscellaneous expenses.

PLAN OF FINANCE
The Series 2022 Bond s are being issued primarily for the purpose of financing the costs of certain improvements to the Electric System and refunding the Refunded VJPFA Bonds, as more fully described below.

A portion of the proceeds of the Series 2022 Bonds will also be applied to fund the Bond Reserve Fund and to pay costs of issuance of the Series 2022 Bonds.

The 2022 Project
Approximately $5.0 million of the net proceeds of the Series 2022A Bonds will be applied t o finance costs (including through reimbursement to the Electric Utility Fund of funds previously expended) for the design, acquisition, construction and equipping of certain distribution system and interconnection facility upgrades for the benefit of the Electric System (the “ 2022 Project”). The improvements to be undertaken to the Electric System consist primarily of upgrades to increase the maximum capacity of the SCLA substation, including the addition of three new transformers and DC battery backup, an d the addition of two new 12 kV distribution circuits to deliver energy to the Electric System distribution network. As designed, the 2022 Project will expand the current delivery capacity from the Southern California Edison Company (“ SCE”) system to the Electric System of 17.34 MW to 40.36 MW. In addition, the 2022 Project includes the costs of certain related upgrades to portions of facilities owned by SCE, including improvements to an existing 34.5 kV connection and facilities for the establishment of an additional 34.5 kV point of interconnection between the SCE system and the Electric System, as well as distribution upgrades to supply the increased capacity on the Electric System. The 2022 Project is being undertaken in preparation for anticipated load growth at SCLA to be served by the Electric System as a result of existing customer planned expansions and to accommodate expected future load growth from the addition of new customers of the Electric System at SCLA.

7 The City expects to co mplete the work to be performed by the City by July 2022 , and to comply with all governmental approval, environmental review, public bidding and other permitting requirements for each component of the 2022 Project to be undertaken by the City as required by law. The City has contracted with Pacific Utility Installation on a fixed price basis for the construction of the work to be completed by the City for the Electric System improvements. Pursuant to an agreement between the City and SCE, SCE will be responsible for the design, engineering and construction of the interconnection facilities and distribution upgrades to the SCE system to be undertaken as part of the 2022 Project in accordance with applicable reliability standards and good utility practice, and to apply for any regulatory approvals necessary in connection therewith , and will be responsible for any costs associated therewith above the agreed -upon price with the City . The 2022 Project, including the upgrades to be undertaken by SCE (assuming their timely completion), is currently scheduled to be in-service by December 31, 2022.

Redemption of Refunded VJPFA Bonds
A portion of the proceeds of the Series 2022 Bonds, together with other available moneys, will be used to refund and redeem the Refunded VJPFA Bonds.

The Victorville Joint Powers Financing Authority Variable Rate Lease Revenue Bonds, 2007 Series A (Cogeneration Facility Project) (the “VJPFA Bonds ”) were issued by the Victorville Joint Powers Financing Authority (the “VJPFA”) in 2007 for the purposes of re -financing the costs of acquisition, construction and expansion of a co-generation project originally expected to be utilized by the City as a power supply resource of VMUS (which project is not in operation) and refunding certain previously issued bonds of the VJPFA issued for such project. The Refunded VJPFA Bonds are secured by revenues received by the VJPFA from the City as base rental payments for the lease of certain property from the VJPFA to the City. The obligation of the City to make the base rental payments is an unsecured obligation of the City payable from the General Fund.

Historically, however, since the issuance of the Refunded VJPFA Bonds, the payments made by the City to be applied to the payment of debt service on the Refunded VJPFA Bonds have been supported by and reimbursed or paid from revenues of the Electric System. See “THE VMUS ELECTRIC SYSTEM – Outstanding Debt Obligations.”
The VJPFA Bonds are variable rate bonds with a final maturity date of May 1, 2040. Following the retirement of the $1,480,000 principal amount of outstanding VJPFA Bonds subject to mandatory sinking fund redemption on May 1, 2022, $45,230,000 principal amount of the VJPFA Bonds remain outstanding. The City expects to call the $4 5,230,000 Refunded VJPFA Bonds for redemption on [June __], 2022 (the “Redemption Date”). Upon the issuance of the Series 2022 Bonds, a portion of the proceeds of the Series 2022 Bonds, together with certain amounts contributed by the City (representing estimated interest to accrue on the Refunded VJPFA Bonds at an assumed interest rate of 1.0% per annum), will be deposited in an escrow fund to be held by the trustee for the Refunded VJPFA Bonds. The amounts so deposited will be held uninvested and will be applied, together with certain other funds on deposit with the trustee for the Refunded VJPFA Bonds and available for such purpose, to effect the redemption of all of the outstanding Refunded VJPFA Bonds on such Redemption Date, as described below.

The redemption of the Refunded VJPFA Bonds will be effected by drawing on the letter of credit for such bonds on the Redemption Date in an amount sufficient to redeem the Refunded VJPFA Bonds called for redemption on the Redemption Date, at a redemption price equal to 100% of the principal of such Refunded VJPFA Bonds, together with accrued interest to the date fixed for redemption, without premium. The proceeds of the Series 2022 Bonds and other amounts deposited in the escrow fund will be used, together with the funds on deposit in the bond reserve fund for the Refunded VJPFA Bonds and other available moneys to be provided by the City for such purpose (if needed), on the Redemption Date of the Refunded VJPFA Bonds to reimburse the letter of credit bank, in its capacity as the credit provider for the Refunded VJPFA Bonds, for the draw made under the letter of credit. Upon such application, following the Redemption Date, no Refunded VJPFA Bonds will remain outstanding.

8 THE SERIES 2022 BONDS
General
The Series 2022A Bonds and Series 2022B Bonds are being issued in the respective aggregate principal amounts set forth on the inside cover page of this Official Statement. The Series 2022 Bonds of each Series will be issued in fully registered form, without coupons, in denominations of $5,000 or any integral multiple thereof (each, an “Authorized Denomination”), will be dated their date of delivery, and will bear interest from such date at the respective per annum rates set forth on the inside cover of this Official Statement. Interest on the Series 2022 Bonds of each Series will be payable on May 1 and November 1 of each year, commencing November 1, 2022 (each, an “Interest Payment Date”), and will be computed on the basis of a 360 -day year, composed of twelve 30-day months.

The Series 2022 Bonds will be registered in the name of Cede & Co., as registered owner and nominee of The Depository Trust Company, New York, New York (“ DTC”). DTC will act as securities d epository for the Series 2022 Bonds. Individual purchases will be made in book-entry form only. Purchasers will not receive a bond certificate representing their beneficial ownership interest in Series 2022 Bonds purchased. So long as Cede & Co. as nominee of DTC, is the registered owner of the Series 2022 Bonds, references herein to Bondholders, Holders or owners of the Series 2022 Bonds shall mean Cede & Co. as aforesaid, and shall not mean the Beneficial Owners (as defined in Appendix F hereto) of Series 2022 Bonds.

So long as Cede & Co. is the registered owner of the Series 2022 Bonds, principal of and interest on the Series 2022 Bonds will be payable by wire transfer of same day funds by the Trustee to Cede & Co., as nominee for DTC. DTC is obligated, in turn, to remit such amounts to the DTC Participants for subsequent disbursement to Beneficial Owners of the Series 2022 Bonds. See APPENDIX F – “BOOK-ENTRY ONLY SYSTEM.” In the event the use of the book- entry system is discontinued, principal of the Series 2022 Bonds will be payable upon surrender thereof at the designated office of the Trustee. All interest payable on the Series 2022 Bonds will be paid by check mailed by first -class mail on each Interest Payment Date to the person in whose name each Series 2022 Bond is registered in the registration books maintained by the Trustee as of the close of business on the 15th day of the calendar month immediately preceding the Interest Payment Date (whether or not such day is a Business Day) (each, a “Record Date”); provided, that registered owners of at least $1,000,000 in aggregate principal amount of Series 2022 Bonds may, at any time prior to a Record Date, give the Trustee written instructions for payment of such interest on each succeeding Interest Payment Date by wire transfer, in accordance with the provisions set forth in the Indenture.

Redemption Provisions
*
Series 2022A Bonds
Optional Redemption . The Series 2022A Bonds maturing on and after May 1, 20__, are subject to redemption prior to their stated maturities, at the option of the City, from any source of available funds, on any date on or after May 1, 20___, as a whole, or in part by such maturity or maturities as may be specified by the City (and by lot within a maturity), at a Redemption Price equal to 100% of the principal amount to be redeemed, plus accrued interest to the date fixed for redemption, without premium.

Mandatory Sinking Account Redemption. The Series 2022A Bonds maturing on May 1, 20 __ and May 1, 20___, are also subject to mandatory redemption from Mandatory Sinking Account Payments for such Series 2022A Bonds, on each date a Mandatory Sinking Account Payment for such Series 2022A Bonds is due, and in the principal amount equal to the Mandatory Sinking Account Payment due on such date, at a Redemption Price equal to the principal amount of the Series 2022A Bonds to be redeemed plus accrued interest, if any, to the redemption date, without premium.

* Preliminary, subject to change.

9 Mandatory Sinking Account Payments for the Series 2022A Bonds maturing on May 1, 20__ shall be due in such amounts and on such dates as follows (except that if any of such Series 2022A Bonds are optionally redeemed as described above, the amounts of the remaining Mandatory Sinking Fund Account Payments for those Series 2022A Bonds will be revised as directed in writing by the City):

Series 2022A Bonds Maturing on May 1, 20__
Mandatory Sinking
Account Payment Date
(May 1)
Mandatory Sinking
Account Payment

†

† Final Maturity.

Mandatory Sinking Account Payments for the Series 2022A Bonds maturing on May 1, 20__ shall be due in such amounts and on such dates as follows (except that if any of such Series 2022A Bonds are optionally redeemed as described above, the amounts of the remaining Mandatory Sinking Fund Account Payments for those Series 2022A Bonds will be revised as directed in writing by the City):

Series 2022A Bonds Maturing on May 1, 20__
Mandatory Sinking
Account Payment Date
(May 1)
Mandatory Sinking
Account Payment

†

† Final Maturity.

Series 2022B Bonds
Optional Redemption . The Series 2022B Bonds are subject to redemption prior to their stated maturities, at the option of the City, from any source of available funds, on any date, as a whole, or in part by such maturity or maturities as may be specified by the City, at a Redemption Price equal to the greater of:
(1) 100% of the principal amount of the Series 2022B Bonds to be redeemed; or (2) the sum of the prese nt value of the remaining scheduled payments of principal and interest [(taking into account any Mandatory Sinking Account Payments for such Series 2022B Bonds to be redeemed)] to the stated maturity date or maturity dates of such Series 2022B Bonds to be redeemed, not including any portion of those payments of interest accrued and unpaid as of the date on which such Series 2022B Bonds are to be redeemed, discounted to the date on which such Series 2022B Bonds are to be redeemed on a semi-annual basis, assuming a 360-day year consisting of twelve 30-day months, at the Treasury Rate (as defined below) plus __ basis points for the Series 2022B Bonds maturing in the years 20__ through and including 20__, __ basis points for the Series 2022B Bonds maturing in the years 20__ and 20__, and __ basis points for the Series 2022B Bonds maturing in the year 20__;

10 plus, in each case, accrued interest on such Series 2022B Bonds to be redeemed to but not including the redemption date.

For the purpose of any optional redemption of the Series 2022B Bonds as described above, “Treasury Rate” means with respect to any redemption date for a particular Series 2022B Bond, the yield to maturity as of such redemption date of United States Treasury securities with a constant maturity (as compiled and published in the most recent Federal Reserve Statistical Release H.15 (519) that has become publicly available on a date selected by the City that is at least two Business Days, but no more than 60 calendar days, prior to the redemption date (excluding inflation indexed securities) or, if such Statistical Release is no longer published, any publicly available source of similar market data) most nearly equal to the period from the redemption date to the maturity date of the Series 2022B Bond to be redeemed; provided, however, that if the period from the redemption date to such maturity date is less than one year, the weekly average of the daily yields for 1 -year Treasury bills (secondary market) published in such statistical release will be used.

The Trustee shall not be responsible for calculating the Redemption Price of the Series 2022B Bonds.

At the option of the City, the Redemption Price of the Series 2022B Bonds to be redeemed may be determined by an independent accounting firm, investment banking firm, financial advisor, municipal advisor or other financial consultant retained by the City. The Trustee and the City may conclusively rely on the determination of such Redemption Price by such independent accounting firm, investment banking f irm, financial advisor, municipal advisor or other financial consultant and shall not be liable for such reliance.

Mandatory Sinking Account Redemption. The Series 2022B Bonds maturing on May 1, 20 __ and May 1, 20___ , are subject to mandatory redemption fr om Mandatory Sinking Account Payments for such Series 2022B Bonds, on each date a Mandatory Sinking Account Payment for such Series 2022B Bonds is due, and in the principal amount equal to the Mandatory Sinking Account Payment due on such date, at a Redemption Price equal to the principal amount of the Series 2022B Bonds to be redeemed plus accrued interest, if any, to the redemption date, without premium.

Mandatory Sinking Account Payments for the Series 2022B Bonds maturing on May 1, 20__ shall be due in such amounts and on such dates as follows (except that if any of such Series 2022B Bonds are optionally redeemed as described above, the amounts of the remaining Mandatory Sinking Fund Account Payments for those Series 2022B Bonds will be revised as directed in writing by the City):

Series 2022B Bonds Maturing on May 1, 20__
Mandatory Sinking
Account Payment Date
(May 1)
Mandatory Sinking
Account Payment

†

† Final Maturity.

11 Series 2022B Bonds Maturing on May 1, 20__
Mandatory Sinking
Account Payment Date
(May 1)
Mandatory Sinking
Account Payment

†

† Final Maturity.

Selection of Series 2022 Bonds for Redemption
In the event of optional redemption of Series 2022 Bonds, the City shall designate which Series and maturities of the Series 2022 Bonds are to be called for redemption. If less than all Series 2022A Bonds maturing by their terms on any one date are to be r edeemed at any one time, the Trustee shall select the Series 2022A Bonds of such maturity date to be redeemed by lot and shall promptly notify the City in writing of the numbers of the Series 2022A Bonds so selected for redemption. For purposes of such selection, Series 2022A Bonds shall be deemed to be composed of multiples of minimum authorized denominations and any such multiple may be separately redeemed.

Notwithstanding anything to the contrary in the Indenture, if less than all Series 2022B Bonds maturing by their terms on any one date are to be redeemed at any one time, then:
(1) If the Series 2022B Bonds are registered in book- entry only form and so long as DTC is the sole registered owner of such Series 2022B Bonds, the particular Series 2022B Bonds of such maturity date to be redeemed shall be selected on a “pro -rata pass-through distribution of principal” basis in accordance with DTC procedures; provided that such selection is made in accordance with the operational arrangements of DTC then in effect. The underwriters of the Series 2022B Bonds have advised the City that the Series 2022B Bonds will be made eligible for partial redemption to be treated by DTC in accordance with its rules and procedures, as a “pro rata pass-through distribution of principal.” The Trustee is directed under the Indenture to send notice to DTC in accordance with such rules and procedures to effect a pro rata reduction of principal of the applicable Series 2022B Bonds to accomplish redemptions of such Series 2022B Bonds through a pass-through distribution of principal. DTC will be responsible for distributing the principal and accrued interest among its direct participants, as applicable, pro rata in accordance with its rules and procedures for a pro rata pass -through distribution of principal based upon the beneficial interests in the Series 2022B Bonds being redeemed that DTC records list as owned by each DTC direct participant as of the record date for such payment. Any failure of the Trustee to make such selection or of DTC or its participants or any other intermediary, to make such selection or proportional allocation, for whatever reason, will not affect the sufficiency or the validity of the redemption of the Series 2022B Bonds.
(2) If the DTC operational arrangements do not allow for redemption on a pro- rata pass-through distribution of principal basis, the particular Series 2022B Bonds of such maturity date to be redeemed will be selected for redemption in accordance with DTC’s then existing rules and procedures and may be by lot. (3) If the Series 2022B Bonds are not then registered in book -entry only form, the particular Series 2022B Bonds of such maturity date to be redeemed shall be selected by the Trustee pro -rata among the Holders of the Series 2022B Bonds of such maturity date and the Trustee shall promptly notify the City in writing of the numbers of the Series 2022B Bonds so selected for redemption. For purposes of such selection, Series 2022B Bonds shall be deemed to be composed of multiples of minimum authori zed denominations and any such multiple may be separately redeemed.

12 Notice of Redemption; Conditional Notice
The Trustee shall give notice of redemption not less than 20 days nor more than 60 days prior to the redemption date to each registered owner of a Series 2022 Bond designated for redemption. The Trustee shall also give notice of redemption to the MSRB through EMMA or such other designated information repository (the “Repository”). Neither failure by the Trustee to give notice to the Repository, nor failure of any registered owner or the Repository to receive such notice nor any defect therein shall affect the sufficiency or validity of the proceedings for the redemption of any of the Series 2022 Bonds.

With respect to any notice of optional redemption of Series 2022 Bonds, unless, upon the giving of such notice, such Series 2022 Bonds shall be deemed to have been paid within the meaning of the provisions of the Indenture, such notice shall state that such redemption shall be conditional upon the receipt by the Trustee on or prior to the date fixed for such redemption of amounts sufficient to pay the principal of, premium, if any, and interest on, such Series 2022 Bonds to be redeemed, and that if such amo unts shall not have been so received said notice shall be of no force and effect and the City shall not be required to redeem such Series 2022 Bonds.

The City may also instruct the Trustee to provide conditional notice of optional redemption, which may be conditioned on the occurrence of any other event if such notice states that if such event does not occur said notice shall be of no force and effect and the City shall not be required to redeem such Series 2022 Bonds. In the event that such notice of optional redemption contains such a condition and such amounts are not so received or such event does not occur, the optional redemption shall not be made and the Trustee shall within a reasonable time thereafter give notice to the registered owners to the effect that such amounts were not so received or such event did not occur and such redemption was not made, such notice to be given by the Trustee in the manner in which the notice of redemption was given. Such failure to optionally redeem such Bonds shall not constitute an Event of Default pursuant to the Indenture.

Any notice of optional redemption given pursuant to the provisions of the Indenture described herein may be rescinded by notice given to the Trustee by the City no later than five Business Days pri or to the date specified for redemption. The Trustee shall give notice of such rescission as soon thereafter as practicable in the same manner, and to the same parties, as notice of such redemption was given.

For so long as the Series 2022 Bonds are in boo k-entry form, all notices of redemption and all other notices described under this caption, shall be delivered to DTC, as securities depository. Neither the City nor the Trustee can or do give any assurance that any such notice will be distributed by DTC t o Beneficial Owners or that any such notice will be distributed on a timely basis . See APPENDIX F – “BOOK-ENTRY ONLY SYSTEM.”
Effect of Redemption; Cessation of Interest
Interest on all Series 2022 Bonds (or portions thereof) for which notice of redemption has been given pursuant to the provisions of the Indenture and for which funds have been provided to the Trustee for the payment of the Redemption Price thereof, together with interest accrued to the redemption date thereon, shall cease to accrue on the r edemption date. Such Series 2022 Bonds (or portions thereof) shall cease to be entitled to any benefit or security under the Indenture on the redemption date and the registered owners of such Series 2022 Bonds (or portions thereof) shall have no rights in respect thereof except to receive payment of the Redemption Price and accrued interest to the redemption date from the funds provided to the Trustee for such payment.

SECURITY AND SOURCES OF PAYMENT FOR THE BONDS
General; Pledge of the Trust Estate
The Bonds, including the Series 2022 Bonds, are limited obligations of the City secured by a pledge of and payable solely from the Trust Estate, which consists of (i) all System Net Revenues; (ii) all funds and accounts held by the Trustee under the Indenture and any Supplemental Indenture (other than the Rebate Fund, all Letter of Credit Funds and all Purchase Funds) and all investments, money, instruments, and other property credited thereto or on deposit therein; (iii) all investment earnings on amounts held by the Trustee in the funds

13 and accounts established under the Indenture, excluding amounts deposited in the Rebate Fund, any Letter of Credit Fund and any Purchase Fund; and ( iv) all proceeds of the foregoing, whether now existing or hereafter arising, subject to the provision of the Indenture permitting the application thereof for the purposes and on the terms and conditions set forth in the Indenture.
“System Net Revenues ” means System Revenues remaining after payment of (1) Maintenance and Operation Costs then due and payable and (2) Energy Payments then due and payable to the extent such Energy Payments are not included in Maintenance and Operation Costs. “System Revenues” means all income, rents, rates, fees, charges and other moneys derived from the ownership or operation of the Electric System, determined in accordance with generally accepted accounting principles, consistently applied, including (i) all income, rents, rates, fees, connection fees, Electric System development fees, charges, standby charges, capacity charges or other moneys derived by the City from the electric services or facilities, and commodities or byproducts, sold, furnished or supplied through the facilities of or in the conduct or operation of the business of the Electric System , and including, without limitation, investment earnings on the operating reserves to the extent that the use of such earnings is limited to the Electric System by or pursuant to law; (ii) any amount received from the levy or collection of taxes which are solely available and are earmarked for the support of the operation of the Electric System ; (iii) allocations from the Rate Stabilization Fund to the Electric Utility Fund; and (iv) grants for maintenance and operations to the extent that the restrictions for the use thereof do not preclude them from being applied to the payment of Maintenance and Operation Costs , Energy Payments or the Bonds or Parity Obligations; provided, however, that System Revenues shall not include in all cases, customers’ deposits or any other deposits or advances subject to refund until such deposits or advances have become the property of the City. As provided in the Indenture, the amount of current System Revenues is reduced by the amount of current System Revenues allo cated to the Rate Stabilization Fund and the amount of current System Revenues shall be increased by any amounts allocated from the Rate Stabilization Fund to the Electric Utility Fund. See “– Rate Stabilization Fund” below. “Maintenance and Operation Cos ts” means costs spent or incurred by the City for maintaining and operating the Electric System, calculated in accordance with generally accepted accounting principles used by the City, consistently applied, including costs of purchased or generated power and energy, costs of fuel, water, and other commodities, costs of transmission of power, energy, fuel, water, and other commodities, expenses of maintenance, repair, billing and collection and other expenses incurred to maintain and preserve the Electric System in good repair and working order, and including administrative costs of the City, salaries and wages of employees, payments to employees retirement systems, overhead, taxes (if any), fees of auditors, accountants, attorneys, engineers or other consul tants and insurance premiums, in each case as attributable to the Electric System, 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 and Parity Obligations, but excluding in all cases (i) depreciation, replacement and obsolescence charges or reserves therefor, (ii) amortization of intangibles or other bookkeeping entries of a similar nature, (iii) costs of capital additions, replacements, betterments, extensions or improvements to the Electric System that under generally accepted accounting principles are chargeable to a capital account or to a reserve for depreciation, and (iv) charges for the payment of Bonds and Parity Obligations. “Energy Payments” means all actual costs, charges or expenses incurred by the City for power, energy, fuel, and capacity under contracts or other arrangements that provide for payments to be made by the City for such power, energy, fuel, or capacity whether or not such power, energy, fuel, or capacity is delivered or capable of being delivered or otherwise made available to or received by or for the account of the City, in each case as attributable to the Electric System.

The Indenture provides that the pledge of the Trust Estate constitutes a lien on and security interest in the Trust Estate to the extent set forth in, and in accordance with, the Indenture.

If no Event of Default has occurred and is continuing under the Indenture, all Maintenance and Operation Costs and Energy Payments are being and have been paid and are then current, and all payments then due and payable with respect to the Outstanding Bonds and outstanding Parity Obligations have been paid, then

14 the City may spend System Revenues for any lawful purpose of the Electric Utility Fund. Any System Net Revenues so spent by the City for a lawful purpose as described in the preceding sentence will no longer be subject to the lien of the Indenture.

The Series 2022 Bonds are limited obligations of the City and are secured by a pledge of and payable, both as to principal and interest and as to any premiums upon the redemption thereof, solely from the Trust Estate as provided in the Indenture, and the City is not obligated to pay the Series 2022 Bonds except from the Trust Es tate as provided in the Indenture . The General Fund of the City is not liable, and the credit or taxing power of the City is not pledged, for the payment of the Series 2022 Bonds or the interest or premium thereon. The Series 2022 Bonds are not secured by a legal or equitable pledge of, or charge, lien or encumbrance upon, any of the property of the City or any of its income or receipts, except the Trust Estate as provided in the Indenture.

Electric Utility Fund; Application of System Revenues
So long as any Bonds are Outstanding or any other amounts payable under the Indenture remain unpaid, the City covenants and agrees that all System Revenues received by it shall be accounted for when and as received in the Electric Utility Fund, which the City covenants and agrees to maintain on the City’s books, and all System Revenues shall be applied and used only as provided in the Indenture, and shall be accounted for separate and apart from all other moneys, funds or other resources of the City . The City may, to th e extent provided in the Indenture, allocate System Revenues and other amounts to the Rate Stabilization Fund or allocate amounts accounted for in the Rate Stabilization Fund to the Electric Utility Fund. The City shall apply available System Revenues in the following order of priority: first, to the payment of all Maintenance and Operation Costs (including amounts reasonably required by the City to be set aside in contingency reserves for Maintenance and Operation Costs the payment of which is not immediately required) and all Energy Payments not included in Maintenance Costs, in each case as they become due and payable; second, (a) on or before each date the Trustee is required to make any transfer or deposit from the Bond Fund for principal or interest a s described under “ – Application of Funds Under the Indenture” below, the City shall transfer to the Trustee such amount as is required for the Trustee to make the transfers and deposits required to be made by the Trustee on such date, including all amounts of principal, purchase price, interest, and Redemption Price then due and payable with respect to the Bonds, and (b) the City shall transfer to the applicable payee or as otherwise required, the amounts required as payments due in respect of Parity Obligations as such payments become due and payable, provided that in the event more than one transfer described in clauses (a) and (b) is required to made on a given date and there are insufficient System Net Revenues to make all such payments, then such payments shall be made ratably (based on the total amount of such transfers then due) to the extent of available System Net Revenues; and third, solely from then-available System Net Revenues, the City shall transfer to the Trustee , such amount, if any, as is required for the Trustee to make the transfers and deposits to any Reserve Fund for any Bonds as described under “– Application of Funds Under the Indenture” below, and, ratably therewith (based on the total amount of such transfers then to be made ) if there are insufficient System Net Revenues to make all such transfers on a given date, any transfers in respect of any debt service reserve fund established for Parity Obligations as set forth in the documents providing for the issuance or incurrence of such Parity Obligations . If (i) no Event of Default has occurred and is continuing, ( ii) all Maintenance and Operation Costs and Energy Payments are being and have been paid and are then current, and ( iii) all payments and transfers then due and payable or required to be made with respect to the Outstanding Bonds and outstanding Parity Obligations have been paid, then the System Revenues, and the proceeds thereof, will be available for any lawful purpose of the Electric Utility Fund.

Application of Funds Under the Indenture
The Trustee shall deposit in the Bond Fund established under the Indenture all amounts received by it from the City pursuant to the Indenture, when and as received by the Trustee.

The Trustee shall set aside on each date set forth belo w the moneys in the Bond Fund in the following respective funds in the following amounts, in the following order of priority, the requirements of each such fund (including the making up of any deficiencies in any such fund resulting from lack of moneys in the Bond Fund

15 sufficient to make any earlier required deposit) at the time of deposit to be satisfied before any deposit is made to any fund subsequent in priority:

First Priority - Interest Fund. No later than each Interest Payment Date, the Trustee shall set aside in the Interest Fund an amount equal to the aggregate amount of interest becoming due and payable on the Outstanding Bonds on such Interest Payment Date (excluding any interest for which there are moneys deposited in the Interest Fund from the proceeds of any Series of Bonds or other source and reserved as capitalized interest to pay such interest on said Interest Payment Date) . No deposit need be made into the Interest Fund with respect to any Bonds if the amount contained therein is at least equal to the interest to become due and payable on said Interest Payment Date and on each Interest Payment Date any excess amounts in the Interest Fund not needed to pay interest on such Interest Payment Date shall be transferred to the Bond Fund (excepting any moneys deposited in the Interest Fund from the proceeds of any Series of Bonds or other source and reserved as capitalized interest to pay interest on any future Interest Payment Dates following such Interest Payment Date).

If there are Liquidity Fac ility Bonds outstanding at the time of any required deposits to the Interest Fund, such deposits shall take into account and include the Liquidity Facility Rate on Liquidity Facility Bonds required by the Liquidity Facility then in effect with respect to such Bonds.

Second Priority - Principal Fund; Sinking Accounts . No later than each Principal Payment Date, the Trustee shall set aside in the Principal Fund an amount equal to (a) the aggregate amount of Bond Obligation becoming due and payable on such Principal Payment Date on the Outstanding Serial Bonds of all Series plus (b) the aggregate of the Mandatory Sinking Account Payments to be paid on such Principal Payment Date into the respective Sinking Accounts for the Term Bonds of all Series . If, however, the City certifies to the Trustee that any principal payments are expected to be paid from amounts on deposit in a Reserve Fund that would be in excess of the Bond Reserve Requirement applicable to such Reserve Fund upon such payment, no amounts need be se t aside towards such principal to be so refunded or paid . All of the aforesaid deposits made in connection with Mandatory Sinking Account Payments shall be made without priority of any payment over any other such payment.

No deposit need be made into the P rincipal Fund on any date so long as there shall be in such fund (i) moneys sufficient to pay the Bond Obligations of all Serial Bonds issued under the Indenture and then Outstanding and maturing by their terms on the immediately succeeding Principal Payment Date plus (ii) the aggregate of all Mandatory Sinking Account Payments required to be made on such Principal Payment Date. On each Principal Payment Date or as soon as practicable thereafter any excess amounts in the Principal Fund not needed to pay Bond Obligation or Mandatory Sinking Account Payments on such Principal Payment Date shall be transferred to the Bond Fund.

If there are any Liquidity Facility Bonds outstanding at the time of any required deposits to the Principal Fund, such deposits shall t ake into account and include any amortizations or redemptions of any Liquidity Facility Bonds required by the Liquidity Facility then in effect with respect to such Bonds . For purposes of the provisions above relating to the Principal Fund, Liquidity Facility Bonds shall be treated as Serial Bonds with maturity dates on the payment dates of any amortization or redemptions.

Third Priority - Reserve Funds. Upon the occurrence of any deficiency in any Reserve Fund, the Trustee shall make such deposit to such Reserve Fund (including such amounts as are required by the Indenture to replenish withdrawals on any Reserve Facility), as is required pursuant to the Indenture, each such deposit to be made as soon as possible in each month, until the balance therein is at least equal to the applicable Bond Reserve Requirement.

Transfer to the City . I
f no Event of Default has occurred and is continuing and all payments then due and payable by the City pursuant to the Indenture have been paid, then, except as the City shall otherwise direct in writing or as is otherwise provided in a Supplemental Indenture, amounts remaining in the Bond Fund after all transfers described above that are required to be made on a given date have been made, and the proceeds thereof, will be transferred to the City on the same Business Day or as soon as practicable thereafter . The City

16 may use and apply such amounts when received by it for any lawful purpose of the Electric Utility Fund , including the redemption of Bonds upon the terms and conditions set forth in the Supplemental Indenture relating to such Bonds and the purchase of Bonds as and when and at such prices as it may determine.

Rate Covenant
Pursuant to the Indenture, the City has covenanted that it will during each Fiscal Year fix, prescribe and collect rates, fees and charges for the Electric Service that are reasonably estimated to yield System Net Revenues for such Fiscal Year equal, in each case, to at least (1) 115% of the Debt Service on all Outstanding Bonds and outstanding Parity Obligations for such Fiscal Year, and (2) 100% of all obligations of the City payable from System Net Revenues in such Fiscal Year. This obligation of the City in the Indenture is referred to herein as the “Rate Covenant.” In fixing and prescribing such rates, fees and charges, the City may make reasonable assumptions concerning contingencies that may affect System Revenues and the timing and amount of payments on Bonds, Parity Obligations and any other obligations of the City that may become due and payable from System Revenues in such Fiscal Year. The City may make adjustments from time to time in such rates, fees and charges and may make such classification thereof as it deems necessary, but shall not reduce the rates, fees and charges then in effect unless the System Net Revenues from such reduced rates, fees and charges are reasonably estimated to be sufficient to meet the requirements of the Rate Covenant. See APPENDIX C – “SUMMARY OF THE INDENTURE – Covenants of the City.” For purpo ses of the Rate Covenant, as pro vided in the Indenture, the amount of System Revenues in any Fiscal Year may be reduced by the amount of current System Revenues allocated to the Rate Stabilization Fund and the amount of System Revenues may be increased by amounts allocated from the Rate Stabilization Fund to the Electric Utility Fund. See “– Rate Stabilization Fund” below.

Bond Reserve Fund With Respect to Series 2022 Bonds
Pursuant to the Indenture, the Bond Reserve Fund is to be established by the Trustee upon the issuance of the Series 2022 Bonds to be held in trust for the benefit of the Owners of the Participating Bonds, including the Series 2022 Bonds. The Bond Reserve Fund is required to be maintained in an amount equal to the Bond Reserve Requirement. The Indenture defines the “Bond Reserve Requirement” to be, with respect to the Bond Reserve Fund, as of any date of calculation, an amount equal to the least of ( a) 10% of the principal amount of the Participating Bonds, (b) the Maximum Annual Debt Service for the Participating Bonds, and (c) 125% of the Average Annual Debt Service for the Participating Bonds , all as computed and determined by the City and specified in writing to the Trustee upon the issuance of any Participating Bonds and upon any o ther change in the amount of the Bond Reserve Requirement; provided, that the amount of the Bond Reserve Requirement shall not increase at any time except upon the issuance of additional Participating Bonds; and provided further, that with respect to the issuance of additional Participating Bonds if the Bond Reserve Fund would have to be increased by an amount greater than 10% of the stated principal amount of such additional Participating Bonds (or, if the issue has more than a de minimis amount of original issue discount or premium, of the issue price of such Bonds) then the Bond Reserve Requirement shall be such lesser amount as is determined by a deposit of such 10%.

The Bond Reserve Fund will initially be funded from the proceeds of the Series 2022 Bonds in an amount equal to the Bond Reserve Requirement ($_________ upon the delivery of the Series 2022 Bonds). In lieu of funding any portion of the Bond Reserve Fund with cash or in replacement of moneys then on deposit in the Bond Reserve Fund, the City may, at any time and from time to time, provide for all or a portion of the Bond Reserve Fund by delivery to the Trustee of an insurance policy, letter of credit, surety bond or other instrument (a “Reserve Facility”) issued by a financial institution or insurance company, as applicable, having a long-term rating at the time of delivery of such insurance policy, letter of credit, surety bond or other instrument in one of the two highest Rating Categories from at least one Rating Agency.

All money in the Bond Reserve Fund shall be used and withdrawn by the Trustee solely for the purpose of (i) making up any deficiency in the Interest Fund or the Principal Fund relating to the Participating Bonds, or (ii) together with any other moneys available therefor, for t he final payment of, or for the defeasance or

17 redemption of all or a portion of, the Participating Bonds (including the Series 2022 Bonds) in accordance with the Indenture. See APPENDIX C – “SUMMARY OF THE INDENTURE – Establishment, Funding and Application of Reserve Funds.”
The Indenture provides that the City may at its sole discretion at the time of issuance of any Series of Non-Participating Bonds or at any time thereafter by Supplemental Indenture provide for the establishment of a Bond Series Reserve Fund as security for one or more Series of Bonds or may provide for no debt service reserve for any such Non -Participating Bonds. Any Bond Series Reserve Fund so established by the City may secure one or more Series of future Bonds as the City shall determ ine and shall specify in the Supplemental Indenture establishing such Bond Series Reserve Fund. Amounts on deposit in any Bond Series Reserve Fund established for any Series of Non -Participating Bonds shall be used and withdrawn as provided in the Suppleme ntal Indenture authorizing the issuance of such Non-Participating Bonds.

Amounts on deposit in the Bond Reserve Fund established in connection with the Series 2022 Bonds secure only Participating Bonds and do not secure in any manner any future Series of B onds that are Non- Participating Bonds or any other Parity Obligations of the City. Amounts on deposit in any Bond Series Reserve Fund for any one or more Series of Non -Participating Bonds or in any debt service reserve for any Parity Obligations will not secure in any manner the Series 2022 Bonds.

City Appropriations Relating to Certain Bond Reserve Fund Withdrawals In order to enhance the security of the Series 2022 Bonds, the City and the Trustee have agreed in the First Supplemental Indenture, for so long as any Series 2022 Bonds remain Outstanding, in the event of any withdrawal from the Bond Reserve Fund for the purpose of making up a deficiency in the Interest Fund or the Principal Fund, to follow the procedures described below to (1) request an appropriation from any available funds from the City, and (2) apply the funds, if any, so appropriated by the City to the replenishment of the Bond Reserve Fund:
(a) Promptly upon any withdrawal from the Bond Reserve Fund for the purpose of making up any deficiency in the Interest Fund or the Principal Fund, the Trustee shall notify the City in writing or by electronic means of the amount of such withdrawal and request that the City deposit a like amount in the Bond Reserve Fund;
(b) If the City does not deposit the amount set out in a request of the Trustee pursuant to paragraph (a) in the Bond Reserve Fund from available System Net Revenues or other available funds of the Electric Utility Fund within 30 days of such request from the Trustee, an Authorized Representative of the City shall request that the City Council budget and appropriate such amount from any available funds of the City within 150 days of such request from the Trustee; and
(c) Any amount so budgeted and appropriated by the City Council pursuant to a request of an Authorized Representative of the City made pursuant to subsection (b) shall be transferred to Trustee promptly after appropriation for deposit in the Bond Reserve Fund and the Trustee shall deposit any such amount in the Bond Reserve Fund promptly upon receipt.

Notwithstanding the foregoing or anything else in the Indenture to the contrary, the fa ilure of City Council to budget and appropriate any amount requested by an Authorized Representative of the City as described in paragraph (b) above for any reason shall not constitute a default or Event of Default under the Indenture and none of the Trust ee, the Holders or any other Person shall have any recourse against the City in the event the City Council does not budget and appropriate any such amount for any reason.

18 debt service on the Series 2022 Bonds. See “RISK FACTORS – No Obligation of City to Appropriate Other Funds.”
Information about the financial condition of the City General Fund, and other information concerning the City’s demographics and economy is provided in APPENDIX A – “THE CITY OF VICTORVILLE.” A copy of the City’s Annual Comprehensive Financial Report for the Fiscal Year ended June 30, 2021 is attached as APPENDIX B. See also “AUDITED FINANCIAL STATEMENTS.” Outstanding Electric System Indebtedness
Certain funds for working capital, startup costs and operation funding shortfalls in connection with the creation of VMUS and the establishment of the Electric System as a municipally -owned utility were advanced by the City General Fund to the Municipal Utility Services Fund ( the fund in which operations of the Electric System were originally accounted for) from Fiscal Year 2003-04 through 2007-08. In 2018, the Interfund Loan Agreement was executed for the reimbursement of such funds in the amount of $17,850,143. As of January 1, 2022, the outstanding principal balance (exclusive of accrued interest) repayable from the Electric Utility Fund to the City General Fund under the Interfund Loan Agreement was $ 3,850,143. Amounts to be repaid to the General Fund are payable out of the Electric Utility Fund from System Net Revenues on a basis junior and subordinate to the payment of the Bonds and any current/or future obligations, liens, or encumbrances of the Electric Utility Fund. See also “THE VMUS ELECTRIC SYSTEM – Outstanding Debt Obligations.” The payment schedule with respect to the Series 2022 Bonds and the Interfund Loan Agreement i s set forth below under “DEBT SERVICE SCHEDULE.”
Additional Bonds and Other Obligations Payable from System Revenues Take-or-Pay Contracts. The City may incur obligations attributable to the Electric System for Energy Payments (as defined above) that are payable whether or not the associated power, energy, fuel and capacity for which such payments are being made is delivered or capable of bein g delivered or otherwise made available to or received by or for the account of the City. Such Energy Payments may include obligations for the payment of debt service costs on indebtedness issued by other entities, including, for example, a joint powers ag ency, for the purpose of financing costs of the project to which such Energy Payments relate. As described herein, any such Energy Payments will be payable from System Revenues prior to the payment of the Bonds and Parity Obligations.

Additional Bonds. The City may, by Supplemental Indenture, issue one or more additional Series of Bonds that, subject to the provision of the Indenture permitting the application thereof for the purposes of and on the terms and conditions set forth in the Indenture, are payable from the Trust Estate and secured by the pledge thereof made under the Indenture equally and ratably with the Outstanding Bonds. Additional Series of Bonds may be issued upon compliance by the City with the provisions set forth in the Indenture and subje ct to certain specific conditions precedent set forth in the Indenture.

Conditions precedent to the issuance of an additional Series of Bonds, include, but are not limited to, the following:
(a) No Event of Default shall have occurred and then be continuing (or the issuance of such additional Series of Bonds will cure any such Event of Default). (b) The Supplemental Indenture providing for the issuance of such Series shall state whether the Bonds of such Series are Participating Bonds . The Series 2022 Bonds are Participating Bonds . If the Bonds of any such additional Series are Participating Bonds, the Supplemental Indenture shall require a deposit of the amount, if any, necessary to increase the amount on deposit in the Bond Reserve Fund to an amou nt at least equal to the Bond Reserve Requirement with respect to such Series of Bonds and all other Participating Bonds secured by such Bond Reserve Fund to be considered Outstanding upon the issuance of such additional Series

19 of Bonds. Subject to the provisions of the Indenture, in the event a Supplemental Indenture providing for the issuance of an additional Series of Bonds shall require either (i) the establishment of a Bond Series Reserve Fund to provide additional security for such Series of Bonds, or (ii) that the balance on deposit in an existing Bond Series Reserve Fund be increased, forthwith upon the receipt of the proceeds of the sale of such Series, to an amount at least equal to the Bond Reserve Requirement (as specified in the Supplemental Indenture establishing such Bond Series Reserve Fund) with respect to such Series of Bonds and all other Bonds secured by such Bond Series Reserve Fund to be considered Outstanding upon the issuance of such additional Series of Bonds, the Supplemental Indenture providing for the issuance of such additional Series of Bonds shall require deposit of the amount necessary. The deposit shall be made as provided in the Supplemental Indenture providing for the issuance of such additional Series of Bonds and may be mad e from the proceeds of the sale of such Series of Bonds or from other funds of the City or from both such sources or may be made in the form of a Reserve Facility.
(c) The aggregate principal amount of Bonds issued shall not exceed any limitation imposed b y law or by any Supplemental Indenture.
(d) The City shall deliver to the Trustee a Certificate of the City or, at the option of the City, a certificate or report of a Consultant, which Certificate of the City or certificate or report of the Consultant sha ll also set forth the computations upon which such Certificate of the City or Consultant’s certificate or report is based, demonstrating either of the following:
(1) The System Net Revenues for either the most recent Fiscal Year for which audited financial statements are available or for any other period of 12 consecutive months (selected by the City) during the 18 months immediately preceding the date on which such additional Series of Bonds will become Outstanding shall have been , in each case, equal at least (x) 120% of the Debt Service on all Outstanding Bonds and outstanding Parity Obligations for the most recently completed Fiscal Year and (y) 100% of all obligations of the City payable from System Net Revenues for the most recently completed Fiscal Year, including in such calculation the Average Annual Debt Service for the additional Series of Bonds to be issued. For the purpose of providing such Certificate of the City or Consultant’s certificate or report , the City or the Consultant may adjust the System Net Revenues for such Fiscal Year or 12-month period, as the case may be, to reflect:
(A) an allowance for System Net Revenues that would have been derived from each new connection to the Electric System that w as made prior to the issuance of such additional Series of Bonds but which was not in existence, during all or any part of such Fiscal Year or twelve (12) month period under consideration, in an amount equal to the estimated additional System Net Revenues that would have been derived from each such connection if it had been made prior to the beginning of such Fiscal Year or 12-month period, and (B) an allowance for System Net Revenues that would have been derived from any increase in the rates, fees and charges fixed and prescribed for Electric Service which became effective prior to the issuance of such additional Series of Bonds but which was not in effect, during all or any part of such Fiscal Year or 12-month period under consideration, in an amount equal to the estimated additional System Net Revenues that would have been derived from such increase in rates, fees and charges if it had been in effect prior to the beginning of such Fiscal Year or 12-month period; or
(2) The estimated System Net Revenues fo r each of the five Fiscal Years next following the earlier of (i) the end of the period during which interest on the additional Series of Bonds is to be capitalized or, if no interest is capitalized, the Fiscal Year in which the additional Series of Bonds is to be issued, or (ii) the date on which substantially all projects financed with the proceeds of any Bonds, including the additional Series of Bonds to be issued, are expected to commence operations will be, in each case, equal to at least (x) 120% of the estimated Debt Service on all Outstanding Bonds (including the additional Series of Bonds to be issued) and outstanding Parity Obligations for each such Fiscal

20 Year and (y) 100% of all obligations of the City payable from System Net Revenues for each such Fiscal Year. For the purpose of providing such Certificate of the City or Consultant’s certificate or report, the City or the Consultant may adjust the System Net Revenues to reflect:
(A) an allowance for System Net Revenues that are estimated to be der ived from any increase in the rates, fees and charges for Electric Service which have been adopted by the City and which will be in effect during all or any portion of the period for which such estimates are provided; and
(B) an allowance for System Net Revenues that are estimated to be derived from new customers of the Electric System anticipated to be served by any additions or improvements to or replacements or extensions of the Electric System reasonably expected to become available during all or any portion of the period for which such estimates are provided in an amount equal to the additional System Net Revenues that are estimated to be derived from such customers.

For purposes of any computation described in paragraph (2) above, with respect to Maintenance and Operation Costs and Energy Payments, the City or the Consultant shall use such assumptions (which shall be set forth in the City’s Certificate or the Consultant’s certificate or report) as the City or the Consultant believes to be reasonable, ta king into account : (i) historical Maintenance and Operation Costs and Energy Payments , (ii) Maintenance and Operation Costs and Energy Payments associated with the additions or improvements to or replacements or extensions of the Electric System to be financed with the proceeds of such additional Series of Bonds and any other new additions or improvements to or extensions of the Electric System during any period for which estimates are provided and (iii ) such other factors, including inflation and changing operations or policies of the City, as the City believes to be appropriate.

In addition, Refunding Bonds may be issued without satisfaction of the tests described in paragraph (d) above if Maximum Annual Debt Service on all Bonds and Parity Obligations which will be outstanding following the issuance of such Series of Refunding Bonds is less than or equal to Maximum Annual Debt Service on all Bonds Outstanding and Parity Obligations outstanding prior to the issuance of such Refunding Bonds.

Parity Obligations. In addition to additional Bonds, the City may also issue or incur other obligations, including Interest Rate Swap Agreements (but excluding fees and expenses and termination payments on Interest Rate Swap Agreements), payable in whole or in part from, and secured by a pledge of System Net Revenues on a parity basis with the Outstanding Bonds, subject to the provisions of the Indenture, provide d that certain conditions precedent to the issuance or incurrence of such Parity Obligations, as set forth in the Indenture, are satisfied.

Conditions precedent to the issuance or incurrence of Parity Obligations include, but are not limited to, the following:
(a) No Event of Default shall have occurred and then be continuing (or the issuance or incurrence of such Parity Obligations will cure any such Event of Default), as evidenced by the delivery to the Trustee of a Certificate of the City to that effect; and
(b) The City shall deliver to the Trustee a Certificate of the City or, at the option of the City, a certificate or report of a Consultant, which Certificate of the City or certificate or report of the Consultant shall also set forth the computations upon which such Certificate of the City or Consultant’s certificate or report is based, demonstrating one of the following:
(A) Such Parity Obligations are being issued or incurred for purposes of refunding and the Maximum Annual Debt Service on all Bonds Outs tanding and all Parity Obligations outstanding following the issuance or incurrence of such Parity Obligations is less than or equal

21 to Maximum Annual Debt Service on all Bonds Outstanding and all Parity Obligations outstanding prior to the issuance or incurrence of such Parity Obligations; or (B) The requirements set forth in paragraph (d) above under “– Additional Bonds” shall have been satisfied with respect to the issuance or incurrence of such Parity Obligations; provided, however that if the Parity Obligation being issued or incurred consists of an Interest Rate Swap Agreement that relates to a Series of Bonds or Parity Obligations (excluding fees and expenses and termination payments on such Interest Rate Swap Agreement), the City shall be deemed to have complied with the requirements described in this paragraph with respect to such Interest Rate Swap Agreement to the extent that the Series of Bonds or Parity Obligations to which the Interest Rate Swap Agreement relates (x) satisfies the requirements described in paragraph (d) above under “ – Additional Bonds” after taking into account the adjustment of Debt Service on such Series of Bonds or Parity Obligations to reflect the impact of the Interest Rate Swap Agreement (in the case of Interest Rate Swap Agreements entered into concurrently with, or subsequent to, the issuance of such Bonds or Parity Obligations), or (y) is expected to satisfy the requirements described in paragraph (d) above under “– Additional Bonds” after taking into account the adjustment o f Debt Service on such Series of Bonds or Parity Obligations to reflect the impact of the Interest Rate Swap Agreement (in the case of Interest Rate Swap Agreements entered into in advance of the issuance of such Bonds or Parity Obligations); or
(C) Such Parit y Obligations consist of Reimbursement Obligations relating to Bonds or Parity Obligations.

Subordinate Obligations. Nothing in the Indenture shall limit the ability of the City to issue or incur obligations, in addition to the Interfund Loan Agreement, pa yable from the Trust Estate or any portion thereof (including the System Net Revenues) on a basis that is junior and subordinate in both payment and lien priority to the Bonds and Parity Obligations.

See also APPENDIX C – “SUMMARY OF THE INDENTURE – [Issuance of Bonds].” Rate Stabilization Fund
Pursuant to the Indenture, the City may establish and maintain on the City’s books a fund or account known as the “Rate Stabilization Fund.” Upon compliance with the terms of the Indenture, the City may, from time to time, allocate to the Rate Stabilization Fund from current System Revenues such amounts as the City shall determine, and the amount of available current System Revenues shall be reduced by the amount so allocated. The City may, from time to time, also allocate to the Rate Stabilization Fund amounts from any other lawfully available source other than current System Net Revenues and the amount of available current System Net Revenues shall not be reduced by the amounts so allocated . The City may allocate amounts accounted for in the Rate Stabilization Fund to the Electric Utility Fund, and any amounts so allocated not later than February 28 following the end of a Fiscal Year may be deemed System Revenues for such Fiscal Year. The City may also apply moneys on deposit in the Rate Stabilization Fund for any other lawful purpose of the Electric Utility Fund.

All interest or other earnings upon amounts allocated to the Rate Stabilization Fu nd may be allocated to the Electric Utility Fund and accounted for as System Revenues in accordance with the terms of th e Indenture relating to the Rate Stabilization Fund or used for any other lawful purpose of the Electric Utility Fund.

22 DEBT SERVICE SCHEDULE
The following table shows the combined annual debt service required for the Series 2022A Bonds and Series 2022B Bonds and the payments due under the subordinate Interfund Loan Agreement. Principal amounts set forth in the table below include sinking fund payments.

Fiscal Year
Ending
June 30
Series 2022A Bonds
(Tax-Exempt)
Series 2022B Bonds
(Taxable)
Subordinate
Interfund
Loan
Total
Debt
Service(1)
Principal Interest Principal Interest
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043
2044
2045
2046
2047
2048
2049
2050
2051
2052
Total(1)

(1) Totals may not add due to rounding.

Source: City.

23 4844-3753-2891v17/022726-0005

THE CITY OF VICTORVILLE AND

VICTORVILLE MUNICIPAL UTILITY SERVICES
General History and Background
The City of Victorville was incorporated on September 21, 1962 as a general law city. At that time, the City had a population of approximately 8,110 and an area of 9.7 square miles. City voters approved a charter in 2008 and the City thereafter became a charter city . The City presently encompasses an area of approximately

74.16 square miles and, as of January 1, 2021, has an estimated population of 127,170.

The City is located in the County of San Bernardino, approximately 97 miles northeast of the City of Los Angeles and approximately 35 miles northeast of the City of San Bernardino. The City is situated just north of the San Bernardino Mountains, at the edge of the Mojave Desert, in the High Desert sub -region of San Bernardino County known as Victor Valley. In addition to the City, the Victor Valley includes the communities of Adelanto, Apple Valley, Barstow Hesperia, Lucerne Valley, Oak Hills, Phelan, and Wrightwood. The City is the business hub of the Victor Valley and the largest commercial center between San Bernardino and the Nevada border. The proximity of the City to major transportation routes contributed to the development of the City .

Interstate Highway 15 and State Highway 18 intersect near the heart of the City, which is bordered on the west by State Highway 395 . Other m ajor trucking and rail routes run through the area . Regularly scheduled air transportation for passengers is available from Ontario International Airport, located approximately 40 miles south of the City.

During World War II, construction of Victorville Army Airfield, later renamed George Air Force Base, was completed. When fully activated, the base employed approximately 6,000 civilian and military personnel.

On January 5, 1989, the Secretary of Defense announced the closure of George Air Force Base under the Base Closure and Realignment Act. The base was deactivated on December 15, 1992. The former military base was annexed into the City on July 21, 1993, and has been renamed Southern California Logistics Airport. In 1998, SCLA was master planned with a reuse plan that proposed redevelopment of the former military base dedicating approximately 2,200 acres to serve as an industrial airport catering to a customer base that performs aircraft maintenance and completion services, flight testing, aircraft research and development, aircraft asset management and aircraft end-of-life cycle services. The balance of the parcels comprising the former base are being developed as an adjacent commercial/industrial center.

The City’s efforts to facilitate job creation and increase local employment opportunities by expanding the industrial sector operating within the city limits have contributed to the City’s transition over the last 40 years from a primarily residential commuter suburb to a business center for the region. The relatively low labor costs, affordable housing, reasonably priced developable land and the availability of low-cost power and proximity to all major southwestern markets have been significant factors in the development of an industrial base within the City.

Land use development within the geographical area of the City includes residential, mixed -use, commercial, industrial, and public, institutional, and open space development. Housing developme nt consists primarily of single family residences, with some of the single family housing developers including KB Homes, K. Hovnanian and D.R. Horton. The City’s commercial and industrial sector development also continues to be active with a number of new projects expected to commence in 2022. See also APPENDIX A – “THE CITY OF VICTORVILLE,” including information under the caption “CITY GENERAL ECONOMIC AND DEMOGRAPHIC INFORMATION – Economic Development.”
In addition to SCLA, existing indust rial development includes the Foxborough Industrial Park, an approximately 200-acre property located in the southeast part of the City, which has been developed as a manufacturing and warehouse logistics operation location. Since 2000, the Foxborough Indus trial Park has provided direct rail access to Burlington Northern Santa Fe’s main line via a publicly-owned rail spur.

The City provides a range of services to its residents and businesses, including , among others, water (through Victorville Water District), refuse collection (through a private contractor), sewer and public works.

24 4844-3753-2891v17/022726-0005
In January 2001, pursuant to Resolution No. 01-11 adopted by the City Council, the City authorized and established VMUS as a new department of the City. As provided in Resolution No. 01-11, VMUS has the power to provide various utility services to the residents and businesses of the City, including, without limitation, electric, gas, cable television, telephone and telecommunications, as from time to time determined by the City Council. VMUS currently exercises only certain of its authorized functions relating to the provision of electric and gas services within the City to limited areas, consisting of the SCLA and the Foxborough Industrial Park.

Through VMUS, the City provides ele ctric and gas service for commercial and industrial customers at SCLA and electric service for commercial and industrial customers at Foxborough Industrial Park . New or expanded commercial or industrial electric service within these two geographical areas served by the Electric System are part of the exclusive service territory of VMUS. Electric service to all of the residents of the City and all businesses not located within the geographic areas currently served by VMUS as noted above is provided by SCE; however, VMUS reserves the right to serve new customers on undeveloped properties within the C ity’s jurisdiction. Natural gas service to all customers not served by VMUS is provided by Southwest Gas Company.

Except electric and gas services, the City does not presently intend to exercise other functions through VMUS. Such other functions and the related facilities, if exercised, would not constitu te part of the Electric System.

Governance and Management
General. The City functions as a charter city under the council-manager form of government. The City is governed by a five- member City Council. As of January 2022, pursuant to a duly adopted ordinance and boundary map, the City changed from an at-large election system to a by-district election system and established five single member Council districts. Commencing at the general municipal election in November of 2022, the voters in districts 2 and 4 will elect Council members by district for full four (4) year terms, and at the general municipal election in November of 2024, the voters in districts 1, 3, and 5 will elect Council members by district for full four (4) year terms. Councilmembers select a Mayor and a Mayor Pro Tem from among the City Council which serve in such positions for a one-year term.

City Council. The current Mayor and City Council members and the expiration dates of their terms are set forth below.

CITY OF VICTORVILLE
Mayor and City Council Members
Name and Title Expiration of Term
Debra Jones, Mayor 2022
Leslie Irving, Mayor Pro Tem 2024
Elizabeth Becerra, Council Member 2024
Blanca Gomez, Council Member 2024
[Vacant], Council Member 2022

As reflected in the table above, since March 3, 2021 a vacancy has existed on the City Council. See “LITIGATION AND CERTAIN OTHER CITY MATTERS” for additional information regarding such vacancy and the status and timing for filling it, as well as a discussion of certain other matters relating to the City Council.

Management. The City Manager, who is appointed by the City Council, is responsible for the day- to- day operations of the City and to ensure that the policies developed by the City Council are executed . Beyond responsibility for the overall operations of the City, the City Manager’s Department also provides support to the City Council in several areas including strategic planning, intergovernmental relations, public relations and legislation. The City Council also appoints a City Attorney who is responsible for advising the City Council on legal issues affecting the City . Biographical summaries of the City Manager and City Attorney are set forth below.

25 4844-3753-2891v17/022726-0005
Keith C. Metzler, City Manager . Mr. Metzler has served as the City Manager since April 2018 . He joined the City in 1996, and served in a variety o f increasingly responsible positions, including as Economic Development Director beginning in 2003 before being named Assistant City Manager in 2011. Mr. Metzler served as Interim City Manager beginning in January 2018 before being appointed to his current position. He obtained a Bachelor of Science degree in Business Administration from the University of California, Riverside and a Master’s degree in Business Administration from California State University, San Bernardino.

Andre de Bortnowsky, City Attorney . Mr. de Bortnowsky currently serves as the City Attorney for the City of Victorville and has served in such capacity since 2007. Prior to that time Mr. de Bortnowsky served as Assistant City Attorney starting in 2003. He also currently serves as General Counsel to the Southern California Logistics Airport Authority and has done so since its inception in 1997. Mr. de Bortnowsky holds a Bachelor’s degree from University of California, Los Angeles, and obtained his law degree from Southwestern University School of Law. Mr. de Bortnowsky is currently a member of the State Bar of California, the Los Angeles County Bar Association, the American Bar Association, and the American Association of Airport Executives.

Other key personnel responsible for management of the City and VMUS include two Deputy City Managers, the Director of Finance/City Treasurer and the Director of Electric Utility Services . The following are biographical summaries of such senior management:

Sophie Smith, Deputy City Manager. Ms. Smith has been a member of the City of Victorville staff for 21 years and has served in various capacities. Ms. Smith currently serves as Deputy City Manager. In that capacity, she is responsible for leadership of the Economic Development, Finance & IT, Risk Managem ent, Human Resources, and City Clerk teams. Ms. Smith is a graduate of the University of California, Santa Barbara with a Bachelor’s degree in Law and Society, and earned her Master’s degree in Business Administration (MBA) from Cal State University, San Bernardino in 2008.

Jenele Davidson, Deputy City Manager . Ms. Davidson has been a member of the City of Victorville team for 17 years. She has served in a variety of increasingly responsible roles across various departments, including VMUS. She currently serves as Deputy City Manager and is responsible for leading the Recreation & Library, Public Works & Water, Engineering, Planning, Code Compliance and Building departments. Ms.

Davidson is a graduate of Cal State University, Northridge with a Bachelor’s degree in Business Administration with a focus on Systems and Operations Management, and earned her Master’s degree in Public Administration (MPA) from Cal State University, San Bernardino in 2014.

John Mendiola, Director of Finance/City Treasurer . Mr. Mendiola has been a member of the City of Victorville staff for 22 years and has served in various capacities. Mr. Mendiola previously served as the City’s Budget Officer and now serves as the Finance Director/City Treasurer. In that capacity, he is responsible for leadership of the Finance team consisting of the following divisions: Purchasing, Accounts Receivable, Customer Service, Accounting, Payroll and Accounts Payable. Mr. Mendiola currently sits on the Fiduciary Committee, Energy Risk Oversight Committee, Audit Committee and the Data Governance Board of the City.

Mr. Mendiola is a graduate of San Diego State University with a Bachelor’s degree in Business Administration.

Brenda Hampton, Director of Electric Utility Services. Ms. Hampton joined the City as the Director of Electric Utility Services in January 2020. In such capacity, under the administrative direction of the City Manager, Ms. Hampton is responsible, for directing the electric and natural gas services of the utility department, planning and directing departmental personnel, administering budgetary and fiscal aspects of VMUS, planning system development and managing regulatory compliance by the utility . Ms. Hampton has more than 30 years of energy-related experience. Prior to joining the City, she served as General Manager of Independence Power & Light, the second largest municipal utility in Missouri. Before being appointed to that position, Ms. Hampton was a Director, Regulatory Policy at Vistra Energy (including predecessor companies). Ms. Hampton also served on the Board of Directors of the North American Generator Forum and Texas Reliability Entity, Inc. Ms.

Hampton holds a Bachelor of Science degree in Mechanical Engineering from the University of Missouri, Columbia and a Master of Science degree in Engineering Management from Missouri University of Science & Technology.

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Employees and Employee Benefit Programs
As of March 15, 2022, the City had approximately 468 employees, of whom seven worked solely on behalf of VMUS. The City has never experienced a strike or work stoppage by its employees. With the exception of certain fire safety employees, City employees are not represented by labor associations.

City employees, including those assigned to VMUS, are eligible to participate in the California Public Employees Retirement System (“PERS”) , a multiple -employer defined benefit pension plan . City employees assigned to VMUS (which constitute less than 2% of all City employees) participate in the City’s Miscellaneous Plan with PERS. Maintenance and Operation Costs of the Electric System include expenses for allocable personnel services, including the funding of a portion of the retirement benefits for such employees. The City’s actuarially determined contractually required contributions for all miscellaneous employees were approximately $5.9 million in Fiscal Year 2020-21. Based upon information provided by PERS, the City projects the required contribution for Fiscal Year 2021-22 will be approximately $6.6 million. As of June 30, 2020 (the most recent actuarial valuation), the City’s Miscellaneous Plan with PERS had an unfunded liability (with respect to all participating City employees, including employees assigned to the General Fund, VMUS and all other non - safety funds) of approximately $64.3 million and a funded ratio 70.9%.

Under Governmental Accounting Standards Board (“GASB”) Statement No. 68, the City is required to report the Net Pension Liability in its financial statements. GASB Statement No. 68 is for financial reporting only and does not affect funding requirements. The actuarial value of assets (referred to as the Plan Fiduciary Net Position for GASB Statement No. 68 reporting purposes) is equal to the market value of the assets as of measurement date. The Net Pension Liability is equal to the difference between the Total Pension Liability and the Plan’s Fiduciary Net Position. As of the June 30, 2020 measurement date (as reported in the City’s audited financial statements for the Fiscal Year ended June 30, 202 1), the Net Pension Liability of the City’s Miscellaneous Plan was approximately $56.2 million, of which the proportionate share allocable to the Electric System has been determined to be approximately $1,046,259. The significant assumptions used to determine the City’s reported pension liabilities for GASB Statement No. 68 reporting purposes may be found in Note 12 to the audited financial statements of the City included in APPENDIX B – “ANNUAL COMPREHENSIVE FINANCIAL REPORT OF THE CITY FOR FISCAL YEAR ENDED JUNE 30, 2021.” See APPENDIX A – “THE CITY OF VICTORVILLE – CITY FINANCIAL INFORMATION – Retirement Programs” for additional information regarding the pension liabilities payable by the City, as well as the City’s current unfunded pension liability. The significant assumptions used to determine the City’s reported pension liabilities for GASB Statement No. 68 reporting purposes may be found in Note 12 to the aud ited financial statements of the City included in APPENDIX B – “ANNUAL COMPREHENSIVE FINANCIAL REPORT OF THE CITY FOR FISCAL YEAR ENDED JUNE 30, 2021.” In addition to required contributions for retirement benefits for employees, the City contributes to two single-employer defined benefit healthcare plans which provide certain post- employment health-care benefits (“OPEB”) for such employees . City employees assigned to VMUS participate in the City Retiree Healthcare Plan (the “City OPEB Plan”). The City has not established a trust that is administered by the City for the purpose of holding assets accumulated for plan benefits. As of June 30, 2021, the City’s total OPEB liability, based upon a June 30, 2020 measurement date, was approximately $27.7 million. The long-term OPEB liability payable by the Electric System has been estimated to be approximately $554,174.

See APPENDIX A – “THE CITY OF VICTORVILLE – CITY FINANCIAL INFORMATION – Other Post-Employment Benefits” for additional information regarding the OPEB liabilities payable by the City, as well as the City’s current unfunded OPEB liability. See also Note 14 to the audited financial statements of the City included in APPENDIX B – “ANNUAL COMPREHENSIVE FINANCIAL REPORT OF THE CITY FOR FISCAL YEAR ENDED JUNE 30, 2021.”

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City Insurance
The City is a member of the Public Entity Risk Management Authority (“PERMA”), a joint powers authority formed for the purpose of jointly funding programs of insurance coverage for its members. PERMA is comprised of 30 participating member agencies, including 20 cities and ten other public entities that are transit agencies, joint powers agencies, special districts or other public entities. The City participates in the liability, worker’s compensation, and employment practices liability programs of PERMA.

The liability program provides coverage up to $50,000,000 per occurrence for personal injury, bodily injury, property damage and public officials’ errors and omissions. The City has a $50,000 self-insured retention and participates in risk sharing pools for losses up to $1,000,000 followed by PERMA’s membership in the Public Risk Innovation, Solutions, and Management ( “PRISM”) joint powers authority for excess coverage to the applicable limits. The City maintains earthquake coverage on its City Hall. The City does not carry wildfire or electrical system component coverage. See “CERTAIN RISK FACTORS – Seismic and Other Natural Disasters.”
The PERMA workers’ compensation program provides statutory limits per accident for wo rkers’ compensation and $5,000,000 coverage per accident for employers’ liability. The City is self -insured for workers’ compensation liabilities for amounts up to $250,000 per accident or employee and participates in a risk sharing pool for losses up to $ 500,000 followed by PERMA’s membership in the Local Agency Worker’s Compensation Excess Insurance Authority and the PRISM joint powers authority for excess coverage to the applicable limits.

The employment practices liability program provides up to $50,000,000 coverage for employment related lawsuits such as wrongful termination and discrimination. The City is self-insured for up to $25,000 per occurrence and participates in the Employment Risk Management Authority for losses up to $1,000,000.

Coverage abov e $1,000,000 and up to the $50,000,000 coverage limit is available through PERMA’s membership in the PRISM joint powers authority for excess liability coverage.

The City also maintains certain cyber insurance coverage.

None of the above programs or polici es have had settlements or paid judgments on behalf of the City that exceeded pooled or insured coverages in the past three years.

The Indenture does not require that the City maintain all of the above insurance coverage amounts while the Series 2022 Bonds are outstanding. See APPENDIX C – “SUMMARY OF THE INDENTURE – [Covenants – Insurance]” for a description of insurance coverages that are required to be maintained pursuant to the Indenture while the Series 2022 Bonds are Outstanding.

THE VMUS ELECTRIC SYSTEM
General
VMUS was formed on January 9, 2001 by the City Council as a new department of the City. The primary purpose of VMUS is to administer and operate the municipally -owned utility services provided by the City pursuant to Resolution No. 01-11. VMUS’ current Electric System operations were established to assist existing businesses at SCLA and Foxborough Industrial Park and to attract new businesses to these areas by offering low energy costs. Of the seven City employees assigned solely to VMUS, there is one Director, four administrative staff, of which two are also tasked with oper ations and maintenance , and two additional operational and maintenance personnel. In addition to the Electric System, VMUS also administers the City’s gas utility. As of January 1, 2022 , VMUS serve d approximately 25 gas customers (representing 60 separately metered gas accounts) and approximately 36 electric customers (representing 81 separately metered electric accounts). Prior to the Fiscal Year ended June 30, 2020, the activities of both the Electric System and the City’s gas utility enterprise were accounted for in the Municipal Utility Services Fund of the City. Beginning with the Fiscal Year ended June 30, 2020, all revenues of the Electric System are credited to, and all expenses of the Electric System

28 4844-3753-2891v17/022726-0005
are payable from, the Electric Utility Fund of the City. The Trust Estate securing the Series 2022 Bonds includes the System Net Revenues attributable to the Electric System only and does not include any revenues of the City’s gas system.

As noted above, VMUS provides electric services only to commercial and industrial customers at SCLA and Foxborough Industrial Park. SCLA includes an approximate 2,200-acre aviation center located on a portion of the property. This portion of SCLA is known as the “On- Airport” development area of the former Air Force Base. The SCLA aviation center is home to world-class companies that include The Boeing Company, General Atomics, General Electric Aircraft Engines and International Aerospace Coatings, all of which are customers serviced by VMUS. The remaining acres of the for mer Air Force Base, known as “Off -Airport” development (which is also part of the service area of the VMUS Electric System), comprises the non -aeronautical facilities owned and operated by the Southern California Logistics Airport Authority and the airport authority’s partner developers, Prologis, Inc. and Covington Group, Inc.. This “Off -Airport” development area is better known as the Southern California Logistics Center (“SCLC”) and is being transformed to an industrial transportation hub supported by ai r and ground connections. The City, in conjunction with the previous developer, successfully developed over 3.4 million square feet of industrial warehousing and manufacturing. O ver 2.8 million square feet of warehouse space is currently under construction.

The Foxborough Industrial Park, located in the southeast part of the City, has been developed as a key manufacturing and warehouse logistics operation location. Since 2000, Foxborough has provided direct rail access to Burlington Northern Santa Fe’s main line via a publicly-owned rail spur. VMUS customers located at the Foxborough Industrial Park include Americold Logistics, The Nutro Company (Mars Pet Care), and Verizon.

During Fiscal Year 2020 -21, the Electric System supplied approximately 78 separately metered customer accounts at these two locations with over 104.0 million kilowatt hours (“kWhs ”) of electric energy and had a peak demand of approximately 19.1 megawatts (“MWs”). The Electric System’s highest peak load of

19.1 MWs occurred in June 2021. See “– Customer Base; Metered Accounts, Retail Sales, Billed Revenues and Demand.” As of January 1, 2022, there are 81 separately metered accounts served by the Electric System.

Physical Assets; Interconnection and Distribution Facilities The physical assets of the Electric System are primarily electricity distribution facilities . The City’s electricity distribution system is almost entirely located underground in conduit and utility vaults. The City does not own or operate any generating plants or transmission assets. See “– Power Supply Resources.” VMUS provides electric service to its customers at SCLA through distribution access to the California Independent System Operator Corporation (“ CAISO”) grid via a 34.5 kilovolt (“kV ”) interconnection to SCE at the SCLA substation and wholesale distribution service under the terms of SCE’s Wholesale Distribution Access Tariff (the “WDAT ”) and pursuant to interconnection and service agreements with SCE. This interconnection is fed from SCE’s Victor Substation on the “Cement” 34.5 kV circuit. The maximum contracted distribution capacity at the VMUS interconnection under the terms of SCE’s WDAT is currently 17.34 MW.

The VMUS SCLA distribution system consists of one 34.5 kV to 12.47 kV substation with three underground

12.47 kV distribution circuits extending nine miles. Electric service to customers is delivered at voltages ranging from 120 volts up to 4,160 volts.

Electric service to VMUS customers at the Foxborough Industrial Park is provided through distribution access to the CAISO grid via a 12.47 kV interconnection to SCE at the Foxborough Interconnection/metering switchgear and wholesale distribution service under the terms of SCE’s WDAT and pursuant to interconnection and service agreements with SCE. This interconnection is fed from SCE’s Victor Substation’s 115 kV bus via SCE’s 12 kV distribution system at PMH 5508521. The maximum contracted distribution capacity at the VMUS interconnection under the terms of SCE’s WDAT is currently 5,000 kW. The VMUS Foxborough distribution system consists of one 12.47 kV underground circuit. Electric service to customers is delivered at voltages ranging from 120 volts up to 480 volts.

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In order to accommodate increasing electric service demands expected over the n ext five years as a result of VMUS’ anticipated growth from existing customer planned expansions and the anticipated addition of new customers of the Electric System, on February 2, 2022 the City has entered into an agreement with SCE to increase the interconnection service delivery capacity from SCE from 17.34 MW to 40.36 MW at the SCLA interconnection and is undertaking the 202 2 Project to provide the necessary improvements to the Electric System facilities in connection therewith. See “PLAN OF FINANCE – The 2022 Project.” Customer Base; Metered Accounts, Retail Sales, Billed Revenues and Demand Nature of the Customer Base. The majority of the customers served by the Electric System are located at the SCLA. The SCLA aviation center includes an aircraft maintenance complex, two runways long enough to accommodate wide-body aircraft such as the Boeing 747 or the Airbus A-380. Since 2010, the Boeing Company has operated its Flight Test Operations division (which facilitated Boeing’s expansion into tw o-wide body hangars), totaling approximately 175,000 square feet, at SCLA to perform maintenance, repair and overhaul work on Boeing aircraft. Other tenants operating at SCLA include International Aerospace Coatings, which performs aircraft painting in two wide body hangars large enough to house Boeing 747-sized aircraft; and GE Aircraft Engines, which conducts jet engine testing for GE-manufactured engines in a large 140,000 square foot hangar. Recent expansion at the SCLA occurred in 2019, with Plastipak Packaging adding over 230,000 square feet to its existing 296,000 square foot facility located at the SCLC, the “Off -Airport” development side of SCLA. Plastipak Packaging is a bottle manufacturer offering services to Keurig Dr. Pepper, which is also located at the SCLC portion of SCLA . In addition, the Newell Brands completed a second expansion, add ing over 466,000 square feet of operation space to its existing 584,000 square foot facility on the SCLC side of SCLA .

Others operating in the SCLC area include Arden Companies, Mars Wrigley (a subsidiary of Mars, Inc.) (through its logistics partner DHL Supply Chain), and United Furniture Industries. Over 3,000 jobs have been created at the SCLA location, making it one of the largest employment hubs in the Victor Valley.

Three facilities adding approximately 2.5 million square feet are currently under construction at SCLA.

Two of the buildings will house distribution centers for Amazon and Mars Petcare, and the third will act as a storage facility for Iron Mountain. VMUS has also received a service application from Grant & Bowman for a 450,000 square foot facility to be constructed.

Among the primary tenants and facilities occupying the Foxborough Industrial Park are The Nutro Company (a subsidiary of Mars, Inc.), a manufacturer of premium pet foo d, which has constructed a 350,000 square foot manufacturing and logistics facility to serv e its western U.S. markets, and Americold Logistics, which operates a 161,002 square foot logistics and temperature-controlled warehousing center serving the food industry.

Through SCLA, Victorville offers multimodal capabilities, including ground transportation services.

Once at SCLA, cargo can be cleared and transported to the west and points eastward within 24 -hours. The City offers a central location with freeway access, located off I-15, US-395 and SR-18 between Los Angeles and Las Vegas—just 40 miles from I-10 and I-40. Other nearby main routes include SR-58, SR-60, I-215, I-210 and SR- 138. Both the Ports of Los Angeles and Long Beach, which are located less than 100 -miles from the City, can be easily accessed from Victorville, via the Union Pacific Railway and BNSF. Additionally, the City has a secured Port of Entry designation that allows businesses to bypass lengthy Customs inspections at major ports by clearing Customs at SCLA.

Given the access to major transportation routes and modes of transportation, products manufactured and produced by or distributed through the facilities of the Electric System’s customers serve m arket demands not only in the entire Southern California region but in some cases, nationally and internationally. Because the Electric System’s customer base is entirely commercial and industrial as described above, electricity demand is not dependent on population growth but is closely tied to regional, and to some extent, national and international economic conditions.

The following table presents the gross domestic product (“GDP”) of the ten counties that comprise the Southern California region from 2018 to 2020.

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SOUTHERN CALIFORNIA REGION
Gross Domestic Product
Calendar Years 2018-2020
County 2018 2019 2020
San Bernardino $ 90,613,064 $ 96,785,983 $ 97,049,499 Riverside 88,443,662 93,798,407 93,250,990
Los Angeles 752,017,612 789,460,877 747,523,558
Orange 254,207,186 266,109,513 259,513,508
San Diego 232,579,152 242,950,042 240,411,072
Imperial 8,220,162 8,742,543 8,566,860
Santa Barbara 29,114,688 29,893,355 29,697,904
San Luis Obispo 17,605,794 18,143,296 18,010,542
Ventura 51,511,950 53,914,259 53,218,972
Kern 46,923,468 47,506,713 45,185,758 Total $1,571,236,738 $1,647,304,988 $1,592,428,663
____________________
Source: U.S. Bureau of Economics, December 8, 2021–new statistics for 2020, revised statistics for 2001-2019.

Metered Accounts, Retail Sales, Billed Revenues and Demand . The number of Electric System customers (based on metered accounts), retail kWh sales and revenues derived from retail sales, by classification of service, and peak demand during each of the last five Fiscal Years are set forth in the table below. The Electric System customer mix served by VMUS is all commercial and industrial businesses, with those characterized as large and larger commercial and industrial customer accounts (monthly demand over 200 kW) comprising approximately 32% of the total metered accounts for Fiscal Year 2020 -21 and medium, small and smaller commercial and industrial customer accounts (monthly demand of 200 kW or less) comprising approximately 56% of the total metered accounts for Fiscal Year 2020 -21. The balance of the metered accounts, comprising approximately 12% of the total number, are characterized as “Other” accounts and represent electricity provided for pumping, traffic lights and street lighting.

As reflected in the table below, the City’s retail kWh electricity deliveries increased by approximately 8% in Fiscal Year 2020- 21 as compared to Fiscal Year 2019 -20. Based upon information through January 1, 2022, retail electric kWh deliveries are currently projected to be approximately 4% higher in Fiscal Year 2022- 23 than Fiscal Year 2020- 21. See “VMUS ELECTRIC SYSTEM FINANCIAL INFORMATION – Projected Operating Results and Debt Service Coverage.” While usage for a number of smaller and small commercial customers declined somewhat since Fiscal Year 2018-19 as a result of the imposition of stay-at-home orders in response to the COVID-19 pandemic, this decline was offset by the substantial increase in demand by some of the City’s medium, large and larger industrial sector customers. The increased electric use by these large customers reflects plant expansions and consumer demand for their products versus the prior period. Billed sales revenues increased by nearly 19% in Fiscal Year 2020 -21 as compared to Fiscal Year 2019 -20. Based on information through February 1, 2022, the City projects recognized revenues from the sale of energy to be approximately 8% higher in Fiscal Year 2021 -22 than in the prior fiscal year. The increased billings and sales revenues reflects not only the increased load occurring, but also the system average rate changes that were implemented by the City in each Fiscal Year 2018-19, 2019-20 and 2020-21. See “– Electric Rates – History of Rate Changes.” Going forward, the City currently expects its retail kWh electricity deliveries and sales revenues to continue to trend upward. The City is currently working with at least four potential customers for new electric connections to be in service within the next two years and has been informed of potential load increases from two of its existing customers to occur over the next five years. These customers include Amazon, Mars, Iron Mountain and Grant & Bowman. Although the City views this as unlikely, to the extent a future load reduction occurs (including as a result of unanticipated economic impacts of the COVID-19 pandemic and its aftermath), Electric System Revenues would be reduced from past actuals and current forecasts. See also “VMUS ELECTRIC SYSTEM FINANCIAL INFORMATION – Projected Operating Results and Debt Service Coverage.”

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Table 1

CITY OF VICTORVILLE

VMUS ELECTRIC SYSTEM
Metered Accounts, Retail Sales, Billed Revenues and Demand Fiscal Years Ended June 30
2017 2018 2019 2020 2021
Number of Metered Accounts:

Smaller Commercial and Industrial 4 9 11 10 10
Small Commercial and Industrial 14 14 11 11 12
Medium Commercial and Industrial 12 14 18 22 22
Large Commercial and Industrial 7 7 7 8 8
Larger Commercial and Industrial 12 12 12 11 12
ESA Larger Commercial and
Industrial(1) 5 5 5 5
5 Other(2) 7 9 10 10 9
Total Metered Accounts(3) 61 70 74 77 78

Kilowatt Hour Retail Sales:

Smaller Commercial and Industrial 7,700 16,800 20,475 20,475 22,487 Small Commercial and Industrial 370,460 427,163 363,407 316,242 317,640 Medium Commercial and Industrial 1,552,752 1,653,275 1,633,992 2,820,905 3,692,472 Large Commercial and Industrial 8,095,376 7,942,588 8,060,962 8,533,072 6,132,766 Larger Commercial and Industrial 61,878,092 67,659,205 65,005,390 68,130,698 78,248,195 ESA Larger Commercial and
Industrial(1)
17,145,888 18,398,174 18,172,458 17,139,849 16,016,449
Other(2) 52,888 61,296 70,392 73,992 62,254
Total kWh Retail Sales 89,103,156 96,158,501 93,327,076 97,035,233 104,492,263

Billed Revenues from Sale of Energy(4)
Smaller Commercial and Industrial(5) $ 2,210 $ 4,771 $ 6,011 $ 4,607 $ 5,333 Small Commercial and Industrial 53,184 58,307 51,352 46,827 54,461 Medium Commercial and Industrial 284,930 298,639 314,542 440,639 657,674 Large Commercial and Industrial 1,077,371 1,108,301 1,141,477 1,244,908 942,026 Larger Commercial and Industrial 7,452,228 7,881,895 7,886,206 8,748,162 11,060,757 ESA Larger Commercial and
Industrial(1)

2,514,856

2,704,992

2,501,386

2,361,638

2,556,985
Other(2) 10,183 11,738 13,710 15,181 16,559
Total Billed Revenues from
Sale of Energy(6) $11,394,962 $12,068,643 $11,914,684 $12,861,964 $15,293,795

Peak Retail Demand (MWs) 15.79 16.62 16.93 17.87 19.1

(1) Contract customers subject to electricity services agreement. See “–Largest Customers” below. (2) Other includes pumping, traffic lights and street lighting. (3) Some businesses have more than one meter. The City generally considers each meter to be a separate account . As of January 1, 2022, there are 81 separately metered accounts served by the Electric System. (4) Includes 2.85% public purpose programs charge amount. See “–Electric Rates” below. Revenues listed are as billed; differs from revenues recognized from the sale of energy as reflected in Table 8 which is derived from information as accounted for in the audited financial statements.
(5) Smaller customers are billed a flat rate based on a per meter per month customer charge. See “–Electric Rates” below. (6) Totals may not add due to rounding.

Source: City.

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Largest Customers
The Electric System’s 11 largest customers (by electricity usage) for Fiscal Year 2020-21 accounted for approximately 98.4% of the Electric System’s retail kWh energy sales and approximately 97% of total billed energy sales revenues for such period. The largest customer accounted for approximately 33 % of total retail kWh energy sales and approximately 3 0% of billed energy sales revenues. Each of the largest customers after the five largest customers accounted for less than 3.0% of retail kWh energy sales an d less than 3.0% of billed energy sales revenues in Fiscal Year 2020-21.

Customer concentration within the Electric System presents a risk in that if one or more of the Electric System’s largest customers were to default on their payments for retail energ y sales, or were to relocate their operations outside of the City or otherwise cease their operations in the City, such failure to pay, relocation of operations or ceasing of operations could have a material impact on the Electric System’s finances, depend ing on, among other factors, the Electric System’s long or short energy purchase position and the price of electricity in the market relative to the Electric System’s costs. No assurances can be given by the City that any such failure to pay, relocation or cessation of operations will not occur during the term of the Series 202 2 Bonds. See “– Power Supply Resources” for a discussion of the City’s resource procurement strategy. See also “– Electric Rates – Uncollectible Accounts” for historical information with respect to write-offs of delinquent accounts.

The City believes that the risk that its largest customers will depart the City is low. As shown in the second column of the table below, most of the largest customers of the Electric System have been in the City for more than 10 years. To help retain its largest industrial customers, the City has entered into multi-year electricity services agreements (“ESAs ”) at a specified discount from SCE rates with two of its largest customers, accounting for approximately 15.3% of total kWh sales and approximately 16.7% of billed sales revenues in 2021. See also “CERTAIN RISK FACTORS – System Net Revenues; Rate Covenant.” As of the date of this Official Statement, facilities are under construction by two addit ional larger customers which are anticipated to commence operations within the next few years and potentially as early as this year. For planning purposes, these customers have provided VMUS with their estimated loads. For purposes of its financial projections set forth under “ VMUS ELECTRIC SYSTEM FINANCIAL INFORMATION – Projected Operating Results and Debt Service Coverage,” the City currently projects load growth of approximately 15% for Fiscal Year 2022-23 over Fiscal Year 2021-2022, and has assumed annual load growth thereafter of approximately 2% per year over the period 2023-24 through 2025-26.

The customers of the Electric System which individually represented more than 1% of Electric System billed revenues in Fiscal Year 2020-21 are listed in the below table in order of sales dollars generated.

[Remainder of page intentionally left blank.]

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Table 2

CITY OF VICTORVILLE

VMUS ELECTRIC SYSTEM
Largest Customers (Fiscal Year 2020-21)
Business Name
Years
In City Type of Business/Location kWhs Purchased
Billed Sales
Revenues
Dollars
Percent of Total
Billed Sales
Revenues
Dollars

1. Plastipak Packaging 13 Manufacturing / SCLA 34,275,205 $ 4,560,175 30%

2. Keurig Dr. Pepper 13 Manufacturing / SCLA 31,590,084 4,454,209 29

3. Mars Inc. (Mars Petcare and
Mars Wrigley)
17 Manufacturing / Foxborough
and SCLA
19,566,737 3,055,716 20

4. City of Victorville - Treatment Plant 8 Water Supply / SCLA 6,260,478 813,992 5

5. Americold Logistics 17 Warehousing / Foxborough 2,687,827 404,409 3

6. International Aerospace Coatings 15 Aircraft Painting / SCLA 2,074,969 352,858 2

7. Hydration Source 3 Manufacturing / SCLA 1,634,899 450,650 3

8. Newell Brands 12 Distribution / SCLA 1,610,820 262,441 2

9. Southern California Logistics Airport
– Boeing Tenant
9 Manufacturing / SCLA 1,255,854 151,952 1

10. United Furniture Industries 11 Warehousing / SCLA 1,053,446 194,056 1

11. General Electric (GE) 16 Aircraft Maintenance / SCLA 800,742 151,426 1

Average Years in City/Total (1) 12 102,811,061 $14,851,883 97%

(1) Totals may not add due to rounding.

Source: City.

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Energy Efficiency Programs
The City maintains public benefits programs as required by State law, a component of which is demand- side management (commonly referred to as energy efficiency and conservation) . The City’s public benefits programs are funded by the 2.85% public purpose program charge amount billed and collected in accordance with its electric rate schedules. See “– Electric Rates.” Under these programs, VMUS offers commercial customers incentives and rebates for the installation of eligible energy efficiency measures, equipment or systems . VMUS also applies collected public purpose program funds for eligible projects that benefit VMUS customers through improved safety, system integrity, energy efficiency, conservation and/or research and development.

The City’s full portfolio of public benefit programs includes the following incentive programs :
(i) lighting incentives for the installation of energy efficiency lighting upgrades that reduce annual energy consumption; (ii) construction incentives for projects that include equipment components that exceed state- mandated codes, federal- mandated codes, industry- accepted performance standards, or other baseline energy performance standards by more than 10%; and (iii) custom energy efficiency incentives for the installation of energy efficient equipment/technology that conserves energy and permanently reduces coincident summer/winter on-peak load. VMUS also provides direct funding for approved projects/activities on the utility side of the meter that promote the improved safety, energy efficiency, conservation or research and development goals of the program. In addition, VMUS conducts on- site energy audits to promote energy education for commercial customers.

Power Supply Resources
General. The City’s resource planning strategy is aimed at providing competitive and stable electric rates that encourage existing customers to expand their facilities as well as attracting new employers to the areas served by VMUS. The City does not own any generation assets. The City acquires its needed power supply resources by seeking to enter into long-term power supply contracts that are competitively priced to meet VMUS’ customer load and regulatory requirements. The City also relies on existing power enabling agreements that have been approved by the Victorville City Council to solicit forward market fixed-price power purchases as needed.

The City is a member of WSPP Inc. (originally named the Western Systems Power Pool) (“WSPP”). WSPP is an organization of electric wholesale market entities that have developed and utilize a standardized power agreement to execute trading opportunities, allowing WSPP members to manage power delivery and price risk.

The City expects that its membership in WSPP will expand the number of potential power suppliers available to the City.

More specifically, the City typically forecasts the VMUS customer load requirements for the next five years and solicits forward market fixed -price power purchases from at least three potential suppliers that supplement its existing long-term power supply contracts to ensure that sufficient resources are available to serve VMUS’ customers . Electric rates are established to reflect the negotiated power prices. Energy p rocured in excess of, or less than, actual load requirements is typically sold into, or purchased from, the CAISO market on an economic basis. Revenues or expenses from wholesale market sales or purchases are treated as an offset or addition to purchased power costs.

In order to continue to comply with certain State mandates relating to renewable energy, the City expects that its supply of electricity from renewable resources will increase in the future. See also “– Future Power Supply Resources,” “– VMUS Renewable Energy Resources Procurement Plan” and “– Developments Affecting Power Supply.”
The power supply resources of the Electric System used to satisfy the load requirements of the Electric System’s customers for the past five Fiscal Years are described in the following table.

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Table 3

CITY OF VICTORVILLE

VMUS ELECTRIC SYSTEM
Resources Used to Satisfy City Load Requirements
(Historical - Fiscal Years Ended June 30, 2017 through 2021) Fiscal Year Ended June 30
2017 2018 2019 2020 2021
Shell PPA(1)
Actual Energy(2) 89,726 90,054 90,487 103,616 103,942
Percentage of Total Energy 95.1% 86.3% 89.9% 99.2% 91.9% Western Boulder Canyon
Contract(3)

Actual Energy(2) N/A N/A 2,364 4,435 4,776
Percentage of Total Energy N/A N/A 2.3% 4.2% 4.2%
Short-Term Market
Purchases/(Sales)(4)

Actual Energy(2) 4,589 14,326 7,835 (3,538) 4,343
Percentage of Total Energy 4.9% 13.7% 7.8% (3.4%) 3.9%
City’s Total Load Requirement
Actual Energy(2) 94,315 104,380 100,686 104,513 113,058 Percentage of Total Energy 100.0% 100.0% 100.0% 100.0% 100%

(1) Forward purchases.
(2) In megawatt hours (“MWhs”).
(3) Contract term effective October 1, 2017.
(4) Contracts for a term of less than one year and spot market purchases. Amount shown is net purchases or sales.

Source: City.

The City’s obligations under power purchase agreements constitute Maintenance and Ope ration Costs and are payable from System Revenues prior to payment of the Series 2022 Bonds.

Current Power Purchase Agreements. The City solicited forward market fixed-price power purchases for 2022 under power purchase agreements with J. Aron & Company, L LC and NextEra Energy Marketing, LLC. Certain terms of the material power purchase agreements of the City are described below.

J. Aron & Company, LLC . On October 28, 2021, the City executed a short -term power purchase agreement (based on the WSPP standard agreement) with J. Aron & Company, LLC (“J. Aron”) for the second quarter of calendar year 2022 (April- June). Staff was consistently monitoring prices for this time frame and based on the indicative prices that were obtained, J. Aron provided a competitive offer for this period. Under the confirmation agreement, VMUS’ electricity market purchase requirements for the second quarter of 2022 will total 27,040 MWh at a cost of $45.05 per MWh.

NextEra Energy Marketing, LLC. On January 5, 2022, the City executed a short-term power purchase agreement (based on the WSPP standard agreement) with NextEra Energy Marketing, LLC (“NextEra”) for the remaining quarters of 2022 (first, third and fourth quarter). Staff was consistently monitoring prices for this time frame and based on the indicative prices that were obtained, NextEra provided a competitive bid for these periods. Under the confirmation agreement, VMUS’ electricity market purchase requirements for the three indicated quarters of 2022 will total 78,598 MWh at a cost of $67.40 per MWh.

Between the two short-term power purchase agreements (J. Aron and NextEra), the average price that the City will pay for system power in calendar year 2022 is $61.81 per MWh.

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Hoover Boulder Canyon Project. In 2016, the City executed a long-term power purchase agreement (the “Western Boulder Canyon Contract”) with the Western Area Power Administration (“Western ”) and the United States Bureau of Reclamation (the “Bureau of Reclamation ”), pursuant to the federal Hoover Powe r Allocation Act of 2011. The Bureau of Reclamation owns and operates the Boulder Canyon Project at the Hoover Dam in Nevada, and Western markets the hydroelectric power generated from such facility (the “Hoover Plant”). The Hoover Plant consists of 17 generating units and two service generating units with a total installed capacity of approximately 2,074 MWs. Pursuant to the Western Boulder Canyon Contract, the City is entitled to approximately 2.625 MWs of available contingent capacity and 5,728 MWhs of associated energy annually from the Hoover Plant. The Western Boulder Canyon Contract became effective on October 1, 2017 and extends until September 30, 2067. The power marketed by Western to the City is provided on a take- or-pay basis wherein Western’s annual costs are allocated to all “Schedule D” contractors based upon their pro rata share of the Hoover Plant capacity. Under the Western Boulder Canyon Contract, the City is obligated for an approximate 0.1266% share of Western costs associated with operat ing the Hoover Plant . In connection with the execution of the Western Boulder Canyon Contract, the City was required to make an upfront payment of $207,473. The average monthly forecasted power rate under the contract through Fiscal Year 2025 -26 is $22.33 per MWh . The forecasted annual available energy to the City under the Western Boulder Canyon Contract through Fiscal Year 2025-2026 is 4,470 MWhs. Capacity and production of the Hoover Plant may be impacted by ongoing drought conditions, the implementation of a drought contingency plan and procedures relating to the operation of Lake Mead. Forecasted annual available energy to the City represents approximately 3.7% of VMUS’ current customer requirements.

The delivery point of the Boulder Canyon Project power is the Mead Substation in Nevada, a major interconnection to the CAISO control area. Transmission is provided via the CAISO grid to the City’s interconnection point with SCE.

In calendar year 2022, purchases by the City under the power purchase agreements described above are expected to provide approximately 96% of the energy supplied by VMUS to meet the Electric System’s customer load ( NextEra power purchase, approximately 68.7%; J. Aron power purchase, approximately 23.6%; and Western Boulder Canyon Contract, approximately 3.7%). The remaining load requirements are expected to be satisfied through CAISO market purchases.

The City has made additional power purchases for calendar years 2023 and 2024 under its existing power purchase agreement with Shell as described below.

Shell Energy North America (US) L.P. The City has executed a Master Power Purchase and Sale Agreement (based on the Edison Electric Institute industry standard agreement) with Shell Energy North America (US), L.P. (“Shell”), effective as of May 20, 2014 (the “Shell PPA”) to facilitate competitive forward market purchases to meet VMUS’ loads in the short- to medium-term. Under the Shell PPA, the City executes periodic confirmation agreements to purchase electric capacity and/or electric energy on a forward basis. As of January 1, 2022, VMUS had no outstanding electricity purchase commitments under the Shell PPA for calendar year 2022. The City executed a new periodic power confirmation agreement with Shell effective October 26, 2021 to facilitate competitive market purchases to meet VMUS’ load in future years during calendar years 2023 and 2024. Under the new confirmation agreement, VMUS’ electricity market purchase requirements for calendar year 2023 and 2024 will total 73,090 MWh at a cost of $52.00 per MWh. Under the Sh ell PPA, Shell delivers firm energy to the City, and the City is obligated to purchase and receive such energy, at a central CAISO trading hub, SP -15. Trading hubs are used to facilitate bilateral transactions between energy buyers and sellers .

Transmission from the SP-15 trading hub to the City’s interconnection point with SCE is provided on the CAISO grid.

The Shell PPA contains collateral posting provisions, under which the “out -of-the money” party ( i.e., the party that would owe a termination payment under the terms of the agreement if it were terminated early) may be required to post cash, letters of credit, or other security acceptable to the other party to secure its obligations under the Shell PPA to the extent the termination payment that would be owed by such party exceeds a threshold value . For the City, the applicable threshold value under the Shell PPA is $5,000,000 . Under the

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Shell PPA, in the event of a default or early termination event with respect to the Shell PPA, the contract provisions include rights to liquidate and/or set off against the posted collateral. As of March 1, 2021, the City did not have any collateral posted pursuant to the Shell PPA and did not hold any collateral posted by Shell. The City has historically not been required to post collateral under the terms of the Shell PPA. No assurance can be given, however, that the City will not be required to post collateral in the future . While the posting of cash collateral in itself is not an expense for the City, it does encumber unrestricted cash balances and may reduce the City’s liquidity.

The City routinely uses energy purchased through short-term CAISO spot market purchases rather than, or in addition to, energy from the above resources to meet customers’ real- time load requirements. Based upon its current forecasted sales growth, resource mix and market prices, the City believes its annual balance- of- month, day-ahead, and hour-ahead purchases will be less than 2% of its total energy requirements through June 30, 2025. While the City expects to continue utilizing short-term market purchases to satisfy load requirements which are not covered by its contracted resources as and when necessary, the City may enter into other long- term power purchase contracts when the City determines that it is economically advantageous to do so or in connection with satisfying renewable energy portfolio requirements . The City has entered into two renewable energy power purchase agreements to satisfy a portion of its future energy requirements. See “– Future Power Supply Resources” and “– Developments Affecting Power Supply” below.

Scheduling Coordination and Settlement Services . The City entered into an Energy Services Agreement, dated as of November 20, 2019 (the “ZGlobal Services Agreement”), with ZGlobal, Inc., a Folsom, California-based power engineering consultancy firm (“ZGlobal”), pursuant to which ZGlobal provides certain energy scheduling and related financial settlement services to VMUS for the Shell PPA and the Western Boulder Canyon Contract (as well as other resources as may be identified by the City) to allow for the settlement of VMUS’ transactions with the CAISO . Under the ZGlobal Services Agreement, ZGlobal serves as the City’s scheduling coordinator for all transactions, and acts as th e interface with the CAISO . The term of the ZGlobal Services Agreement is through December 31, 2023, unless earlier terminated.

The City has also retained the services of ASTRUM Utility Services, LLC, an electric utility consulting firm (“ Astrum”) to perf orm certain services for the Electric System. Astrum performs a variety of duties, including resource planning, rate studies, tariff schedules, regulatory strategies and compliance filings and customer facilities and energy service agreements.

Future Power Supply Resources
Renewable Resources Under Development. The City has entered into the follow ing power purchase agreements in connection with meeting its future power supply needs and satisfying future renewable energy procurement requirements. See “– VMUS Renewable Energy Resources Procurement Plan” below.

AM Wind Repower LLC PPA. The City entered into a Renewable Power Purchase and Sale Agreement with AM Wind Repower LLC (“AM Wind”), effective as of June 24, 2020 (the “AM Wind Power PPA”), for the purchase of renewable energy from the 27 MW Alta Mesa Wind Energy Center to be located in Riverside County, California. The Alta Mesa Wind Energy Center is under development by AM Wind and has a projected commercial operation date of December 21, 2022. Pursuant to the AM Wind Power PPA, the City has agreed to purchase a 40.74% share of the output of the project, including all energy, environmental attributes and capacity attributes associated therewith. The term of the AM Wind Power PPA is for 25 years from the commercial operation date. The Alta Mesa Wind Energy Center will interconnect to the CAISO grid. Power and energy will be delivered to the City at the Seawind 115 kV Substation and sold into the CAISO market. The City is expected to receive an average of ap proximately 41,380 MWhs of renewable energy a year from the project. Projected energy to be received represents approximately 31% of VMUS’ projected customer load requirements in Fiscal Year 2023-24 and 30% in Fiscal Year 2024-25. The contract price is $40.00 per MWh with no escalation. The AM Wind PPA also provides for the option of battery storage at the site.

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Gaskell West 2 PPA. The City entered into a Renewable Power Purchase and Sale Agreement with Gaskell West 2 LLC (“Gaskell West 2”), effective October 27, 2021 (the “Gaskell West 2 PPA”), for the purchase of renewable energy and battery storage from a 29 MW solar photovoltaic electric generating facility combined with a 20 MW/80 MWh lithium ion battery storage facility, to be located in Kern County, California.

The Gaskell West 2 solar project is under development by Recurrent Energy and has projected commercial operation date of December 31, 2022. Pursuant to the Gaskell West 2 PPA, the City has agreed to purchase a 10 MW share of the output of the project (as delivered), including all energy, environmental attributes and capacity attributes associated therewith, and an 8 MW interest in the battery energy storage system . The term of the Gaskell West 2 PPA is for 25 years from the commercial operation date for the power purchase and 20 years for the battery storage product. The forecasted first year generation is 34,650 MWhs of renewable energy. Projected energy to be received represents approximately 24% of VMUS’ projected customer load requirements in Fiscal Year 2023-24 and 23% in Fiscal Year 2024 -25. As with any solar photovoltaic generating facility, the annual output would be expected to decline over time due to solar panel degradation effects. The expected commercial operation date for this resource is December 31, 2022.

The following table describes the City’s contracted commitments and anticipated short- term market purchases to meet its forecasted load requirements through Fiscal Year 2025-26.

CITY OF VICTORVILLE

VMUS ELECTRIC SYSTEM
Projected Resources Used to Satisfy City Load Requirements (Fiscal Years Ended June 30, 2022 through 2026)
Fiscal Year Ended June 30
2022 2023 2024 2025 2026
City’s Projected Load Requirement 113,400 130,503 133,568 136,724 139,975 Resource:

Western Boulder Canyon Hydro 4,470 4,470 4,470 4,470 4,470 Contracted Renewables
AM Wind PPA -- 20,689 41,378 41,378 41,378
Gaskell West 2 PPA Solar -- 17,591 34,617 34,617 34,617 Short-Term Contracts + (1) 51,387 70,114 37,226 21,610 802 CAISO Purchases/(Sales)(1) 57,543 17,639 15,877 34,649 58,708 Total Short-Term(1) 108,930 87,753 53,103 56,259 59,510 Total Contracted 55,857 112,864 117,691 102,075 81,267
% of Requirements Covered
by Contract 49% 86% 88% 75% 58%

(1) Contracts for a term of less than one year and spot market purchases. Amounts shown are estimated net purchases.

Source: City.

Future Power Supply Considerations . In the near term, the City has adequate resources to meet the current regulatory requirements, in particular, related to renewable energy procurement targets. The City expects that it will acquire additional resources to provide sufficient then -needed capacity reserves and renewable resources to meet the future renewable energy procurement targets. Options for the City to meet the future renewable energy procurement targets as well as capacity and energy needs include, among other things, soliciting new competitive forward market purchases; acquiring City- owned renewable projects; or purchasing qualifying renewable energy credits (“RECs ”). The City will continue to assess options to reliably meet the future electricity needs of VMUS customers, as well as satisfying applicable regulatory requirements.

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VMUS Renewable Energy Resources Procurement Plan
The California Renewable Energy Resources Act, which was enacted in 2011 as California Senate Bill X1-2 (“SBX1-2”), required each local, publicly-owned electric utility (“POU”), such as VMUS, to develop and implement a renewable energy resources procurement plan to provide for a specified target percentage of the POU’s electric system retail sales to be procured from eligible renewable energy resources in each year over defined compliance periods beginning from January 1, 2011 and continuing through December 31, 2020, culminating in a renewable energy target under SBX1-2 of 33% of 2020 retail sales. Legislation enacted in 2018, California Senate Bill 100 (“SB 100”), requires that the amount of electricity generated each year from eligible renewable energy resources be increased to at least 60% by December 31, 2030. See “– Developments Affecting Power Supply – Senate Bill 100 – 100 Percent Clean Energy Act of 2018” below.

The governing boards of POUs are responsible for implementing renewables portfolio standard (“RPS”) program requirements for POUs, rather than the California Public Utilities Commission (the “CPUC”), as is the case for the investor-owned utilities (“IOUs”). In addition, the California Energy Commission (the “CEC”) was given certain enforcement authority for POUs and the California Air Resources Board (“CARB”) was given the authority to set penalties. The CEC has developed detailed rules to implement RPS legislation, and has adopted regulations, the Enforcement Procedures for the Renewable Portfolio Standard for Local Publicly -Owned Electric Utilities (the “CEC RPS Regulations ”), for the e nforcement of the RPS program requirements for POUs, which regulations have been subsequently amended from time to time.

The CEC Regulations allow optional compliance measures, including banking (accumulating excess procurement in one compliance period to be applied in a subsequent compliance period); delayed compliance (for inadequate transmission, insufficient eligible renewable resources, delays in permitting or interconnections or unanticipated curtailment for reliability needs) and cost limitations (co st limitations on expenditures for renewable energy resources).

The City has taken a number of steps in connection with satisfying the RPS targets set forth in State legislation. In accordance with the requirements of SBX1-2, the City Council, as the governing board of VMUS, adopted Resolution No. 11-051 on December 6, 2011, adopting and establishing an RPS Enforcement Program for VMUS, which established compliance periods, adopted RPS procurement targets, authorized VMUS to establish cost limitations on procurement expenditures, and directed the City Manager to develop and present to the City Council and RPS Procurement Plan.

On November 5, 2013, the City Council adopted Resolution No. 13-056 to establish a VMUS Renewable Energy Resources Procurement P lan in accordance with the RPS legislation, which plan was subsequently amended on October 25, 2015 by Resolution No. 15-065, and most recently on December 1, 2020 by Resolution No. 20-105, to reflect subsequent legislative requirements.

Pursuant to State law and consistent with the City’s adopted RPS Enforcement Program, the City Council adopted delay of timely compliance rules and cost limitation rules for procurement expenditures to be applied by VMUS in co mplying with its RPS procurement targets. As a result of the application of such rules, VMUS was not required to procure a specified quantity of RPS -eligible resource in any individual year during the preceding compliance periods. The CEC has deemed that the City is in compliance with the RPS procurement requirements through 2016.

The City intends to continue to meet its RPS compliance obligations going forward, initially through its AM Wind Power PPA and Gaskell West 2 PPA, which have expected commercial operation dates in December 2022, and 25-year terms, and future executed renewable energy purchase agreements as needed. The forecasted full year annual generation of approximately 41,380 MWhs of renewable energy from the AM Wind Power PPA and 34,650 MWhs of renewable energy from the G askell West 2 PPA represents almost 60% of the City’s projected annual energy sales over the years 2023 to 2025.

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Developments Affecting Power Supply
A number of actions have been taken by regulatory agencies which affect the amount of power that the City must have available in order to maintain resource adequacy and the nature of the electric resources which the City must include in its resource base. Certain elements of these actions are described below.

CAISO Markets; Resource Adequacy. In 2006, the CAISO filed with the Federal Energy Regulatory Commission (“ FERC”) its Market Redesign and Technology Upgrade (“MRTU ”) tariff amendment to implement a comprehensive overhaul of the electricity markets administered by the CAISO. The programs under the MRTU initiative were designed to implement market improvements to assure grid reliability and more efficient and cost-effective use of resources and to create technology upgrades that would strengthen the entire CAISO computer system. The California energy market under the MRTU includes the following features, among others, which were not part of CAISO’s previous real-time only market tariff:
• An integrated forward market for energy, ancillary services and congestion management that operates on a day-ahead basis;
• Congestion management which represents all network transmission constraints; • Congestion Revenue Rights to allow market participants to manage their costs of transmission congestion;
• Local energy prices by price nodes (approximately 3,000 nodes in total), also known as locational marginal pricing; and
• New market rules and penalties to prevent gaming and illegal manipulation of the market as well as modifications to certain existing market rules.

The MRTU became operational on April 1, 2009 and the initial MRTU tariff filed with FERC went into effect at that time. Power is scheduled on a nodal basis, rather than the previous zonal system. Furthermore, the MRTU incorporates the CPUC’s resource adequacy requirements to ensure that there are adequate energy resources in critical areas . The MRTU requires that all scheduling coordinators for all load -serving entities (electric utilities providing energy to end -use customers or “ LSEs”), which include the City, meet standards concerning forward capacity and energy procurements to meet their load requirements.

In September 2005, the Governor signed into law Assembly Bill 38 0 (“AB 380”), which, among other things, requires POUs to procure adequate resources to meet their peak demands and reserves. In October 2005, the CPUC issued a decision requiring that LSEs under its jurisdiction acquire capacity which is sufficient to serve their forecast retail customer load plus an applicable reserve margin. The MRTU tariff incorporates the CPUC’s resource adequacy requirements.

To the extent the City’s r esource adequacy procurement is less than identified amounts of capacity products the obligation for which is allocated pursuant to the CAISO tariff or the actions of the Victorville City Council, and other CAISO tariff provisions are triggered, the City may be allocated a share of the CAISO’s cost- based backstop procurement mechanism (termed the Capacity Procurement Mechanism under the CAISO’s tariff). These tariff provisions are subject to regulatory review by FERC, including the triggers for such backstop procurement activities and the capacity prices paid to suppliers under the relevant tariff provisions. The CAISO tariff provisions have not been triggered to date and the City has not been allocated a share of CAISO’s cost- based Capacity Procurement Mechanism.

Senate Bill 1037 – Energy Procurement, Efficiency and Demand Reduction . California Senate Bill 1037 (“SB 1037”) signed into law in 2005, requires that each P OU prior to procuring new energy generation resources, first acquire all available energy efficiency, demand reduction, and renewable resources that are cost effective, reliable and feasible. SB 1037 also requires each POU to report annually to its custome rs and to the CEC its investment in energy efficiency and demand reduction programs . The City is complying with these ongoing reporting requirements.

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Assembly Bill 2021– Energy Efficiency Reporting. California Assembly Bill 2021 (“AB 2021”), signed into law in 2006, requires that POUs establish, report, and explain the basis of annual energy efficiency and demand reduction targets by June 1, 2007 and every three years thereafter for the next ten-year period. A subsequent amendment, Assembly Bill 2227, exte nded the reporting timeframe from three to four years . The City is complying with these ongoing reporting requirements. The information obtained from the POUs is being used by the CEC to present progress made by the State to double energy efficiency saving s in electricity and natural gas final end uses by 2030, to the extent doing so is cost effective, feasible, and does not adversely impact public health and safety.

Senate Bill 350 – Clean Energy and Pollution Reduction Act of 2015. California Senate Bill 350 (“SB 350”), signed into law in 2015, establishes an RPS target of 50% by December 31, 2030 for the amount of electricity generated and sold to retail customers from eligible renewable energy resources for retail sellers and POUs, including interim targ ets of (i) 40% of retail sales from eligible renewable energy resources by December 31, 2024; (ii) 45% of retail sales from eligible renewable energy resources by December 31, 2027; and (iii) 50% of retail sales from eligible renewable energy resources by December 31, 2030.

Senate Bill 100 – 100 Percent Clean Energy Act of 2018. California Senate Bill 100 (“SB 100”), signed into law in September 2018, accelerates the State’s RPS target as established by SB 350 from 50% by 2030 to 60% by 2030 and sets a goal of 100% “clean energy” by the year 2045 . SB 100 requires retail electric sellers and POUs to procure a minimum quantity of electricity products from eligible renewable energy resources so that the total kWhs of those products sold to retail end -use customers achieve (i) 44% of retail sales by December 31, 2024; (ii) 52% of retail sales by December 31, 2027; and (iii) 60% of retail sales by December 1, 2030. SB 100 additionally establishes that it is the policy of the State that eligible renewable energy resources and zero -carbon resources supply 100% of retail sales of electricity to California end -use customers by December 31, 2045. Along with SB 100, Governor Brown signed an executive order that directs the State to achieve carbon neutrality by 2045 and net negative greenhouse gas (“GHG”) emissions thereafter. The goal of carbon neutrality by 2045 is in addition to existing Statewide targets of reducing GHG emissions. By expanding the State’s carbon reduction goal the State will also look to reduce carbon through sequestration in forests, soils and other natural landscapes.

In December 2020, the CEC adopted regulations to update its RPS enforcement procedures for POUs, including to update regulations amended by both SB 350 and SB 100, among other enacted bi lls. This includes implementing a provision relating to the long -term procurement of renewable resources which requires, beginning January 1, 2021, that at least 65% of renewable procurement must be for a duration of 10 years or more. The regulations implement the new RPS procurement requirements for the compliance periods between 2021 and 2030, establish soft procurement targets for the intervening years of the compliance periods to demonstrate reasonable progress in meeting the RPS procurement target for the compliance periods, and establish three-year compliance periods beginning after 2030. The regulations also define requirements for 10 - year procurement contracts for purposes of satisfying the long-term procurement requirement.

Assembly Bill 32 – Global Warming Solutions Act of 2006 . California Assembly Bill 32 (“AB 32 ”), signed into law in 2006 , required CARB to adopt enforceable GHG emission limits and emission reduction measures in order to reduce GHG emissions from within the State to 1990 levels by 2020. California Senate Bill 32 (“SB 32”), an amendment to AB 32 , signed into law in 2016, requires that statewide GHG emissions be reduced to 40% below 1990 levels by 2030.

AB 32 established an annual mandatory reporting requirement for all IOUs, POUs and other LSEs to inventory and report GHG emissions to CARB, required CARB to adopt regulations for significant GHG emission sources, and gave CARB the authority to enforce such regulations beginning in 2012 . CARB implemented the Global Warming Solutions Act through a series of regulations (the “Cap -and-Trade Program”). The Cap-and-Trade Program sets an aggregate GHG emission limit on the sources (called “Covered Entities”) responsible for 85% of California’s GHG emissions, establishes a price signal intended to drive long- term investment in clean fuels and energy efficiency, and permits these Covered Entities to seek out and implement the lowest- cost options for reducing their emissions. The Cap -and-Trade Regulations require all

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regulated entities to obtain and submit to CARB compliance instruments (allowances and/or offsets) that represent GHG emissions related to its industrial processes within the State; for electric utilities this includes generation and GHG emissions associated with imported electricity from out- of-state resources. The Cap-and- Trade Program was designed to work together with compl ementary emission reduction measures that apply to POUs, including the California Renewable Portfolio Standard, energy efficiency mandates, and the California Solar Initiative.

Under the Cap -and-Trade Program, an entity, such as the City, that owns and ope rates an electrical distribution system is called an Electric Distribution Utility (“EDU”). Each EDU receives a free allocation of allowances from CARB on an annual basis for each vintage year, which commenced in 2013. The quantity of allowances freely allocated to each EDU is fixed in CARB’s regulations. With limited exceptions, each EDU is required to place these allowances in its Limited Use Holding Account (“LUHA”) which was established by CARB. Each EDU is subsequently required to consign the a llowances to one or all of CARB’s allowance auctions held in the same year as their vintage ( e.g., all of the 2013 vintage allowances were consigned to one or more of the auctions scheduled in 2012 and 2013). The revenue generated from the sale of each entity’s allowances (called “Allowance Value ”) is distributed to that entity. Each EDU may only use the Allowance Value for the benefit of its retail electricity ratepayers. Allowance allocations are prim arily restricted to manufacturing, mining sectors and support activities for air transportation with noticeable levels of trade exposure and emissions intensity. The distinction between mining and manufacturing sectors, and other commercial sectors such as technology and R&D facilities, are that mining and manufacturing facilities receiving industrial allocation emit carbon as part of their core business process. The City currently uses the revenues generated to provide a rebate to the ratepayers who qualif y as a manufacturing, mining or support activities for air transportation business. Auction proceeds are also available for renewable energy projects.

In July 2017, California Assembly Bill 398 (“ AB 398”) was signed into law, which extends the Cap- and-Trade Regulations from 2021 to 2030. The bill passed both chambers with a 2/3 supermajority vote, which protects the legislation from certain legal challenges . Under AB 398, CARB was directed to address the following: establish a price ceiling, of fer non-tradeable allowances at two price containment points below the price ceiling, transfer current vintages unsold for more than 24 months to the allowance price containment reserve, evaluate and address allowance over -allocation concerns, set industry assistance factors for allowance allocation, and establish allowance banking rules . Under AB 398, CARB was directed to include cost containment provisions to keep allowance prices from rising too high and pushing business expansion outside of the state (r eferred to as “leakage ”). AB 398 was passed in conjunction with Assembly Bill 617, which strengthens the monitoring of criteria air pollutants and toxic air contaminants in local communities .

Amendments to the Cap-and-Trade Regulations to reflect the requirements of AB 398 were adopted by CARB and went into effect on April 1, 2019.

Assembly Bill 1110 – Greenhouse Gas Emissions Intensity Reporting. California Assembly Bill 1110 (“AB 1110”), signed into law in 2016, requires GHG emissions intensity data and unbundled renewable energy credits to be included as part of retail suppliers’ power source disclosure reports and power content label (“PCL”) to their customers . GHG emissions intensity factors are required to be provided for all the retail electricity products. The inclusion of this new information requirement on the PCL begins in 2021 for calendar year 2020 data. In addition to being required to post the PCL on the City’s website, AB 1110 also requires that PCL disclosures must be mailed to customers unless customers have opted for electronic notifications. In accordance with this requirement, the City posts disclosures of its PCL on its website.

Wildfire Mitigation Measures
California Senate Bill 1028 (“SB 1028”), which was signed into law in 2016, requires municipal electric utilities to construct, maintain and operate their electrical lines and equipment in a manner that will minimize the risk of catastrophic wildfire posed by those electrical lines and equipment. California Senate Bill 901 (“SB 901”), which was signed into law in 2018, addresses the response to, mitigation of and prevention of wildfires .

SB 901 requires municipal electric utilities to prepare before January 1, 2020 and annually thereafter a wildfire mitigation plan. SB 901 further requires utilities to present their wildfire mitigation plan in an appropriately

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noticed public meeting, to accept comments on the plan from the public, other local and state agencies and interested parties and to verify that the plan complies with all app licable rules, regulations, and standards, as appropriate. SB 901 also requires the utilities to contract with a qualified independent evaluator to review and assess the comprehensiveness of its plan. The report of the independent evaluator is to be made available on the Internet and to be presented at a public meeting of the utilities’ governing boards.

VMUS has prepared and has in place a Wildfire Mitigation Plan . In accordance with the requirements of SB 901, VMUS’ Wildfire Mitigation Plan was adopted, and the report of the independent e valuator was presented, at the November 19, 2019 meeting of the City Council. The City is in a geographical area classified by the CPUC’s Fire Threat Map as a “Tier 1” fire-threat area (i.e., it is not in an area of elevated or extreme risk from utility -associated wildfires) . Further, as noted above, the VMUS electric supply system is entirely underground. Historically, underground electric lines have not been associated with catastrophic wildfires . In connection with the operation of its facilities and equipment, the City currently has in place a number of safety and emergency response measures . These measures include routine maintenance of all distribution facilities, ongoing vegetation clearance and management activities, and the ability to de -energize portions of its electric distribution system due to fire-threat conditions in extraordinary circumstances.

California Assembly Bill 1054 (“AB 1054 ”) was signed into law in 2019 . AB 1054 establishes a Wildfire Fund for IOUs to facilitate payment of eligible, uninsured third -party damage claims resulting from future catastrophic wildfires. Participation in the Wildfire Fund is exclusive to IOUs. POUs, such as VMUS, are not eligible to participate in or receive funding for wildfire claims from the Wildfire Fund.

AB 1054 expands on the existing requirements for POUs established under SB 901 for wildfire mitigation plans. AB 1054 requires each POU, by July 1 of each year, to submit its wildfire mitigation plan to a newly created California Wildfire Safety Advisory Board (the “Wildfire Advisory Board ”) for review and comment. Under AB 1054, the Wildfire Advisory Board is required to provide comments and an advisory opinion to each POU regarding the content and sufficiency of its pla n and to make recommendations on the mitigation of wildfire risks. AB 1054 requires each POU to comprehensively revise its wildfire mitigation plan at least once every three years. VMUS submitted its wildfire mitigation plan to the Wildfire Advisory Board on May 28, 2020 as required by AB 1054. The Wildfire Advisory Board issued the Guidance Advisory Opinion for the 2021 Wildfire Mitigation Plans of Electric Publicly Owned Utilities and Cooperatives (“2021 WSAB Guidance Advisory Opinion”) on December 15, 2020. Based on the recommendations, VMUS’ revised wildfire mitigation plan was approved by the City Council on June 15, 2021 and submitted to the Wildfire Advisory Board by July 1, 2021, which plan included an informational response as Appendix I.

Energy Risk Management Policy
VMUS has an established energy risk management policy, the primary objectives of which are to balance the business goals of : (1) providing stable electric rates to end users ; (2) preserving a supply cost advantage through obtaining the best available energy prices; and (3) managing business practices to allow the City to work efficiently and cost effectively. The policy applies to all City employees, consultants and agents of the City engaged directly or indirectly in transacting on behalf of the City in the energy markets . The basic approach underlying the City’s energy risk management policy is that no activities related to energy purchase and sales should expose the City to the possibility of large financial losses in relation to the size of the electric reserve funds.

Pursuant to the policy, the speculative buying and selling of energy products not needed for meeting forecasted load or that are not owned is prohibited . The maximum term of any supply resource transaction (purchase or sale) is generally limited to 10 years, unless specifically approved by the City Council, to meet long-term portfolio planning objectives. Whenever possible, the City will obtain three or more quotations when making a purchase or sale transaction. Only the City Manager, or his designee, is authorized to enter into short- term power transactions, within specified limits, that meet VMUS’ current customer load requirements. Executed transactions are to be independently confirmed.

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The City has established a Risk Oversight Committee (the “ROC”) composed of the Director of Electric Utility Services and the City Treasurer to provide managerial oversight of the energy risk management policy’s implementation, compliance and revisions . The ROC reports to the City Manager . The Director of Electric Utility Services serves as the risk officer for VMUS and chairs the ROC. Responsibilities of the ROC include:
(1) establishing and modifying internal control processes; (2) assessing proper function of the policies; (3) approving all forward and near -term procurement strategies; (4) recommending to the City Manager all policies, types of physical transactions, products and controls necessary for the prudent operation of VMUS; and (5) insuring that the risk management activities are reported to the City Manager on at least a semi-annual basis.

The ROC meets periodically.

Electric Rates
General. The Electric System’s retail rates are established by the City Council and ar e not subject to regulation, review or approval by the CPUC or any other State or federal agency, although the CEC is authorized to evaluate electric rate policies in furtherance of State regulatory goals and to make recommendations to the Governor, the State Legislature and POUs. The Electric System provides no free service.

VMUS strives to ensure customers are provided with safe and reliable utility services at rates that are deemed fair and reasonable for both the customer and the utility. For the last several years, VMUS has been able to offer competitively priced energy, with system average rates for retail customers remaining significantly below the comparable rates of SCE, the local investor-owned utility provider.

In establishing rates for VMUS custo mers, City staff , with the assistance of its energy consultant, performs a financial analysis of VMUS’ historical and forecasted expenses to determine the revenue requirements for the next fiscal year . Those expenses include expected operations and mainten ance costs, anticipated capital investment requirements, fixed expenses such as purchased power contracts, debt service, and the adequacy of reserves. Also considered are pending regulatory or legislative mandates and volatility in energy market prices tha t may have a substantive financial impact on forecasted expenses. The resultant revenue requirements provide the basis for any potential rate changes.

VMUS also evaluates proposed rate changes against the SCE rates in effect at the time of the review to ensure VMUS remains an affordable alternative for customers. The analysis is performed using the previous 12- month period to establish VMUS customer load profiles. Applying VMUS proposed rates (taking into account GHG rebates passed on to customers) and SCE’s current applicable tariff schedules to each customer profile, the resultant calculated revenues divided by the corresponding retail sales provides the system average rate for VMUS and SCE. Based upon such analysis, VMUS’ system average rates were forecasted to be: in Fiscal Year 2018-19, approximately 7.5% lower than SCE ’s rates; in F iscal Year 2019-20, approximately 5% lower than SCE’s rates; in F iscal Year 2020-21, approximately 5.3% lower than SCE’s rates; and as of March 1, 2022, approximately 25% lower than SCE rates, following SCE’s Consolidated Revenue Requirement and Rate Change on March 1, 2022.

The rate design of the City’s specific customer classifications is reflective of surrounding electric utilities applicable tariff schedules. The City’s most recent rate increases took effect on July 1, 2021. Current rates are as follows:

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Table 4

CITY OF VICTORVILLE

VMUS ELECTRIC SYSTEM
Primary Rate Schedules
(Effective July 1, 2021)
Smaller Commercial and Industrial
200 kWh or less
Customer Charge $63.57 per meter per month

Small Commercial and Industrial
20 kW or less
Customer Charge $12.93 per meter per month
Energy Charge
Non-Time of Use (TOU)/
Demand Pricing Option:

TOU Pricing Option:

Summer Season
Winter Season

Summer Season – On-Peak
Mid-Peak
Off- Peak

Winter Season – Mid Peak
Off-Peak
Super Off-Peak

22.178 cents per kWh

17.687 cents per kWh

15.720 cents per kWh

14.878 cents per kWh

9.520 cents per kWh

15.212 cents per kWh

10.285 cents per kWh

8.427 cents per kwh
Demand Charge
Facilities Related $ 10.63per kW per meter per month
Time Related

TOU Summer – On-Peak
TOU Winter – Mid Peak
$17.27per kW per meter per month
$ 3.23 per kW per meter per month
Three Phase Service 87 cents per month

Medium Commercial and Industrial
Above 20 kW and below 200 kW
Customer Charge $150.11 per meter per month
Energy Charge
Summer Season – On-Peak
Mid-Peak
Off- Peak

Winter Season – Mid Peak
Off-Peak
Super Off-Peak

13.079cents per kWh

12.187cents per kWh

9.397cents per kWh

11.022 cents per kWh

9.929 cents per kWh

7.876 cents per kWh
Demand Charge
Facilities Related $12.82 per kW per meter per month
Time Related

TOU Summer – On-Peak
TOU Winter – Mid Peak
$29.95per kW per meter per month
$ 7.82per kW per meter per month

4844-3753-2891v17/022726-0005 46

CITY OF VICTORVILLE

VMUS ELECTRIC SYSTEM
Primary Rate Schedules
(Effective July 1, 2021)
(continued)
Large Commercial and Industrial
200 – 500 kW
Customer Charge $359.42 per meter per month
Energy Charge
Summer Season – On-Peak
Mid-Peak
Off- Peak

Winter Season – Mid Peak
Off-Peak
Super Off-Peak

12.238 cents per kWh

11.408 cents per kWh

8.870 cents per kWh

10.396 cents per kWh

9.369 cents per kWh

7.444 cents per kWh
Demand Charge
Facilities Related $13.72 per kW per meter per month
Time Related

TOU Summer – On-Peak
TOU Winter – Mid Peak
$29.48 per kW per meter per month
$ 7.19 per kW per meter per month
Power Cost Adjustment Factor 0.560 cents per kWh

Larger Commercial and Industrial
Exceeds 500 kW
Customer Charge $547.06 per meter per month
Energy Charge

Summer Season – On-Peak
Mid-Peak
Off- Peak

Winter Season – Mid Peak
Off-Peak
Super Off-Peak

11.638 cents per kWh

10.852 cents per kWh

8.299 cents per kWh

9.700 cents per kWh

8.759 cents per kWh

6.991 cents per kWh
Demand Charge
Facilities Related $14.34 per kW per meter per month
Time Related

TOU Summer – On-Peak
TOU Winter – Mid Peak
$33.20 per kW per meter per month
$ 8.12 per kW per meter per month
Power Cost Adjustment Factor 0.570 cents per kWh

Source: City.

As required by State law, the Electric System is required to set aside 2.85% of total annual retail revenue for a public purpose program. This public purpose account can be used to fund investments in energy efficiency and conservation, renewable energy resources, services for low -income customers, and research and development projects and initiatives that provide a public benefit. This charge is assessed as a component of the customer’s monthly bill. The revenue collected for public purpose programs that are not spent are held in the public purpose account for future use. As of June 30, 2021, the balance of such account was $3,204,005. See “– Energy Efficiency Programs.”

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The rates set forth in the above rate schedules are subject to adjustment by the City’s (i) Power Cost Adjustment Factor (“PCAF”); (ii) Change in Law Adjustment Factor (“CLAF ”); and (iii) Greenhouse Gas Rebate (“GHG Rebate”).

Power Cost Adjustment Factor. The PCAF is a charge per kWh which may be used to adjust the VMUS electric rates for the actual cost of purchasing and generating (if applicable) electric power and energy to service customers. The PCAF recovers the costs of purchasing and delivering power and energy from all suppliers. The PCAF may be either positive or negative, and can be reviewed and revised on a quarterly basis to reflect actual changes in excess of a plus or minus 10% of the amount stated in the applicable Rate Schedule. As of January 1, 2022, no PCAF was applicable.

Change o
f Law Adjustment Factor . The CLAF is a charge per kWh which may be used to adjust the VMUS electric rates for the impact of changes in law, including any change, modification, revision or adoption of a law, rule, regulation, order, writ, judgment, decree, resolution, ordinance or other legal or regulatory determination, that would materially change the Electric System revenues or expenses. The CLAF may be either positive or negative, and can be reviewed and revised quarterly to reflect actual changes in excess of a plus or minus 10% of the amount stated in the appl icable Rate Schedule. As of January 1, 202 2, no CLAF was applicable.

Greenhouse Gas Rebate. T he GHG Rebate reflects amounts received by the City from the greenhouse gas allowances auction under AB 32 (as discussed under “ –Developments Affecting Power Supply–Assembly Bill 32 – Global Warming Solutions Act of 2006”) that are rebated to Electric System customers that operate facilities primarily classified as either manufacturing or supporting airport activities under the North America Industry Classification System pursuant to the provisions of AB 32.

Separate rate schedules apply to: (i) street and traffic control lighting services based upon factors such as the strength of the lighting used and number of traffic signals; and (ii) electricity used for agricultural or water pumping purposes.

History of Rate Changes. The following table presents a recent history of VMUS electric rate changes since Fiscal Year 2017-18. The last base rate increase took effect July 1, 2021.

Table 5

CITY OF VICTORVILLE

VMUS ELECTRIC RATE CHANGES
Fiscal Year
Effective Date Percent Change
2021-22(1) 7.5% System Average Increase
2020-21(2) 7.2% System Average Increase
2019-20 6.0% System Average Increase
2018-19 3.0% System Average Increase
2017-18 1.0% Increase only to Small Commercial and Industrial Rate Class Customer Charge and Three Phase Service

(1) Effective July 1, 2021.
(2) Effective August 1, 2020.

Source: City.

Comprehensive Rate Study and Results. In late 2020, VMUS issued a request for proposal to hire a third party consultant to conduct a cost of service study and provide recommendations, if any, for changes to the Electric System rates and/or the current rate design. A review of system load and financial data was completed, using five -year historical and five- year forecasted data. The results of the analysis confirmed revenue

4844-3753-2891v17/022726-0005 48
requirements have been adequately funded historically. To ensure revenue adequacy for the five- year planning period, taking into account the continuing financial health of the utility, City and VMUS management proposed for City Council consideration a 7.5% rate increase for F iscal Year 2021-22. City Council approved the rate increase, and the new rates went into effect on July 1, 2021. City and VMUS management also expect to recommend an additional rate increase of a minimum of 5% in Fiscal Year 2022-23 and will continue to evaluate rates through 20 25-26. Proposed rates are subject to change; s taff expects to continue to conduct periodic financial reviews to ensure an adequate level of revenues based on market conditions and expenditures at th e applicable points in time. The projected operating results set forth in this Official Statement under “FINANCIAL INFORMATION – Projected Operating Results and Debt Service Coverage” assume that the contemplated 5% rate increase for Fiscal Year 2023 is adopted. It should be noted, however, such projected rate increases has not been approved by the City Council and actual electric rates and charges to be effective in each such Fiscal Year are subject to adoption by the City Council.

Collection Procedures . Bills for electric service are generally rendered monthly or as otherwise provided in the rate schedules. All electric bills are due and payable upon receipt, and are considered past due if not paid within 19 days of the date of billing. Electric bills are consolidated with bills for gas service. If payment is not paid within 19 days after billing, a second notice will be delivered. If a past due bill is not paid within 15 days after notice that service will be discontinued is given, electric services are subject to termination (in accordance with applicable law) until all fees, charges, penalties and the entire delinquent balance have been paid. Fees associated with a delinquency include a $25 returned check fee, a late charge equal to 0.8% of the outstanding balance and a re connection fee. As a result of the COVID-19 pandemic, the City is currently not assessing late fees. See also “CERTAIN RISK FACTORS – Pandemic; COVID-19 Considerations.” Uncollectible Accounts. The City considers its write-offs for uncollectible accounts to be low by electric utility industry standar ds for comparable utilities. The annual write- offs for uncollectible accounts have been less than 1% for each of the last four Fiscal Years as shown in the table below.

Table 6

CITY OF VICTORVILLE

VMUS ELECTRIC SYSTEM
Uncollectible Accounts
Fiscal Year Ended
June 30
Uncollectible
Revenues
Percent of
Gross Billings
2017 $51,806(1) 0.457%
2018 243 0.002
2019 0 0.000
2020 0 0.000
2021 0 0.000

(1) The uncollectible revenues in 2017 was primarily due to the closure of a customer’s aerospace business operations in the City and subsequent write-off of unpaid amounts.

Source: City.

In response to the COVID- 19 pandemic and the financial hardship anticipated to be experienced by certain of its electric customers, the City implemented certain customer protections for its customers. The measures include the suspension of the collection of any late fees or penalties for delinquent accounts. The City currently expects these customer protections will e xtend through April 30, 2022. It should be noted, however, that while the City has experienced a small increase in past due accounts, there has not been any significant increase in uncollectible accounts since the onset of the COVID -19 pandemic. The City attributes this to the nature of the VMUS customer base and particularly, the types of industry in which a number of its largest customers are engaged. See “– Customer Base, Metered Accounts, Retail Sales, Billed Revenues and Demand.” The City is unable to predict with certainty at this time if, as a result of economic factors related to the COVID-19 pandemic and such customer protection measures, increased delinquencies and more non-payment of utility bills than normal and forecasted will occur in the future.

4844-3753-2891v17/022726-0005 49
Capital Requirements
Separate from the 2022 Project, the City expects the capital requirements for general Electric System improvements to average approximately $321,000 over the five Fiscal Years 2021 -22 through 2025 -26. Such improvements include system capacity enhancements at Foxborough, procurement of equipment to provide redundancy, a fleet upgrade, and system impact and facilities studies for new or existing services. It is expected that these requirements will be funded primarily on a pay- as-you-go basis from System Net Revenues or available funds in the Electric Utility Fund.

The following table lists the expected annual capital requirements for the Electric System for Fiscal Years 2021-22 through 2025-26 (exclusive of the 2022 P roject which is being financed f rom proceeds of the Series 2022 Bonds).

Table 7

CITY OF VICTORVILLE

VMUS ELECTRIC SYSTEM
Capital Requirements
Fiscal Year Ending
June 30 Capital Requirements
2022 $ 125,000
2023 100,000
2024 160,000
2025 1,060,000(1)
2026 160,000
Total $1,605,000

(1) Reflects potential capacity expansion improvements at Foxborough; actual timing will depend on actual load growth.

Source: City.

See also “PLAN OF FINANCE – The 2022 Project” for a description of the Electric System capacity expansion project being financed from the proceeds of the 2022 Bonds.

Outstanding Debt Obligations
Interfund Loan from General Fund. On July 1, 2018, the Interfund Loan Agreement was executed by the City on behalf of the Municipal Utility Services Fund (the fund in which operations of the electric utility were originally accounted for) for the reimbursement of funds previously advanced from Fis cal Year 2003-04 through 2007-08 from the General Fund to the Municipal Utility Services Fund for working capital, startup costs and operation funding shortfalls in the amount of $17,850,143. The Interfund Loan Agreement was recorded in Fiscal Year 2018-19 through transfers in and out of the respective funds. The advance is required to be repaid to the City General Fund over a term of eight years with $11,000,000 paid on July 1, 2018 and annual installments of $1,000,000 to be paid on July 1 of each year over the subsequent six years, with a final principal installment of $850,143 due on July 1, 2025. The principal balance of the loan bears interest at an interest rate equal to the annualized Local Agency Investment Fund (“LAIF”) rate of return with interest paid quarterly . As of the January 1, 2022, the outstanding principal balance payable from the Electric Utility Fund to the City General Fund was $3,850,143. Pursuant to its terms, the repayment of the amounts due under the Interfund Loan Agreement are junior and subordinate to any current and/or future obligations, liens, or encumbrances of the Electric Utility Fund, including the pledge of the Trust Estate securing the payment of the Bonds.

VJPFA Bonds. As described under “PLAN OF FINANCE – Redemption of Refunded VJPFA Bonds,” the VJPFA issued the Refunded VJPFA Bonds for the purposes of re -financing the costs of acquisition, construction and expansion of a co- generation project (and refunding certain pre viously issued bonds of the VJPFA issued for such project) originally expected to be utilized by the City as a power supply resource for

4844-3753-2891v17/022726-0005 50
VMUS customers. The Refunded VJPFA Bonds are secured by revenues received by the VJPFA from the City as base rental payments for the lease of certain property from the VJPFA to the City. The obligation of the City to make the base rental payments is an unsecured obligation of the City payable from the General Fund of the City. Historically, the payments made by the City to be applied to the payment of debt service on the Refunded VJPFA Bonds have been supported by and reimbursed or paid from revenues of the Electric System. The Refunded VJPFA Bonds are being refunded and redeemed in full in connection with the iss uance of the Series 2022 Bonds. See “PLAN OF FINANCE.”

VMUS ELECTRIC SYSTEM

FINANCIAL INFORMATION
Budget Process
The City prepares and adopts a budget for each Fiscal Year which includes proposed expenditures and the means of financing such expenditures . Under the City’s budget procedure, the City Manager submits a proposed budget to the City Council for the Fiscal Year commencing the following July 1. Prior to June 30 of each year, a public hearing is held and public notice is disseminated to obtain public comments and the budget is legally enacted by the City Council through the passage of a resolution . The City Council adopted the Fiscal Year 20 21-22 budget on June 15, 202 1. The Fiscal Year 2022 -23 budget is expected to be presented for consideration by the City Council on June 19, 2022.

Financial Statements
A copy of the annual comprehensive financial report of the City for the Fiscal Year ended June 30, 2021 (the “Financial Statements”), together with the letter of the City’s independent accountants, CliftonLarsonAllen LLP, Irvine, California (the “Independent Accountants ”), and the Independent Auditors’ Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Gov ernment Auditing Standards, is set forth in APPENDIX B. The Financial Statements should be read in their entirety. The Independent Accountants have not reviewed, audited or performed any procedures with respect to this Official Statement. See “AUDITED FINA NCIAL STATEMENTS.”
The City accounts for moneys received and expenses paid in accordance with generally accepted accounting principles applicable to public entities . In certain cases, generally accepted accounting principles require or permit 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 B. Except as otherwise expressly noted herein, all financial information that has been derived from the City’s audited financial statements reflects the application of generally accepted accounting principles.

Commencing with the Fiscal Year ended June 30, 2020, the Electric System of the City is accounted for within the Electric Utility Fund, a proprietary fund type (enterprise fund) . In governmental accounting, proprietary funds are used to account for operations the enterprises 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.

Proprietary funds are accounted for using the “economic resources” measurement focus and the accrual basis of accounting. Under the accrual basis of accounting, revenues are recognized in the period in which they are earned while expenses are recognized in the period in which the related goods or services are delivered.

4844-3753-2891v17/022726-0005 51
Proprietary funds distinguish operating revenues and expenses from non- operating items. Operating revenues, such as charges for services, result from exchange transactions associated with the principal activity of the fund. Exchange transactions are those in which each party receives and gives up essentially equal values.

Non-operating revenues, such as subsidies and investment earnings, result from non -exchange transactions or ancillary activities . Operating expenses include the cost of sales and services , administrative expenses , and depreciation on capital assets (a non-cash item which is not reflected in this Official Statement) . All expenses which do not meet this definition are reported as non-operating expenses.

Financial Policies
The City has adopted several policies which are designed to ensure the prudent and effective management of City operations, including an investment policy and a debt management policy. Further information about each such policy is set forth in Appendix A. See APPENDIX A – “THE CITY OF VICTORVILLE – CITY FINANCIAL INFORMATION – General Financial Condition and Outlook of the City – Fiscal Policies” and “– City Investment Policy.”
Available Cash Reserves of the Electric System
As of January 2022, the Electric Utility Fund had approximately $12.2 million in available reserves , which includes unrestricted cash and investments. This amount does not include the balance of public purpose charge collections set aside and held in a separate fund to fund future eligible energy efficiency initiatives and other public benefit programs. See “– Electric Rates.”
Summary of Historical Operating Results
A summary of historical System Revenues, Maintenance and Operation Costs and debt service coverage for the City’s Electric System for the last five Fiscal Years is shown in the following table. The summary below presents the calculation of System Net Revenues and d ebt service coverage based upon the flow of funds and financial covenants established under the Indenture . The summary was prepared by the City from information derived from or accounted for in the audited annual financial statements for the past five Fiscal Years but exclude certain non-cash items which are not included as System Revenues or Maintenance and Operation Costs and include certain other adjustments. See the definition of System Revenues and Maintenance and Operation Costs set forth in Appendix C attached hereto for additional information with respect to such exclusions and adjustments. The line item designations presented in Table 8 below may not necessarily correlate to the specific line item designations as set forth in the audited financial statements. The summary operating results set forth below are qualified in their entirety by reference to such financial statements, including the notes thereto, and the provisions of the Indenture summarized in Appendix C hereto. The table has not been reviewed or audited by the City’s Independent Accountants.

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4844-3753-2891v17/022726-0005 52
Table 8

CITY OF VICTORVILLE

VMUS ELECTRIC SYSTEM
Historical Revenues, Expenses and Debt Service Coverage (1) Fiscal Year Ended June 30
2017 2018 2019 2020 2021
System Revenues
Revenue From Sale of Energy (2) $11,458,887 $11,594,141 $12,276,085 $13,067,414 $15,754,047 Miscellaneous Revenue (3) 1,225,739 439,857 156,085 139,714 76,155 Interest Income (4) 61,787 201,464 243,653 176,668 21,325 Total System Revenues $12,746,413 $12,235,462 $12,675,823 $13,383,796 $15,851,527 Maintenance and Operation Costs (5)
Purchased Power and Associated Costs (6) $ 4,251,919 $ 5,304,090 $ 5,177,396 $ 6,344,497 $7,120,395 Maintenance and Operation (7) 1,425,739 1,901,187 2,629,360 2,162,275 2,487,769 Personnel Services (8) 600,916 982,247 1,033,911 1,124,862 1,087,493 Total Maintenance and
Operation Costs $ 6,278,574 $ 8,187,524 $ 8,840,667 $ 9,631,634 $10,695,657 System Net Revenues Available
for Debt Service $ 6,467,839 $ 4,047,938 $ 3,835,156 $ 3,752,162 $5,155,870 Debt Service
VJPFA Bonds Debt Service (9) $ 1,817,611 $ 2,045,091 $ 2,230,566 $ 1,936,495 $1,457,896 Bonds Debt Service Coverage Ratio 3.56x 1.98x 1.72x 1.94x 3.54x Interfund Loan Repayment (10) $ -- $ -- $11,165,773 $1,120,513 $1,027,161 System Net Revenues Remaining $ 4,650,227 $ 2,002,847 ($9,561,182) $ 695,154 $2,670,813 Cash and Investments (11) $16,059,278 $18,879,454 $9,382,850 $8,993,784 $11,890,324

(1) Totals may not add due to rounding. Figures in Fiscal Years 2016- 17 through 2018- 19 do not correspond to audited financial statements in such years as the electric and gas utilities were reported together in the Municipal Utility Fund. Beginning in Fiscal Year 2019-20, the Electric Utility Fund and Gas Utility Fund are reported separately and will be reported separately in future years.
(2) Revenues from sale of energy include ESA customers which make up approximately 16% of total revenues in Fiscal Year 2020-

21. Revenues from sale of energy also includes 2.85% public purpose program charge amount and are net of GHG rebates/cap - and-trade amounts.
(3) Miscellaneous revenues include late fees, connection/set up fees, sale of equipment/property, reimbursements , and other miscellaneous revenue.
(4) Includes interest earnings on electric system, public purpose program and cap -and-trade funds. Does not include unrealized gain (loss) on investments or increase (decrease) in fair market value of investments. (5) Maintenance and Operation Costs excludes depreciation, amortization and other non-cash items. (6) Includes CAISO-related charges, resource adequacy requirements and SCE access fees. Power costs are net of GHG rebates/cap- and-trade amounts.
(7) Includes, among other things, utilities, supplies, vehicle expenses, computer and other equipment, infrastructure repairs, gr ounds maintenance, contract services, legal, and certain allocated costs. Also includes VJPFA Bonds letter of credit, remarketing f ees and support costs. Increase in Fiscal Year 2018-19 reflects a correction made by bond trustee in calculation of letter of credit fees. (8) Includes, among other things, regular wages, overtime wages, standby wages, fringe benefits, payroll taxes, retir ee expenses and pension expenses.
(9) Reflects debt service on the Refunded VJPFA Bonds (being refunded by the Series 2021 Bonds) which, though not legally obligated therefor, have historically been paid from revenues of the Electric System. Includes principal and interest payments. As a result of a partial redemption of the outstanding bonds in 2013, no principal amount was payable in 2016. See “THE VMUS ELECTRIC SYSTEM – Outstanding Debt Obligations” and “PLAN OF FINANCE.” (10) The Interfund Loan Agreement was executed on July 1, 2018 and initial repayment to the City of amounts advanced for V MUS start-up was made on such date in the principal amount of $11,000,000. Interfund loan interest is paid quarterly and based on LAIF quarterly apportionment rates . See “THE VMUS ELECTRIC SYSTEM –Outstanding Debt Obligations – Interfund Loan from General Fund.”
(11) Includes aggregate cash and investments, including electric system, public purpose program and cap- and-trade balances. The public purpose program and ca p-and-trade balances are restricted to specified uses and make up approximately 45% of the total cash and investments in 2021. Excludes any bond reserves (cash with fiscal agent).

Source: City.

4844-3753-2891v17/022726-0005 53
Projected Operating Results and Debt Service Coverage
Set forth below are the City’s projections of System Revenues, Maintenance and Operation Costs and debt service coverage of the Electric System for Fiscal Years 2021-22 through 2025-26. The projected operating results are based on the City’s load forecasts, its estimated costs of power and other operating and non-operating revenues and expenses. The City has forecasted such operating and non -operating expenses taking into consideration the Electric System’s historical costs and trends, projected load growth and inflation.

Certain assumptions have been made by the City in the development of the forecasts, including the assumptions which are set forth in the footnotes to the below table. Among the assumptions made by the City are the following:

1. Annual kWh sales are projected to increase by approximately 15% in Fiscal Year 2022-23 and by 2% annually from Fiscal Year 2023-24 through 2025-26, reflecting assumed load growth to serve the current customers of the Electric System and the addition of future new Electric System customers anticipated over the projection period.

2. Renewable energy resources are assumed to serve up to 60% of City loa d over the projection period at contracted prices. System energy costs reflect indicative power supply prices. The total average purchased power expense through Fiscal Year 2024 -25 is an estimated $0.0683 per kWh.

3. Applicable operating expenses generally include a 3% inflation rate over the forecast period.

4. A rate increase of a minimum 5 % is assumed to be implemented in Fiscal Year 202 2-23 and staff will continue to monitor revenue requirements and request rate adjustment as deemed necessary. Such assumed rate increase has not yet been approved by the City Council. There can be no assurance that the City Council will implement the projected rate increases or that the City Council will not make further adjustments to rates that have currently been adopted.

5. It is assumed that the COVID-19 pandemic and its after effects will not have a material adverse impact on System Revenues, as described in more detail under “CERTAIN RISK FACTORS – Pandemic; COVID-19 Considerations.”
While the City believes that the above assumptions are reasonable, there can be no assurance that the assumed conditions will in fact occur. The City’s projections may be affected (favorably or unfavorably) by unforeseen future events which could cause actual results to differ materially from those presented below.

Therefore, the results projected in the following table cannot be assured. See also “CERTAIN RISK FACTORS – Uncertainties of Projections, Forecasts and Assumptions.”

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4844-3753-2891v17/022726-0005 54
Table 9

CITY OF VICTORVILLE

VMUS ELECTRIC SYSTEM
Projected Revenues, Expenses and Debt Service Coverage(1) Fiscal Year Ended June 30
2022 2023 2024 2025 2026
System Revenues
Revenue From Sale of Energy (2) $16,454,500 $18,918,000 $19,447,700 $19,993,800 $20,556,900 Miscellaneous Revenue (3) 52,200 68,240 69,301 70,483 71,486 Interest Income (4) 54,575 66,944 79,877 89,560 109,336 Total System Revenues $16,561,275

$19,053,184 $19,596,878 $20,153,843 $20,737,722
Maintenance and Operation Costs
Purchased Power and Associated Costs (5) 8,085,946 10,122,830 9,732,469 9,855,400 10,115,400 Maintenance and Operation (6) 2,027,631 1,436,758 1,472,104 1,508,452 1,546,001 Personnel Services (7) 1,102,997 1,227,417 1,264,300 1,302,300 1,341,400 Total Maintenance and
Operation Costs $11,216,574 $12,787,005 $12,468,873 $12,666,152 $13,002,801 System Net Revenues Available
for Debt Service $5,344,701 $ 6,266,179 $ 7,128,005 $ 7,487,691 $ 7,734,921 Debt Service
VJPFA Bonds Debt Service (8) $1,536,500 $ -- $ -- $ -- $ -- Series 2022 Bonds Debt Service (9) $ -- 3,577,136 3,591,208 3,591,322 3,596,482 Total Debt Service $1,536,500 $3,577,136 $ 3,591,208 $ 3,591,322 $ 3,596,482 Bonds Debt Service Coverage Ratio 3.48x 1.75x 1.98x 2.08x 2.15x Interfund Loan Repayment (10) 1,057,752 1,042,752 1,027,752 1,012,952 0 System Net Revenues Remaining $2,750,449 $1,646,291 $2,509,045 $2,883,417 $4,138,439

(1) Totals may not add due to rounding.
(2) Reflects implementation of an assumed increase in Electric System rates averaging approximately 5% in Fiscal Year 202 2-23.

Although it is very likely to have additional rate increases for the remaining forecast period, a more conservative approach was taken and no further rate increases were built into the financials for Fiscal Years 2023-2026. Such assumed rate increase in Fiscal Year 2022-2023 has not yet been approved by City Council. Revenue from sale of energy assumes sales growth of approximately 15% in Fiscal Year 2022-23 and 2% thereafter through Fiscal Year s 2024-26 based on Fiscal Year 2021-22 actuals and updates from new and existing customers. Revenues from sale of energy include ESA customers which made up approximately 16% of total revenues in Fiscal Year 2020-21. Revenues from sale of energy also includes 2.85% public purpose program charge amount and are net of GHG rebates/cap-and-trade amounts.
(3) Miscellaneous revenues include late fees, connection/set up fees, sale of equipment/property, reimbursements, and other miscellaneous revenue.
(4) Assumes interest earnings at 0.5% per annum.
(5) Fiscal Year 2022-23 reflects an approximate 21% increase due to increased requirements for resource adequacy and an increase in power supply needs to meet customer demand. Fiscal Year 2023 -24 assumes a 1% decrease due to an anticipated decrease in overall power costs and Fiscal Year 2024 -25 and 2025-2026 assumes a 1% and 3% increase, respectively, due to the projected consistent increase in customer load. Power costs are net of GHG rebates/cap-and-trade amounts. See “THE VMUS ELECTRIC SYSTEM – Power Supply Resources.”
(6) Includes, among other things, utilities, supplies, vehicle expenses, computer and other equipment, infrastructure repairs, grounds maintenance, contract services, legal, and certain allocated costs. A 3% inflation rate was assumed on most maintenance and operation costs of the forecasted period. Decline in Fiscal Year 2022-23 reflects the elimination of the letter of credit, remarketing and other support costs associated with the VJPFA Bonds being refunded. (7) Includes, among other things, regular wages, overtime wages, standby wages, fringe benefits, payroll taxes, retiree expenses and pension expenses. Decline in Fiscal Year s 2020-22 from prior years reflects department vacancies and reallocation of wages. A

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3% inflation rate was assumed for Fiscal Years 2022 -23 through 2024- 26 for cost-of-living adjustments (COLA) and potential merit increases.
(8) Interest payment for the final quarter of Fiscal Year 2022 is estimated based on actual interest payments for the first three quarters of Fiscal Year 2020-21.
(9) Preliminary, subject to change. See “THE SERIES 2022 BONDS. (10) Interfund loan repayment interest estimated at 1.50% for the forecasted period after Fiscal Year 202 1-22. See “THE VMUS ELECTRIC SYSTEM –Outstanding Debt Obligations – Interfund Loan from General Fund.” Source: City.

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CERTAIN RISK FACTORS
The following factors, which represent certain risk factors, should be considered along with all other information in this Official Statement by potential investors in evaluating the Series 2022 Bonds. The following description of risks is not an exhaustive list of the risks associated with the purchase of the Series 2022 Bonds and the order in which the information below is presented does not necessarily reflect the relative importance of the various risks or the probability of their occurrence. Other factors and events, including those described elsewhere in this Official Statement, could adversely affect the operations or financial condition of the City and the Electric System. Investors must read the entire Official Statement to obtain information essential to making an informed investment decision.

General
The ability of the City to comply with its covenants under the Indenture and to generate System Net Revenues sufficient to pay principal of and interest on the Series 2022 Bonds may be adversely affected by actions and events outside of the control of the City and may be adversely affected by actions taken (or not taken) by voters, property owners, taxpayers or persons obligated to pay fees and charges. Among other matters, general and local economic conditions and changes in law and government regulations could adversely affect the amount of System Net Revenues realized by the City or significantly raise the cost of operating the Electric System.

In addition, the realization of future System Net Revenues is subject to, among other things, the capabilities of management of the Electric System, the ability of the Electric System to provide service to its customers, the ability of the City to establish, maintain and collect charges from its customers and the ability of the City to establish, maintain and collect rates and charges sufficien t to pay for Maintenance and Operation Costs, the Series 2022 Bonds and other obligations payable from System Net Revenues.

Limited Obligation
The Series 2022 Bonds are limited obligations of the City and are secured by a pledge of and payable solely from the Trust Estate as provided in the Indenture, and the City is not obligated to pay the Series 2022 Bonds except from the Trust Estate as provided in the Indenture. The General Fund of the City is not liable, and the credit or taxing power of the City is not pledged, for the payment of the Series 2022 Bonds or the interest or premium thereon. The Series 2022 Bonds are not secured by a legal or equitable pledge of, or charge, lien or encumbrance upon, any of the property of the City or any of its income or r eceipts, except the Trust Estate as provided in the Indenture.

No Obligation of City to Appropriate Other Funds
In the event of a withdrawal from the Bond Reserve Fund for the purpose of making up any deficiency in the Interest Fund or the Principal Fund, the First Supplemental Indenture provides that, under certain circumstances, the City Manager or the City Treasurer or other Authorized Representative of the City will follow certain procedures to request that the City Council budget and appropriate from a ny available funds of the City amounts sufficient to replenish such withdrawal from the Bond Reserve Fund. Even if an Authorized Representative of the City requests such an appropriation, the City Council is not obligated by the City Enterprise Revenue Bon d Law, any covenant made in the Indenture, or any other provision of law, to appropriate or otherwise make any funds available other than System Net Revenues and such other amounts comprising the Trust Estate to replenish the Bond Reserve Fund or to pay debt service on the Series 2022 Bonds. No assurance can be given that the City Council will make any such appropriation or that such appropriation will be in the time period requested.

The failure of City Council to budget and appropriate any amount requested by an Authorized Representative of the City as described for any reason shall not constitute a default or Event of Default under the Indenture and Bondholders have no right to compel any such appropriation. None of the Trustee, the owners or any other Person shall have any recourse against the City in the event the City Council does not budget and

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appropriate any such amount for any reason. See “SECURITY AND SOURCES OF PAYMENT FOR THE BONDS – City Appropriations Relating to Certain Bond Reserve Fund Withdrawals.” System Net Revenues; Rate Covenant
System Net Revenues are dependent upon the demand for Electric S ervices, which can be affected by economic and other factors.

There can be no assurance that demand for the City’s Electric Services will be consistent with the levels contemplated in this Official Statement. A decrease in demand could require an increase in rates or charges in order to comply with the Rate Covenant contained in the Indenture or pay debt service on the Series 2022 Bonds.

The City’s ability to meet its Rate Covenant is dependent upon its capacity to increase rates while continuing to attract customers without driving down demand to a level insufficient to pay debt service on the Series 2022 Bonds. The electric rates charged by the City to its two ESA customers are subject to the terms of the applicable ESA. The ESAs require the City to maintain rates for such customers at a specified discount from SCE rates, which may limit the amount of any rate increase that can be imposed by the City on such customers. The City’s two ESA customers accounted for approximately 16% of its total revenues from the sale of energy in Fiscal Year 2020-21.

Although the City has covenanted in the Indenture to impose rates, fees and charges as more particularly described herein, and expects that sufficient revenues will be generated through the imposition and collection of such rates, fees and charges and other System Revenues described herein, there is no assurance that such imposition of such fees, connection fees or other System Revenues will result in the generation of System Net Revenues in the amounts required by the Indenture . The City’s Rate Covenant does not constitute a guarantee that sufficient System Net Revenues will be available to make debt service payments on the Series 2022 Bonds.

Limited Service Area; Concentration of Customers
The Electric System serves only two industrial parks within the City with a total of approximately 36 customers (representing 81 separately metered accounts) as of January 1, 2022. Customer concentration presents a risk in that if one or more of the Electric System’s largest customers were to default on their payments for retail energy sales, or were to relocate their operations outside of the City or otherwise cease their operations in the City, such failure to pay, relocation of operations or ceasing of operations could have a material adverse impact on the Electric System Revenues and finances. No assurances can be given by the City that any such failure to pay, relocation or cessation of operations will not occur during the term of the Series 2022 Bonds.

Increased Costs
The actual cost of operating and maintai ning the Electric System and implementing necessary capital improvements will depend on a variety of factors, including but not limited to labor costs (including costs related to pension liabilities), power purchase and other resource costs, regulatory com pliance costs, the discovery of unforeseen subsurface conditions, environmental conditions and other events, many of which are outside of the control of the City. There can be no assurances that such costs will not significantly exceed the amounts projected by the City. In the event that actual costs of operating and maintaining the Electric System and/or implementing necessary capital improvements significantly exceed the amounts projected by the City, such circumstances could have a material adverse impact on the ability of the City to generate System Net Revenues in the amounts required by the Indenture.

Pandemic; COVID-19 Considerations
The spread of the novel strain of coronavirus (and variants thereof) and the disease it causes (known as “COVID 19”) has had significant negative impacts throughout the world, including in California. In 2020, the World Health Organization declared the COVID -19 outbreak to be a pandemic, and states of emergency have been declared by the United States, the State, and numerous counties throughout the State, including in San

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Bernardino County (which state of emergency was terminated by the Board of Supervisors of such county as of March 1, 2022). The purpose behind these declarations was to coordinate and formalize emergency actions and across federal, state and local governmental agencies, and to proactively prepare for a wider spread of the virus.

Over the course of the pandemic, the State and the County issued various “stay-at-home” orders and other guidance and restr ictions on businesses and other activities, which severely restrict ed the movements of residents and operations of business and related activities , with specified exceptions, including exceptions for certain sectors of the workforce that were classified as providing essential services and products.

With widespread vaccination currently underway worldwide, the domestic governmental-imposed “stay at home” orders and restrictions on operations of schools and businesses implemented to respond to and control the outbreak have been eased. The Governor of California lifted most statewide COVID 19 restrictions on June 15, 2021. Restrictions, however, may be re-imposed in various jurisdictions from time to time as local conditions warrant. It is not known with any level of certainty when a full re-opening of the economy will be achieved and sustained. The negative effects of the COVID –19 pandemic and its aftermath on global, national and local economies is widely expected to continue at least for some period of time.

The City has been monitoring and responding to the COVID-19 pandemic. The City has implemented a variety of measures with respect to essential workers, remote employees and back -up operations designed to maintain its business functions and to protect the public health and the health of its employees . The City has continued to provide essential services to the citizens of the City. To date, the finances and operations of the City and the Electric System have not been significantly adversely impacted by the COVID-19 pandemic.

With respect to the Electric System, although energy usage by some of the smaller and small Electric System customers declined as businesses were temporarily closed, energy deliveries have continued to increase overall. This is likely largely attributable to plant expansions and continued consumer demand for the p roducts produced by the Electric System’s larger industrial sector customers. See “THE VMUS ELECTRIC SYSTEM – Customer Base; Metered Accounts, Retail Sales, Billed Revenues and Demand.” Although the City has temporarily suspended the collection of late fees and penalties on past due electric bills, and there has been some small increase in late payments, the Electric System has not experienced any increase in write- offs or uncollectible amounts. See “THE VMUS ELECTRIC SYSTEM – Electric Rates.” With respect to the City more broadly, while the City’s general operations are dependent on the ability to raise sales taxes, property taxes and transient occupancy taxes and assess business licenses, developer fees and construction permits , which may be affected by g eneral economic conditions, the City implemented measures to reduce expenditures in response to the COVID -19 pandemic. Expenditures were also reduced as a result of the cancellation of certain community programs due to COVID-19 restrictions on gatherings. The City has not had to withdraw any cash reserves to balance the Fiscal Year 2019 -20 or 2020- 21 budget. See APPENDIX A – “THE CITY OF VICTORVILLE – CITY FINANCIAL INFORMATION—Effect of COVID- 19 Outbreak on General Fund.”
The American Rescue Plan Act of 2021 (the “ARPA”), which became law on March 11, 2021, provides certain federal assistance to state and local governments to help mitigate the effects of the COVID-19 pandemic.

The City expects to receive approximately $33.5 million in federal assistance pur suant to the ARPA. The City received 50% of the funding in June 2021 and expects to receive the other 50% of the funding in June 2022. This pandemic relief funding is available for a broad range of uses, including responding directly to the health emergency, addressing its negative economic impacts with assistance to households and small businesses, restoring government services reduced in response to pandemic- related revenue losses, and making certain necessary infrastructure improvements. Pursuant to the provisions of the bill, f unding received pursuant to the ARPA must be spent by the end of the 2024 calendar year. Recipient governments are required to provide periodic reports to the U.S. Department of Treasury with a detailed accounting of the use of funds. The U.S.

Department of Treasury can recoup funds if the recipient government does not comply with the eligible uses.

On July 20, 2021, the City Council appr oved the City’s ARPA Allocation Plan. This program contains five categories that identify eligible uses under the classification outlined by the U.S. Department of Treasury. To

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date, the City has created three programs through its ARPA funding, all responding to COVID-19 or its negative impacts. These programs include the Utility Bill Assistance Program, Homeless Shelter Program, and the Employee Incentive Vaccination Program. Other capital expenditures that have been approved by the City Council are four fire apparatus. Staff is continuing to identify the needs in the community and how these ARPA funds can be used as eligible expenses.

The ultimate degree of impact to the City ’s and/or the Electric System’s finances and operations is difficult to predict due to the evolving nature of the COVID-19 pandemic, and uncertainties relating thereto. The extent of the fiscal impacts on the City and the Electric System will depend on, among other things, (i) the extent to which the disruption to the local and global economies and financial markets persists; (ii) the effectiveness of and ability to reach wide spread distribution of vaccines and the period of time therefor; (iii) the ramifications of future actions that may be taken or required by governmental authorit ies to respond to the effects of the pandemic, including additional stimulus efforts by the federal government; and (iv) the pace at which the economy fully re-opens and the speed of the economic recovery. If the COVID-19 pandemic and/or the economic recovery is prolonged, the likelihood or magnitude of potential adverse impacts to the City’s and/or the Electric System’s finances or operations from the factors discussed herein or from other factors, could be increased . No assurances can be given that the Ci ty’s and/or the Electric System ’s financial results or operations will not be materially and adversely affected by the COVID-19 pandemic and its consequences in the future.

Uncertainties of Projections, Forecasts and Assumptions Certain information contain ed in this Official Statement, including the projections contained under “VMUS ELECTRIC SYSTEM FINANCIAL INFORMATION – Projected Operating Results and Debt Service Coverage” is based upon assumptions and projections . Projections and assumptions are inheren tly subject to significant uncertainties . Inevitably, some assumptions will not be realized and unanticipated events and circumstances may occur and actual results are likely to differ, perhaps materially, from those projected .

Accordingly, such projections are not necessarily indicative of future performance, and the City does not assume any responsibility for the failure to meet such projections. In addition, certain assumptions with respect to future business and financing dec isions of the City are subject to change. No representation is made or intended, nor should any representation be inferred, with respect to the likely existence of any particular future set of facts or circumstances, and prospective purchasers of the Serie s 2022 Bonds are cautioned not to place undue reliance upon any projections or requirements for projections. See also “CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS” after the inside front cover of this Official Statement. If actual results are less favorable than the results projected, or if the assumptions used in preparing such projections prove to be incorrect, then the amount of System Net Revenues may be materially less than expected . Consequently, the ability of the City to make timely p ayments of the principal of and interest on the Series 2022 Bonds may be materially adversely affected.

Seismic and Other Natural Disasters
The City , like much of California, is located in a seismically active area . In addition, active and potentially active seismic faults cross the regional transmission facilities over which the City obtains power and energy deliveries needed to service its electric customers. If there were to be an occurrence of severe seismic activity in the area of the City or affecting such regional transmission facilities, there could be an interruption in the ability of the Electric System to provide Electric Service, resulting in a temporary reduction in the amount of System Net Revenues available to pay interest on and principal and premium, if any, of the Series 2022 Bonds when due. The City is not required to maintain earthquake insurance on Electric System facilities under the Indenture, and does not currently maintain such insurance. See “THE CITY OF VICTORVILLE AND VICTORVILLE MUNICIPAL UTILITY SERVICES – City Insurance.” No assurance can be given that a future seismic event will not materially adversely affect the operation of the Electric System.

Other natural or man -made disasters, including without limitation , wildfires, droughts, floods, landslides, high winds and other disasters or accidents could cause failure of Electric System infrastructure or infrastructure upon which the Electric System is dependent or otherwise interrupt operation of the Electric

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System and thereby impair the ability of the City to generate sufficient System Net Revenues and may require the City to increase its rates and charges . The severity and/or frequency of natural disaster occurrences may be exacerbated by the impacts of climate change.

Wildfire Risks
A number of wildfires occurred in California in 2017, 2018, 2019 and 2020. Under the doctrine of inverse condemnation (a legal concept that entitles property owners to just compensation if their property is damaged by a public use), California courts have imposed liability on utilities in legal actions brought by property holders for damages caused by the utility’s infrastructure. Thus, if the facilities of a utility, such as its electric distribution and transmission lines, are determined to be the substantial cause of a fire, and the doctrine of inverse condemnation applies, the utility could be liable for damages without having been found negligent. In early 2019, PG&E Corporation and Pacific Gas and Electric Company (together, “ PG&E”) commenced bankruptcy proceedings. In its bankruptcy filings, PG&E indicated that such proceedings were initiated to address extraordinary financial challenges that were largely attributed to potential liabilities associated with wildfires.

Although the City is not in a geographical area considered to be an area of elevated or extreme risk from utility-associated wildfires and the City does not currently own or operate transmission assets of the nature that have been associated with catastrophic wildfires (see “THE VMUS ELECTRIC SYSTEM – Wildfire Mitigation Measures”), wildfire risks are a focus of concern in the broader electric utility industry. Recent State legislation relating to wildfire risks and mitigation efforts in California, including SB 1028, SB 901 and A B 1054, do not address the existing legal doctrine relating to utilities’ liability for wildfires. How any future legislation addresses California’s inverse condemnation and “strict liability” issues for utilities in the context of wildfires in particular could be significant for the electric utility industry.

Climate Change
There is scientific consensus that increasing concentrations of greenhouse gases have caused and will continue to cause a rise in temperatures around the world . The change in the earth’ s average atmospheric temperature, generally referred to as “climate change,” is, among other things, expected to result in a wide range of changes in climate patterns, including increases in the frequency and severity of extreme weather events and more frequent incidences of wildfires and substantial flooding . The City cannot predict the timing, extent, or severity of climate change or its effect on the City’s operations and finances (including the Electric System) or economies, and there can be no assurances such effects will not be material and adverse.

Many areas in the western United States have been experiencing severe to extreme drought conditions for the last several years. Among other things, these conditions have impacted hydroelectric power generation and have been a cause or contributing factors in large and devastating wildfires in the region. Seasonal temperature changes could affect the electric loads on the Electric System, and extreme weather events could result in damage to or destruction of the Electric System facilities.

Cybersecurity
The City relies on computers and technology to conduct its operations . The City and its departments, including VMUS, face cyber threats from time to time, including but not limited to hacking, viruses, malware, and other attacks on computers and other sensitive digital networks and systems.

The City employs a cybersecurity program that consists of policies, procedures, and technical controls, including firewalls, anti- virus software, anti- spam/malware software, intrusion protection and domain name system filtering software. The City also contracts with third party vendors to monitor and augment internal monitoring of the City’s computer systems. In addition, the City has signed mutual assistance agreements with the California Utilities Emergency Association to send and receive mutual assistance for cyber security issues should they arise.

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Although the City has a variety of security measures and safeguards in place as described above, no assurances can be given that any existing or additional safety and security measures will prove adequate in the event that cyberattacks or military conflicts or terrorist activities, including cyber terrorism, are directed against the City’s systems technology or the assets of the Electric System. Cyberattacks are becoming more sophisticated and certain cyber incidents, such as surveillance, may remain undetected for an extended period . United States government agencies have in the past issued warnings indicating that critical infr astructure sectors such as the electric grid may be specific targets of cybersecurity threats. Attacks directed at critical electric sector operations could damage generation, transmission or distribution assets that are essential to the City’s ability to serve its electric customers, cause operational malfunctions and outages affecting the City’s Electric System, and result in costly recovery and remediation efforts. The costs of security measures or of remedying damage from security breaches could be greater than presently anticipated.

Changing Law and Requirements Generally
Electric utilities are subject to continuing environmental regulation . Federal, State and local standards and procedures which regulate the environmental impact of electric utilities are subject to change. These changes may arise from continuing legislative, regulatory and judicial action regarding such standards and procedures .

Although the City currently does not own or operate any generation or transmission facilities, the City may seek to acquire and/or construct generation and/or transmission assets in the future. T here is no assurance that any facilities or projects of the City will remain subject to the laws and regulations currently in effect, will always be in compliance with future laws and regulations or will always be able to obtain all required operating permits.

An inability to comply with environmental standards could result in, for example, additional capital expenditures, reduced operating levels or the shutdow n of individual units not in compliance . In addition, increased environmental laws and regulations may create certain barriers to new facility development, may require modification of existing facilities and may result in additional costs for affected resources.

In addition, on both the federal and State levels, legislation is introduced frequently addressing domestic energy policies and various environmental matters and impacts relating to energy, including the generation of energy using conventional and unconventional technologies. Issues raised in legislative proposals in recent years have included implementation of energy efficiency and renewable energy standards, addressing transmission planning, siting and cost allocation to support the construction of renewable energy facilities, cybersecurity legislation that would allow FERC to issue interim measures to protect critical electric infrastructure, a federal cap-and-trade program to reduce GHG emissions, and renewable energy incentives that could provide grants and credits to municipal utilities to invest in renewable energy infrastructure. Congress has also considered other bills relating to energy supplies and development. The City is unable to predict at this time whether any of these or other legislative proposals will be enacted into law or what the impact of any such proposals that may ultimately be enacted will be.

See also “THE VMUS ELECTRIC SYSTEM – Developments Affecting Power Supply” and “OTHER FACTORS AFFECTING THE ELECTRIC UTILITY INDUSTRY.”
Effect of City Bankruptcy
The City is authorized to file a bankruptcy proceeding under Chapter 9 of the U.S. Bankruptcy Code in certain circumstances. Should the City file for such bankruptcy relief, there could be adverse effects on the Holders or Beneficial Owners of the Series 2022 Bonds.

If the System Net Revenues are “ special revenues ” under the Bankruptcy Code, then System Net Revenues collected after the date of the bankruptcy filing should be subject to the lien of the Indenture. “Special revenues” are defined to include receipts derived from the ownership or operation of projects or systems that are primarily used to provide utility services . Although the System Net Revenues appear to satisfy this definition and thus be “special revenues,” no assurance can be given that a court would hold that the System Net Revenues are special revenues or are otherwise subject to the lien of the Indenture post-bankruptcy. In addition, t he determination of whether or not particular revenues are “special revenues,” and (if they are special revenues) the

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parallel determination of whether the Bankruptcy Code mandates that such revenues continue to be used to pay obligations to Holders or Beneficial Owners post- bankruptcy, are subject to broad judicial discretion, and may evolve over time as decisions are rendered in various Chapter 9 bankruptcy cases throughout the United States.

If the System Net Revenues are determined not to be “special revenues,” then System Net Revenues collected after the commencement of the bankruptcy case will likely not be subject to the lien of the Indenture. The Holders or Beneficial Owners of the Series 2022 Bonds may not be able to assert a claim against any property of the City other than the System Net Revenues, and if these amounts are no longer subject to the lien of the Indenture, then there may be no amounts from which the Holders or Beneficial Owners of the Series 2022 Bonds are entitled to be paid.

The Bankruptcy Code provides that special revenues can be applied to necessary operating expenses of the project or system, before they are applied to other obligations. This rule applies regardless of the provisions of the transaction documents. Thus, the City may be able to use System Net Revenues to pay necessary operating expenses of the Electric System that are greater or different than the Maintenance and Operation Costs as defined in the Indenture, before the remaining System Net Revenues are made available to the Trustee to pay amounts owed to the holders of the Series 2022 Bonds. It is not clear precisely which expenses would constitute necessary operating expenses.

If the City is in bankruptcy, the City’s creditors (including the holders of the Series 2022 Bonds) may be prohibited from taking any action to collect any amount from the City (including but not limited to the System Net Revenues constituting “special revenues”) or to enforce any obligation of the City, unless the permission of the bankruptcy court is obtained. These restrictions may also prevent the Trustee from making pa yments to the holders of the Series 2022 Bonds from funds in the Trustee’s possession. The Rate Covenant (see “SECURITY AND SOURCES OF PAYMENT FOR THE BONDS – Rate Covenant”) may not be enforceable in bankruptcy by the Trustee or the holders of the Series 2022 Bonds.

The provisions of the Indenture that provide that the commencement of a bankruptcy case by the City is an Event of Default, and that certain other insolvency-related events with respect to the City are also Events of Default, may be unenforceable. This may limit the ability of the Trustee to require the City to turn over to the Trustee System Net Revenues and may allow the City to continue to spend System Net Revenues for any lawful purpose as provided in the Indenture free and clear of the lien of the Indenture, notwithstanding that the City is in bankruptcy.

With respect to System Net Revenues collected after the bankruptcy filing, if the City does not voluntarily turn over such System Net Revenues to the Trustee, it is not entirely clear what procedures the Trustee and the holders of the Series 2022 Bonds would have to follow to attempt to obtain possession of such System Net Revenues, how much time it would take for such procedures to be completed, or whether such procedures would ultimately be successful. Under such circumstances, there may be delays or reductions in payments on the Series 2022 Bonds.

The City may be able to borrow additional money that is secured by a lien on any of its property (including the System Net Revenues), which lien could have priority over the lien of the Indenture, as long as the bankruptcy court determines that the rights of the Trustee and the holders of the Series 2022 Bonds will be adequately protected. The City may also be able to cause some of the System Net Revenues to be released to it, free and clear of lien of the Indenture, as long as the bankruptcy court determines that the rights of the Trustee and the holders of the Series 2022 Bonds will be adequately protected.

The City may be able, without the consent and over the objection of the Trustee and the holders of the Series 2022 Bonds, to alter the priority, interest rate, principal amount, payment terms, collateral, maturity dates, payment sources, covenants (including tax- related covenants), and other terms or provisions of the Indenture and the Series 2022 Bonds, as long as the bankruptcy court determines that the alterations are fair and equitable.

There may be delays in payments on the Series 2022 Bonds while the court considers any of these issues.

There may be other possible effects of a bankruptcy of the City that could result in delays or reductions in

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payments on the Series 2022 Bonds, or result in losses to the holders of the Series 2022 Bonds. Regardless of any specific adverse determinations in a City bankruptcy proceeding, the fact of a City bankruptcy proceeding could have an adverse effect on the liquidity and value of the Series 2022 Bonds.

Initiative and Referendum
Under the State Constitution, the voters of the State have the ability to initiate legislation and require a public vote on legislation passed by the State Legislature through the powers of initiative and referendum, respectively. In past years, several initiative measures have been proposed or adopted which affect the ability of local governments to increase taxes and rates . The City is unable to predict whether any such initiatives might be submitted to or approved by the voters, the nature of such initiatives, or their potential impact on the City or the Electric System. There is no assurance that the electorate or the State Legislature will not at some future time approve additional limitations that could affect the ability of the City to implement rate increases, which could reduce System Net Revenues and adversely affect the security for the Series 2022 Bond s. See also “CONSTITUTIONAL LIMITATIONS ON TAXES AND FEES IN CALIFORNIA.” Limitation on Remedies
If an Event of Default should occur, the Trustee and the holders of the Series 2022 Bonds have no ability to accelerate the maturity of the Series 2022 Bonds. This means that even after an Event of Default occurs, the Series 2022 Bonds may be paid according to the regularly scheduled due dates . This may result in delays or reductions in payments on the Series 2022 Bonds compared to what would happen if the Trustee could accelerate the maturity of the Series 2022 Bonds, and could cause the market value of the Series 2022 Bonds to decline after the occurrence of an Event of Default.

OTHER FACTORS AFFECTING THE ELECTRIC UTILITY INDUSTRY
The following general discussion of other factors affecting the electric utility industry, including certain legislative and regulatory matters, should be considered when evaluating the City Electric System and considering an investment in the Series 2022 Bonds. This discussion does not purport to be comprehensive or definitive, and these matters are subject to change subsequent to the date hereof . The electric industry has historically been subject to continuing legislative and administrative reform. The City cannot predict at this time whether any future legislation or rules will be enacted which will affect the finances or operations of the Electric System, but the impacts of future such actions could be significant. Extensive information on the electric utility industry is available from the legislative and regulatory bodies and other sources in the public domain, and potential purchasers of the 2022 Bonds should obtain and review such information. Such information is not incorporated herein by reference.

The electric utility industry in general has been, or in the future may be, affected by a number of other factors which could impact the financial condition and competitiveness of many electric utilities and the level of utilization and costs of generating and transmission resources. In addition to the factors discussed above, such factors include, among others, (a) effects of compliance with rapidly changing environmental, safety, licensing, regulatory and legislative requirements other than those described herein (including potential new energy storage requirements), (b) changes resulting from conservation and demand -side management programs on the timing and use of electric energy, (c) effects on the integration and reliability of power supply from the increased usage of renewables, (d) changes resulting from a national energy policy, (e) effects of competition from other electric utilities (including increased competition resulting from a movement to allow direct access or expanded community choice aggregation or from mergers, acquisitions, and “strategic alliances” of competing electric and natural gas utilities and from competitors transmitting less expensive electricity from much greater distances over an interconnected system) and new methods of, and new facilities for, producing low-cost electricity, (f) the repeal of certain federal statutes that would have the effect of increasing the competitiveness of many IOUs, (g) increased competition from independent p ower producers and marketers, brokers and federal power marketing agencies, (h) “self-generation” or “distributed generation” (such as microturbines, fuel cells and solar installations) by industrial and commercial customers and others, (i) issues relating to the ability to issue tax -

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exempt obligations, including severe restrictions on the ability to sell to nongovernmental entities electricity from generation projects and transmission service from transmission line projects financed with outstanding tax- exempt obligations, (j) effects of inflation on the operating and maintenance costs of an electric utility and its facilities, (k) changes from projected future load requirements, (l) increases in costs and uncertain availability of capital, (m) shifts in the availability and relative costs of different fuels (including the cost of natural gas and nuclear fuel), (n) sudden and dramatic increases in the price of energy purchased on the open market that may occur in times of high peak demand in an area of the country experiencing such high peak demand, such as has occurred in the past in California, (o) issues relating to risk management procedures and practices with respect to, among other things, the purchase and sale of natural gas, energy and transmission ca pacity, (p) other legislative changes, voter initiatives, referenda and statewide propositions, (q) effects of the changes in the economy, population and demand of customers within a utility’s service area, including as a consequence of the COVID-19 pandemic and its impacts; (r) effects of possible manipulation of the electric markets, (s) acts of terrorism or cyber -terrorism impacting a utility and/or significant load customers, (t) changes to the climate; (u) natural disasters or other physical calamities, including, but not limited to, earthquakes, droughts, severe weather, floods and wildfires, and potential liabilities of electric utilities in connection therewith, and (v) adverse impacts to the market for insurance relating to recent wildfires and other calamities, leading to higher costs or prohibitively expensive coverage, or limited or unavailability of coverage for certain types of risk. Any of these factors (as well as other factors) could have an adverse effect on the financial condition of any given electric utility, including the City, and likely will affect individual utilities in different ways.

CONSTITUTIONAL LIMITATIONS ON TAXES AND FEES IN CALIFORNIA Article XIIIA of the State Constitution
On June 6, 1978, State voters approved an amendment (commonly known as both Proposition 13 and the Jarvis-Gann Initiative) to the State Constitution. The amendment, which added Article XIIIA to the State Constitution, among other things affects the valuation of real property for the purpose of taxation in that it defines the full cash property value to mean “the county assessor’s valuation of real property as shown on the 1975/76 tax bill under ‘full cash value’, or thereafter, the appraised value of real p roperty newly constructed, or when a change in ownership has occurred after the 1975 assessment.” The full cash value may be adjusted annually to reflect inflation at a rate not to exceed 2% per year, or a reduction in the consumer price index or comparable local data at a rate not to exceed 2% per year, or reduced in the event of declining property value caused by damage, destruction or other factors including a general economic downturn. The amendment further limits the amount of any ad valorem tax on real property to 1% of the full cash value, except that additional taxes may be levied to pay debt service on indebtedness approved by the voters prior to December 1, 1978, and bonded indebtedness for the acquisition or improvement of real property approved on or after December 1, 1978 by two- thirds of the votes cast by the voters voting on the proposition (55% in the case of certain school facilities).

Property taxes that are subject to Proposition 13 are a significant source of the City’s General Fund revenu es.

See APPENDIX A – “THE CITY OF VICTORVILLE – CITY FINANCIAL INFORMATION.” Legislation enacted by the State Legislature to implement Article XIIIA provides that all taxable property is shown at full assessed value as described above. Tax rates for voter approved bonded indebtedness are also applied to 100% of assessed value.

Future assessed valuation growth allowed under Article XIIIA (for new construction, change of ownership or 2% annual value growth) is allocated on the basis of “situs” among the jurisdictions that serve the tax rate area within which the growth occurs. Local agencies and school districts share the growth of “base” revenue from the tax rate area. Each year’s growth allocation becomes part of each agency’s allocation the following year. Article XIIIA effectively prohibits the levying of any other ad valorem property tax above the 1% limit except for taxes to support indebtedness approved by the voters as described above.

Article XIIIA has subsequently been amended to permit reduction of t he “full cash value” base in the event of declining property values caused by damage, destruction or other factors, and to provide that there

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would be no increase in the “full cash value” base in the event of reconstruction of property damaged or destroyed in a disaster and in certain other limited circumstances.

Unitary Property
Some amount of property tax revenue of the City is derived from utility property which is considered part of a utility system with components located in many taxing jurisdictions ( “unitary property”). Under the State Constitution, such property is assessed by the CDTFA as part of a “going concern” rather than as individual pieces of real or personal property. State-assessed unitary and certain other property is allocated to the counties by the CDTFA, taxed at special county -wide rates, and the tax revenues distributed to taxing jurisdictions (including the City) according to a statutory formula that is generally based on the distribution of taxes in the prior year.

Constitutional Limitations on Governmental Spending
At the Statewide special election on November 6, 1979, the voters approved an initiative entitled “Limitation on Government Appropriations,” which added Article XIIIB to the State Constitution. Under Article XIIIB of the State Constitution, state and local government entities have an annual “appropriations limit” which limits their ability to spend certain moneys called “appropriations subject to limitation,” which consist of tax revenues, certain state subventions and certain other moneys, including user charges to the extent they exceed the costs reasonably borne by the entity in providing the service for which it is levying the charge. The City is of the opinion that the electric service and use charges imposed by the Cit y do not exceed the costs the City reasonably bears in providing the electric service. In general terms, the “appropriations limit” is to be based on certain 1978-79 expenditures, and is to be adjusted annually to reflect changes in the consumer price inde x, population, and services provided by these entities. Among other provisions of Article XIIIB, if any entity’s revenues in any year exceed the amount permitted to be spent, the excess would have to be returned by revising tax rates or fee schedules over the subsequent two years.

To the best of the City’s knowledge, the City’s appropriations have never exceeded the limitation on appropriations under Article XIIIB of the State Constitution.

Propositions 218 and 26
Proposition 218, a State ballot initiative known as the “Right to Vote on Taxes Act,” was approved by the voters of the State of California on November 5, 1996. Proposition 218 added Articles XIIIC and XIIID to the State Constitution . Article XIIIC imposes a majority voter approval requirement on local governments (including the City) with respect to taxes for general purposes, and a two-thirds voter approval requirement with respect to taxes for special purposes . Article XIIID creates additional requirements for the imposition by most local governments of general taxes, special taxes, assessments and “property -related” fees and charges. Article XIIID explicitly exempts fees for the provision of electric service from the provisions of such article.

Article XIIIC expressly extends the people’s initiative power to the reduction or repeal of local taxes, assessments, and fees and charges imposed prior to its effective date (November 1996). The California Supreme Court held in Bighorn- Desert View Water Agency v. Verjil, 39 Cal.4th 205 (2006) that, under A rticle XIIIC, local voters by initiative may reduce a public agency’s water rates and delivery charges, as those are property - related fees or charges within the meaning of Article XIIID, and noted that the initiative power described in Article XIIIC may extend to a broader category of fees and charges than the property- related fees and charges governed by Article XIIID. Moreover, in the case of Bock v. City Council of Lompoc, 109 Cal.App.3d 52 (1980), the Court of Appeal determined that an electric rate ord inance was not subject to the same constitutional restrictions that are applied to the use of the initiative process for tax measures so as to render it an improper subject of the initiative process . Thus, electric service charges (which are expressly exem pted from the provisions of Article XIIID) may be subject to the initiative provisions of Article XIIIC, thereby subjecting such fees and charges to reduction by the electorate. The City believes that even if the electric rates of the City are subject to the initiative power, under Article XIIIC or otherwise, Article XIIIC does not grant to the electorate

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of the City the power to repeal or reduce its electric rates and charges in a manner that would impair the payment of the contractual obligations of the City (including those under the Indenture).

The California electorate approved Proposition 26 at the November 2, 2010 election, amending Article XIIIC of the California Constitution. Proposition 26 was designed to supplement tax limitations California voters adopted when they approved Proposition 13 in 1978, and Proposition 218 in 1996. Proposition 26 applies by its terms to any levy, charge or exaction imposed, increased or extended by a local government on or after November 3, 2010. Proposition 26 deems an y such levy, charge or fee to be a “tax”, requiring voter approval under Article XIIIC unless it comes within one of the listed exceptions. Proposition 26 expressly excludes from its definition of a “tax,” among other things, 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 .” Proposition 26 is applicable to th e electric rates of governmental entities such as the City; therefore, newly adopted rates must conform to its requirements.

Proposition 26 is subject to interpretation by California courts, including the extent to which it is applicable to pre-existing electric rates and general fund transfers. A number of lawsuits have been filed against public agencies in California under Proposition 26, including particularly with respect to electric utility fund transfers. The City is unable to predict at this time how Proposition 26 will ultimately be interpreted.

Other Initiatives
Articles XIIIB, and Articles XIIIC and XIIID and the amendments effected thereto by Proposition 26 , were each adopted as measures that qualified for the ballot pursuant to California’s initiative process. From time to time, other initiatives have been, and could be, proposed, and if qualified for the ballot, could be enacted which place limitations on the ability of the City to raise rates or otherwise affect the City’s Electric System revenues or operations. The City is unable to predict either the likelihood of qualification for ballot or passage of these measures or the nature and impact of these measures on the finances or operations of the Electric System.

SEC SETTLEMENT
On July 24, 2018, the City and the Southern California Logistics Airport Authority (“SCLAA”) each executed a consent (the “Consents ”) in which they agreed to the entry by the United States District Court of California of a final judgment (the “Judgment”) in the civil proceeding, Securities and Exchange Commission v. City of Victorville, et al, No. 13 -cv-00776 (C.D. Cal. filed April 29, 2013). The Consents were entered into as part of the settlement agreed to by the City, SCLAA and the U.S. Securities and Exchange Commission (the “SEC”) of litigation brought by the SEC against the City and SCLAA in 2013 in which the SEC alleged certain securities law violations by the City and SCLAA in connection with tax increment bonds issued by SCLAA in 2008. The original complaint also in cluded allegations of certain securities law violations by the then Director of Economic Development for the City, Mr. Keith Metzler. Mr. Metzler was not named, and such claims were not included, in the second amended complaint. In its second amended complaint, the SEC alleged that the City and SCLAA knew or should have known that the assessed valuations of certain airplane hangars on which the tax increment bond financing was based were inflated, and as a result, that the projected tax revenues and debt service coverage ratios disclosed to investors in the related offering document were false, and that such conduct constituted a violation of the antifraud provisions of Section 17(a)(2) of the Securities Act of 1933. In connection with their Consents, the Ci ty and SCLAA neither admitted nor denied the SEC’s allegations in the litigation.

The Judgment against the City and SCLAA permanently prohibits each of them from violating the antifraud provisions of Section 17(a)(2) of the Securities Act of 1933. In addition, the City was ordered not to participate (either directly or through any of its associated entities) in the issuance of municipal securities prior to the time the City certified to the SEC that it had complied with certain undertakings required by the Judgment as described in clause (vi) of the next paragraph. The settlement and Judgment became final with the approval of the presiding judge in the matter on July 30, 2018. As described in the next paragraph, the City has complied with the requirements of the Judgment and has made the required certification to the SEC.

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Pursuant to the Consents and Judgment, the City agreed and has undertaken to: (i) within 45 days after the entry of the Judgment, retain an independent consultant to review the City’s policies and procedures as they relate to internal controls and practices concerning municipal securities disclosures and as they relate to accounting and record-keeping of municipal bond proceeds; (ii) fully cooperate with the independent consultant in the discharge or the independent consultant’s responsibilities; (iii) receive within 270 days of retention, a written report of the independent consultant’s findings and recommendations for changes in or improvements to the City’s policies and procedures; and (iv) adopt all recommendations contained in the independent consultant’s report within 90 days of the date of the report; (v) designate an employee or employment position within the City to be responsible for ensuring compliance by the City with its internal c ontrols and policies concerning municipal securities disclosures and as they relate to accounting and record-keeping of municipal bond proceeds, including any recommendations made by the independent consultant, and for such employee to review such internal controls and policies and receive adequate training in them; (vi) certify, in writing, to the SEC the City’s compliance with the foregoing requirements within 60 days after the City adoption of the independent consultant’s recommendations. The City has complied with each of the foregoing requirements.

The independent consultant’s report described above was submitted to the City and approved by the City Council on February 12, 2019, at which time the City agreed to comply with the recommendations of the independent consultant set forth therein. Pursuant to such recommendations, the City’s debt management policy was amended to, among other things, further detail the City’s established procedures for municipal securities disclosure. See “VMUS ELECTRIC SYSTEM FINANCIAL INFORMATION – Financial Policies.”

LITIGATION AND CERTAIN OTHER CITY MATTERS
Litigation. There is no controversy or litigation of any nature now pending or threatened restraining or enjoining the issuance of the Series 2022 Bond s or in any way con testing or affecting the validity of the Series 2022 Bonds or any proceedings of the City taken with respect to the execution, delivery or sale thereof.

At any given time, including the present, there are certain other claims and disputes, including those currently in litigation, that arise in the normal course of the City’s activities. There is no litigation known to be pending or threatened against the C ity which, in the opinion of the City Attorney, would materially adversely affect the Electric System or the sources of payment for the Series 2022 Bonds.

Certain Matters Relating to the City Council. At its meeting on March 2, 2021, the City Council made certain findings determining that a then member of the City Council no longer resided within the City limits and therefore was removed from office. As a result, as of March 3, 2021, a vacancy existed on the City Council.

State law provides that within 60 days from the commencement of the vacancy (i.e., by April 30, 2021), the City Council shall either fill the vacancy by appointment or call a special election to fill the vacancy. The City Council had undertaken discussion for possible action to fill the vacancy; however, the City Council made no decision as to filling such vacancy by appointment or pursuant to a special election. Since no such determination was made, the City Council seat remains vacant until the next Statewide general election in November 2022.

CONTINUING DISCLOSURE
Pursuant to a Continuing Disclosure Certificate to be dated the date of delivery of the Series 2022 Bonds (the “Continuing Disclosure Certificate”), the City will covenant for the benefit of owners of the Series 2022 Bonds to provide certain financial information and operating data relating to the City and the Electric System by not later than the February 28 next succeeding the end of each F iscal Year of the City (or in the event of any change in the Fiscal Year of the City, which as of the date of this Of ficial Statement ends on June 30 of each year, the end of the eighth month next succeeding the end of each Fiscal Year of the City), commencing with the Annual Report for the 2021-22 Fiscal Year, and to provide notices of the occurrence of certain enumerated events. Such Annual Reports and notices are required to be filed with the MSRB through EMMA. The City has appointed the Trustee as the initial Dissemination Agent of the City with respect to the Series 2022 Bonds under the Continuing Disclosure Certificate . The specific nature of the information to be contained in the Annual Report and the notices of enumerated events is described in APPENDIX D – “FORM OF CONTINUING

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DISCLOSURE CERTIFICATE.” These covenants have been made in order to assist the Underwrite r of the Series 2022 Bonds in complying with the Rule.

The City and certain other entities related to the City, including the former Victorville Redevelopment Agency, the Victorville Water District (formerly Baldy Mesa Water District), SCLAA, and certain community facilities districts (together, the “City Entities”), have previously entered into a number of continuing disclosure undertakings under the Rule in connection with the issuance of long-term obligations. During the last five years, the City Entities have failed to comply in certain respects with their previous continuing disclosure undertakings.

Certain continuing disclosure filings during the past five years were made after the required filing date. The se included each of the annual report filings of the Victorville Water District for Fiscal Years 201 7 through 2021 for certain Baldy Mesa Water District certificates of participation (which reports were filed up to approximately 90 days after the required filing date). The City assumed the continuing disclosure obligations of the Baldy Mesa Water District in 2007 when the Victor Valley Water District and the Baldy Mesa Water District were consolidated into a subsidiary district of the City; the filing deadline under the assumed continuing disclosure obligation is not aligned with the City’s other continuing disclosure obligations and is incompatible with the City’s annual audit schedule and the City expects that the annual report filings for the Baldy Mesa Water District certificates of participation will continue to be filed after the required filing deadline in the future. Other filings made after the required filing date include a portion of the annual report filing in two years for certain community facilities district bonds (which were filed approximately 12 days after the required filing date) and a portion of the annual report filing in another year for certain Victorville Redevelopment Agency and SCLAA bonds (which was filed approximately four days after the required filing date). Other than with respect to the 2020 annual report filing for the Baldy Mesa Water District certificates of participation, the City Entities did not file notices of late filings in the past five years . The annual report filings of the SCLAA (or portions thereof) in each of Fiscal Years 2017 through 2021 were also not linked to the CUSIP numbers for all of the applicable series of SCLAA bonds. The City has since linked the annual report filings of the SCLAA to the CUSIPs for the missed series of SCLAA bonds. In addition, the annual report filings for the Victorville Water District for Fiscal Years 2018 and 2019 failed to include certain information required by the continuing disclosure undertaking for the Baldy Mesa Water District certificates of participation. The City included more than five years of past data for certain of such information in the annual report filing of the Victorville Water District for Fiscal Year 2020 and has since made a supplemental filing to provide the r emaining missed information for Fiscal Years 2018 and 2019. The annual report filing for Fiscal Year 2020 for certain community facilities district bonds also included certain additional required past data related to tax collections, which was previously n ot included in the prior annual report filings but could be derived from the information that had been provided. Lastly, the City did not file or did not timely file a rating change in connection with the City Entities’ bonds on one occasion during the previous five years.

The City believes it has established processes intended to ensure that in the future it will make its continuing disclosure filings as required. The City’s Debt Management Policy establishes procedures for the fulfillment of the City’s continuing disclosure obligations. The Debt Management Policy (i) designates the City Treasurer as the party responsible for continuing disclosure filings; (ii) provides for the engagement of consultants to assist in meeting this obligation; (iii) requires the City to form a disclosure committee consisting of the City Manager, Deputy City Managers, City Treasurer and other appropriate department heads to review in advance each continuing disclosure annual report and event notice; and (iv) requires the City to provide seek staff training in disclosure matters, as appropriate.

TAX MATTERS
Series 2022A Bonds
In the opinion of Orrick, Herrington & Sutcliffe LLP, bond counsel to the City (“Bond Counsel”), based upon an analysis of existing laws, regulations, rulings and court decisions, and assuming, among other matters, the accuracy of certain representations and compliance with certain covenants, interest on the Series 2022A Bonds is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986 (the “ Code”) and is exempt from State of California personal income taxes . Bond Counsel is of

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the further opinion that interest on the Series 2022A Bonds is not a specific preference item for purposes of the federal alternative minimum tax. A complete copy of the proposed form of opinion of Bond Counsel is set forth in Appendix E hereto.

To the extent the issue price of any maturity of the Series 2022A Bonds is less than the amount to be paid at maturity of such Series 2022A Bond s (excluding amounts stated to be interest and payable at least annually over the term of such Series 2022A Bonds), the difference constitutes “original issue discount,” the accrual of which, to the extent properly allocable to each Beneficial Owner thereof, is treated as interest on the Series 2022A Bond s which is excluded from gross income for federal income tax purposes and State of California personal income taxes. For this purpose, the issue price of a particular maturity of the Series 2022A Bonds is the first price at which a substantial amount of such maturity of the Series 2022A Bonds is sold to the public (excluding bond houses, brokers, or similar persons or organizations acting i n the capacity of underwriters, placement agents or wholesalers). The original issue discount with respect to any maturity of the Series 2022A Bond s accrues daily over the term to maturity of such Series 2022A Bond s on the basis of a constant interest rate compounded semiannually (with straight-line interpolations between compounding dates).

The accruing original issue discount is added to the adjusted basis of such Series 2022A Bonds to determine taxable gain or loss upon disposition (including sale, redemption, or payment on maturity) of such Series 2022A Bonds. Beneficial Owners of the Series 2022A Bonds should consult their own tax advisors with respect to the tax consequences of ownership of Series 2022A Bonds with original issue discount, including the treatment of Beneficial Owners who do not purchase such Series 2022A Bonds in the original offering to the public at the first price at which a substantial amount of such Series 2022A Bonds is sold to the public.

Series 2022A Bonds purchased, whether at o riginal issuance or otherwise, for an amount higher than their principal amount payable at maturity (or, in some cases, at their earlier call date) (“Premium Bonds”) will be treated as having amortizable bond premium . No deduction is allowable for the amor tizable bond premium in the case of bonds, like the Premium Bonds, the interest on which is excluded from gross income for federal income tax purposes. However, the amount of tax-exempt interest received, and a Beneficial Owner’s basis in a Premium Bond, w ill be reduced by the amount of amortizable bond premium properly allocable to such Beneficial Owner. Beneficial Owners of Premium Bonds should consult their own tax advisors with respect to the proper treatment of amortizable bond premium in their particular circumstances.

The Code imposes various restrictions, conditions and requirements relating to the exclusion from gross income for federal income tax purposes of interest on obligations such as the Series 2022A Bonds. The City has made certain representations and covenanted to comply with certain restrictions, conditions and requirements designed to ensure that interest on the Series 2022A Bond s will not be included in federal gross income .

Inaccuracy of these representations o r failure to comply with these covenants may result in interest on the Series 2022A Bonds being included in gross income for federal income tax purposes, possibly from the date of original issuance of the Series 2022A Bond s. The opinion of Bond Counsel ass umes the accuracy of these representations and compliance with these covenants . Bond Counsel has not undertaken to determine (or to inform any person) whether any actions taken (or not taken), or events occurring (or not occurring), or any other matters coming to Bond Counsel’s attention after the date of issuance of the Series 2022A Bonds may adversely affect the value of, or the tax status of interest on, the Series 2022A Bonds. Accordingly, the opinion of Bond Counsel is not intended to, and may not, be relied upon in connection with any such actions, events or matters.

Although Bond Counsel is of the opinion that interest on the Series 2022A Bonds is excluded from gross income for federal income tax purposes and is exempt from State of California personal income taxes, the ownership or disposition of, or the accrual or receipt of amounts treated as interest on, the Series 2022A Bonds may otherwise affect a B eneficial Owner’s federal, state or local tax liability . The nature and extent of these other tax consequences depends upon the particular tax status of the Beneficial Owner or the Beneficial Owner’s other items of income or deduction . Bond Counsel expresses no opinion regarding any such other tax consequences.

Current and future legislative proposals, if enacted into law, clarification of the Code or court decisions may cause interest on the Series 2022A Bonds to be subject, directly or indirectly, in whole or in part, to federal

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income taxation or to be subject to or exempted from state income taxation , or otherwise prevent Beneficial Owners from realizing the full current benefit of the tax status of such interest. The introduction or enactment of any such legislative proposals or clarification of the Code or court decisions may also affect, perhaps significantly, the market price for, or marketability of, the Series 2022A Bonds. Prospective purchasers of the Series 2022A Bonds should consult their own tax advisors regarding the potential impact of any pending or proposed federal or state tax legislation, regulations or litigation, as to which Bond Counsel is expected to express no opinion.

The opinion of Bond Counsel is based on current legal authority, covers certain matters not directly addressed by such authorities, and represents Bond Counsel’s judg ment as to the proper treatment of the Series 2022A Bonds for federal income tax purposes. It is not binding on the Internal Revenue Service (“IRS”) or the courts . Furthermore, Bond Counsel cannot give and has not given any opinion or assurance about the future activities of the City or about the effect of future changes in the Code, the applicable regulations, the interpretation thereof or the enforcement thereof by the IRS. The City has covenanted, however, to comply with the requirements of the Code.

Bond Counsel’s engagement with respect to the Series 2022A Bonds ends with the issuance of the Series 2022A Bonds, and, unless separately engaged, Bond Counsel is not obligated to defend the City or the Beneficial Owner s regarding the tax- exempt status of the Series 2022A Bond s in the event of an audit examination by the IRS . Under current procedures, parties other than the City and its appointed counsel, including the Beneficial Owners, would have little, if any, right to participate in the audit examination process .

Moreover, because achieving judicial review in connection with an audit examination of tax -exempt bonds is difficult, obtaining an independent review of IRS positions with which the City legitimately disagrees, may not be practicable. Any action of the IRS, including but not limited to selection of the Series 2022A Bonds for audit, or the course or result of such audit, or an audit of bonds presenting similar tax issues may affect the market price for, or the marketability of, the Serie s 2022A Bonds, and may cause the City or the Beneficial Owners to incur significant expense.

Series 2022B Bonds
In the opinion of Bond Counsel, based upon an analysis of existing laws, regulations, rulings and court decisions, and assuming, among other mat ters, the accuracy of certain representations and compliance with certain covenants, interest on the Series 2022B Bonds is exempt from State of California personal income taxes.

Bond Counsel observes that interest on the Series 2022B Bonds is not excluded from gross income for federal income tax purposes under Section 103 of the Code. Bond Counsel expresses no opinion regarding any other tax consequences relating to the ownership or disposition of, or the amount, accrual, or receipt of interest on, the Series 2022B Bonds. The proposed form of opinion of Bond Counsel is contained in Appendix E hereto.

The following discussion summarizes certain U.S. federal income tax considerations generally applicable to U.S. Holders (as defined below) of the Series 2022B Bonds that acquire their Series 2022B Bonds in the initial offering. The discussion below is based upon laws, regulations, rulings, and decisions in effect and available on the date hereof, all of which are subject to change, possibly with retroactive effec t. Prospective investors should note that no rulings have been or are expected to be sought from the IRS with respect to any of the U.S. federal income tax considerations discussed below, and no assurance can be given that the IRS will not take contrary positions. Further, the following discussion does not deal with U.S. tax consequences applicable to any given investor, nor does it address the U.S. tax considerations applicable to all categories of investors, some of which may be subject to special taxing rules (regardless of whether or not such investors constitute U.S.

Holders), such as certain U.S. expatriates, banks, REITs, RICs, insurance companies, tax-exempt organizations, dealers or traders in securities or currencies, partnerships, S corporations, estates and trusts, investors that hold their Series 2022B Bonds as part of a hedge, straddle or an integrated or conversion transaction, investors whose “functional currency” is not the U.S. dollar, or certain taxpayers that are required to prepare certif ied financial statements or file financial statements with certain regulatory or governmental agencies. Furthermore, it does not address (i) alternative minimum tax consequences, (ii) the net investment income tax imposed under Section 1411 of the Code, or (iii) the indirect effects on persons who hold equity interests in a holder. This summary also

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does not consider the taxation of the Series 2022B Bonds under state, local or non -U.S. tax laws. In addition, this summary generally is limited to U.S. tax con siderations applicable to investors that acquire their Series 2022B Bonds pursuant to this offering for the issue price that is applicable to such Series 2022B Bonds (i.e., the price at which a substantial amount of the Series 2022B Bonds are sold to the public) and who will hold their Series 2022B Bonds as “capital assets” within the meaning of Section 1221 of the Code. The following discussion does not address tax considerations applicable to any investors in the Series 2022B Bonds other than investors that are U.S. Holders.

As used herein, “U.S. Holder” means a Beneficial Owner of a Series 2022B Bond that for U.S. federal income tax purposes is an individual citizen or resident of the United States, a corporation or other entity taxable as a corporation created or organized in or under the laws of the United States or any state thereof (including the District of Columbia), an estate the income of which is subject to U.S. federal income taxation regardless of its source or a trust where a court within the U nited States is able to exercise primary supervision over the administration of the trust and one or more United States persons (as defined in the Code) have the authority to control all substantial decisions of the trust (or a trust that has made a valid election under U.S. Treasury Regulations to be treated as a domestic trust). As used herein, “Non-U.S. Holder” generally means a Beneficial Owner of a Series 2022B Bond (other than a partnership) that is not a U.S. Holder . If a partnership holds Series 2022B Bonds, the tax treatment of such partnership or a partner in such partnership generally will depend upon the status of the partner and upon the activities of the partnership . Partnerships holding Series 2022B Bonds, and partners in such partnerships, should consult their own tax advisors regarding the tax consequences of an investment in the Series 2022B Bonds (including their status as U.S. Holders or Non-U.S. Holders).

Prospective investors should consult their own tax advisors in determining the U.S. federal, state, local or non-U.S. tax consequences to them from the purchase, ownership and disposition of the Series 2022B Bonds in light of their particular circumstances.

Interest. Interest on the Series 2022B Bonds generally will be taxable to a U.S. Holder as ordinary interest income at the time such amounts are accrued or received, in accordance with the U.S. Holder’s method of accounting for U.S. federal income tax purposes.

To the extent that the issue price of any maturity of the Taxable Bonds is less than the amount to be paid at maturity of such Taxable Bonds (excluding amounts stated to be interest and payable at least annually over the term of such Taxable Bonds) by more than a de minimis amount, the difference may constitute original issue discount (“OID”). U.S. Holders of Taxable Bonds will be required to include OID in income for U.S. federal income tax purposes as it accrues, in accordance with a constant yield method based on a compounding of interest (which may be before the receipt of cash payments attributable to such income). Under this method, U.S.

Holders generally will be required to include in income increasingly greater amounts of OID in successive accrual periods.

Series 2022B Bonds purchased for an amount in excess of the principal amount payable at maturity (or, in some cases, at their earlier call date) will be treated as issued at a premium. A U.S. Holder of a Series 2022B Bond issued at a premium may make an election, applicable to all debt securities purchased at a premium by such U.S. Holder, to amortize such premium, using a constant yield method over the term of such Series 2022B Bond.

Sale or Other Taxable Disposition of the Series 2022B Bonds. Unless a nonrecognition provision of the Code applies, the sale, exchange, redemption, retirement (including pursuant to an offer by the City) or other disposition of a Series 2022B Bond will be a taxable event for U.S. federal income tax purposes. In such event, in general, a U. S. Holder of a Series 2022B Bond will recognize gain or loss equal to the difference between (i) the amount of cash plus the fair market value of property received (except to the extent attributable to accrued but unpaid interest on the Series 2022B Bond, which will be taxed in the manner described above) and (ii) the U.S. Holder’s adjusted U.S. federal income tax basis in the Series 2022B Bond (generally, the purchase price paid by the U.S. Holder for the Series 2022B Bond, decreased by any amortized premium) . Any such gain or loss generally will be capital gain or loss. In the case of a non-corporate U.S. Holder of the Series 2022B Bonds,

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the maximum marginal U.S. federal income tax rate applicable to any such gain will be lower than the maximum marginal U.S. federal income tax rate applicable to ordinary income if such U.S. holder’s holding period for the Series 2022B Bonds exceeds one year. The deductibility of capital losses is subject to limitations.

Defeasance of the Series 2022B Bonds. If the City defeases any Series 2022B Bond, the Series 2022B Bond may be deemed to be retired for U.S. federal income tax purposes as a result of the defeasance . In that event, in general, a holder will recognize taxable gain or loss equal to the difference between (i) the amount realized from the deemed sale, exchange or retirement (less any accrued qualified stated interest which will be taxable as such) and (ii) the holder’s adjusted U.S. federal income tax basis in the Series 2022B Bond.

Information Reporting and Backup Withholding. Payments on the Series 2022B Bonds generally will be subject to U.S. information reporting and possibly to “backup withholding.” Under Section 3406 of the Code and applicable U.S. Treasury Regulations issued thereunder, a non -corporate U.S. Holder of the Series 2022B Bonds may be subject to backup withholding at the current rate of 24% with respect to “reportable payments,” which include interest paid on the Series 2022B Bonds and the gross proceeds of a sale, exchange, redemption, retirement or other disposition of the Series 2022B Bonds. The payor will be required to deduct and withhold the prescribed amounts if (i) the payee fails to furnish a U.S. taxpayer identification number (“TIN”) to the payor in the manner required, (ii) the IRS notifies the payor that the TIN furnished by the payee is incorrect, (iii) there has been a “notified payee underreporting” described in Section 3406(c) of the Code or (iv) the payee fails to certify under penalty of perjury that the payee is not subject t o withholding under Section 3406(a)(1)(C) of the Code. Amounts withheld under the backup withholding rules may be refunded or credited against the U.S.

Holder’s federal income tax liability, if any, provided that the required information is timely furnishe d to the IRS. Certain U.S. holders (including among others, corporations and certain tax -exempt organizations) are not subject to backup withholding. A holder’s failure to comply with the backup withholding rules may result in the imposition of penalties by the IRS.

Foreign Account Tax Compliance Act . Sections 1471 through 1474 of the Code impose a 30% withholding tax on certain types of payments made to foreign financial institutions, unless the foreign financial institution enters into an agreement with the U.S. Treasury to, among other things, undertake to identify accounts held by certain U.S. persons or U.S. -owned entities, annually report certain information about such accounts, and withhold 30% on payments to account holders whose actions prevent it from complying with these and other reporting requirements, or unless the foreign financial institution is otherwise exempt from those requirements .

In addition, the Foreign Account Tax Compliance Act (“FATCA”) imposes a 30% withholding tax on the same types of payments to a non-financial foreign entity unless the entity certifies that it does not have any substantial U.S. owners or the entity furnishes identifying information regarding each substantial U.S. owner. Under current guidance, failure to comply w ith the additional certification, information reporting and other specified requirements imposed under FATCA could result in the 30% withholding tax being imposed on payments of interest on the Bonds . In general, withholding under FATCA currently applies t o payments of U.S. source interest and, under current guidance, will apply to certain “passthru” payments no earlier than the date that is two years after publication of final U.S. Treasury Regulations defining the term “foreign passthru payments.” Prospective investors should consult their own tax advisors regarding FATCA and its effect on them.

The foregoing summary is included herein for general information only and does not discuss all aspects of U.S. federal taxation that may be relevant to a particular holder of Series 2022B Bonds in light of the holder’s particular circumstances and income tax situation . Prospective investors are urged to consult their own tax advisors as to any tax consequences to them from the purchase, ownership and disposition of Series 2022B Bonds, including the application and effect of state, local, non-U.S., and other tax laws.

APPROVAL OF LEGALITY
The validity of the Series 2022 Bonds and certain other legal matters are subject to the approving opinion of Orrick, Herrington & Sutcliffe LLP, Bond Counsel to the City. A complete copy of the proposed form of Bond Counsel Opinion is contained in APPENDIX E hereto. Bond Counsel undertakes no responsibility for the accuracy, completeness or fairness of this Official Statement. Certain legal matters will be passed upon for

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the Underwriter by Chapman and Cutler LLP, and for the City by the City Attorney and its Disclosure Counsel for the Series 2022 Bonds, Stradling Yocca Carlson & Rauth, a Professional Corporation.

RATING
S&P Global Ra tings (“S&P”) has assigned the Series 2022 Bonds the long -term rating of “_____.” S&P’s rating outlook is “_________.” The rating and the outlook reflects only the view of the rating agenc y, and any explanation of the significance of such rating may be obtained only from such rating agenc y. There is no assurance that the rating will remain in effect for any given period of time or that it will not be revised downward or withdrawn entirely by such rating agenc y, if, in its judgment, circumstances so warrant. Any downward revision or withdrawal of any rating may have an adverse effect on the market price of the Series 2022 Bonds.

The City has covenanted in the Continuing Disclosure Certificate to file notices of any rating changes on the Series 2022 Bonds with EMMA. See “CONTINUING DISCLOSURE” and APPENDIX D –“FORM OF CONTINUING DISCLOSURE CERTIFICATE.” Notwithstanding such covenant, information relating to rating changes on the Series 2022 Bonds may be publicly available from the rating agency prior to such information being provided to the City and prior to the date the City is obligated to file a notice of rating change with EMMA.

Purchasers of the Series 2022 Bonds are directed to the ratings agency and its website and official media outlets for the most current ratings changes with respect to the Series 2022 Bond s after the initial issuance of the Series 2022 Bonds.

Generally, rating agen cies base their ratings on information and materials furnished to them and on investigations, studies and assumptions by the rating agencies. In providing its rating on the Series 2022 Bonds, the rating agency may have performed independent calculations of coverage ratios using its own internal formulas and methodology, which may not reflect the provisions of the Indenture . The City makes no representations as to any such calculations, and such calculations should not be construed as a representation by the City as to past or future compliance with any financial covenants, the availability of particular revenues for the payment of debt service or for any other purpose.

UNDERWRITING
Goldman Sachs & Co. LLC (the “Underwriter ”) has agreed, subject to certain co nditions, (i) to purchase the Series 2022A Bonds at a purchase price of $ ________ (representing the $________ aggregate principal amount of the Series 2022A Bonds, [plus/less] of $_______ of original issue [premium/discount], and less a $________ Underwrit er’s discount); and (ii) to purchase the Series 2022B Bonds at a purchase price of $________ (representing the $________ aggregate principal amount of the Series 2022B Bonds, less a $________ Underwriter’s discount).The Bond Purchase Agreement relating to the Series 2022 Bonds provides that the Underwriter will purchase all of the Series 2022 Bonds if any are purchased.

The Series 2022 Bonds are being offered for sale to the public at the respective prices shown on the inside cover page hereof . The Underwriter reserves the right to lower such initial offering prices as it deems necessary in connection with the marketing of the Series 2022 Bonds. The Underwriter may offer and sell the Series 2022 Bonds to certain dealers (including dealers depositing the Series 2022 Bonds into investment trusts) and others at prices lower than the initial public offering price or prices set forth in the Official Statement. The Underwriter reserves the right to join with dealers and other underwriters in offering the Series 2022 Bonds to the public. The obligation of the Underwriter to accept delivery of the Series 2022 Bonds is subject to the terms and conditions set forth in the Bond Purchase Agreement , the approval of legal matters by counsel and other conditions. The Underwriter may over-allot or effect transactions which stabilize or maintain the market price of the Series 2022 Bonds at levels above that which might otherwise prevail in the open market. Such stabilizing, if commenced, may be discontinued at any time.

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

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The Underwriter and its affiliates are full service financial institutions engaged in various activities, which may include sales and trading, commercial and investme nt banking, advisory, investment management, investment research, principal investment, hedging, market making, brokerage and other financial and non - financial activities and services. The Underwriter and its affiliates may provide a variety of these services to the City and to persons and entities with relationships with the City, for which they received or will receive customary fees and expenses.

In the ordinary course of their various business activities, the Underwriter and its affiliates, officers, directors and employees may purchase, sell or hold a broad array of investments and actively trade securities, derivatives, loans, commodities, currencies, credit default swaps and other financial instruments for their own account and for the accounts of their customers, and such investment and trading activities may involve or relate to assets, securities and/or instruments of the City (directly, as collateral securing other obligations or otherwise) and/or persons and entities with relationships with the City . The Underwriter and its affiliates may also communicate independent investment recommendations, market color or trading ideas and/or publish or express independent research views in respect of such assets, securities or instrum ents and may at any time hold, or recommend to clients that they should acquire, long and/or short positions in such assets, securities and instruments.

MUNICIPAL ADVISOR
The City has retained Urban Futures, Inc., as municipal advisor in connection with the issuance and sale of the Series 2022 Bond s. Although Urban Futures, Inc. has participated in the preparation of the Official Statement, Urban Futures, Inc. is not obligated to undertake, and has not undertaken to make, an independent verification or to assume responsibility for the accuracy, completeness or fairness of the information contained in the Official Statement or any of the other legal documents, and further Urban Futures , Inc. does not assume any responsibility for the possible impact of any cu rrent, pending or future actions taken by any legislative or judicial bodies or rating agencies.

AUDITED FINANCIAL STATEMENTS
A copy of the Annual Comprehensive Financial Report, containing the audited Financial Statements of the City (including the Electr ic Utility Fund ), for the Fiscal Year ended June 30, 2021 and the Independent Auditors’ Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Governmen t Auditing Standards are attached hereto as APPENDIX B. The City’s Financial Statements were audited by the independent accounting firm of CliftonLarsonAllen LLP, Irvine, California as stated in their report appearing in APPENDIX B. In the Independent Audi tor’s Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards prepared by the Auditor in connection with the City’s Fiscal Year 2020 -21 audited financial statements, and dated February 25, 2022 (the “Report on Internal Control”), the Auditor identified certain deficiencies in internal control that it considered to be material weaknesses as described in their report. City officers and staff has reviewed and implemented or identified corrective action as needed to modify City audit and accounting practices to address each of the material weaknesses identified.

The audited F inancial Statements include information concerning the C ity’s General Fund and other funds, including the Electric Utility Fund and the other proprietary funds relating to the Victorville Water District and the City’s airport, solid waste management, sanitary and gas utility enterprises. The Series 2022 Bonds are special obligations of the City, secured by and payable solely from the Trust Estate, which consists primarily of System Net Revenues of the Electric System which are accounted for in the Electric Utility Fund. The City is not obligated under the Indenture or otherwise to appropriate or otherwise make available any other funds of the City other than System Net Revenues and such other amounts included in the Trust Estate for the paym ent of debt service on the Series 2022 Bonds.

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The Independent Accountants have agreed to the City ’s inclusion of their report on their audit of the Financial Statements in Appendix B to this Official Statement. The Independent Accountants have made no representation in connection with inclusion of the audit herein that there has been no material change in the financial condition of the City or the Electric System since the most recent audit was concluded .

CliftsonLarsonAllen LLP, the City’s Independent Accountants, has not been engaged to perform and ha s not performed, since the date of its report included in Appendix B, any procedures on the Financial Statements addressed in that report. CliftonLarsonAllen LLP also has not performed any procedures relating to this Official Statement.

MISCELLANEOUS
Included herein are brief summaries of certain documents and reports, which summaries do not purport to be complete or definitive, and reference is made to such documents and reports for full and complete statements of the contents thereof . Any statements in this Official Statement involving matters of opinion, whether or not expressly so stated, are intended as such and not as representations of fact. This Official Statement is not to be construed as a contract or agreement between the City and the purchasers or owners of any of the Series 2022 Bonds.

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The execution and delivery of this Official Statement has been duly authorized by the City and has been reviewed by the City’s disclosure committee in accordance with the City’s debt management policy.

CITY OF VICTORVILLE
By:

Keith C. Metzler
City Manager
By:

Sophie L. Smith
Deputy City Manager
By:

Jenele Davidson
Deputy City Manager
By:

John Mendiola
Director of Finance and City Treasurer
By:

Brenda Hampton
Director of Electric Utility Services

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APPENDIX A

THE CITY OF VICTORVILLE
This Appendix A provides general economic, demographic and financial information regarding the City of Victorville (the “City”). The Series 2022 Bonds are limited obligations of the City secured by a pledge of and payable solely from the Trust Estate, which consists primarily of the System Net Revenues of the City’s Electric System, as described elsewhere in the Official Statement. The 2022 Bonds are not secured by any pledge of the full faith and credit or taxing power of the City.

CITY GENERAL ECONOMIC AND

DEMOGRAPHIC INFORMATION
General
The City is located in the County of San Bernardino (the “County”), approximately 97 miles northeast of the City of Los Angeles and approximately 35 miles northeast of the City of San Bernardino. The City is just north of the San Bernardino Mountains, at the edge of the Mojave Desert. Interstate Highway 15 and State Highway 18 intersect near the heart of the City, which is bordered on the west by State High way 395. Major trucking and rail routes run through the area. The City is conveniently close to Southern California Logistics Airport and within 50 miles of Ontario International Airport.

During World War II, construction of Victorville Army Airfield, later renamed George Air Force Base, was completed. When fully activated, the base supported two Tactical Fighter Wings of the Tactical Air Command whose primary aircraft was the F -4 Phantom. It also employed approximately 6,000 civilian and military personnel. On January 5, 1989, the Secretary of Defense announced the closure of George Air Force Base under the Base Closure and Realignment Act. The base was deactivated December 15, 1992. The former military base was annexed into the City on July 21, 1993, and has been renamed Southern California Logistics Airport (“SCLA”).

The City was incorporated on September 21, 1962, initially as a general law city with a population of approximately 8,110 and an area of 9.7 square miles. The City presently encompasses an area of approximately

74.16 square.

Municipal Government
The City has operated as a charter city since July 16, 2008, under the council -manager form of government. Five council members are to be elected by districts to serve four-year staggered terms. Members of the City Council select the Mayor from among their members to serve a two -year term. The City Manager is appointed by the City Council. As of January 1, 2022, the City had approximately 442 full-time employees. The City offers pension and other retirement benefits to its employees. See Notes 12 and 14 to the audited financial statements of the City included in Appendix B to this Official Statement.

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Miscellaneous Statistics
The following are miscellaneous statistics with respect to the City:

CITY OF VICTORVILLE
Miscellaneous Statistics
Date of Incorporation ............................................................................... September 21, 1962 Form of Government ............................................................................... Council/Manager Employees ................................................................................................ 420 Population ............................................................................................... 127,543 Area (square miles) .................................................................................. 74.16 square miles Miles of streets ......................................................................................... 449 miles Parks & Recreation:

Parks .................................................................................................. 19 Public Education:

Victor Elementary School District (grades Pre-K-6) ........................ 18 schools Victor Valley Union High School District (grades 7-12) .................. 10 schools Adelanto Elementary School District (grades K-6) 5 schools Hesperia Unified School District (grades K-6) 1 school
Snowline Joint Unified School District (grades K-5) 1 school

Police Protection:
(Services contracted with the San Bernardino County
Sheriff’s Department)

No. of Patrol Units ............................................................................ 70 Fire Protection:

No. of Stations ................................................................................... 5 No. of Firefighters ............................................................................. 60 Sewer:

Length of Sewer Lines ...................................................................... 455 miles

Source: City of Victorville.

Population, Housing, and Employment
The City’s population as of January 1, 2021, was estimated to be 12 7,170 according to the California Department of Finance. The following table shows a historical comparison of the respective populations of the City, the County and the State of California for the years 2017 through 2021.

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CITY OF VICTORVILLE, SAN BERNARDINO COUNTY,

AND STATE OF CALIFORNIA
Population Comparison
Calendar Years 2017-2021
Year
City of
Victorville
Percent
Change
San
Bernardino
County
Percent
Change
State of
California
Percent
Change
2017 124,727 N/A 2,139,520 N/A 39,352,398 N/A
2018 125,291 0.5 2,150,017 0.5 39,519,535 0.4
2019 125,694 0.3 2,165,876 0.7 39,605,361 0.2
2020 127,518 1.5 2,175,424 0.5 39,648,938 0.1
2021 127,170 (0.3) 2,175,909 0.0 39,466,855 (0.5)

Source: California Department of Finance, E-4 Population Estimates 2011-2021, with 2010 Benchmark.

Other historical demographic and employment information is shown below.

CITY OF VICTORVILLE
Demographic and Employment Statistics
Calendar Years 2016-2020
Year
Housing
Units
Labor
Force Employed Unemployed
Unemployment
Rate
2016 37,614 45,100 41,600 3,500 7.8%
2017 37,709 45,400 42,300 3,100 6.8
2018 37,809 45,600 42,900 2,600 5.8
2019 37,990 46,100 43,600 2,500 5.5
2020 38,297 46,600 40,800 5,800 12.4

Source: California Department of Finance, Labor Force data March 2020 Benchmark.

As of February 2021, the State Department of Employment Development reported the preliminary unemployment rate (not seasonally adjusted) in the City of Victorville to be 11.9%. This compares with an unadjusted unemployment rate of 8.4% for California and 6.6% for the nation during the same period. See “RISK FACTORS – Pandemic; COVID-19 Considerations” in the front part of this Official Statement.

Employment and Industry
In the County, service industries accounted for more than 83.7 % of total non-agricultural employment in 2020 (the most recent full year for which such information is available), with a total of 651,900 jobs. The government sector was the second largest sector in 20 20, comprising approximately 16% of total County non- agricultural employment with a total of 124,800 jobs.

The following table summarizes employment by industry in the County from 2016 through 2020. A breakdown of such information for the City is not readily available.

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COUNTY OF SAN BERNARDINO
Employment by Industry
(in thousands)
Calendar Years 2016-2020(1)
2016 2017 2018 2019 2020
Farm 1,900 2,200 2,200 2,500 2,000
Mining and Logging 600 600 800 700 900
Construction 33,800 35,200 37,800 39,000 38,400
Manufacturing 56,300 56,300 56,600 55,400 51,900
Trade, Transportation, and Utilities 193,500 206,600 216,000 224,800 231,200 Information 5,200 5,200 5,300 5,000 4,000
Financial Activities 23,800 22,400 21,700 23,400 22,900 Professional and Business Services 80,700 80,300 80,900 85,000 83,400 Education and Health Services 114,100 119,700 124,500 135,000 136,300 Leisure and Hospitality 71,500 75,200 76,900 78,100 62,900 Other Services 22,800 22,800 23,000 22,900 20,100
Government 122,900 124,600 127,100 129,100 124,800
Total All Industries (2) 727,100 750,900 772,700 801,000 778,700

(1) Most recent full year information available.
(2) Totals may not add due to rounding.

Source: State of California, Employment Development Department, Labor Market Information Division, San Bernardino County Industry Employment & Labor Force - by Annual Average, March 2020 Benchmark.

Taxable Sales
The following table presents taxable retail sales in the City for the years 2016 through 2020 (the most recent full year for which such information is available). Through the first three quarters of 2021, taxable sales for all outlets totaled $1,896,710.

CITY OF VICTORVILLE
Summary of Taxable Sales by Category
Calendar Years 2016-2020(1)
(in thousands of dollars)
Type of Business 2016 2017 2018 2019 2020
Retail and Food Services $1,710,249 $1,750,595 $1,790,453 $1,835,902 $1,809,260 All Other Outlets 149,264 154,425 170,710 209,592 183,904 Total All Outlets $1,859,513 $1,905,020 $1,961,163 $2,045,494 $1,993,164

(1) Most recent full year information available.

Source: Taxable Sales in California, California Department of Tax and Fee Administration for 2016-2020.

Economic Development
The City’s location, adjacent to Interstate 15, State Highway 18, State Route 395, and Route 66, together with abundant land available for development, makes it a desirable location in the Victor Valley for businesses and individuals. The economic community includes a mix of retail shopping, restaurants, service busines ses, industrial manufacturing and warehousing, hotels and public services. Within the City, there are over 7,000 acres of industrial zoned land with some areas having direct access to SCLA or railway connections.

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The City is home to the only regional mall located in the Victor Valley anchored with over 100 stores and specialty shops. Many restaurants are located in or near this area, and more are in the process of being built.

There are a number of new businesses recently opened or expected to open in the City in 2022, including an Amazon “last mile delivery station,” CarMax, Chick -fil-A, Dutch Bros., Avid Hotel and a Maverick travel center. The revenue received from auto sales ranks second highest in the economic category just below general consumer goods at 28% of the total City’s taxable transactions revenue; their sales tax receipts contributed a total of 24% to the City’s taxable transactions revenue in 2021.

According to the City’s Department of Building and Safety, in 20 21, the City issued 740 new -home residential permits , an increase of 46% over 2020 totals, and recently approved two large -multi-family developments.

Transportation
Victorville has access to Interstate 15, Highway 18 and Highway 395. The City is centrally located on both sides of Interstate 15, approximately 35 miles north of San Bernardino. U.S. Highway 395, which heads north to Ridgecrest, Bishop and northwestern Nevada, bisects the western sector of the City. State Highway 18 from Palmdale enters the City to the west and traverses the City on its way to Apple Valley, Lucerne Valley, and Big Bear Lake.

Regularly scheduled air transportation for passengers occurs at Ontario International Airport, located approximately 40 miles south of the City. Local bus transportation is available through the Victor Valley Transit Authority. Rail service is provided by the Burlington Northern Santa Fe Railroads. The City has an Amtrak stop on the Burlington Northern Santa Fe main line between Las Vegas and Los Angeles.

Community Facilities
Since 1962, the City has contracted with the San Bernardino County Sheriff’s office to provide full service police protection, including 24-hour dispatching and 911 emergency services. There are two hospitals in the City of Victorville, Victor Valley Global Medical Center and Desert Valley Hospital, which is affiliated with Desert Valley Medical Center.

Educational services are provided through the Victor Elementary School District which operates one preschool and 17 elementary schools; Victor Valley Union High School, which operated 11 middle schools and 10 high schools; Adelanto Elementary School District which operates 4 elementary schools and one middle school; Hesperia Unified School District, which operates one elementary school; and Snow line Joint Unified School District, which operates one elementary school. There is one community college, Victor Valley College.

Within the City, there are 19 parks, seven community centers, one swimming pool, one golf course and a library.

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CITY FINANCIAL INFORMATION
Accounting and Financial Reporting
The City maintains its accounting records in accordance with Generally Accepted Accounting Principles (“GAAP”) and the standards established by the Governmental Accounting Standards Board (“GASB ”). At the end of the first and second quarters of each Fiscal Year , a report is prepared for the City Council and City staff which reviews fiscal performance to date against the budget. Combined financial statements of the City and its component units are produced following the close of each Fiscal Year.

The City Council employs an independent certified public accountant who examines at least annually the financial statements of the City in accordance with generally accepted auditing standards, including tests of the accounting records and other auditing procedures as such accountant considers necessary. As soon as practicable after the end of the Fiscal Year, a final audit and report is submitted by the indepen dent certified public accountant to the City Council.

The accounts of the City are organized on the basis of funds and account groups, each of which is considered a separate accounting entity. The operations of each fund are accounted for with a separate s et of self-balancing accounts that comprise its assets, liabilities, fund equity, revenues and expenditures, or expenses, as appropriate. Government resources are allocated to and accounted for in individual funds based upon the purposes for which they are to be spent and the means by which spending activities are controlled.

The City’s government -wide financial statements are reported using the economic resource measurement focus and the accrual basis of accounting, under which revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of the related cash flows.

The City’s governmental fund (including General Fund) financial statements are reported using the current financial resources m easurement focus and the modified accrual basis of accounting, under which revenues are recognized as soon as they are both measurable and available ( i.e., collectible within the current period or soon enough thereafter to pay liabilities of the current period), and expenditures are recorded when a liability is incurred.

The General Fund is the general operating fund of the City. It is used to account for all financial resources except those that are required to be accounted for in another fund. The tables set forth below set forth certain historical and current Fiscal Year budget information for the General Fund. Information on the remaining governmental funds of the City as of June 30, 202 1 is set forth in APPENDIX B – ANNUAL COMPREHENSIVE FINANCIAL REPORT OF THE CITY FOR FISCAL YEAR ENDED JUNE 30, 2021.” General Financial Condition and Outlook of the City
Fiscal Policies. The City has adopted several policies related to its fiscal management and operations, including the following:

General Fund Reserve Po licy. The City Council has adopted a General Fund Reserve Policy effective July 1, 2021 to mitigate current and future risks and to ensure long-term financial planning. Under the General Fund Reserve Policy, a minimum of 5% and a maximum of 17% of annual General Fund appropriations will be held in reserve to provide liquidity for cash flow requirements, economic uncertainties, uninsured losses, local emergencies/disasters and other unknown financial hardships. If reserves fall below the 17% level, the City Manager will develop a plan to rebuild the General Fund reserve to the target level. The plan will be presented and/or updated on an annual basis for review and approval by the City Council during the annual budget review and adoption process until the General Fund reserve reaches the target level.

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In the event that there are unanticipated expenses or revenue shortfalls during the annual budget approval process, funds may be appropriated by the City Council from the General Fund reserve to balance the annual operating budget. Funds may also be appropriated by the City Council in case of a local emergency/disaster or financial hardship after the annual operating budget is adopted.

Fund balance is essentially the difference between the assets, deferred outflows and deferred inflows of resources and liabilities reported in a governmental fund. There are five separate components of fund balance, each of which identifies the ext ent to which the City is bound to honor constraints on the specific purposes for which amounts can be spent:
• Nonspendable fund balance (inherently nonspendable, i.e., inventory) • Restricted fund balance (externally enforceable limitations on use, i.e., restricted by law or terms of grant)
• Committed fund balance (self-imposed limitations on use) • Assigned fund balance (limitation resulting from intended use , but not formally restricted or committed)
• Unassigned fund balance (residual net resources)
The City Council, as the City’s highest level of decision -making authority, may commit fund balances for specific purposes pursuant to constraints imposed by the adoption of a resolution. These committed amounts cannot be used for any other purpose unless the City Council removes or changes the specified use through the same type of formal action that was originally taken to establish the commitment. City Council action to commit fund balances must occur within the fiscal reporting period; howeve r, the amount can be determined subsequently.

Debt Management Policy. The City’s debt management policy addresses the matters that are required by California Government Code Section 8855(i), including: (i) the purposes for which debt proceeds may be used; (ii) the types of debt that may be issued; (iii) the relationship of the debt to, and integration with, the City’s capital improvement program or budget; (iv) policy goals related to the City’s planning goals and objectives; and (v) the internal control pr ocedures which ensure that the proceeds of each debt issuance are directed to their intended use.

The City’s debt management policy also outlines City officer and staff responsibilities for managing the various types of debt that may be issued, establishes primary and continuing disclosure procedures for various types of debt offerings, and sets forth post -issuance tax compliance and investment procedures and record - keeping requirements for municipal bond proceeds.

The debt management policy designates the City Treasurer as the responsible officer for administering and staffing the policy and procedures established thereunder. With respect to municipal securities disclosure, the debt management policy establishes a number of procedures to be followed by the City in connection with any public debt offering, including: (i) requiring the City to form a disclosure committee consisting of the City Manager, Deputy City Managers and the City Treasurer, and, at the invitation of the City Treasurer, the Department Head of the department closest to the bond issue, to be responsible for reviewing in advance any offering statement of the City to determine the adequacy and accuracy of the disclosures included therein; (ii) requiring the City to retain the services of disclosure counsel in connection with the preparation of the offering document; (iii) requiring the City to seek staff training in disclosure matters, as appropriate; and (iv) providing that the preliminary official statement for a bond issue will only be released to the market after the completion of “due diligence” meetings with the disclosure committee and with appropriate staff and approval in form by the City Council.

Investment Policy. The City’s investment policy is described in detail under the caption “CITY FINANCIAL INFORMATION—City Investment Policy.”

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Budget Policy. The City’s budget policy is described under the caption “ —Budget Procedure, Current Budget and Historical Budget Information—Budget Timeline.” Strategic Plan. In 2020, the City de veloped a Strategic Plan that is intended to identify City priorities and the means of achieving them over a multi-year period (initially three years). The Strategic Plan includes the following City goals:
• Financial Sustainability. The City intends t o foster its fiscal health through disciplined long - term planning, cost control, increased revenues and cost recovery. In order to achieve this goal, the City will, among other measures, develop a long -term General Fund financial model that includes antic ipated effects of the COVID -19 pandemic, maintain adequate reserves (as discussed in greater detail under the subcaption “—General Fund Reserve Policy”), update development impact fees, develop a multi-year plan to address the City’s pension obligations and conduct a Citywide fee study.
• P ublic Safety. The City intends to develop and implement public safety strategies which foster the growth of the community . In order to achieve this goal, the City will, among other measures, put a sales ta x measure on the ballot (Measure P, which was adopted in November 2020, as discussed under the caption “—Sales Taxes”), prepare a Fire Department Master Plan, increase Police Department resources to reduce response times, transition the operating focus of code enforcement to proactive enforcement, with support from the City’s Human Resources department and transition the focus of animal services to active public information and outreach.
• C
ommunity and Economic Development . The City intends to support the economic vitality of the community. In order to achieve this goal, the City will, among other measures, establish a Community Revitalization and Investment Authority and a façade improvement program for Old Town Victorville, complete the 7th Street- Old T own streetscape, utilize the incentives associated with Opportunity Zones to bring investment to the City and implement a vacant property registration system.
• H
omelessness. The City intends to reduce homelessness in the community . In order to achieve this goal, the City will, among other measures, establish a centralized resource center and shelter, establish a task force to address homelessness, strengthen collaboration with the County and other entities and develop measures to evaluate the effectiveness of the City’s efforts. • In
frastructure . The City intends to maintain the City’s assets through investment and innovation. In order to achieve this goal, the City will, among other measures, develop a facilities and master maintenance plan, parks and recreation master plan and library master plan, implement advanced metering infrastructure for the City’s water system, continue to develop a bicycle network throughout the City and design and construct a recycling center and a recycled water reservoir.
• Co
mmunication and Outreach . The City build strong connections with residents and community partners. In order to achieve this goal, the City will, among other measures, develop a branding plan, establish a City “app” to respond to resident requests related to code enforcement and public works, launch an educational tool to inform residents about City services and government and hold more community events after the waning of the COVID-19 pandemic.
• O
rganizational Effectiveness and Sustainability . The Cit y intends to provide high quality services through best practices and employee retention and development efforts . In order to achieve this goal, the City will, among other measures, develop comprehensive workplace

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safety standards, conduct exit interviews with departing employees, establish an ongoing employee training program, develop and employee recognition program, develop a student intern program and implement employee development plans for each employee.

The City expects to update the Strategic Plan in 2023.

Summary of General Fund Results and Budgets . As of June 30, 2021, the General Fund had a year - end surplus (revenues in excess of expenditures) of approximately $21.7 million, which was significantly more than the year-end deficit of $ 3.4 million that was conservatively projected in the Fiscal Year 2020 -21 General Fund budget. The budget surplus was the result of renewed economic activity, particularly online sales for which the City received an allocation of sales tax revenues from the County, during the second half of Fiscal Year 2021 as the COVID-19 outbreak waned.

As discussed under the caption “—Sales Taxes,” a new sales tax measure (“Measure P”) was approved by City voters and came into effect in the last quarter of Fiscal Year 2020-21 (April 1, 2021). Measure P, which does not have a sunset provision, increased the City’s sales tax rate from 7.75% to 8.75% and brought in approximately $7.1 million in additional sales tax revenues in the last quarter of Fiscal Year 2020-21.

For Fiscal Year 2021-22, the adopted General Fund operating budget projects revenues of $96.5 million, which is approximately $ 7.6 million (8.6%) above Fiscal Year 2020-21 actual revenues of $88.9 million. The adopted Fiscal Year 2021 -22 General Fund opera ting budget projects expenditures of $93.6 million, which is approximately $26.4 million (39.4%) above Fiscal Year 2020-21 actual expenditures of $67.2 million. The Fiscal Year 2021-22 budget assumed that Measure P would generate approximately $19 million in additional sales tax revenues in Fiscal Year 2021 -22. However, based on the City’s current projections, Measure P revenues are expected to total approximately $28 million in Fiscal Year 2021-22 and future Fiscal Years.

See the caption “—Budget Procedure, Current Budget and Historical Budget Information” for additional information relating to the adopted budget for Fiscal Year 2021 -22. See the caption “—Effect on COVID- 19 Outbreak on General Fund” for information with respect to budgeted and actual amounts for Fiscal Year 2019-20.

Effect of COVID-19 Outbreak on General Fund
In response to the COVID- 19 outbreak (as described in detail under the caption “CERTAIN RISK FACTORS—Pandemic; COVID-19 Considerations”) in early 2020, the Governor extended the deadline to file and pay spring 2020 property taxes for residential and certain commercial property owners and first quarter 2020 sales and use tax returns by 90 days for all but the very largest taxpayers. As a result of the extended deadline to file sales and use tax returns, it is estimated that up to 361,000 California businesses with less than $5 million in taxable annual sales were permitted to defer up to $50,000 in sales tax payments and enter into 12 -month payment plans at zero interest. These actions resulted in delays in the receipt by the City of its portion of such tax payments. See the captions “CITY FINANCIAL INFORMATION—Sales Taxes.” In an attempt to mitigate the effects of the COVID-19 pandemic on State property taxpayers, on May 6, 2020, the Governor signed Executive Order N -61-20 (“ Order N -61-20”). Under Order N- 61-20, certain provisions of the State Revenue and Taxation Code were suspended until May 6, 2021 to the extent that they required a tax collector to impose penalties, costs or interest for the failure to pay secured or unsecured property taxes, or to pay a supplemental bill, before the date that such taxes become delinquent. Such penalties, costs and interest were cancelled under the conditions that were provided for in Order N-61-20, including that the property was residential real property which was occupied by the taxpayer or qualified as a small business under certain State laws, the taxes were not delinquent prior to March 4, 2020, the taxpayer filed a claim for relief with the tax collector and the taxpayer demonstrated economic hardship or other circumstances that have arisen due to the COVID-19 pandemic or due to a local, state, or federal governmental response thereto. These actions prevented the City from receiving penalties and interest on delinquent property tax payments in 2020 and 2021, but did not

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have a material impact on total property tax revenues received by the City during such period. See the caption “CITY FINANCIAL INFORMATION—Property Taxes.”
The City reports that Fiscal Year 2019-20 General Fund expenditures of $63.6 million were lower than originally budgeted by approximately $ 1.5 million ( 2.3%) as the City implemented measures to reduce expenditures in response to the COVID -19 pandemic in the last quarter of Fiscal Year 2019 -20, including suspending recruitments, suspending elective spending and not filling the majority of the positions that became open. In addition, expenditures were reduced as a result of the cancellation of many community programs.

However, Fiscal Year 2019 -20 General Fund revenues of $67.8 million came in higher than budgeted by approximately $3.0 million (4.7%) as certain revenues, including tax revenues and charges for services , were higher than budgeted as a result of the City’s conservative budgeting pr actices. The City did not withdraw any cash reserves to balance the Fiscal Year 2019 -20 budget. See the caption “CITY FINANCIAL INFORMATION—Budget Procedure, Current Budget and Historical Budget Information.” The budget for Fiscal Year 2020-21 was developed conservatively to account for the projected impacts of the continuing COVID-19 outbreak, including a continued hiring freeze and the continued suspension of most community programs. The Fiscal Year 2020-21 budget reflected: (i) an increase in General Fund expenditures of approximately $4.8 million (7.5%) above audited Fiscal Year 2019-20 General Fund expenditures to account for pandemic- related costs , including continued expenses associated with sanitation measures and splitting employee to shifts to minimize the number of employees in municipal offices and City vehicles at any one time; and (ii) a decrease in General Fund revenues of approximately $2.9 million (4.3%) below audited Fiscal Year 2019-20 General Fund revenues. Actual Fiscal Year 2020 -21 General Fund expenditures were approximately $1.2 million lower than budgeted (and approximately $3.6 million higher than audited Fiscal Year 2019- 20 General Fund expenditures) as the economy recovered and City spending on public safety increased, while actual Fiscal Year 2020 -21 General Fund revenues were approximately $ 24.0 million higher than budgeted (and approximately $21.0 million higher than Fiscal Year 2019-20 audited General Fund revenues), reflecting a more robust economic recovery than the City conser vatively budgeted for. See the captions “CITY FINANCIAL INFORMATION—General Economic Condition and Outlook of the City” and “CITY FINANCIAL INFORMATION—Budget Procedure, Current Budget and Historical Budget Information.” No Coronavirus Aid, Relief, and Eco nomic Stabilization Act or ARPA funding was included in the City’s budget for Fiscal Year 2020-21.

For Fiscal Year 2021-22, the adopted General Fund operating budget projects revenues of $96.5 million, which is approximately $ 7.6 million (8.6%) above Fiscal Year 2020 -21 actual revenues of $88.9 million, reflecting a robust economic recovery and the receipt of ARPA funding. The City’s adopted Fiscal Year 2021- 22 General Fund operating budget conservatively projects expenditures of $93.6 million, which is approximately $26.4 million (39.4%) above Fiscal Year 2020-21 actual expenditures of $67.2 million.

The City continues to actively monitor General Fund 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 repay the Bonds.

Budget Procedure, Current Budget and Historical Budget Information Budget Timeline. The City’s Fiscal Year 2021-22 budget was approved on June 15, 2021. The budget includes all funding sources of the City, including the Gen eral Fund. The City’s budget process is described below.

The Victorville Municipal Code requires that the City Manager submit the proposed annual budget and proposed annual salary plan to the City Council. The Finance Department is responsible for the coor dination, development, and preparation of the annual budget. Department Heads are responsible for preparing their

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department budget requests and revenue estimates in accordance with the guidelines provided by the Finance Department, along with any special budget instructions or direction that may be provided by the City Manager.

The budget is a planning tool that identifies strategic actions for the City for the Fiscal Year. It matches the financial and human resources available in order to carry out the planned actions. It also includes information about the City organization and identifies the policy direction under which the budget is prepared.

Under the City’s budget policy, the City’s goals are to: (i) d evelop and adopt a fiscally sustainable, balanced budget prior to July 1st of each Fiscal Year; (ii) keep the City Council informed on the fiscal condition of the City; (ii) maintain a reserve for economic uncertainties (the City’s General Fund reserve is described under the caption “—General Economic Condition and Outlook of the City—Fiscal Policies —General Fund Reserve Policy”); (iv) identify resources for City Council-identified priorities and initiatives ; (v) m aintain annual expenditure levels at a conservative growth rate; (vi) limit expenditures to anticipated revenues and designated reserves; (vii) maintain a diversified and stable revenue base; (viii) use one-time or irregular revenue resources strategically and not in support of operating costs; and (ix) annually update and adopt the Capital Improvement Plan budget, identifying the specific projects, or portions thereof, that can be completed during the F iscal Year with known funding sources
The development of the City’s annual operating budget begins in the July-September period with a review of the City’s budgetary performance in the Fiscal Year that concluded on the prior June 30. Thereafter, during the October-December period, the City’s executive leadership begins planning the budget for the Fiscal Year that will commence on the followin g July 1. Next, a mid-Fiscal Year review is undertaken each January and February.

Budget preparation is undertaken in the March -May period, followed in May and June by public workshops with the City Council, one or more public hearings and the adoption of the budget by City Council resolution.

The City Manager may authorize budget transfers between line items, programs and agencies within a fund as long as the total budget has not exceeded the amount approved by City Council.

[Remainder of page intentionally left blank.]

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A summary of the actions taken during the budgetary process is set forth below:

CITY OF VICTORVILLE
Budget Process

Source: City.

Current Budget. For Fiscal Year 2021-22, the adopted General Fund operating budget projects revenues of $96.5 million, which is approximately $ 7.6 million (8.6%) above Fiscal Year 2020 -21 actual revenues of $88.9 million. The adopted Fiscal Year 2021-22 General Fund operating budget projects expenditures of $93.6 million, which is approximately $26.4 million (39.4%) above Fiscal Year 2020-21 actual expenditures of $67.2 million.

The General Fund operating budget for Fiscal Year 2021 -22, as revised, reflects the following significant assumptions: (a) the City will fill 10 additional General Fund positions ; (b) assessed valuations of property will increase by 5% above budgeted Fiscal Year 2020-21 assessed valuations; and (c) sales tax revenues will increase by 28% (before adjustments) above budgeted Fiscal Year 2020-21 sales tax revenues.

Set forth in the below table are recent General Fund budgets and results of the City, including transfers in and out.

[Remainder of page intentionally left blank.]

Review of Fiscal Year
Staff reviews budget-to-
actual numbers for the
Fiscal Year that
concluded the prior
June 30
Planning
Executive leadership
begins planning the
budget for the next
Fiscal Year
Mid-Year Review
Staff reviews budget-to-
actual progress for the
then-current Fiscal
Year
Budget Preparation
The budget for the next
Fiscal Year is
developed
Workshops
The City Council holds
budget workshops
Public Hearings
One or more public
hearings is held to
consider the budget
Approval
Budget Approved by
City Council Resolution
Implementation/
Adjustments
City Council may amend
Budget during Fiscal
Year/City Manager may
transfer within funds
July-
September
October-
December
January-
February March-May
May-June May-June June July

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Table A1

CITY OF VICTORVILLE
General Fund Budgets and Results

Fiscal Year
2017-18
Adopted Budget
Fiscal Year
2017-18
Audited Results
Fiscal Year
2018-19
Adopted Budget
Fiscal Year
2018-19
Audited Results
Fiscal Year
2019-20
Adopted Budget
Fiscal Year
2019-20
Audited Results
Fiscal Year
2020-21
Adopted Budget
Fiscal Year
2020-21
Audited Results
Fiscal Year
2021-22
Adopted Budget
Revenues
Property Taxes $ 17,063,656 $ 16,675,456 $ 17,661,000 $ 17,314,826 $ 17,342,000 $ 17,964,124 $ 18,008,130 $ 18,895,846 $ 18,513,235 Motor Vehicle in lieu(1) 58,000 65,043 75,000 59,377 60,000 100,153 100,153 92,730 93,000 Sales Taxes 21,552,543 20,926,732 21,947,300 22,957,781 21,902,930 21,775,558 20,477,900 35,683,421 43,413,251 Other Taxes(2) 8,279,560 9,090,562 8,977,256 11,073,421 10,296,587 11,553,595 11,318,980 14,909,043 12,358,172 Licenses and Permits 1,430,640 1,862,788 2,022,140 2,633,303 2,792,750 2,786,279 2,350,028 4,244,266 3,245,200 Intergovernmental 15,400 67,162 800 948 1,000 1,296 704 2,525 9,300 Charges for Services 10,962,758 10,691,450 10,925,640 11,026,242 11,671,830 12,217,920 11,948,222 13,480,288 17,363,442 Fines and Forfeitures 376,800 395,140 328,700 380,109 436,200 348,399 358,380 649,020 118,020 Investment Income 5,000 (46,360) 5,000 317,043 18,400 430,847 80,000 (424,335) 510,206 Other 86,653 149,622 170,350 420,502 287,676 652,872 285,550 1,351,300 881,466 Total Revenues $ 59,831,010 $ 59,877,595 $ 62,113,186 $ 66,183,552 $ 64,809,373 $ 67,831,043 $ 64,928,047 $ 88,884,104 $ 96,505,293

Expenditures
General Government $ 11,063,580 $ 10,950,501 $ 11,294,209 $ 10,624,998 $ 11,556,143 $ 11,649,680 $ 12,591,143 $ 11,977,814 $ 21,361,624 Public Safety 39,505,299 39,010,584 45,157,854 44,869,189 40,688,259 39,921,786 43,651,974 43,280,102 53,894,948 Community Development - 1,939 - - - - - 53,240
Public Works 4,741,683 4,527,759 4,791,049 4,976,940 6,597,971 6,014,189 6,416,725 6,392,285 10,423,739 Parks and Recreation 4,265,526 3,642,273 3,907,730 4,047,452 4,613,659 4,237,666 4,908,110 4,307,982 6,834,256 Capital Outlay - - 812,638 1,312,199 1,609,528 1,563,895 596,220 947,924 874,974 Debt Service: Principal - - - - - 153,088 158,890 158,890 164,911 Debt Service: Interest - - - - - 45,535 39,733 39,733 33,712 Total Expenditures $ 59,576,088 $ 58,133,056 $ 65,963,480 $ 65,830,778 $ 65,065,560 $ 63,585,839 $ 68,362,795 $ 67,157,790 $ 93,588,164

Excess (Deficiency) of Revenues
Over (Under) Expenditures $ 254,922 $ 1,744,539 $ (3,850,294) $ 352,774 $ (256,187) $ 4,245,204 $ (3,434,748) $ 21,726,134 $ 2,917,129

Other Financing Sources (Uses)
Proceeds from Sale of Assets $ - $ 27,737 $ - $ - $ - $ - $ - $ - $ Capital Lease Proceeds - - 1,201,450 - - - - Transfers In(3) 200,000 63,151 11,100,000 18,424,382 2,000 41,164 23,000 46,482 14,000 Transfers Out - (538,107) 6,600,000 (6,580,521) - - - - Total Other Financing Sources
(Uses) $ 200,000 $ 447,219 $ 4,500,000 $ 13,045,311 $ 2,000 $ 41,164 $ 23,000 $ 46,482 $ 14,000

Net Change in Fund Balances $ 454,922 $ 1,297,320 $ 649,706 $ 13,398,085 $ (254,187) $ 4,286,368 $ (3,411,748) $ 21,772,616 $ 2,931,129 Fund Balances – Beginning of
Year, as Restated(4) $ 5,353,317 $ 5,353,317 $ 6,650,637 $ 6,650,637 $ 20,048,722 $ 20,048,722 $ 24,483,368 $ 24,483,368 $ 46,255,984 Fund Balances – End of Year $ 5,808,239 $ 6,650,637 $ 7,300,343 $ 20,048,722 $ 19,794,535 $ 24,335,090 $ 21,071,620 $ 46,255,984(5) $ 49,187,113

(1) See the caption “—State of California Motor Vehicle In-Lieu Payments.” Referred to in certain tables of the City’s audited financial statements as “Property Taxes in Lieu.” (2) Includes franchise tax, transient occupancy tax, property transfer tax and all other tax revenues of the City. See the caption “—Other Taxes.” (3) Fiscal Year 2018-19 amount reflects repayment of interfund loan by the City’s Municipal Utility Services Fund. See the caption “THE VMUS ELECTRIC SYSTEM—Outstanding Debt Obligations—Interfund Loan from General Fund.
(4) Restatement in Fiscal Year 2020-21 reflects implementation of Governmental Accounting Standards Board Statement No. 84 (Fiduciary Activities), which caused some previously reported fiduciary funds to be reclassified as governmental funds.
(5) Increase in fund balance reflects increases in tax revenues (including Measure P revenues in the last quarter of Fiscal Year 2020-21) and charges for services. See the caption “—Sales Taxes.” Sources: Adopted budgets of the City for Fiscal Years 2017-18 through 2021-22; audited financial statements of the City for Fiscal Years 2017-18 through 2020-21.

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Change in Fund Balance of the City General Fund
Set forth in the below table are the City’s General Fund statements of revenues, expenditures and changes in fund balance for the last five Fiscal Years.

Table A2

CITY OF VICTORVILLE
General Fund Statement of Revenues, Expenditures and Changes in Fund Balance

Fiscal Year
2016-17
Fiscal Year
2017-18
Fiscal Year
2018-19
Fiscal Year
2019-20
Fiscal Year
2020-21
Revenues
Property Taxes $ 16,268,276 $ 16,675,456 $ 17,314,826 $ 17,964,124 $ 18,895,846 Motor Vehicle in lieu(1) 55,331 65,043 59,377 100,153 92,730 Sales Taxes 20,974,688 20,926,732 22,957,781 21,775,558 35,683,421 Other Taxes(2) 7,700,131 9,090,562 11,073,421 11,553,595 14,909,043 Licenses and Permits 1,463,039 1,862,788 2,633,303 2,786,279 4,244,266 Intergovernmental 1,086 67,162 948 1,296 2,525
Charges for Services 8,705,242 10,691,450 11,026,242 12,217,920 13,480,288 Fines and Forfeitures 541,756 395,140 380,109 348,399 649,020 Investment Income (117,588) (46,360) 317,043 430,847 (424,335) Other 105,634 149,622 420,502 652,872 1,351,300 Total Revenues $ 55,697,595 $ 59,877,595 $ 66,183,552 $ 67,831,043 $ 88,884,104

Expenditures
General Government $ 8,965,827 $ 10,950,501 $ 10,624,998 $ 11,649,680 $ 11,977,814 Public Safety 37,496,746 39,010,584 44,869,189 39,921,786 43,280,102 Community Development 57,940 1,939 - - 53,240
Public Works 4,768,801 4,527,759 4,976,940 6,014,189 6,392,285 Parks and Recreation 3,687,091 3,642,273 4,047,452 4,237,666 4,307,982 Capital Outlay - - 1,312,199 1,563,895 947,924
Debt Service: Principal - - - 153,088 158,890
Debt Service: Interest - - - 45,535 39,733
Total Expenditures $ 54,976,405 $ 58,133,056 $ 65,830,778 $ 63,585,839 $ 67,157,790

Excess (Deficiency) of Revenues
Over (Under) Expenditures $ 721,190 $ 1,744,539 $ 352,774 $ 4,245,204 $ 21,726,134

Other Financing Sources (Uses)
Proceeds from Sale of Assets $ 70,527 $ 27,737 $ - $ - $ - Capital Lease Proceeds - 1,201,450 - - Transfers In(3) 221,532 63,151 18,424,382 41,164 46,482 Transfers Out (553,905) (538,107) (6,580,521) - - Total Other Financing Sources
(Uses) $ (261,846) $ 447,219 $ 13,045,311 $ 41,164 $ 46,482

Net Change in Fund Balances $ 459,344 $ 1,297,320 $ 13,398,085 $ 4,286,368 $ 21,772,616 Fund Balances – Beginning of
Year, as Restated(4) $ 4,893,973 $ 5,353,317 $ 6,650,637 $ 20,048,722 $ 24,483,368 Fund Balances – End of Year $ 5,353,317 $ 6,650,637 $ 20,048,722 $ 24,335,090 $ 46,255,984(5)

(1) See the caption “—State of California Motor Vehicle In-Lieu Payments.” Referred to in certain tables of the City’s audited financial statements as “Property Taxes in Lieu.”
(2) Includes franchise tax, transient occupancy tax, property transfer tax and all other tax revenues of the City . See the caption “—Other Taxes.”
(3) Fiscal Year 2018-19 amount reflects repayment of interfund loan by the City’s Municipal Utility Enterprise Fund. See the caption “THE VMUS ELECTRIC SYSTEM—Outstanding Debt Obligations—Interfund Loan from General Fund. (4) Restatement in Fiscal Year 2020-21 reflects implementation of Governmental Accounting Standards Board Statement No. 84 (Fiduciary Activities), which caused some previously reported fiduciary funds to be reclassified as governmental funds. (5) Increase in fund balances reflects increases in tax revenues (including Measure P revenues in the last quarter of Fiscal Year 2020-21) and charges for services. See the caption “—Sales Taxes.” Sources: Audited financial statements of the City for Fiscal Years 2016-17 through 2020-21.

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General Fund Balance Sheets of the City
Set forth in the below table are the City’s General Fund balance sheets for the last five Fiscal Years.

Table A3

CITY OF VICTORVILLE
General Fund Balance Sheets
Fiscal Year
2016-17
Fiscal Year
2017-18
Fiscal Year
2018-19
Fiscal Year
2019-20
Fiscal Year
2020-21
Assets
Cash and Investments $ 2,290,681 $ 4,165,936 $ 9,837,532 $11,959,396 $26,430,581 Accounts Receivable 1,154,152 1,202,851 975,985 1,030,036 1,375,135 Interest Receivable 170,441 355,345 450,774 328,055 75,911 Due from Other Funds -- 100 -- 4,108,196 4,163,082
Advances to Other Funds -- -- 7,015,916 5,970,656 4,877,304 Due from Other Governments 4,138,718 3,554,200 4,995,986 5,062,063 12,577,030(1) Inventories 154,568 189,920 207,701 188,738 255,978
Prepaid Items 17,397 281,800 12,700 65,958 15,902 Total Assets $ 7,925,957 $ 9,750,152 $23,496,594 $28,713,098 $49,770,923

Liabilities
Accounts Payable $ 1,312,110 $ 1,908,108 $ 1,939,329 $ 2,195,608 $ 2,021,906 Accrued Liabilities 1,215,968 1,150,893 1,469,348 2,146,087 1,407,602 Deposits Payable 27,876 30,052 32,529 35,412 85,278
Unearned Revenues 16,686 10,462 6,666 901 153 Total Liabilities $ 2,572,640 $ 3,099,515 $ 3,447,872 $ 4,378,008 $ 3,514,939

Fund Balances (Deficits)
Nonspendable: Prepaid Items $ 17,397 $ 281,800 $ 12,700 $ 65,958 $ 15,902 Nonspendable: Inventories 154,568 189,920 207,701 188,738 255,978 Nonspendable: Advances to
Other Funds -- -- 7,015,916 5,970,656 4,877,304 Spendable: Restricted -- -- -- -- --
Spendable: Unassigned 5,181,352 6,178,917 12,812,405 18,109,738 41,106,800 Total Fund Balances $ 5,353,317 $ 6,650,637 $20,048,722 $24,335,090 $46,255,984

Total Liabilities, Deferred
Inflows of Resources and
Fund Balances $ 7,925,957 $ 9,750,152 $23,496,594 $28,713,098 $
_49,077,923

(1) Increase reflects sales tax revenues (including Measure P revenues) that were allocated through June 30, 2021 but received after the end of Fiscal Year 2020-21 and recorded as a receivable.

Sources: Audited financial statements of the City for Fiscal Years 2016-17 through 2020-21.

Property Taxes
General Fund property tax receipts of $18,895,846 provided the second largest tax revenue source of the City in Fiscal Year 2020 -21, contributing approximately 27.2% of General Fund tax revenues and approximately 21.3% of total General Fund revenues during Fiscal Year 2020-21.

Property in the State which is subject to ad valorem taxes is classified as “secured” or “unsecured.” The secured classification includes property on which any property tax levied by a county becomes a lien on that property. A tax that is levied on unsecured property may become a lien on certain other property owned by the taxpayer. Every tax which becomes a lien on secured property has priority over all other liens arising pursuant to State law on the secured property, regardless of the time of the creation of other liens.

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The exclusive means of compelling the payment of delinquent taxes with respect to secured property is the sale of the property securing the taxes for the amount of taxes that are delinquent. The taxing authority has three methods of collecting unsecured personal property taxes: (1) filing a civil action against the taxpayer; (2) obtaining a judgment lien on certain property of the taxpayer from the county clerk or county recorder; and (3) seizing and selling personal property, improvements or possessory interests belonging or taxable to the assessee.

A 10% penalty is added to delinquent taxes which have been levied with respect to property on the secured roll. In addition, beginning on the July 1 following a delinquency, interest begins accruing at the rate of

1.5% per month on the amount delinquent. If taxes are unpaid for a period of five years or more, the property is deeded to the State and then is subject to sale by the county tax collector. A 10% penalty also applies to the delinquent taxes or property on the unsecured roll, and an additional penalty of 1.5% per month accrues with respect to such taxes beginning on the varying dates related to the tax billing date.

In an attempt to mitigate the effects of the COVID-19 pandemic on State property taxpayers, on May 6, 2020, the Governor signed Order N -61-20, as discussed in detail under the caption “—Effect of COVID- 19 Outbreak on General Fund .” Order N- 61-20 prevented the City from receiving penalties and interest on delinquent property tax paymen ts in 2020 and 2021, but did not have a material impact on total property tax revenues received by the City during such period.

State law also provides for the supplemental assignment and taxation of property as of the occurrence of a change in ownership or completion of new construction . Collection of taxes based on supplemental assessments occurs throughout the year . Taxes due are prorated according to the amount of time remaining in the tax year.

An initiative measure (the “Split Roll Initiative ”) to amend Article XIIIA of the State Constitution qualified for the State’s November 2020 ballot . See the caption “CONSTITUTIONAL LIMITATIONS ON TAXES AND FEES IN CALIFORNIA—Article XIIIA of the State Constitution.” Although it was not adopted by State voters, the Split Roll Initiative would have based property taxes for commercial and industrial properties on periodic analyses of market values beginning in tax year 2020- 21. Such market values would have been reassessed by the applicable county assessor’s office at least once every three years. The Split Roll Initiative included exceptions for businesses with a total market value of less than $2 million (adjusted for inflation), which would have continued to be subject to property taxes based on purchase price, and exempted from property tax assessments up to $500,000 of the value of personal property, or all personal property for businesses with fewer than 50 employees. Although the Split Roll Initiative was not adopted, there can be no assurance that a similar initiative will not be brought before voters in the future. The City is unable to predict how the adoption of such a future initiative would affect the level of commercial building activity within the City and the relationship between the assessed value of different land use types (i.e. residential versus commercial) in the City, or what other impacts such an initiative might have on the local economy or the City’s financial condition, including the receipt of property tax revenues.

For a number of years, the State Legislature shifted property taxes from cities, counties and special districts to the Educational Revenue Augmentation Fund (“ERAF”). In Fiscal Years 1993 and 1994, in response to serious budgetary shortfalls, the State Legislature and administration permanently redirected over $3 billion of property taxes from cities, counties, and special districts to schools and community college districts pursuant to ERAF shifts. The Fiscal Year 2004-05 State Budget included an additional $1.3 billion shift of property taxes from certain local agencies, including the City, in Fiscal Years 2004-05 and 2005-06.

On July 27, 2009, the Governor signed a revised Fiscal Year 2010 State budget that included an ERAF shift of approximately 8% of 1% ad valorem property tax revenues from certain local agencies, including the City.

On November 2, 2010, State voters approved Proposition 22, which: (i) prohibits the State of California from shifting or delaying the distribution of funds from special districts to schools and commu nity colleges; (ii) eliminates the authority to shift property taxes temporarily during a severe financial hardship of the State;

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and (iii) restricts the State’s authority to use fuel tax revenues to pay debt service on transportation bonds, to borrow or change the distribution of fuel tax revenues or to use vehicle license fee revenues to reimburse local governments for state-mandated costs.

Despite the passage of Proposition 22, there can be no assurance that 1% ad valorem property tax revenues which the City currently expects to receive will not be temporarily shifted from the City or reduced pursuant to State legislation enacted in the future, including in response to State budget deficits. See the caption “STATE OF CALIFORNIA BUDGET INFORMATION.” If the property tax formula is permanently changed in the future, it could have a material adverse effect on the receipt of its share of 1% ad valorem property tax revenues by the City.

Set forth in the below table are the secured and unsecured assessed valuations for property in the City for the last five Fiscal Years, including valuations attributed to the City’s redevelopment successor agency.

Table A4

CITY OF VICTORVILLE
Assessed Valuation History
Fiscal
Year Secured Value
Unsecured
Value Non-Unitary
Taxable
Assessed Value
Percentage
Increase in
Taxable
Assessed Value
Total Direct
Tax Rate
2016-17 $7,358,274,302 $548,314,490 $225,429,163 $8,132,017,955 N/A% 18.23% 2017-18 7,751,404,680 507,854,639 106,929,139 8,366,188,458 2.88 18.22 2018-19 8,173,462,255 553,108,056 104,329,108 8,830,899,419 5.55 18.21 2019-20 8,697,654,376 549,306,339 98,788,971 9,345,749,686 5.83 18.20 2020-21 9,212,471,887 608,604,365 100,188,971 9,921,265,223 6.16 18.19

Sources: San Bernardino County Assessor Combined Tax Rolls; HdL Coren & Cone.

Set forth in the below table are property tax levies and collections in the City as of June 30 for the last five Fiscal Years. Although the County has adopted the Alternative Method of Distribution of Tax Levies and Collections and of Tax Sale Proceeds (known as the Teeter Plan), as provided for in Section 4701 et seq. of the Revenue and Taxation Code of the State, the City does not participate in such plan. As a result, the City is exposed to the risk of property tax payment delinquencies but receives penalties and interest on delinquent collections. The City also receives supplemental taxes throughout the year.

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Table A5

CITY OF VICTORVILLE
Property Tax Levies and Collections Table(1)
Fiscal
Year
Total
Tax Levy
Collections within
the Fiscal Year
of Levy(2)
Percent of Levy
Collected within
the Fiscal Year of
Levy
Collections in
Subsequent Years
Percent of Levy
Collected to Date
2017 $7,545,734.10 $7,525,491.48 100% $116,435.71 101%
2018 7,650,325.17 7,664,337.97 100 93,571.40 101
2019 7,839,526.94 7,793,296.52 99 80,414.80 100
2020 8,040,899.90 7,970,993.46 99 87,861.91 100
2021 8,225,606.66 8,263,642.26 100 -- 100

(1) The tax levy/receivable is based on the equalized roll. Collections actually received include Assessor corrections and supplemental taxes.
(2) The amounts shown in this column do not reflect supplemental tax revenues that are attributable to the vehicle in lieu fees, which are shown in the “Property Taxes” line item in Tables A1 and A2.

Source: San Bernardino County Assessor.

Information with respect to the ten largest property taxpayers in the City as shown on the Fiscal Year 2020-21 tax roll is set forth in the below table.

Table A6

CITY OF VICTORVILLE
Ten Largest Property Taxpayers
Taxpayer
Fiscal Year 2020-21
Taxable
Assessed Valuation
% of Total
Assessed
Valuation(1)
Stirling Capital Investments $ 148,459,257 1.50%
Macerich Victor Valley 143,662,318 1.45
High Desert Power Trust 99,400,000 1.00
Cemex Construction Materials Pacific 83,365,688 0.84
The American Bottling Company 81,680,656 0.82
Desert Valley Hospital Inc. 69,769,074 0.70
Nutro Products Inc. 67,095,857 0.68
Walmart Stores Inc. 65,034,821 0.66
Federal Express Corporation 53,463,287 0.54
Veyron KDP 1 Partners 50,121,635 0.51
TOTAL $ 862,052,593 8.70%

(1) The total Fiscal Year 2020-21 taxable assessed value within the City is $9,921,265,223. (2) This taxpayer has a pending property tax appeal. See the caption “RISK FACTORS—Assessed Value of Taxable Property.” Source: HdL Coren & Cone.

Sales Taxes
Sales tax receipts of $ 35,683,421 provided the larges t tax revenue source for the City in Fiscal Year 2020-21, contributing approximately 51.4 % of General Fund tax revenues and approximately 40.1 % of total General Fund revenues during Fiscal Year 2020 -21. Retail sales at the Mall of Victor Valley and automobile sales at various automobile dealerships contribute significantly to such receipts.

A sales tax is imposed on retail sales or consumption of personal property and collected and distributed by the California Department of Tax and Fee Administration (the “CDTFA”). The basic sales tax rate is

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established by the State Legislature, and local overrides may be approved by voters. The current sales tax rate in the City is 8.75%.

At the November 3, 2020 election, City voters approved a new sales tax measure, Measure P, which came into effect in the last quarter of Fiscal Year 2020-21 (April 1, 2021). The additional General Fund revenues generated by Measure P are intended to fund expansions of essential services such as police, fire, code compliance, animal care and control, library and homelessness and housing . Measure P, which does not have a sunset provision, increased the City’s sales tax rate from 7.75% to 8.75% and brought in approximately $7.1 million in additional sales tax revenues in the last quarter of Fiscal Year 2020 -21. Based on the City’s current projections, Measure P revenues are expected to total approximately $28 million in Fiscal Year 2021 -22 and future Fiscal Years.

As discussed under the caption “— Effect of COVID- 19 Outbreak on General Fund ,” in 2020, the Governor extended the deadline to file and pay spring 2020 sales and use tax returns by 90 days for all but the very largest taxpayers, and up to 361,000 California businesses with less than $5 million in taxable annual sales were allowed to defer up to $50,000 in sales tax and enter into 12- month payment plans at zero interest. These actions resulted in delays in the receipt by the City of its portion of such tax payments.

Other Taxes
Other taxes collected by the City include franchise tax es, transient occupancy tax es, property transfer taxes and business license taxes. Fran chise taxes are levied on gas, electric, cable television , telephone and sanitation service providers within the City. Business license taxes are based on either a flat rate or a gross receipts basis. Transient occupancy taxes are levied for the occupancy of space or use of furnishings or other services or accommodations in a hotel, motel or any other structure intended for occupancy by transients for dwelling, lodging or sleeping purposes for a period of thirty consecutive calendar days or less . The curren t transient occupancy tax rate in the City is 7%.

The City has not experienced material declines in other tax revenues, including transient occupancy tax revenues, since the onset of the COVID-19 pandemic in March 2020.

Services
Charges of $13,480,288 collected for services provided by the City in Fiscal Year 2020 -21, including but not limited to fees for plan checks and other planning services, library services and recreational program fees, provided approximately 15.2% of General Fund revenues during Fiscal Year 2020-21.

The City notes that most recreation programs were cancelled in 2020 and 2021 as a result of the COVID- 19 outbreak, resulting in reduced fees and other revenues from such programs. Such revenues are currently expected to rebound in and after mid-2022.

State of California Motor Vehicle In-Lieu Payments
The State imposes a Vehicle License Fee (the “VLF ”), which is the portion of the fees paid in lieu of personal property taxes on a vehicle. The VLF is based on vehicle value and declines as the vehicle ages. Prior to the adoption of the Fiscal Year 2004 -05 State Budget, the VLF was 2% of the value of a vehicle. Through legislation in prior Fiscal Years, the State enacted VLF reductions under which the State was required to “backfill” local governments for their revenue losses resulting from the lowered fee. The Fiscal Year 2004 -05 State Budget permanently reduced the VLF from 2% to 0.65% of the value of a vehicle and deleted the requirement for backfill payments, providing instead that the amount of the backfill requirement will be met by an increase in the property tax allocation to cities and counties (which is reflected in the City’s property tax receipts). See the caption “STATE OF CALIFORNIA BUDGET INFORMATION.”

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VLF receipts totaled $92,730 in Fiscal Year 2020-21. Such revenues contributed approximately 0.13% of General Fund tax revenues and approximately 0.10% of total General Fund revenues in Fiscal Year 2020-21.

Other Indebtedness
General Fund-Supported Debt.
2018 Pumper Truck Lease. In 2018, the City entered into a lease agreement (the “2018 Pumper Truck Lease ”) with Rev Financial Services, LLC to finance two pumper trucks for the City’s fire department. The 2018 Pumper Truck Lease matures in 2025 and bears interest at the rate of 3.79% per annum.

The 2018 Pumper Truck Lease is payable from legally available funds of the City, including the General Fund.

As of June 30, 2021, the 2018 Pumper Truck Lease was outstanding in the principal amount of $889,472. 2007 VJPFA Bonds. In 2007, the Victorville Joint Powers Financing Authority (the “VJPFA” as defined in the front part of this Official Statement) issued its Variable Rate Lease Revenue Bonds, 2007 Series A (Cogeneration Facility Project) (the “Refunded VJPFA Bonds” as defined in the front part of this Official Statement ) to finance a cogeneration power plant and other related facilities for the benefit of the Electric System. The Refunded VJPFA Bonds mature in 2040 and bear interest at variable rates. The Refunded VJPFA Bonds are payable from rental payments payable from the City to the Authority under a lease agreement between the Authority, as lessor, and the City, as lessee . The City has covenanted in the 2007 Lease to budget and appropriate moneys annually for the lease payments payable thereunder from legally available funds, including the General Fund. Historically, however, the payments made by the City to be applied to the payment of debt service on the VJPFA Bonds have been reimbursed or paid from revenues of the Electric System. As of June 30, 2021, the 2007 Lease Revenue Bonds were outstanding in the aggregate principal amount of $46,710,000. The VJPFA Bonds remaining outstanding upon the issuance of the 2022 Bonds are being refunded in connection with the issuance of 2022 Bonds. See “PLAN OF FINANCE.” Other Long Term Debt. Debt of the City’s Electric System is described under the caption “THE VMUS ELECTRIC SYSTEM—Outstanding Debt Obligations.”
In 2006, the Victorville Water District (formerly Baldy Mesa Water District), a subsidiary district of the City, caused Parity Certificates of Participation (Water System Improvement Project) Series 2006 (the “2006 Water Certificates”) to be executed and delivered to finance certain capital improvements of the City’s water system. The 2006 Water Certificates mature in 2036 and bear interest at rates ranging from 3.20% to 5.00% per annum. The 2006 Water Certificates are payable from revenues of the City’s water system. As of June 30, 2021, the 2006 Water Certificates were outstanding in the aggregate principal amount of $8,930,000.

Short-Term Debt. The City currently has no short-term debt outstanding.

Estimated Direct and Overlapping Bonded Debt. The estimated direct and overlapping bonded debt of the City as of June 30, 2021 is set forth in the below table. The information in the below table has been derived from data assembled and reported to the City by California Municipal Statistics, Inc. Neither the City nor the Underwriter has independently verified the information in the below table and the City and the Underwriter do not guarantee its accuracy.

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Table A7

CITY OF VICTORVILLE
Estimated Direct and Overlapping Bonded Debt as of June 30, 2021 Fiscal Year 2020-21 Assessed Valuation: $9,919,352,933(1)

OVERLAPPING TAX AND ASSESSMENT DEBT:

Total Debt
6/30/21
%
Applicable(2)
City’s Share of
Debt 6/30/21
Victor Valley Joint Community College District $159,002,414 28.526% $45,357,029 Victor Valley Joint Union High School District 115,292,037 62.032 71,517,956 Adelanto School District 2,690,991 43.169 1,161,674
Victor School District 49,806,332 84.095 41,884,635
Mojave Water Agency Assessments 3,290,000 24.805 816,085 Adelanto School District Community Facilities District No. 1, I.A. A 13,380,000 100.000 13,380,000 Adelanto School District Community Facilities District No.2 2,995,000 100.000 2,995,000 Hesperia Unified School District Community Facilities Districts 8,280,000 100.000 8,280,000 Snowline Joint Unified School District Community Facilities Districts 9,415,000 100.000 9,415,000 Victor School District Community Facilities Districts 28,895,000 100.000 28,895,000 Victor Valley Joint Union High School District Community Facilities Districts
5,220,000 100.000 5,220,000
City of Victorville Community Facilities Districts 5,315,000 100.000 5,315,000 TOTAL OVERLAPPING TAX AND ASSESSMENT DEBT $234,237,379

DIRECT AND OVERLAPPING GENERAL FUND DEBT:

San Bernardino County General Fund Obligations $214,095,000 3.963% $ 8,484,585 San Bernardino Pension Obligation Bonds 180,825,585 3.963 7,166,118 San Bernardino County Flood Control District General Fund Obligations
51,360,000 3.963 2,035,397
Victor Valley Union High School District Certificates of Participation 20,235,000 62.032 12,552,175 Hesperia Unified School District General Fund Obligations 120,650,000 7.354 8,872,601 Snowline Joint Unified School District General Fund Obligations 63,210,000 14.899 9,417,658 Adelanto School District Certificates of Participation 6,340,000 43.169 2,736,915 Oro Grande School District Certificates of Participation 33,160,000 0.570 189,012 City of Victorville General Fund Obligations 0 100 0
TOTAL DIRECT AND OVERLAPPING GENERAL FUND DEBT $51,454,461

OVERLAPPING TAX INCREMENT DEBT (Successor Agencies): $316,219,925 66.778 - 100.%
$221,424,295

TOTAL DIRECT DEBT $ 0
TOTAL OVERLAPPING DEBT $507,116,135

COMBINED TOTAL DEBT $
507,116,135(2)

Ratios to Fiscal Year 2020-21 Assessed Valuation:

Total Overlapping Tax and Assessment Debt 2.36%
Total Direct Debt ($0) 0.00%
Combined Total Debt 5.11%

Ratios to Redevelopment Successor Agencies Incremental Valuation ($5,509,185,995) Total Overlapping Tax Increment Debt 4.02%

(1) Differs from assessed valuation shown in Tables A4 and A6 under the caption “—Property Taxes” as a result of slight differences in methodology.
(2) The percentage of overlapping debt applicable to the City is estimated using taxable assessed property value. Applicable percentages were estimated by determining the portion of each overlapping district’s assessed value that is within the boundaries of the City divided by each such district’s total taxable assessed value.
(3) Excludes 2022 Bonds.
(4) Excludes tax and revenue anticipation notes, enterprise revenue bonds, mortgage revenue bonds and non- bonded capital lease obligations.

Source: California Municipal Statistics, Inc.

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Retirement Programs
Accounting and financial reporting by state and local government employers for defined benefit pension plans is governed by GASB Statement No. 68 (“GASB 68”). GASB 68 includes the following componen ts:
(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 and reporting requirements, but it does not change the City’s pension plan funding obligations.

The City participates in two plans to fund pension benefits for employees: (i) a Safety Plan for fire department and certain other personnel; and (ii) a Miscellaneous Plan for all other eligible personnel. The City’s pension plans are administered by PERS. PERS administers agent multiple-employer public employee defined benefit pension plans for all of the City’s full-time and certain part-time employees. PERS 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. PERS plan benefit provisions and all other requirements are established by State statute and the City Council.

City employees are subject to different benefit levels based on their hire date. The plans’ provisions and benefits in effect at June 30, 2020 are summarized as follows:

CITY OF VICTORVILLE
PERS Pension Plans – Summary of Benefit Provisions
Safety Plan
Employees Hired
Before January 1, 2013
Employees Hired on or
After January 1, 2013
Benefit Formula 2.0% @ age 50 2.7% @ age 57
Benefit Vesting 5 years of service 5 years of service
Benefit Payments Monthly for life Monthly for life
Minimum Retirement Age 50-55 52-57
Employee Normal Cost 9.00%(1) 13.75%(1)
Employer Normal Cost Rate 20.89% 13.88%
Miscellaneous Plan
Employees Hired
Before January 1, 2013
Employees Hired on or
After January 1, 2013
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
Minimum Retirement Age 50-55 52-67
Employee Normal Cost 8.00%(1) 6.75%(1)
Employer Normal Cost Rate 10.59% 9.69%

(1) Employees are required to make the full employee contribution themselves. The City does not make any portion of the employee contribution.

Source: City.

Contributions to the City’s pension plans consist of : (i) contributions from plan participants ( i.e., employees); and (ii) contributions by the City.

City employees who were hired after December 31, 2012 and who were not previously PERS members receive benefits based on a 2.7% at age 57 formula (for Safety Plan employees) or a 2.0% at age 62 formula (for

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Miscellaneous Plan employees). Such employees are required to make the full amount of required employee contributions themselves under the California Public Employees’ Pension Reform Act of 2013 (“AB 340”), which was signed by the State Governor on September 12, 2012. AB 340 established a new pension tier for such employees. Benefits for such participants are calculated on the highest average annual compensation over a consecutive 36-month period. Employees are required to pay at least 50% of the total normal cost rate. AB 340 also capped pensionable income as noted below. Amounts are set annually, subject to Consumer Price Index increases, and retroactive benefits increases are prohibited, as are contribution holidays and purchases of additional non-qualified service credit.

CITY OF VICTORVILLE
Pensionable Income Caps for Calendar Year 2022

Employees Hired On or Before
December 31, 2012
(Non-AB 340 Employees)
Employees Hired After
December 31, 2012
(AB 340 Employees)
Maximum Pensionable Income $305,000 $161,969
Maximum Pensionable Income if
also Participating in Social
Security N/A 134,974

Source: City.

Additional employee contributions, limits on pensionable compensation and higher retirement ages for new members as a result of the passage of AB 340 are expected to reduce the City’s unfunded pension lability and potentially reduce City contribution levels in the long term.

The City is also required to contribute the actuarially determined remaining amounts necessary to fund benefits for its members. Employer contribution rates for all public employers are determined on an annual basis by the PERS actuary and are effective o n the July 1 following notice of a change in the rate. Total plan contributions are determined through the PERS annual actuarial valuation process. The total minimum required employer contribution is the sum of: (i) the plan’s employer normal cost rate, wh ich funds pension benefits for current employees for the upcoming Fiscal Year (expressed as a percentage of payroll); plus (ii) the employer unfunded accrued liability contribution amount, which funds pension benefits that were previously earned by current and former employees (billed monthly).

For Fiscal Year 2020-21, required employer normal cost rates as a percentage of payroll were 20.887% for classic Safety Plan employees, 13.884% for AB 340 Safety Plan employees and 10.590% for Miscellaneous Plan employees. For Fiscal Year 2021 -22, required employer normal cost rates as a percentage of payroll are

20.94% for classic Safety Plan employees, 13.98% for AB 340 Safety Plan employees and 10. 50% for Miscellaneous Plan employees.

For Fiscal Year 2020-21, the total required employer payment of the unfunded accrued liability for the City’s Safety Plan was $ 1,065,737. For Fiscal Year 2021- 22, the total required employer payment of the unfunded accrued liability for the City’s Safety Plan is $1,115,641.

For Fiscal Year 2020-21, the total required employer payment of the unfunded accrued liability for the City’s Miscellaneous Plan was $3,484,218. For Fiscal Year 2021-22, the total required employer payment of the unfunded accrued liability for the City’s Miscellaneous Plan is $4,152,551.

Beginning in Fiscal Year 2017 -18, PERS began collecting employer contributions toward a pension plan’s unfunded liability as dollar amounts instead of the prior method of a percentage of payroll. According to PERS, 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 pen sion plans. Due to stakeholder feedback regarding internal needs for total contributions expressed as an estimated percentage of payroll, the PERS reports include such results in the

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contribution projection for informational purposes only. Contributions toward a pension plan’s unfunded liability will continue to be collected as set dollar amounts.

The City’s required contributions to PERS fluctuate each year and, as noted, include a normal cost component and a component equal to an amortized amount of the unfunded liability. Many assumptions are used to estimate the ultimate liability of pensions and the contributions that will be required to meet those obligations.

The PERS Board of Administration has adjusted and may in the future further adjust certain a ssumptions used in the PERS actuarial valuations, which adjustments may increase the City’s required contributions to PERS in future years. Accordingly, the City cannot provide any assurances that the City’s required contributions to PERS in future years w ill not significantly increase (or otherwise vary) from any past or current projected levels of contributions. PERS earnings reports for Fiscal Years 2009 -10 through 2020- 21 report investment gains of approximately 13.3%, 21.7%, 0.1%, 13.2%, 18.4%, 2.4%, 0 .6%, 11.2%, 8.6%, 6.7%, 4.7% and 21.3%, respectively. Future earnings performance may increase or decrease future contribution rates for plan participants, including the City. The City notes that PERS’ earnings in Fiscal Year 2019 -20 were below its investment targets 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 “CITY FINANCIAL INFORMATION—Effect of COVID-19 Outbreak on General Fund.” On December 21, 2016, the PERS Board of Administration voted to lower its discount rate from 7.50% to 7.00% over a three period. For public agencies such as the City, the new discount rate took effect July 1, 2017.

Lowering the discount rate means that employers which contract with PERS to administer their pension plans will see increases in their normal costs and unfunded actuarial liabilities. Active members hired after January 1, 2013 will also see their contribution rates rise under AB 340. T he reduction of the discount rate will result in average employer rate increases of approximately 1% to 3% of normal cost as a percentage of payroll for most retirement plans such as the City’s plans. Additionally, many employers will see a 30% to 40% increase in their current unfunded accrued liability payments (relative to the unfunded accrued liability payments projected in the June 30, 2015 valuation report) for pension plans. These payments are made to amortize unfunded liabilities over 20 years to bring pension funds to a fully funded status over the long-term.

The announcement on July 12, 2021 that PERS achieved an investment return of 21.3% for the period from July 1, 2020 through June 30, 2021 caused the PERS Board of Administration to lower PERS’ discount rate from 7.00% to 6.80% on November 15, 2021 in accordance with a risk mitigation policy that was adopted in 2015, which calls for the discount rate to be lowered if returns exceed the then- current discount rate by two or more percentage points.

Portions of the above disclosures are primarily derived from information that has been produced by PERS, its independent accountants and its actuaries. 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 PERS.

The annual comprehensive financial reports of PERS are available on PERS ’ Internet website at www.PERS.ca.gov. The PERS website also contains PERS’ most recent actuarial valuation reports and other information that concerns benefits and other matters. 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. Actuarial assessments are “forward -looking” statements that reflect the judgment of the fiduciaries of the pension plans, and are based upon a variety of assumptions, one or more of which may not materialize or be changed in the future.

The City’s Safety Plan had a total net pension liability of approximately $ 12,515,992 for Fiscal Year 2020-21 (as of the measurement date of June 30, 2020). The net pension liability is the difference between the total pension liability and the fair market value of pension assets. The City’s total pension assets include funds that are held by PERS, and its net pension asset or liability is based on such amounts. For Fiscal Year 2020 -21, the City incurred Safety Plan pension expenses of $1,433,856.

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The City’s Miscellaneous Plan had a total net pension liability of approximately $56,153,894 for Fiscal Year 2020-21 (as of the measurement date of June 30, 2020). The net pension liability is the difference between the total pe nsion liability and the fair market value of pension assets. The City’s total pension assets include funds that are held by PERS, and its net pension asset or liability is based on such amounts. For Fiscal Year 2020-21, the City incurred Miscellaneous Plan pension expenses of $2,514,488.

A summary of principal assumptions and methods used to determine the total pension liability for Fiscal Year 2020-21 is shown below.

CITY OF VICTORVILLE
Actuarial Assumptions for PERS Pension Plans
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 2.50%
Salary Increases Varies by entry age and service
Mortality Rate Table(1) Derived using PERS’ membership data for all funds

(1) The mortality table used was developed based on PERS-specific data from a 2017 actuarial experience study for the period from 1997-2015.

Source: City.

Changes in the net pension liability for the City’s pension plans in the most recent Fiscal Year for which information is available were as follows:

CITY OF VICTORVILLE
Changes in PERS Pension Plans Net Pension Liability
Safety Plan
Increase / (Decrease)

Total
Pension Liability
Plan Fiduciary
Net Position
Net Pension
Liability / (Asset)
Balance at June 30, 2019 $ 40,712,182 $ 28,663,348 $ 12,048,834 Balance at June 30, 2020 42,350,801 29,834,809 12,515,992 Net Changes for period from July 1,
2019 through June 30, 2020 $ 1,638,619 $ 1,171,464 $ 467,158 Miscellaneous Plan
Increase / (Decrease)

Total
Pension Liability
Plan Fiduciary
Net Position
Net Pension
Liability / (Asset)
Balance at June 30, 2019 $ 202,652,096 $ 150,980,795 $ 51,671,301 Balance at June 30, 2020 213,295,811 157,141,917 56,153,894 Net Changes for period from July 1,
2019 through June 30, 2020 $ 10,643,715 $ 6,161,122 $ 4,482,593

Source: City.

The table below presents the net pension liability of the City’s pension plans, calculated using the discount rate applicable to Fiscal Year 2020-21 (7.15%), as well as what the net pension liability would be if it were calculated using a discount rate tha t is 1 percentage point lower (6.15%) or 1 percentage point higher (8.15%) than the Fiscal Year 2020-21 rate:

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CITY OF VICTORVILLE
Sensitivity of PERS Pension Plans Net Pension Liability to Changes in Discount Rate Plan’s Net Pension
Liability/(Asset)
Discount Rate – 1%
(6.15%)
Applicable Discount
Rate (7.15%)
Discount Rate + 1%
(8.15%)
Safety Plan $18,267,388 $12,515,992 $ 7,796,427
Miscellaneous Plan 86,277,212 56,153,894 31,439,809

Source: City.

For additional information relating to the City’s pension plans, see Note 12 to the City’s audited financial statements set forth in Appendix B.

Other Post-Employment Benefits
The City provides post -employment health care benefits to qualified retired employees who retire directly from the City after eight years of service and their beneficiaries. Employees are eligible for such benefits in accordance with applicable memoranda of understanding with employee bargaining units. The City administers two single-employer defined benefit post- employment healthcare plan , one for water system employees (the “Water System Plan”) and the other for all other eligible City employees (the “City Plan” and, collectively with the Water System Plan, the “OPEB Plan”). Benefits under the City Plan include a contribution toward health insurance premiums, with larger benefits accruing to employees with more years of service to the City, while benefits under the Water System Plan include contribution toward health insurance, dental and vision insurance premiums.

At June 30, 2020 (the census date), the following employees were covered by the benefit terms:

Category City Plan Water System Plan
Active employees 322 81
Inactive employees or beneficiaries currently
receiving benefit payments 59 28
Inactive employees entitled to but not yet
receiving benefit payment 151 4

Source: City.

For the year ended June 30, 2021: (i) the City’s cash contribution to the City Plan was $275,577 for current premiums, with an implied subsidy (discussed in the following paragraph) of $109,000, resulting in a total payment of $384,577; and (ii) the City’s cash contribution to the Water System Plan was $205,788, with an implied subsidy of $48,000, resulting in a total payment of $253,788. Employees do not contribute to the OPEB Plan, but may pay the difference between the benefit that they receive and monthly premiums for that benefit.

GASB has issued two pronouncements, known as GASB 74 and GASB 75, related to funding and accounting for the OPEB Plan. Under these pronouncements, OPEB Plan benefits are intended to be accounted for in a manner that is similar to the accounting treatment of pensions under GASB 68. See the caption “— Retirement Contributions.” Under GASB 74 and 75, unfunded OPEB Plan benefits will be recognized on the City’s financial statements and the City is required to use the Entry Age actuarial cost method when calculating OPEB Plan liabilities. In addition, a 20 -year municipal bond rate is used to disc ount unfunded OPEB Plan payments and the long-term rate of return on plan investments is used to discount benefits that are projected to be paid by plan assets. GASB 75 also requires that a valuation of the District’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

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The City retained a consultant (the “Actuarial Consultant”) to calculate the City’s post- employment benefits funding status. In a report dated June 30, 2021 (measurement date June 30, 2020) (the “Report”), the Actuarial Consultant concluded that the City’s actuarially determined contribution to the OPEB Plan is $384,577.

According to the Actuarial Consultant, the City’s unfunded a ctuarial accrued liability for post- employment benefits was $27,707,436 as of June 30, 2021, the most recent date that such liability was calculated.

The City is not required to fund the amortization of the unfunded actuarial liability , and the City funds its liability on a pay-as-you-go basis.

Changes in the total liability for the City’s OPEB Benefit plan for Fiscal Year 2019-20 were as follows.

CITY OF VICTORVILLE
Changes in OPEB Plan Liability
City Plan

Total
OPEB Plan Liability
Plan Fiduciary
Net Position
Net OPEB Plan
Liability / (Asset)
Balance at June 30, 2019 $ 25,556,102 $ 0 $ 25,556,102 Net Changes for period from
July 1, 2019 through June 30, 2020
2,151,334 0 2,151,334
Balance at June 30, 2020 $ 27,707,436 $ 0 $ 27,707,436

Water System Plan

Total
OPEB Plan Liability
Plan Fiduciary
Net Position
Net OPEB Plan
Liability / (Asset)
Balance at June 30, 2020 $ 10,288,735 $ 0 $ 10,288,735 Net Changes for period from
July 1, 2020 through June 30, 2021
1,515,258 0 1,515,258
Balance at June 30, 2021 $ 11,803,993 $ 0 $ 11,803,993

Source: City.

The following table presents the net liability of the OPEB Plan, calculated using the discount rate applicable to Fiscal Year 2020-21 (2.21%), as well as what the net pension liability would be if it were calculated using a discount rate that is 1 percentage point lower ( 1.21%) or 1 percentage point higher ( 3.21%) than the current rate:

CITY OF VICTORVILLE
Sensitivity of OPEB Plan Liability to Changes in Discount Rate

Discount Rate – 1%
(1.21%)
Current Discount Rate
(2.21%)
Discount Rate + 1%
(3.21%)
City Plan Total Liability / (Asset) $33,510,351 $27,707,436 $23,183,204 Water System Plan Total Liability /
(Asset) 14,080,594 11,803,993 10,010,162

Source: City.

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 OPEB Plan 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 OPEB Plan benefits will have a material adverse effect on the ability of the City to pay the Series 2022 Bonds.

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For additional information relating to the City’s OPEB Plan, see Note 14 to the City’s audited financial statements set forth in Appendix B.

City Investment Policy
The City invests its funds in accordance with the City’s investment policy (the “Investment Policy ”), which is reviewed by the City Council on an annual basis. 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 City’s investment policy 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 Finance Director/City Treasurer . Eligible investments are generally limited to the Local Agency Investment Fund which is operated by the California State Treasurer, local agency bonds (limited to maximum maturities of 5 years and 70% of the portfolio), United States Treasury bills, notes and bonds (limited to maximum maturities of 5 years and 70% of the portfolio) , obligations issued by United States Government agencies (limited to maximum maturities of 5 years and 70% of the portfolio) , FDIC-insured or negotiable certificates of deposit (limited to maximum maturities of 2 years and 30% of the portfolio, repurchase agreements limited to maximum maturities of 1 year), banker’s acceptances (limited to maximum maturities of 180 days and 40% of the portfolio), mutual funds, including money market mutual funds (limited to maximum maturities of 5 years and 20% of the portfolio) and commercial paper (limited to maximum maturities of 270 days and 40% of the portfolio). Funds are invested in the following order of priority:
• Safety of Principal;
• Liquidity; and
• Return on Investment.

The Finance Director/City Treasurer provides a quarterly report to the City Council showing the type of investment, date of maturity, amount invested, current market value, rate of interest, and other such information as may be required by the City Council.

A summary of the City’s investments as of June 30, 2021 is set forth in the below table. Approximately $26.4 million (16.7%) of the total investment portfolio as of June 30, 2021 was attributed to the General Fund.

CITY OF VICTORVILLE
Summary of Investments
(1)
Investment Maturity
Investment Type
12 Months
or Less
13 Months
to 24 Months
25 Months to
60 Months
Greater than
60 Months Total
Local Agency Investment Fund $124,054,764 $ - $ - $ - $124,054,764 Guaranteed Investment Contract
Held by Bond Trustee -- -- -- 816,500 816,500
Money Market Mutual Funds 33,659,776 -- -- -- 33,659,776 Totals $157,714,540 $ -- $ -- $ 816,500 $158,531,040

(1) Totals may not add due to rounding.

Source: City.

For additional information relating to the City’s investments, see Note 3 to the City’s audited financial statements set forth in Appendix B.

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STATE OF CALIFORNIA BUDGET INFORMATION
Although the State is not a significant source of City revenues, there can be no assurance that the State’s annual budget or other legislation will not materially adversely affect the financial condition of the City, in particular given that the City receives certain revenues such as sales tax proceeds and VLF from the State. The following information describes the State budget process and the current and upcoming State budgets.

General
Information about the State budget is regularly available at various State- maintained websites. Text of proposed and adopted budgets may be found at the website of the State Department of Finance (the “DOF ”), http://www.dof.ca.gov, under the heading “California Budget.” An impartial analysis of the budget is posted by the Legislative Analyst’s Office (the “ LAO”) at http://www.lao.ca.gov. In addition, various State Official Statements, many of which contain a summary of the current and past State budgets and the impact of those budgets on cities in the State, may be found at the website of the State Treasurer, http://www.treasurer.ca.gov.

The information referred to is prepared by the respective State agency maintaining each website and not by the City, and the City takes no responsibility for the continued accuracy of these Internet addresses or for the accuracy, completeness or timeliness of info rmation posted there, and such information is not incorporated herein by these references.

Budget for State Fiscal Year 2021-22
On July 16, 2021, the Governor signed a series of bills representing the State budget for State fiscal year 2021-22 (the “2021-22 Budget”). The Governor’s signing followed negotiations between the Governor and the State Legislature regarding the final provisions of the 2021 -22 Budget, including the expenditure of a large projected State general fund surplus. The State Legislature passed temporary budgetary legislation in June 2021 to meet the required State Constitutional budget deadline. The following is drawn from the DOF summary of the 2021-22 Budget.

The 2021 -22 Budget indicates that revenues are up significantly from the forecast included in the Governor’s proposed State budget for State fiscal year 2021-22, resulting in a large budgetary surplus. This is a result of strong cash trends, two major federal relief bills since the beginning of 2021 (as discussed under the caption “CITY FINANCIAL INFORMATION—Effect of COVID-19 Outbreak on General Fund”), continued stock market appreciation and a significantly upgraded economic forecast from the prior State fiscal year. The 2021-22 Budget also reports that the State has received appr oximately $285 billion in federal COVID -19 stimulus funding for State programs. Although the 2021- 22 Budget acknowledges that building reserves and paying down debts are critical, the 2021-22 Budget allocates approximately 85% of discretionary funds to one- time spending. The multi -year forecast reflects a budget roughly in balance, although the 2021 -22 Budget assumes that risks remain to the economic forecast, including a stock market decline that could reduce State revenues.

For State fiscal year 2020-21, the 2021-22 Budget projects total general fund revenues and transfers of $188.8 billion and authorizes expenditures of $166.1 billion. The State is projected to end State fiscal year 2020- 21 with total available reserves of $39.8 billion, including $25.1 billion in the traditional general fund reserve, $12.3 billion in the State’s basic reserve fund, known as the Budget Stabilization Account (the “BSA”), $1.9 billion in the Public School System Stabilization Account and $450 million in the Safety Net Reserve Fund. For State fiscal year 2021-22, the 2021-22 Budget projects total general fund revenues and transfers of $175.3 billion and authorizes expenditures of $196.4 billion. The State is projected to end State fiscal year 2021 -22 with total available reserves of $25.2 billion, including $4 billion in the traditional general fund reserve, $15.8 billion in the BSA, $4.5 billion in the Public School System Stabilization Account (the “PSSSA”) and $900 million in the Safety Net Reserve Fund.

The 2021-22 Budget sets the Proposition 98 minimum funding guarantee for State fiscal year 2021 -22 at $93.7 billion. This results in per -pupil funding of $13,976 from Proposition 98 funding, growing to $21,555 when accounting for all funding sources. The 2021-22 Budget also makes retroactive increases to the minimum

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school funding guarantee in fiscal years 2019 -20 and 2020-21, setting them at $79.3 billion and $93.4 billion, respectively. Collectively, this represents a three-year increase in the minimum funding guarantee of $47 billion from the level projected by the 2020-21 Budget.

Other significant features of the 2021-22 Budget include the following:
• General Apportionments – An increase of $395 million in ongoing Proposition 98 funding for general apportionments, co mprised of: (i) $371.2 million to fund a 5.07% cost of living adjustment; and (ii) $23.8 million to fund 0.50% enrollment growth.
• Deferrals – $1.453 billion in Proposition 98 funding to repay apportionment deferrals, of which $144.6 million is from State fiscal year 2019-20, $1.1 billion is from State fiscal year 2020-21 and $229.8 million is from State fiscal year 2021-22.
• Student Assistance – $250 million in one -time ARP Act funds to support emergency student financial assistance grants. The 2021-22 Budget also provides $160 million in Proposition 98 funding for student assistance, comprised of $100 million in one -time funding available over three years to address student basic needs including food and housing insecurity, $30 million in ongoing funding to support student mental health services and $30 million in ongoing funding for colleges to establish basic needs centers and hire basic needs coordinators.
• Workforce Programs – $42.4 million in ongoing Proposition 98 funding to increase program funding and enable community college districts to support work -based learning opportunities. The 2021- 22 Budget also provides $20 million in one-time Proposition 98 funding to support community college participation in High Road Training Partnerships and regiona l partnerships developed by the California Workforce Development Board.
• Facilities – $581.4 million in State general obligation bond funding, including $8.2 million to start nine new capital outlay projects and $573.2 million for the construction phase of 32 projects anticipated to complete design by the spring 2022. In addition, the 2021- 22 Budget provides $511 million in one -time Proposition 98 funding to address deferred maintenance.

Proposed 2022-23 State Budget
On January 10, 2022, the Governor released his proposed State budget for State fiscal year 2022-23 (the “Proposed 2022-23 Budget”). The following information is drawn from the DOF and LAO overviews of the Proposed 2022-23 Budget.

The Proposed 2022- 23 Budget reports that, s ince the passage of the prior fiscal year’s budgetary legislation, the State’s economy has continued to recover from the recession occasioned by the COVID -19 pandemic. Before accounting for certain required transfers (such as those to the BSA), State revenues are higher than the projections included in the 2021- 22 Budget by almost $28.7 billion over a three -year span from State fiscal years 2020-21 through 2022-23. The Proposed 2022-23 Budget attributes this increase to four main factors:
(1) a more robust economic recovery; (2) a greater share of wage gains going to high-wage sectors; (3) a stronger than forecast stock market; and (4) higher inflation. The Proposed 2022-23 Budget identifies several risk factors that could affect the current economic and rev enue forecasts, including the impact of the COVID -19 Omicron variant or other potential future COVID -19 variants, persistent supply chain issues, increased inflation, stock market volatility and the lack of affordable housing.

For State fiscal year 2021 -22, the Proposed 2022- 23 Budget projects total general fund revenues and transfers of $196.7 billion and authorizes expenditures of $210 billion. The State is projected to end State fiscal year 2021-22 with total reserves of $47.4 billion, including $20.5 billion in the traditional general fund reserve, $19.3 billion in the BSA, $6.7 billion in the PSSSA and $900 million in the Safety Net Reserve Fund. For fiscal year 2022-23, the Proposed 2022-23 Budget projects total general fund revenues and transfers of $195.7 billion and authorizes expenditures of $213 billion. The State is projected to end the 2022- 23 fiscal year with total

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reserves of $34.6 billion, including $3.1 billion in the traditional general fund reserve, $20.9 billion in the BSA, $9.7 billion in the PSSSA and $900 million in the Safety Net Reserve Fund.

The upward revisions of State general fund revenues results in significant increases to the Proposition 98 minimum funding guarantee. Proposition 98 funding for K -14 school districts for State f iscal year 2022-23 is set at $102 billion (including $73.1 billion from the State general fund and $28.9 billion from other sources), an increase of $8.2 billion (or 8.8%) from the level set by the 2021-22 Budget.

As a result of increased revenues, the Proposed 2022- 23 Budget would also make certain retroactive adjustments to the minimum funding guarantee in State fiscal years 2020-21 and 2021-22, setting them at $95.9 billion and $99.1 billion, respectively. Together with the funding level for State fis cal year 2022 -23, this represents a three-year increase in the guarantee of $16.1 billion over the level included in the 2021-22 Budget.

The Proposed 2022 -23 Budget would set total funding for K -12 education at $119 billion, including $70.5 billion from th e State general fund and $48.5 billion from other sources. K -12 per-pupil funding would total $20,855 from all sources, including $15,261 from Proposition 98 sources. Other significant features of the Proposed 2022-23 Budget include the following:
• Universal Transitional Kindergarten – $639.2 million to expand eligibility for transitional kindergarten to include all children turning five years old between September 2 and February 2, beginning in State fiscal year 2022-23. Additionally, the Proposed 2022- 23 Budget includes $383 million in Proposition 98 funding to add one additional certificated or classified employee to every transitional kindergarten class, which is expected to reduce student-to-adult ratios to more closely align with the State’s preschool program. • Literacy – $500 million in one-time Proposition 98 funding for grants to high-needs schools to train and hire literacy coaches and reading specialists and $200 million in one- time Proposition 98 funding to enable local educational agencies to create and expand multi-lingual school or classroom libraries. • Expanded Learning Time – $3.4 billion in ongoing Proposition 98 funding to continue funding a multi-year plan to implement expanded -day, full-year instruction and enrichment for all elementary school students. The Proposed 2022-23 Budget also includes $937 million in one-time Proposition 98 funding to support expanded learning opportunities infrastructure, with a focus on integrating arts and music programming into enrichment opportunities for students.
• Special Education – $500 million to increase in the State- wide base funding rate for special education funding.
• College and Career Pathways – $1.5 billion in one-time Proposition 98 funding, over four years, to support the development of college and career pathways for high schoolers focused on technology (including computer science, green technology and engineering), health care, education and climate- related fields.

Additionally, the Proposed 2022- 23 Budget includes $500 million in one -time Proposition 98 funding, also available over four years, to strengthen and expand student access and participation in dual enrollment opportunities that are also coupled with student advising and support services. • Transportation – $1.5 billion in one-time Proposition 98 funding, available over three years, to support school transportation programs with a focus on greening school bus fleets. • Facilities – $1.4 billion in State general obligation bond funding to support school construction projects. The Proposed 2022-23 Budget also provides $1.3 billion in one-time State general funds in fiscal year 2022-23, and $925 million of such funds in 2023- 24, to support new construction and modernization projects through the State’s school facility program.

Additional information regarding the 2022-23 Budget and the Proposed 2022-23 Budget, see the DOF and LAO websites. The information presented on such websites is not incorporated herein by reference.

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None of the websites or webpages that are referenced above is in any way incorporated into this Official Statement. They are cited for informational purposes only. The City and the Underwriter make no representation whatsoever as to the accuracy or completeness of any of the information on such websites.

There can be no assurance that additional legislation will not be enacted in the future to implement provisions relating to the State budget, address the COVID-19 outbreak or otherwise that may affect the City or its General Fund revenues.

Potential Impact of State Financial Condition on the City The State has experienced significant financial stress in recent years, with budget shortfalls in the several billions of dollars. The COVID -19 outbreak materially adversely impacted the financial condition of the State and the waning of the infection crisis is expected to be followed by increases in unfunded liabilities of the two main retirement systems managed by State entities, PERS and the California State Teachers’ Retirement System.

The State also has a significant unfunded liability with respect to other post-employment benefits.

Current and future State budgets will be significantly affected by the COVID -19 outbreak and other factors over which the City has no control. The City cannot determine what actions will be taken in the future by the State Legislature and the Governor to deal with the COVID -19 outbreak, future recessions and resulting changing State revenues and expenditures. There can be no assurance that, as a result of the COVID-19 outbreak or otherwise, the State will not significantly reduce revenues to local governments (including the City) or shift financial responsibility for programs to local governments as part of its efforts to address State financial conditions. Although the State is not a significant source of City revenues, there can be no assurance that State actions to respond to the COVID-19 outbreak will not materially adversely affect the financial condition of the City. The State’s ability to undertake such revenue reductions or shifting has been limited by provisions of the State Constitution , particularly Proposition 22 . See the caption “ CITY FINANCIAL INFORMATION — Property Taxes.”
Redevelopment Dissolution
General. On December 29, 2011, the State Supreme Court upheld Assembl y Bill 1x26 (“ AB 1x26”), which dissolved redevelopment agencies in the State. The effect of AB 1x26 upon the City is the termination of the redevelopment functions of the Victorville Redevelopment Agency (the “Former Agency”) and the transfer of such functions to a successor agency (the City, referred to in this context as the “Successor Agency”), which was tasked with winding down the Former Agency’s redevelopment activities. Under AB 1x26, the Successor Agency cannot enter into new redevelopment projects or obligations and its assets can be used only to pay enforceable obligations, which enforceable obligations are generally limited to obligations in existence in mid - 2011, when AB 1x26 was signed by the Governor. In addition, the Successor Agency will receive tax increment revenues in amounts that are sufficient to pay 100% (but no greater amount) of such enforceable obligations until such obligations (including accrued interest, as applicable) are paid in full, at which time the Successor Agency will be di ssolved. Certain tax revenues formerly allocable to the Former Agency will continue to be available to the Successor Agency to pay certain obligations, and a portion of such revenues may be redirected to other taxing agencies, such as the County, the local school districts and the City. The Successor Agency’s activities are subject to review by an oversight board established under AB 1x26. Under AB 1x26, liabilities of the Successor Agency are not liabilities of the City.

On June 27, 2012, the Governor sign ed Assembly Bill 1484 (“AB 1484”), which made certain amendments to AB 1x26. Under AB 1484, the County Auditor -Controller, the DOF and the State Controller may require the return of funds that were improperly spent or transferred to a public entity in conf lict with the provisions of the Community Redevelopment Law, as amended by AB 1x26 and AB 1484, and if such funds are not returned within 60 days, they may be recovered through an offset of sales and use tax or property tax allocations to the relevant local agency, which, in the case of the Successor Agency, is the City.

On September 22, 2015, the following amendments to AB 1x26 and AB 1484 were enacted as Senate Bill 107 (“SB 107”): (1) redevelopment successor agencies that enter into a written agreement with the DOF to

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remit unencumbered cash to the county auditor-controller will receive a finding of completion, which provides successor agencies with additional fiscal tools and reduced State oversight; (2) successor agencies that that have a “Last and Final” ROPS (as discussed below) may expend a portion of proceeds of bonds issued in 2011, which proceeds are currently frozen; (3) pension or State Water Project override revenues that are not pledged to or not needed for redevelopment bond debt service will be returned to the entity that levies the override; (4) agreements relating to State highway improvements and money loaned to successor agencies to pay costs associated with redevelopment dissolution litigation will be considered enforceable obligations; a nd (5) reentered agreements entered into after the passage of AB 1484 are unenforceable unless entered into for the purpose of providing administrative support.

SB 107 also: (a) requires the preparation of a Recognized Obligation Payment Schedule with respect to enforceable obligations (a “ROPS”), which are required to be submitted to the oversight board and the DOF in accordance with AB 1x26, once a year beginning with the ROPS period that commenced on July 1, 2016 (rather than twice a year under prior law); (b) establishes an optional “Last and Final” ROPS process beginning in September 2015; under this process, a successor agency that elected to submit a “Last and Final ROPS would no longer submit a periodic ROPS and the enforceable obligations set forth in the “Last and Final” ROPS would be binding on all parties; and (c) clarifies that former tax increment caps and plan limits do not apply for the purposes of paying approved enforceable obligations.

Impact on the City. Significant provisions of AB 1x26, AB 1484, SB 107 and implementing actions of affected parties, including the Successor Agency, the oversight board, the County and the DOF, may be subject to legal challenge, statutory or administrative changes and other clarifications which could affect the impact of the dissolution of redevelopment on the City and its General Fund. The DOF has periodically proposed additional legislation which would modify statutes affecting redevelopment dissolution; it is not known whether additional legislation will be enacted. The full extent of the impact of the implementation of AB 1x26, AB 1484 and SB 107 or potential future legislation on the City’s General Fund is unknown at this time. While certain administrative costs previously charged to the Former Agency by the General Fund will no longer be supported by the Successor Agency, certain property tax revenues formerly allocated to the Former Agency will now be received by the City’s General Fund.

The City does not believe that it has received material amounts from the Former Agency or the Successor Agency which may be asserted to be in violation of AB 1x26 or AB 1484, and the City is not currently engaged in any disputes with the DOF with respect to amounts received from the Former Agency.

Successor Agency Obli gations to the General Fund . Although AB 1x26 generally invalidates agreements between host cities and their former redevelopment agencies, provision is made for the enforcement of agreements entered into with respect to obligations which meet certain specified criteria.

The City believes that the Successor Agency’s payment obligations under various advances from the City (collectively, the “Advances ”) to the Former Agency constitute enforceable obligations of the Successor Agency. The City expects that the Successor Agency will continue to be able to apply tax increment revenues to the payment of the Advances, although the City notes that most of such Advances are to be repaid to the City’s Housing Successor Agency Fund rather than to the General Fund. The City lists the Advances in each Successor Agency ROPS, and the Advances have been approved as enforceable obligations by the Successor Agency’s oversight board and the DOF. However, there can be no assurance that such entities, the State Controller, other State or County bodies implementing the dissolution of redevelopment or a court will not disagree with the City’s interpretation and seek to prohibit the Successor Agency from making the payments on the Advances in the future, or that additional le gislation could be enacted which will not be consistent with the City’s interpretation. There can also be no assurance that AB 1x26, AB 1484 and/or subsequent implementing statutes will not interfere with the receipt by the City from the Successor Agency o f the amounts contemplated to be received by the City pursuant to the Advances or otherwise.

As of June 30, 2021, the Advances were collectively outstanding in the principal amount of $3,500,000.

The Advances were used by the Former Agency for various rede velopment purposes and are payable from

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available Successor Agency moneys. The Advances bear interest at the rate of 12% per annum but do not have a specific maturity date.

To the extent that the Successor Agency’s assets are liquidated for distribution of proceeds to the affected taxing entities, the City currently does not expect that the City’s General Fund will receive any portion of such assets.

Future State Budgets
No prediction can be made by the City as to whether the State will continue to encounter budgetary problems in future years, and if it were to do so, it is not clear what measures would be taken by the State to balance its budget, as required by law. In addition, the City cannot predict the final outcome of future State budget negotiations, the impact that such budgets will have on City finances and operations or what actions will be taken in the future by the State Legislature and the Governor to deal with changing State revenues and expenditures. There can be no assurance that actions taken by the State to address its financial condition will not materially adversely affect the financial condition of the City. Current and future State budgets will be affected by national and State economic conditions and other factors, including the current economic downturn, over which the City has no control.

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APPENDIX B

ANNUAL COMPREHENSIVE FINANCIAL REPORT OF THE CITY
FOR THE FISCAL YEAR ENDED JUNE 30, 2021
The audited financial statements of the City included in its Annual Comprehensive Financial Report have been prep ared in accordance with generally accepted accounting principles . The Projected Operating Results and certain other information presented in the Official Statement have been prepared in accordance with the requirement sand definitions contained in the Inde nture, which may differ from generally accepted accounting principles.

The audited financial statements include information concerning the City’s General Fund and other funds, including the Electric Utility Fund and the other proprietary funds relating to the Victorville Water District and the City’s airport, solid waste management, sanitary and gas utility enterprises. The Series 2022 Bonds are special obligations of the City, secured by and payable solely from the Trust Estate which consists primarily of System Net Revenues of the Electric System which are accounted for in the Electric Utility Fund.

The City is not obligated under the Indenture or otherwise to appropriate or otherwise make available any other funds of the City other than System Net Revenues and such other amounts included in the Trust Estate for the payment of debt service on the Series 2022 Bonds.

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APPENDIX C

SUMMARY OF THE INDENTURE

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APPENDIX D

FORM OF CONTINUING DISCLOSURE CERTIFICATE
This Continuing Disclosure Certificate (the “Disclosure Certificate”), dated May __, 2022, is executed and delivered by the City of Victorville (the “City”) in connection with the issuance of $________ aggregate principal amount of City of Victorville Electric Revenue Bonds, Series 2022A and $_______ aggregate principal amount City of Victorville Electric Revenue Bonds, Series 2022B (Federally Taxable)(collectively, the “Bonds”). The Bonds are being issued pursuant to the Indenture, dated as of May 1, 2022 (the “Indenture”), by and between the City and The Bank of New York Mellon Trus t Company, N.A., as trustee (the “Trustee”), as supplemented by the First Supplemental Indenture, dated as of May 1, 2022, by and between the City and the Trustee. The City covenants and agrees as follows:

SECTION 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and delivered by the City for the benefit of the Owners and Beneficial Owners of the Bonds and in order to assist the Participating Underwriter in complying with Securities and Exchange Commission Rule 15c2-12(b)(5).

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“MSRB” shall mean the Municipal Securities Rulemaking Board or any other entity designated or authorized by the SEC to receive reports or notices pursuant to the Rule. Until otherwise designated by the MSRB or the SEC, filings with the MSRB are to be made through the Electronic Municipal Market Access (EMMA) website of the MSRB, currently located at http://emma.msrb.org. “Official Statement” shall mean the Official Statement dated ________, 2022 relating to the Bonds.
“Participating Underwriter” shall mean Goldman Sachs & Co. LLC, the underwriter of the Bonds required to comply with the Rule in connection with the offering of the Bonds. “Rule” shall mean Rule 15c2-12(b)(5) adopted by the SEC under the Securities Exchange Act of 1934, as the same may be amended from time to time. “SEC” shall mean the Securities and Exchange Commission or any successor agency thereto.

SECTION 3. Provision of Annual Reports.
(a) The City shall, or shall cause the Dissemination Agent to, by not later than the February 28 next succeeding the end of each Fiscal Year of the City (or in the event of any change in the Fiscal Year of the City, the end of the eighth month next succeeding the end of each Fiscal Year of the City), commencing with the report for the Fiscal Year ending June 30, 2022, provide to the MSRB an Annual Report which is consistent with the requirements of Section 4 of this Disclosure Certificate. Each Annual Report must be submitted in electronic format in the manner and accompanied by such identifying information as is prescribed by the MSRB, and may include by reference other information as provided in Section 4 of this Disclosure Certificate; provided that the audited financial statements of the City may be submitted separately from the balance of the Annual Report and later than the date required above for the filing of the Annual Report if they are not available by that date. If the City’s Fiscal Year changes, the City shall give notice of such change in the same manner as for a Listed Event under Section 5(e) hereof. The City shall provide a written certification with each Annual Report furnished to the Dissemination Agent to the effect that such Annual Report constitutes the Annual Report required to be furnished by it hereunder. The Dissemination Agent may conclusively rely upon such certification of the City and shall have no duty or obligation to review such Annual Report). (b) Not later than fifteen (15) Business Days prior to the date specified in subsection (a) for providing the Annual Report to the MSRB, the City shall provide its Annual Report to the Dissemination Agent. If by fifteen (15) Business Days prior to such date, the Dissemination Agent has not received a copy of the Annual Report from the City, the Dissemination Agent shall contact the Disclosure Representative to determine if the City is in compliance with subsection (a).
(c) If the Dissemination Agent is unable to verify that an Annual Report of the City has been provided to the MSRB by the date required in subsection (a) , the Dissemination Agent shall send a notice, in electronic format, to the MSRB, such notice to be in substantially the form attached hereto as Exhibit A.
(d) Unless the City shall have informed the Dissemination Agent in writing that the City has provide d its Annual Report directly to the MSRB, the City shall inform the Dissemination Agent and (if the Dissemination Agent is not the Trustee) the Trustee in writing that

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its Annual Report has been provided to the MSRB pursuant to this Disclosure Certificate and stating the date it was provided. The Dissemination Agent shall, to the extent the City has provided the Dissemination Agent with the Annual Report, inform the City and the Trustee (if the Dissemination Agent is not the Trustee) in writing that the Annual Report has been provided to the MSRB pursuant to this Disclosure Certificate and stating the date it was provided. The Dissemination Agent shall have no responsibility for the content of any Annual Report or any notice prepared by the City pursuant to this Disclosure Certificate.

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with generally accepted accounting principles for governmental enterprises as prescribed from time to time by any regulatory body with jurisdiction over the City and by the Governmental Accounting Standards Board. If the City’s audited financial statements are not available by the time the Annual Report is required to be filed pursuant to Section 3(a), the Annual Report shall contain unaudited financial statem ents in a format similar to the financial statements contained in the Official Statement, and the audited financial statements shall be filed in the same manner as the Annual Report when they become available.
(b) Any or all of the items listed above may be included by specific reference to other documents, including official statements of debt issues of the City or public entities related thereto, which have been submitted to the MSRB or the SEC. If the document included by reference is a final official st atement, it must be available from the MSRB. The City shall clearly identify each such other document so included by reference.

SECTION 5. Reporting of Significant Events.
(a) Pursuant to the provisions of this Section 5, the City shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Bonds, not later than ten (10) business days after the occurrence of the event:

1. Principal and interest payment delinquencies;

2. Unscheduled draws on debt service reserves reflecting financial difficulties;

3. Unscheduled draws on credit enhancements reflecting financial difficulties;

4. Substitution of credit or liquidity providers, or their failure to perform;

5. Adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability or Notices of Proposed Issue (IRS Form 5701-TEB);

6. Tender offers;

7. Defeasances;

8. Rating changes;

9. Bankruptcy, insolvency, receivership or similar event of the City; and

10. Default, event of acceleration, terminati on event, modification of terms, or other similar events under the terms of a Financial Obligation of the City, any which reflect financial difficulties.

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or business of the City, or if such jurisdiction has been assumed by leaving the existing governing body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the City.
(b) Pursuant to the provisions of this Section 5, the City shall give, or cause to be given, notice of the occurrence of any of the following events with respe ct to the Bonds, if material, not later than ten (10) business days after the occurrence of the event:

1. Non-payment related defaults;

2. Unless described in paragraph 5(a)(5), other material notices or determinations by the Internal Revenue Service with respect to the tax status of the Bonds or other material events affecting the tax status of the Bonds;

3. Modifications to rights of Owners;

4. Bond calls;

5. Release, substitution, or sale of property securing repayment of the Bonds;

6. The consummation of a merger, consolidation, or acquisition involving the City or the sale of all or substantially all of the assets of the City, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitiv e agreement relating to any such actions, other than pursuant to its terms;

7. Appointment of a successor or additional trustee or the change of name of a trustee; and

The Dissemination Agent shall have no responsibility to determine the materiality of any Listed Event.
(d) Whenever the City obtains knowledge of the occurrence of a Listed Event described in subsection (b), whether because of a notice from the Dissemination Agent pursuant to subsection (c) or otherwise, the City shall as soon as possible determine if such event would be material under applicable federal securities laws.

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(e) If the City learns of the occurrence of a Listed Event described in subsection (a), or determines that knowledge of a Listed Event described in subsection (b) would be material under applicable federal securities laws, the City shall within ten (10) business days of occurrence instruct the Dissemination Agent to a notice of such occurrence with the MSRB in electronic format, accompanied by such identifying information as is prescribed by the MSRB. If the Dissemination Agent has been instructed by the City to report the occurrence of a Listed Event, the Dissemination Agent shall file a notice of such occurrence with the MSRB. Notwithstanding the foregoing, notice of Listed Events described in subsections (a)(7) and (b)(4) need not be given under this subsection any earlier than the notice (if any) of the underlying event is given to Owners of affected Bonds pursuant to the Indenture.
(f) The City intends to comply with the Listed Events described in Section 5(a)(10) and Section 5(b)(8), and the definition of “Financial Obligation” in Section 1, with reference to the Rule, any other applicable federal securities laws and the guidance provided by the SEC in Release No. 34 -83885 dated August 20, 2018 (the “2018 Release”), and any further amendments or written guidance provided by the SEC or its staff with respect the amen dments to the Rule effected by the 2018 Release.

SECTION 6. Termination of Reporting Obligation. The obligations of the City and the Dissemination Agent under this Disclosure Certificate shall terminate upon the legal defeasance, prior redemption or payment in full of all of the Bonds and with respect to any Bonds upon the maturity, defeasance, prior redemption or payment in full of such Bonds.

SECTION 7. Di ssemination Agent. The City may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Certificate, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. The initial Dissemination Agent shall be The Bank of New York Mellon Trust Company, N.A.

SECTION 8. Am
endment; Waiver. Notwithstanding any other provision of this Disclosure Certificate, the City may amend this Disclosure Certificate, and any provision of this Disclosure Certificate may be waived, provided that the following conditions are satisfied:
(a) If the amendment or waiver relates to the provisions of Sections 3(a), 4, 5(a) or 5(b), it may only be made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature or status of an obligated person with respect to the Bonds, or the type of business conducted; (b) The undertaking, as amended or taking into account such waiver, would, in the opinion of nationally recognized bond counsel, have complied with the requirements of the Rule at the time of the original issuance of the Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; and (c) The amendment or waiver either (i) is approved by the Owners of the Bonds in the same manner as provided in the Indenture with respect to amendments to the Indenture which require the consent of Owners, or (ii) does not, in the opinion of nationally recognized bond counsel, materially impair the interests of the Owners or Beneficial Owners of the Bonds.

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the City. In a ddition, if the amendment relates to the accounting principles to be followed in preparing financial statements, (i) notice of such change shall be given in the same manner as for a Listed Event, and (ii) the Annual Report for the year in which the change is made should present a comparison (in narrative form and also, if feasible, in quantitative form) between the financial statements as prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principl es. The Dissemination Agent shall not be obligated to enter into any amendment which adversely affects the Dissemination Agent’s own rights, duties or immunities under this Disclosure Certificate or otherwise.

SECTION 9. Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the City from disseminating any other information, using the means of dissemination set forth in this Disclosure Certificate or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Certificate. If the City chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Certificate, the City shall have no obligation under this Disclosure Certificate to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event.

SECTION 10. Def
ault. In the event of a failure of the City or the Dissemination Agent to comply with any provision of this Disclosure Certificate, the Trustee may (and, at the request of any Participating Underwriter or the Owners of at least 25% aggregate principal amount of Outstanding Bonds, shall), subject to prior receipt of indemnification satisfactory to it, and payment of its fees and expenses including fees and expenses of its counsel, or any Owner or Beneficial Owner of the Bonds may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the City or the Dissemination Agent, as the case may be, to comply with its obligations under this Disclosure Certificate. A default under this Disclosure Certificate shall not be deemed an Event of Default under the Indenture, and the sole remedy under this Disclosure Certificate in the event of any failure of the City or the Dissemination Agent to comply with this Disclosure Certificate shall be an action to compel performance.

SECTION 11. D
uties, Immunities and Liabilities of Dissemination Agent. The Dissemination Agent (if other than the Trustee or the Trustee in its capacity as Dissemination Agent) shall have only such duties as are specifically set forth in this Disclosure Certificate. In its capacity as Dissemination Agent, the Dissemination Agent shall be entitled to the protections and limitations from liability afforded to the Trustee under the Indenture. The City agrees to indemnify and save the Dissemination Agent, and its officers, directors, employees , and the City agrees to indemnify and save the Dissemination Agent, and its officers, directors, employees and agents, harmless against any loss, expense and liabilities which it may incur ar ising out of or in the exercise or performance of its powers and duties hereunder, including the costs and expenses (including attorneys’ fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent’s negligence or willful misconduct. The obligations of the City under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds. The Dissemination Agent shall receive reasonable compensation for its services as dissemination agent, and reimbursement for all expenses incurred by it, under this Disclosure Agreement.

SECTION 12. B
eneficiaries. This Disclosure Certificate shall inure solely to the benefit of the City, the Dissemination Agent, the Trustee, the Participating Underwriter and Owners and Beneficial Owners from time to time of the Bonds, and shall create no rights in any other person or entity. No person shall have any right to commence any action against the Dissemination Agent seeking any remedy other than to compel specific performance of this Disclosure Certificate. The Dissemination Agent shall not be liable under any circumstances for monetary damages to any person for any breach of this Disclosure Certificate.

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SECTION 13. California Law. This Disclosure Certific ate shall be construed and governed in accordance with the laws of the State of California.

SECTION 14. No tices. All written notices to be given hereunder shall be given in person or by mail to the party entitled thereto at its address set forth below, or at such other address as such party may provide to the other parties in writing from time to time, namely:

To the City: City of Victorville
14343 Civic Drive
P.O. Box 5001
Victorville, California 92393
Attention: City Treasurer
Telephone: (760) 955-5079

To the Dissemination Agent: The Bank of New York Mellon Trust Company, N.A.
333 S. Hope Street, Suite #2525
Los Angeles, California 90017
Attention: Corporate Trust
Telephone: (213) 630-6480

The Dissemination Agent and the City may, by notice given hereunder, designate any further or different addresses to which subsequent notices, certificates or other communications shall be sent. Unless specifically otherwise required by the context of this Disclosure Certificate, any notices required to be given hereunder to the Dissemination Agent or the City may be given by any form of electronic transmission capable of producing a written record. Each such party shall file with the Dissemination Agent information appropriate to receiving such form of electronic transmission.

SECTION 15. Electronic Signatures. The City agrees that the transaction consisting of this Disclosure Certificate may be conducted by electronic means. The City agrees, and acknowledges that it is the City’s intent, that if the City signs this Disclosure Certificate using an electronic signature, it is signing, adopting and accepting this Disclosure Certificate and that signing this Disclosure Certificate using an electronic signature is the legal equivalent of having placed its handwritten signature on this Disclosure Certificate on paper. The City acknowledges that it is being provided with an electronic or paper copy of this Disclosure Certificate in a usable format.

[Remainder of page intentionally left blank.]

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IN WITNESS WHEREOF, this Disclosure Certificate is executed and delivered by the City as of the date set forth above.

CITY OF VICTORVILLE
By:

City Treasurer

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EXHIBIT A

NOTICE OF FAILURE TO FILE ANNUAL REPORT

Name of Municipal Entity: City of Victorville

Name of Issue: $_______ City of Victorville Electric Revenue Bonds, Series 2022A and $_______ City of Victorville Electric Revenue Bonds, Series 2022B (Federally Taxable)

Date of Issuance: _________ [__], 2022

NOTICE IS HEREBY GIVEN that the City of Victorville has not provided an Annual Report with respect to the above-named Bonds as required by the Continuing Disclosure Certificate, dated __________ [__], 2022, executed by the City. The City of Victorville anticipates that the Annual Report will be filed by _______________________________.

Dated: _______________

THE BANK OF NEW YORK MELLON
TRUST COMPANY, N.A., on behalf of
the City of Victorville

cc: City of Victorville

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APPENDIX E

PROPOSED FORM OF BOND COUNSEL OPINION
[To come from Bond Counsel]

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APPENDIX F

BOOK-ENTRY ONLY SYSTEM
The information in this section regarding DTC and its book-entry system has been obtained from DTC’s website, for use in securities offering documents, and the City and the Underwriter take no responsibility for the accuracy or completeness thereof or for the absence of material changes in such information after the date hereof.

The Depository Trust Company ( “DTC”), New York, New York, will act as securities depository for the Series 2022 Bonds. The Series 2022 Bonds will be issued as fully registered securities registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully registered bond certificate will be issued for each maturity of each Series of the Series 2022 Bonds, each in the aggregate principal amount of such maturity, and will be deposited with DTC.

DTC, the world’s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation ” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934, as amended. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, thr ough electronic computerized book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates . Direct Participants include both U.S. and non -U.S. securities brokers and dealer s, banks, trust companies, clearing corporations, and certain other organizations .

DTC is a wholly owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company for DTC, National Securities Clearing Corporation and F ixed Income Clearing Corporation, all of which are registered clearing agencies . DTCC is owned by the users of its regulated subsidiaries . Access to the DTC system is also available to others such as both U.S. and non -U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ( “Indirect Participants”). DTC has a Standard & Poor’s rating of AA+. The DTC Rules applicable to Participants are on file with the Securities and Exchange Commission .

More information about DTC can be found at www.dtcc.com.

Purchases of the Series 2022 Bond s under the DTC system must be made by or through Direct Participants, which will receive a credit for the Series 2022 Bonds on DTC’s records. The ownership interest of each actual purchaser of each Series 2022 Bond (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records . Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Series 2022 Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the Series 2022 Bonds, except in the event that use of the book-entry system for the Series 2022 Bonds is discontinued.

To facilitate subsequent transfers, all Series 2022 Bonds deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co. or such other name as may be requested by an authorized representative of DTC . The deposit of Series 2022 Bonds with DTC and the ir registration in the name of Cede & Co. or such other DTC nominee do not affect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Series 2022 Bonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Series 2022 Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.

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Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Series 2022 Bond s may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Series 2022 Bonds, such as redemptions, tenders, defaults and proposed amendments to the Series 2022 Bond s documents . For example, Beneficial Owners of Series 2022 Bonds may wish to ascertain that the nominee holding the Series 2022 Bonds for their benefit has agreed to obtain and transmi t notices to Beneficial Owners . In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of the notices be provided directly to them.

While the Series 2022 Bonds are in the book-entry-only system, redemption notices will be sent to DTC.

If less than all of the Series 2022 Bonds of a maturity are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed.

Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to the Series 2022 Bonds unless authorized by a Direct Participant in accordance with DTC’s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the City as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts the Series 2022 Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).

Principal and interest payments on the Series 2022 Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt o f funds and corresponding detail information from the City or the Trustee on the payable date in accordance with their respective holdings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of such Participant and not of DTC, the Trustee or the City, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal and interest payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the City or the Trustee, disbur sement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.

DTC may discontinue providing its services as depository with respect to the Series 2022 Bonds at any time by giving reasonable notice to the City or the Trustee. Under such circumstances, in the event that a successor depository is not obtained, certificates representing the Series 2022 Bonds are required to be printed and delivered.

The City may decide to discontinue use of the system of book- entry-only transfers through DTC (or a successor securities depository) . In that event, certificates representing the Series 2022 Bonds will be printed and delivered to DTC.

The information in this Appendix F concerning DTC and DTC’s book-entry system has been obtained from sources that the City and the Underwriter believe to be reliable, but the City and the Underwri ter do not take any responsibility for the accuracy thereof.

ATTACHMENT G
Continuing Disclosure Certificate
1 CONTINUING DISCLOSURE CERTIFICATE
This Continuing Disclosure Certificate (the “Disclosure Certificate”), dated May _ _, 2022, is executed and delivered by the City of Victorville (the “City”) in connection with the issuance of $________ aggregate principal amount of City of Victorville Electric Revenue Bonds, Series 2022A and $_______ aggregate principal amount City of Victorville Electric Revenue Bonds, Series 2022B (Federally Taxable)(collectively, the “Bonds”) . The Bonds are being iss ued pursuant to the Indenture, dated as of May 1, 2022 (the “Indenture”), by and between the City and The Bank of New York Mellon Trust Company, N.A. , as trustee (the “Trustee”) , as supplemented by the First Supplemental Indenture, dated as of May 1, 2022, by and between the City and the Trustee . The City covenants and agrees as follows:

SECTION 2. Definitions. In addition to the definitions set forth in the Indenture, which apply to any capitalized term used in this Disclosure Certificate unless otherwise defined in this Section 2, the following capitalized terms shall have the following meanings:
“Annual Report” shall mean any Annual Report provided by the City pursuant to, and as described in, Sections 3 and 4 of this Disclosure Certificate. “Beneficial Owner” shall mean any person which has or shares the power, directly or indirectly, to make investment decisions concerning ownership of any Bonds (including persons holding Bonds through nominees, depositories or other intermediaries). “Disclosure Representative” shall mean the City Treasurer of the City or his or her designee, or such other officer or employee as the City shall designate in writing to the Dissemination Agent from time to time.
“Dissemination Agent” shall mean The Bank of New York Mellon Trust Company, N.A., or any successor Dissemination Agent designated in writing by the City and which has filed with the City a written acceptance of such designation.
“Financial Obligation” shall mean, for purposes of the Listed Events set out in Section 5(a)(10) and Section 5(b)(8), a (i) debt obligation; (ii) derivative instrument entered into in connection with, or pledged as security or a source of payment for, an existing or planned debt obligation; or (iii) guarantee of (i) or (ii). The term “Financial Obligation” shall not include municipal securities (as defined in the Securities Exchange Act of 1934, as amended) as to which a final official statement (as defined in the Rule) has been provided to the MSRB consistent with the Rule. “Fiscal Year” shall mean the period beginning on July 1 of each year and ending on the next succeeding June 30, or any other 12-month or 52 -week period hereafter selected by the City , with notice of such change in fiscal year to be provided as set forth herein. “Listed Events” shall mean any of the events listed in Section 5(a) or 5 (b) of this Disclosure Certificate.
2 “MSRB” shall mean the Municipal Securities Rulemaking Board or any other entity designated or a uthorized by the SEC to receive reports or notices pursuant to the Rule . Until otherwise designated by the MSRB or the SEC, filings with the MSRB are to be made through the Electronic Municipal Market Access (EMMA) website of the MSRB, currently located at http://emma.msrb.org. “Official Statement” shall mean the Official Statement dated ________ , 2022 relating to the Bonds.
“Participating Underwriter” shall mean Goldman Sachs & Co. LLC , the underwriter of the Bonds required to comply with the Rule in connection with the offering of the Bonds. “Rule” shall mean Rule 15c2-12(b)(5) adopted by the SEC under the Securities Exchange Act of 1934, as the same may be amended from time to time. “SEC” shall mean the Securities and Exchange Commission or any successor agency thereto.

SECTION 3. Provision of Annual Reports.
(a) The City shall, or shall cause the Dissemination Agent to, by not later than the February 28 next succeeding the end of each F iscal Year of the City (or in the event of any change in the Fiscal Year of the City, the end of the eighth month next succeeding the end of each Fiscal Year of the City) , commencing with the report for the Fiscal Year ending June 30, 2022, provide to the MSRB an Annual Report which is consistent with the requirements of Section 4 of this Disclosure Certificate . Each Annual Report must be submitted in electronic format in the manner and accompanied by such identifying information as is prescribed by the MSRB, and may include by reference other information as provided in Section 4 of this Disclosure Certificate; provided that the audited financial statements of the City may be submitted separately from the balance of the Annual Report and later than the date require d above for the filing of the Annual Report if they are not available by that date . If the City’s Fiscal Year changes, the City shall give notice of such change in the same manner as for a Listed Event under Section 5(e) hereof . The City shall provide a written certification with each Annual Report furnished to the Dissemination Agent to the effect that such Annual Report constitutes the Annual Report required to be furnished by it hereunder . The Dissemination Agent may conclusively rely upon such certification of the City and shall have no duty or obligation to review such Annual Report). (b) Not later than fifteen (15) Business Days prior to the date specified in subsection (a) for providing the Annual Report to the MSRB, the City shall provide its Annual Report to the Dissemination Agent . If by fifteen (15) Business Days prior to such date, the Dissemination Agent has not received a copy of the Annual Report from the City , the Dissemination Agent shall contact the Disclosure Representative to determine if the City is in compliance with subsection (a).
(c) If the Dissemination Agent is unable to verify that an Annual Report of the City has been provided to the MSRB by the date required in subsection (a), the Dissemination Agent shall send a notice, in electronic format, to the MSRB, such notice to be in substantially the form attached hereto as Exhibit A.
(d) Unless the City shall have informed the Dissemination Agent in writing that the City has provided its Annual Report directly to the MSRB, the City shall inform the Dissemination Agent and (if the Dissemination Agent is not the Trustee) the Trustee in writing 3 that its Annual Report has been provided to the MSRB pursuant to this Disclosure C ertificate and stating the date it was provided . The Dissemination Agent shall, to the extent the City has provided the Dissemination Agent with the Annual Report, inform the City and the Trustee (if the Dissemination Agent is not the Trustee) in writing that the Annual Report has been provided to the MSRB pursuant to this Disclosure Certificate and stating the date it was provided . The Dissemination Agent shall have no responsibility for the content of any Annual Report or any notice prepared by the City pursuant to this Disclosure Certificate.

SECTION 4. Content of Annual Reports.
(a) The City ’s Annual Report shall contain or include by reference the following:
(i) Updated information comparable to the information in the chart entitled “Table 1: City of Victorville VMUS Ele ctric System Metered Accounts, Retail Sales, Billed Revenues and Demand” as it appears in the Official Statement; (ii) Updated information comparable to the information in the chart entitled “ Table 2: City of Victorville VMUS Electric System Largest Customers ” as it appears in the Official Statement;
(iii) Updated information comparable to the information in the chart entitled “Table 3: City of Victorville VMUS Electric System Resources Used to Satisfy City Load Requirements” as it appears in the Official Statement; (iv) Updated information comparable to the information in the chart entitled “Table 5: City of Victorville VMUS Electric Rate Changes ” as it appears in the Official Statement;
(v) Updated information comparable to the information in the chart entitled “Table 6: City of Victorville VMUS Electric System Uncollectible Accounts ” as it appears in the Official Statement;
(vi) Updated information comparable to the information in the chart entitled “Table 8 : City of Victorville VMUS Electric System Historical Revenues, Expenses and Debt Service Coverage” as it appears in the Official Statement; (vii) Updated information comparable to t he information in the chart entitled “Table A1: City of Victorville General Fund Budget and Results ” as it appears in the Official Statement;
(viii) Updated information comparable to the information in the chart entitled “Table A2: City of Victorville General Fun d Statement of Revenues, Expenditures and Changes in Fund Balance” as it appears in the Official Statement; (ix) Updated information comparable to the information in the chart entitled “Table A3: City of Victorville General Fund Balance Sheets” as it appears in the Official Statement; and
(x) The audited financial statements of the City for the prior Fiscal Year (including schedules relating to the Electric Utility Fund), prepared in accordance 4 with generally accepted accounting principles for governmental enterprises as prescribed from time to time by any regulatory body with jurisdiction over the City and by the Governmental Accounting Standards Board. If the City’s audited financial statements are not available by the time the Annual Report is required to be filed pursuant to Section 3(a), the Annual Report shall contain unaudited financial statements in a format similar to the financial statements contained in the Official Statement, and the a udited financial statements shall be filed in the same manner as the Annual Report when they become available.
(b) Any or all of the items listed above may be included by specific reference to other documents, including official statements of debt issues of th e City or public entities related thereto, which have been submitted to the MSRB or the SEC . If the document included by reference is a final official statement, it must be available from the MSRB . The City shall clearly identify each such other document so included by reference.

1. Principal and interest payment delinquencies;

2. Unscheduled draws on debt service reserves reflecting financial difficulties;

3. Unscheduled draws on credit enhancements reflecting financial difficulties;

4. Substitution of credit or liquidity providers, or their failure to perform;

5. Adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability or Notices of Proposed Issue (IRS Form 5701-TEB);

6. Tender offers;

7. Defeasances;

8. Rating changes;

9. Bankruptcy, insolvency, receivership or similar event of the City; and

10. Default, event of acceleration, termination event, modification of terms, or other similar events under the terms of a Financial Obligation of the City , any which reflect financial difficulties.

Note: for the purposes of the event identified in subparagraph (9), the event is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent or similar officer for the City in a proceeding under the U.S. Bankruptcy Code or in any other proceeding under state or federal law in wh ich a court or governmental authority has assumed jurisdiction over substantially all of the 5 assets or business of the City, or if such jurisdiction has been assumed by leaving the existing governing body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the City.
(b) Pursuant to the provisions of this Section 5, the City shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Bonds, if material, not later than ten (10) business days after the occurrence of the event:

1. Non-payment related defaults;

3. Modifications to rights of Owners;

4. Bond calls;

5. Release, substitution, or sale of property securing repayment of the Bonds;

6. The consummation of a merger, consolidation, or acquisition involving the City or the sale of all or substantially all of the assets of the City , other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms;

7. Appointment of a successor or additional trustee or the change of name of a trustee; and

8. Incurrence of a Financial Obligation of the City , or ag reement to covenants, events of default, remedies, priority rights, or other similar terms of a Financial Obligation of the City, any of which affect Owners. (c) The Dissemination Agent shall, within two (2) Business Days of obtaining at its corporate trust of fice actual knowledge of the occurrence of any of the Listed Events, contact the Disclosure Representative, inform such person of the event, and request that the City promptly notify the Dissemination Agent in writing whether or not to report the event pursuant to subsection (e); provided , however, that the failure by the Dissemination Agent to so notify the Disclosure Representative and make such request shall not relieve the City of its duty to report any of the Listed Events as required by this Section 5 nor impose any liability upon the Dissemination Agent. The Dissemination Agent shall have no responsibility to determine the materiality of any Listed Event.
(d) Whenever the City obtains knowledge of the occurrence of a Listed Event described in subsection ( b), whether because of a notice from the Dissemination Agent pursuant to subsection (c) or otherwise, the City shall as soon as possible determine if such event would be material under applicable federal securities laws. 6 (e) If the City learns of the occurrence of a Listed Event described in subsection (a), or determines that knowledge of a Listed Event described in subsection (b) would be material under applicable federal securities laws, the City shall within ten (10) business days of occurrence instruct the Dissemination Agent to a notice of such occurrence with the MSRB in electronic format, accompanied by such identifying information as is prescribed by the MSRB . If the Dissemination Agent has been instructed by the City to report the occurrence of a Listed Event, the Dissemination Agent shall file a notice of such occurrence with the MSRB .

Notwithstanding the foregoing, notice of Listed Events described in subsections (a)(7) and (b)( 4) need not be given under this subsection any earlier than the notice (if any) of the underlying event is given to Owners of affected Bonds pursuant to the Indenture. (f) The City intends to comply with the Listed Events described in Section 5(a)(10) and Section 5(b)(8), and the definition of “Financial Obligation” in Section 1, wit h reference to the Rule, any other applicable federal securities laws and the guidance provided by the SEC in Release No. 34 -83885 dated August 20, 2018 (the “2018 Release”), and any further amendments or written guidance provided by the SEC or its staff with respect the amendments to the Rule effected by the 2018 Release.

SECTION 7. Dissemination Agent . The City may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Certificate, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. The initial Dissemination Agent shall be The Bank of New York Mellon Trust Company, N.A.

SECTION 8. Amendment; Waiver . Notwithstanding any other provision of this Disclosure Certificate, the City may amend this Disclosure C ertificate, and any provision of this Disclosure Certificate may be waived, provided that the following conditions are satisfied:
(a) If the amendment or waiver relates to the provisions of Sections 3(a), 4, 5(a) or 5(b), it may only be made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature or status of an obligated person with respect to the Bonds, or the type of business conducted; (b) The undertaking, as amended or takin g into account such waiver, would, in the opinion of nationally recognized bond counsel, have complied with the requirements of the Rule at the time of the original issuance of the Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; and (c) The amendment or waiver either (i) is approved by the Owners of the Bonds in the same manner as provided in the Indenture with respect to amendments to the Indenture which require the consent of Owners, or ( ii) does not, in the opinion of nationally recognized bond counsel, materially impair the interests of the Owners or Beneficial Owners of the Bonds.

In the event of any amendment or waiver of a provision of this Disclosure Certificate, the City shall descr ibe such amendment in its next Annual Report, and shall include, as applicable, a narrative explanation of the reason for the amendment or waiver and its impact on the type (or in the case of a 7 change of accounting principles, on the presentation) of financial information or operating data being presented by the City. In addition, if the amendment relates to the accounting principles to be followed in preparing financial statements, (i) notice of such change shall be given in the same manner as for a Listed Event, and (ii) the Annual Report for the year in which the change is made should present a comparison (in narrative form and also, if feasible, in quantitative form) between the financial statements as prepared on the basis of the new accounting principl es and those prepared on the basis of the former accounting principles. The Dissemination Agent shall not be obligated to enter into any amendment which adversely affects the Dissemination Agent’s own rights, duties or immunities under this Disclosure Cert ificate or otherwise.

SECTION 9. Additional Information . Nothing in this Disclosure Certificate shall be deemed to prevent the City from disseminating any other information, using the means of dissemination set forth in this Disclosure Certificate or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Certificate. If the City chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Certificate, the City shall have no obligation under this Disclosure Certificate to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event.

SECTION 10. Default. In the event of a failure of the City or the Dissemination Agent to comply with any provision of this Disclosure Certificate, the Trustee may (and, at the request of any Participating Underwriter or the Owners of at least 25% aggregate principal amount of Outstanding Bonds, shall), subject to prior receipt of indemnification satisfactory to it, and payment of its fees and expenses including fees and expenses of its counsel, or any Owner or Beneficial Owner of the Bonds may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the City or the Dissemination Agent, as the case may be, to comply with its obligations under this Disc losure Certificate. A default under this Disclosure Certificate shall not be deemed an Event of Default under the Indenture, and the sole remedy under this Disclosure Certificate in the event of any failure of the City or the Dissemination Agent to comply with this Disclosure Certificate shall be an action to compel performance.

SECTION 11. Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination Agent (if other than the Trustee or the Trustee in its capacity as Dissemination Agent) shall have only such duties as are specifically set forth in this Disclosure Certificate. In its capacity as Dissemination Agent, the Dissemination Agent shall be entitled to the protections and limitations from liability affor ded to the Trustee under the Indenture. The City agrees to indemnify and save the Dissemination Agent, and its officers, directors, employees , and the City agrees to indemnify and save the Dissemination Agent, and its officers, directors, employees and agents, harmless against any loss, expense and liabilities which it may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the costs and expenses (including attorneys’ fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent’s negligence or willful misconduct. The obligations of the City under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds . The Dissemination Agent shall receive reasonable compensation for its services as dissemination agent, and reimbursement for all expenses incurred by it, under this Disclosure Agreement.

No person shall have any right to commence any action against the Dissemination Agent seeking any remedy other than to compel specific performance of this Disclosure Certificate. The Dissemination 8 Agent shall not be liable under any circumstances for monetary damages to any person for any breach of this Disclosure Certificate.

SECTION 13. California Law . This Discl osure Certificate shall be construed and governed in accordance with the laws of the State of California.

SECTION 14. Notices. All written notices to be given hereunder shall be given in person or by mail to the party entitled thereto at its address set forth below, o r at such other address as such party may provide to the other parties in writing from time to time, namely:

To the City: City of Victorville
14343 Civic Drive
P.O. Box 5001
Victorville, California 92393
Attention: City Treasurer
Telephone: (760) 955-5079

To the Dissemination Agent: The Bank of New York Mellon Trust Company, N.A.
333 S. Hope Street, Suite #2525
Los Angeles, California 90017
Attention: Corporate Trust
Telephone: (213) 630-6480

The Dissemination Agent and th e City may, by notice given hereunder, designate any further or different addresses to which subsequent notices, certificates or other communications shall be sent. Unless specifically otherwise required by the context of this Disclosure Certificate, any n otices required to be given hereunder to the Dissemination Agent or the City may be given by any form of electronic transmission capable of producing a written record . Each such party shall file with the Dissemination Agent information appropriate to receiving such form of electronic transmission.

SECTION 15. Electronic Signatures. The City agrees that the transaction consisting of this Disclosure Certificate may be conducted by electronic means. The City agrees, and acknowledges that it is the City ’s intent, that if the City signs this Disclosure Certificate using an electronic signature, i t is signing, adopting and accepting this Disclosure Certificate and that signing this Disclosure Certificate using an electronic signature is the legal equivalent of having placed its handwritten signature on this Disclosure Certificate on paper. The City acknowledges that it is being provided with an electronic or paper copy of this Disclosure Certificate in a usable format.

[Remainder of page intentionally left blank.]
9 IN WITNESS WHEREOF, this Disclosure Certificate is executed and delivered by the City as of the date set forth above.

CITY OF VICTORVILLE
By:

City Treasurer

A-1
4837-2738-3518v7/022726-0005

EXHIBIT A

NOTICE OF FAILURE TO FILE ANNUAL REPORT

Name of Municipal Entity: City of Victorville

Name of Issue: $_______ City of Victorville Electric Revenue Bonds, Series 2022A and $_______ City of Victorville Electric Revenue Bonds, Series 2022B (Federally Taxable)

Date of Issuance: _________ [__], 2022

NOTICE IS HEREBY GIVEN that the City of Victorville has not provided an Annual Report with respect to the above-named Bonds as required by the Continuing Disc losure Certificate, dated __________ [__], 2022, executed by the City. The City of Victorville anticipates that the Annual Report will be filed by _______________________________.

Dated: _______________

THE BANK OF NEW YORK MELLON
TRUST COMPANY, N.A., on behalf of
the City of Victorville

cc: City of Victorville

ATTACHMENT H
Bank Consent

CONSENT
THIS CONSENT, dated as of [___________], 2022 (this “Consent”), is by and among the City of Victorville (the “City”), the Victorville Joint Powers Financing Authority (the “Authority”), and BNP Paribas (the “Bank”). Capitalized terms used herein and not otherwise defined herein shall have the meanings given to them in the Indenture (as defined below).

W I T N E S S E T H :

WHEREAS, the Authority has issued Variable Rate Lease Revenue Bonds, 2007 Series A (Cogeneration Facility Project) (the “Bo nds”) pursuant to the Indenture , dated as of May 1, 2007 (as amended, amended and restated, supplemented or modified from time to time, the “ Indenture”), between the Authority and The Bank of New York Mellon Trust Company, N.A., in its capacity as the Trustee under the Indenture (the “Trustee”); WHEREAS, the Bank has issued to the Trustee an irrevocable direct pay letter of credit (the “Credit Facility”) to support payment of principal, purchase price and interest on the Bonds;
WHEREAS, the City and the Bank are party to the Reimbursement Agreement, dated as of May 1, 2007 (as amended, amended and restated, supplemented or modified from time to time, the “Reimbursement Agreement”), which provides for and evidences the obligation of the City to reimburse the Bank for any drawings under the Credit Facility; WHEREAS, the City is incurring additional indebtedness by issuing its Electric Revenue Bonds, Series 2022A and its Electric Revenue Bonds, Series 2022B (Federally Taxable) (collectively, the “ 2022 Bonds”), a portion of the proceeds of which will be used directly to indirectly to redeem the Bonds in whole prior to the maturity thereof; WHEREAS, under Section 4.03(c) of the Indenture, the Trustee ma y not deliver to the Owners a notice of optional redemption under the Indenture unless either (1) the Authority has deposited with the Trustee moneys in an amount sufficient to cover the principal of, premium, if any, and interest due on such redemption date (exclusive of anticipated investment earnings thereon), or (2) the Authority delivers to the Trustee the prior written consent of the Bank; and

WHEREAS, the Authority and the City have requested the Bank’s consent and, subject to the terms and conditions hereof, the Bank has consented to the Trustee’s deli very to the Owners of a notice of redemption of all issued and outstanding Bonds.

NOW, THEREFORE, the Authority, the City, the Trustee and the Bank hereby agree as follows:

SECTION 1. Consent.
(a) The Bank hereby consents to the Trustee’s delivery to the Owners of a notice of redemption of all of the issued and outstanding Bonds (the “ Redemption 2 Notice”) so long as (i) prior to the Trustee’s delivery of the Redemption Notice, the City shall have deposited with the Trustee an amount equal to all principal of, interest (which, notwithstanding anything to the contrary in the Indenture, shall be calculated based on a rate of 1.0% per annum) and redemption premiums on or in respect of the Bonds, which amount shall be available for payment of the Bonds or for the reimbursement in full of any draw on the Credit Facility made in connection with the redemption in full of the Bonds, as the case may be; (ii) the Redemption Notice is delivered no later than one (1) Business Day after the City issues the 202 2 Bonds; (iii) the redemption date specified in the Redemption Notice shall be no later than 30 days after the delivery date of the Redemption Notice (such 30 th day, the “ Redemption
Outside Date”); and (iv) on or before the delivery date of the Redemption Notice, the City shall have paid the Bank (x) an amount equal to all portions of the Facility Fee (as defined in the Reimbursement Agreement) then due and payable plus an amount equal to the portion of the Facility Fee that will accrue between the delivery date of the Redemption Notice and the redemption date set forth in the Redemption Notice, and (y) all of the Bank’s costs and expenses (including attorneys’ fees) incurred as of such delivery date in connection with the redemption of the Bonds and the enforcement or protection of the Bank’s rights and remedies under the Reimbursement Agreement and the Indenture.
(b) Notwithstanding anything to the contrary in the Indenture or herein, if the redemption of the Bonds does not occur by the Redemption Outside Date as contemplated above the City hereby agrees that, at all times on and after the Redemption Outside Date until the date the Bonds are redeemed in full, (i) the amounts deposited with the Trustee under Section 1(a) above in relation to the principal of and the redemption premiums on the Bonds shall remain on deposit with the Trustee and (ii) it shall cause an amount of interest to be on deposit with the Trustee in an amount equal to one month of interest on the outstanding principal amount of the Bonds calculated at the Maximum Rate; and (c) The City hereby agrees that the indemnification and reimbursement obligations of the City under Sections 8.4 and 8.5 of the Reimbursement Agreement shall apply to any claims, damages, losses, liabilities, costs or expenses which the Bank may incur or which may be claimed against the Bank by any person in connection with the redemption of the Bonds as contemplated herein, including, without limitation, any such claims, damages, losses, liabilities, costs or expenses which the Bank may incur or which may be claimed against the Bank by any person as a result of the failure of the Bonds to be redeemed by the Redemption Outside Date.

SECTION 2. Conditions of Effectiveness. This Consent shall become effective on, and only on, the date on which each of the following conditions to effectiveness have been satisfied (the “Effective Date”):
(a) Counterparts. Each of the Bank and the Trustee shall have received a counterpart of this Consent, duly executed by each party hereto. 3 (b) Governmental Approvals. To the extent not otherwise provided for hereunder, t he Bank shall have received true and correct copies of any and all governmental approvals necessary for the City and the Authority to enter into this Consent and/or the other documents and the transactions contemplated thereby and hereby.
(c) Escrow Agreement. The Bank shall have received a fully-executed copy of the Escrow Agreement, dated as of [May 1], 2022, between the City and the Trustee, as the escrow agent.
(d) Costs and Expenses . The Bank shall have received from the City payment of all of the Bank’s costs and expenses (including attorneys’ fees) incurred in connection with the preparation, negotiation, and delivery of this Consent.

SECTION 3. Representations and Warranties of the City and the Authority .

Each of the City and the Authority represents and warrants to the Bank as follows:
(a) It is, in the case of the City, a municipal corporation , and, in the case of the Authority, a public body, corporate and politic, duly organized and existing under the laws of the State of California , and, in each case, duly organized and validly existing under the Constitution and laws of the State.
(b) It has full power and authority to own its properties and to carry on its business as now conducted and as contemplated to be conducted under the Financing Documents (as defined in the Reimbursement Agreement) to which it is a party, and to execute, deliver and perform this Consent and the other Financing Documents to which it is a party, and to execute, deliver and perform all other agreements and instruments executed and delivered or to be executed and delivered by it pursuant to or in connection with this Consent and the other Financing Documents to which it is a party and has full power and authority to perform its obligations under each of the foregoing.
(c) This Consent and the other Financing Documents to which it is a party have been duly and validly authorized, executed and delivered, and this Consent and the other Financing Documents to which it is a party constitute the legal, valid and binding obl igations of it enforceable against it in accordance with their respective terms, except insofar as enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights and remedies generally, and by general principles of equity, whether applied by a court of law or equity.
(d) It is not in default under any of the Financing Documents to which it is a party or under any other material mortgage, indenture, contract, agreement or undertaking with respect to the Leased Property (as defined in the Reimbursement Agreement) or to which it is a party or which purports to be binding on it or on any of its assets.
4 (e) It is in compliance with and not in violation under any federal or State laws which would adversely affect its existence or its powers and authority. (f) The execution, delivery and performance by it of this Consent, and all other agreements and instruments relating to all the foregoing executed and delivered by it in connection herewith and therewith, (A) did not and will not violate any provision of federal or State laws or any other applicable law, regulation, order, writ, judgment or decree of any court, arbitrator or governmental authority, and (B) did not and will not violate any provision of, constitute a default under, or result in the creation or imposition of any Lien, other than the Liens granted under the Reimbursement Agreement and the other Financing Documents, on any of the assets of it pursuant to the provisions of, any mortgage, resolution, indenture, contract, agreement or other undertaking to which it is a party or which purports to be binding on it or on any of its assets.
(g) No authorization, approval or other action by, and no notice to or filing with, any person or entity (including, without limitation, the Trustee) is required for the due execution, delivery and performance by it of this Consent. (h) There are no actions, suits, proceedings, judgments, orders, writs or decrees outstanding against it, nor is there now pe nding or, to its knowledge after due inquiry, any threatened litigation, contested claim, investigation, arbitration, or governmental proceeding by or against it that (x) individually or in the aggregate could reasonably be expected to have a material adverse impact on the business, operations or conditions (financial or otherwise) of it or (y) purports to affect the legality, validity or enforceability of this Consent.

SECTION 4. Release.
(a) IN CONSIDERATION OF THE FOREGOING, EACH OF THE

CITY AND THE AUTHORITY, ON BEHALF OF ITSELF AND FOR EACH OF

ITS DIRECT AND INDIRECT AFFILIATES, AGENCIES, SUBDIVISIONS,

SUCCESSORS, PREDECESSORS AND ASSIGNS, AND THEIR PRESENT AND

FORMER OFFICIALS, OFFICERS, MANAGERS, LEGAL REPRESENTATIVES,

EMPLOYEES, AGENTS, AND ATTORNEYS, AND THEIR T RUSTEES,
SUCCESSORS AND ASSIGNS (COLLECTIVELY, THE “RELEASORS”),

HEREBY RELEASES, REMISES, ACQUITS AND FOREVER DISCHARGES (THE “RELEASE”) THE BANK AND THE BANK’S EMPLOYEES, AGENTS,

REPRESENTATIVES, CONSULTANTS, ATTORNEYS, FIDUCIARIES,

SERVANTS, OFFICERS, D IRECTORS, PARTNERS, PREDECESSORS,

SUCCESSORS AND ASSIGNS, SUBSIDIARY COMPANIES, PARENT

COMPANIES AND RELATED COMPANY DIVISIONS (ALL OF THE
FOREGOING HEREINAFTER CALLED THE “RELEASED PARTIES”) FROM

ANY AND ALL ACTIONS AND CAUSES OF ACTION, JUDGMENTS,

EXECUTIONS, SUITS, DEBTS, CLAIMS, DEMANDS, LIABILITIES,

OBLIGATIONS, DAMAGES AND EXPENSES OF ANY AND EVERY
5 CHARACTER, KNOWN OR UNKNOWN, DIRECT OR INDIRECT, AT LAW OR

IN EQUITY, OF WHATSOEVER KIND OR NATURE, WHETHER HERETOFORE

OR HEREAFTER ARISING, FOR OR BECAUSE OF ANY MATTER OR THINGS

DONE, OMITTED OR SUFFERED TO BE DONE BY ANY OF THE RELEASED

PARTIES PRIOR TO AND INCLUDING THE DATE OF EXECUTION HEREOF,

AND IN ANY WAY DIRECTLY OR INDIRECTLY ARISING OUT OF OR IN

ANY WAY CONNECTED TO THIS CONSENT, THE REIMBURSEMEN T

AGREEMENT OR THE OTHER FINANCING DOCUMENTS (ALL OF THE
FOREGOING HEREINAFTER CALLED THE “RELEASED MATTERS”). EACH

OF THE CITY AND THE AUTHORITY REPRESENTS AND WARRANTS TO

THE BANK THAT IT HAS NOT PURPORTED TO TRANSFER, ASSIGN,

PLEDGE OR OTHERWISE CONVEY ANY OF THE ITS RIGHT, TITLE OR

INTEREST IN ANY RELEASED MATTER TO ANY OTHER PERSON OR

ENTITY AND THAT THE FOREGOING CONSTITUTES A FULL AND
COMPLETE RELEASE OF ALL RELEASED MATTERS. IN ANY LITIGATION

ARISING FROM OR RELATED TO AN ALLEGED BREACH OF THE REL EASE,

THE RELEASE MAY BE PLEADED AS A DEFENSE, COUNTERCLAIM OR

CROSS CLAIM AND SHALL BE ADMISSIBLE INTO EVIDENCE WITHOUT FOUNDATION TESTIMONY WHATSOEVER. THE RELEASORS EXPRESSLY

COVENANT AND AGREE THAT THE RELEASE SHALL BE BINDING IN ALL

RESPECTS UPON THE IR RESPECTIVE SUCCESSORS, ASSIGNS AND

TRANSFEREES INCLUDING, WITHOUT LIMITATION, ANY TRUSTEE IN

BANKRUPTCY, AND SHALL INURE TO THE BENEFIT OF THE SUCCESSORS AND ASSIGNS OF THE RELEASED PARTIES.
(b) TO THE EXTENT APPLICABLE, THE RELEASORS ARE
AWARE OF AND UNDER STAND THE PROVISIONS OF SECTION 1542 OF THE CALIFORNIA CIVIL CODE, WHICH STATES:
“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE

CREDITOR OR RELEASING PARTY DOES NOT KNOW OR SUSPECT TO

EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE

RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE

MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE
DEBTOR OR RELEASED PARTY.”
THE RELEASORS HEREBY WAIVE THE PROVISIONS OF SECTION 1542 OF THE

CALIFORNIA CIVIL CODE AND THE PROVISIONS OF ANY OTHER APPLICABLE

LAWS RESTRICTING THE RELEASE OF CLAIMS WHICH THE RELEASORS DO NOT

KNOW OR SUSPECT TO EXIST AT THE TIME OF RELEASE, WHICH, IF KNOWN,

WOULD HAVE MATERIALLY AFFECTED THE DECISION TO AGREE TO SUCH RELEASE. THE RELEASORS HEREBY AGREE, REPRESENT AND WARRANT TO THE

RELEASED PARTIES THAT THE RELEASORS REALIZE AND ACKNOWLEDGE THAT

FACTUAL MATTERS NOW UNKNOWN TO THE RELEASORS MAY HAVE GIVEN OR

MAY HEREAFTER GIVE RISE TO CAUSES OF ACTION, CLAIMS, DEMANDS, DEBTS,

CONTROVERSIES, DAMAGES, COSTS, LOSSES AND EXPENSES WHICH ARE 6 PRESENTLY UNKNOWN, UNANTICIPATED AND UNSUSPECTED, AND THE

RELEASORS FURTHER AGREE, REPRESENT AND WARRANT THAT THE RELEASE

PROVIDED HEREUNDER HAS BEEN NEGOTIATED AND AGREED UPON IN LIGHT OF

THAT REALIZATION AND THAT THE RELEASORS NEVERTHELESS HEREBY

INTEND TO RELEASE, DISCHARGE AND ACQUIT THE RELEASED PARTIES FROM ANY SUCH UNKNOWN CLAIMS. THE RELEASORS REPRESENT, WARRANT AND

AGREE THAT IN EXECUTING AND ENTERING INTO THIS RELEASE, THE

RELEASORS ARE NOT RELYING AND HAVE NOT RELIED UPON ANY

REPRESENTATIONS, PROMI SES OR STATEMENTS MADE BY ANY PERSON THAT ARE NOT RECITED, CONTAINED OR EMBODIED HEREIN.

SECTION 5. Reference to and Effect on the Indenture.
(a) The Indenture and each other Financing Document shall remain in full force and effect and are hereby ratified and confirme d by each of the parties hereto, and (ii) the Bank shall not be deemed to have waived any rights or remedies it may have under the Reimbursement Agreement, any other Financing Document or applicable law.
(b) The execution, delivery and effectiveness of this Consent shall not operate as an amendment to any right, power or remedy of the Bank or the Trustee under any of the Financing Documents or constitute a waiver of or an amendment to any provision of any of the Financing Documents.

SECTION 6. Counterparts; Delivery by Telecopier or other Electronic Means. This Consent may be executed in counterparts and by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but both of which shall together constitute one and the same instrument. This Consent may be executed and delivered by telecopier, facsimile or other electronic means with the same force and effect as if the same were a fully executed and delivered original manual counterpart. Any signature (including, without limitation, (x) any electronic symbol or process attached to, or associated with, a contract or other record and adopted by a person with the intent to sign, authenticate or accept such contract or record and (y) any facsimile or .pdf signature) hereto or to any other certificate, agreement or document related to this transaction, and any contract formation or record-keeping, in each case, through electronic means, shall have the same legal validity and enforceability as a manually executed signature or use of a paper-based record-keeping system to the fullest extent permitted by applicable law, including the Uniform Commercial Code and the Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act, or any similar state law based on the Uniform Electronic Transactions Act, and shall be binding on the City, the Authority and the Bank, and the parties hereto hereby waive any objection to the contrary. The Bank may also require that any such documents and signatures be confirmed by a manually -signed original thereof; provided , however, that the failure to request or deliver the same shall not limit the effectiveness of any facsimile document or signature.
7 SECTION 7. Governing Law; Submission to Jurisdiction; Waiver of Jury Trial.
(a) This Consent shall be governed by, and construed in accordance with, the internal laws of the State of New York; provided, that the power, authority and capacity of the City and the Authority to enter into this Consent and pe rform its obligations hereunder shall be governed by the laws of the State of California.

(b) Each of the parties hereto hereby irrevocabl y waives, to the fullest extent permitted by law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement or the transactions contemplated hereby . Each of the City and the Authority further agrees that, in the event of litigation, it will not personally or through its agents or attorneys seek to repudiate the validity of this Section 7, and it acknowledges that it freely and voluntarily entered into this agreement to waive trial by jury in order to induce the Bank to enter into this Consent.

[Remainder of Page Intentionally Left Blank; Signature Page to Follow]

IN WITNESS WHEREOF, the parties hereto have caused this Consent to be executed by their respective officer or director thereunto duly authorized, as of the date first above written.

BNP PARIBAS
By: _______________________________
Name:

Title:

By: _______________________________
Name:

Title:

CITY OF VICTORVILLE

By:__________________________________
Name:

Title:

VICTORVILLE JOINT POWERS FINANCING

AUTHORITY
By: ____________________________________
Name:

Title:

ACKNOWLEDGED:

THE BANK OF NEW YORK MELLON
TRUST COMPANY, N.A., as Trustee
By: _____________________________________
Name:

Title:

Item Number: 11
City Council / Board of Directors
Written Communication
Meeting of: April 19, 2022
Submitted By:

Scott Webb, City Planner

Subject:

Consideration of funding allocations to Community Development Block Grant (CDBG) applicants for eligible services through the American Rescue Plan Act (ARPA) Recommendation:

That the Honorable City Council:
(1) Authorize staff to proceed with the allocation of funds through ARPA to fund eligible CDBG applicants as outlined in Attachment A of this staff report; (2) Approve the disbursement of ARPA funds utilizing the reimbursement and tracking model that is typical of the CDBG funding requirements; and (3) Authorize the City Manager or their designee to execute all necessary documents and contracts.

Fiscal Impact:

The allocation of funds to the eligible CDBG applicants will be funded from the funds set aside for the Homeless Shelter and Housing Services Recovery Program that was previously approved on September 21, 2021. The amount recommended for allocation is $530,000 and was budgeted in Fiscal Year 2021/2022 under ARPA Contract Services (2770010-52300).

No additional appropriation is required.

Background:

The American Rescue Plan Act of 2021 is a $1.9 trillion economic stimulus bill passed by the 117th United States Congress as H.R. 1319 and signed into law by President Joe Biden on March 11, 2021. The main objective of the act is to speed up the United States' recovery from the economic and health effects of the COVID-19 pandemic and the ongoing recession. Under section H.R. 1319, Subtitle M, Section 603, details were provided for eligible uses of the funds appropriated to the City into four criterions:
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To respond to the public health emergency with respect to COVID-19 or its negative economic impacts;
To respond to workers performing essential work during the COVID-19 public health emergency by providing premium pay to eligible workers; For the provision of government services to the extent of the reduction in revenue due to the COVID-19 public health emergency relative to revenues collected in the most recent full fiscal year prior to the emergency; or To make necessary investments in water, sewer, or broadband infrastructure.

On September 21, 2021, the City Council approved the Homeless Shelter and Housing Services Recovery Program by allocating $2 million to said program. The Homeless Shelter and Housing Services Recovery Program is a program meant to assist non-profits that have experienced a loss of revenue due to the COVID-19 pandemic and provide temporary living arrangements (congregate and non-congregate shelter; and transitional housing) to homeless individuals in Victorville. The program received ten applications during the application period; however, only one application was deemed eligible and was funded to the maximum amount of $100,000. Currently, the Homeless Shelter and Housing Services Recovery Program account maintains an available balance of $1.9 million.

Discussion:

The City of Victorville developed the Homeless Shelter and Housing Services Recovery Program in order to provide funding to non-profit organizations that experienced a loss of revenue due to COVID-19. Although not all non-profit organizations can demonstrate a loss of revenue, there are various non-profits that do demonstrate a need for services that directly impact the target population of homeless individuals or those at risk of becoming homeless.

During the course of the review of applications for fiscal year 2022-2023 Community Development Block Grant (CDBG) funding, staff determined that eight applications received proposed programs that service the target population, such as rent/lease payments, mortgage payments, utility expenses, payroll and benefit costs, Personal Protection Equipment (PPE), and other similar expenses that occur in the course of operations.

Specifically, programs that address utility, rent, and mortgage assistance as well as those that provide food assistance and were proposed in response to the COVID-19 pandemic were identified as proposals that would meet the intent of the ARPA funded Homeless Shelter and Housing Services Recovery Program. Given the increased demand for the noted assistance programs as a result of the COVID-19 pandemic and because the subject assistance programs are operated by non-profit organizations and are directly related to homelessness and preventing homelessness, staff is proposing the use of $530,000 of the remaining $1.9 million in allocated Homeless Shelter and Housing Services Recovery Program funding to award the following CDBG applicants:
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3 1
Organization Project Name Allocation
A Core Solution Utilities and Rental Assistance $40,000 Catholic Charities of San Bernardino
and Riverside
Coordinated Housing, Food and
Eviction Prevention Service $45,000
Community Health Action Network Emergency Assistance Program $30,000 God’s Hand Extended Resource Assistance Program $15,000 High Desert Second Chance Food Collaborative $100,000
High Desert Second Chance Emergency Housing Assistance $100,000 High Desert Second Chance Senior and Veteran Program $20,000 Victor Valley Family Resource Center COVID-19 Rental Relief Program $180,000 Total $530,000
As recommended by staff, the funding awards noted above will: utilize the CDBG applications previously submitted; be subject to reporting requirements typical of CDBG programs, which exceed the standards of ARPA funds; be funded through a reimbursement model to ensure expenditures are in compliance with program requirements; and be managed by CDBG grant staff with oversight by the City Manager’s office.

Staff recommends that the City Council authorize the allocation of funds through ARPA to fund eligible CDBG applicants as outlined in Attachment A of this staff report, making disbursement of ARPA funds subject to the reimbursement and tracking model that is typical of CDBG funding requirements.

Attachments:

Attachment A – ARPA Funding Recommendations

ATTACHMENT A
ARPA Funding Recommendations

Organization Name Project Name Brief Description
Number of People to
be Served Amount Requested Funding Recommendations
1 A Core Solution Utilities and rental assistance Utility and rental assistance with financial literacy classes 55 $40,000.00 $40,000.00 2 Catholic Charities San Bernardino and Riverside Coordinated Housing, Food and Eviction Prevention Services Utility, rental and food assistance for those in need 1,073 $45,000.00 $45,000.00 3 Community Health Action Network Emergency Assistance Program Utility assistance 60 $30,000.00 $30,000.00 4 God's Hand Extended Resource Assistance Program Provide moving, utility, motel and food assistance 150 $15,000.00 $15,000.00 5 High Desert Second Chance High Desert Second Chance Food Collaborative Food bank 39,000 $100,000.00 $100,000.00 6 High Desert Second Chance High Desert Second Chance Emergency Housing Assistance Rental and mortgage assistance 30 $100,000.00 $100,000.00 7 High Desert Second Chance High Desert Second Chance Senior and Veteran Program Food delivery to homebound seniors, veterans and health compromised people 5,000 $20,000.00 $20,000.00 8 Victor Valley Family Resource Center VVFRC COVID-19 Rental Relief Program Rental and mortgage assistance up to $1,800 per household 100 $180,000.00 $180,000.00 Total: 45,468 $530,000.00 $530,000.00
Item Number: 12
City Council / Board of Directors
Written Communications
Meeting of: April 19, 2022
Submitted By:

Doug Mathews, Director of Public Works and Water

Subject:

Approval for Purchase of an International Bergkamp FP5 Flameless Patcher Truck Recommendation:

That the Honorable City Council approve the purchase of an International Bergkamp FP5 Flameless Patcher Truck from Bergkamp Pavement Preservation Solutions in the amount of $292,302.

Fiscal Impact:

This purchase will result in a fiscal impact of $292,302. An additional appropriation is not required. There are sufficient funds in the budget to cover the planned expense. The budget account numbers (fund sources) are shown below.

Fund Source: Account Number: Available Budget:

Gas Tax 2205001-55040-70698 $73,125
GF Asphalt 1005001-55040-70698 $22,500
Water 4105001-55040-70698 $73,125
Sanitary Sewer 4255001-55040-70698 $56,250
Measure I 2504503-55040-62058 $228,000
Background:

The Street Division of the Public Works Department currently has two asphalt patch trucks that are 20+ years old (2000 and 2002). The Streets Division funds and deploys two (2) two-man patch truck crews when both units are operational, which has proven to be a challenge as this equipment often requires frequent and extensive repairs due to age and a rigorous duty cycle.

The asphalt crews face a never-ending backlog of repairs due to the age and condition of the roadways, and the harsh desert environment. They perform over forty-thousand 2 5
3 8
square feet of routine and emergency pothole and asphalt repairs a year. When one of the patch trucks is down for repairs, the second crew is only able to perform temporary, stopgap measures as the backlog of service requests continues to grow.

Discussion:

The purchase of this patch truck will allow staff to have a reliable piece of equipment for one of the crews, and two older trucks that can be used as a primary and backup for the other crew. This purchase will increase response times and will also allow staff to operate three trucks during times of increased requests for service when all trucks are operational.

Due to the national supply chain shortage impacting vehicles, parts, and materials, staff has been informed that the delivery of the International Bergkamp FP5 Flameless Patcher Truck could take 12 to 24 months. The purchasing approval for this unit will allow staff to issue a Purchase Order (PO) to put an order in the queue and guarantee a firm price.

Manufacturers have been reluctant to provide quotes for price and/or delivery during the pandemic.

Per the Victorville Municipal Code §2.28.120, Purchasing of Supplies and Equipment through Cooperative Purchasing Arrangements, the City may utilize various cooperative purchasing programs to take advantage of volume pricing through the National Joint Powers Alliance (NJPA). Sourcewell is a public agency that serves as a member-focused cooperative and offers a multitude of cooperatively contracted specialized products and equipment to government entities that cannot be procured from local dealers.

Staff recommends that the Honorable City Council approve the purchase of a International Bergkamp FP5 Flameless Patcher Truck from Bergkamp Pavement Preservation Solutions in the amount of $292,302.

Staff remains available for any questions that the City Council may have.

Attachments: A. Quote with Specifications

ATTACHMENT A

Item Number: 13
City Council / Board of Directors
Written Communications
Meeting of: April 19, 2022
Submitted By:

Brian Gengler, City Engineer

Subject:

Approval for Purchase of a Peterbilt MB Longline Striper Recommendation:

That the Honorable City Council approve the purchase of a new Peterbilt MB Striper from JX-Truck Center in the amount of $427,073.22.

Fiscal Impact:

This purchase will result in a fiscal impact of $427,073.22. An additional appropriation is not required. There are sufficient funds in the budget to cover the planned expense. The fund source, budget account number and amount are shown below.

Fund Source Account No. Available Budget:

Measure I 2504500-55315-60135 $ 435,000.00

Background:

There are approximately 445 miles of paved roads maintained by the City and 325 miles of lane line striping. The lane line striping consists of double yellow lines, yellow center lines, white skip lines, and white edge lines. The lane line striping is typically repainted annually by City maintenance staff. A truck with specialized equipment, referred to as a “longline striper”, is used to repaint the lane lines.

Discussion:

The current longline striper in use is a 1999 Mac TMT Pathway. Due to its age and the lack of available certain essential parts, the longline striper does not meet the California Air Quality Management District (AQMD) standards. The AQMD will require that the City eventually replace this piece of equipment.
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Staff has planned for the replacement of the longline striper and is requesting to move forward with a purchase. With the current national shortage of vehicles, parts, and materials staff have been informed that the delivery of a new longline striper could take 12 to 24 months. The purchasing approval will allow staff to issue a Purchase Order (PO) to guarantee a purchase and a firm price.

The piggyback of the Sourcewell contract fulfills the City’s legal obligations of competitive bidding requirements and will potentially provide significant savings. A quotation from JX- Truck Center for a Peterbilt MB Longline Striper was submitted through Sourcewell for a price of $427,073.22. The Public Works Fleet Maintenance Division along with Engineering staff have reviewed the quotation in relation to staff’s specifications and have confirmed that the quote meets or exceeds the minimum specification requirements. Staff has reviewed the price and found that it is acceptable.

Staff recommends that the Honorable City Council approve the purchase from JX-Truck Center for the piggyback purchase of a new Peterbilt MB Longline Striper in the amount of $427,073.22.

Staff is available for any questions that the City Council may have.

Attachments: A. Quote and Specifications
B. Striper Photo

ATTACHMENT A

ATTACHMENT B

Item Number: 14
City Council / Board of Directors
Written Communications
Meeting of: April 19, 2022
Submitted By:

Brian Gengler, City Engineer

Subject:

Approval for Purchase of an Aerial Altec Bucket Truck
Recommendation:

That the Honorable City Council approve the purchase of a 2024 Ford F-550 Aerial Altec Bucket Truck Model AT41M from Altec Industries Inc., in the amount of $211,915.02.

Fiscal Impact:

This purchase will result in a fiscal impact of $211,915.02. An additional appropriation is not required. There are sufficient funds in the budget to cover the planned expense.

The fund source, budget account number and amount are shown below.

Fund Source Account No. Available Budget:

Street Lighting 2004501-55040-62058 $131,250.00
Measure I 2504503-55040-62058 $228,000.00
Total $359,250.00
Background:

The Traffic Maintenance Division of the Engineering Department currently has four bucket trucks used for maintenance of the 96 traffic signals which the City maintains. These bucket trucks are equipped with an extendable, hydraulic boom with a large bucket which raises a worker to access the traffic signal poles and equipment. Summary information about the four bucket trucks used by the Traffic Maintenance Division are shown in the table below.

Year Model Description
1991 Ford L-800 Primarily used to load and move poles. The largest of the four trucks. Used less frequently than the other trucks. 2 4
8 8
2000 F-450 Maintenance and Emergency Response
2016 F-550 Maintenance and Emergency Response
2018 F-550 Maintenance and Emergency Response
Discussion:

The 2000, F-450 bucket truck has been in high use for about 21 years and needs to be replaced. A new Ford F-550 Model AT41M articulating telescopic bucket truck has been specified by staff. This new bucket truck will meet the ongoing maintenance requirements for the City’s traffic signals. The 2000, F-450 would then become the backup when one of the other bucket trucks is out of service for repairs or maintenance. Staff would also be able to share the 2000, F-450 bucket truck with other departments including Public Works, Parks, and Facilities.

Staff has planned for the replacement of the 2000, F-450 bucket truck and is requesting to move forward with a purchase. Due to the national shortage of vehicles, parts, and materials staff has been informed that the delivery of the F-550 bucket truck could take up to 31 months. The purchasing approval will allow staff to issue a Purchase Order (PO) to guarantee a purchase and a firm price
Per the Victorville Municipal Code §2.28.120, Purchasing of Supplies and Equipment through Cooperative Purchasing Arrangements, the City may utilize various cooperative purchasing programs to take advantage of volume pricing through the National Joint Powers Alliance (NJPA). Sourcewell is a public agency that serves as a member-focused cooperative and offers a multitude of cooperatively contracted specialized products and equipment to government entities that cannot be procured from local dealers.

The piggyback of the Sourcewell contract fulfills the City’s legal obligations of competitive bidding requirements and will potentially provide significant savings. A quotation from Altec Industries was submitted through Sourcewell for a price of $211,915.02. The Public Works Fleet Maintenance Division along with Engineering staff have reviewed the quotation in relation to staff’s specifications and have confirmed that the quote meets or exceeds the minimum specification requirements. Staff has reviewed the price and found that it is acceptable.

Staff recommends that the Honorable City Council approve the purchase of a 2024 Ford F-550 Aerial Altec Bucket Truck Model AT41M from Altec Industries Inc., in the amount of $211,915.02.

Staff remains available for any questions that the City Council may have.

Attachments: A. Quote and Specifications
B. Altec Bucket Truck Photo

ATTACHMENT A

ATTACHMENT B

Item Number: 12
City Council / Board of Directors
Written Communications
Meeting of: April 19, 2022
Submitted By:

Matthew Pugh, Interim Information Technology Officer
Subject:

Purchase of Cisco Switches, Web Filtering Appliance, and Firewall Software Recommendation:

That the Honorable City
Council award the purchase in the amount not to exceed
$273,831.34 to Logicalis, Inc. for the installation and configuration of new Cisco network equipment, licensing, and software that will support a 10-gigabit internet circuit for the City Hall local area network.

Fiscal Impact:

The network infrastructure purchase will be funded from the Broadband category that was approved by the Honorable City Council as part of the ARPA spending plan on July 20, 2021 under Resolution No. 21-072. The below account will be used to pay for the proposed project:

Account 2770010-55050-97076 (ARPA Capital Projects and Purchases – IT Equipment/MDF Refresh)
No additional appropriation is required.

Background:

Victorville City Hall currently has a 1-gigabit internet circuit that is used to deliver internet services to the many departments and staff members that inhabit City Hall during business hours. In addition, the City utilizes a Local Area Network (LAN), illustrated in ATTACHMENT A, to connect the McArt Rd Public Works building, Victorville Police Station building, Corporate Yard East building, and Water District Warehouse 1 building to the City Hall building, meaning all of the staff members of those buildings are also using the 1-gigabit internet circuit provided by Spectrum Enterprise. Due to the ever-increasing demand for digital information from the staff of these buildings, the existing network infrastructure can no longer provide enough bandwidth to support the internet traffic that these staff members generate.

The Information Technology Department has been working towards supporting a 10- gigabit internet service to the primary network located at Victorville City Hall that will be provided by the City’s primary internet services provider (ISP), Spectrum Enterprise.

The 10-gigabit internet circuit will deliver faster and more consistent internet signals to the staff members of City Hall and the facilities located on the LAN described previously. The larger circuit, which is delivered by Spectrum’s fiber optic cable infrastructure, will require that several components of the City’s internet network infrastructure be upgraded in order for the network to allow up to 10-gigabits of data throughput. Due to the complexity of these upgrades, several past actions have been taken by the Honorable City Council and the City Manager to purchase network components in phases as to not disrupt existing internet services for extended periods of time. Those previous actions are as follows:
• At the special meeting of the City Council of November 3rd, 2020, the Honorable City Council awarded the purchase of $185,259.87 to Logicalis, Inc. with CARES Act funding to update the three intermediate distribution frame (IDF) Cisco distribution switches located at the north and south ends of the City Hall building.
• At the regular meeting of the City Council of October 5th, 2021, the Honorable City Council awarded the purchase of $83,615.42 to Logicalis, Inc. with ARPA funds to upgrade the City’s Cisco firewall and Cisco router located in the main distribution frame (MDF) at the City Hall building.
• On March 16, 2022, the City Manager awarded the purchase and installation of new fiber optic cables to Apple Valley Communications, Inc. in the amount of $16,464.82 to upgrade the connections between the three Cisco switches located in the IDFs and the primary switch located in the MDF.

ATTACHMENT B illustrates where these updates have been installed on the network, and the following definitions will assist in understanding how the network functions:
• The Internet Service Provider (ISP) - A utility company that installs cable in the ground or on existing utility poles that allow homes, businesses, and other closed networks to connect to the world-wide web (aka: the internet). The City’s current ISP is Spectrum Enterprise.
• Gigabit Internet – A gigabit refers to a unit of digital information or computer storage. A gigabit would be 1,000,000,000 bits of digital information, and 10 gigabits would be 10,000,000,000 bits of digital information. • Fiber Optic Cable – A cable that uses strands of glass fiber to deliver digital information in the form of light, which is significantly better performing than traditional copper-based cables.
• Local Area Network – A collection of devices connected together in one physical location. This can be one building, or many buildings in close proximity. • Wide Area Network – A large network that is not tied to a single location and is typically connected on ISP cable infrastructure over a large geographic area. • Distribution Switch – A device that distributes digital signals to multiple nodes within a network based on internet protocol addresses.
• Core Switch – The primary distribution switch within a LAN or WAN. • Main Distribution Frame (MDF) – A rack system that holds various network equipment, including the core switch, firewall appliance, and routers. • Intermediate Distribution Frame (IDF) – A secondary rack system that holds subordinate network equipment that connects back to the MDF. • Router – A device that sends and receives data in a computer network using packets that contain files or internet interaction requests. • Firewall – A device that monitors incoming and outgoing network traffic and decides whether or not to allow that traffic based on a set of established rules. • Data Center – A collection of servers and data storage devices that combine to form a repository of digital information.
• Data Storage Array – A collection of hard drives that are used to store digital information so it can be accessed on a computer network. • Hosting Server Cluster – A combination of multiple computing machines that process digital information stored on the data storage array to distribute it within a computer network for display on end user displays/screens.

If you are a staff member using this network from one of the computers, you can see how far the signal has to travel along the network before it reaches the internet. For example, imagine starting from one of the staff member computers located in the South IDF group. In order to connect to the internet, your computer signal must travel from the computer over an ethernet cable to the IDF 1 distribution switch, where it is then sent over a fiber cable to the core switch located in the MDF. From there, it must travel through the City’s router and firewall, then through the Spectrum connection appliance before it finally reaches the internet where website and applications the City utilizes are found.

Next, imagine there are hundreds of staff members attempting to access the internet at the same time, every single second. The distribution switch and the core switch have to process hundreds, if not thousands of data requests per second, and if the switches are not sized and scoped properly, they will not be able to keep up with the demand.

This is very similar to a water pipe system where water pressure and volume supplied will decrease if the size of the tank and pipes are not large enough to meet the demand.

The City’s core switch, a Cisco Catalyst 4510R+E, is now undersized when compared to the demand on it and therefore must be replaced to increase its capacity. In addition, the data center switch, a Cisco Catalyst 6807, has reached its end of useful life and should be replaced along with the core switch.

In conjunction with these switch deficiencies, the City’s web filtering appliance, a Cisco Web Security Appliance (WSA), is undersized to meet the demands of the City Hall LAN internet traffic. Staff members have noticed significant slowness when they use the internet, and it has been determined that the existing Cisco WSA, which is a virtual appliance that operates on one of the City’s hosting servers, should be converted to a physical appliance that stands on its own so that it is not impacted by other demands on the hosting servers, such as high usage of Munis, EnerGov, or other large Citywide software applications, and it should be upsized to a model that can support 10-gigabits of digital traffic throughput.

ATTACHMENT C illustrates the changes that need to be made to the City Hall LAN infrastructure in order to fully support a 10-gigabit environment, as recommended by the City’s network engineering partner, Logicalis, Inc. This is the final phase of the 10-gi gabit upgrade process and a significant improvement to the City Hall LAN will be made in both internet speed and total bandwidth, which will allow the City to add additional capacity to accommodate additional staff or additional locations in the future.

Discussion:

Logicalis, Inc. has been the City’s partner for many years in architecting and deploying various solutions to improve the City’s network infrastructure. ATTACHMENT D contains the quotation they have submitted in the amount of $273,831.34 to 1) update the core switch from a Cisco Catalyst 4510 R+E to a Cisco Catalyst C9410R; 2) update the data center switch from a Cisco Catalyst 6807 to a Cisco Catalyst C9407R; 3) add a new Cisco Catalyst C9500 distribution switch to the MDF room to connect the three existing IDF switches and the data center switch; 4) upgrade the virtual Cisco Web Security Appliance to a physically racked appliance that supports 10-gigabits of throughput; 5) upgrade the existing firewall management software to Cisco Secure Firewall Management Center (FMC) for the firewall that the Honorable City Council awarded the purchase of on October 5th, 2021; 6) upgrade all of the connector cables between the core switch, the new router, and new firewall; and 7) install and configure all of the former.

The quotation adheres to the pricing requirements of the National Association of State Procurement Officials (NASPO) ValuePoint Master Agreement #AP3227, Cisco Participating Addendum CA #7-20-70-47-01 contract. Per Section 2.28.100(b)(3) of the Victorville Municipal Code (VMC), the City Council can authorize the purchase of equipment that is purchased through a cooperative purchasing arrangement pursuant to Section 2.28.120 of the VMC. The NASPO ValuePoint Master Agreement #AP3227 names Logicalis, Inc. as an authorized fulfillment partner of the agreement and therefore meet the requirements of the aforementioned VMC sections.

Furthermore, the previous two equipment purchase awards authorized by the Honorable City Council to Logicalis, Inc. were done under the same NASPO ValuePoint contract, which currently has an expiry date of September 30, 2024.

Information Technology Department Staff recommend that the Honorable City Council award the purchase of the quoted equipment, software, and professional services outlined in ATTACHMENT D and Staff are available to answer any questions the Honorable City Council may have.

Attachments: A. CITY HALL LOCAL AREA NETWORK (LAN) OVERVIEW B. PREVIOUS NETWORK UPGRADES FOR 10-GIGABIT

INTERNET
C. PROPOSED NETWORK UPGRADES FOR 10-GIGABIT

INTERNET
D. LOGICALIS, INC. QUOTE #2022-134451v4 - COV-VARIOUS

PROJECTS

ATTACHMENT A
CITY NETWORK
WIDE AREA

NETWORK

INTERNET

VICTORVILLE
POLICE STATION
WATER
WAREHOUSE 1
CORPORATE YARD
EAST
PUBLIC WORKS
CITY HALL
CITY HALL LOCAL AREA NETWORK (LAN) OVERVIEW

ATTACHMENT B
WIDE AREA NETWORK
(OTHER CITY FACILITIES)

INTERNET
PUBLIC WORKS YARD POLICE STATION

CORPORATE
YARD EAST
WATER
WAREHOUSE 1
CITY HALL
NORTH IDF
SOUTH IDF 1 SOUTH IDF 2
MDF
DATA
CENTER
VICTORVILLE CITY HALL LOCAL AREA NETWORK
LEGEND
STAFF MEMBER COMPUTER
DISTRIBUTION SWITCH
CORE SWITCH
ROUTER AND FIREWALL
SPECTRUM CONNECTION
DATA STORAGE ARRAY
HOSTING SERVER CLUSTER
UPGRADED HARDWARE FOR 10‐GB
UPGRADED FIBER FOR 10‐GB
PREVIOUS NETWORK UPGRADES FOR 10‐GIGABIT INTERNET

ATTACHMENT C
WIDE AREA NETWORK
(OTHER CITY FACILITIES)

INTERNET
PUBLIC WORKS
YARD
POLICE STATION

CORPORATE
YARD EAST
WATER
WAREHOUSE 1
CITY HALL
NORTH IDF
SOUTH IDF 1 SOUTH IDF 2
MDF
DATA
CENTER
VICTORVILLE CITY HALL LOCAL AREA NETWORK
LEGEND
STAFF MEMBER COMPUTER
DISTRIBUTION SWITCH
CORE SWITCH
ROUTER AND FIREWALL
SPECTRUM CONNECTION
DATA STORAGE ARRAY
HOSTING SERVER CLUSTER
UPGRADED HARDWARE FOR 10‐GB
UPGRADED FIBER FOR 10‐GB
WEB SECURITY APPLIANCE
PROPOSED NETWORK UPGRADES FOR 10‐GIGABIT INTERNET

ATTACHMENT D
COV - Various Projects
Quotation # 2022-134451v4
Prepared By Logicalis for:

City of Victorville

To the attention of :

Gene Whiteside
City of Victorville
14343 Civic Dr
Victorville, CA 92392-2303
Tel: (760) 955-5000
Email: [email protected]

April 05, 2022

Pricing Summary
The following is a price summary of Logicalis’ proposed solution.

Price Summary

Amount

Hardware

$178,704.98

Software

$40,799.62

Hardware Maintenance

$11,051.25

Software Maintenance

$589.80

Professional Services

$27,049.00

Grand Total

$273,831.34

City of Victorville
April 05, 2022

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Victorville City CouncilApril 19, 2022

Victorville City Council
April 19, 2022