Watsonville City Council
June 10, 2025

City of Watsonville
AB 2561 Compliance
(Addressing Vacancy Rates and Workforce Initiatives)
June 10, 2025
Presented by:

Monica Florez, Principal Human Resources Analyst

Overview of AB 2561
Approved on September 22, 2024
AB 2561 requires public agencies to annually present vacancy rates, recruitment and retention before budget adoption.

Recognized employee organizations must be notified and given opportunity to participate if they choose
If the vacancy rate within a bargaining unit meets or exceeds 20%, additional obligation may apply.

2024 Year End Vacancy Rate
By Bargaining Group
Bargaining Unit Number of Budgeted Positions in FY
24-25
Number of Vacancies in Calendar Year
2024
Vacancy
Rate
Confidential 10 1 10%
Executive 11 1 9.1%
IAFF L-1272 34 0 0%
Fire Management 4 0 0%
Management 57 7 12.3%
Mid-Management 82 7 8.5%
Operating Engineers Local 3
(OE3) 119 6 5.1%
Police Management 5 0 0%
Police Mid-Management 11 2 18.2%
Police Officers Association
(POA) 56 8 14.3%
SEIU 521 43 5 11.7%
Total 432 37 8.6%

Current Vacancy Rate
By Bargaining Group
Bargaining Unit Number of Budgeted Positions in
FY 24-25
Number of Vacancies in Calendar
Year 2024
Vacancy
Rate
Number of Current
Vacancies
Vacancy
Rate
Confidential 10 1 10% 0 0%
Executive 11 1 9.1% 0 0%
IAFF L-1272 34 0 0% 0 0%
Fire Management 4 0 0% 0 0%
Management 57 7 12.3% 7 12.3%
Mid-Management 82 7 8.5% 6 7.3%
Operating Engineers Local 3
(OE3) 119 6 5.1% 6 5.1%
Police Management 5 0 0% 0 0%
Police Mid-Management 11 2 18.2% 0 0%
Police Officers Association
(POA) 56 8 14.3% 2 3.6%
SEIU 521 43 5 11.7% 4 9.3%
Total 432 37 8.6% 25 5.8%

Recruitment and Retention Efforts
Targeted
Recruitment
Strategies
Hiring
Incentives
Career
Development
Opportunities
Alternative
Work
Schedules
Ability to
Telecommute

Conclusion and Next Steps
The City of Watsonville remains
committed to addressing vacancy
challenges transparently and
proactively.

Recruitment and retention
strategies are aligned with the
City’s Strategic Goal to attract and
retain a talented workforce.

Vacancy data and workforce
planning efforts will continue to be
monitored, reported, and refined
annually in compliance with
AB 2561.

We look forward to ongoing
collaboration with City leadership,
departments, and employee
organizations to build a strong and
sustainable workforce.

1 CITY COUNCIL AGENDA REPORT
MEETING DATE: Tuesday, June 10, 2025
TO: CITY COUNCIL
RECOMMENDED BY: ADMINISTRATIVE SERVICES DIRECTOR DURAN
APPROVED BY: TAMARA VIDES, CITY MANAGER
SUBJECT: RECOMMEND BUDGET PLAN FOR FISCAL YEARS 2025-2027 AND

RELATED ACTIONS
Link to Budget: https://www.watsonville.gov/DocumentCenter/View/26527/Budget-FY2025-27-Draft RECOMMENDATION:

Staff will present the proposed Budget Plan for Fiscal Years 2025-2027, including the 5-year Capital Improvement Program.

It is recommended that the City Council and Successor Agency and Successor Housing Agency Boards of the City of Watsonville review the proposed FY 2025-26 and FY 2026-27 Budget Plan.

It is also recommended that the Watsonville City Council :
1) Approve a Resolution authorizing City Manager to sign the purchase order with Burton’s Fire Inc. for a purchase of a Rosenbauer Tiller on a Commander Chassis in the amount of $2,710,669.70 from Burton’s Fire Inc.
2) Approve a Resolution calling for bids for the Citywide LED Streetlight Module Procurement and installation services, this project will be funded with Measure R Funds.

DISCUSSION:

Budget appropriations for fiscal year 2025-26 are $316,105,441, including a $125,389,622 General Fund.

It includes 420.25 full-time equivalent (FTE) positions across 12 departments that provide a range of public safety, infrastructure and support services.

The proposed budget for the City of Watsonville is a balanced financial plan developed for a two-year planning period. It reflects our continued commitment to fiscal responsibility while focusing on the delivery of essential services to our community. The budget aligns available resources with the City

2 Council’s priorities and strategic goals, supporting public safety, infrastructure, and community programs.

As a planning document, it provides a framework for maintaining service levels, promoting long-term financial sustainability, and ensuring the well-being of Watsonville residents.

Table 1: Fiscal Year FY 2025-26 and Fiscal Year 2026-27 Budget Summary We are presenting a budget that will provide for proposed budget savings to present a balanced General Fund budget. Table 2 below provides a summary of the vacant positions removed to balance the General Fund. This is a balanced budget that maintains Council-approved reserves.

City Charter. Under the Charter of the City of Watsonville, sections 1103-1105 instruct that the City Manager must prepare and present a proposed budget for the ensuing fiscal year at least 30 days before the beginning of the next fiscal year. The Charter requires the budget to include:
a) An itemized statement of estimated income and revenues from all sources for the year that the budget is to cover.
b) An itemized statement of the proposed expenditures recommended by the City Manager for each office, department, or agency for the year which the budget is to cover. c) The probable amount required to be levied and raised by property taxation; and d) Other information the City Manager may deem essential, or as the Council may require.

The Charter requires that “the Council shall proceed to consider the proposed budget and may increase, decrease or omit any item or insert new items therein.” It further requires that a public hearing be held, grants the authority for Council to make any final modifications, and then requires that before the beginning of the ensuing fiscal year, “the Council shall adopt the budget with revisions, if any.” General Fund
While the City is experiencing slowing or moderate growth in its major General Fund revenue sources, this growth is outpaced by rising costs, particularly in the areas of salaries, employee benefits, and contractual services. These rising costs continue to place significant pressure on the City’s financial resources. As we put this budget together, we recognize that uncertainty with inflation, interest rates, unpredictability stemming from larger economic uncertainty, and threats to federal funding are of concern. To present a balanced budget, staff conducted a thorough review of all authorized positions that had been vacant since the start of our last fiscal year budget process, and were on a temporary General Fund
Total Special Total
Debt
Total
Enterprise
Total
Internal
Total
Private Trust
Total Total All Funds
Projected Resources 2025-26
Total Resources 108,435,976 28,543,299 286,993 88,417,440 24,117,936 419,145 250,220,789 Total Uses 125,389,622 43,682,308 286,993 120,379,074 25,872,784 494,660 316,105,441 Surplus / (Shortfall) (16,953,646) (15,139,009) - (31,961,634) (1,754,848) (75,515) (65,884,652) Projected Resources 2026-27
Total Resources 64,315,469 21,114,151 286,161 96,625,721 25,115,663 419,145 207,876,310 Total Uses 74,468,618 21,610,044 144,521 97,767,458 26,112,585 422,883 220,526,109 Surplus / (Shortfall) (10,153,149) (495,893) 141,640 (1,141,737) (996,922) (3,738) (12,649,799) FUND ANALYSIS SUMMARY FY 2025-26 AND FY 2026-27

3 hiring pause, and have made a reduction in those positions. These difficult but prudent decisions were made to ensure the City remains fiscally responsible while continuing to provide essential services to the community. This budget has reduced 14 vacant positions across several departments, with 11 of these positions in the General Fund and the other 3 positions in the Special Revenue Funds.

All our labor agreements, apart from those of our Service Employees International Union (SEIU) group, were up for negotiations at the same time this year. As part of our last contract with some of the labor groups, the City conducted a comprehensive salary survey for most positions. The proposed budget includes cost-of-living adjustments (COLAs) and limited equity adjustments as a way to recognize and value the hard work and dedication of our employees and support the retention of professional talent We are experiencing operational expenditures exceeding our initial budget projections. The increased costs are in several areas, specifically salaries, insurance costs, PERS Unfunded Liability, and legal and other contract services. Rising pension liabilities are due to the underperformance of the Public Employees’ Retirement System (CALPERS) investment earnings.

The rise in salaries also increased the costs of insurance and retirement. Unfunded liability estimates are provided by CalPERS and are used in the budget preparation. In June 2023, those were provided assuming that the investment return rate by CalPERS would be 6.8%. However, the revised amount now payable for the upcoming fiscal year is with the investment rate of return of 5.8%. Annual payment on the Unfunded Accrued Liability (UAL) is the amortized dollar amount needed to fund past service credit earned (or accrued) for members who are currently receiving benefits, active members, and for members entitled to deferred benefits, as of the valuation date. The Unfunded PERS liability costs are anticipated to remain high until 2032. At which point, there should be some relief as the PEPRA formula provides for some relief in costs. The proposed increase in legal costs is to align these expenditures with a more realistic budget. In previous years, we’ve had to request additional legal budget appropriations during the mid-year review. Other contract services include the Animal Shelter and 911 JPA increased costs.

Pursuant to City Council directions and in coordination with our City Manager’s Office, we executed targeted expenditure reductions, consisting of 1% baseline operational cuts across multiple general fund departments. These structural adjustments generated the necessary budgetary savings to sustain departmental service levels and strategic growth initiatives while still preserving a balanced General Fund with no deficits.

4 Table 2 – Vacant General Fund Positions Reduced to Balance Budget Additional vacant positions were eliminated in the Grants and Housing Funds due to the associated grant funding ending. These reductions reflect positions that were unfunded because of the expiration of their respective special funding sources.

Table 3- Grant and Housing Funds Positions Reduced due to Funding Ending Revenues:

The following chart illustrates the composition of revenues in the General Fund for FY 2025-26.

Position Department
Number
of FTE
Assistant City Manager City Manager 1
Custodian Public Works 1
Assistant Finance Director Finance 1
IT Analyst II Innovative Technology 1
Development Review Tech Community Development 1
Police Officer Police 2
Recration Coordinator Police 1
Police Clerk II Police 1
Fire Inspector Fire 1
Sr Admin Analyst Parks and Recreation 1
Totals 11
Position Department
Number
of FTE
Recreation Specialist Parks and Recreation 1
Program Coordinator Police 1
Administrative Analyst Community Development 1
Totals 3

5 Chart 1: General Fund Revenues by Type for Fiscal Year 2025-26 Property Tax- We are budgeting base property tax to be 3.6% higher than the estimated collections for FY 2024-25 resulting in a total of $14,943,741. Property taxes are collected based on County Assessor rolls that were formally closed in January of 2025. Normal Prop 13 assessed CPI growth maximum allowed is 2% but we have continued to see modest growth and properties changing hands and this is increasing our property tax base.

Sales Tax – The category of sales represents 34% of General Fund revenues, which has positioned itself as our top General Fund revenue source. This is due to the passage of Measure R. Measure R adds a ½ cent sales tax that is a true showing of our communities forward thinking and strong support to fund key community priorities, which include streets and roads, libraries and parks. Additionally, the City is also supported by sales tax in various special funds, including the Library, Measure Y Public Safety Sales tax, and Measure D Transportation Tax. Similar assumptions discussed in this report also affect each of these funds.

Over the past few years, sales tax has experienced robust growth. However, in the upcoming year, we are projecting modest increases. We cannot continue to assume the increases above budget we have been receiving, as nationwide car sales are slowing, uncertainty with tariffs, and the lower economy in general will start to affect this revenue stream. The table below shows the City’s share of the County’s

9.75% sales tax:

6 Table 4: Breakdown of Santa Cruz sales tax.

Hotel Tax – Hotel Tax represents a relatively smaller proportion of the City’s overall revenue mix. Hotel Tax is projected to grow by about 3% next fiscal year 2025-26.

Utility User Tax- Utility User Tax represents about 6.8% of General Fund revenues. This tax stream tends to be more stable as it is a tax on telecommunication services, electricity, gas, and water. This revenue has been basically flat in the current year, and we are expecting normal growth of 3% in the next budget year.

Community Development Department Revenues – The Community Development Department charges fees for various services, such as inspections, plan check, and permit issuance. The department is expected to see lower than budgeted revenues in the current year. They are further planning for decrease planning permit revenues due to several factors, including a few projects in the planning pipeline, reduced revenues from the streamlined approval process for infill projects downtown (involving only an Administrative Design Review Permit [~$4,000 per project] and streamlined environmental review because of the adopted Downtown Watsonville Specific Plan and associated EIR.

Furthermore, anticipated cooling market conditions and reduced new housing starts because of increased construction costs and uncertainty with tariffs on lumber and building materials.

Parks and Community Services Revenues – The Parks and Community Services Department is projecting modest increases in their departmental revenue over their current fiscal year collections. The Parks and Community Services department brings exceptional value, particularly through its low-cost services for our residents, especially children and seniors. The department has partnered with the Pajaro Valley Unified School District and is collaborating with the school district and in this way are leveraging resources to better serve the community. Parks staff are busy working on the Ramsay Park Renaissance Project and we will have a very much improved park space when we finalize this project. This budget

7 does include a lease revenue bond issuance of $12MM to help fund the Ramsay Park and Plaza Improvement project upgrades. We are using legally available general funds including Measure R for this issuance.

Other General Fund revenues make up smaller portions of the overall revenues and we are projecting fewer fluctuations. This includes items like business licenses and parking permits, franchise fees, lease revenues and interest. Each item was analyzed on its own. The budget does assume the use of $7.9MM of American Rescue Plan Act (ARPA) funds over the next fiscal year. We are using those funds to help fund the Ramsay Park Renaissance Project. At 26 acres, Ramsay Park is the City’s largest park and is often considered the community’s hub for recreation. The last major renovations to the site were completed over 30 years ago, bringing in new play structures and a ballfield, with the skatepark and pump track added in the past decade. It is important to highlight that these funds must be spent for its specific purpose by December 2026. The ARPA funds present us with a unique opportunity to address a pressing community call for reinvestment of this key space is demonstrated by a two-decade-long conversation with the community through countless meetings with hundreds of residents over three state grant applications that ultimately went unfunded, especially regarding improvements to the soccer field and play areas.

Table 5 below summarizes all the revenue categorized by type described above.

Table 5: General Fund Revenue Summary
Actual Projected Budget Budget
Revenue 2024 2025 2026 2027
Property Tax 14,788,668 14,943,741 15,661,030 15,786,150 Sales Tax-General 15,936,386 15,596,717 15,231,874 15,693,891 Hotel Room Tax 1,412,314 1,450,000 1,610,000 1,620,000
Utility User Tax 4,675,775 4,769,979 4,532,000 4,650,000 Transfers In 3,993,020 4,249,900 4,487,890 4,587,890
Measure R $6,190,360 5,403,984 5,573,439 5,625,000
TOTAL 46,996,523 46,414,321 47,096,233 47,962,931
General Fund 46,996,523 46,414,321 47,096,233 47,962,931 CDD 2,376,587 1,781,992 1,706,400 1,708,400
Police 1,608,643 1,441,599 1,707,297 1,707,297
Streets 44,078 82,122 262,000 262,000
Parks 766,243 627,513 875,163 875,163
Other 15,994,626 10,795,722 10,081,041 10,320,739
Bond Proceeds - - 12,000,000 -
TOTAL 67,786,700 61,143,269 73,728,134 62,836,530

8 Expenditures
The City is facing a situation where expenditures are projected to grow faster than revenues. In prior years, Watsonville was already dealing with structural shortfalls in its budget. This was primarily driven by increasing costs of unfunded actuarial liabilities (UAL) related to retirement costs. Unfunded actuarial liabilities refer to the difference between the projected obligations of the pension plan and the assets set aside to fund those obligations. Though this is still a major driver for the increased costs, salaries and insurance costs have also seen steep increases. We received a 12% increase in Worker’s Compensation, Liability and 4.8% Health Insurance rate increases. The City has demonstrated prudent fiscal planning and remained focused on maintaining reserves and anticipating future needs. We have reduced our workforce by 14 positions across our departments. We have been prudently working with our departments; we are better prepared to address unforeseen circumstances or financial challenges that may arise. We have implemented a 1% operating budget reduction as well. These two efforts have helped the City to be able to have a balanced budget with no deficits. We are also proactively planning for certain adjustments that must be made to accommodate cost-of-living adjustments, (COLAS), small equity adjustments, increased benefits costs, and contractual obligations.

With the passage of Measure R, we were able to leverage the funds and work on issuing a Lease Revenue Bond. Currently we are working with a financial advisor that tells us that a $12MM bond issuance would cost us $1.5 MM annual debt service payment for 10 years. We have already met with the rating board S&P and brought for your approval the issuance of this bond. We are excited that the $8.5MM will fully help fund the remainder of the Ramsay Renaissance Park Project and provide $3.5MM for the City Plaza renovation.

Additionally, this revenue source has added about $350k for Library operations and $1.4MM for additional Parks programming. On the other hand, Parks has been able to offer more programming for seniors and youth, seniors, Teen Action Council and added special events. Also, we have budgeted most of the fund balance and current operational revenue to fund our Library Rooftop project, the citywide Street Lights and a Trails annual project.

Table 6 below summarizes General Fund proposed budget that includes Measure R funds.

9 Table 6: General Fund proposed budget that includes Measure R funds Salaries– Salaries and benefits make up 51% percent of General Fund operating expenditures and therefore represent the greatest cost increase. The budget also reflects both actual and expected contractual raises for all our bargaining units. While salaries typically account for approximately 75% of the General Fund expenditure, this proportion appears reduced in the current fiscal year due to significant investments ($28.2MM) in capital projects funded by Measure R and Bond Proceeds.

Measure R is part of the General Fund and is therefore included with General Fund totals.

Graph 2: General Fund Expenditures Breakdown
Unfunded Actuarial Liability (UAL) – The City’s UAL costs pose an ongoing challenge. In the upcoming FY 2025-26, UAL costs will represent 8% of the general fund operating budget. The total of $7,386 million Proposed Measure R Budget FY 25/26
Operations
Parks 1,419,650
Library $350,000
Financing 1,500,000
Capital Library 2,600,000
Capital Public Works 2,200,000
Totals 8,069,650

10 represents a $982 thousand increase from the prior year. Costs are projected to increase every fiscal year until about 2032. At which point, there will be some relief as a result of a new retirement formula the City implemented in FY 2013, known as the California Public Employees’ Pension Reform Act (PEPRA). The fact that the UAL costs are expected to represent 12% of the general fund operating budget suggests a significant portion of the city’s financial resources will be allocated to addressing the liability. We have a CalPERS smoothing reserve of $1 million fully funded in our fund balance reserves to help mitigate the impact of the future UAL costs on the city’s budget.

Other Benefits – Other benefits, such as normal retirement costs, social security, and Medicare, are expected to rise at similar rates to salaries. Our health insurance broker has recently provided information that after several years of minimal or no increases in healthcare costs, there will be 4.8 percent rate increase in the upcoming calendar year.

Other Non-Position Costs—Other citywide non-position impacts on the General Fund are mainly rate increases and the JPA contract with the county for 911 and Animal Shelter Services. We are also expecting an unknown cost for the public safety radio system upgrade.

Select Department Changes
All departments are impacted by the citywide impacts described above. Table 6 shows the proposed General Fund operating budget by the department.

Table 7: General Fund Operating Budget by Department
Below is the table that shows the breakdown of the General Fund expenditures:

11 Graph 3: General Fund Operational Expenditures by Type Approximately 75 percent of the City of Watsonville’s operating revenues are allocated to personnel costs across all departments. The largest share supports Public Safety services, followed by Parks & Community Services and lastly the City’s Internal Support Departments.

Community Development Department – The Community Development Department is actively engaged in two major projects: in getting the City’s new general plan update and housing element to the finish line. They are further planning for a decrease in planning demands, including few projects in the planning pipeline and it is anticipating cooling market conditions and reduced new housing starts because of increased construction costs and uncertainty with tariffs on lumber and building materials.

Parks and Community Services Department- The Parks and Community Services (PCS) offers a wide array of services and programming for our community. The Science Workshop Program is also a program that PCS offers; this helps better leverage our combined child programming resources. PCS grew programs and community participation through the addition of Measure R funds. They added programming for youth, seniors, Teen Action Council and added special events. In addition to the ongoing projects and programs mentioned earlier, the department is also actively involved in the Ramsay Renaissance Park Improvements. Bothman Construction was awarded the contract at the March 2024 meeting.

Construction is in full swing, in fact we just negotiated additional funding through a lease revenue bond we are issuing leveraging general funds including Measure R funds. The park’s grand opening is expected in late 2025. The department is also working on the design for the City Plaza renovation.

These efforts demonstrate the City’s and department commitment to enhancing recreation facilities and providing inclusive and enjoyable spaces for our community.

12 Other General Fund Operational Changes- As discussed, most of the increases in the table above reflect the increased costs of doing business and increases in salary and benefits for existing employees.

Graph 4: General Fund Operational Expenditures by Department for Fiscal Year 2025-26 Five Year Outlook
Our five-year projection assumption assumes that there will be no new programmatic changes. It provides a snapshot of the projected costs if we were to maintain our current operations and not introduce new programming. To that end it takes our annual budget produced and described above and adds some assumed inflationary factors to both the revenues and expenses. This of course will be refined and updated each year as information becomes available, as economic conditions change, as new priorities arise, and as decisions are made to keep the City’s budget in balance. Table 8 reflects the General Fund’s five-year outlook with major assumptions described below.

Table 8: General Fund Five-Year Outlook
2025/26 2026/27 2027/28 2028/29 2029/30
General Fund Revenues 73,728,134 62,774,170 63,837,515 65,079,082 66,810,561 Operational General Fund Expenditures 57,575,361 62,391,700 64,141,777 66,007,680 67,929,560 Capital 30,015,929 2,872,000 2,872,000 2,872,000 2,872,000 Excess of Revenues Over/Under Expenditures (13,863,156) (2,489,530) (3,276,262) (4,000,598) (4,290,999)

13 Property Tax: Based on historical figures we are projecting a 3% increase in each of the out years.

Sales Tax: FY 2025-26 sales tax is expected to have a 3.6% increase over the last fiscal year. In the following years past the current proposed budget, we have received estimates from our sales consultants as to our percentage growth increases assuming some normal growth.

Other Non-Department and Departmental Revenues: Are projected to grow between 2% and 3% for each of the out years assuming some normal amount of inflation.

Salaries: In the last three years we assume salaries have grown very gradually, at 2%.

Retirement Costs: The normal cost portion of our retirement is anticipated to grow at the same rate as our salaries. Our portion of the unfunded liability is based on the most recent actuarial reports from CalPERS. The actuarial report shows our annual liability increasing in the budget year included.

Health Benefits – While Watsonville has seen little to no increases in our health insurance costs in recent years, we knew it was an anomaly in industry and among our peer cities. The City of Watsonville has recently been informed that after several years of minimal or no increases in healthcare costs, there will be a moderate increase of approximately 4.8 percent in the upcoming calendar year. We have planned such an increase in the next fiscal year as the increase is effective at the beginning of the calendar year.

Utilities – We will be working on a new rate fee study in the upcoming fiscal year but have used the previous adopted rate increase schedule for the Public Utilities of 1% for Water, 7.5% for Wastewater, and 5% for Solid Waste.

Other Non-Personnel Costs – We assume these costs will increase by 3%, an assumed approximate for CPI.

Operating Capital- In our 5-year Capital Plan, we are budgeting capital for just over $20.1 million in FY 2026-27. The City has quite a bit of unfunded capital needs. We continue to look for outside funding sources to meet those needs. However, budgeting a realistic amount of capital to maintain our facilities is imperative to preventing projects from becoming larger and more expensive replacement projects.

14 Select Special Revenue Funds
Table 9: Select Special Revenue Funds
Library Fund
The Library Fund is supported through a County levied special sales and use tax, Measure R funds, and General Fund. As such, we expect its revenues to return to normal levels and follow the sales tax patterns described above. The library proposes to utilize some of its accumulated fund balance in their special revenue fund for building improvements, upgrading the AV in the meeting rooms and adding pillar booths. This will enable the library to expand its service, offering to better cater to the needs of our citizens.

ARPA
We have budgeted and obligated the remaining American Rescue Plan Act (ARPA) funds to support improvements at the Ramsay Park Renaissance project. This fund provided us with opportunities to fund streets, council chamber upgrades, youth job training, Summer in the City Program and position restoration, just to name a few. We will continue to monitor the spending of these funds as the deadline to fully spend down these funds is December 31, 2026.

Gas Tax and SB1
Gas Tax is expected to be relatively flat in this budget. These funds pay for roadway projects and include some staff and material costs for regular maintenance of the streets. The Public Works Department has been very successful in recent years in receiving grants for transportation projects in addition to these special revenue funds.

Measure Y
In March 2020, Watsonville voters overwhelmingly approved Measure Y, renewing the existing half-cent public safety sales and use tax. This renewal has provided continued support for essential city services, particularly in the Fire, Police and Parks departments, by allowing for increased expenditures and 0250 0262 0274 0305 0306 0310 0312
Projected Resources 2025-26 LIBRARY
ARPA FUNDAMERICAN

RELIEF PLAN

PUBLIC ART

FEE GAS TAX
SB 1 - GAS TAX

FUNDING SALES TAX

MEASURE Y

MEASURE D -

TRANSPORTATION
FUND
Revenues 4,699,264 7,891,503.00 25,000.00 1,455,601.00 1,100,000.00 5,212,100 1,178,000 Transfer In 25,940
Total Gross Resources 4,725,204 7,891,503 25,000 1,455,601 1,100,000 5,212,100 1,178,000 Operations 4,569,883 - 100,000.00 1,084,038.00 - 5,479,856 - Capital 386,000 7,891,503.00 1,285,094.00 5,771,374.00 1,940,630 5,725,525 Transfer Out 180,648 - -
Debt Service -
Grand Total 5,136,531 7,891,503 100,000 2,369,132 5,771,374 7,420,486 5,725,525 Surplus / (Shortfall) (411,327) - (75,000) (913,531) (4,671,374) (2,208,386) (4,547,525)

15 expanded budgets. The Fire and Police Departments can fund positions, other operating expenditures, and some capital with these funds. The Parks Department can fund repairs, staffing and other operating costs with their allocation.

Both Fire and Police are now facing limitations in capital funding capacity. As a result, ongoing support from the General Fund will be necessary to meet future capital investment needs. In the current fiscal year, the City is planning to purchase a new tiller truck using a portion of the remaining spendable fund balance. The General Fund will assume responsibility for the associated debt service payments in future years, ensuring the department can maintain its critical emergency response capabilities.

Select Enterprise Funds
Table 10: Select Enterprise Funds
The Utility Enterprise Funds of Wastewater, Water, and Solid Waste are proposing minimal changes to their operating budgets. In this upcoming fiscal year, they will be embarking on a new five-year rate study. The study will evaluate the need for additional resources to support several upcoming capital projects that are expected to be significant in cost. The rising costs within the Utility Enterprise Funds are primarily driven by increasing capital improvement expenses, the costs of materials and supplies, and in the case of Solid Waste, the cost of disposal contracts, rather than personnel-related cost increases typically seen in the General Fund.

The Water Fund is preparing to pursue a 4.5MM State Revolving Fund (SRF) loan to finance upcoming compliance requirements related to Chromium-6 regulations. Simultaneously, the Wastewater Department will be initiating the replacement of the Main Switchgear and Energy Recovery Electrical System Improvements. These two major initiatives represent the primary drivers contributing to increased budgetary needs with the enterprise funds. Our Solid Waste Division was able to reopen Landfill Cell IV in the current fiscal year after a seven-year closure, unveiling two new areas that will give the city its own waste facility for about 75 years. This project is a major milestone in sustainable waste 4 ENTERPRISE FUNDS
0710 0720 0730 0740 0741 0789
Projected Resources 2025-26 WASTE WATER WATER AIRPORT SOLID WASTE

LANDFILL

CLOSURE

FIBER OPTIC
FUND
Revenues 36,232,690 27,174,548 4,636,463 20,231,889 141,850 Transfer In
Total Gross Resources 36,232,690 27,174,548 4,636,463 20,231,889 - 141,850 Operations 19,544,209 18,486,395 4,346,395 16,958,395 150,761 77,443 Capital 21,310,995 34,664,932 171,000 2,990,055 630,545 Transfer Out 202,513 31,651 5,056 45,836
Debt Service 182,013 4,118 28,796 547,966
Grand Total 41,239,730 53,187,096 4,551,247 20,542,252 781,306 77,443 Surplus / (Shortfall) (5,007,040) (26,012,548) 85,216 (310,363) (781,306) 64,407

16 management. Reopening the landfill strengthens the City’s ability to manage waste locally, keeping costs down for residents and ensuring a more sustainable future.

The Airport Fund is supported through three revenue streams, leasing properties to aeronautical and non-aeronautical commercial businesses, leasing of aviation storage units, and aviation fuel sales. The department is expecting revenues to improve in the budget cycle. The Airport is committing a portion of its special events budget to community outreach efforts by partnering with local schools and offering the 4
th grade field trip, community non-profits and emergency services groups. They are also planning a Fire in the Sky event in September 2025.

Five-Year Capital Improvement Plan
The Five-Year Capital Plan helps the City prioritize its funding and planning for longer term structural needs. This year, all departments submitted a comprehensive list of all capital needs and projects.

Departments were encouraged to submit all their known capital needs knowing that the City may not be able to fund all projects. The list will inform the City of its capital needs. Several departments have recently been through Master Planning processes which formed their requests. Furthermore, the Public Works and Utility department has recently completed a comprehensive facility study. The study identified most of the City’s buildings and their maintenance and repairs needs.

The prioritization and decision process differed depending on the funding source. For the General Fund, this year’s guiding principles were:
1) To fund projects that align with City Council’s strategic priorities as much as possible to create efficiencies by collaborating across the City.
2) To match or sync up with grant or other funding activities occurring at the same time; and 3) Projects required by changes in law or operational necessity. 4) Maximize the use of fund balance from other available funds to preserve General Fund for projects with no other funding options.

Based on the above criteria, the General Fund has prioritized finishing the Ramsay Renaissance Park Project and the City Plaza Renovation projects. New funding in the General Fund is $13MM in FY 2025- 26, which includes an additional $8.5MM for the Ramsay Renaissance Project and $3.5MM for the City Plaza Project. The City is issuing lease revenue bonds in the amount of $12MM to be able to complete these projects. The General fund’s capital expenditure also includes funding for police vehicles, body worn cameras and flock cameras. We are also proposing to fund $159k towards the financing of a fire tiller-truck for our Fire Department. Also, included in the reappropriation are the costs for the City’s General Plan, Wayfinding and Ramsay Park. We are hoping to complete Ramsay Park by the end of 2025 and re-open for our community’s use. Measure R is proposing to fund the Library Rooftop Project at $2.6MM and the Citywide Streetlights project at $1.9MM.

The Fire Department is requesting approval to sign a purchase order with Burton’s Fire Truck Inc. to lock in current truck pricing available through the Sourcewell contract. The price is guaranteed. Although the

17 purchase will be finalized now to secure pricing, financing payments will begin in the next fiscal year, in alignment with the proposed budget presented for your consideration. Authorizing the purchase of the fire truck will enhance fire response times and support the Fire Department’s ability to keep our community safe.

Most capital projects are not General Fund and will be managed by the Public Works and Utilities Department. Both the Wastewater and Water Enterprise Funds have previously completed comprehensive master plans last year which informed their proposals.

Wastewater Fund
In Fiscal year 2024/25, the two larger recommended projects are the Main Switchgear and Energy Recovery Electrical System Improvements $15MM in FY 2025-26. The main electrical switchgear and backup generation system that provides power and emergency backup power to all equipment in the Wastewater Treatment Plant is nearing the end of its useful life. This critical equipment was identified in the Wastewater Treatment Plant (WWTF) Hazard Assessment as vulnerable to flood and seismic hazards.

This project will replace this critical equipment and mitigate future floods or seismic hazards so WWTF will continue to provide safe and effective wastewater treatment for the communities it serves. We are also planning to spend about $1.35MM on sewer pump improvements at the lift station at Pajaro Dunes.

We also are budgeting for a fencing project and reappropriating $1.0MM for a Headworks Project.

Water Fund
In Fiscal Year 2025/26 the Water Fund is proposing to spend $4.5MM on a project to work on water main replacements. Water mains are pipes that supply drinking water to homes and businesses. As they age, they become corroded and can break, causing problems for communities. The City invests to improve water system reliability. Additionally, in Fiscal Year 2025-26 they are proposing to spend $2MM on the Chromium-6 project. The State is in the process of updating the regulation limits for Chromium-6.

Depending on the final regulation limit issued by the State, several of the City's existing well sites may require additional treatment to meet these new regulatory limits. This project will provide Chromium-6 treatment technology at wells 2,3,7,14,17 &18 to meet regulatory compliance.

They are also proposing other projects that will repair or improve reservoirs, RWTF Electrical Improvements, water meter main replacements and various other projects.

Solid Waste
The Solid Waste Capital Program is a bit smaller than in years past as they completed the reopening of Cell IV in April 2025. The proposed planned purchases are collection vehicles, street sweepers, and fuel trailers at about $1.0MM. They will also be working on some building improvements and are proposing to spend $300k for FY 25/26.

Grant Funds

18 The City has been successful in obtaining a $10.5MM grant to construct a pedestrian bridge over SR 1, install sidewalk and reconfigure bike lanes on Harkins Slough Rd. and modify Harkins Slough Rd/Green Valley Rd/Silver Leaf Dr intersection to improve bicycle and pedestrian access. Also, at Pajaro Valley High School and at feeder schools and various locations within the high school attendance area install high visibility crosswalks, curb extensions, upgrade curb ramps and improve bicycle facilities and provide pedestrian and bicycle safety training.

Transportation Funds
Funding comes from many sources, and each has its own requirements. Four of the sources, Gas Tax, Measure D, SB1 and General Funds in the form of Measure R have similar requirements and can be used on design and construction of transportation projects that include road repair and rehabilitation, traffic signals, safety improvements and bicycle and pedestrian improvements. The City also secures grant funding through local, State and Federal sources that is awarded on a competitive basis. These grants often focus on an area, such as safety, pedestrian facilities, bicycle facilities or reducing pollution. Another source of funding is developer fees, which are collected for specific improvements in an area and used restricted to that purpose.

The number and size of projects identified in our recent Pavement Management Plan will be determined by available funding. Currently, Watsonville receives approximately $3.5MM annually from Gas Tax, SB1 and Measure D to fund all transportation work and projects. Approximately $1 million of this is used for staffing, operations, and maintenance costs. Grants also provide one-time funding for specific projects.

We are planning to spend $3.7MM on pavement repair in fiscal year 25/26.

Unfunded Capital Needs
Despite a plan which expects to fund over $60.5 million of new Capital projects next budget year, we still have many unfunded capital projects. The majority of these are not for “wish list” items but for basic maintenance and updates to our facilities and equipment, as identified in our facility’s plan. Capital investment was neglected after the 2008 recession and has left the City with a backlog of needs to our police and fire stations, our parks, our community buildings, and our sports facilities. We will continue to seek grants and other funds to invest in our capital assets and potentially look to Federal infrastructure funding that we hope will come our way.

19 Table 11: Capital Improvement Program by Funding Source Budget Legislation
Each year the passage of the budget requires the passage of a few legislative items. Below is a listing of each of those items along with a brief description.

Staff recommends the following actions at the June 10, 2025, council meeting. 1) Approve a Resolution authorizing City Manager to sign the purchase order with Burton’s Fire Inc. for a purchase of a Rosenbauer Tiller on a Commander Chassis in the amount of $2,710,669.70 from Burton’s Fire Inc.

Capital Improvement Plan Summary
FY25/26 Requests Carryforwards 2026/27 2027/28 2028/29 2029/30 GENERAL FUND $ 13,126,062 $ 6,972,051 $ 3,096,062 $ 4,458,062 $ 9,426,062 $ 1,571,062 MEASURE R $ 4,800,000 $ 5,117,816 $ 400,000 $ 300,000 $ 300,000 $ 300,000 COMPUTER REPLACEMENT FUND $ - $ -
TOTAL GENERAL FUND $ 17,926,062 $ 12,089,867 $ 3,496,062 $ 4,758,062 $ 9,726,062 $ 1,871,062

SPECIAL REVENUE FUNDS
CDBG $ 225,000 $ - $ - $ - $ - $ -
CIVIC CENTER $ 445,000 $ 1,010,435 $ 1,035,000 $ 75,000 $ - $ - LIBRARY $ 106,000 $ 280,000 $ - $ - $ - $ -
GRANTS $ 10,541,000 $ 16,626,633 $ 6,863,000 $ - $ - $ - ARPA $ - $ 7,891,503 $ -
PARKS DEVELOPMENT $ - $ 89,712 $ - $ - $ - $ -
GAS TAX $ 555,000 $ 730,094 $ 555,000 $ 555,000 $ 555,000 $ 555,000 SB1 $ 3,725,000 $ 2,046,374 $ 1,325,000 $ 1,325,000 $ 1,325,000 $ 1,325,000 MEASURE Y $ 514,000 $ 1,426,630 $ 1,198,614 $ 1,164,000 $ 500,000 $ 115,000 MEASURE D $ 1,750,000 $ 3,975,525 $ 1,180,000 $ 1,180,000 $ 1,180,000 $ 1,180,000 EAST HIGHWAY $ - $ 321,000 $ - $ - $ - $ -
UNDERGROUND UTILITY $ - $ 287,171 $ - $ 350,000 $ - $ - STORM DRAIN $ 70,000 $ 400,000 $ 2,000,000 $ - $ - $ -
PARK LAND IMPACT $ - $ 24,120 $ - $ - $ - $ -
CITY-WIDE TRAFFIC $ 900,000 $ 70,468 $ - $ - $ - $ -
PUBLIC FACILITIES $ - $ 11,603 $ - $ - $ - $ -
MANABE OW IMPACT FEE $ 190,000 $ - $ - $ - $ - $ -
TOTAL SPECIAL REVENUE FUNDS $ 19,021,000 $ 35,191,268 $14,156,614 $ 4,649,000 $ 3,560,000 $ 3,175,000 $ -
ENTERPRISE FUNDS $ -
AIRPORT $ 80,000 $ 91,000 $ 887,200 $ 420,000 $ 1,587,000 $ - WASTEWATER $ 10,515,000 $ 10,795,994 $ 12,725,900 $ 19,089,454 $ 13,550,000 $ 7,550,000 WATER $ 10,510,145 $ 24,154,787 $ 19,310,402 $ 19,588,106 $ 29,978,158 $11,287,632 SOLID WASTE $ 1,290,000 $ 1,700,055 $ 1,580,808 $ 935,808 $ 1,500,000 $ 100,000 LANDFILL CLOSURE $ 300,000 $ 330,546 $ 200,000 $ 100,000 $ 100,000 $ 100,000 INFORMATION TECHNOLOGY $ 840,000 $ 410,552 $ 340,000 $ 340,000 $ 340,000 $ 200,000 TOTAL ENTERPRISE FUNDS $ 23,535,145 $ 37,482,934 $35,044,310 $40,473,368 $47,055,158 $19,237,632 $ -
TOTAL CIP $ 60,482,207 $ 84,764,069 $52,696,986 $49,880,430 $60,341,220 $24,283,694

20 2) Approve a Resolution calling for bids for the Citywide LED Streetlight Module Procurement and installation services, this project will be funded with Measure R Funds STRATEGIC PLAN:

The current balance budget meets Strategic Plan goal Number 2 of fiscal health by presenting a balanced budget, preserving the General Fund Reserve, and looking ahead to ensure the long-term financial health of the City.

FINANCIAL IMPACT:

Appropriate Fiscal Year 2025-26 spending $316,105,441.

ALTERNATIVE ACTION:

The City Council may direct staff to present different alternatives for the budget or make changes to the current recommendation.

ATTACHMENTS AND/OR REFERENCES (IF ANY):

None.

Reso No. (CM)
Meeting Date: 061025 SWZ ______ TV ______ WFD ______
1 RESOLUTION NO. (CM)

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
WATSONVILLE AUTHORIZING THE PURCHASE OF ONE (1)
ROSENBAUER 100’ TRACTOR DRAWN TILLER ON A COMMANDER

CHASSIS AND SPECIFIED EQUIPMENT FOR THE WATSONVILLE FIRE

DEPARTMENT THROUGH THE NATIONAL JOINT POWERS
AGREEMENT, IN AN AMOUNT NOT TO EXCEED $2,710,699.70;

AUTHORIZING AND DIRECTING THE CITY MANAGER TO EXECUTE
PURCHASE ORDER WITH BURTON FIRE INC., INCLUDING ANY

EXTENSIONS OR AMENDMENTS THEREOF IN ORDER TO IMPLEMENT
THIS AGREEMENT; AND AUTHORIZING THE CITY MANAGER TO SIGN NECESSARY CHANGE ORDERS NOT EXCEEDING FIFTEEN (15%)
PERCENT OF THE $2,710,699.70 BASE PRICE (FUNDED BY THE
MEASURE Y [0310] FUND AND GENERAL FUND [0150])
WHEREAS, competitive bidding requirements for the purchase of supplies, equipment and non-personal contractual services and the sale of personal property are set forth in Chapter 5 of Title 3 of the Municipal Code; and WHEREAS, subdivision (e) of § 3-5.210 exempts purchases made cooperatively with one (1) or more units of government through cooperative purchasing programs substantially the same as the City of Watsonville’s; and
WHEREAS, the City and Burton’s Fire Inc. are members of the National Joint Powers Agreement (NJPA); and
WHEREAS, NJPA creates national cooperative contract purchasing solutions on behalf of its member agencies; and
WHEREAS, the City received a quote from Burton’s Fire Inc., member of Sourcewell (formerly NJPA) through purchasing contract #113021-RSD, for the purchase of one (1) Rosenbauer 100’ Tractor Drawn Tiller on a Commander Chassis and specified equipment, in an amount of $2,710,699.70; and
WHEREAS, City staff has evaluated the bid process used by Sourcewell and determined that its bid process is similar to that of the City of Watsonville.

Reso No. (CM)
Meeting Date: 061025
2 NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF WATSONVILLE, CALIFORNIA, AS FOLLOWS:

1. This action is exempt from the requirements of the California Environmental Quality Act (CEQA) in accordance with CEQA Guidelines Section 15378(b)(5), in that approving the purchase of one (1) Rosenbauer 100’ Tractor Drawn Tiller on a Commander Chassis does not meet CEQA's definition of a “project,” because the action does not have the potential for resulting in either a direct physical change in the environment or a reasonably foreseeable indirect physical change in the environment, and because the action constitutes organizational or administrative activities of governments that will not result in direct or indirect physical changes in the environment and if a “project,” is exempt under the “common sense” exception (14 Cal. Code Regs. § 15061(b)(3)) because it can be seen with certainty that there is no possibility that this action may have a significant effect on the environment.

2. This purchase is exempt from the purchasing procedures of Chapter 5 of Title 3 of the Municipal Code as a purchase made cooperatively with one (1) or more units of government under subdivision (e) of § 3-5.210 of the Municipal Code.

3. That the Council hereby authorizes the purchase of one (1) Rosenbauer 100’ Tractor Drawn Tiller Rosenbauer Commander Chassis and specified equipment for the Watsonville Fire Department from Rosenbauer Minnesota LLC., through the purchasing authority of Sourcewell (formerly National Joint Powers Agreement), in an amount not to exceed $2,710,699.70, funded by the Measure Y and General Fund.

4. That the City Manager is hereby authorized and directed to execute a Purchase Order with Burton’s Fire Inc., in an amount not to exceed $2,710,699.70,

Reso No. (CM)
Meeting Date: 061025
3 including any extensions or amendments thereof in order to implement this Order for the City of Watsonville.

5. That the City Manager is hereby authorized to sign necessary change orders not exceeding 15% of the $2,710,699.70 base price.
****************************************

Purchaser: Contract #
Address 1: Supplier:

Address 2: Address 1:

City, State, Zip: Address 2:

City, State, Zip:

Quantity
Salesperson:

Signature:

Purchaser:

Burton's Fire Inc.

Title:

Date
Signature:

Rosenbauer Dealer :

Wyoming, MN 55092
PO Box 549
Date:

Purchase Order Number: 18533
Delivery in Calendar Days, after
receipt and acceptance of Order: 660
Member #
$2,710,699.70
NOTES:

Watsonville Fire Department
TOTAL $2,710,699.70
(enter)
The contract/purchase order price includes sales tax in the amount of $239,787.70.

PURCHASE ORDER
Watsonville Fire Department
115 2nd Avenue
Watsonville Fire Department, CA 95076

SUPPLIER
Sourcewell Contract #: 113021-RSD
Purchaser
5180 260th Street
Rosenbauer Minnesota, LLC
The amount in this proposal shall remain firm for a period of 30 days from the date of same. 1 $2,710,699.70
Description Price Price (Extended)
One (1) (select), complete with (select) chassis per attached specifications.

Print Name:

Change Window #1
RBM Chassis 0-60 days
RBA Aerial 0-60 days
Rosenbauer Body 0-60 days
Change Window #2
RBM Chassis 61-75 days
RBA Aerial 61-75 days
Rosenbauer Body 61-120 days
Change Window #3
RBM Chassis 76-120 days
RBA Aerial 76-120 days
Rosenbauer Body 121-180 days
Change Window #4
RBM Chassis After 120 days
RBA Aerial After 120 days
Rosenbauer Body After 180 days
*Note: Any late change orders that are factory driven will be done at cost and no additional mark up or penalties will apply.

INFLATIONARY NOTICE
BUYER INITIALS:

Changes are not recommended at this time. Any changes requested will be priced on a time and material basis. Any changes requested, and that are quoted to the customer, must be approved by the customer within three days or they will not be valid.

All changes are subject to a 25% mark-up. All changes are subject to factory review and may be denied due to engineering or lead time issues.

All changes are subject to a 50% mark-up, and 50% restocking fee on deleted items. All changes are subject to factory review and may be denied due to engineering or lead time issues. No major components can be changed at this time; major components are considered engine, transmission, axles, suspension, cab, frame (wheelbase), seats, water pump and water tank.

This change order policy is intended to reflect the increased cost of changes which result in delayed deliveries, confused paperwork, poor production flow and increased potential of trucks being built to incorrect specifications. With your cooperation, changes can be kept to a minimum which means we will be able to reduce lead times, increase production and maintain costs which will benefit all of us.

Our objective is accurate, high quality and on-time deliveries exceeding our customer expectations.

Changes any time after the order is received may delay the quoted delivery date. Significate design or component changes will have the largest impact on the schedule and quoted delivery date. Changes that occur later in the process will also have the largest impact on the schedule and quoted delivery date.

All time fences are reference to contract execution date if not otherwise stated.

APPENDIX C

CHANGE ORDER POLICY
All changes will be priced at standard pricing and specials will be priced through our normal process. Significant changes made to the vehicle during this time period may result in a delivery extension.

Due to unprecedented volatility with inflationary pressures in our economy and existing market demand creating substantial production backlogs, Rosenbauer America reserves the right to potentially request price escalation under this contract. To be fair and reasonable, any potential price escalation request will be presented and supported with specific evidence of supply chain cost increases from material or component providers. Upon request, this may include copies of invoices from relevant suppliers to substantiate accordingly. Any request will be done in a timely manner for careful review and consideration.

BUYER INITIALS:

Cancellation Window #3
All requests for cancellation after the specifications have been released until the truck starts in production will incur a $15,000 cancellation fee in addition to evaluation of materials that have been ordered
Cancellation Window #4
All requests for cancellation while the truck is in production will be subject to review and charged based material and production time.

APPENDIX D

CANCELLATION POLICY
This cancellation policy is intended to outline the costs associated with canceling a contract after the vehicle has been ordered.

Cancellation Window #1
All requests for cancellation from order entry until the preconstruction meeting is held will incur a $5,000 cancellation fee.

Cancellation Window #2
All requests for cancellation after the pre construction until the specifications have been released to engineering will incur a $10,000 cancellation fee.

Reso No. (CM)
Meeting Date: 061025 SWZ ______ TV ______ PWU ______
1 RESOLUTION NO.__________ (CM)

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF

WATSONVILLE APPROVING RELEASE OF REQUEST FOR BIDS FOR

THE PROCUREMENT OF LED STREETLIGHT MODULES AND

REQUEST FOR PROPOSALS FOR INSTALLATION SERVICES,
PROJECT ESTIMATE IS $1.9M AND WILL BE FUNDED FROM THE
MEASURE R FUND (0201)
WHEREAS, the LED Streetlight Upgrade project will solicit material bids from vendors and solicit installation services from Contractors; and

NOW THEREFORE BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF WATSONVILLE, CALIFORNIA, AS FOLLOWS:

1. This action is exempt from the requirements of the California Environmental Quality Act (CEQA) in accordance with CEQA Guidelines Section 15378(b)(5), in that calling for bids for the procurement and installation of LED Streetlight Modules does not meet CEQA's definition of a “project,” because the action does not have the potential for resulting in either a direct physical change in the environment or a reasonably foreseeable indirect physical change in the environment and if a “project,” is exempt under the “common sense” exception (14 Cal. Code Regs. § 15061(b)(3)) because it can be seen with certainty that there is no possibility that this action may have a significant effect on the environment.

2. That the plans and specifications for the LED Streetlight Upgrade, Project No. _________, copies of which are on file in the Office of the City Clerk and incorporated by reference in this Resolution, are hereby approved.

3. That the Purchasing Officer is hereby authorized and directed to call for public competitive sealed bids in accordance with Title 7, Chapter 14 of the Watsonville Municipal Code for the above named project, and that the bids are to be

Reso No. (CM)
Meeting Date: 061025 2
opened in the “Old City Council Chambers”, 250 Main Street, Watsonville, California, on July 2, 2025, at 4:00 PM and the City Clerk is hereby directed to give notice inviting such sealed bids in the time, form, and manner provided by law.

4. That hand-carried bids should be delivered to the City of Watsonville, 250 Main Street, Watsonville, California, c/o Purchasing Officer. Bidders may mail bids at their own risk to the City of Watsonville, c/o Purchasing Officer, 250 Main Street, Watsonville, California 95076.

5. That after the bids are opened, they shall be tabulated and analyzed and a report submitted to the City Manager, who shall recommend the awarding, or other action, to the Council at its next regular meeting, or as soon thereafter as possible.

6. Council authorizes staff to issue Request for Proposals for Installation Services for the LED Streetlight Upgrade project.

7. That after the proposals are opened, they shall be analyzed, and a report submitted to the City Manager, who shall recommend awarding, or other action, to the City Council at the next regular meeting, or as soon thereafter as possible. ************************************

City of Watsonville
Finance Department
June 10, 2025
Proposed Budget FY
2025-27
Marissa Duran
Administrative Services Director

Today’s Topics
• Budget overview and study session
• General Fund
• Capital Improvement Plan
• Approve resolution approving purchase order for the purchase of a new fire truck
• Approve a Resolution calling for bids for the Citywide LED Streetlight Module Procurement and installation services, this project will be funded with General Fund that includes Measure R funds
• Enterprise and Other Funds
• Set the budget adoption date for two weeks from now.

June 2025 – Biannual Budget
February 2026 - Mid-Year
June 2026 – Budget Revise for FY 26/27
Budget
Schedule

Budget Overview
General Fund
Total Special Total
Debt
Total
Enterprise
Total
Internal
Total
Private Trust
Total Total All Funds
Projected Resources 2025-26
Revenues 103,682,983 28,424,164 - 88,417,440 24,117,936 419,145 245,061,668 Transfers In 4,752,993 119,135 286,993 - - - 5,159,121
Total Gross Resources 108,435,976 28,543,299 286,993 88,417,440 24,117,936 419,145 250,220,789 Projected Expenditures
Operations 66,292,927 13,691,709 - 59,563,598 24,622,232 77,742 164,248,208 Capital 58,926,168 25,302,029 - 59,767,527 1,250,552 - 145,246,276 Transfers Out 170,527 4,688,570 - 285,056 - 14,968 5,159,121 Debt Service - - 286,993 762,893 - 401,950 1,451,836
Total Gross Uses 125,389,622 43,682,308 286,993 120,379,074 25,872,784 494,660 316,105,441 Surplus / (Shortfall) (16,953,646) (15,139,009) - (31,961,634) (1,754,848) (75,515) (65,884,652) Projected Resources 2026-27
Revenues 66,256,213 21,020,956 - 96,625,721 25,115,663 419,145 209,437,698 Transfers In 4,922,256 93,195 286,161 - - - 5,301,612
Total Gross Resources 71,178,469 21,114,151 286,161 96,625,721 25,115,663 419,145 214,739,310 Projected Expenditures
Operations 62,927,533 13,695,479 - 62,305,898 25,772,585 10,715 164,712,210 Capital 11,394,062 3,060,000 - 34,704,310 340,000 - 49,498,372 Transfers Out 147,023 4,854,565 - 285,056 - 14,968 5,301,612 Debt Service - - 144,521 472,194 - 397,200 1,013,915
Total Gross Uses 74,468,618 21,610,044 144,521 97,767,458 26,112,585 422,883 220,526,109 Surplus / (Shortfall) (3,290,149) (495,893) 141,640 (1,141,737) (996,922) (3,738) (5,786,799)

Budget By Fund FY 25/26

Budget by Expenditure Type

General Fund

A fund which accounts
for the tax supported
activities of the City and
other types of activities
not elsewhere
accounted for.”

General Fund Revenues

General Fund Revenues
Revenue 2024 2025 2026 2027
Property Tax 14,788,668 14,943,741 15,661,030 15,786,150 Sales Tax-General 15,936,386 15,596,717 15,231,874 15,693,891 Hotel Room Tax 1,412,314 1,450,000 1,610,000 1,620,000
Utility User Tax 4,675,775 4,769,979 4,532,000 4,650,000 Transfers In 3,993,020 4,249,900 4,487,890 4,587,890
Measure R $6,190,360 5,403,984 5,573,439 5,625,000
TOTAL 46,996,523 46,414,321 47,096,233 47,962,931
General Fund 46,996,523 46,414,321 47,096,233 47,962,931 CDD 2,376,587 1,781,992 1,706,400 1,708,400
Police 1,608,643 1,441,599 1,707,297 1,707,297
Streets 44,078 82,122 262,000 262,000
Parks 766,243 627,513 875,163 875,163
Other 15,994,626 10,795,722 10,081,041 10,320,739
Bond Proceeds - - 12,000,000 -
TOTAL 67,786,700 61,143,269 Page 233 of 908 73,728,134 62,836,530 General Fund by Department

General Fund Operational
Expenditures

General Fund Expenditures
Actual Original Budget Budget
Expenditutres 2024 2025 2026 2027
City Council 125,142 296,825 222,385 224,740
City Manager 1,831,926 1,861,960 1,849,053 1,943,845
City Clerk 732,570 1,196,910 841,968 872,677
City Attorney 163,010 603,757 703,262 703,262
Community Development 3,086,169 3,229,808 2,821,973 2,984,845 Finance 1,564,016 1,898,810 2,003,388 2,110,801
Human Resources 894,256 913,185 1,099,108 1,161,101
Social Services 239,436 279,415 235,000 250,000
Parks & Community Services 5,697,669 7,336,688 7,794,136 8,083,314 Fire 9,344,775 9,239,593 9,434,479 9,893,285
Library 454,088 943,584 887,789 945,154
Non-Department 3,827,378 2,904,728 2,717,042 2,774,248
Police 22,539,380 24,866,361 24,741,722 26,133,627
Public Works 1,754,656 1,373,247 2,224,056 2,321,667
Total Depts 52,254,471 56,944,871 Page 236 of 908 57,575,361 60,402,566 Key Items to Balance Operational Budget
*Remove 11 Vacant Positions from Budget for FY
25/26, previously on pause from hiring
*Implement a contingent budget for a 1% reduction
of operational expenditures for fiscal year,
approximately $450,000 across general fund
departments

Budget Savings for a Balanced Budget

Contingency Budget
Target 1% Reduction Rates
FUND ORG ACCOUNT DESCRIPTION 24/25 ORIGINAL 1% Target
0150 110 Total 110 CITY COUNCIL 296,825 2,968.25
0150 120 Total 120 CITY MANAGER 1,861,960 18,619.60
0150 130 Total 130 CITY ATTORNEY 603,757 6,037.57
0150 160 Total 160 CITY CLERK 843,000 8,430.00
0150 162 Total 162 CITY CLERK - ELECTIONS 53,910 539.10 0150 210 Total 210 HUMAN RESOURCES 913,185 9,131.85
0150 220 Total 220 CENTRAL OFFICE/BUILDING M 831,176 8,311.76 0150 230 Total 230 FINANCE 1,656,979 16,569.79
0150 240 Total 240 PURCHASING 241,831 2,418.31
0150 280 Total 280 NON-DEPARTMENTAL 2,904,728 29,047.28 0150 282 Total 282 SOCIAL SERVICE GRANTS 279,415 2,794.15 0150 315 Total 315 COMMUNITY DEVELOPMENT 3,229,808 32,298.08 0150 409 Total 409 POLICE - SUPPORT SERVICES 3,737,259 37,372.59 0150 410 Total 410 POLICE - GENERAL 18,264,583 182,645.83 0150 417 Total 417 POLICE ACTIVITIES LEAGUE 407,236 4,072.36 0150 419 Total 419 ADMINISTRATIVE SERVICES P 775,538 7,755.38 0150 423 Total 423 ABANDONED VEHICLE AUTHORI 63,654 636.54 0150 426 Total 426 NARCOTICS FORFEITURE AWAR 11,500 115.00 0150 430 Total 430 ANIMAL SHELTER 850,569 8,505.69
0150 450 Total 450 FIRE 9,239,593 92,395.93
0150 510 Total 510 STREETS 1,055,159 10,551.59
0150 511 Total 511 SIDEWALKS 115,000 1,150.00
0150 512 Total 512 MAINTENANCE & LANDSCAPING 203,088 2,030.88 0150 680 Total 680 RECREATION - PARKS 2,258,986 22,589.86 0150 681 Total 681 RECREATION FACILITIES 988,841 9,888.41 0150 682 Total 682 COMMUNITY SERVICES 1,225,572 12,255.72 0150 683 Total 683 RECREATION 514,558 5,145.58
0150 690 Total 690 RECREATION - ADMINISTRATI 811,837 8,118.37 0150 694 Total 694 SCIENCE WORKSHOP 209,853 2,098.53
0150 699 Total 699 PUBLIC ART IMPACT FEE 100,000 1,000.00

Five Year General
Fund Plan

Five Year General
Fund Plan – Fund
Balance Over
Time
FY 2025/26 FY 2026/27 FY 2027/28 FY 2028/29 FY 2029/30
Revenue 73,728,134 62,774,170 63,837,515 65,406,293 66,810,561 Expenses 89,234,420 64,847,566 66,659,643 68,526,082 70,448,515 Revenue less Expense (15,506,286) (2,073,396) (2,822,128) (3,119,790) (3,637,954)

Measure R
Proposed
Budget

REVENUES
SALES TAX - MEASURE R $5,473,439

EXPENDITURES
PARKS $1,419,650
LIBRARY $350,000
FINANCING $1,500,000
LIBRARY ROOFTOP PROJ. $2,600,000
STREETLIGHTS $1,900,000
TRAILS- EQUIP&REPAIRS $300,000
TOTALS $8,069,650
Community Investment Tax 64.4%–To
provide locally controlled funding for
Watsonville’s essential services with
community oversight – during campaign
voters understood -increased investment
in 3 areas- Library, Parks and Streets

Capital Improvement Program
FUNDING SOURCE FY25/26 Requests 2026/27 2027/28 2028/29 2029/30 GENERAL FUND $ 13,126,062 $ 3,096,062 $ 4,458,062 $ 9,426,062 $ 1,571,062 MEASURE R $ 4,800,000 $ 400,000 $ 300,000 $ 300,000 $ 300,000 TOTAL GENERAL FUND $ 17,926,062 $ 3,496,062 $ 4,758,062 $ 9,726,062 $ 1,871,062

SPECIAL REVENUE FUNDS
CDBG $ 225,000 $ - $ - $ - $ -
CIVIC CENTER $ 445,000 $ 1,035,000 $ 75,000 $ - $ -
LIBRARY $ 106,000 $ - $ - $ - $ -
GRANTS $ 10,541,000 $ 6,863,000 $ - $ - $ -
GAS TAX $ 555,000 $ 555,000 $ 555,000 $ 555,000 $ 555,000 SB1 $ 3,725,000 $ 1,325,000 $ 1,325,000 $ 1,325,000 $ 1,325,000 MEASURE Y $ 514,000 $ 1,198,614 $ 1,164,000 $ 500,000 $ 115,000 MEASURE D $ 1,750,000 $ 1,180,000 $ 1,180,000 $ 1,180,000 $ 1,180,000 UNDERGROUND UTILITY $ - $ - $ 350,000 $ - $ -
STORM DRAIN $ 70,000 $ 2,000,000 $ - $ - $ -
CITY-WIDE TRAFFIC $ 900,000 $ - $ - $ - $ -
MANABE OW IMPACT FEE $ 190,000 $ - $ - $ - $ -
TOTAL SPECIAL REVENUE FUNDS $ 19,021,000 $14,156,614 $ 4,649,000 $ 3,560,000 $ 3,175,000 $ -
ENTERPRISE FUNDS $ -
AIRPORT $ 80,000 $ 887,200 $ 420,000 $ 1,587,000 $ -
WASTEWATER $ 10,515,000 $ 12,725,900 $ 19,089,454 $ 13,550,000 $ 7,550,000 WATER $ 10,510,145 $ 19,310,402 $ 19,588,106 $ 29,978,158 $ 11,287,632 SOLID WASTE $ 1,290,000 $ 1,580,808 $ 935,808 $ 1,500,000 $ 100,000 LANDFILL CLOSURE $ 300,000 $ 200,000 $ 100,000 $ 100,000 $ 100,000 INFORMATION TECHNOLOGY $ 840,000 $ 340,000 $ 340,000 $ 340,000 $ 200,000 TOTAL ENTERPRISE FUNDS $ 23,535,145 $35,044,310 $40,473,368 $47,055,158 $19,237,632 $ -
TOTAL CIP $ 60,482,207 $52,696,986 $49,880,430 $60,341,220 $24,283,694 FY 25/26 through FY
29/30

Top 6 Funding CIP New Projects
TOP 6 PROJECTS FY 25/26
Fund Project Name Description Budget FY 25/26
Grant
Funding
Hwy1/Harkins Slough
Rd Pedestrian Bridge &
Safe Routes to School
Project
Construct pedestrian bridge over SR 1, install sidewalk and reconfigure bike lanes on Harkins Slough Rd. Modify Harkins Slough Rd/Green Valley Rd/Silver Leaf Dr intersection to improve bicycle and pedestrian access. At Pajaro Valley High School and at feeder schools and various locations within the high school attendance area install high visibility crosswalks, curb extensions, upgrade curb ramps and improve bicycle facilities and provide pedestrian and bicycle safety training. 10,541,000 General
Fund
Ramsay Park
Renaissance
Funds toward Ramsay Renaissance Project for new soccer field, multi use synthetic field, dog park, playground, landscape, etc. 8,500,000 Grant
Funding
Main Switchgear and
Energy Recovery
Electrical System
Improvements
The main electrical switchgear and backup generation system that provides power and emergency backup power to all equipment in the wastewater treatment plant is nearing the end of its useful life. This critical equipment was identified in the WWTF Hazard Assessment as vulnerable to flood and seismic hazards. This project will replace this critical equipment and mitigate against future flood or seismic hazards so the WWTF will continue to provide safe and effective wastewater treatment for the communities it serves. 8,000,000
SB1 Pavement Repair Pavement Repair project identified in Pavement Management Plan 3,725,000 Grant
Fund
/General
Fund City Plaza Revitalization City Plaza Revitalization 3,500,000 Water
Additional(0.5
miles/year) Water Main
Replacement - CIP
Projects
(Design/Bid/Build)
In order to address the City's most critical main replacement needs and maintain an industry standard water main lifespan replacement rate of 90-100 years, a total of 2.65 miles per year are needed to be replaced.

This project will bid and contract out an additional 0.5 miles per year of water main replacements under the CIP to get the City closer to this target replacement rate. Prioritization of project will be determined by City staff. 3,000,000
TOP 6 PROJECTS FY 25/26 37,266,000

Pedestrian Bridge
& Safe Routes to
School - $10.5MM
grant
Construct pedestrian bridge over SR 1, install sidewalk and reconfigure bike lanes on Harkins Slough Rd.

Modify Harkins Slough Rd/Green Valley Rd/Silver Leaf
Dr intersection to improve bicycle and pedestrian
access. At Pajaro Valley High School and at feeder
schools and various locations within the high school
attendance area install high visibility crosswalks, curb extensions, upgrade curb ramps and improve bicycle
facilities.

Ramsay Park Renaissance – $8.5MM
*Project is approximately 35% completed.
*Grading is 90% completed.
*12 of 14 athletic light poles have been installed.
*Site concrete at the playground and dog park is 60% completed *Retaining wall and bench seating at south side of Sotomayer Soccer field is 50% completed.
*Soccer netting pole detail is 90% completed. Page 246 of 908 Main Switchgear
and Energy
Recovery Electrical
System - $8MM
Provides backup power and emergency
backup power to call equipment at
Wastewater Treatment Plant.

Major Reconstruction of Green Valley
Road and Bridge Stret

City Plaza Revitalization – this
project will come back to City Council when it is 90% done with design

City Crews Water Mains Replacement

Fire Tiller Truck

LED Streetlight
Replacement
*Quote from our Mayor Orozco- One of the most
frequent concerns I hear from residents is street
lighting — and I’m proud to share that we are taking meaningful steps to address this issue head-on. Ensuring our streets are well-lit is one of
the city of Watsonville’s top priorities, as it plays a vital role in public safety, quality of life and
community well-being.
*One of Council’s priorities improve safety in our
streets and public investment in shovel ready
projects

LED Streetlight Replacement
Material Procurement
Details
The City of Watsonville has
approximately 2,834
streetlights across the City
on a combination of City,
utility, or other agency
owned poles. The City is
seeking to replace existing
LED streetlight fixtures
with CREE Guideway
Series LED Streetlight
fixtures.

Used to account for
activities
paid for by taxes
or other designated
revenue sources
that have specific legal
use limitations
Special Revenue
Funds

Special
Revenue
Funds
2 SPECIAL REVENUE FUNDS
0250 0262 0305 0306 0310 0312 0340
Projected Resources 2025-26 LIBRARY
ARPA FUNDAMERICAN RELIEF

PLAN GAS TAX
SB 1 - GAS TAX

FUNDING

SALES TAX

MEASURE Y

MEASURE D -

TRANSPORTATION
FUND
IMPACT:

CITY-WIDE

TRAFFIC
Revenues 4,699,264 7,891,503 1,455,601 1,100,000 5,212,100 1,178,000 25,000 Transfer In 25,940
Total Gross Resources 4,725,204 7,891,503 1,455,601 1,100,000 5,212,100 1,178,000 25,000 Operations 4,569,883 - 1,084,038.00 - 5,479,856 - -
Capital 386,000 7,891,503 1,285,094 4,446,374 1,940,630 5,725,525 970,468 Transfer Out 180,648 - -
Debt Service -
Grand Total 5,136,531 7,891,503 2,369,132 4,446,374 7,420,486 5,725,525 970,468 Surplus / (Shortfall) (411,327) - (913,531) (3,346,374) (2,208,386) (4,547,525) (945,468) Projected Resources 2026-27
Revenues 4,894,243 - 1,498,917 1,110,000 5,280,100 1,250,000 25,000 Transfers In - - - - - - -
Total Gross Resources 4,894,243 - 1,498,917 1,110,000 5,280,100 1,250,000 25,000 Projected Expenditures
Operations 4,706,229 - 1,111,975 - 5,337,112 - -
Capital - - 555,000 1,325,000 1,180,000 -
Transfers Out 246,643 - - - - - -
Debt Service - - - - - - -
Total Gross Uses 4,952,872 - 1,666,975 1,325,000 5,337,112 1,180,000 - Surplus / (Shortfall) (58,629) - (168,058) (215,000) (57,012) 70,000 25,000 Projected Fund / Cash Balance 6/30/2 1,987,799 7,891,503 1,100,000 4,600,000 2,075,873 4,500,000 2,500,000 Projected Fund / Cash Balance 6/30/2 1,517,843 7,891,503 18,411 1,038,626 (189,525) 22,475 1,579,532 Less Restricted Fund / Cash Balances - - - - - - -
Total Available Funds 6/30/2027 1,517,843 Page 255 of 908 - 18,411 1,038,626 (189,525) 22,475 1,579,532 Used to account for
self-supporting
activities
that provide services
on a user-charge basis
Enterprise Funds

Enterprise Funds
4 ENTERPRISE FUNDS
0710 0720 0730 0740 0789
Projected Resources 2025-26 WASTE WATER WATER AIRPORT SOLID WASTE

FIBER OPTIC
FUND
Revenues 36,232,690 27,174,548 4,636,463 20,231,889 141,850 Transfer In
Total Gross Resources 36,232,690 27,174,548 4,636,463 20,231,889 141,850 Operations 19,544,209 18,486,395 4,346,395 16,958,395 77,443 Capital 21,310,995 31,118,256 171,000 2,990,055
Transfer Out 202,513 31,651 5,056 45,836
Debt Service 182,013 4,118 28,796 547,966
Grand Total 41,239,730 49,640,420 4,551,247 20,542,252 77,443 Surplus / (Shortfall) (5,007,040) (22,465,872) 85,216 (310,363) 64,407 Projected Resources 2026-27
Revenues 36,699,149 33,192,453 5,755,923 20,831,346 146,850 Transfers In - - - - -
Total Gross Resources 36,699,149 33,192,453 5,755,923 20,831,346 146,850 Projected Expenditures
Operations 20,071,670 19,044,342 5,493,084 17,468,450 77,591 Capital 12,725,900 19,310,402 887,200 1,580,808 -
Transfers Out 202,513 31,651 5,056 45,836 -
Debt Service 88,130 - 6,037 378,027 -
Total Gross Uses 33,088,213 38,386,395 6,391,377 19,473,121 77,591 Surplus / (Shortfall) 3,610,936 (5,193,942) (635,454) 1,358,225 69,259

Current Risks/Considerations
*Potentially Volatile General Fund Revenues- Sales tax #1 revenue source, recent trend show slowing growth and rising costs
*UAL Payments projected to increase & Calpers pension cost increases
*Aging Infrastructure
*Currently in negotiations with all bargaining groups
*Inflationary Pressure
*Overtime Costs for Fire and Police

Pers Unfunded Liability (UAL)

Possible Cuts in Federal Funding
Impending Federal Budget Cuts: National proposals
include cuts to HUD, education health, housing and
block grants that might negatively impact local
services in Watsonville though these are pending
litigation.
• Not directly to our City – But the
cuts in federal funding to our
local County could negatively
impact our community.

Opportunities

Citywide User Fee and Rate
Study
We are working on
an RFP, to review
our fees, so that
we stay true to
today’s costs,
specifically for
development

Fiscal Policies

Today’s Actions
• *Approve resolution approving purchase
order for the purchase of a new fire truck
• *Approve a Resolution calling for bids for
the Citywide LED Streetlight Module
Procurement and installation services,
this project will be funded with General
Fund that includes Measure R funds
• *No action – Reminder that the budget
adoption date is set for two weeks from
now.

Questions
• Marissa Duran, Finance Director
• 831-768-3471
• [email protected]

1 CITY COUNCIL AGENDA REPORT
MEETING DATE: Tuesday, June 10, 2025
TO: CITY COUNCIL
RECOMMENDED BY: ADMINISTRATIVE SERVICES DIRECTOR DURAN
APPROVED BY: TAMARA VIDES, CITY MANAGER
SUBJECT: WATSONVILLE PUBLIC FINANCE AUTHORITY APPROVE/AUTHORIZE ISSUANCE OF LEASE REVENUE BONDS, SERIES 2025, IN AGGREGATE PRINCIPAL NOT TO EXCEED $13,000,000 TO FINANCE PORTION OF

RAMSAY PARK AND CITY PLAZA CAPITAL IMPROVEMENTS
RECOMMENDATION:

Sitting as the Watsonville Public Finance Authority Board of Directors, adopt a resolution of the Board of Directors of the Watsonville Public Finance Authority authorizing the execution and delivery by the Authority of a Ground Lease, Lease Agreement, Indenture, Assignment Agreement, and Bond Purchase Agreement in connection with the issuance of Watsonville Public Finance Authority Lease Revenue Bonds, Series 2025, authorizing the issuance of such bonds in an aggregate principal amount not to exceed $13,000,000, authorizing the distribution of an Official Statement in connection with the offering and sale of such bonds and authorizing the execution of necessary documents and certificates and related actions.

DISCUSSION:

At the May 27, 2025 Council meeting, the City Council heard an item regarding issuance of lease revenue bonds to generate funds to be used for park renovations in the City of Watsonville. To effectuate the bond issuances, the City Council needed to adopt one resolution sitting as the City Council on behalf of the City, and another sitting as the Board of Directors (Board) on behalf of the Public Finance Authority (PFA).

Due to an inadvertent error by staff, the adoption of the resolution of the PFA was improperly noticed.

Thus, while the Council action on May 27 was effective for the City resolution, the action was not effective as to the PFA resolution.

2 This item allows the Board to adopt the PFA resolution in support of issuing the proposed lease revenue bonds (see Attachment 3, “Authority Resolution”). All attachments to the original, May 27 item are attached here to for Council’s reference. Details of the transaction can be found in the May 27 staff report (Attachment 1).

STRATEGIC PLAN:

The issuance of the 2025 Bonds is consistent with Strategic Plan Priority:
2-Infrastructure & Environment
FINANCIAL IMPACT:

Pursuant to Government Code Section 5852.1, good faith estimates (obtained from the underwriter and the municipal advisor) must be disclosed at a public meeting before the authorization of the 2025 Bonds.

Required good faith estimates are provided in the applicable resolutions; the table below summarizes those estimates and includes additional information.
2025 Bonds
Principal Amount:

Final Maturity:

True interest cost:
$11,375,000
May 1, 2035

3.47%
Finance charge: $337,749
Amount of project proceeds received: $12,000,000
Average annual debt service:

Total debt service payment amount:
$1,485,201
$14,625,108
* These are good faith estimates only and are based on market rates as of May 13, 2025. Final results will likely differ based on market conditions as of the actual sale date and other factors. However, for the financing to proceed, the not-to-exceed parameters described in the previous section must be met.

3 ALTERNATIVE ACTION:

The Board of Directors could not approve the Resolution in which case the funding of the Projects would be delayed.

ATTACHMENTS AND/OR REFERENCES (IF ANY):

1. May 27, 2025 Staff Report

2. City Council Resolution

3. Public Finance Authority Resolution

4. Form of Indenture

5. Form of Ground Lease

6. Form of Lease Agreement

7. Form of Assignment Agreement

8. Form of Bond Purchase Agreement

9. Preliminary Official Statement (with Form of the Continuing Disclosure Certificate Included as Appendix E)

1 CITY COUNCIL AGENDA REPORT
MEETING DATE: Tuesday, May 27, 2025
TO: CITY COUNCIL AND WATSONVILLE PUBLIC FINANCE AUTHORITY RECOMMENDED BY: ADMINISTRATIVE SERVICES DIRECTOR DURAN
APPROVED BY: TAMARA VIDES, CITY MANAGER
SUBJECT: CITY OF WATSONVILLE AND WATSONVILLE PUBLIC FINANCE

AUTHORITY APPROVE/AUTHORIZE ISSUANCE OF LEASE REVENUE
BONDS, SERIES 2025, IN AN AGGREGATE PRINCIPAL AMOUNT NOT TO EXCEED $13,000,000 TO FINANCE PROTION OF RAMSAY PARK AND

CITY PLAZA CAPITAL IMPROVEMENTS
RECOMMENDATION:

1. City Council: Hold a public hearing on the financing of the Projects.

2. City Council: Adopt Resolution a Resolution of the City Council of the City of Watsonville authorizing the execution and delivery by the City of Watsonville of a Ground Lease, Lease Agreement, Indenture, Continuing Disclosure Certificate and Bond Purchase Agreement in connection with the issuance of Watsonville Public Finance Authority Lease Revenue Bonds, Series 2025, approving the issuance of such bonds in an aggregate principal amount not to exceed $13,000,000, authorizing the distribution of an Official Statement in connection with the offering and sale of such bonds and authorizing the execution of necessary documents and certificates and related actions.

3. Board of Directors: Adopt a Resolution of the Board of Directors of the Watsonville Public Finance Authority authorizing the execution and delivery by the Authority of a Ground Lease, Lease Agreement, Indenture, Assignment Agreement, and Bond Purchase Agreement in connection with the issuance of Watsonville Public Finance Authority Lease Revenue Bonds, Series 2025, authorizing the issuance of such bonds in an aggregate principal amount not to exceed $13,000,000, authorizing the distribution of an Official Statement in connection with the offering and sale of such bonds and authorizing the execution of necessary documents and certificates and related actions.

BACKGROUND:

The City of Watsonville maintains 143 acres of park space, 70 acres of which consist of the City portion of Attachment 1

2 Pinto Lake. This equates to 2.5 acres of parkland per 1,000 residents, a far cry from the national average of 10 acres per 1,000. One needs only to compare Watsonville’s 143 acres of parkland to the City of Santa Cruz’s 1,700 acres to realize that our residents have extremely disproportionate access to parks, playgrounds, and open space.

Research has shown time and time again that residents of neighborhoods of color have access to 44% less park space per person than those of white neighborhoods. Communities with fewer park spaces are hotter in summer, have worse air quality, and are more susceptible to catastrophic flooding. People without parks close to home get less exercise, and a lack of access is associated with higher rates of heart disease, stroke, and obesity. Because access to parks is tied to overall community health, it is critical that the limited park space available to our community consists of quality, safe and wellmaintained outdoor space.

Ramsay Park and the City Plaza have historically been identified and prioritized as the City’s most significant and highly used park assets. Over the past two decades, the City has prioritized investment in improvements to amenities at both sites.

At 26 acres, Ramsay Park is the City’s largest park and is often considered the community’s hub for recreation. The last major renovations to the site were completed over 30 years ago, bringing in new play structures and a ballfield, with the skatepark and pump track added in the past decade. A community call for reinvestment of this key space is demonstrated by a two-decade-long conversation with the community through countless meetings with hundreds of residents over three state grant applications that ultimately went unfunded, especially regarding improvements to the soccer field and play areas.

Known as the "heart of the city," the City Plaza has been the focus of community gatherings and celebrations for well over a century. The Plaza’s designation on the National Register of Historic Places points to several key features, including a bandstand, water fountain, historic cannons, and other elements that have been added throughout the space’s close to 175-year history. All these features need repair and restoration. The historic gazebo/bandstand, although iconic in local imagery, has not been usable since the 1989 Loma Prieta Earthquake and is too small to serve as a modern performance venue.

In 2019, the City of Watsonville Parks and Community Services Department worked with Verde Design to lead a community input process to develop the Department's Strategic Plan and park master plans for the City Plaza and Ramsay Park. A comprehensive community input process was used to create the 2020 Parks and Recreation Strategic Plan that identifies priorities for the Parks and Community Services Department for the next 5-10 years. The park master plans created through this process provided a vision and plan for these loved community spaces and positioned the projects well for funding through grants, earmarks and community investment.

Through the support of Speaker Rivas, the City received $7 million in specified grant funds from the State of California to improve the soccer field. Shortly after, the City allocated a portion of its ARPA funds to augment this project and convert the softball field into a multiuse softball/soccer field. Simultaneously, the City invested CIP funds for the design of the project and secured grant funds to provide seed money Attachment 1

3 for construction of a new dog park and playground. With Watsonville residents passing Measure R in 2022, it has long been discussed that this new revenue could be used to fully fund construction of the playground, dog park and supporting amenities (parking lots, pathways and trails), with the whole project collectively now known as the Ramsay Park Renaissance. The Council awarded the construction contract for this project in March 2024.

In 2021, the City was awarded $3,350,000 in Proposition 68 funds from the State of California for the City Plaza Revitalization Project. Due to the sharp rise in construction costs since the master plan was developed and this grant was awarded, it has long been anticipated that construction cost will exceed the grant award and that Measure R funds could be leveraged to complete most, if not all, of the master plan improvements. Staff have completed the design of this project and are awaiting permitting before going out to bid.

The Ramsay Park Renaissance Project and City Plaza Revitalization Project (“Projects”) are under way and will be funded by Measure R, State Grants, ARPA, the City’s General Fund, and a portion of the Watsonville Public Finance Authority Lease Revenue Bonds, Series 2025 (“2025 Bonds”) proceeds.

Staff and the financing team have been working on the 2025 Bonds for several months and are now ready to present, for consideration by the City Council and Board of Directors of the Watsonville Public Finance Authority (“Authority”), this financing that would generate $12 million in bond proceeds to finance a portion of the Projects.

DISCUSSION:

Public Hearing
In accordance with Government Code Section 6586.5(a)(1), the City must hold a public hearing to consider public testimony concerning the possible issuance of bonds by the Authority to finance certain public capital improvements within the boundaries of the City. The City Resolution approves the sale of bonds by the Authority and finds that there are significant public benefits in connection with the Projects, and the associated financing thereof, with bond proceeds.

This meeting has been convened as a joint meeting of the City Council and the Authority Board of Directors in order to allow the City Council, and the Council Members acting in their capacity as the Authority Board of Directors, to hold the hearing as described above and consider adoption of resolutions of each body approving or authorizing the issuance of bonds by the Authority and approving the form of related financing documents and other actions.

Summary of Financing Documents
The City can generate proceeds required to complete the Projects through the issuance of the 2025 Bonds, which would be secured by lease payments that are made by the City pursuant to a lease agreement. The lease payments would be made by the City from legally available funds which are expected to consist primarily of funds in the City’s General Fund and would not require an increase in taxes to its residents.

Attachment 1

4 Under this financing mechanism, the Authority would issue the 2025 Bonds. The Authority would simultaneously enter into a Ground Lease with the City whereby the City leases city-owned property (“Leased Assets”) to the Authority in consideration of an upfront payment (generated by the issuance of the 2025 Bonds), and the Authority leases the Leased Assets back to the City in consideration for semiannual lease payments, which in turn, are used to pay debt service on the 2025 Bonds.

The Resolutions approve the financing plan outlined above, appoints and retains the financing team, including Urban Futures, Inc. as Municipal Advisor; Anzel Galvan LLP as Bond and Disclosure Counsel; Samuel A. Ramirez & Co. as Underwriter; and U.S. Bank Trust Company National Association as Trustee; and approves all documents and actions needed to authorize the issuance and sale of the 2025 Bonds, including the form financing documents provided herein, together with any changes or additions deemed advisable and approved by any Authorized Officer, upon consultation with Bond Counsel. Because certain numbers and information related to the financing are unknown until the 2025 Bonds are sold, after the sale of the 2025 Bonds, such final numbers and information will be populated into the documents and approved by an Authorized Officer before execution of the financing documents and closing of the transaction. The following documents and information related to the transaction are included herein:
• Ground Lease and Lease Agreement: The Ground Lease and Lease Agreement provide for the City to lease the Leased Assets (City Hall, Youth Center, Parks and Community Services Building, and the Police/IT Building) to the Authority in consideration of an upfront rent payment, and for the Authority to lease the Leased Assets back to the City in consideration of the payment by the City to the Authority of semi-annual base rental payments, which rental payments are pledged to the repayment of the 2025 Bonds. The rental payments will be due on dates and in amounts to enable the Authority to pay scheduled debt service on the 2025 Bonds. In addition, under the Lease Agreement the City would agree to annually budget for and appropriate the rental payments for the use and occupancy of the Leased Assets. The City would further agree in the Lease Agreement to provide specified forms of insurance and to maintain the Leased Assets.

To comply with the Surplus Land Act, California Government Code Sections 54220 – 54234, the resolutions include the required findings and declarations to conclude that the Leased Assets under the Ground Lease and the Lease Agreement are “exempt surplus land.” Under the Surplus Land Act, if a local agency leases property for a term of more than 15 years, it is generally required to first be offered for affordable housing purposes under a published notice of availability. However, a local agency may lease exempt surplus land without publishing a notice of availability. As relevant to the proposed Ground Lease and Lease Agreement, the Leased Assets are “exempt surplus land” because the property will be transferred from one local agency to another local agency for “the receiving agency’s use” under Government Code Section 54221(f)(1)(D). In this case, the transfer from the City to the Authority under the Ground lease is exempt because the Authority will use the leased property in connection with the financing of the Project. The transfer of the Leased Assets from the Authority back to the City is exempt because the City will use the leased property for its legitimate City purposes in operating a City Hall, Youth Center, Parks and Community Services Building, and Police/IT Building.

Attachment 1

5 • Indenture: The Indenture defines the terms and conditions of the 2025 Bonds, including the pledge of revenues, redemption provisions, investment and management of funds and accounts, repayment mechanisms, and the rights and obligations of the City, the Authority, the municipal bond insurer, if any, the Trustee (US Bank), and the bondholders. Under the Indenture, the Trustee directly receives rental payments made by the City under the Lease Agreement, which are equal in amount to the interest and principal payments due on the 2025 Bonds. The Trustee receives and disburses the rental payments semiannually to holders of the 2025 Bonds as payments of interest and principal.
• Assignment Agreement: Under the Assignment Agreement, the Authority agrees to assign to the Trustee its right to receive the rental payments made under the Lease Agreement. • Bond Purchase Agreement: The Bond Purchase Agreement among the Authority, the City, and Samuel A. Ramirez & Co. (the Underwriter) defines the terms and conditions under which the 2025 Bonds will be purchased by the Underwriter.
• Preliminary Official Statement (“POS”): The POS will be distributed to prospective purchasers of the 2025 Bonds. The POS must contain all facts material to potential purchasers of the 2025 Bonds, including information regarding the security for the bonds and the City (with certain permitted exceptions to be completed in the final Official Statement) must not omit any material facts. The POS is required to satisfy the City’s obligation under federal securities laws to provide material information to potential purchasers of the 2025 Bonds and must be accurate and complete in all material respects.

The City Council, as the governing body of the City, and the Board of Directors, as the governing body of the Authority, have an obligation to ensure that the POS includes all information that would be material to a prospective investor’s decision whether to purchase the 2025 Bonds.

While the City’s Disclosure Counsel, Municipal Advisor, and the Underwriter have participated in preparing the documents, the City is ultimately responsible for ensuring that the POS is accurate, contains no misleading information, and does not omit any information necessary to make the POS not misleading to investors.
• Continuing Disclosure Certificate: The Continuing Disclosure Certificate will be delivered by the City for the benefit of owners of the 2025 Bonds and to assist the Underwriter in complying with Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission. This document describes various annual and certain event reporting and disclosure obligations of the City, as required by federal securities laws.

The City Resolutions also set forth certain not-to-exceed parameters for the 2025 Bonds, including a principal amount not exceeding $13 million, a true interest cost not exceeding 4.5%, a final maturity not exceeding May 1, 2037, and an underwriter’s discount not exceeding 0.8% of the principal amount of the Attachment 1

6 2025 Bonds. These not-to-exceed parameters are meant to provide some flexibility and cushion in case market conditions change.

Next Steps
On May 22, 2025, City staff and the financing team met with S&P Global Ratings to discuss the bond issuance, and we expect to receive the rating by May 30th. If the City Council and Board of Directors adopt the Resolutions approving/authorizing the issuance of the 2025 Bonds, the financing team will proceed with seeking bond insurance bids and will distribute the Preliminary Official Statement to potential purchasers of the bonds on or about June 3rd. The 2025 Bonds are expected to be sold the week of June 9th and delivered the week of June 23rd, at which time the City would receive the bond proceeds.

CALIFORNIA ENVIRONMENTAL QUALITY ACT (CEQA) DETERMINATION:

The potential environmental impacts resulting from the recommended resolutions to authorize the Watsonville Public Finance Authority Lease Revenue Bonds have been adequately evaluated by previously adopted mitigated negative declarations, in accordance with the California Environmental Quality Act (CEQA), as authorized by CEQA Guidelines Section 15162. The recommended resolutions will authorize funding through the Lease Revenue Bonds of public improvement projects known as the Ramsay Renaissance Project and the Watsonville City Plaza Expansion and Revitalization Project. The Ramsay Renaissance Project was analyzed in an Initial Study/Mitigated Negative Declaration with a corresponding mitigation monitoring program that supported the City Council’s award of the construction contract at its meeting on March 26, 2024. The Plaza Expansion and Revitalization Project was analyzed in the Mitigated Negative Declaration and mitigation monitoring program for which the Notice of Determination (Document Number 027-19 NOD) was filed with the Santa Cruz County Clerk on December 20, 2019.

STRATEGIC PLAN:

The issuance of the 2025 Bonds is consistent with Strategic Plan Priority:
2-Infrastructure & Environment
FINANCIAL IMPACT:

Pursuant to Government Code Section 5852.1, good faith estimates (obtained from the underwriter and the municipal advisor) must be disclosed at a public meeting before the authorization of the 2025 Bonds.

Required good faith estimates are provided in the applicable resolutions; the table below summarizes those estimates and includes additional information.

Attachment 1

7 2025 Bonds
Principal Amount:

Final Maturity:

True interest cost:
$11,375,000
May 1, 2035

3.47%
Finance charge: $337,749
Amount of project proceeds received: $12,000,000
Average annual debt service:

Total debt service payment amount:
$1,485,201
$14,625,108
* These are good faith estimates only and are based on market rates as of May 13, 2025. Final results will likely differ based on market conditions as of the actual sale date and other factors. However, for the financing to proceed, the not-to-exceed parameters described in the previous section must be met.

ALTERNATIVE ACTION:

The Council and Board of Directors could not approve the Resolutions in which case the funding of the Projects would be delayed.

ATTACHMENTS AND/OR REFERENCES (IF ANY):

1. City Council Resolution

2. Authority Resolution

3. Form of Indenture

4. Form of Ground Lease

5. Form of Lease Agreement

6. Form of Assignment Agreement

7. Form of Bond Purchase Agreement

8. Preliminary Official Statement (with Form of Continuing Disclosure Certificate included as Appendix E)
Attachment 1

RESOLUTION NO. ________

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF

WATSONVILLE AUTHORIZING THE EXECUTION AND DELIVERY BY

THE CITY OF WATSONVILLE OF A GROUND LEASE, LEASE

AGREEMENT, INDENTURE, CONTINUING DISCLOSURE CERTIFICATE

AND BOND PURCHASE AGREEMENT IN CONNECTION WITH THE

ISSUANCE OF WATSONVILLE PUBLIC FINANCE AUTHORITY LEASE
REVENUE BONDS, SERIES 2025, APPROVING THE ISSUANCE OF SUCH

BONDS IN AN AGGREGATE PRINCIPAL AMOUNT OF NOT TO EXCEED $13,000,000, AUTHORIZING THE DISTRIBUTION OF AN OFFICIAL

STATEMENT IN CONNECTION WITH THE OFFERING AND SALE OF

SUCH BONDS AND AUTHORIZING THE EXECUTION OF NECESSARY

DOCUMENTS AND CERTIFICATES AND RELATED ACTIONS
WHEREAS, the City of Watsonville, California (the “City”) is a charter city and municipal corporation duly organized and existing under and by virtue of the Constitution and laws of the State of California;
WHEREAS, the Watsonville Public Finance Authority (the “Authority”) is a joint exercise of powers authority duly organized and existing pursuant to the laws of the State of California and that certain Joint Exercise of Powers Agreement, dated as of October 24, 2017, as amended pursuant to that certain First Amendment to Joint Exercise of Powers Agreement, dated as of May 1, 2025, each between the City and the Industrial Development Authority of the City of Watsonville (as so amended, the “Joint Powers Agreement”);
WHEREAS, pursuant to the Joint Powers Agreement and Section 6588(h) of the Marks-Roos Local Bond Pooling Act of 1985, commencing with Section 6584 of the California Government Code (the “Act”), the Authority has the legal authority to lease and sublease lands, structures, real or personal property, and other interests in lands that are located within the State of California that the Authority determines are necessary or convenient for the financing of public capital improvements, or any portion thereof;
WHEREAS, the City and the Authority desire to finance all or a portion of the costs of the design, acquisition, construction and/or installation of certain capital improvements in the City, including capital improvements to Ramsay Park and the Watsonville Civic Plaza (collectively, the “Project”);
WHEREAS, the City is a member of the Authority, and the Project is located within the boundaries of the City;
WHEREAS, the City has, prior to the consideration of this Resolution, held a public hearing on the financing of the Project in accordance with Section 6586.5 of the Act, which hearing was held at 275 Main Street, Watsonville, California on May 27, 2025; WHEREAS, in accordance with Section 6586.5 of the Act, notice of such hearing was published once at least five days prior to the hearing in Santa Cruz Sentinel, a local newspaper of general circulation in the City;
Attachment 2

2 WHEREAS, the Authority and the City have determined that it would be in the best interests of the City and residents of the City to authorize the preparation, sale and delivery of the “Watsonville Public Finance Authority Lease Revenue Bonds, Series 2025,” in one or more series, on a taxable or tax-exempt basis (the “Bonds”) for the purpose of financing all or a portion of the Project; WHEREAS, to facilitate the issuance of the Bonds, the City and the Authority desire to enter into a Ground Lease between the City and the Authority (the “Ground Lease”) pursuant to which the City will lease certain real property, which real property shall initially consist of (i) City Hall, located at 250 Main Street, Watsonville, California, (ii) the Watsonville Parks and Community Services Building, located at 231 Union Street, Watsonville, California, (iii) the Watsonville Police Information Technology Building, located at 215 Union Street, Watsonville, California, and (iv) the Watsonville Youth Center, located at 30 Maple Street, Watsonville, California (collectively, the “Leased Assets”), to the Authority, and a Lease Agreement between the City and the Authority (the “Lease Agreement”), pursuant to which the City will lease the Leased Assets back from the Authority, and pay certain Base Rental Payments (as defined in the Lease Agreement), which will be pledged to the owners of the Bonds by the Authority pursuant to an Indenture by and among U.S. Bank Trust Company, National Association (the “Trustee”), the City and the Authority (the “Indenture”); WHEREAS, the Authority will issue the Bonds pursuant to the Act; WHEREAS, the City and the Authority desire to provide for the negotiated sale of the Bonds; WHEREAS, the City and the Authority have selected Samuel A. Ramirez, Inc., to act as underwriter (in such capacity, the “Underwriter”) and to purchase the Bonds from the Authority pursuant to a Bond Purchase Agreement (the “Bond Purchase Agreement”), among the City, the Authority and the Underwriter;
WHEREAS, Rule 15c2-12 promulgated under the Securities Exchange Act of 1934 (“Rule 15c2-12”) requires that, in order to be able to purchase or sell the Bonds, the underwriter thereof must have reasonably determined that the City has undertaken in a written agreement or contract for the benefit of the holders of the Bonds to provide disclosure of certain financial information and certain events on an ongoing basis;
WHEREAS, to cause such requirement to be satisfied, the City desires to execute and deliver a Continuing Disclosure Certificate (the “Continuing Disclosure Certificate”); WHEREAS, a form of the Preliminary Official Statement (the “Preliminary Official Statement”) has been prepared;
WHEREAS, good faith estimates of certain information relating to the Bonds are disclosed and set forth in Exhibit A attached to this Resolution as required by California Government Code Section 5852.1; such estimates were provided by Urban Futures, Inc., the City’s the Municipal Advisor, based on preliminary bond pricing information provided by the Underwriter; WHEREAS, the City Council has been presented with the form of each document referred to herein, and the City Council has examined and approved each document and desires to authorize and direct the execution of such documents and the consummation of such financing; and Attachment 2

3 WHEREAS, all acts, conditions and things required by the laws of the State of California to exist, to have happened and to have been performed precedent to and in connection with the consummation of such financing authorized hereby do exist, have happened and have been performed in regular and due time, form and manner as required by law, and the City is now duly authorized and empowered, pursuant to each and every requirement of law, to consummate such financing for the purpose, in the manner and upon the terms herein provided;

NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF WATSONVILLE AS FOLLOWS:

Section 1. Each of the above recitals is true and correct. Following a duly noticed public hearing, the City Council hereby approves the financing of the Project and further finds and determines that there are significant public benefits to the citizens of the City through the issuance of the Bonds and execution and delivery of the Ground Lease and Lease Agreement pursuant to the Act and otherwise hereunder within the meaning of Section 6586(a) through (d), inclusive, of the Act, in that the delivery of the Bonds and related transactions will result in demonstrable savings in effective interest rate to the City and enable the City to undertake the Project on a timely basis, and provide a more efficient delivery of public safety services to the community.

Section 2. The forms of the Ground Lease and Lease Agreement, on file with the City Clerk, are hereby approved, and the Mayor, the Mayor Pro Tempore, the City Manager, the Administrative Services Director, and the City Clerk, and each of their authorized designees (the “Authorized Officers”), are each hereby authorized and directed, for and in the name and on behalf of the City, to execute and deliver the Ground Lease and Lease Agreement in substantially said forms, with such changes, insertions and omissions therein as the Authorized Officer executing the same may require or approve, such requirement or approval to be conclusively evidenced by the execution and delivery thereof; provided, however, that the all-in true interest cost applicable to the Bonds shall not exceed 3.47% per annum. In the event that it is determined by the City Manager, or her designee, that there are limitations or restrictions on the ability of the City to lease or sublease any portion of the Leased Assets as contemplated by the Ground Lease and Lease Agreement or that other City-owned property would be more appropriate to use as Leased Assets under the Ground Lease and the Lease Agreement, the City Manager, or her designee, is hereby expressly authorized to designate other or additional real property of the City to be leased or subleased pursuant to the Ground Lease and Lease Agreement, with such designation to be conclusively evidenced by the execution and delivery of the Ground Lease and Lease Agreement by an Authorized Officer.

The City Council hereby declares that the real property that is the subject of the Ground Lease (herein defined as the “Leased Assets”) is “exempt surplus land” as defined by California Government Code Section 54221(f)(1)(D) since the City is transferring the Leased Assets to another local agency (the Authority) for the Authority’s use. As set forth in the Ground Lease and the Lease Agreement, the Leased Assets are needed for the Authority’s use to serve as the leased property in connection with the financing of the Project, which are important public improvements that will benefit the Authority and the City.

Section 3. The form of Indenture, on file with the City Clerk, is hereby approved, and the Authorized Officers are each hereby authorized and directed, for and in the name and on behalf of the City, to execute and deliver the Indenture in substantially said form, with such changes, insertions and omissions therein as the Authorized Officer executing the same may require or approve, such requirement or approval to be conclusively evidenced by the execution and delivery thereof; provided, Attachment 2

4 however, that the aggregate principal amount of the Bonds shall not exceed $13,000,000, and the allin true interest cost applicable to the interest components of the Base Rental Payments shall not exceed

3.47% per annum; and, provided, further, that such changes, insertions and omissions shall be consistent with the terms of the Bonds established at negotiated sale pursuant to the Bond Purchase Agreement. In the event that it is determined by the Administrative Services Director, or her designee, that the funding or financing of capitalized interest on the Bonds would be in the best interests of the City, the Indenture may be modified to provide for capitalized interest on such basis as is determined by the Administrative Services Director or her designee, such determination to be conclusively evidenced by the execution and delivery of the Indenture by an Authorized Officer.

Section 4. The Bond Purchase Agreement, on file with the City Clerk, is hereby approved and the Authorized Officers are each hereby authorized and directed, for and in the name of the City, to execute and deliver the Bond Purchase Agreement in substantially said form, with such changes, insertions and omissions as the Authorized Officer executing the same may require or approve, such requirement or approval to be conclusively evidenced by the execution of the Bond Purchase Agreement by such Authorized Officer; provided, however, that the underwriter’s discount (not including any original issue discount paid by the Underwriter) from the principal amount of the Bonds shall not exceed eight tenths of one percent (0.80%) of the principal amount of the Bonds.

As an alternative to the sale of the Bonds through a public offering authorized in the immediately preceding paragraph of this Section 4, the Bonds may be sold on a private placement basis through Samuel A. Ramirez, Inc., acting as private placement agent (in such capacity, the “Private Placement Agent”), if a private placement of the Bonds will produce lower interest rates than are available through a public offering of the Bonds, or if a private placement is otherwise preferable and/or more appropriate than a public offering of the Bonds, in the opinion of, and upon recommendation of, the City’s Municipal Advisor, which recommendation is agreed to by the City Manager or the Administrative Services Director; provided, however, that the compensation paid to the Private Placement Agent shall not exceed the amount approved by the City Manager or the Administrative Services Director. The Authorized Officers are each hereby authorized to negotiate and execute a private placement agreement with the Private Placement Agent in consultation with the City’s Bond Counsel and Municipal Advisor.

Section 5. The issuance by the Authority of not to exceed $13,000,000 aggregate principal amount of the Bonds, in one or more series, on a taxable or tax-exempt basis, in the principal amounts, bearing interest at the rates and maturing on the dates as specified in the Indenture as finally executed, is hereby approved.

Section 6. The sale and issuance of the Bonds and execution and delivery of the Lease Agreement is hereby determined to be consistent with the City’s Debt Management Policy and to the extent the sale and issuance of the Bonds is not in compliance with the City’s Debt Management Policy, such noncompliance is waived in accordance with the terms of the City’s Debt Management Policy.

The City further instructs Anzel Galvan LLP, as Bond Counsel, on behalf of the City, with respect to the Bonds and the Lease Agreement described in this Resolution, (a) to cause notices of the proposed sale and final sale of the Bonds and the Lease Agreement to be filed in a timely manner with the California Debt and Investment Advisory Commission (“CDIAC”) pursuant to Government Code Section 8855, and (b) to certify to CDIAC, on behalf of the City, that the City’s Debt Management Policy complies with Government Code Section 8855(i) in the notice of proposed sale filed pursuant to Government Code Section 8855.

Attachment 2

5 Section 7. The form of Preliminary Official Statement, on file with the City Clerk, with such changes, insertions and omissions therein as may be approved by an Authorized Officer, is hereby approved, and the use of the Preliminary Official Statement in connection with the offering and sale of the Bonds is hereby authorized and approved. The Authorized Officers are each hereby authorized to certify on behalf of the City that the Preliminary Official Statement is deemed final as of its date, within the meaning of Rule 15c2-12 (except for the omission of certain final pricing, rating and related information as permitted by Rule 15c2-12).

The Authorized Officers are each hereby authorized and directed to furnish, or cause to be furnished, to prospective bidders for the Bonds a reasonable number of copies of the Preliminary Official Statement.

Section 8. The preparation and delivery of an Official Statement, and its use in connection with the offering and sale of the Bonds, is hereby authorized and approved. The Official Statement shall be in substantially the form of the Preliminary Official Statement with such changes, insertions and omissions as may be approved by an Authorized Officer, such approval to be conclusively evidenced by the execution and delivery thereof. The Authorized Officers are each hereby authorized and directed, for and in the name of and on behalf of the City, to execute the final Official Statement and any amendment or supplement thereto for and in the name and on behalf of the City.

Section 9. The form of Continuing Disclosure Certificate, on file with the City Clerk, is hereby approved, and the Authorized Officers are each hereby authorized and directed, for and in the name and on behalf of the City, to execute and deliver the Continuing Disclosure Certificate in substantially said form, with such changes, insertions and omissions therein as the Authorized Officer executing the same may require or approve, such requirement or approval to be conclusively evidenced by the execution and delivery thereof.

Section 10. Anzel Galvan LLP is hereby approved and appointed as Bond and Disclosure Counsel, Urban Futures, Inc., is hereby approved and appointed as Municipal Advisor, and U.S. Bank Trust Company, National Association is hereby appointed as Trustee, each to provide such services to the City and any other related services as may be required to issue the Bonds.

Section 11. The officers, employees and agents of the City are hereby authorized and directed, jointly and severally, to do any and all things which they may deem necessary or advisable to consummate the transactions herein authorized and otherwise to carry out, give effect to and comply with the terms and intent of this Resolution, including, but not limited to, taking such actions and executing such instruments as may be necessary or appropriate to remove encumbrances and clear title to any Leased Assets. Anything to the contrary herein notwithstanding, in the event the Administrative Services Director determines in consultation with the Municipal Advisor that the cost-efficient marketing of the Bonds requires creation of a funded reserve under the Indenture, each of the Indenture, Lease Agreement and other documents approved herein may be revised to reflect the funding of such a reserve. Specifically and without limiting the foregoing, the Administrative Services Director is authorized and directed to solicit and accept bids for bond insurance and, if applicable, a reserve account insurance policy, for the Bonds, provided she determines acceptance of the best bid will result in lower overall debt service or lower interest cost, and appropriate changes to each of the documents referenced herein to evidence such bond insurance, and, if applicable, a reserve account insurance policy, and the terms thereof, are hereby authorized and approved. All actions heretofore taken by the officers, employees and agents of the City with respect to the transactions set forth above are hereby approved, confirmed and ratified.

Attachment 2

6 Section 12. The City Council hereby determines the potential environmental impacts resulting from the adoption of this Resolution have been adequately evaluated by previously adopted mitigated negative declarations, in accordance with the California Environmental Quality Act (CEQA), as authorized by CEQA Guidelines Section 15162. The Bonds will finance public improvement projects known as the Ramsay Renaissance Project and the Watsonville City Plaza Expansion and Revitalization Project. The Ramsay Renaissance Project was analyzed in an Initial Study/Mitigated Negative Declaration with a corresponding mitigation monitoring program that supported the City Council’s award of the construction contract at its meeting on March 26, 2024. The Plaza Expansion and Revitalization Project was analyzed in the Mitigated Negative Declaration and mitigation monitoring program for which the Notice of Determination (Document Number 027-19 NOD) was filed with the Santa Cruz County Clerk on December 20, 2019.

Section 13. This Resolution shall take effect from and after its date of adoption.

PASSED AND ADOPTED this ___ day of May 2025.

Mayor of the City of Watsonville
ATTEST:

City Clerk of the City of Watsonville
APPROVED AS TO FORM:

City Attorney
Attachment 2

7 STATE OF CALIFORNIA )
) ss.

COUNTY OF SANTA CRUZ )
I, Irwin I. Ortiz, City Clerk of said City, do hereby certify that the foregoing Resolution was duly adopted by the City Council of said City and was signed by the Mayor of said City at an adjourned regular meeting of said City Council held on the ___ day of May 2025 and was approved by the following vote:

AYES: COUNCIL MEMBERS:

NOES: COUNCIL MEMBERS:

ABSENT: COUNCIL MEMBERS:

ABSTAIN: COUNCIL MEMBERS:

City Clerk of the City of Watsonville
Attachment 2

A-1

EXHIBIT A

GOOD FAITH ESTIMATES
The good faith estimates set forth herein are provided with respect to the Bonds in accordance with California Government Code Section 5852.1. Such good faith estimates have been provided to the City by the City’s Municipal Advisor, Urban Futures, Inc., in consultation with Samuel A. Ramirez, Inc., the Underwriter of the Bonds.

Principal Amount. The Municipal Advisor has informed the City that, based on the City’s financing plan and current market conditions, its good faith estimate of the aggregate principal amount of the Bonds to be issued and sold is $13,000,000 (the “Estimated Principal Amount”).

True Interest Cost of the Bonds. The Municipal Advisor has informed the City that, assuming that the Estimated Principal Amount of the Bonds is issued and sold, and based on market interest rates prevailing at the time of preparation of such estimate, its good faith estimate of the true interest cost of the Bonds, which means the rate necessary to discount the amounts payable on the respective principal and interest payment dates to the purchase price received for the Bonds, is 3.47%.

Finance Charge of the Bonds. The Municipal Advisor has informed the City that, assuming that the Estimated Principal Amount of the Bonds is issued and sold, and based on market interest rates prevailing at the time of preparation of such estimate, its good faith estimate of the finance charge for the Bonds, which means the sum of all fees and charges paid to third parties (or costs associated with the Bonds), is $337,749.

Amount of Proceeds to be Received. The Municipal Advisor has informed the City that, assuming that the Estimated Principal Amount of the Bonds is issued and sold, and based on market interest rates prevailing at the time of preparation of such estimate, its good faith estimate of the amount of proceeds expected to be received by the City for sale of the Bonds, less the finance charge of the Bonds, as estimated above, and any reserves or capitalized interest paid or funded with proceeds of the Bonds, is $12,000,000.

Total Payment Amount. The Municipal Advisor has informed the City that, assuming that the Estimated Principal Amount of the Bonds is issued and sold, and based on market interest rates prevailing at the time of preparation of such estimate, its good faith estimate of the total payment amount, which means the sum total of all payments the City will make to pay debt service on the Bonds, plus the finance charge for the Bonds, as described above, not paid with the proceeds of the Bonds, calculated to the final maturity of the Bonds, is $14,625,108, which excludes any reserves or capitalized interest paid or funded with proceeds of the Bonds (which may offset such total payment amount).

The foregoing estimates constitute good faith estimates only and are based on market conditions prevailing at the time of preparation of such estimates. The actual principal amount of the Bonds issued and sold, the true interest cost thereof, the finance charges thereof, the amount of proceeds received therefrom and total payment amount with respect thereto may differ from such good faith estimates due to (a) the actual date of the sale of the Bonds being different than the date assumed for purposes of such estimates, (b) the actual principal amount of Bonds issued and sold being different from the Estimated Principal Amount, (c) the actual amortization of the Bonds being different than the amortization assumed for purposes of such estimates, (d) the actual market interest rates at the time of Attachment 2

A-2
sale of the Bonds being different than those estimated for purposes of such estimates, (e) other market conditions, (f) alterations to the City’s financing plan, or a combination of such factors.

Attachment 2

1 WATSONVILLE PUBLIC FINANCE AUTHORITY
RESOLUTION NO. ___

RESOLUTION OF THE BOARD OF DIRECTORS OF THE WATSONVILLE

PUBLIC FINANCE AUTHORITY AUTHORIZING THE EXECUTION AND

DELIVERY BY THE AUTHORITY OF A GROUND LEASE, LEASE

AGREEMENT, INDENTURE, ASSIGNMENT AGREEMENT, AND BOND

PURCHASE AGREEMENT IN CONNECTION WITH THE ISSUANCE OF

WATSONVILLE PUBLIC FINANCE AUTHORITY LEASE REVENUE
BONDS, SERIES 2025, AUTHORIZING THE ISSUANCE OF SUCH BONDS

IN AN AGGREGATE PRINCIPAL AMOUNT OF NOT TO EXCEED
$13,000,000, AUTHORIZING THE DISTRIBUTION OF AN OFFICIAL

STATEMENT IN CONNECTION WITH THE OFFERING AND SALE OF

SUCH BONDS AND AUTHORIZING THE EXECUTION OF NECESSARY

DOCUMENTS AND CERTIFICATES AND RELATED ACTIONS
WHEREAS, the Watsonville Public Finance Authority (the “Authority”) is a joint exercise of powers authority duly organized and existing pursuant to the laws of the State of California and that certain Joint Exercise of Powers Agreement, dated as of October 24, 2017, as amended pursuant to that certain First Amendment to Joint Exercise of Powers Agreement, dated as of May 1, 2025, each between the City of Watsonville, California (the “City”) and the Industrial Development Authority of the City of Watsonville (as so amended, the “Joint Powers Agreement”); WHEREAS, pursuant to the Joint Powers Agreement and Section 6588(h) of the Marks-Roos Local Bond Pooling Act of 1985, commencing with Section 6584 of the California Government Code (the “Act”), the Authority has the legal authority to lease and sublease lands, structures, real or personal property, and other interests in lands that are located within the State of California that the Authority determines are necessary or convenient for the financing of public capital improvements, or any portion thereof;
WHEREAS, the City and the Authority desire to finance all or a portion of the costs of the design, acquisition, construction and/or installation of certain capital improvements in the City, including improvements to Ramsay Park and the Watsonville Civic Plaza (collectively, the “Project”); WHEREAS, the City is a member of the Authority, and the Project is located within the boundaries of the City;
WHEREAS, the City has, prior to the consideration of this Resolution, held a public hearing on the financing of the Project in accordance with Section 6586.5 of the Act, which hearing was held at 275 Main Street, Watsonville, California on May 27, 2025 and adopted its resolution approving the financing and making a finding of significant public benefit in accordance with the Act; WHEREAS, in accordance with Section 6586.5 of the Act, notice of such hearing was published once at least five days prior to the hearing in Santa Cruz Sentinel, a local newspaper of general circulation in the City;
Attachment 3

2 WHEREAS, the Authority and the City have determined that it would be in the best interests of the Authority, the City and residents of the City to authorize the preparation, sale and delivery of the “Watsonville Public Finance Authority Lease Revenue Bonds, Series 2025,” in one or more series, on a taxable or tax-exempt basis (the “Bonds”) for the purpose of financing all or a portion of the Project;
WHEREAS, to facilitate the issuance of the Bonds, the City and the Authority desire to enter into a Ground Lease between the City and the Authority (the “Ground Lease”) pursuant to which the City will lease certain real property, which real property shall initially consist of (i) City Hall, located at 250 Main Street, Watsonville, California, (ii) the Watsonville Parks and Community Services Building, located at 231 Union Street, Watsonville, California, (iii) the Watsonville Police Information Technology Building, located at 215 Union Street, Watsonville, California, and (iv) the Watsonville Youth Center, located at 30 Maple Street, Watsonville, California (collectively, the “Leased Assets”), to the Authority, and a Lease Agreement between the City and the Authority (the “Lease Agreement”), pursuant to which the City will lease the Leased Assets back from the Authority, and pay certain Base Rental Payments (as defined in the Lease Agreement), which will be pledged to the owners of the Bonds by the Authority pursuant to an Indenture by and among U.S. Bank Trust Company, National Association (the “Trustee”), the City and the Authority (the “Indenture”); WHEREAS, the Authority and the Trustee desire to enter into an Assignment Agreement to provide, among other things, that all rights to receive the Base Rental Payments have been assigned without recourse by the Authority to the Trustee;
WHEREAS, the Authority will issue the Bonds pursuant to the Act; WHEREAS, the City and the Authority desire to provide for the negotiated sale of the Bonds; WHEREAS, the City and the Authority have selected Samuel A. Ramirez, Inc., to act as underwriter (in such capacity, the “Underwriter”) and to purchase the Bonds from the Authority pursuant to a Bond Purchase Agreement (the “Bond Purchase Agreement”), among the City, the Authority and the Underwriter;
WHEREAS, a form of the Preliminary Official Statement (the “Preliminary Official Statement”) has been prepared;
WHEREAS, on February 23, 2021, the City Council of the City adopted a Debt Management Policy for the City that complies with Government Code Section 8855(i) (the “Debt Management Policy”), which Debt Management Policy is by this Resolution being adopted by the Authority, and the sale and issuance of the Bonds as contemplated by this Resolution complies with the Debt Management Policy;
WHEREAS, good faith estimates of certain information relating to the Bonds are disclosed and set forth in Exhibit A attached to this Resolution as required by California Government Code Section 5852.1; such estimates were provided by Urban Futures, Inc., the Authority’s the Municipal Advisor, based on preliminary bond pricing information provided by the Underwriter; WHEREAS, the Board of Directors of the Authority (the “Board of Directors”) has been presented with the form of each document referred to herein, and the Board of Directors has examined Attachment 3

3 and approved each document and desires to authorize and direct the execution of such documents and the consummation of such financing; and
WHEREAS, all acts, conditions and things required by the laws of the State of California to exist, to have happened and to have been performed precedent to and in connection with the consummation of such financing authorized hereby do exist, have happened and have been performed in regular and due time, form and manner as required by law, and the Authority is now duly authorized and empowered, pursuant to each and every requirement of law, to consummate such financing for the purpose, in the manner and upon the terms herein provided;

NOW, THEREFORE, BE IT RESOLVED BY THE BOARD OF DIRECTORS OF THE WATSONVILLE PUBLIC FINANCE AUTHORITY AS FOLLOWS:

Section 1. All of the recitals herein contained are true and correct and the Board of Directors so finds. The Board of Directors of the Authority has determined and hereby finds that the Authority’s assistance in financing the Project by the issuance of the Bonds and related transactions will result in significant public benefits of the type described in Section 6586 (a) through (d), inclusive, of the Act.

Section 2. The forms of the Lease Agreement and the Ground Lease, on file with the Secretary of the Authority, are hereby approved, and the Chair, Vice Chair, Executive Director, the Secretary, and the Treasurer, and each of their authorized designees (the “Authorized Officers”), are each hereby authorized and directed, for and in the name and on behalf of the Authority, to execute and deliver the Lease Agreement and the Ground Lease, respectively, in substantially said forms, with such changes, insertions and omissions therein as the Authorized Officer executing the same may require or approve, such requirement or approval to be conclusively evidenced by the execution and delivery thereof; provided, however, that the all-in true interest cost applicable to the Bonds shall not exceed 3.47% per annum. In the event that it is determined by the Executive Director, or her designee, that there are limitations or restrictions on the ability of the City to lease or sublease any portion of the Leased Assets as contemplated by the Ground Lease and Lease Agreement, or that other City-owned property would be more appropriate to use as Leased Assets under the Ground Lease and the Lease Agreement the Executive Director, or her designee, is hereby expressly authorized to designate other or additional real property of the City to be leased or subleased pursuant to the Ground Lease and Lease Agreement, with such designation to be conclusively evidenced by the execution and delivery of the Ground Lease and Lease Agreement by an Authorized Officer.

The Board of Directors hereby declares that the real property that is the subject of the Lease Agreement (previously defined as the “Leased Assets”) is “exempt surplus land” as defined by California Government Code Section 54221(f)(1)(D) since the Authority is transferring the Leased Assets to another local agency (the City) for the City’s use. As set forth in the Ground Lease and the Lease Agreement, the Leased Assets are needed for the City’s use to serve as the leased property in connection with the of the Project, which are important public improvements that will benefit the Authority and the City. The Leased Assets are also needed for the City’s ongoing operational purposes to providing facilities for City Hall, the Community Services Building, Police Information Technology purposes, as well as recreational purposes.

Section 3. The form of Indenture, on file with the Secretary of the Authority, is hereby approved, and the Authorized Officers are each hereby authorized and directed, for and in the name and on behalf of the Authority, to execute and deliver the Indenture in substantially said form, with Attachment 3

4 such changes, insertions and omissions therein as the Authorized Officer executing the same may require or approve, such requirement or approval to be conclusively evidenced by the execution and delivery thereof; provided, however, that the aggregate principal amount of the Bonds shall not exceed $13,000,000, and the all-in true interest cost applicable to the Bonds shall not exceed 3.47% per annum and, provided, further, that such changes, insertions and omissions shall be consistent with the terms of the Bonds established at negotiated sale pursuant to the Bond Purchase Agreement. In the event that it is determined by the Treasurer, or her designee, that the funding or financing of capitalized interest on the Bonds would be in the best interests of the City, the Indenture may be modified to provide for capitalized interest on such basis as is determined by the Treasurer or her designee, such determination to be conclusively evidenced by the execution and delivery of the Indenture by an Authorized Officer.

Section 4. The issuance of not to exceed $13,000,000 aggregate principal amount of the Bonds, in one or more series, on a taxable or tax-exempt basis, in the principal amounts, bearing interest at the rates and maturing on the dates as specified in the Indenture as finally executed, is hereby authorized and approved.

Section 5. The form of Assignment Agreement, on file with the Secretary of the Authority, is hereby approved, and the Authorized Officers are each hereby authorized and directed, for and in the name and on behalf of the Authority, to execute and deliver the Assignment Agreement in substantially said form, with such changes, insertions and omissions therein as the Authorized Officer executing the same may require or approve, such requirement or approval to be conclusively evidenced by the execution and delivery thereof.

Section 6. The Bond Purchase Agreement, on file with the Secretary of the Authority, is hereby approved, and the Authorized Officers are each hereby authorized and directed, for and in the name of the Authority to execute and deliver the Bond Purchase Agreement in substantially said form, with such changes, insertions and omissions as the Authorized Officer executing the same may require or approve, such requirement or approval to be conclusively evidenced by the execution of the Bond Purchase Agreement by such Authorized Officer; provided, however, that the underwriter’s discount (not including any original issue discount paid by the Underwriter) from the principal amount of the Bonds shall not exceed eight tenths of one percent (0.80%) of the principal amount of the Bonds.

As an alternative to the sale of the Bonds through a public offering authorized in the immediately preceding paragraph of this Section 6, the Bonds may be sold on a private placement basis through Samuel A. Ramirez, Inc., acting as private placement agent (in such capacity, the “Private Placement Agent”), if a private placement of the Bonds will produce lower interest rates than are available through a public offering of the Bonds, or if a private placement is otherwise preferable and/or more appropriate than a public offering of the Bonds, in the opinion of, and upon recommendation of, the Authority’s Municipal Advisor, which recommendation is agreed to by the Executive Director or Treasurer of the Authority; provided, however, that the compensation paid to the Private Placement Agent shall not exceed the amount approved by the Executive Director or Treasurer of the Authority. The Authorized Officers are each hereby authorized to negotiate and execute a private placement agreement with the Private Placement Agent in consultation with the Authority’s Bond Counsel and Municipal Advisor.

Section 7. The form of Preliminary Official Statement, on file with the Secretary of the Authority, with such changes, insertions and omissions therein as may be approved by an Authorized Officer, is hereby approved, and the use of the Preliminary Official Statement in connection with the offering and sale of the Bonds is hereby authorized and approved. The Authorized Officers are each Attachment 3

5 hereby authorized to certify on behalf of the Authority that the Preliminary Official Statement is deemed final as of its date, within the meaning of Rule 15c2-12 promulgated under the Securities Exchange Act of 1934 (except for the omission of certain final pricing, rating and related information as permitted by such Rule).

The Authorized Officers are each hereby authorized and directed to furnish, or cause to be furnished, to prospective bidders for the Bonds a reasonable number of copies of the Preliminary Official Statement.

Section 8. The preparation and delivery of an Official Statement, and its use in connection with the offering and sale of the Bonds, is hereby authorized and approved. The Official Statement shall be in substantially the form of the Preliminary Official Statement with such changes, insertions and omissions as may be approved by an Authorized Officer, such approval to be conclusively evidenced by the execution and delivery thereof. The Authorized Officers are each hereby authorized and directed, for and in the name of and on behalf of the Authority, to execute the final Official Statement and any amendment or supplement thereto for and in the name and on behalf of the Authority.

Section 9. Anzel Galvan LLP is hereby approved and appointed as Bond and Disclosure Counsel, Urban Futures, Inc., is hereby approved and appointed as Municipal Advisor, and U.S. Bank Trust Company, National Association is hereby appointed as Trustee, each to provide such services to the Authority and any other related services as may be required to issue the Bonds.

Section 10. The Authority hereby adopts the Debt Management Policy and certifies that the Debt Management Policy complies with Government Code Section 8855(i), and that the Authority’s financing described in this Resolution and its obligations under the Indenture and the Ground Lease as contemplated by this Resolution are in compliance with the Debt Management Policy, and to the extent the sale and issuance of the Bonds is not in compliance with the Debt Management Policy, such noncompliance is waived in accordance with the terms of the Debt Management Policy.

The Authority further instructs Anzel Galvan LLP, as Bond Counsel, on behalf of the Authority, with respect to the Bonds described in this Resolution, (a) to cause notices of the proposed sale and final sale of the Bonds to be filed in a timely manner with the California Debt and Investment Advisory Commission (“CDIAC”) pursuant to Government Code Section 8855, and (b) to certify to CDIAC, on behalf of the Authority, that the Debt Management Policy complies with Government Code Section 8855(i) in the notice of proposed sale filed pursuant to Government Code Section 8855.

Section 11. The officers and agents of the Authority are hereby authorized and directed, jointly and severally, to do any and all things which they may deem necessary or advisable to consummate the transactions herein authorized and otherwise to carry out, give effect to and comply with the terms and intent of this Resolution. Specifically and without limiting the foregoing, any Authorized Officer is authorized and directed to solicit and accept bids for bond insurance and, if applicable, a reserve account insurance policy, for the Bonds, provided such officer determines acceptance of the best bid will result in lower overall debt service or lower interest cost, and appropriate changes to each of the documents referenced herein to evidence such bond insurance, and, if applicable, a reserve account insurance policy, and the terms thereof, are hereby authorized and approved.

Anything to the contrary herein notwithstanding, in the event the Executive Director determines in consultation with the Municipal Advisor that the cost-efficient marketing of the Bonds requires creation of a funded reserve under the Indenture, each of the Indenture, Lease Agreement and other documents approved herein may be revised to reflect the funding of such a reserve. All actions Attachment 3

6 heretofore taken by the officers and agents of the Authority with respect to the transactions set forth above are hereby approved, confirmed and ratified.

Section 12. The Board of Directors hereby determines the potential environmental impacts resulting from the adoption of this Resolution have been adequately evaluated by previously adopted mitigated negative declarations, in accordance with the California Environmental Quality Act (CEQA), as authorized by CEQA Guidelines Section 15162. The Bonds will finance public improvement projects known as the Ramsay Renaissance Project and the Watsonville City Plaza Expansion and Revitalization Project. The Ramsay Renaissance Project was analyzed in an Initial Study/Mitigated Negative Declaration with a corresponding mitigation monitoring program that supported the City Council’s award of the construction contract at its meeting on March 26, 2024. The Plaza Expansion and Revitalization Project was analyzed in the Mitigated Negative Declaration and mitigation monitoring program for which the Notice of Determination (Document Number 027-19 NOD) was filed with the Santa Cruz County Clerk on December 20, 2019.

Section 13. This Resolution shall take effect from and after its date of adoption.

PASSED AND ADOPTED this __ day of May 2025.

Chair
ATTEST:

Secretary
APPROVED AS TO FORM:

Counsel
Attachment 3

7 STATE OF CALIFORNIA )
) ss.

COUNTY OF SANTA CRUZ )
I, Irwin I. Ortiz, Secretary of the Board of Directors of the Watsonville Public Finance Authority, do hereby certify that the above and foregoing Resolution was duly and regularly adopted by the Board of Directors of said Authority and was signed by the Chair of said Board at a regular meeting held on the ____ day of May, 2025, and that it was so adopted by the following vote:

AYES: Directors
NOES: Directors
ABSENT: Directors
ABSTAIN: Directors
Secretary of the Watsonville Public Finance Authority
Attachment 3

A-1

EXHIBIT A

GOOD FAITH ESTIMATES
The good faith estimates set forth herein are provided with respect to the Bonds in accordance with California Government Code Section 5852.1. Such good faith estimates have been provided to the Authority by the Authority’s Municipal Advisor, Urban Futures, Inc., in consultation with Samuel A. Ramirez, Inc., the Underwriter of the Bonds.

Principal Amount. The Municipal Advisor has informed the Authority that, based on the Authority’s financing plan and current market conditions, its good faith estimate of the aggregate principal amount of the Bonds to be issued and sold is $13,000,000 (the “Estimated Principal Amount”).

True Interest Cost of the Bonds. The Municipal Advisor has informed the Authority that, assuming that the Estimated Principal Amount of the Bonds is issued and sold, and based on market interest rates prevailing at the time of preparation of such estimate, its good faith estimate of the true interest cost of the Bonds, which means the rate necessary to discount the amounts payable on the respective principal and interest payment dates to the purchase price received for the Bonds, is 3.47%.

Finance Charge of the Bonds. The Municipal Advisor has informed the Authority that, assuming that the Estimated Principal Amount of the Bonds is issued and sold, and based on market interest rates prevailing at the time of preparation of such estimate, its good faith estimate of the finance charge for the Bonds, which means the sum of all fees and charges paid to third parties (or costs associated with the Bonds), is $337,749.

Amount of Proceeds to be Received. The Municipal Advisor has informed the Authority that, assuming that the Estimated Principal Amount of the Bonds is issued and sold, and based on market interest rates prevailing at the time of preparation of such estimate, its good faith estimate of the amount of proceeds expected to be received by the Authority for sale of the Bonds, less the finance charge of the Bonds, as estimated above, and any reserves or capitalized interest paid or funded with proceeds of the Bonds, is $12,000,000.

Total Payment Amount. The Municipal Advisor has informed the Authority that, assuming that the Estimated Principal Amount of the Bonds is issued and sold, and based on market interest rates prevailing at the time of preparation of such estimate, its good faith estimate of the total payment amount, which means the sum total of all payments the Authority will make to pay debt service on the Bonds, plus the finance charge for the Bonds, as described above, not paid with the proceeds of the Bonds, calculated to the final maturity of the Bonds, is $14,625,108, which excludes any reserves or capitalized interest paid or funded with proceeds of the Bonds (which may offset such total payment amount).

The foregoing estimates constitute good faith estimates only and are based on market conditions prevailing at the time of preparation of such estimates. The actual principal amount of the Bonds issued and sold, the true interest cost thereof, the finance charges thereof, the amount of proceeds received therefrom and total payment amount with respect thereto may differ from such good faith estimates due to (a) the actual date of the sale of the Bonds being different than the date assumed for purposes of such estimates, (b) the actual principal amount of Bonds issued and sold being different from the Estimated Principal Amount, (c) the actual amortization of the Bonds being different than the Attachment 3

A-2
amortization assumed for purposes of such estimates, (d) the actual market interest rates at the time of sale of the Bonds being different than those estimated for purposes of such estimates, (e) other market conditions, (f) alterations to the Authority’s financing plan, or a combination of such factors.

Attachment 3

Agenda Version

INDENTURE
by and among

WATSONVILLE PUBLIC FINANCE AUTHORITY
and

CITY OF WATSONVILLE
and
U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION,
as Trustee
Dated as of June 1, 2025
Relating to
$[PAR]

WATSONVILLE PUBLIC FINANCE AUTHORITY
LEASE REVENUE BONDS, SERIES 2025
Attachment 4

TABLE OF CONTENTS
Page
i
4865-0168-5958v12/202040-0002

ARTICLE I
DEFINITIONS; EQUAL SECURITY
Section 1.01 Definitions..................................................................................................................... 2 Section 1.02 Equal Security ............................................................................................................. 10

ARTICLE II

THE BONDS
Section 2.01 Authorization of Bonds............................................................................................... 11 Section 2.02 Terms of Series 2025 Bonds....................................................................................... 11 Section 2.03 Form of Series 2025 Bonds......................................................................................... 12 Section 2.04 Transfer and Exchange of Bonds................................................................................ 12 Section 2.05 Registration Books...................................................................................................... 13 Section 2.06 Execution of Bonds..................................................................................................... 13 Section 2.07 Authentication of Bonds ............................................................................................. 13 Section 2.08 Temporary Bonds........................................................................................................ 13 Section 2.09 Bonds Mutilated, Lost, Destroyed or Stolen............................................................... 13 Section 2.10 Book-Entry Bonds....................................................................................................... 14

ARTICLE III
ISSUANCE OF BONDS; APPLICATION OF PROCEEDS
Section 3.01 Issuance of Series 2025 Bonds.................................................................................... 15 Section 3.02 Application of Proceeds of the Series 2025 Bonds..................................................... 16 Section 3.03 [Reserved]................................................................................................................... 16 Section 3.04 Costs of Issuance Fund ............................................................................................... 16 Section 3.05 Project Fund ................................................................................................................ 16 Section 3.06 Conditions for the Issuance of Additional Bonds....................................................... 17 Section 3.07 Procedure for the Issuance of Additional Bonds ........................................................ 18 Section 3.08 Additional Bonds ........................................................................................................ 19

ARTICLE IV

REDEMPTION OF BONDS
Section 4.01 Redemption of Series 2025 Bonds.............................................................................. 19 Section 4.02 Notice of Redemption ................................................................................................. 20 Section 4.03 Selection of Bonds for Redemption ............................................................................ 21 Section 4.04 Partial Redemption of Bonds...................................................................................... 21 Section 4.05 Effect of Notice of Redemption .................................................................................. 21

ARTICLE V
SECURITY FOR BONDS; FLOW OF FUNDS; INVESTMENTS
Section 5.01 Pledge; Special Obligations........................................................................................ 21 Section 5.02 Flow of Funds ............................................................................................................. 22 Section 5.03 Application of Net Insurance Proceeds....................................................................... 22 Section 5.04 Title Insurance............................................................................................................. 24 Section 5.05 Rebate Fund ................................................................................................................ 24 Section 5.06 Investment of Moneys................................................................................................. 25 Attachment 4

TABLE OF CONTENTS
(continued)
Page
ii

ARTICLE VI

COVENANTS
Section 6.01 Compliance with Agreements..................................................................................... 27 Section 6.02 Compliance with Ground Lease and Lease Agreement.............................................. 27 Section 6.03 Observance of Laws and Regulations......................................................................... 27 Section 6.04 Other Liens.................................................................................................................. 27 Section 6.05 Prosecution and Defense of Suits................................................................................ 27 Section 6.06 Accounting Records and Statements........................................................................... 28 Section 6.07 Recordation and Filing................................................................................................ 28 Section 6.08 Tax Covenants............................................................................................................. 28 Section 6.09 Continuing Disclosure................................................................................................. 29 Section 6.10 Further Assurances...................................................................................................... 29

ARTICLE VII

DEFAULT AND LIMITATIONS OF LIABILITY
Section 7.01 Action on Default........................................................................................................ 29 Section 7.02 Other Remedies of the Trustee.................................................................................... 30 Section 7.03 Non-Waiver................................................................................................................. 30 Section 7.04 Remedies Not Exclusive ............................................................................................. 30 Section 7.05 No Liability by the Authority to the Owners.............................................................. 30 Section 7.06 No Liability by the City to the Owners....................................................................... 31 Section 7.07 No Liability of the Trustee to the Owners .................................................................. 31 Section 7.08 Application of Amounts After Default ....................................................................... 31 Section 7.09 Trustee May Enforce Claims Without Possession of Bonds ...................................... 31 Section 7.10 Limitation on Suits...................................................................................................... 31

ARTICLE VIII

THE TRUSTEE
Section 8.01 Employment of the Trustee......................................................................................... 32 Section 8.02 Duties, Removal and Resignation of the Trustee........................................................ 32 Section 8.03 Compensation of the Trustee ...................................................................................... 33 Section 8.04 Protection of the Trustee ............................................................................................. 34

ARTICLE IX

MODIFICATION OR AMENDMENTS
Section 9.01 Modifications and Amendments Permitted................................................................. 37 Section 9.02 Effect of Supplemental Indenture ............................................................................... 38 Section 9.03 Endorsement of Bonds; Preparation of New Bonds ................................................... 38 Section 9.04 Amendment of Particular Bonds................................................................................. 38

ARTICLE X

DEFEASANCE
Section 10.01 Discharge of Indenture................................................................................................ 39 Section 10.02 Bonds Deemed To Have Been Paid............................................................................ 39 Section 10.03 Payment of Bonds After Discharge of Indenture........................................................ 40 Attachment 4

TABLE OF CONTENTS
(continued)
Page
iii

ARTICLE XI

MISCELLANEOUS
Section 11.01 Benefits of Indenture Limited to Parties..................................................................... 40 Section 11.02 Successor Deemed Included in all References to Predecessor ................................... 40 Section 11.03 Execution of Documents by Owners .......................................................................... 40 Section 11.04 Waiver of Personal Liability ....................................................................................... 41 Section 11.05 Destruction of Bonds .................................................................................................. 41 Section 11.06 Funds and Accounts.................................................................................................... 41 Section 11.07 Article and Section Headings Gender and References ............................................... 41 Section 11.08 Partial Invalidity.......................................................................................................... 42 Section 11.09 Disqualified Bonds...................................................................................................... 42 Section 11.10 Money Held for Particular Bonds............................................................................... 42 Section 11.11 Payment on Non-Business Days................................................................................. 42 Section 11.12 California Law ............................................................................................................ 42 Section 11.13 Notices ........................................................................................................................ 43 Section 11.14 Notice to Rating Agencies .......................................................................................... 43 Section 11.15 Execution in Counterparts........................................................................................... 43 Signatures .............................................................................................................................S-1/S-2 EXHIBIT A FORM OF SERIES 2025 BOND..............................................................................A-1 EXHIBIT B FORM OF PROJECT FUND REQUISITION .........................................................B-1 Attachment 4

INDENTURE
THIS INDENTURE (this “Indenture”), executed and entered into as of June 1, 2025, is by and among the WATSONVILLE PUBLIC FINANCE AUTHORITY, a joint exercise of powers entity duly organized and existing pursuant to the Joint Exercise of Powers Agreement (defined below) and the laws of the State of California (the “Authority”), the CITY OF WATSONVILLE, a charter city and municipal corporation duly organized and existing under and by virtue of the Constitution and laws of the State of California (the “City”), and U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION, a national banking association duly organized and existing under and by virtue of the laws of the United States, as Trustee (the “Trustee”).

WITNESSETH:

WHEREAS, the City and the Authority desire to finance all or a portion of the design, acquisition, construction and/or installation of certain capital improvement projects in the City, including capital improvements to Ramsay Park and the Watsonville Civic Plaza (collectively, the “Project”);
WHEREAS, the City and the Authority have determined that it would be in the best interests of the City and residents of the City to authorize the preparation, sale and delivery of the “Watsonville Public Finance Authority Lease Revenue Bonds, Series 2025” (the “Series 2025 Bonds”) for the purpose of financing the Project;
WHEREAS, to facilitate the issuance of the Series 2025 Bonds, the City will lease certain real property and the improvements located thereon (the “Property”) to the Authority pursuant to a Ground Lease, dated as of the date hereof, and the City will sublease the Property back from the Authority pursuant to a Lease Agreement, dated as of the date hereof (the “Lease Agreement”); WHEREAS, the City and the Authority have determined that it would be in the best interests of the City and the Authority to provide the funds necessary to finance all or a portion of the Project through the issuance by the Authority of the Series 2025 Bonds payable from the base rental payments (the “Base Rental Payments”) to be made by the City under the Lease Agreement; WHEREAS, all rights to receive the Base Rental Payments have been assigned without recourse by the Authority to the Trustee pursuant to an Assignment Agreement, dated as of the date hereof;
WHEREAS, the Series 2025 Bonds will be payable equally and ratably from the Base Rental Payments;
WHEREAS, the Authority and the City desire to provide for the issuance of additional bonds in the future (the “Additional Bonds”) payable from the Base Rental Payments on a parity with the Series 2025 Bonds (the Series 2025 Bonds and any such Additional Bonds being collectively referred to as the “Bonds”);
WHEREAS, to provide for the authentication and delivery of the Bonds, to establish and declare the terms and conditions upon which the Bonds are to be issued and secured, and to secure the payment of the principal thereof, premium, if any, and interest thereon, the Authority and the City have authorized the execution and delivery of this Indenture; and Attachment 4

2 WHEREAS, the Authority and the City have determined that all acts and proceedings required by law necessary to make the Bonds, when executed by the Authority, authenticated and delivered by the Trustee and duly issued, the valid, binding and legal special obligations of the Authority, and to constitute this Indenture a valid and binding agreement for the uses and purposes herein set forth in accordance with its terms, have been done and taken, and the execution and delivery of the Indenture has been in all respects duly authorized;
NOW THEREFORE, in consideration of the premises and of the mutual agreements and covenants contained herein and for other valuable consideration, the parties do hereby agree as follows:

ARTICLE I
DEFINITIONS; EQUAL SECURITY
Section 1.01 Definitions. Unless the context otherwise requires, the terms defined in this Section shall for all purposes hereof and of any amendment hereof or supplement hereto and of the Bonds and of any certificate, opinion, request or other document mentioned herein or therein have the meanings defined herein, the following definitions to be equally applicable to both the singular and plural forms of any of the terms defined herein. Capitalized terms not otherwise defined herein shall have the meanings assigned to such terms in the Lease Agreement. “Additional Bonds” means Bonds other than the Series 2025 Bonds issued hereunder in accordance with the provisions of Sections 3.06 and 3.07 hereof. “Act” means the Marks-Roos Local Bond Pooling Act of 1985, commencing with Section 6584 of the California Government Code.
“Additional Rental Payments” means all amounts payable by the City as Additional Rental Payments pursuant to Section 3.02 of the Lease Agreement. “Assignment Agreement” means the Assignment Agreement, dated as of the date hereof, by and between the Authority and the Trustee, as amended and supplemented from time to time. “Authority” means the Watsonville Public Finance Authority, a joint exercise of powers entity organized and existing under and by virtue of the laws of the State of California. “Authorized Authority Representative” means the Chair, Vice Chair, Executive Director, Treasurer and Secretary of the Authority, or any other person authorized by the Board of Directors of the Authority to act on behalf of the Authority under or with respect to this Indenture. “Authorized City Representative” means the Mayor of the City, the Mayor Pro Tempore of the City, the City Manager of the City, the Administrative Services Director of the City or the City Clerk, or any other person authorized by the City Council of the City to act on behalf of the City under or with respect to this Indenture.
“Authorized Denominations” means $5,000 or any integral multiple thereof. “Base Rental Payment Fund” means the fund by that name established in accordance with Section 5.02 hereof.

Attachment 4

3 “Base Rental Payments” means all amounts payable to the Authority by the City as Base Rental Payments pursuant to Section 3.01 of the Lease Agreement. “Beneficial Owner” means, whenever used with respect to a Book-Entry Bond, the person whose name is recorded as the beneficial owner of such Book-Entry Bond or a portion of such BookEntry Bond by a Participant on the records of such Participant or such person’s subrogee. “Bonds” means the Series 2025 Bonds and any Additional Bonds issued hereunder. “Book-Entry Bonds” means the Bonds of a Series registered in the name of the nominee of DTC, or any successor securities depository for such Series of Bonds, as the registered owner thereof pursuant to the terms and provisions of Section 2.10 hereof. “Business Day” means a day which is not (a) a Saturday, Sunday or legal holiday, (b) a day on which banking institutions in the State of California, or in any state in which the Office of the Trustee is located, are required or authorized by law (including executive order) to close, or (c) a day on which the New York Stock Exchange is closed or the payment system of the Federal Reserve System is not operational.
“Cede & Co.” means Cede & Co., the nominee of DTC, and any successor nominee of DTC with respect to a Series of Book-Entry Bonds.
“City” means the City of Watsonville, a charter city and municipal corporation duly organized and existing under and by virtue of the Constitution and laws of the State of California. “Closing Date” means June [___], 2025.
“Code” means the Internal Revenue Code of 1986, as amended. “Continuing Disclosure Certificate” means the Continuing Disclosure Certificate, dated as of the date hereof, executed by the City, as originally executed and as it may from time to time be amended in accordance with the provisions thereof.
“Costs of Issuance” means all the costs of issuing and delivering the Bonds, including, but not limited to, all printing and document preparation expenses in connection with this Indenture, the Lease Agreement, the Ground Lease, the Assignment Agreement, the Bonds and any preliminary official statement and final official statement pertaining to the Bonds, rating agency fees, CUSIP Service Bureau charges, market study fees, legal fees and expenses of counsel with the issuance and delivery of the Bonds, the initial fees and expenses of the Trustee and its counsel, the initial fees and expenses of any bond insurer or reserve fund credit facility provider, and other fees and expenses incurred in connection with the issuance and delivery of the Bonds, to the extent such fees and expenses are approved by the City.
“Costs of Issuance Fund” means the fund by that name established in accordance with Section 3.04 hereof.
“DTC” means The Depository Trust Company, a limited-purpose trust company organized under the laws of the State of New York, and its successors as securities depository for any Series of Book-Entry Bonds, including any such successor appointed pursuant to Section 2.10 hereof.

Attachment 4

4 “Electronic Means” shall mean the following communications methods: e-mail, secure electronic transmission containing applicable authorization codes, passwords and/or authentication keys issued by the Trustee, or another method or system specified by the Trustee as available for use in connection with its services hereunder.
“Federal Securities” means (a) direct general obligations of the United States of America (including obligations issued or held in book entry form on the books of the Department of the Treasury of the United States of America), and (b) obligations of any agency, department or instrumentality of the United States of America the timely payment of principal of and interest on which are fully guaranteed by the United States of America.
“Ground Lease” means the Ground Lease, dated as of the date hereof, by and between the City and the Authority, as originally executed and as it may from time to time be amended in accordance with the provisions thereof and of the Lease Agreement. “Indenture” means this Indenture, as originally executed and as it may be amended or supplemented from time to time by any Supplemental Indenture. “Information Services” means the Municipal Securities Rulemaking Board through its Electronic Municipal Marketplace Access (EMMA) website; and, in accordance with then current guidelines of the Securities and Exchange Commission, such other services providing information with respect to called bonds as the Authority may designate in a Written Certificate of the Authority delivered to the Trustee.
“Interest Fund” means the fund by that name established in accordance with Section 5.02 hereof.
“Interest Payment Date” means May 1 and November 1 of each year, commencing on November 1, 2025.
“Joint Exercise of Powers Agreement” means the Joint Exercise of Powers Agreement, dated as of October 24, 2017, as amended pursuant to that certain First Amendment to Joint Exercise of Powers Agreement, dated as of May 1, 2025, each between the City and the Industrial Development Authority of the City of Watsonville, pursuant to which the Authority is established, as originally executed and as it may from time to time be amended in accordance with the provisions thereof. “Lease Agreement” means the Lease Agreement, dated as of the date hereof, by and between the City and the Authority, as originally executed and as it may be from time to time amended in accordance with the provisions thereof.
“Moody’s” means Moody’s Investors Service, a corporation organized and existing under the laws of the State of Delaware, its successors and assigns, except that if such corporation shall no longer perform the function of a securities rating agency for any reason, the term “Moody’s” shall be deemed to refer to any other nationally recognized securities rating agency selected by the Authority. “Office of the Trustee” means the principal corporate trust office of the Trustee in San Francisco, California, or such other office as may be specified to the Authority and the City by the Trustee in writing, except that with respect to presentation of Bonds for payment or for registration of transfer and exchange such term shall mean the office or the agency of the Trustee at which, at any Attachment 4

5 particular time, its corporate trust agency shall be conducted as specified to the Authority and the City by the Trustee in writing.
“Opinion of Counsel” means a written opinion Anzel Galvan LLP, or other counsel of recognized national standing in the field of law relating to municipal bonds, appointed and paid by the Authority or the City and which written opinion is satisfactory to the Trustee. “Outstanding,” when used as of any particular time with reference to Bonds, means (subject to the provisions of Section 11.09 hereof) all Bonds theretofore, or thereupon being, authenticated and delivered by the Trustee under this Indenture except:
(a) Bonds theretofore canceled by the Trustee or surrendered to the Trustee for cancellation;
(b) Bonds with respect to which all liability of the Authority shall have been discharged in accordance with Section 10.01 hereof; and (c) Bonds for the transfer or exchange of or in lieu of or in substitution for which other Bonds shall have been authenticated and delivered by the Trustee pursuant to this Indenture. “Owner” means, with respect to a Bond, the Person in whose name such Bond is registered on the Registration Books.
“Participant” means any entity which is recognized as a participant by DTC in the book-entry system of maintaining records with respect to Book-Entry Bonds. “Participating Underwriter” has the meaning ascribed thereto in the Continuing Disclosure Certificate.
“Permitted Investments” means any of the following to the extent then permitted by the general laws of the State of California:
(1) (a) Direct obligations (other than an obligation subject to—variation in principal repayment) of the United States of America (“United States Treasury Obligations”), (b) obligations fully and unconditionally guaranteed as to timely payment of principal and interest by the United States of America, (c) obligations fully and unconditionally guaranteed as to timely payment of principal and interest by any agency or instrumentality of the United States of America when such obligations are backed by the full faith and credit of the United States of America, or (d) evidences of ownership of proportionate interests in future interest and principal payments on obligations described above held by a bank or trust company as custodian, under which the owner of the investment is the real party in interest and has the right to proceed directly and individually against the obligor and the underlying government obligations are not available to any person claiming through the custodian or to whom the custodian may be obligated (collectively “United States Obligations”).

These include, but are not necessarily limited to:
-U.S. Treasury obligations
All direct or fully guaranteed obligations
-Farmers Home Administration
Certificates of beneficial ownership
Attachment 4

6 -General Services Administration
Participation certificates
-U.S. Maritime Administration
Guaranteed Title XI financing
-Small Business Administration
Guaranteed participation certificates
Guaranteed pool certificates
-Government National Mortgage Association (GNMA)
GNMA-guaranteed mortgage-backed securities
GNMA-guaranteed participation certificates
-U.S. Department of Housing & Urban Development
Local authority bonds
-Washington Metropolitan Area Transit Authority
Guaranteed transit bonds
(2) Federal Housing Administration debentures.
(3) The listed obligations of government-sponsored agencies which are not backed by the full faith and credit of the United States of America:
-Federal Home Loan Mortgage Corporation (FHLMC)
Participation certificates (excluded are stripped mortgage securities which are purchased at prices exceeding their principal amounts) Senior debt obligations
-Farm Credit Banks (formerly: Federal Land Banks, Federal intermediate Credit Banks and Banks for Cooperatives)
Consolidated systemwide bonds and notes
-Federal Home Loan Banks (FHL Banks)
Consolidated debt obligations
-Federal National Mortgage Association (FNMA)
Senior debt obligations
Mortgage-backed securities (excluded are stripped mortgages securities which are purchased at prices exceeding their principal amounts) -Financing Corporation (FICO)
Debt obligations
-Resolution Funding Corporation (REFCORP)
Debt obligations
(4) Bank deposit products, unsecured certificates of deposit (including those placed by a third party pursuant to an agreement between the City and the Trustee), trust funds, trust accounts, overnight banking deposits, interest bearing deposits, interest bearing money market accounts, time deposits, demand deposits, other deposit products, and bankers’ acceptances (having maturities of not more than 30 days) of any bank (including the Trustee and any affiliate) the shortterm obligations of which are rated “A-1” or “A-2” without regard to qualifier by S&P. (5) Deposits the aggregate amount of which are fully insured by the Federal Deposit Insurance Corporation (FDIC), in banks, including the Trustee and its affiliates, which have capital and surplus of at least $5 million.

Attachment 4

7 (6) Commercial paper (having original maturities of not more than 270 days) rated, at the time of purchase, “A-1” or better by S&P and “Prime-1” by Moody’s. (7) Money market mutual funds rated in the highest investment category granted thereby from S&P and Moody’s (including those for which the Trustee or its affiliates receives and retains a fee for services provided to the fund, whether as a custodian, transfer agent, investment advisor or otherwise) but excluding such funds with a floating net asset value. (8) Repurchase agreements:

With (1) any domestic bank, or domestic branch of a foreign bank or any non-bank financial institution or primary dealer as designated by the Federal Reserve the long term debt of which is rated at least “BBB+” by Standard & Poor’s or Moody’s (including the Trustee or any of its affiliates); or (2) any broker-dealer with “retail customers” or a related affiliate thereof which broker-dealer has, or the parent company (which guarantees the provider) of which has, long-term debt rated at least “BBB+” by Standard & Poor’s or Moody’s, which broker-dealer falls under the jurisdiction of the Securities Investors Protection Corporation; or (3) any other entity rated “BBB+” or better by Standard & Poor’s or Moody’s, provided that:
(a) The collateral shall be securities described in clause 1(a), (b) or (c) of this subsection, and the market value of the collateral is maintained at levels equal to 104% of the amount of cash transferred by the Trustee or the City to the provider of the repurchase agreement plus accrued interest with the collateral being valued weekly and marked-to-market at current market price plus accrued interest; (b) The Trustee or a third party acting solely as agent therefor or for the City (the “Holder of the Collateral”) has possession of the collateral or the collateral has been transferred to the Holder of the Collateral in accordance with applicable state and federal laws (other than by means of entries on the transferor’s books); (c) The repurchase or reverse repurchase agreement shall state and an opinion of counsel shall be rendered at the time such collateral is delivered that the Holder of the Collateral has a first priority security interest in the collateral, any substituted collateral and all proceeds thereof (in the case of bearer securities, this means the Holder of the Collateral is in possession);
(d) The repurchase or reverse repurchase agreement shall provide that if during its term the provider’s rating by either Moody’s or Standard & Poor’s is withdrawn or suspended or falls below “BBB” by Standard & Poor’s or “Baa2” by Moody’s, as appropriate, the provider must, at the direction of Trustee, within 10 days of receipt of such direction, repurchase all collateral and terminate the agreement, with no penalty or premium to the Trustee or the City.

Notwithstanding the above, if a repurchase agreement has a term of 270 days or less (with no evergreen provision), collateral levels need not be as specified in (a) above, so long as such collateral levels are 103% or better and the provider is rated at least “A” by Standard & Poor’s or Moody’s, respectively.

Attachment 4

8 (9) State Obligations
(a) Direct general obligations of any state of the United States or any subdivision or agency thereof to which is pledged the full faith and credit of a state the unsecured general obligation debt of which is rated “A2” by Moody’s and “A” by S&P, or better, or any obligation fully and unconditionally guaranteed by any state, subdivision or agency whose unsecured general obligation debt is so rated. (b) Direct, general short-term obligations of any state agency or subdivision described in (a) above and rated “A-1+” by S&P and “Prime-1” by Moody’s.
(c) Special Revenue Bonds (as defined in the United States Bankruptcy Code) of any state, state agency or subdivision described in (a) above and rated “AA” or better by S&P and “Aa” or better by Moody’s.
(10) Local Agency Investment Fund of the State of California. (11) Investment agreements, including guaranteed investment contracts, repurchase agreements and forward delivery agreements, that are obligations of an entity rated, or whose obligations are rated, or guaranteed by an entity which is rated or whose obligations are rated, (at the time the investment is entered into) not lower than “A-“ by S&P or Fitch, or “A3” by Moody’s. (12) Pre-refunded municipal obligations rated “AAA” by S&P and “Aaa” by Moody’s meeting the following requirements:
(a) the municipal obligations are (1) not subject to redemption prior to maturity or (2) the trustee for the municipal obligations has been given irrevocable instructions concerning their call and redemption and the issuer of the municipal obligations has covenanted not to redeem such municipal obligations other than as set forth in such instructions;
(b) the municipal obligations are secured by cash or United States Treasury Obligations which may be applied only to payment of the principal of, interest and premium on such municipal obligations;
(c) the principal of and interest on the United States Treasury Obligations (plus any cash in the escrow) has been verified by the report of independent certified public accountants to be sufficient to pay in full all principal of, interest, and premium, if any, due and to become due on the municipal obligations (“Verification”); (d) the cash or United States Treasury Obligations serving as security for the municipal obligations are held by an escrow agent or trustee in trust for owners of the municipal obligations;
(e) no substitution of a United States Treasury Obligation shall be permitted except with another United States Treasury Obligation and upon delivery of a new Verification; and
Attachment 4

9 (f) the cash or United States Treasury Obligations are not available to satisfy any other claims, including those by or against the trustee or escrow agent.

The Trustee shall have no responsibility to monitor the ratings of Permitted Investments after the initial purchase of such Permitted Investments.
“Person” means an individual, corporation, firm, association, partnership, trust, or other legal entity or group of entities, including a governmental entity or any agency or political subdivision thereof.
“Project” means the design, acquisition, construction and installation of certain public capital improvements to be located at Ramsay Park and the Watsonville Civic Plaza, and related infrastructure improvements as further described in Exhibit B to the Lease Agreement. “Project Fund” means the fund by that name established in accordance with Section 3.05 hereof.
“Principal Fund” means the account by that name established in accordance with Section 5.02 hereof.
“Rebate Fund” means the fund by that name established in accordance with Section 5.05 hereof.
“Rebate Requirement” has the meaning ascribed thereto in the Tax Certificate. “Record Date” means the fifteenth day of the month next preceding an Interest Payment Date, whether or not such day is a Business Day.
“Redemption Fund” means the fund by that name established in accordance with Section 5.02 hereof.
“Redemption Price” means the aggregate amount of principal of and premium, if any, on the Bonds upon the redemption thereof pursuant hereto.
“Registration Books” means the records maintained by the Trustee for the registration of ownership and registration of transfer of the Bonds pursuant to Section 2.05 hereof. “Rental Payments” means, collectively, the Base Rental Payments and the Additional Rental Payments.
“Rental Period” means the period from the Closing Date through April 30, 2026, and, thereafter, the twelve-month period commencing on May 1 of each year during the term of the Lease Agreement.
“Representation Letter” means the Letter of Representations from the Authority to DTC, or any successor securities depository for any Series of Book-Entry Bonds, in which the Authority makes certain representations with respect to issues of its securities for deposit by DTC or such successor depository.

Attachment 4

10 “S&P” means S&P Global Ratings, a Standard & Poor’s Financial Services LLC business, its successors and assigns, except that if such entity shall no longer perform the functions of a securities rating agency for any reason, the term “S&P” shall be deemed to refer to any other nationally recognized securities rating agency selected by the Authority. “Securities Depositories” means The Depository Trust Company; and, in accordance with then current guidelines of the Securities and Exchange Commission, such other securities depositories as the Authority may designate in a Written Certificate of the Authority delivered to the Trustee. “Security Documents” means this Indenture, the Lease Agreement and the Assignment Agreement.
“Series” means the Series 2025 Bonds executed, authenticated and delivered on the Closing Date and identified pursuant to this Indenture and any Additional Bonds issued pursuant to a Supplemental Indenture and identified as a separate Series of Bonds. “Series 2025 Bonds” means the Watsonville Public Finance Authority Lease Revenue Bonds, Series 2025 issued hereunder.
“Supplemental Indenture” means any supplemental indenture amendatory of or supplemental to this Indenture, but only if and to the extent that such Supplemental Indenture is specifically authorized hereunder.
“Tax Certificate” means the Tax Certificate executed by the Authority and the City at the time of issuance of the Series 2025 Bonds relating to the requirements of Section 148 of the Code, as originally executed and as it may from time to time be amended in accordance with the provisions thereof.
“Trustee” means U.S. Bank Trust Company, National Association, a national banking association duly organized and existing under and by virtue of the laws of the United States, or any successor thereto as Trustee hereunder, appointed as provided herein. “Written Certificate of the Authority” and “Written Request of the Authority” mean, respectively, a written certificate or written request signed in the name of the Authority by an Authorized Authority Representative. Any such certificate or request may, but need not, be combined in a single instrument with any other instrument, opinion or representation, and the two or more so combined shall be read and construed as a single instrument. “Written Certificate of the City” and “Written Request of the City” mean, respectively, a written certificate or written request signed in the name of the City by an Authorized City Representative. Any such certificate or request may, but need, not, be combined in a single instrument with any other instrument, opinion or representation, and the two or more so combined shall be read and construed as a single instrument.

Section 1.02 Equal Security. In consideration of the acceptance of the Bonds by the Owners thereof, this Indenture shall be deemed to be and shall constitute a contract among the Authority, the City, the Trustee and the Owners from time to time of all Bonds authorized, executed, issued and delivered hereunder and then Outstanding to secure the full and final payment of the principal of, premium, if any, and interest on all Bonds which may from time to time be authorized, Attachment 4

11 executed, issued and delivered hereunder, subject to the agreements, conditions, covenants and provisions contained herein; and all agreements and covenants set forth herein to be performed by or on behalf of the Authority or the City shall be for the equal and proportionate benefit, protection and security of all Owners of the Bonds without distinction, preference or priority as to security or otherwise of any Bonds over any other Bonds by reason of the number or date thereof or the time of authorization, sale, execution, issuance or delivery thereof or for any cause whatsoever, except as expressly provided herein or therein.

ARTICLE II

THE BONDS
Section 2.01 Authorization of Bonds. The Authority hereby authorizes the issuance of the Bonds under and subject to the terms of this Indenture and applicable laws of the State of California for the purpose of financing and refinancing the Project. The Bonds may consist of one or more Series of Bonds of varying denominations, dates, maturities, interest rates and other provisions, subject to the provisions and conditions contained herein.

Section 2.02 Terms of Series 2025 Bonds.
(a) The Series 2025 Bonds shall be designated the “Watsonville Public Finance Authority Lease Revenue Bonds, Series 2025.” Each Series of Additional Bonds shall bear such additional designation as may be necessary or appropriate to distinguish such Series from every other Series of Bonds.
(b) The Series 2025 Bonds shall be issued in fully registered form without coupons in Authorized Denominations, so long as no Series 2025 Bond shall have more than one maturity date.

The Series 2025 Bonds shall be dated as of the Closing Date, shall be issued in the aggregate principal amount of $[PAR].00, shall mature on May 1 of each year and shall bear interest (calculated on the basis of a 360-day year comprised of twelve 30-day months) at the rates per annum as follows:

Maturity Date
(May 1)
Principal
Amount
Interest
Rate
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
[T Term Bond]
(c) Interest on the Series 2025 Bonds shall be payable from the Interest Payment Date next preceding the date of authentication thereof unless (i) a Series 2025 Bond is authenticated Attachment 4

12 on or before an Interest Payment Date and after the close of business on the preceding Record Date, in which event it shall bear interest from such Interest Payment Date, (ii) a Series 2025 Bond is authenticated on or before the first Record Date, in which event interest thereon shall be payable from the dated date thereof, or (iii) interest on any Series 2025 Bond is in default as of the date of authentication thereof, in which event interest thereon shall be payable from the date to which interest has been paid in full, payable on each Interest Payment Date. Interest shall be paid in lawful money of the United States on each Interest Payment Date to the Persons in whose names the ownership of the Series 2025 Bonds is registered on the Registration Books at the close of business on the immediately preceding Record Date, except as provided below. Interest shall be paid by check of the Trustee mailed by first class mail, postage prepaid, on each Interest Payment Date to the Series 2025 Bond Owners at their respective addresses shown on the Registration Books as of the close of business on the preceding Record Date.
(d) The principal and premium, if any, of the Series 2025 Bonds shall be payable in lawful money of the United States of America upon presentation and surrender thereof upon maturity or earlier redemption at the Office of the Trustee.
(e) The Series 2025 Bonds shall be subject to redemption as provided in Article IV.

Section 2.03 Form of Series 2025 Bonds. The Series 2025 Bonds shall be in substantially the form set forth in Exhibit A hereto, with appropriate or necessary insertions, omissions and variations as permitted or required hereby.

Section 2.04 Transfer and Exchange of Bonds. Any Bond may, in accordance with its terms, be transferred upon the Registration Books by the Person in whose name it is registered, in person or by his duly authorized attorney, upon surrender of such Bond for cancellation, accompanied by delivery of a written instrument of transfer, duly executed in a form acceptable to the Trustee.

Whenever any Bond or Bonds shall be surrendered for transfer, the Authority shall execute and the Trustee shall authenticate and shall deliver a new Bond or Bonds of the same Series in a like aggregate principal amount, in any Authorized Denomination. The Trustee shall require the Bond Owner requesting such transfer to pay any tax or other governmental charge required to be paid with respect to such transfer.

The transferor shall also provide or cause to be provided to the Trustee all information necessary to allow the Trustee to comply with any applicable tax reporting obligations, including without limitation any cost basis reporting obligations under Internal Revenue Code Section 6045. The Trustee may rely on the information provided to it and shall have no responsibility to verify or ensure the accuracy of such information.

The Bonds may be exchanged at the Office of the Trustee for a like aggregate principal amount of Bonds of the same Series of other authorized denominations. The Trustee shall require the payment by the Bond Owner requesting such exchange of any tax or other governmental charge required to be paid with respect to such exchange.

The Trustee shall not be obligated to make any transfer or exchange of Bonds of a Series pursuant to this Section during the period established by the Trustee for the selection of Bonds of such Series for redemption, or with respect to any Bonds of such Series selected for redemption.

Attachment 4

13 Section 2.05 Registration Books. The Trustee will keep or cause to be kept, at the Office of the Trustee, sufficient records for the registration and transfer of ownership of the Bonds, which shall be open to inspection during regular business hours and upon reasonable written notice by the City; and, upon presentation for such purpose, the Trustee shall, under such reasonable regulations as it may prescribe, register or transfer or cause to be registered or transferred, on such records, the ownership of the Bonds as hereinbefore provided.

Section 2.06 Execution of Bonds. The Bonds shall be executed in the name and on behalf of the Authority with the manual or facsimile signature of an Authorized Authority Representative attested by the manual or facsimile signature of the Secretary or any duly authorized deputy secretary of the Authority. The Bonds shall then be delivered to the Trustee for authentication by it. In case any of such officers of the Authority who shall have signed or attested any of the Bonds shall cease to be such officers of the Authority before the Bonds so signed or attested shall have been authenticated or delivered by the Trustee, or issued by the Authority, such Bonds may nevertheless be authenticated, delivered and issued and, upon such authentication, delivery and issue, shall be as binding upon the Authority as though those who signed and attested the same had continued to be such officers of the Authority, and also any Bonds may be signed and attested on behalf of the Authority by such Persons as at the actual date of execution of such Bonds shall be the proper officers of the Authority although at the nominal date of such Bonds any such Person shall not have been such officer of the Authority.

Section 2.07 Authentication of Bonds. Only such of the Bonds as shall bear thereon a certificate of authentication substantially in the form as that set forth in Exhibit A hereto, manually executed by the Trustee, shall be valid or obligatory for any purpose or entitled to the benefits of this Indenture, and such certificate of or on behalf of the Trustee shall be conclusive evidence that the Bonds so authenticated have been duly executed, authenticated and delivered hereunder and are entitled to the benefits of this Indenture.

Section 2.08 Temporary Bonds. The Bonds of a Series may be issued in temporary form exchangeable for definitive Bonds of such Series when ready for delivery. Any temporary Bonds may be printed, lithographed or typewritten, shall be of such authorized denominations as may be determined by the Authority, shall be in fully registered form without coupons and may contain such reference to any of the provisions of this Indenture as may be appropriate. Every temporary Bond shall be executed by the Authority and authenticated by the Trustee upon the same conditions and in substantially the same manner as the definitive Bonds. If the Authority issues temporary Bonds of a Series it will execute and deliver definitive Bonds of such Series as promptly thereafter as practicable, and thereupon the temporary Bonds of such Series, may be surrendered, for cancellation, at the Office of the Trustee and the Trustee shall authenticate and deliver in exchange for such temporary Bonds an equal aggregate principal amount of definitive Bonds of such Series in Authorized Denominations.

Until so exchanged, the temporary Bonds of such Series shall be entitled to the same benefits under this Indenture as definitive Bonds of such Series authenticated and delivered hereunder.

Section 2.09 Bonds Mutilated, Lost, Destroyed or Stolen. If any Bond shall become mutilated, the Authority, at the expense of the Owner of said Bond, shall execute, and the Trustee shall thereupon authenticate and deliver, a new Bond of like tenor and Series in exchange and substitution for the Bond so mutilated, but only upon surrender to the Trustee of the Bond so mutilated. Every mutilated Bond so surrendered to the Trustee shall be canceled by it and delivered to, or in accordance with the order of, the Authority. If any Bond shall be lost, destroyed or stolen, evidence of such loss, destruction or theft may be submitted to the Trustee and, if such evidence and indemnity satisfactory to the Trustee shall be given, the Authority, at the expense of the Owner, shall execute, and the Trustee Attachment 4

14 shall thereupon authenticate and deliver, a new Bond of like tenor and Series in lieu of and in replacement for the Bond so lost, destroyed or stolen (or if any such Bond shall have matured or shall have been selected for redemption, instead of issuing a replacement Bond, the Trustee may pay the same without surrender thereof). The Authority may require payment by the Owner of a sum not exceeding the actual cost of preparing each replacement Bond issued under this Section and of the expenses which may be incurred by the Authority and the Trustee. Any Bond of a Series issued under the provisions of this Section in lieu of any Bond of such Series alleged to be lost, destroyed or stolen shall constitute an original additional contractual obligation on the part of the Authority whether or not the Bond so alleged to be lost, destroyed or stolen be at any time enforceable by anyone, and shall be entitled to the benefits of this Indenture with all other Bonds of such Series secured by this Indenture.

Section 2.10 Book-Entry Bonds.
(a) Prior to the issuance of a Series of Bonds, the Authority may provide that such Series of Bonds shall initially be issued as Book-Entry Bonds and, in such event, the Bonds of such Series for each maturity shall be in the form of a separate single fully registered Bond (which may be typewritten). The Series 2025 Bonds shall initially be issued as Book-Entry Bonds.

Except as provided in subsection (c) of this Section, the registered Owner of all of the Book-Entry Bonds shall be Cede & Co., as nominee of DTC. Notwithstanding anything to the contrary contained in this Indenture, payment of interest with respect to any Book-Entry Bond registered as of each Record Date in the name of Cede & Co. shall be made by wire transfer of same-day funds to the account of Cede & Co. on the Interest Payment Date at the address indicated on the Record Date for Cede & Co. in the Registration Books or as otherwise provided in the Representation Letter. (b) The Trustee and the Authority may treat DTC (or its nominee) as the sole and exclusive Owner of Book-Entry Bonds registered in its name for the purposes of payment of the principal, premium, if any, or interest with respect to Book-Entry Bonds, selecting Book-Entry Bonds or portions thereof to be redeemed, giving any notice permitted or required to be given to Owners of Book-Entry Bonds under this Indenture, registering the transfer of Book-Entry Bonds, obtaining any consent or other action to be taken by Owners of Book-Entry Bonds and for all other purposes whatsoever, and neither the Trustee nor the Authority shall be affected by any notice to the contrary.

Neither the Trustee nor the Authority shall have any responsibility or obligation to any Participant, any person claiming a beneficial ownership interest in Book-Entry Bonds under or through DTC or any Participant, or any other person which is not shown on the Registration Books as being an Owner, with respect to the accuracy of any records maintained by DTC or any Participant, the payment by DTC or any Participant of any amount in respect of the principal, premium, if any, or interest with respect to Book-Entry Bonds, any notice which is permitted or required to be given to Owners of Book-Entry Bonds under this Indenture, the selection by DTC or any Participant of any person to receive payment in the event of a partial redemption of Book-Entry Bonds, or any consent given or other action taken by DTC as Owner of Book-Entry Bonds. The Trustee shall pay all principal, premium, if any and interest with respect to Book-Entry Bonds, only to DTC, and all such payments shall be valid and effective to fully satisfy and discharge the Authority’s obligations with respect to the principal, premium, if any, and interest with respect to the Book-Entry Bonds to the extent of the sum or sums so paid. Except under the conditions of subsection (c) of this Section, no person other than DTC shall receive an executed Book-Entry Bond for each separate stated maturity. Upon delivery by DTC to the Trustee of written notice to the effect that DTC has determined to substitute a new nominee in place of Cede & Co., and subject to the provisions herein with respect to record dates, the term “Cede & Co.” in this Indenture shall refer to such new nominee of DTC.

Attachment 4

15 (c) In the event (i) DTC, including any successor as securities depository for a Series of Bonds, determines not to continue to act as securities depository for such Series of Bonds, or (ii) the Authority determines that the incumbent securities depository shall no longer so act, and delivers a written certificate to the Trustee to that effect, then the Authority will discontinue the bookentry system with the incumbent securities depository for such Series of Bonds. If the Authority determines to replace the incumbent securities depository for such Series of Bonds with another qualified securities depository, the Authority shall prepare or direct the preparation of a new single, separate fully registered Bond of such Series for the aggregate outstanding principal amount of Bonds of such Series of each maturity, registered in the name of such successor or substitute qualified securities depository, or its nominee, or make such other arrangement acceptable to the Authority, the Trustee and the successor securities depository for the Bonds of such Series as are not inconsistent with the terms of this Indenture. If the Authority fails to identify another qualified successor securities depository for such Series of Bonds to replace the incumbent securities depository, then the Bonds of such Series shall no longer be restricted to being registered in the Registration Books in the name of the incumbent securities depository or its nominee, but shall be registered in whatever name or names the incumbent securities depository for such Series of Bonds, or its nominee, shall designate. In such event the Authority shall execute, and deliver to the Trustee, a sufficient quantity of Bonds of such Series to carry out the transfers and exchanges provided in Sections 2.04, 2.08 and 2.09 hereof. All such Bonds of such Series shall be in fully registered form in Authorized Denominations. (d) Notwithstanding any other provision of this Indenture to the contrary, so long as any Book-Entry Bond is registered in the name of DTC, or its nominee, all payments with respect to the principal, premium, if any, and interest with respect to such Book-Entry Bond and all notices with respect to such Book-Entry Bond shall be made and given, respectively, as provided in the Representation Letter.
(e) In connection with any notice or other communication to be provided to Owners of Book-Entry Bonds pursuant to this Indenture by the Authority, the City or the Trustee with respect to any consent or other action to be taken by Owners, the Authority, the City or the Trustee, as the case may be, shall establish a record date for such consent or other action and give DTC notice of such record date not less than 15 calendar days in advance of such record date to the extent possible.

In connection with any proposed transfer outside the Book-Entry Only system, the Authority, the City or DTC shall provide or cause to be provided to the Trustee all information necessary to allow the Trustee to comply with any applicable tax reporting obligations, including without limitation any cost basis reporting obligations under Internal Revenue Code Section 6045. The Trustee may rely on the information provided to it and shall have no responsibility to verify or ensure the accuracy of such information.

ARTICLE III
ISSUANCE OF BONDS; APPLICATION OF PROCEEDS
Section 3.01 Issuance of Series 2025 Bonds. The Authority may, at any time, execute the Series 2025 Bonds for issuance hereunder and deliver the same to the Trustee. The Trustee shall authenticate the Series 2025 Bonds and deliver the Series 2025 Bonds to the original purchaser thereof upon receipt of a Written Request of the Authority and upon receipt of the purchase price therefor.

Attachment 4

16 Section 3.02 Application of Proceeds of the Series 2025 Bonds. On the Closing Date, the net proceeds of the sale of the Series 2025 Bonds received by the Trustee in the amount of $________ (being the purchase price for the Series 2025 Bonds), shall be deposited by the Trustee as follows:
(a) The Trustee shall deposit the amount of $________ in the Costs of Issuance Fund.
(b) The Trustee shall deposit the amount of $________ in the Project Fund to be applied as provided in Section 3.05 hereof.

The Trustee may establish one or more temporary accounts from time to time to facilitate the application of proceeds of the Bonds.

Section 3.03 [Reserved].

Section 3.04 Costs of Issuance Fund. The Trustee shall establish and maintain a separate fund designated the “Costs of Issuance Fund.” On the Closing Date, there shall be deposited in the Costs of Issuance Fund the amount specified in Section 3.02 hereof. There shall be additionally deposited in the Cost of Issuance Fund the portion, if any, of the proceeds of the sale of any Additional Bonds required to be deposited therein under the Supplemental Indenture pursuant to which such Additional Bonds are issued.

The moneys in the Costs of Issuance Fund shall be used and withdrawn by the Trustee from time to time to pay the Costs of Issuance upon submission of a Written Request of the Authority stating (a) the Person to whom payment is to be made, (b) the amount to be paid, (c) the purpose for which the obligation was incurred, (d) that such payment is a proper charge against the Costs of Issuance Fund, and (e) that such amounts have not been the subject of a prior disbursement from the Costs of Issuance Fund, in each case together with a statement or invoice for each amount requested thereunder.

Each such Written Request of the Authority shall be sufficient evidence to the Trustee of the facts stated therein and the Trustee shall have no duty to confirm the accuracy of such facts. One hundred eighty (180) days following the Closing Date, or earlier upon the Written Request of the Authority, all amounts, if any, remaining in the Costs of Issuance Fund shall be withdrawn therefrom by the Trustee and transferred to the Interest Fund.

Section 3.05 Project Fund.

The Trustee shall establish, maintain and hold in trust a separate fund designated as the “Project Fund.” The moneys in the Project Fund or the accounts therein shall be disbursed by the Trustee on behalf of the City as specified in a Written Request of the City in the form attached hereto as Exhibit B. Each Written Request of the City shall be sufficient evidence to the Trustee of the facts stated therein and the Trustee shall have no duty to confirm the accuracy of such facts. The Trustee shall be under no duty or obligation to analyze or verify any documentation supporting the payments or reimbursements in such Written Request but shall hold and provide to Owners upon request such documentation supporting the payments or reimbursements requested by the City, solely as a repository for the benefit of Owners. On the date on which the City determines that amounts in the Project Fund are no longer necessary for payment of the cost of the Project, the City shall submit a Written Request to the Trustee to transfer any remaining balance in the Project Fund not needed for Project Fund purposes, at the City’s sole discretion, to the City for use on eligible capital facilities, and the Project Attachment 4

17 Fund shall be closed. Investment earnings on amounts on deposit in the Project Fund shall remain on deposit in the Project Fund for application in accordance with this Section.

Section 3.06 Conditions for the Issuance of Additional Bonds. The Authority may at any time issue one or more Series of Additional Bonds (in addition to the Series 2025 Bonds) payable from Base Rental Payments as provided herein on a parity with all other Bonds theretofore issued hereunder, but only subject to the following conditions, which are hereby made conditions precedent to the issuance of such Additional Bonds:
(a) The issuance of such Additional Bonds shall have been authorized under and pursuant hereto and shall have been provided for by a Supplemental Indenture which shall specify the following:
(i) The application of the proceeds of the sale of such Additional Bonds; (ii) The principal amount and designation of such Series of Additional Bonds and the denomination or denominations of the Additional Bonds; (iii) The date, the maturity date or dates, the interest payment dates and the dates on which mandatory sinking fund redemptions, if any, are to be made for such Additional Bonds; provided, however, that (i) the serial Bonds of such Series of Additional Bonds shall be payable as to principal annually on May 1 of each year in which principal falls due, and the term Bonds of such Series of Additional Bonds shall have annual mandatory sinking fund redemptions on May 1, (ii) the Additional Bonds shall be payable as to interest semiannually on May 1 and November 1 of each year, except that the first installment of interest may be payable on either May 1 or November 1 and shall be for a period of not longer than twelve months and the interest shall be payable thereafter semiannually on May 1 and November 1, (iii) all Additional Bonds of a Series of like maturity shall be identical in all respects, except as to number or denomination, and (iv) serial maturities of serial Bonds or mandatory sinking fund redemptions for term Bonds, or any combination thereof, shall be established to provide for the redemption or payment of such Additional Bonds on or before their respective maturity dates;
(iv) The redemption premiums and terms, if any, for such Additional Bonds;
(v) The form of such Additional Bonds; and
(vi) If a reserve fund is to be established and maintained for such Series of Additional Bonds, the applicable reserve requirement and the amount, if any, to be deposited from the proceeds of sale of such Additional Bonds in such reserve fund to be held as separate security for such Series of Additional Bonds;
(vii) Designate accounts in the Interest Fund, the Principal Fund, the Redemption Fund, the Rebate Fund and the reserve fund (if any) to be applicable to such Additional Bonds; and
Attachment 4

18 (viii) Such other provisions that are appropriate or necessary and are not inconsistent with the provisions hereof, including the establishment of a capitalized interest fund for the Additional Bonds, if appropriate;
(b) The Authority shall be in compliance with all agreements, conditions, covenants and terms contained herein, in the Lease Agreement and in the Ground Lease required to be observed or performed by it;
(c) The City shall be in compliance with all agreements, conditions, covenants and terms contained herein, in the Lease Agreement and in the Ground Lease required to be observed or performed by it; and
(d) The Ground Lease shall have been amended, to the extent necessary, and the Lease Agreement shall have been amended so as to increase the Base Rental Payments payable by the City thereunder by an aggregate amount equal to the principal of and interest on such Additional Bonds, payable at such times and in such manner as may be necessary to provide for the timely payment of the principal of and interest on such Additional Bonds; provided, however, that no such amendment shall be made such that the sum of Base Rental Payments, including any increase in the Base Rental Payments as a result of such amendment, plus Additional Rental Payments, in any Rental Period shall be in excess of the annual fair rental value of the Property after taking into account the use of the proceeds of any Additional Bonds issued in connection therewith (evidence of the satisfaction of such condition shall be made by a Written Certificate of the City).

Nothing contained herein shall limit the issuance of any bonds or other obligations payable from Base Rental Payments if, after the issuance and delivery of such bonds or other obligations, none of the Bonds theretofore issued hereunder will be Outstanding.

Section 3.07 Procedure for the Issuance of Additional Bonds. At any time after the sale of any Additional Bonds in accordance with the Act, such Additional Bonds shall be executed by the Authority for issuance hereunder and shall be delivered to the Trustee and thereupon shall be authenticated and delivered by the Trustee, but only upon receipt by the Trustee of the following:
(a) Certified copies of the Supplemental Indenture authorizing the issuance of such Additional Bonds, the amendment to the Lease Agreement required by Section 3.06 hereof and the amendment to the Ground Lease, if any, required by Section 3.06 hereof, together with satisfactory evidence that such amendment to the Lease Agreement and such amendment to the Ground Lease, if any, have been (or will be immediately upon issuance of such Additional Bonds) duly recorded in the Official Records of the Santa Cruz County, California Recorder’s office; (b) A Written Request of the Authority as to the delivery of such Additional Bonds; (c) An opinion of Bond Counsel substantially to the effect that (i) the Indenture (including all Supplemental Indentures), the Lease Agreement (including the amendment thereto required by Section 3.06 hereof) and the Ground Lease (including any amendment thereto required by Section 3.06 hereof) have been duly authorized, executed and delivered by, and constitute the valid and binding obligations of, the Authority and the City, enforceable in accordance with their terms (except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors’ rights and by the application of equitable principles and by the exercise of judicial discretion in appropriate cases and subject to the limitations on legal remedies Attachment 4

19 against political subdivisions in the State of California), (ii) such Additional Bonds constitute valid and binding special obligations of the Authority payable solely from Base Rental Payments as provided herein and are enforceable in accordance with their terms (except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors’ rights and by the application of equitable principles and by the exercise of judicial discretion in appropriate cases and subject to the limitations on legal remedies against political subdivisions in the State of California), and (iii) the issuance of such Additional Bonds, in and of itself, will not adversely affect the exclusion of interest on any tax-exempt Bonds Outstanding prior to the issuance of such Additional Bonds from gross income for federal income tax purposes; (d) a Written Certificate of the Authority that the requirements of Section 3.06 hereof have been met;
(e) a Written Certificate of the City that the requirements of Section 3.06 hereof and Sections 6.01 and 6.02 of the Lease Agreement have been met, and a Written Certificate of the City directing the application of the proceeds of such Additional Bonds; and (f) Such further documents as are required by the provisions hereof or by the provisions of the Supplemental Indenture authorizing the issuance of such Additional Bonds.

Section 3.08 Additional Bonds. So long as any of the Bonds remain Outstanding, the Authority shall not issue any Additional Bonds or obligations payable from the Base Rental Payments, except pursuant to Sections 3.06 and 3.07 hereof.

ARTICLE IV

REDEMPTION OF BONDS
Section 4.01 Redemption of Series 2025 Bonds.
(a) Extraordinary Redemption. The Series 2025 Bonds shall be subject to extraordinary redemption, in whole or in part, on any date, in Authorized Denominations, from and to the extent of any Net Insurance Proceeds received with respect to all or a portion of the Property, deposited by the Trustee in the Redemption Fund pursuant to Sections 5.03 and 5.04 hereof, at a Redemption Price equal to the principal amount of the Series 2025 Bonds to be redeemed, plus accrued interest thereon to the date of redemption, without premium. (b) No Optional Redemption. The Series 2025 Bonds are not subject to optional redemption prior to maturity.
(c) [Sinking Fund Redemption. The Series 2025 Bonds maturing on May 1, 20__ are subject to mandatory sinking fund redemption in part (by lot) on each May 1 on and after May 1, 20__, in integral multiples of $5,000 at a Redemption Price of the principal amount thereof plus accrued interest to the date fixed for redemption, without premium, in accordance with the following schedule:

Attachment 4

20 Sinking Fund Redemption Date
(May 1)
Principal Amount
To Be Redeemed
(maturity)
In the event of a partial redemption pursuant to Section 4.01(a), the City shall provide the Trustee with a revised mandatory sinking fund schedule giving effect to the redemption so completed.] Section 4.02 Notice of Redemption. The Authority shall provide the Trustee with written notice of redemption pursuant to Section 4.01(a) at least thirty (30) days prior to the date set for the redemption of 2025 Bonds, or such shorter period as may be consented to by the Trustee, such notice being for the convenience of the Trustee. The Trustee on behalf and at the expense of the Authority shall provide notice of any redemption (i) by mail (by first class mail) to the respective Owners of any 2025 Bonds designated for redemption at their respective addresses appearing on the Registration Books, (ii) by electronic mail (email) to the Securities Depositories, (iii) by posting on the internet website (Electronic Municipal Market Access) maintained by the Municipal Securities Rulemaking Board and (iv) if directed in writing by the Authority, to one or more additional Information Services, at least 20 but not more than 60 days prior to the date fixed for redemption. Such notice shall state the date of the notice, the redemption date, the redemption place and the Redemption Price and shall designate the CUSIP numbers, the Bond numbers and the maturity or maturities (except in the event of redemption of all of the Bonds of such maturity or maturities in whole) of the Bonds to be redeemed, and shall require that such Bonds be then surrendered at the Office of the Trustee for redemption at the Redemption Price, giving notice also that further interest on such Bonds will not accrue from and after the date fixed for redemption. Such notice of redemption may also state that no representation is made as to the accuracy or correctness of the CUSIP numbers printed therein or on the Bonds. Neither the failure to receive any notice so mailed, nor any defect in such notice, shall affect the validity of the proceedings for the redemption of the Bonds or the cessation of accrual of interest thereon from and after the date fixed for redemption.

With respect to any notice of optional redemption of the Bonds, such notice may state that such redemption shall be conditional upon the receipt by the Trustee, on or prior to the date fixed for such redemption, of moneys sufficient to pay the principal of, premium if any, and interest on the Bonds to be redeemed and upon other conditions set forth therein and that, if such money shall not have been so received or such other conditions shall not have been satisfied, said notice shall be of no force and effect and the Trustee shall not be required to redeem such Bonds. If sufficient moneys for redemption shall not have been received or any condition stated in the redemption notice for an optional redemption shall not have been satisfied on or prior to the redemption date: (i) the redemption notice shall be of no force and effect, (ii) the Authority shall not be required to redeem such Bonds, (iii) the redemption shall not be made, and (iv) the Trustee shall within a reasonable time thereafter give notice to the persons in the manner in which the conditional redemption notice was given that such condition or conditions were not met and that the redemption was canceled.

The Trustee shall not have any liability to any party in connection with any failure to timely file such notice of redemption with the Information Service and the sole remedy available shall be an Attachment 4

21 action by the Owners of the Bonds in mandamus for specific performance or similar remedy to compel performance.

Section 4.03 Selection of Bonds for Redemption. Whenever provision is made in this Indenture for the redemption of less than all of the Bonds, the Trustee shall select the Bonds to be redeemed from all Bonds not previously called for redemption with respect to any redemption of Bonds of a Series, among maturities of Bonds of such Series as directed in a Written Request of the Authority, and by pro rata among Bonds of the same Series with the same maturity. For purposes of such selection, all Bonds shall be deemed to be comprised of separate $5,000 denominations and such separate denominations shall be treated as separate Bonds which may be separately redeemed.

Section 4.04 Partial Redemption of Bonds. Upon surrender of any Bonds redeemed in part only, the Authority shall execute and the Trustee shall authenticate and deliver to the Owner thereof, at the expense of the Authority, a new Bond or Bonds of the same Series in authorized denominations equal in aggregate principal amount representing the unredeemed portion of the Bonds surrendered.

Section 4.05 Effect of Notice of Redemption. Notice having been mailed as aforesaid, and moneys for the Redemption Price, and the interest to the applicable date fixed for redemption, having been set aside in the Redemption Fund, the Bonds shall become due and payable on said date, and, upon presentation and surrender thereof at the Office of the Trustee, said Bonds shall be paid at the Redemption Price thereof, together with interest accrued and unpaid to said date.

If, on said date fixed for redemption, moneys for the Redemption Price of all the Bonds to be redeemed, together with interest to said date, shall be held by the Trustee so as to be available therefor on such date, and, if notice of redemption thereof shall have been mailed as aforesaid and not canceled, then, from and after said date, interest on said Bonds shall cease to accrue and become payable. All moneys held by or on behalf of the Trustee for the redemption of Bonds shall be held in trust for the account of the Owners of the Bonds so to be redeemed without liability to such Owners for interest thereon.

All Bonds paid at maturity or redeemed prior to maturity pursuant to the provisions hereof shall be canceled upon surrender thereof and destroyed.

ARTICLE V
SECURITY FOR BONDS; FLOW OF FUNDS; INVESTMENTS
Section 5.01 Pledge; Special Obligations. Subject only to the provisions of this Indenture permitting the application thereof for the purposes and on the terms and conditions set forth herein, all of the Base Rental Payments and any other amounts (including proceeds of the sale of the Bonds) held in the Base Rental Payment Fund, the Interest Fund, the Principal Fund and the Redemption Fund are hereby pledged to secure the payment of the principal of, premium, if any, and interest on the Bonds in accordance with their terms, the provisions of this Indenture and the Act. Said pledge shall constitute a first lien on such assets. This pledge shall secure the payment of such Bonds and shall be effective, binding, and enforceable against the Authority, its successors, creditors and all others irrespective of whether those parties have notice of the pledge or grant and without the need of any physical delivery, recordation, filing, or further act. The pledge and grant is an agreement between the Authority and the Owners of Bonds to provide security for the Bonds in addition to any statutory lien that may exist.

Attachment 4

22 All obligations of the Authority under this Indenture shall be special obligations of the Authority, payable solely from Rental Payments and the other assets pledged therefor hereunder; provided, however, that all obligations of the Authority under the Bonds shall be special obligations of the Authority, payable solely from Base Rental Payments and the other assets pledged therefor hereunder. Neither the faith and credit nor the taxing power of the Authority, the City or the State of California, or any political subdivision thereof, is pledged to the payment of the Bonds.

Section 5.02 Flow of Funds.
(a) The Trustee shall establish and maintain separate funds designated the “Base Rental Payment Fund,” the “Interest Fund,” the “Principal Fund” and the “Redemption Fund.” If Additional Bonds are issued, the Trustee shall establish subaccounts within each fund for each Series of Additional Bonds.

All Base Rental Payments shall be paid directly by the City to the Trustee, and if received by the Authority at any time shall be transferred by the Authority to the Trustee within one Business Day after the receipt thereof. All Base Rental Payments received by the Trustee shall be deposited by the Trustee in the Base Rental Payment Fund. (b) The Trustee shall transfer the amounts on deposit in the Base Rental Payment Fund, at the times and in the manner hereinafter provided, to the following respective funds in the following order of priority:
(1) Interest Fund. On the Business Day immediately preceding each Interest Payment Date, the Trustee shall transfer from the Base Rental Payment Fund to the Interest Fund the amount, if any, necessary to cause the amount on deposit in the Interest Fund to be equal to the interest due on the Bonds on such Interest Payment Date. Moneys in the Interest Fund shall be used by the Trustee to pay interest due on the Bonds on each Interest Payment Date.
(2) Principal Fund. On the Business Day immediately preceding each May 1, commencing May 1, [2026], the Trustee shall transfer from the Base Rental Payment Fund to the Principal Fund the amount, if any, necessary to cause the amount on deposit in the Principal Fund to be equal to the principal amount of the Bonds due on such May 1 either as a result of the maturity thereof or mandatory sinking fund redemption payments required to be made with respect thereto. Moneys in the Principal Fund shall be used by the Trustee for the purpose of paying the principal of the Bonds when due and payable at their maturity dates or upon earlier mandatory sinking fund redemption.
(3) Redemption Fund. The Trustee shall deposit in the Redemption Fund any amounts required to be deposited therein pursuant to Section 5.03 or Section 5.04 hereof.

Moneys in the Redemption Fund shall be used by the Trustee for the purpose of paying the principal of and interest and premium, if any, on Series 2025 Bonds redeemed pursuant to the provisions of subsections (a) of Section 4.01 hereof and Additional Bonds redeemed pursuant to the corresponding provisions of the Supplemental Indenture pursuant to which such Additional Bonds are issued.

Section 5.03 Application of Net Insurance Proceeds. If the Property or any portion thereof shall be damaged or destroyed, subject to the further requirements of this Section, the City shall, as Attachment 4

23 expeditiously as possible, continuously and diligently prosecute or cause to be prosecuted the repair or replacement thereof, unless the City elects not to repair or replace the Property or the affected portion thereof in accordance with the provisions hereof.

The Net Insurance Proceeds (other than Net Insurance Proceeds of rental interruption insurance), including the proceeds of any self-insurance, received on account of any damage or destruction of the Property or a portion thereof shall as soon as possible be deposited with the Trustee and be held by the Trustee in a special account and made available for and, to the extent necessary, shall be applied to the cost of repair or replacement of the Property or the affected portion thereof upon receipt of a Written Request of the City, together with invoices therefor. Pending such application, such proceeds may be invested by the Trustee as directed by the City in Permitted Investments that mature not later than such times moneys are expected to be needed to pay such costs of repair or replacement.

Notwithstanding the foregoing, the City shall, within 60 days of the occurrence of the event of damage or destruction, notify the Trustee in writing as to whether the City intends to replace or repair the Property or the portions of the Property which were damaged or destroyed. If the City does intend to replace or repair the Property or portions thereof, the City shall deposit with the Trustee the full amount of any insurance deductible to be credited to the special account.

In the event of any damage to or destruction of the Property caused by one of the perils covered by the insurance required by Section 6.01(c) of the Lease Agreement which would result in an abatement of rental payments or any portion thereof pursuant to Section 3.06 thereof, then the City shall apply the Net Insurance Proceeds (other than Net Insurance Proceeds of rental interruption insurance), together with other legally available funds that the City elects to contribute, to the repair, reconstruction or replacement of the damaged or destroyed portions of the Property; provided, however, that the City shall not be required to repair or replace any portion of the Property pursuant to this Section 5.03 if such Net Insurance Proceeds, together with any other amounts held under this Indenture and any other legally available funds made available by the City at its election, are sufficient to prepay (i) all of the Outstanding Bonds, or (ii) a portion of the Outstanding Bonds such that the resulting Base Rental Payments under Section 4.01(a) in any Rental Period following such partial prepayment are sufficient to pay in such Rental Period the principal of and interest on all Bonds to remain Outstanding immediately after such partial redemption. If the City is not required to replace or repair the Property, or the affected portion thereof, or to use such amounts to redeem Bonds, in each case as set forth in this Section 5.03, then such proceeds (and rental interruption insurance proceeds not applied pursuant to the next paragraph) shall, if there is first delivered to the Trustee a Written Certificate of the City to the effect that the annual fair rental value of the Property after such damage or destruction, and after any repairs or replacements made as a result of such damage or destruction, is at least equal to 100% of the maximum amount of Base Rental Payments becoming due under the Lease Agreement in the then current Rental Period or any subsequent Rental Period and the fair replacement value of the Property after such damage or destruction is at least equal to the principal amount of the Outstanding Bonds, be paid to the City to be used for any lawful purpose.

Proceeds of rental interruption insurance shall be deposited to the Base Rental Payment Fund and applied to the payment of Base Rental Payments to the extent of any abatement thereof pursuant to the Lease Agreement, and otherwise as directed by the City.

The proceeds of any award in eminent domain received in respect to the Property shall be deposited by the Trustee in the Redemption Fund and applied to the redemption of Bonds pursuant to Attachment 4

24 subsection (a) of Section 4.01 hereof and the corresponding provisions of any Supplemental Indenture pursuant to which Additional Bonds are issued.

Section 5.04 Title Insurance. Proceeds of any policy of title insurance received by the Trustee in respect of the Property shall be applied and disbursed by the Trustee as follows:
(a) if the City determines that the title defect giving rise to such proceeds has not substantially interfered with its use and occupancy of the Property and will not result in an abatement of Rental Payments payable by the City under the Lease Agreement, such proceeds shall be remitted to the City and used for any lawful purpose thereof; or (b) if the City determines that the title defect giving rise to such proceeds has substantially interfered with its use and occupancy of the Property and will result in an abatement of Rental Payments payable by the City under the Lease Agreement, then the Trustee shall immediately deposit such proceeds in the Redemption Fund and such proceeds shall be applied to the redemption of Bonds in the manner provided in subsection (a) of Section 4.01 hereof and the corresponding provisions of any Supplemental Indenture pursuant to which Additional Bonds are issued.

Section 5.05 Rebate Fund.
(a) Establishment. The Trustee shall establish a fund for the Bonds designated the “Rebate Fund” when required in accordance herewith. Absent an Opinion of Counsel that the exclusion from gross income for federal income tax purposes of interest on the Series 2025 Bonds will not be adversely affected, the Authority shall cause to be deposited in the Rebate Fund such amounts as are required to be deposited therein pursuant to this Section and the Tax Certificate. All money at any time deposited in the Rebate Fund shall be held by the Trustee in trust for payment to the United States Treasury. All amounts on deposit in the Rebate Fund for the Series 2025 Bonds shall be governed by this Section and the Tax Certificate, unless and to the extent that the Authority delivers to the Trustee an opinion of Bond Counsel that the exclusion from gross income for federal income tax purposes of interest on the Bonds will not be adversely affected if such requirements are not satisfied.

Notwithstanding anything to the contrary contained herein or in the Tax Certificate, the Trustee:
(1) shall be deemed conclusively to have complied with the provisions thereof if it follows all Written Requests of the Authority or Written Requests of the City; (2) shall have no liability or responsibility to enforce compliance by the Authority or the City with the terms of the Tax Certificate and shall not be deemed to have knowledge of the terms thereof; (3) may rely conclusively on the Authority’s or the City’s calculations and determinations and certifications relating to rebate matters; and (4) shall have no responsibility to independently make any calculations or determinations or to review the Authority’s or the City’s calculations or determinations thereunder. (i) Annual Computation. Within 55 days of the end of each fifth Bond Year (as such term is defined in the Tax Certificate), the Authority shall calculate or cause to be calculated the amount of rebatable arbitrage, in accordance with Section 148(f)(2) of the Code and Section 1.148-3 of the Treasury Regulations (taking into account any applicable exceptions with respect to the computation of the rebatable arbitrage, described, if applicable, in the Tax Certificate (e.g., the temporary investments exceptions of Section 148(f)(4)(B) and the construction expenditures exception of Section 148(f)(4)(C) of the Code), and taking into account whether the election pursuant to Section 148(f)(4)(C)(vii) of the Code (the “1½% Penalty”) has been made), for this purpose treating the last day of the applicable Bond Year as a computation date, within the meaning of Section 1.148-1(b) of the Treasury Regulations (the Attachment 4

25 “Rebatable Arbitrage”). The Authority shall obtain expert advice as to the amount of the Rebatable Arbitrage to comply with this Section.
(ii) Annual Transfer. Within 55 days of the end of each fifth Bond Year, upon the Written Request of the Authority or Written Request of the City, an amount shall be deposited to the Rebate Fund by the Trustee from any Rental Payments legally available for such purpose (as specified by the Authority or the City in the aforesaid Written Request), if and to the extent required, so that the balance in the Rebate Fund shall equal the amount of Rebatable Arbitrage so calculated in accordance with clause (i) of this subsection (a). In the event that immediately following the transfer required by the previous sentence, the amount then on deposit to the credit of the Rebate Fund exceeds the amount required to be on deposit therein, upon Written Request of the Authority or Written Request of the City, the Trustee shall withdraw the excess from the Rebate Fund and then credit the excess to the Base Rental Payment Fund.
(iii) Payment to the Treasury. The Trustee shall pay, as directed by Written Request of the Authority, to the United States Treasury, out of amounts in the Rebate Fund:
(A) Not later than 60 days after the end of: (X) the fifth Bond Year; and (Y) each applicable fifth Bond Year thereafter, an amount equal to at least 90% of the Rebatable Arbitrage calculated as of the end of such Bond Year; and (B) Not later than 60 days after the payment of all of the Bonds, an amount equal to 100% of the Rebatable Arbitrage calculated as of the end of such applicable Bond Year, and any income attributable to the Rebatable Arbitrage, computed in accordance with Section 148(f) of the Code and Section 1.148-3 of the Treasury Regulations.

In the event that, prior to the time of any payment required to be made from the Rebate Fund, the amount in the Rebate Fund is not sufficient to make such payment when such payment is due, the Authority shall calculate or cause to be calculated the amount of such deficiency and deposit an amount received from any legally available source equal to such deficiency prior to the time such payment is due. Each payment required to be made pursuant to this subsection (a) shall be made to the Internal Revenue Service Center, Ogden, Utah 84201 on or before the date on which such payment is due, and shall be accompanied by Internal Revenue Service Form 8038-T (prepared by the Authority), or shall be made in such other manner as provided under the Code. (b) Disposition of Unexpended Funds. Any funds remaining in the Rebate Fund after redemption and payment of the Series 2025 Bonds and the payments described in subsection (a) above being made may be withdrawn by the Authority and utilized in any manner by the Authority. (c) Survival of Defeasance. Notwithstanding anything in this Section to the contrary, the obligation to comply with the requirements of this Section shall survive the defeasance or payment in full of the Series 2025 Bonds.

Section 5.06 Investment of Moneys. Except as otherwise provided herein, all moneys in any of the funds or accounts established pursuant to this Indenture and held by the Trustee shall be invested by the Trustee solely in Permitted Investments, as directed in writing by the Authority. The Trustee may conclusively rely upon the Authority’s written instructions as to both suitability and Attachment 4

26 legality of Permitted Investments. Moneys in all funds and accounts held by the Trustee shall be invested in Permitted Investments maturing not later than the date on which it is estimated that such moneys will be required for the purposes specified in this Indenture. Absent timely written direction from the Authority, the Trustee shall hold any funds held by it uninvested.

Subject to the provisions of Section 5.06 hereof, all interest, profits and other income received from the investment of moneys in any fund or account established pursuant to this Indenture shall be retained in such fund or account.

Permitted Investments acquired as an investment of moneys in any fund established under this Indenture shall be credited to such fund. For the purpose of determining the amount in any fund, all Permitted Investments credited to such fund shall be valued by the Trustee at the fair market value thereof, such valuation to be performed not less frequently than semiannually on or before each May 15 and November 15. In determining fair market value, the Trustee may use and rely conclusively on any generally recognized securities pricing service available to it (including brokers and dealers in securities).

The Trustee may act as principal or agent in the making or disposing of any investment. Upon the Written Request of the Authority, the Trustee shall sell or present for redemption any Permitted Investments so purchased whenever it shall be necessary to provide moneys to meet any required payment, transfer, withdrawal or disbursement from the fund to which such Permitted Investments is credited, and the Trustee shall not be liable or responsible for any loss resulting from any investment made or sold pursuant to this Section. The Trustee shall have no liability in respect of losses incurred as a result of the liquidation of any investment prior to its stated maturity or failure of the Authority to provide timely written investment direction. Ratings of permitted investments shall be determined at the time of purchase of such permitted investments and without regard to ratings subcategories. For purposes of investment, the Trustee may commingle moneys in any of the funds and accounts established hereunder.

The Trustee may make any investments hereunder through the bond or investment department or trust investment department of the entity acting as Trustee hereunder, or those of such entity’s parent or any affiliate, and such entity, or its parent or affiliate, as applicable, shall be entitled to its normal, customary and reasonable compensation for such services.

The entity acting as Trustee hereunder, or any of its affiliates, may act as sponsor, advisor or manager in connection with any investments made by the Trustee hereunder and such entity, or its affiliate, as applicable, shall be entitled to its normal, customary and reasonable compensation for such services, including account maintenance fees.

The Authority and the City acknowledge that, to the extent regulations of the Comptroller of the Currency or other applicable regulatory entity grant the Authority and the City the right to receive brokerage confirmations of security transactions as they occur, at no additional cost, the Authority and the City specifically waive receipt of such confirmations to the extent permitted by law.

Attachment 4

27 ARTICLE VI

COVENANTS
Section 6.01 Compliance with Agreements. The Trustee will not authenticate or deliver any Bonds in any manner other than in accordance with the provisions hereof, and the Authority and the City will not suffer or permit any default by them to occur hereunder, but will faithfully comply with, keep, observe and perform all the agreements, conditions, covenants and terms hereof required to be complied with, kept, observed and performed by them.

Section 6.02 Compliance with Ground Lease and Lease Agreement. The Authority and the City will faithfully comply with, keep, observe and perform all the agreements, conditions, covenants and terms contained in the Ground Lease and the Lease Agreement required to be complied with, kept, observed and performed by them and, together with the Trustee, will enforce the Ground Lease and the Lease Agreement against the other party thereto in accordance with their respective terms.

Section 6.03 Observance of Laws and Regulations. The Authority, the City and the Trustee will faithfully comply with, keep, observe and perform all valid and lawful obligations or regulations now or hereafter imposed on them by contract, or prescribed by any law of the United States of America or of the State of California, or by any officer, board or commission having jurisdiction or control, as a condition of the continued enjoyment of each and every franchise, right or privilege now owned or hereafter acquired by them, including their right to exist and carry on their respective businesses, to the end that such franchises, rights and privileges shall be maintained and preserved and shall not become abandoned, forfeited or in any manner impaired.

Section 6.04 Other Liens. The City will keep the Property and all parts thereof free from judgments and materialmen’s and mechanics’ liens and free from all claims, demands, encumbrances and other liens of whatever nature or character, and free from any claim or liability which materially impairs the City in conducting its business or utilizing the Property, and the Trustee at its option (after first giving the City ten days’ written notice to comply therewith and failure of the City to so comply within such ten-day period) may, but is in no event obligated to, defend against any and all actions or proceedings, or may pay or compromise any claim or demand asserted in any such actions or proceedings; provided, however, that, in defending against any such actions or proceedings or in paying or compromising any such claims or demands, the Trustee shall not in any event be deemed to have waived or released the City from liability for or on account of any of its agreements and covenants contained herein, or from its liability hereunder and to perform such agreements and covenants.

So long as any Bonds are Outstanding, none of the Trustee, the Authority or the City shall create or suffer to be created any pledge of or lien the amounts on deposit in any of the funds or accounts created hereunder, other than the pledge and lien hereof.

The Authority, the City and the Trustee shall not encumber the Property other than in accordance with the Ground Lease, the Lease Agreement, the Indenture and the Assignment Agreement.

Section 6.05 Prosecution and Defense of Suits. The City will promptly, upon request of the Trustee (which request the Trustee is not required to make), take such action from time to time as may be necessary or proper to remedy or cure any cloud upon or defect in the title to the Property or Attachment 4

28 any part thereof, whether now existing or hereafter developing, will prosecute all actions, suits or other proceedings as may be appropriate for such purpose and will indemnify and save the Trustee harmless from all cost, damage, expense or loss, including attorneys’ fees and expenses, which it or the Owners may incur by reason of any such cloud, defect, action, suit or other proceeding.

Section 6.06 Accounting Records and Statements. The Trustee will keep proper accounting records in which complete and correct entries shall be made of all transactions relating to the receipt, deposit and disbursement of the Base Rental Payments, and such accounting records shall be available for inspection by the Authority and the City at reasonable hours and under reasonable conditions, including, without limitation, reasonable prior written notice of inspection.

Section 6.07 Recordation and Filing. The City will record, or cause to be recorded, with the appropriate county recorder, the Lease Agreement, the Ground Lease and the Assignment Agreement, or memoranda thereof.

Section 6.08 Tax Covenants. Notwithstanding any other provision of the Indenture, absent an Opinion of Counsel that the exclusion from gross income of the interest on the Series 2025 Bonds will not be adversely affected for federal income tax purposes, the City and the Authority covenant to comply with all applicable requirements of the Code necessary to preserve such exclusion from gross income with respect to the Series 2025 Bonds and specifically covenant, without limiting the generality of the foregoing, as follows:
(a) No Arbitrage. The City and the Authority will not take, or permit or suffer to be taken by the Trustee or otherwise, any action with respect to the proceeds of the Series 2025 Bonds which, if such action had been reasonably expected to have been taken, or had been deliberately and intentionally taken, on the date of issuance of the Series 2025 Bonds would have caused the Series 2025 Bonds to be “arbitrage bonds” within the meaning of section 148 of the Code. (b) Rebate Requirement. The City and the Authority will take any and all actions necessary to assure compliance with section 148(f) of the Code, relating to the rebate of excess investment earnings, if any, to the federal government, to the extent that such section is applicable to the Series 2025 Bonds.
(c) Private Activity Bond Limitation. The City and the Authority will assure that the proceeds of the Series 2025 Bonds are not so used as to cause the Series 2025 Bonds to satisfy the private business tests of section 141(b) of the Code or the private loan financing test of section 141(c) of the Code.
(d) Federal Guarantee Prohibition. The City and the Authority will not take any action or permit or suffer any action to be taken if the result of such action would be to cause any of the Series 2025 Bonds to be “federally guaranteed” within the meaning of section 149(b) of the Code. (e) Maintenance of Tax-Exemption. The City and the Authority will take all actions necessary to assure the exclusion of interest on the Series 2025 Bonds from the gross income of the Owners of the Series 2025 Bonds to the same extent as such interest is permitted to be excluded from gross income under the Code as in effect on the date of issuance of the Series 2025 Bonds. (f) Record Retention. The City and the Authority will retain its records of all accounting and monitoring they carry out with respect to the Series 2025 Bonds for at least 3 years Attachment 4

29 after the Series 2025 Bonds mature or are redeemed (whichever is earlier); however, if the Series 2025 Bonds are redeemed and refunded, the City and the Authority will retain their records of accounting and monitoring at least 3 years after the earlier of the maturity or redemption of the obligations that refunded the Series 2025 Bonds.
(g) Compliance with Tax Certificate. The City and the Authority will comply with the provisions of the Tax Certificate with respect to the Series 2025 Bonds, which are incorporated herein as if fully set forth herein.

The covenants of this Section 5.07 will survive payment in full or defeasance of the Series 2025 Bonds. This Section and the covenants set forth herein shall not be applicable to, and nothing contained herein shall be deemed to prevent the City and the Authority from causing the Trustee to issue revenue bonds or to execute and deliver contracts payable on a parity with the Series 2025 Bonds, the interest with respect to which has been determined by an Opinion of Counsel to be subject to federal income taxation.

Section 6.09 Continuing Disclosure. The City will comply with and carry out all of the provisions of the Continuing Disclosure Certificate. Notwithstanding any other provision of this Indenture, failure of the City to comply with the Continuing Disclosure Certificate shall not constitute an event of default hereunder; provided, however, that the Trustee may (and, at the written direction of any Participating Underwriter or the holders of at least 25% of the aggregate principal amount of Outstanding Bonds, and upon being indemnified to its reasonable satisfaction therefor, shall) or any holder or Beneficial Owner of the Bonds may take such actions as may be necessary and appropriate to compel performance, including seeking mandate or specific performance by court order.

Section 6.10 Further Assurances. Whenever and so often as requested to do so by the Trustee, the Authority and the City will promptly execute and deliver or cause to be executed and delivered all such other and further assurances, documents or instruments and promptly do or cause to be done all such other and further things as may be necessary or reasonably required in order to further and more fully vest in the Trustee all advantages, benefits, interests, powers, privileges and rights conferred or intended to be conferred upon it hereby or by the Assignment Agreement, the Ground Lease or the Lease Agreement.

ARTICLE VII

DEFAULT AND LIMITATIONS OF LIABILITY
Section 7.01 Action on Default. If an event of default (as described in Article VII of the Lease Agreement) shall happen, then such event of default shall constitute an event of default hereunder. The Trustee, as assignee of the Authority, shall give notice to the City of an event of default under the Lease Agreement. In each and every case during the continuance of an event of default, the Trustee may, upon notice in writing to the City and the Authority, exercise any of the remedies granted to the Authority under the Lease Agreement and, in addition, take whatever action at law or in equity may appear necessary or desirable to enforce its rights as assignee pursuant to the Assignment Agreement or to protect and enforce any of the rights vested in the Trustee or the Owners by this Indenture or by the Bonds, either at law or in equity or in bankruptcy or otherwise, whether for the specific enforcement of any covenant or agreement or for the enforcement of any other legal or equitable right, including any one or more of the remedies set forth in Section 7.02 hereof.

Attachment 4

30 Section 7.02 Other Remedies of the Trustee. Subject to the provisions of Section 7.01 hereof, the Trustee shall have the right:
(a) by mandamus or other action or proceeding or suit at law or in equity to enforce its rights against the Authority or the City or any member, director, officer or employee thereof, and to compel the Authority or the City or any such member, director, officer or employee to perform or carry out its or his or her duties under law and the agreements and covenants required to be performed by it or him or her contained herein;
(b) by suit in equity to enjoin any acts or things which are unlawful or violate the rights of the Trustee; or
(c) by suit in equity upon the happening of any event of default hereunder to require the Authority and the City to account as the trustee of an express trust.

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

Section 7.03 Non-Waiver. A waiver of any default or breach of duty or contract by the Trustee shall not affect any subsequent default or breach of duty or contract or impair any rights or remedies on any such subsequent default or breach of duty or contract. No delay or omission by the Trustee to exercise any right or remedy accruing upon any default or breach of duty or contract shall impair any such right or remedy or shall be construed to be a waiver of any such default or breach of duty or contract or an acquiescence therein, and every right or remedy conferred upon the Trustee by law or by this Article may be enforced and exercised from time to time and as often the Trustee shall deem expedient.

If any action, proceeding or suit to enforce any right or to exercise any remedy is abandoned or determined adversely to the Trustee or any Owner, then subject to any adverse determination, the Trustee, such Owner, the Authority and the City shall be restored to their former positions, rights and remedies as if such action, proceeding or suit had not been brought or taken.

Section 7.04 Remedies Not Exclusive. Subject to the provisions of Section 7.01 hereof, no remedy herein conferred upon or reserved to the Trustee is intended to be exclusive of any other remedy, and each such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing in law or in equity or by statute or otherwise and may be exercised without exhausting and without regard to any other remedy conferred by any law. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy.

Section 7.05 No Liability by the Authority to the Owners. Except as expressly provided herein, the Authority shall not have any obligation or liability to the Owners with respect to the payment when due of the Base Rental Payments by the City, or with respect to the performance by the City of the other agreements and covenants required to be performed by it contained in the Lease Agreement or herein, or with respect to the performance by the Trustee of any right or obligation required to be performed by it contained herein.

Attachment 4

31 Section 7.06 No Liability by the City to the Owners. Except for the payment when due of the Base Rental Payments and the performance of the other agreements and covenants required to be performed by it contained in the Lease Agreement, the Ground Lease or herein, the City shall not have any obligation or liability to the Owners with respect to this Indenture or the preparation, execution, delivery or transfer of the Bonds or the disbursement of the Base Rental Payments by the Trustee to the Owners, or with respect to the performance by the Trustee of any right or obligation required to be performed by it contained herein.

Section 7.07 No Liability of the Trustee to the Owners. Except as expressly provided herein, the Trustee shall not have any obligation or liability to the Owners with respect to the payment when due of the Base Rental Payments by the City, or with respect to the performance by the Authority or the City of the other agreements and covenants required to be performed by them contained in the Lease Agreement, the Ground Lease or herein.

Section 7.08 Application of Amounts After Default. All payments received by the Trustee with respect to the rental of the Property after a default by the City pursuant to Article VII of the Lease Agreement (including, without limitation, any proceeds received in connection with the sale, assignment or sublease of the Authority’s right, title and interest in the Ground Lease), and all damages or other payments received by the Trustee for the enforcement of any rights and powers of the Trustee under Article VII of the Lease Agreement, shall be deposited into the Base Rental Payment Fund and as soon as practicable thereafter applied, together with all other funds held hereunder (except funds in the Rebate Fund):
(a) to the payment of all amounts due the Trustee under Article VIII hereof; (b) to the payment of all amounts then due for interest on the Bonds, in respect of which, or for the benefit of which, money has been collected (other than Bonds which have become payable prior to such event of default and money for the payment of which is held by the Trustee), ratably without preference or priority of any kind, according to the amounts of interest on such Bonds due and payable; and
(c) to the payment of all amounts then due for principal of the Bonds, in respect of which, or for the benefit of which, money has been collected (other than Bonds which have become payable prior to such event of default and money for the payment of which is held by the Trustee), ratably without preference or priority of any kind, according to the amounts of principal of such Bonds due and payable.

Section 7.09 Trustee May Enforce Claims Without Possession of Bonds. All rights of action and claims under this Indenture or the Bonds may be prosecuted and enforced by the Trustee without the possession of any of the Bonds or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, be for the ratable benefit of the Owners in respect of which such judgment has been recovered.

Section 7.10 Limitation on Suits. No Owner of any Bond shall have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture, or for the appointment of a receiver or Trustee, or for any other remedy hereunder, unless (a) such Owner shall have previously given written notice to the Trustee of a continuing event of default, (b) the Owners of not less than Attachment 4

32 25% of the aggregate principal amount of Bonds then Outstanding shall have made written request to the Trustee to institute proceedings in respect of such event of default in its own name as Trustee hereunder, (c) such Owner or Owners shall have afforded to the Trustee indemnity reasonably satisfactory to the Trustee against the costs, expenses and liabilities to be incurred in compliance with such request, (d) the Trustee for 60 days after its receipt of such notice, request and offer of indemnity shall have failed to institute any such proceedings, and (e) no direction inconsistent with such written request shall have been given to the Trustee during such 60 day period by the Owners of a majority of the aggregate principal amount of Bonds then Outstanding; it being understood and intended that no one or more Owners shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other Owner, or to obtain or seek to obtain priority or preference over any other Owner or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all the Owners.

ARTICLE VIII

THE TRUSTEE
Section 8.01 Employment of the Trustee. The Authority hereby appoints and employs the Trustee to receive, deposit and disburse the Base Rental Payments, to authenticate, deliver and transfer the Bonds and to perform the other functions contained herein, all in the manner provided herein and subject to the conditions and terms hereof. By executing and delivering this Indenture, the Trustee accepts the appointment and employment hereinabove referred to and accepts the rights and obligations of the Trustee provided herein, subject to the conditions and terms hereof. Other than when an event of default has occurred and is continuing, the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee. In case an event of default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of his own affairs. The Trustee hereby covenants and agrees that it will not encumber the Property other than in accordance with this Indenture or the Assignment Agreement.

Section 8.02 Duties, Removal and Resignation of the Trustee. The Authority shall remove the Trustee initially a party hereto and any successor thereto if at any time (a) requested to do so by an instrument or concurrent instruments in writing signed by the Owners of a majority of the aggregate principal amount of Bonds at the time Outstanding (or their attorneys duly authorized in writing), or (b) the Trustee shall cease to be eligible in accordance with the following sentence, and shall appoint a successor Trustee. The Trustee and any successor Trustee shall be: (i) a national banking association in good standing authorized to exercise trust powers or having the powers of a trust company and duly authorized to exercise trust powers within the State having a combined capital and surplus of at least $250,000,000, and subject to supervision or examination by federal or state authority, or (ii) a state-chartered commercial bank that is a member of the Federal Reserve System having at least $1,000,000,000 of assets. No removal, resignation or termination of the Trustee shall take effect until a successor, meeting the requirements above, shall be qualified and appointed. If such entity publishes a report of condition at least annually, pursuant to law or to the requirements of any supervising or examining authority above referred to, then for the purposes of this Section the combined capital and surplus of such entity shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published.

Attachment 4

33 The Authority shall provide 30 days written notice to the Trustee of the removal of the Trustee and the removal of the Trustee by the Authority shall be subject to such party not being in default under the transaction documents.

The Trustee may at any time resign by giving written notice of such resignation to the Authority and the City and by giving notice, by first class mail, postage prepaid, of such resignation to the Owners at their addresses appearing on the Registration Books. Upon receiving such notice of resignation, the Authority shall promptly appoint a successor Trustee by an instrument in writing; provided, however, that in the event the Authority does not appoint a successor Trustee within 30 days following receipt of such notice of resignation, the resigning Trustee may, at the expense of the Authority, petition the appropriate court having jurisdiction to appoint a successor Trustee. Any resignation or removal of a Trustee and appointment of a successor Trustee shall become effective only upon acceptance of appointment by the successor Trustee.

Any corporation, association or agency into which the Trustee may be converted or merged, or with which it may be consolidated, or to which it may sell or transfer its corporate trust business and assets as a whole or substantially as a whole, or any corporation or association resulting from any such conversion, sale, merger, consolidation or transfer to which it is a party, provided that such entity meets the combined capital and surplus requirements of this Section, ipso facto, shall be and become successor trustee under this Indenture and vested with all the trusts, powers, discretions, immunities, privileges and all other matters as was its predecessor, without the execution or filing of any instrument or any further act, deed or conveyance on the part of any of the parties hereto, anything herein to the contrary notwithstanding.

Section 8.03 Compensation of the Trustee. The City shall from time to time, subject to any written agreement then in effect with the Trustee, pay the Trustee reasonable compensation for all its services rendered hereunder and reimburse the Trustee for all its reasonable advances and expenditures (which shall not include “overhead expenses” except as such expenses are included as a component of the Trustee’s stated annual fees) hereunder, including but not limited to advances to and reasonable fees and reasonable expenses of accountants, agents, appraisers, consultants or other experts, and counsel not directly employed by the Trustee but an attorney or firm of attorneys retained by the Trustee, employed by it in the exercise and performance of its rights and obligations hereunder.

The Trustee may take whatever legal actions are lawfully available to it directly against the Authority or the City.

The City shall, to the extent permitted by law, indemnify and save the Trustee harmless against any loss, damage, liabilities, costs, claims or expenses, including those of its attorneys, which it may incur in the exercise and performance of its powers and duties hereunder, under the Lease Agreement, or in connection with any document or transaction contemplated hereunder or thereunder, including the enforcement of any remedies and the defense of any suit, and which are not due to its negligence or its willful misconduct as finally adjudicated by a court of competent jurisdiction. The duty of the City to indemnify the Trustee shall survive the termination and discharge of this Indenture and the earlier removal or resignation of the Trustee.

If the Trustee renders any service hereunder not provided for in this Indenture or related financing documents, or the Trustee is made a party to or intervenes in any litigation pertaining to this Indenture or related financing documents or institutes interpleader proceedings relative hereto, the Trustee shall be compensated reasonably by the Authority for such extraordinary services and Attachment 4

34 reimbursed for any and all claims, liabilities, losses, damages, fines, penalties, and expenses, including out-of-pocket and incidental expenses and legal fees and expenses occasioned thereby.

No provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers hereunder. The Trustee may refuse to perform any duty or exercise any right or power which would require it to expend its own funds or risk any liability if it shall reasonably believe that repayment of such funds or adequate indemnity against such risk is not reasonably assured to it.

Upon an Event of Default, and only upon an Event of Default, the Trustee shall have a first lien with right of payment prior to payment on account of principal of and premium, if any, and interest on any Bond, upon the trust estate for the foregoing fees, charges and expenses incurred by it. When the Trustee incurs expenses or renders services after the occurrence of an Event of Default, such expenses and the compensation for such services are intended to constitute expenses of administration under any federal or state bankruptcy, insolvency, arrangement, moratorium, reorganization or other debtor relief law.

Section 8.04 Protection of the Trustee. The Trustee shall be protected and shall incur no liability in acting or proceeding in good faith upon any affidavit, bond, certificate, consent, notice, request, requisition, resolution, statement, telegram, voucher, waiver or other paper or document which it shall in good faith believe to be genuine and to have been adopted, executed or delivered by the proper party or pursuant to any of the provisions hereof, and the Trustee shall be under no duty to make any investigation or inquiry as to any statements contained or matters referred to in any such instrument, but may accept and rely upon the same as conclusive evidence of the truth and accuracy of such statements. The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Owners of the Bonds pursuant to this Indenture, unless such Owners shall have offered to the Trustee security or indemnity, reasonably satisfactory to the Trustee, against the reasonable costs, expenses and liabilities which might be incurred by it in compliance with such request or direction. The Trustee may consult with counsel, who may be counsel to the Authority or the City, with regard to legal questions, and the opinion of such counsel shall be full and complete authorization and protection in respect to any action taken or suffered by it hereunder in good faith in accordance therewith.

The Trustee shall not be responsible for the sufficiency of the Bonds or the Lease Agreement, or of the assignment made to it by the Assignment Agreement, or for statements made in any preliminary or final official statement or any other disclosure material prepared or distributed relating to the Bonds, or of the title to the Property. The Trustee shall have no responsibility for compliance with any state or federal securities laws in connection with the Bonds.

Whenever in the administration of its rights and obligations hereunder the Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking or suffering any action hereunder, such matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a Written Certificate of the City or a Written Certificate of the Authority, and such certificate shall be full warrant to the Trustee for any action taken or suffered under the provisions hereof upon the faith thereof, but in its discretion the Trustee may, in lieu thereof, accept other evidence of such matter or may require such additional evidence as it deems reasonable.

Attachment 4

35 The Trustee may buy, sell, own, hold and deal in any of the Bonds and may join in any action which any Owner may be entitled to take with like effect as if the Trustee were not a party hereto. The Trustee, either as principal or agent, may also engage in or be interested in any financial or other transaction with the Authority or the City, and may act as agent, depository or trustee for any committee or body of Owners or of owners of obligations of the Authority or the City as freely as if it were not the Trustee hereunder.

The Trustee may, to the extent reasonably necessary, execute any of the trusts or powers hereof and perform any rights and obligations required of it hereunder either directly or by or through agents, attorneys, custodians, nominees or receivers appointed with due care, and shall be entitled to advice of counsel concerning all matters of trust and its rights and obligations hereunder, and the Trustee shall not be answerable for the negligence or misconduct of any such agent, attorney, custodian, nominee or receiver selected by it with reasonable care. The Trustee shall not be liable for any error of judgment made by it in good faith unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts.

The Trustee shall not be answerable for the exercise of any trusts or powers hereunder or for anything whatsoever in connection with the funds established hereunder, except only for its own willful misconduct, negligence or breach of an obligation hereunder.

The Trustee shall not be deemed to have knowledge of an event of default unless it has actual knowledge thereof.

The Trustee may, on behalf of the Owners, intervene in any judicial proceeding to which the Authority or the City is a party and which, in the opinion of the Trustee and its counsel, affects the Bonds or the security therefor, and shall do so if requested in writing by the Owners of at least 5% of the aggregate principal amount of Bonds then Outstanding, provided the Trustee shall have no duty to take such action unless it has been indemnified to its reasonable satisfaction against all risk or liability arising from such action.

The Trustee’s rights to immunities and protection from liability hereunder and its rights to payment of its fees and expenses shall survive its resignation or removal and final payment or defeasance of the Bonds.

All indemnifications and releases from liability granted herein to the Trustee shall extend to the directors, officers, employees and agents of the Trustee.

The permissive right of the Trustee to do things enumerated in this Indenture shall not be construed as a duty, and the Trustee shall not be answerable for other than its negligence or willful default. The Trustee shall have no responsibility or liability with respect to any information, statements or recitals in any offering memorandum or other disclosure material prepared or distributed with respect to the issuance of these Bonds. The Trustee shall not be accountable for the use or application by the Borrower of any of the Bonds or the proceeds thereof or for the use or application of any money paid over by the Trustee in accordance with the provisions of this Indenture or for the use and application of money received by any paying agent.

In no event shall the Trustee be responsible or liable for special, indirect, consequential, punitive or incidental loss or damage of any kind whatsoever (including, but not limited to, loss of Attachment 4

36 profit) irrespective of whether the Trustee has been advised of the likelihood of such loss or damage and regardless of the form of action.

In no event shall the Trustee be responsible or liable for any failure or delay in the performance of its obligations hereunder arising out of or caused by, directly or indirectly, forces beyond its control, including, without limitation, strikes, work stoppages, accidents, acts of war or terrorism, civil or military disturbances, pandemics, epidemics, recognized public emergencies, quarantine restrictions, nuclear or natural catastrophes or acts of God, interruptions, loss or malfunctions of utilities, communications or computer (software and hardware) services, and hacking, cyber-attacks, or other use or infiltration of the Trustee’s technological infrastructure exceeding authorized access; it being understood that the Trustee shall use reasonable efforts that are consistent with accepted practices in the banking industry to resume performance as soon as practicable under the circumstances.

The Trustee shall have the right to accept and act upon instructions, including funds transfer instructions (“Instructions”) given pursuant to this Indenture and related financing documents and delivered using Electronic Means; provided, however, that the Authority or the City, as applicable, shall provide to the Trustee an incumbency certificate listing officers with the authority to provide such Instructions (“Authorized Officers”) and containing specimen signatures of such Authorized Officers, which incumbency certificate shall be amended by the Authority or the City, as applicable, whenever a person is to be added or deleted from the listing. If the Authority or the City, as applicable, elects to give the Trustee Instructions using Electronic Means and the Trustee in its discretion elects to act upon such Instructions, the Trustee’s understanding of such Instructions shall be deemed controlling. The Authority and the City understand and agree that the Trustee cannot determine the identity of the actual sender of such Instructions and that the Trustee shall conclusively presume that directions that purport to have been sent by an Authorized Officer listed on the incumbency certificate provided to the Trustee have been sent by such Authorized Officer. The Authority and the City shall be responsible for ensuring that only Authorized Officers transmit such Instructions to the Trustee and that the Authority, the City and all Authorized Officers are solely responsible to safeguard the use and confidentiality of applicable user and authorization codes, passwords and/or authentication keys upon receipt by the Authority and/or the City, as applicable. The Trustee shall not be liable for any losses, costs or expenses arising directly or indirectly from the Trustee’s reliance upon and compliance with such Instructions notwithstanding such directions conflict or are inconsistent with a subsequent written instruction. The Authority and the City agree: (i) to assume all risks arising out of the use of Electronic Means to submit Instructions to the Trustee, including, without limitation, the risk of the Trustee acting on unauthorized Instructions, and the risk of interception and misuse by third parties; (ii) that it is fully informed of the protections and risks associated with the various methods of transmitting Instructions to the Trustee and that there may be more secure methods of transmitting Instructions than the method(s) selected by the Authority and/or the City, as applicable; (iii) that the security procedures (if any) to be followed in connection with its transmission of Instructions provide to it a commercially reasonable degree of protection in light of its particular needs and circumstances; and (iv) to notify the Trustee immediately upon learning of any compromise or unauthorized use of the security procedures.

In acting or omitting to act pursuant to the Lease Agreement or Ground Lease, the Trustee shall be entitled to all of the rights, immunities and indemnities accorded to it under this Indenture and the Lease Agreement, including, but not limited to, this Article VIII.

Attachment 4

37 ARTICLE IX

MODIFICATION OR AMENDMENTS
Section 9.01 Modifications and Amendments Permitted.
(a) This Indenture and the rights and obligations of the Authority, the City, the Owners of the Bonds and the Trustee may be modified or amended from time to time and at any time by a Supplemental Indenture, which the Authority, the City and the Trustee may enter into with the prior written consent of the Owners of a majority in aggregate principal amount of all Bonds then Outstanding, which shall have been filed with the Trustee. No such modification or amendment shall (i) extend the fixed maturity of any Bonds, or reduce the amount of principal thereof or the rate of interest thereon, or extend the time of payment, without the consent of the Owner of each Bond so affected, or (ii) reduce the aforesaid percentage of Bonds the consent of the Owners of which is required to effect any such modification or amendment, or (iii) permit the creation of any lien on the Base Rental Payments and other assets pledged under this Indenture prior to or on a parity with the lien created by this Indenture or deprive the Owners of the Bonds of the lien created by this Indenture on such Base Rental Payments and other assets (except as expressly provided in this Indenture), without the consent of Owners of all of the Bonds then Outstanding. It shall not be necessary for the consent of the Bond Owners to approve the particular form of any Supplemental Indenture, but it shall be sufficient if such consent shall approve the substance thereof. (b) This Indenture and the rights and obligations of the Authority, the City, the Trustee and the Owners of the Bonds may also be modified or amended from time to time and at any time by a Supplemental Indenture, which the Authority, the City and the Trustee may enter into without the consent of any Bond Owners for any one or more of the following purposes:
(1) to add to the covenants and agreements of the Authority or the City in this Indenture contained other covenants and agreements thereafter to be observed, to pledge or assign additional security for the Bonds (or any portion thereof), or to surrender any right or power herein reserved to or conferred upon the Authority or the City; (2) to make such provisions for the purpose of curing any ambiguity, inconsistency or omission, or of curing or correcting any defective provision contained in this Indenture;
(3) to provide for the issuance of one or more Series of Additional Bonds, and to provide the terms and conditions under which such Series of Additional Bonds may be issued, subject to and in accordance with the provisions of Sections 3.06 and 3.07 hereof; (4) to modify, amend or supplement this Indenture in such manner as to permit the qualification hereof under the Trust Indenture Act of 1939, as amended, or any similar federal statute hereafter in effect, and to add such other terms, conditions and provisions as may be permitted by said act or similar federal statute; (5) to modify, amend or supplement this Indenture in such manner as to cause interest on the Bonds to be excludable from gross income for purposes of federal income taxation by the United States of America; and
Attachment 4

38 (6) in any other respect whatsoever as the Authority and the City may deem necessary or desirable, provided that such modification or amendment does not materially adversely affect the interests of the Bond Owners hereunder. (c) Promptly after the execution by the Authority, the City and the Trustee of any Supplemental Indenture, the Trustee shall mail a notice (the form of which shall be furnished to the Trustee by the Authority), by first class mail postage prepaid, setting forth in general terms the substance of such Supplemental Indenture, to the Owners of the Bonds at the respective addresses shown on the Registration Books. Any failure to give such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such Supplemental Indenture. (d) No Supplemental Indenture shall modify any of the rights or obligations of the Trustee without the Trustee’s prior written consent.

The Authority or the City shall send copies of any Supplemental Indenture to any rating agency which maintains a rating with respect any Series of Bonds.

Section 9.02 Effect of Supplemental Indenture. Upon the execution of any Supplemental Indenture pursuant to this Article, this Indenture shall be deemed to be modified and amended in accordance therewith, and the respective rights, duties and obligations under this Indenture of the Authority, the City, the Trustee and all Owners of Bonds Outstanding shall thereafter be determined, exercised and enforced hereunder subject in all respects to such modification and amendment, and all the terms and conditions of any such Supplemental Indenture shall be deemed to be part of the terms and conditions of this Indenture for any and all purposes.

In executing, or accepting the additional trusts created by any supplemental indenture permitted by this Article or the modification thereby of the trusts created by this Indenture, the Trustee shall be entitled to receive, and shall be fully protected in relying upon, an opinion of counsel stating that the execution of such supplemental indenture is authorized or permitted by this Indenture and complies with the terms hereof.

Section 9.03 Endorsement of Bonds; Preparation of New Bonds. Bonds delivered after the execution of any Supplemental Indenture pursuant to this Article may, and if the Authority so determines shall, bear a notation by endorsement or otherwise in form approved by the Authority and the Trustee as to any modification or amendment provided for in such Supplemental Indenture, and, in that case, upon demand of the Owner of any Bonds Outstanding at the time of such execution and presentation of their Bonds for the purpose at the Office of the Trustee a suitable notation shall be made on such Bonds. If the Supplemental Indenture shall so provide, new Bonds so modified as to conform, in the opinion of the Authority and the Trustee, to any modification or amendment contained in such Supplemental Indenture, shall be prepared and executed by the Authority and authenticated by the Trustee, and upon demand of the Owners of any Bonds then Outstanding shall be exchanged at the Office of the Trustee, without cost to any Bond Owner, for Bonds then Outstanding, upon surrender for cancellation of such Bonds, in equal aggregate principal amount of the same interest rate and maturity.

Section 9.04 Amendment of Particular Bonds. The provisions of this Article shall not prevent any Bond Owner from accepting any amendment as to the particular Bonds held by such Owner.

Attachment 4