HomeMy WebLinkAbout2016-02-08 PacketCITY OF UKIAH
CITY COUNCIL AGENDA
Special Meeting
CIVIC CENTER COUNCIL CHAMBERS
300 Seminary Avenue
Ukiah, CA 95482
February 8, 2016
4:00 p.m.
1. ROLL CALL
2. CLOSED SESSION
3. UNFINISHED BUSINESS
a. Adoption of Resolution and Related Documents for the Issuance of Water Revenue
Refunding Bonds, Series 2016
4. PUBLIC COMMENT
5. ADJOURNMENT
Please be advised that the City needs to be notified 24 hours in advance of a meeting if any specific
accommodations or interpreter services are needed in order for you to attend. The City complies with
ADA requirements and will attempt to reasonably accommodate individuals with disabilities upon request.
Materials related to an item on this Agenda submitted to the City Council after distribution of the agenda
packet are available for public inspection at the front counter at the Ukiah Civic Center, 300 Seminary
Avenue, Ukiah, CA 95482, during normal business hours, Monday through Friday, 8:00 am to 5:00 pm.
I hereby certify under penalty of perjury under the laws of the State of California that the foregoing agenda
was posted on the bulletin board at the main entrance of the City of Ukiah City Hall, located at 300
Seminary Avenue, Ukiah, California, not less than 24 hours prior to the meeting set forth on this agenda.
Dated this 5t" day of February, 2016.
Kristine Lawler, City Clerk
City of ukiah
ITEM NO.: 3a
MEETING DATE: February 8, 2016
AGENDA SUMMARY REPORT
SUBJECT: ADOPTION OF RESOLUTION AND RELATED DOCUMENTS FOR THE ISSUANCE OF
WATER REVENUE REFUNDING BONDS, SERIES 2016
Summary: Council to authorize the sale of Water Revenue Refunding Bonds, Series 2016, and approve
the resolution (Attachment #1) and other documents in relation to the issuance of the said bonds.
Background: On December 16, 2015 Council authorized approval of a contract for Bond and Disclosure
Counsel and underwriter Services to refund the 2005 Water Bonds. On January 20, 2016 Council
authorized staff to send a notice of redemption to the current bond holders.
The Association of Bay Area Governments (ABAG) issued the 2005 Water and Wastewater Revenue
Bonds, Series A on behalf of the City to finance the acquisition and construction of capital improvements
to water systems of the City in the principal amount of $17.9 million of which $11.85 million is presently
outstanding. Given the low interest rate environment the City Staff has been working with PFM, the City's
financial advisor, to identify refunding opportunities. Based on an analysis, the City's 2005 Water Bonds
were identified as a good refunding candidate with the potential to achieve meaningful present value
savings if refunded. Accordingly, a financing team was established to execute the issuance of the Water
Revenue Refunding Bonds, Series 2016 to refund the 2005 Water Bonds. This refund will save the water
system approximately $1.5 million.
Discussion: Staff has been working with Bob Gamble at PFM to analyze the refinancing of the City's
2005 Water Bond. Based upon the volatility in the financial markets, City Staff believes it is prudent to
proceed with the refinancing in order to avoid the risk, to the extent possible, of interest rates rising in the
coming months. Hence an expedited financing schedule was adopted to issue the Water Revenue
Continued on PgRe 2
Recommended Action(s): Staff recommends that Council adopt the resolution authorizing the
issuance of Water Revenue Refunding Bonds, Series 2016, and approving certain documents and
authorizing certain actions in connection therewith.
Alternative Council Option(s): N/A
Citizens advised: N/A
Requested by: N/A
Prepared by: Karen Scalabrini, Finance Director.
Coordinated with: Sean White, Water and Sewer Director.
Presenter: Sean White, Water and Sewer Director.
Attachments: 1. Resolution
2. Bond Indenture — Exhibit A
3. Bond Purchase Agreement — Exhibit B
4. Escrow Agreement — Exhibit C
5. Official Statement — Exhibit D
6. Continuing Disclosure Certificates — Exhibit E
T Financina Schedule
COUNCIL ACTION DATE: : ❑ Approved ❑ Continued to ❑ Other _
RECORDS APPROVED: ❑ Agreement: ❑ Resolution: ❑ Ordinance:
:'Vote: Please write Agreement No. in upper right corner of agreement it hen drafted..
ti
Approved:
ge a como, City Manager
Page 2 of 3
Refunding Bonds, Series 2016, with the final delivery of bonds expected to occur by the end of February.
The par amount for the bonds is expected not to exceed $20 million and the bonds will be secured by the
net revenue of the water system. All the other related legal covenants have been elaborated in the bond
indenture and official statement among other documents.
A refinancing transaction, such as this, requires the involvement of several parties and the development
of many legal documents to support the transaction. To that end, City Staff with the assistance of PFM
has assembled a financing team, which includes Stradling Yocca Carlson & Rauth, P.C. (Bond and
Disclosure Counsel), Raymond James & Associates, Inc. (Underwriter), and Wells Fargo Bank (Trustee
and Escrow Agent) to execute the refunding transaction. The issuance of bonds and the execution of the
transaction require the City to enter into various agreements as well as develop financing and investor
material listed below:
• Bond Indenture (Attachment #2)
• Bond Purchase Agreement (Attachment #3)
• Escrow Agreement (Attachment #4)
• Official Statement (Attachment #5)
• Continuing Disclosure Certificates (Attachment #6)
All such documents developed in relation to this refunding are provided as an attachment for the
Council's review. A brief description of the documents is as follows:
Bond Indenture: describes the bonds and the source of repayment for the bonds (net revenues of the
water system), specifies how the bond proceeds may be used, and establishes the City's agreement with
Wells Fargo Bank, National Association, as trustee, to cause the bonds to be repaid. The Indenture also
contains important covenants, including a covenant to set water system rates and charges at levels that
are expected to be sufficient each fiscal year to repay the bonds, and conditions on the issuance of
additional obligations payable from net revenues of the water system.
Bond Purchase Agreement: is entered into with the bond underwriter, Raymond James & Associates.
The Bond Purchase Agreement establishes the terms of the bond sale, contains standard closing
conditions, and sets forth the documents that are required to be executed in connection with the issuance
of the bonds.
Escrow Agreement: is entered into with Wells Fargo Bank, National Association, as escrow agent. The
Escrow Agreement provides instructions to the escrow agent with respect to the refunding of City's
obligations that secure the 2005 ABAG Bonds.
Official Statement: is distributed to investors and provides material information about the bonds, the City's
water system, and the legal documents that are necessary for investors to make an informed decision
about whether or not to buy the bonds. The underwriter uses the Official Statement as a marketing
document, and the Official Statement is subject to federal securities laws. Although members of the
financing team, including bond counsel, the City's financial advisor and the underwriter, can assist in the
preparation of the Official Statement, the Official Statement is ultimately a document for which the City is
responsible. At closing, the City will certify that the Official Statement does not contain any material
misstatements of fact or omit any statements the omission of which would make the information that is
presented misleading.
Page 3 of 3
Continuing Disclosure Certificates: set forth the City's obligation to update certain information in the
Official Statement (primarily related to the water system) annually so that the bonds may be traded by
investors in the future with the benefit of current information.
In addition to the 2005 Water Bonds, the City also intends to prepay its water loan owed to the State of
California Department of Water Resources. The City's current obligation under the loan is $1,065,356
and a part of the proceeds from the sale of the Series 2016 bonds will be used to refund the water loan
outstanding with the State Department.
Public issuance of bonds requires they be rated by an independent rating agency. The City has engaged
Standard and Poor's Rating Services to rate the current issuance. As part of the rating process, a rating
presentation was made to the rating agency on February 2, 2016, highlighting the various credit strengths
of the City's water system. The rating outcome will be reported to Council when it becomes available.
Impact on City Resources: Through this refinancing, the City's water enterprise is anticipated to save
approximately $100,000 annually through 2035, from lower interest rates. This represents present value
savings of approximately $1.5 million. In addition, the prepayment of the State loan results in additional
present value savings of about $45,000. The savings will improve the City's water bond coverage ratio
and improve the annual cash flow for additional capital projects. As all costs related to a refinancing are
contingent upon a successful closing, with the exception of a credit rating review by Standard & Poor's,
no financial risk will accrue should refinancing meeting the City's requirements not occur.
Assuming City Council approval, the bond issuance will be finalized and the underwriter will begin to
market the bonds to investors well in advance of pricing. At this point, the bonds are expected to price
the week of February 15th, 2016, with delivery of bonds expected to occur the week of February 29th,
2016. A detailed financing schedule is attached with the report (Attachment #7). The 2005 Bonds are
only callable on interest payment dates (March 1st and September 1St of any year) and the financing
schedule, along with pricing and closing dates, was put together to incorporate that requirement. A notice
of redemption, which must be sent at least thirty days prior to refunding, has been sent to the 2005
Bonds' bondholders notifying them of intent to redeem.
FISCAL IMPACT:
Budgeted
Amount in
New Appropriation
Account Number
Budget
Amendment
Previous
Contract or
15 -16 FY
General Fund
Required
Purchase Order
No.
N/A
N/A
N/A
Yes No Z
N/A
Attachment 1
RESOLUTION NO. 2016-
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF UKIAH AUTHORIZING THE
ISSUANCE OF NOT TO EXCEED $20,000,000 PRINCIPAL AMOUNT OF WATER REVENUE
REFUNDING BONDS, SERIES 2016, AND APPROVING CERTAIN DOCUMENTS AND
AUTHORIZING CERTAIN ACTIONS IN CONNECTION THEREWITH
WHEREAS, the City Council (the "City Council ") of the City of Ukiah (the "City ") has
determined to refinance the acquisition and construction of certain water system capital
improvements (collectively, the "2005 Project "), more particularly described in the 2005
Installment Sale Agreement (as such term is defined below); and
WHEREAS, the Association of Bay Area Governments (the "Prior Issuer ") has
previously entered into an Installment Sale Agreement with the City dated as of September 1,
2005 (the "2005 Installment Sale Agreement ") and issued its Association of Bay Area
Governments 2005 Water and Wastewater Revenue Bonds, Series A (the "2005 Bonds "), to
finance the acquisition and construction of certain water system capital improvements, including
the 2005 Project; and
WHEREAS, a portion of the 2005 Bonds are secured by payments made by the City
under the 2005 Installment Sale Agreement; and
WHEREAS, the City Council has determined to prepay its obligations under Loan
Contract No. E54304, dated September 30, 1988 (the "State Loan "), by and between the City
and the State of California Department of Water Resources ( "DWR "); and
WHEREAS, in order to accomplish the refinancing of the 2005 Project and the
prepayment of the State Loan, the City desires to issue its Water Revenue Refunding Bonds,
Series 2016 (the "2016 Bonds ") pursuant to that certain Indenture of Trust (the "Indenture "), by
and between the City and Wells Fargo Bank, National Association, as trustee (the "Trustee "),
substantially in the form presented to this City Council at the meeting at which this Resolution
has been adopted; and
WHEREAS, the City's obligation to pay the 2016 Bonds will be payable from Net
Revenues of the Water System (as such terms are defined in the Indenture); and
WHEREAS, the City will cause the 2005 Project to be refinanced through the
prepayment of the 2005 Installment Sale Agreement from the proceeds of the 2016 Bonds and
pursuant to the terms of an Escrow Agreement (2005 Installment Sale Agreement) with Wells
Fargo Bank, National Association (the "Escrow Agreement "), substantially in the form presented
to this City Council at the meeting at which this Resolution has been adopted; and
WHEREAS, the City will prepay the State Loan from the proceeds of the 2016 Bonds;
WHEREAS, the City Council desires to approve the form of a Bond Purchase
Agreement (the "Purchase Contract "), by and between the City and Raymond James &
Associates, Inc. (the "Underwriter "), pursuant to which the Underwriter will agree to purchase
the 2016 Bonds on the terms and conditions set forth therein, substantially in the form
presented to this City Council at the meeting at which this Resolution has been adopted; and
Page 1 of 4
WHEREAS, the City Council desires to approve the form of Preliminary Official
Statement in order to enable the Underwriter to market the 2016 Bonds, substantially in the form
presented to this City Council at the meeting at which this Resolution has been adopted; and
WHEREAS, the City Council desires t
Certificate of the City, substantially in the form
which this Resolution has been adopted; and
follows:
> approve the form of a Continuing Disclosure
presented to this City Council at the meeting at
NOW, THEREFORE, BE IT RESOLVED, by the City Council of the City of Ukiah as
Section 1. The Indenture, in substantially the form attached hereto as Exhibit A and,
upon execution as authorized below, made a part hereof as though set forth in full herein, is
hereby approved. The Mayor, the Vice - Mayor, the City Manager, the Finance Director, the City
Clerk, or the designee of any of them (each, an "Authorized Officer "), are each hereby
authorized and directed to execute and deliver the Indenture with such changes, insertions and
omissions as may be recommended by the City Attorney or Stradling Yocca Carlson & Rauth, a
Professional Corporation, bond counsel to the City ( "Bond Counsel'), and approved by the
officers executing the same, said execution being conclusive evidence of such approval.
Section 2. The City Council hereby authorizes the issuance, sale and delivery of the
2016 Bonds in an aggregate principal amount not to exceed $20,000,000 (except that such
amount may be increased with the approval of the City Manager or the Finance Director to
provide for original issue discount to the extent that such original issue discount will result in a
lower interest rate or yield to maturity with respect to the 2016 Bonds) in accordance with the
terms and provisions of the Indenture. The proceeds of the 2016 Bonds will be expended: (i) to
refinance the 2005 Project; (ii) to prepay the State Loan; (iii) to fund a reserve fund, if required;
and (iv) to pay the costs of issuance of the 2016 Bonds.
Section 3. The Purchase Contract, in substantially the form attached hereto as Exhibit
B and, upon execution as authorized below, made a part hereof as though set forth in full
herein, is hereby approved. The Authorized Officers are each hereby authorized and directed to
execute and deliver the Purchase Contract with such changes, insertions and omissions as may
be recommended by the City Attorney or Bond Counsel and approved by the person executing
the same, said execution being conclusive evidence of such approval; provided, however, that
in no event shall the aggregate principal amount of the 2016 Bonds exceed $20,000,000
(except that such amount may be increased with the approval of the City Manager or the
Finance Director to provide for original issue discount to the extent that such original issue
discount will result in a lower interest rate or yield to maturity with respect to the 2016 Bonds),
nor shall the underwriting discount for the 2016 Bonds exceed 0.40% of the aggregate principal
amount of the 2016 Bonds, nor shall the all -in true interest cost of the 2016 Bonds exceed
4.00 %.
Section 4. The Escrow Agreement, in substantially the form attached hereto as Exhibit
C and, upon execution as authorized below, made a part hereof as though set forth in full
herein, is hereby approved. The Authorized Officers are each hereby authorized and directed to
execute and deliver the Escrow Agreement with such changes, insertions and omissions as
may be recommended by the City Attorney or Bond Counsel and approved by the officers
executing the same, said execution being conclusive evidence of such approval.
Page 2 of 4
Section 5. Wells Fargo Bank, National Association, is hereby appointed as Trustee on
behalf of the owners of the 2016 Bonds, with the duties and powers of such Trustee as set forth
in the Indenture, and Wells Fargo Bank, National Association is hereby appointed as Escrow
Agent under the Escrow Agreement.
Section 6. The City Manager, the Finance Director or the designee of either of them are
authorized to reject any terms presented by the Underwriter if determined not to be in the best
interest of the City, and the City Manager, the Finance Director, or the designee of either of
them, are further authorized to evaluate whether the purchase of municipal bond insurance or a
debt service reserve policy for the 2016 Bonds will result in a net savings to the City and, if so,
to arrange for the purchase of such municipal bond insurance or debt service reserve policy.
Section 7. The preparation and distribution of the Preliminary Official Statement, in
substantially the form attached hereto as Exhibit D, is hereby approved. The Authorized
Officers are each hereby authorized to make such changes, insertions and omissions to the
Preliminary Official Statement as may be recommended by the City Attorney or Bond Counsel
and to sign a certificate deeming the Preliminary Official Statement final for purposes of Rule
15c2 -12 promulgated under the Securities Exchange Act of 1934. Upon execution of such
certificate, the Underwriter is hereby authorized to distribute copies of said Preliminary Official
Statement to persons who may be interested in the initial purchase of the 2016 Bonds. The
Authorized Officers are each hereby authorized and directed to execute, approve and deliver
the final Official Statement in the form of the Preliminary Official Statement, which, upon
execution as authorized below, is made a part hereof as though set forth in full herein, with such
changes, insertions and omissions as may be recommended by the City Attorney or Bond
Counsel and approved by the officer executing the same, said execution being conclusive
evidence of such approval. The Underwriter is directed to deliver copies of any final Official
Statement to all actual initial purchasers of the 2016 Bonds.
Section 8. The Continuing Disclosure Certificate of the City, in substantially the form
attached hereto as Exhibit E and, upon execution as authorized below, made a part hereof as
though set forth in full herein, be and the same is hereby approved. The Authorized Officers are
each hereby authorized and directed to execute and deliver the Continuing Disclosure
Certificate with such changes, insertions and omissions as may be recommended by the City
Attorney or Bond Counsel and approved by the person executing the same, said execution
being conclusive evidence of such approval.
Section 9. The Authorized Officers and all other officers of the City are hereby
authorized, jointly and severally, to do any and all things and to execute and deliver any and all
documents which they may deem necessary and advisable in order to consummate the sale
and delivery of the 2016 Bonds and otherwise effectuate the purposes of this Resolution,
including, but not limited to, working with the Prior Issuer and the trustee for the 2005 Bonds to
cause the redemption of that portion of the 2005 Bonds that is secured by the City's payments
under the 2005 Installment Sale Agreement and working with DWR to effect the prepayment of
the State Loan, and any such actions previously taken by such officers are hereby ratified and
confirmed. Each of the Authorized Officers is hereby authorized to solicit bids from municipal
bond insurers, to select an insurer to provide municipal bond insurance with respect to the 2016
Bonds and a debt service reserve policy, if applicable, and to execute and negotiate any
agreements necessary in connection with the procurement of such municipal bond insurance or
debt service reserve policy, provided that such municipal bond insurance or debt service
reserve policy provides debt service savings or other benefits to the proposed transaction, as
determined by the City. The City's execution of an insurance commitment shall be conclusive
Page 3 of 4
evidence of such determination. Each of the above - referenced officers is hereby authorized to
direct Bond Counsel and /or the City Attorney to make any necessary revisions to the legal
documents to effectuate the procurement of municipal bond insurance and /or a debt service
reserve fund policy. In the event that the Mayor is unavailable or unable to execute and deliver
any of the above - referenced documents, any other member of the City Council may validly
execute and deliver such document, and, in the event that the City Clerk is unavailable or
unable to execute and deliver any of the above - referenced documents, any deputy clerk may
validly execute and deliver such document. Expenditures of net proceeds of the 2016 Bonds to
refinance the 2005 Project and prepay the State Loan shall be subject to compliance by the City
with all legal and other conditions precedent thereto.
Section 10. This Resolution shall take effect immediately upon its adoption.
PASSED AND ADOPTED this 8th day of February 2016, by the following roll call vote:
AYES:
NOES:
ABSTAIN:
ABSENT:
ATTEST:
Kristine Lawler, City Clerk
Page 4 of 4
Stephen G. Scalmanini, Mayor
Attachment 2
Stradling Yocca Carlson & Rauth
Draft of 1/27/16
INDENTURE OF TRUST
Dated as of March 1, 2016
by and between
WELLS FARGO BANK, NATIONAL ASSOCIATION,
as Trustee
and the
CITY OF UKIAH
Relating to
CITY OF UKIAH
WATER REVENUE REFUNDING BONDS, SERIES 2016
Section 1.01
Section 1.02
Section 1.03
Section 2.01.
Section 2.02.
Section 2.03.
Section 2.04.
Section 2.05.
Section 2.06.
Section 2.07.
Section 2.08.
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS; CONTENT OF CERTIFICATES AND OPINIONS
Definitions............................................................................... ............................... 2
Content of Certificates and Opinions ....................................... .............................13
Interpretation............................................................................ .............................13
ARTICLE II
THE 2016 BONDS
Authorization of 2016 Bonds ................................................... .............................14
Terms of the 2016 Bonds ......................................................... .............................14
Transfer of 2016 Bonds ........................................................... .............................14
Exchange of 2016 Bonds ......................................................... .............................15
RegistrationBooks ................................................................... .............................15
Form and Execution of 2016 Bonds ........................................ .............................15
2016 Bonds Mutilated, Lost, Destroyed or Stolen ................... .............................16
BookEntry System .................................................................. .............................16
ARTICLE III
ISSUANCE OF 2016 BONDS; APPLICATION OF PROCEEDS
Section 3.01. Issuance of the 2016 Bonds ..................................................... .............................19
Section 3.02. Application of Proceeds of the 2016 Bonds ............................ .............................19
Section 3.03. Establishment and Application of Costs of Issuance Fund ...... .............................19
Section 3.04. Validity of 2016 Bonds ............................................................ .............................19
Section 3.05. Establishment and Application of Bond Proceeds Fund ......... .............................19
ARTICLE IV
REDEMPTION OF 2016 BONDS
Section 4.01. Terms of Redemption ............................................................ ............................... 20
Section 4.02. Selection of 2016 Bonds for Redemption .............................. ............................... 21
Section 4.03. Notice of Redemption ............................................................ ............................... 21
Section 4.04. Partial Redemption of 2016 Bonds .......................................... .............................21
Section 4.05. Effect of Redemption ............................................................. ............................... 22
ARTICLE V
REVENUES, FUNDS AND ACCOUNTS; PAYMENT OF PRINCIPAL AND INTEREST
Section 5.01. Pledge and Assignment; Revenue Fund ................................ ............................... 22
Section 5.02. Allocation of Revenues .......................................................... ............................... 23
Section 5.03. Reserve Fund ......................................................................... ............................... 24
TABLE OF CONTENTS
(continued)
Page
Section 5.04.
Application of Interest Account ............................................. ...............................
26
Section 5.05.
Application of Principal Account .......................................... ...............................
26
Section 5.06.
Application of Redemption Fund .......................................... ...............................
26
Section5.07.
Investments ............................................................................ ...............................
26
Section5.08.
Rebate Fund ............................................................................. .............................27
30
Section 5.09.
Rate Stabilization Fund .......................................................... ...............................
28
Section 5.10.
Application of Funds and Accounts When No 2016 Bonds are Outstanding.......
29
ARTICLE VI
PARTICULAR COVENANTS
Section 6.01.
Punctual Payment .................................................................. ...............................
29
Section 6.02.
Extension of Payment of 2016 Bonds ................................... ...............................
29
Section 6.03.
Against Encumbrances .......................................................... ...............................
29
Section 6.04.
Power to Issue 2016 Bonds and Make Pledge and Assignment ...........................29
Section 6.05.
Accounting Records and Financial Statements ..................... ...............................
30
Section6.06.
Tax Covenants ....................................................................... ...............................
30
Section6.07.
Waiver of Laws ...................................................................... ...............................
31
Section 6.08.
Further Assurances ................................................................ ...............................
31
Section6.09.
Budgets .................................................................................. ...............................
31
Section 6.10.
Observance of Laws and Regulations .................................... ...............................
31
Section 6.11.
Compliance with Contracts .................................................... ...............................
31
Section 6.12.
Prosecution and Defense of Suits .......................................... ...............................
32
Section 6.13.
Continuing Disclosure ........................................................... ...............................
32
Section 6.14.
Additional Contracts and Bonds .............................................. .............................32
Section 6.15.
Against Sale or Other Disposition of Property ...................... ...............................
33
Section 6.16.
Against Competitive Facilities .............................................. ...............................
33
Section 6.17.
Maintenance and Operation of the Water System ................. ...............................
34
Section6.18.
Payment of Claims ................................................................. ...............................
34
Section6.19.
Insurance ................................................................................ ...............................
34
Section 6.20.
Payment of Taxes and Compliance with Governmental Regulations ..................
35
Section 6.21.
Amount of Rates and Charges ............................................... ...............................
35
Section 6.22.
Collection of Rates and Charges ............................................ ...............................
35
Section 6.23.
Eminent Domain Proceeds .................................................... ...............................
36
Section 6.24.
Enforcement of Contracts ...................................................... ...............................
36
ARTICLE VII
EVENTS OF DEFAULT AND REMEDIES OF 2016 BOND OWNERS
Section 7.01. Events of Default ................................................................... ............................... 36
Section 7.02. Remedies Upon Event of Default .......................................... ............................... 37
Section 7.03. Application of Revenues and Other Funds After Default ...... ............................... 38
Section 7.04. Trustee to Represent 2016 Bond Owners .............................. ............................... 39
Section 7.05. 2016 Bond Owners' Direction of Proceedings ...................... ............................... 39
Section7.06. Suit by Owners ...................................................................... ............................... 39
Section 7.07. Absolute Obligation of the City ............................................. ............................... 40
M
TABLE OF CONTENTS
(continued)
Page
Section 7.08. Remedies Not Exclusive .......................................................... .............................40
Section 7.09. No Waiver of Default ............................................................ ............................... 40
Section 7.10. [BOND INSURER PROVISIONS TO COME] .................... ............................... 40
ARTICLE VIII
THE TRUSTEE
Section 8.01. Duties, Immunities and Liabilities of Trustee ....................... ............................... 40
Section 8.02. Merger or Consolidation ........................................................ ............................... 42
Section 8.03. Liability of Trustee ................................................................ ............................... 42
Section 8.04. Right to Rely on Documents .................................................. ............................... 44
Section 8.05. Preservation and Inspection of Documents ........................... ............................... 45
Section 8.06. Compensation and Indemnification ......................................... .............................45
ARTICLE IX
MODIFICATION OR AMENDMENT OF THE INDENTURE
Section 9.01. Amendments Permitted ......................................................... ............................... 45
Section 9.02. Effect of Supplemental Indenture ............................................ .............................46
Section 9.03. Endorsement of 2016 Bonds; Preparation of New 2016 Bonds ........................... 47
Section 9.04. Amendment of Particular 2016 Bonds .................................. ............................... 47
ARTICLE X
DEFEASANCE
Section 10.01. Discharge of Indenture .......................................................... ............................... 47
Section 10.02. Discharge of Liability on 2016 Bonds ................................... ............................... 48
Section 10.03. Deposit of Money or Securities with Trustee ........................ ............................... 48
Section 10.04. Payment of 2016 Bonds After Discharge of Indenture .......... ............................... 49
ARTICLE XI
MISCELLANEOUS
Section 11.01.
Liability of City Limited to Revenues ................................... ...............................
49
Section 11.02.
Successor Is Deemed Included in All References to Predecessor ........................
49
Section 11.03.
Limitation of Rights to Parties and 2016 Bond Owners .......... .............................49
Section 11.04.
Waiver of Notice; Requirement of Mailed Notice ................. ...............................
50
Section 11.05.
Destruction of 2016 Bonds .................................................... ...............................
50
Section 11.06.
Severability of Invalid Provisions ......................................... ...............................
50
Section11.07.
Notices ................................................................................... ...............................
50
Section 11.08.
Evidence of Rights of 2016 Bond Owners ............................ ...............................
50
Section 11.09.
Disqualified 2016 Bonds ....................................................... ...............................
51
Section 11.10.
Money Held for Particular 2016 Bonds ................................. ...............................
51
Section 11.11.
Funds and Accounts ............................................................... ...............................
51
iii
TABLE OF CONTENTS
(continued)
Page
Section 11.12. Waiver of Personal Liability .................................................. ............................... 51
Section 11.13. Execution in Several Counterparts ........................................ ............................... 52
Section 11.14. CUSIP Numbers .................................................................... ............................... 52
Section 11.15. Choice of Law ........................................................................ ............................... 52
Section 11.16. Paired Obligation Provider Guidelines .................................. ............................... 52
Section 11.17. [BOND INSURER PROVISIONS TO COME] .................... ............................... 52
Signatures............................................................................................. ............................... S -1
Exhibit A Form of 2016 Bond ................................................................. ............................A -1
lv
INDENTURE OF TRUST
THIS INDENTURE OF TRUST is made and entered into and dated as of March 1, 2016 (the
"Indenture "), by and between the CITY OF UKIAH, a municipal corporation and general law city
duly organized and existing under the laws of the State of California (the "City "), and WELLS
FARGO BANK, NATIONAL ASSOCIATION, a national banking association duly organized and
existing under the laws of the United States of America, as trustee hereunder (the "Trustee ").
RECITALS
A. The City has determined that it is in the best interest of the public to prepay and
defease that certain Installment Sale Agreement, dated as of September 1, 2005 (the "2005
Installment Sale Agreement "), by and between the City and the Association of Bay Area
Governments (the "Prior Issuer ").
B. The City is authorized by Article 11 of Chapter 3 of Part 1 of Division 2 of Title 5 of
the Government Code of the State of California, including but not limited to Section 53583, to issue
bonds for the purpose of refunding any evidences of indebtedness of the City.
C. In order to provide for the authentication and delivery of refunding revenue bonds
(the "2016 Bonds "), to establish and declare the terms and conditions upon which such 2016 Bonds
are to be issued and secured and to secure the payment of the principal thereof and interest and
premium, if any, thereon, the City has authorized the execution and delivery of the Indenture.
D. The City has determined that all acts and proceedings that are required by law and
necessary to make the 2016 Bonds, when executed by the City, authenticated and delivered by the
Trustee, and duly issued, the valid, binding and legal special obligations of the City, and to cause the
Indenture to be 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
have been in all respects duly authorized.
GRANTING CLAUSES
The City, in consideration of the premises and the acceptance by the Trustee of the trusts
hereby created, the mutual covenants contained herein and the purchase and acceptance of the 2016
Bonds by the owners thereof, and for other valuable consideration, the receipt of which is hereby
acknowledged, in order to secure the payment of the principal of and the interest and premium (if
any) on all 2016 Bonds at any time issued and Outstanding under the Indenture, according to their
terms, and to secure the performance and observance of all of the covenants and conditions therein
and herein set forth, does hereby assign and pledge unto, and grant a security interest in, the
following (the "Trust Estate ") to the Trustee, and its successors in trust and assigns forever, for the
securing of the performance of the obligations of the City to the 2016 Bond Owners hereinafter set
forth:
FIRST
All right, title and interest of the City in and to the Revenues (as such term is defined herein),
including, but without limiting the generality of the foregoing, the present and continuing right to
make claim for, collect and receive any Revenues payable to or receivable by the City under the
Constitution of the State, the Government Code of the State, the Indenture and any other applicable
laws of the State or otherwise, to bring actions and proceedings thereunder for the enforcement
thereof, and to do any and all things which the City is or may become entitled to do thereunder,
subject to the terms hereof.
SECOND
All moneys and securities held in funds and accounts of the Indenture, except amounts held
in the Rebate Fund and the Rate Stabilization Fund (other than those amounts transferred by the City
from the Rate Stabilization Fund to the Revenue Fund), and all other rights of every name and nature
from time to time herein or hereafter by delivery or by writing of any kind pledged, assigned or
transferred as and for additional security hereunder to the Trustee by the City or by anyone on its
behalf, or with its written consent, and to hold and apply the same, subject to the terms hereof.
The Trust Estate shall be held by the Trustee and its respective successors in trust and assigns
forever for the benefit of the Owners, and such pledge shall constitute a lien on and security interest
in such Trust Estate.
The Trust Estate shall be held by the Trustee upon the terms and trusts herein set forth for the
equal and proportionate benefit, security and protection of all present and future Owners of the 2016
Bonds issued under and secured by the Indenture without privilege, priority or distinction as to the
lien or otherwise of any of the 2016 Bonds over any of the other 2016 Bonds.
PROVIDED, HOWEVER, that if the City, its successors or assigns shall pay, or cause to be
paid, the principal of and interest and any redemption premium on the 2016 Bonds due or to become
due thereon, at the times and in the manner provided in the 2016 Bonds according to the true intent
and meaning thereof, keep, perform and observe all of the covenants and conditions of the Indenture
to be kept, performed and observed by it, and pay or cause to be paid to Trustee all sums of money
due or to become due in accordance with the terms and provisions hereof, then upon such final
payments or deposits as herein provided, the Indenture and the rights hereby granted shall cease,
terminate and be void; otherwise the Indenture shall remain in full force and effect.
It is expressly declared that all 2016 Bonds issued and secured hereunder are to be issued,
authenticated and delivered, and all sold property, rights and interests, including, without limitation,
the Revenues, hereby assigned and pledged, are to be dealt with and disposed of, under, upon and
subject to the terms, conditions, stipulations, covenants, agreements, trusts, uses and purposes
hereinafter expressed, and the City has agreed and covenanted and does hereby covenant and agree
with the Trustee, for the benefit of the respective Owners from time to time of the 2016 Bonds, as
follows:
ARTICLE I
DEFINITIONS; CONTENT OF CERTIFICATES AND OPINIONS
Section 1.01. Definitions. Unless the context otherwise requires, the terms defined in this
Section 1.01 will, for all purposes of the Indenture and of any indenture supplemental to the
Indenture and of any certificate, opinion or other document mentioned in the Indenture, have the
meanings specified in the Indenture, to be equally applicable to both the singular and plural forms of
any of the terms defined in the Indenture.
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Accountant's Report. The term "Accountant's Report" means a report signed by an
Independent Certified Public Accountant.
Authorized Representative. The term "Authorized Representative" means, with respect to
the City, its Mayor, Vice - Mayor, City Clerk, City Manager, Finance Director or any other person
designated as an Authorized Representative of the City by a Certificate of the City signed by its
Mayor, Vice - Mayor, City Clerk, City Manager or Finance Director and filed with the Trustee.
Bond Counsel. The term "Bond Counsel" means Stradling Yocca Carlson & Rauth, a
Professional Corporation, or another firm of nationally recognized attorneys experienced in the
issuance of obligations the interest on which is excludable from gross income under Section 103 of
the Code.
Bond Insurer. The term `Bond Insurer" means , or any successor thereto.
Bonds. The term "Bonds" means all revenue bonds or notes of the City authorized, executed,
issued and delivered by the City, the payments of which are payable from Net Revenues on a parity
with the 2016 Bonds and which are secured by a pledge of and lien on Revenues as described in
Section 5.01.
Bond Proceeds Fund. The term "Bond Proceeds Fund" means the fund by that name
established with the Trustee pursuant to Section 3.05.
Bond Year. The term "Bond Year" means the period beginning on the date of issuance of the
2016 Bonds and ending on 1, 2016, and each successive one year or, during the last period
prior to maturity or the last period prior to redemption of all 2016 Bonds Outstanding at such time,
shorter period thereafter, until there are no Outstanding 2016 Bonds.
Business Day. The term "Business Day" means: (i) a day which is not a Saturday, Sunday or
legal holiday on which banking institutions in the State, or in any other state in which the Office of
the Trustee is located, are closed; or (ii) a day on which the New York Stock Exchange is not closed.
Certificate; Direction; Request; Requisition. The terms "Certificate," "Direction," "Request"
and "Requisition" of the City mean a written certificate, direction, request or requisition signed in the
name of the City by an Authorized Representative. Any such instrument and supporting opinions or
representations, if any, may, but need not, be combined in a single instrument with any other
instrument, opinion or representation, and the two or more so combined will be read and construed as
a single instrument. If and to the extent required by Section 1.02, each such instrument will include
the statements provided for in Section 1.02.
Cam. The term "City" means the City of Ukiah, a municipal corporation and general law city
duly organized and existing under and by virtue of the laws of the State.
Closing Date. The term "Closing Date" means the date on which the 2016 Bonds are
delivered to the original purchaser thereof.
Code. The term "Code" means the Internal Revenue Code of 1986, as amended.
Continuing Disclosure Certificate. The term "Continuing Disclosure Certificate" means the
Continuing Disclosure Certificate of the City relating to the 2016 Bonds, dated the Closing Date, as
originally executed or as it may be from time to time amended or supplemented in accordance with
its terms.
Contracts. The term "Contracts" means all contracts of the City previously or later
authorized and executed by the City, the payments under which are payable from Net Revenues on a
parity with the 2016 Bonds and which are secured by a pledge and lien on Revenues as described in
Section 5.01; but excluding contracts entered into for operation and maintenance of the Water
System.
Costs of Issuance. The term "Costs of Issuance" means all items of expense directly or
indirectly payable by or reimbursable to the City and related to the authorization, issuance, sale and
delivery of the 2016 Bonds, including but not limited to costs of preparation and reproduction of
documents, printing expenses, filing and recording fees, initial fees and charges of the Trustee and
counsel to the Trustee, legal fees and charges, fees and disbursements of consultants and
professionals, rating agency fees, title insurance premiums, letter of credit fees, bond insurance
premiums and reserve surety premiums (if any), fees and charges of the Escrow Agent and
verification agent, fees and charges for preparation, execution and safekeeping of the 2016 Bonds
and any other cost, charge or fee in connection with the original issuance of the 2016 Bonds.
Costs of Issuance Fund. The term "Costs of Issuance Fund" means the fund by that name
established pursuant to Section 3.03.
Credit Facility. The term "Credit Facility" means a letter of credit, insurance policy, surety
bond or other such funding instrument, including the Reserve Policy, issued by an entity the long-
term unsecured obligations of which are rated "AA" or better by S &P and deposited with the Trustee
into the Reserve Fund pursuant to Section 5.03.
Debt Service. The term "Debt Service" means, for any period of calculation, the sum of:
(1) the interest payable during such period on all outstanding Bonds, assuming
that all outstanding serial Bonds are retired as scheduled and that all outstanding term Bonds are
redeemed or paid from sinking fund payments as scheduled (except to the extent that such interest is
capitalized or is reasonably anticipated to be reimbursed to the City by the United States of America
pursuant to Section 54AA of the Code (Section 1531 of Title I of Division B of the American
Recovery and Reinvestment Act of 2009 (Pub. L. No. 111 -5, 23 Stat. It 5 (2009), enacted February
17, 2009)), or any future similar program);
(2) those portions of the principal amount of all outstanding serial Bonds
maturing in such period;
(3) those portions of the principal amount of all outstanding term Bonds required
to be redeemed or paid in such period; and
(4) those portions of the Contracts on which payments are required to be made
during such period, (except to the extent that the interest evidenced and represented thereby is
capitalized or is reasonably anticipated to be reimbursed to the City by the United States of America
pursuant to Section 54AA of the Code (Section 1531 of Title I of Division B of the American
Recovery and Reinvestment Act of 2009 (Pub. L. No. 111 -5, 23 Stat. 115 (2009), enacted February
17, 2009)), or any future similar program);
E
but less the earnings to be derived from the investment of moneys on deposit in debt service reserve
funds established for Bonds or Contracts;
provided that, as to any such Bonds or Contracts bearing or comprising interest at other than a fixed
rate, the rate of interest used to calculate Debt Service will, for all purposes, be assumed to bear
interest at a fixed rate equal to the higher of-
(i) the then current variable interest rate borne by such Bonds or Contracts plus
1 %; and
(ii) the highest variable rate borne over the preceding 24 months by outstanding
variable rate debt issued by the City or, if no such variable rate debt is at the time outstanding, by
variable rate debt of which the interest rate is computed by reference to an index comparable to that
to be utilized in determining the interest rate for the debt then proposed to be issued;
provided further, that if twenty -five percent (25 %) or more of the aggregate principal amount of any
series or issue of such Bonds or Contracts is due in any one year, Debt Service will be determined for
the period of determination as if the principal of and interest on such series or issue of such Bonds or
Contracts were being paid from the date of incurrence thereof in substantially equal annual amounts
over a period of twenty -five (25) years from the date of calculation; and
provided further, that as to any such Bonds or Contracts or portions thereof bearing no interest but
which are sold at a discount and which such discount accretes with respect to such Bonds or
Contracts or portions thereof, such accreted discount will be treated as interest in the calculation of
Debt Service; and
provided further, that if the Bonds or Contracts constitute Paired Obligations, the interest rate on such
Bonds or Contracts will be the resulting linked rate or the effective fixed interest rate to be paid by
the City with respect to such Paired Obligations, but only if the applicable Paired Obligations satisfy
the requirements set forth in Section 11.16; and
provided further, that the amount on deposit in a debt service reserve fund on any date of calculation
of Debt Service will be deducted from the amount of principal due at the final maturity of the Bonds
and Contracts for which such debt service reserve fund was established, and to the extent that the
amount in such debt service reserve fund is in excess of such amount of principal, such excess will be
applied to the full amount of principal due, in each preceding year, in descending order, until such
amount is exhausted.
Depository; DTC. The term "Depository" or "DTC" means The Depository Trust Company,
New York, New York, a limited purpose trust company organized under the laws of the State of New
York, in its capacity as securities depository for the 2016 Bonds.
Escrow Agent. The term "Escrow Agent" means Wells Fargo Bank, National Association, as
escrow agent pursuant to the terms of the Escrow Agreement (2005 Installment Sale Agreement), or
its successor thereunder.
Escrow Agreement (2005 Installment Sale Agreement). The term "Escrow Agreement (2005
Installment Sale Agreement)" means the Escrow Agreement (2005 Installment Sale Agreement),
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dated as of March 1, 2016, by and between the City and the Escrow Agent, as originally executed
and as it may from time to time be amended or supplemented in accordance with its terms.
Event of Default. The term "Event of Default" means any of the events specified in Section
7.01.
Federal Securities. The term "Federal Securities" means any direct, noncallable 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), or noncallable
obligations the timely payment of principal of and interest on which are fully and unconditionally
guaranteed by the United States of America.
Fiscal Year. The term "Fiscal Year" means the twelve month period beginning on July 1 of
each year and ending on the next succeeding June 30, both dates inclusive, or any other twelve month
period later selected and designated as the official fiscal year period of the City.
Generally Accepted Accounting Principles. The term "Generally Accepted Accounting
Principles" means the uniform accounting and reporting procedures set forth in publications of the
American Institute of Certified Public Accountants or its successor, or by any other generally
accepted authority on such procedures, and includes, as applicable, the standards set forth by the
Governmental Accounting Standards Board or its successor.
Indenture. The term "Indenture" means this Indenture of Trust, dated as of March 1, 2016,
by and between the City and the Trustee, as originally executed or as it may from time to time be
supplemented, modified or amended by any Supplemental Indenture.
Independent Certified Public Accountant. The term "Independent Certified Public
Accountant" means any firm of certified public accountants appointed by the City, each of whom is
independent of the City pursuant to the Statement on Auditing Standards No. 1 of the American
Institute of Certified Public Accountants.
Independent Financial Consultant. The term "Independent Financial Consultant" means a
financial consultant or firm of such consultants appointed by the City, which may, for purposes of the
certification described in the definition of "Paired Obligations" be an interest rate swap adviser, and
who, or each of whom: (i) is in fact independent and not under domination of the City; (ii) does not
have any substantial interest, direct or indirect, with the City; and (iii) is not connected with the City
as an officer or employee thereof, but who may be regularly retained to make reports thereto.
Information Services. The term "Information Services" means the Municipal Securities
Rulemaking Board; or, in accordance with then - current guidelines of the Securities and Exchange
Commission, such other services providing information with respect to called bonds as the City may
specify in a certificate to the Trustee and as the Trustee may select.
Initial Rating Requirement. The term "Initial Rating Requirement" means the rating
requirement described in Section 11.16(a).
Interest Account. The term "Interest Account" means the account by that name in the
Payment Fund established pursuant to Section 5.02.
M
Interest Payment Date. The term "Interest Payment Date" means 1, 2016 and each
1 and 1 thereafter.
Investment Agreement. The term "Investment Agreement" means an investment agreement
by a provider, supported by appropriate opinions of counsel; provided that, without limiting the
foregoing, any such Investment Agreement must: (i) be from a provider rated by S &P or Moody's at
"A-" or "AY, respectively, or above; (ii) require the City to terminate such agreement and
immediately reinvest the proceeds thereof in other Permitted Investments if the rating assigned to
such provider by S &P or Moody's falls to "BBB +" or "Baal ", respectively, or below; and (iii)
expressly permit the withdrawal, without penalty, of any amounts necessary at any time to fund any
deficiencies on account of debt service requirements with respect to the 2016 Bonds, together with
such amendments as may be approved by the City and the Trustee from time to time.
Late Payment Rate. The term "Late Payment Rate" means
Law. The term "Law" means the laws of the State of California pursuant to which the City
was formed and operates, and Section 5451 of the Government Code of the State of California, and
in each case all laws amendatory thereof or supplemental thereto.
Letter of Representations. The term "Letter of Representations" means the letter of the City
delivered to and accepted by the Depository on or prior to delivery of the 2016 Bonds as book entry
bonds setting forth the basis on which the Depository serves as depository for such book entry bonds,
as originally executed or as it may be supplemented or revised or replaced by a letter from the City
delivered to and accepted by the Depository.
Minimum Rating Requirement. The term "Minimum Rating Requirement" means the rating
requirement described in Section 11.16(b).
Mood. The term " Moody's" means Moody's Investors Service, Inc. or any successor
thereto.
Net Proceeds. The term "Net Proceeds" means, when used with respect to any casualty
insurance or condemnation award, the proceeds from such insurance or condemnation award
remaining after payment of all expenses (including attorneys' fees) incurred in the collection of such
proceeds.
Net Revenues. The term "Net Revenues" means, for any period, the Revenues for such
period less the Operation and Maintenance Costs for such period. When held by the Trustee in any
funds or accounts established under the Indenture, Net Revenues will include all interest or gain
derived from the investment of amounts in any of such funds or accounts.
Nominee. The term "Nominee" means the nominee of the Depository, which may be the
Depository, as determined from time to time pursuant to Section 2.08.
Office. The term "Office" means with respect to the Trustee, the principal corporate trust
office of the Trustee at , California, Facsimile: , email: , Re: City
of Ukiah Series 2016, or such other or additional offices as may be specified in writing by the
Trustee to the City, except that, with respect to the presentation of 2016 Bonds for payment or for
7
registration of transfer and exchange, such term means the office or agency of the Trustee at which,
at any particular time, its corporate trust agency business is conducted.
Operation and Maintenance Costs. The term "Operation and Maintenance Costs" means the
reasonable and necessary costs and expenses paid or incurred by the City to maintain and operate the
Water System, determined in accordance with Generally Accepted Accounting Principles, including
all reasonable expenses of management and repair and all other expenses necessary to maintain and
preserve the Water System in good repair and working order, all administrative costs of the City that
are charged directly or apportioned to the operation of the Water System, such as salaries and wages
of employees, pension and other post - employment benefit obligations, overhead, taxes (if any) and
insurance premiums (including payments required to be paid into any self - insurance funds), and
including all other reasonable and necessary costs of the City or charges required to be paid by it to
comply with the terms of the Indenture, any Supplemental Indenture or any Contracts or Bonds, such
as compensation, reimbursement and indemnification of the Trustee and fees and expenses of
Independent Certified Public Accountants; but excluding in all cases: (i) payment of Debt Service on
Contracts, Bonds and obligations payable from Revenues on a subordinate basis to Contracts and
Bonds; (ii) costs of capital additions, replacements, betterments, extensions or improvements which
under Generally Accepted Accounting Principles are chargeable to a capital account; (iii)
depreciation, replacement and obsolescence charges or reserves therefor and amortization of
intangibles; and (iv) and any amounts transferred to the Rate Stabilization Fund.
Outstanding. The term "Outstanding," when used as of any particular time with reference to
2016 Bonds, means (subject to the provisions of Section 11.09) all 2016 Bonds theretofore or
thereupon being authenticated and delivered by the Trustee under the Indenture except: (i) 2016
Bonds theretofore canceled by the Trustee or surrendered to the Trustee for cancellation; (ii) 2016
Bonds with respect to which all liability of the City has been discharged in accordance with Section
10.02, including 2016 Bonds (or portions thereof) described in Section 11.09; and (iii) 2016 Bonds
subject to transfer or exchange, or in lieu of or in substitution for which other 2016 Bonds have been
authenticated and delivered by the Trustee pursuant to the Indenture.
Owner; 2016 Bond Owner. The term "Owner" or "2016 Bond Owner," whenever used in the
Indenture with respect to a 2016 Bond, means the person in whose name the ownership of such 2016
Bond is registered on the Registration Books.
Paired Obligation Provider. The term "Paired Obligation Provider" means a party to a Paired
Obligation other than the City.
Paired Obligations. The term "Paired Obligations" means any Bond or Contract (or portion
thereof) designated as Paired Obligations in the resolution, indenture or other document authorizing
the issuance or execution and delivery thereof, which are simultaneously issued or executed and
delivered: (i) the principal of which is of equal amount maturing and to be redeemed or prepaid (or
cancelled after acquisition thereof) on the same dates and in the same amounts; and (ii) the interest
rates which, taken together, are reasonably expected to result in a fixed interest rate obligation of the
City for the term of such Bond or Contract, as certified by an Independent Financial Consultant in
writing, and which comply with the provisions of Section 11.16.
Participants. The term "Participants" means those broker- dealers, banks and other financial
institutions from time to time for which the Depository holds book entry certificates as securities
depository.
N.
Payment Fund. The term "Payment Fund" means the fund by that name established pursuant
to Section 5.02.
Permitted Investments. The term "Permitted Investments" means any of the following which
at the time of investment are legal investments under the laws of the State for the moneys proposed
to be invested therein. The Trustee is entitled to rely upon the written investment direction of the
City as a representation that such investment constitutes a legal investment under the laws of the
State.
(a) for all purposes, including but not limited to defeasance investments in
refunding escrow accounts: (1) cash (insured at all times by the Federal Deposit Insurance
Corporation or otherwise collateralized with obligations described in part (2) below); and (2) direct
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, including REFCORP Interest STRIPS) or
obligations the principal of and interest on which are unconditionally guaranteed by the United States
of America; and
(b) for all purposes other than defeasance investments in refunding escrow
accounts: (1) obligations of any of the following federal agencies that represent the full faith and
credit of the United States of America, including the Export-Import Bank, Farmers Home
Administration, General Services Administration, U.S. Maritime Administration, Government
National Mortgage Association, U.S. Department of Housing & Urban Development (PHAs) and
Federal Housing Administration; (2) bonds, notes or other evidences of indebtedness rated at least
"AA -" or "Aa3" by the applicable Rating Agency issued by Fannie Mae or the Federal Home Loan
Mortgage Corporation with remaining maturities not exceeding three years; (3) U.S. dollar
denominated deposit accounts, certificates of deposit, federal funds and banker's acceptances with
domestic commercial banks (including the Trustee) which are either insured by the Federal Deposit
Insurance Corporation or have a rating on their short term certificates of deposit on the date of
purchase of "A -1" or "A -1 +" by S &P and "P -1" by Moody's and maturing no more than 360 days
after the date of purchase (ratings on holding companies are not considered as the rating of the bank);
(4) commercial paper which is rated at the time of purchase in the single highest classification,
"A -1 +" by S &P and "P -1" by Moody's and which matures not more than 270 days after the date of
purchase; (5) investments in a money market fund rated "AAm ", "AAm -G ", "AAAm" or "AAAm-
G" or better by S &P, including such funds for which the Trustee or an affiliate acts as investment
advisor or provides other services; (6) pre - refunded municipal obligations defined as follows: any
bonds or other obligations of any state of the United States of America or of any agency,
instrumentality or local governmental unit of any such state which are not callable at the option of the
obligor prior to maturity or as to which irrevocable instructions have been given by the obligor to call
on the date specified in the notice and which are rated, based on the escrow, in the highest rating
category of S &P and Moody's; (7) any Investment Agreement; (8) the California Investment Trust;
and (9) the State of California Local Agency Investment Fund.
Policy. The term "Policy" means the Municipal Bond Insurance Policy issued by the Bond
Insurer that guarantees the scheduled payment of principal of and interest on the 2016 Bonds when
due.
Principal Account. The term "Principal Account" means the account by that name in the
Payment Fund established pursuant to Section 5.02.
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Prior Issuer. The term "Prior Issuer" has the meaning set forth in the first recital of the
Indenture.
Rate Stabilization Fund. The term "Rate Stabilization Fund" means the fund by that name
continued pursuant to Section 5.09.
Rating. The term "Rating" means any currently effective rating on the 2016 Bonds issued by
a Rating Agency.
Rating Agencies. The term "Rating Agencies" means S &P and any other nationally
recognized statistical rating organization then rating the 2016 Bonds.
Rebate Fund. The term "Rebate Fund" means the fund by that name established pursuant to
Section 5.08.
Record Date. The term "Record Date" means, with respect to any Interest Payment Date, the
fifteenth (15th) day of the calendar month preceding such Interest Payment Date, whether or not such
day is a Business Day.
Redemption Date. The term "Redemption Date" means the date fixed for an optional
redemption prior to maturity of the 2016 Bonds.
Redemption Fund. The term "Redemption Fund" means the fund by that name established
pursuant to Section 5.06.
Redemption Price. The term "Redemption Price" means, with respect to any 2016 Bond (or
portion thereof), the principal amount of such 2016 Bond (or portion) plus the interest accrued to the
applicable Redemption Date and the applicable premium, if any, payable upon redemption thereof
pursuant to the provisions of such 2016 Bond and the Indenture.
Registration Books. The term "Registration Books" means the records maintained by the
Trustee for the registration of ownership and registration of transfer of the 2016 Bonds pursuant to
Section 2.05.
Reserve Fund. The term "Reserve Fund" means the fund by that name established in
accordance with Section 5.03.
Reserve Insurer. The term "Reserve Insurer" means
Reserve Policy. The term "Reserve Policy" means the financial guaranty insurance policy
issued by the Reserve Insurer under which claims may be made in order to provide moneys in the
Reserve Fund available for the purposes thereof.
Reserve Requirement. The term "Reserve Requirement" means, as of the date of calculation
an amount equal to the least o£ (i) "10% of the proceeds of the issue" of the 2016 Bonds within the
meaning of Section 148 of the Code; (ii) the maximum amount of debt service on the 2016 Bonds
payable in any one year; and (iii) 125% of the average amount of debt service on the 2016 Bonds
payable in each year.
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Responsible Officer of the Trustee. The term "Responsible Officer of the Trustee" means
any officer within the corporate trust division (or any successor group or department of the Trustee)
including any vice president, assistant vice president, assistant secretary or any other officer or
assistant officer of the Trustee customarily performing functions similar to those performed by the
persons who at the time are such officers, respectively, with responsibility for the administration of
the Indenture.
Revenue Fund. The term "Revenue Fund" means the Water Fund of the City, or such other
enterprise fund of the City in which Revenues are deposited.
Revenues. The term "Revenues" means all gross income and revenue received or receivable
by the City from the ownership or operation of the Water System, determined in accordance with
Generally Accepted Accounting Principles, including all fees (including connection fees, facility
capacity fees and standby charges), rates, charges, amounts paid under any contracts received by or
owed to the City in connection with the operation of the Water System, proceeds of insurance
relating to the Water System, investment income allocable to the Water System and other income and
revenue howsoever derived by the City from the ownership or operation of the Water System or
arising from the Water System, subject to and after satisfaction of any obligations payable on a senior
basis to Bonds and Contracts, and investment earnings on amounts held in the Revenue Fund; but
excluding in all cases: (i) customer deposits or any other deposits or advances that are subject to
refund until such deposits or advances have become the property of the City; and (ii) any proceeds of
taxes or assessments that are restricted by law to be used by the City to pay bonds or other
obligations later issued.
"Revenues" also include all amounts transferred from the Rate Stabilization Fund to the
Revenue Fund during any Fiscal Year in accordance with Section 5.09 and do not include any
amounts transferred from the Revenue Fund to the Rate Stabilization Fund during any Fiscal Year in
accordance with Section 5.01(b)(iii).
S &P. The term "S &P" means Standard and Poor's Ratings Services, a Standard & Poor's
Financial Services LLC business, or any successor thereto.
Securities Depositories. The term "Securities Depositories" means The Depository Trust
Company; and, in accordance with then current guidelines of the Securities and Exchange
Commission, such other addresses and/or such other securities depositories as the City may designate
in a Written Request of the City deliver to the Trustee.
State. The term "State" means the State of California.
State Loan. The term "State Loan" means Loan Contract No. E54304, dated September 30,
1988, by and between the City and the State of California Department of Water Resources.
Supplemental Indenture. The term "Supplemental Indenture" means any indenture later duly
authorized and entered into between the City and the Trustee, supplementing, modifying or amending
the Indenture; but only if and to the extent that such Supplemental Indenture is specifically
authorized under the Indenture.
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Tax Certificate. The term "Tax Certificate" means the Tax Certificate dated the Closing Date
concerning certain matters pertaining to the use and investment of proceeds of the 2016 Bonds,
including any and all exhibits attached thereto.
Trustee. The term "Trustee" means Wells Fargo Bank, National Association, a national
banking association duly organized and existing under the laws of the United States of America, or
its successor as Trustee under the Indenture as provided in Section 8.01.
2005 Installment Sale Agreement. The term "2005 Installment Sale Agreement" means the
Installment Sale Agreement, dated as of September 1, 2005, by and between the City and the Prior
Issuer, as originally executed and as it may from time to time be amended or supplemented in
accordance therewith.
2016 Bonds. The term "2016 Bonds" means the City of Ukiah Water Revenue Refunding
Bonds, Series 2016 issued by the City and at any time Outstanding pursuant to the Indenture.
Valuation Date. "Valuation Date" means the fifth Business Day preceding the date of
redemption.
Value. The term "Value," which will be determined as of the end of each month, means that
the value of any investments will be calculated as follows:
(a) for the purpose of determining the amount of any fund, all Permitted
Investments credited to such fund will be valued at fair market value. The Trustee will determine the
fair market value based on accepted industry standards and from accepted industry providers.
Accepted industry providers include, but are not limited to, pricing services provided by Financial
Times Interactive Data Corporation, Bank of America Merrill Lynch and Morgan Stanley Smith
Barney.
(b) As to certificates of deposit and bankers' acceptances: the face amount
thereof, plus accrued interest.
(c) As to any investment not specified above: market value, or, if the market
value is not ascertainable by the City or the Trustee, at cost.
Water Service. The term "Water Service" means the water distribution service made
available or provided by the Water System.
Water S,, sue. The term "Water System" means the whole and each and every part of the
water system of the City, including the portion thereof existing on the Closing Date, and including all
additions, betterments, extensions and improvements to such water system or any part thereof later
acquired or constructed; but not including the City's wastewater system or recycled water system
unless otherwise designated by the City Council of the City.
Written Consent of the City; Written Order of the City; Written Request of the City; Written
Requisition of City. The terms "Written Consent of the City," "Written Order of the City," "Written
Request of the City" and "Written Requisition of the City" mean, respectively, a written consent,
order, request or requisition signed by or on behalf of the City by an Authorized Representative or by
any two persons (whether or not members of the City Council) who are specifically authorized by
resolution of the City to sign or execute such a document on its behalf.
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Section 1.02. Content of Certificates and Opinions. Every certificate or opinion provided
for in the Indenture except the certificate of destruction provided for in Section 11.05, with respect to
compliance with any provision of the Indenture must include: (1) a statement that the person making
or giving such certificate or opinion has read such provision and the definitions in the Indenture
relating thereto; (2) a brief statement as to the nature and scope of the examination or investigation
upon which the certificate or opinion is based; (3) a statement that, in the opinion of such person he
has made or caused to be made such examination or investigation as is necessary to enable him to
express an informed opinion with respect to the subject matter referred to in the instrument to which
his signature is affixed; (4) a statement of the assumptions upon which such certificate or opinion is
based, and that such assumptions are reasonable; and (5) a statement as to whether, in the opinion of
such person, such provision has been complied with.
Any such certificate or opinion made or given by an officer of the City may be based, insofar
as it relates to legal or accounting matters, upon a certificate or opinion of or representation by
counsel or an Independent Certified Public Accountant or Independent Financial Consultant, unless
such officer knows, or in the exercise of reasonable care should have known, that the certificate,
opinion or representation with respect to the matters upon which such certificate or statement may be
based, as aforesaid, is erroneous. Any such certificate or opinion made or given by counsel or an
Independent Certified Public Accountant or Independent Financial Consultant may be based, insofar
as it relates to factual matters (with respect to which information is in the possession of the City)
upon a certificate or opinion of or representation by an officer of the City, unless such counsel,
Independent Certified Public Accountant or Independent Financial Consultant knows, or in the
exercise of reasonable care should have known, that the certificate or opinion or representation with
respect to the matters upon which such person's certificate or opinion or representation may be
based, as aforesaid, is erroneous. The same officer of the City, or the same counsel or Independent
Certified Public Accountant or Independent Financial Consultant, as the case may be, need not
certify to all of the matters required to be certified under any provision of the Indenture, but different
officers, counsel or Independent Certified Public Accountants or Independent Financial Consultants
may certify to different matters, respectively.
Section 1.03. Interpretation.
(a) Unless the context otherwise indicates, words expressed in the singular
include the plural and vice versa and the use of the neuter, masculine, or feminine gender is for
convenience only and will be deemed to include the neuter, masculine or feminine gender, as
appropriate.
(b) Headings of articles and sections in the Indenture and the table of contents are
solely for convenience of reference, do not constitute a part of the Indenture and do not affect the
meaning, construction or effect thereof.
(c) All references in the Indenture to "Articles," "Sections" and other
subdivisions are to the corresponding Articles, Sections or subdivisions of the Indenture; the words
"herein," "hereof," "hereby," "hereunder" and other words of similar import refer to the Indenture as
a whole and not to any particular Article, Section or subdivision hereof.
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ARTICLE II
THE 2016 BONDS
Section 2.01. Authorization of 2016 Bonds. The City hereby authorizes the issuance under
the Indenture from time to time of the 2016 Bonds, which constitute special obligations of the City,
for the purpose of prepaying all amounts payable under the 2005 Installment Sale Agreement and the
State Loan. The 2016 Bonds are hereby designated the "City of Ukiah Water Revenue Refunding
Bonds, Series 2016" in the aggregate principal amount of $ . The Indenture
constitutes a continuing agreement with the Owners from time to time of the 2016 Bonds to secure
the full payment of the principal of and interest and premium (if any) on all of the 2016 Bonds,
subject to the covenants, provisions and conditions contained in the Indenture.
Section 2.02. Terms of the 2016 Bonds. The 2016 Bonds will be issued in fully registered
form without coupons in denominations of $5,000 or any integral multiple thereof. The 2016 Bonds
will mature on 1 in each of the years and in the amounts set forth below and will bear interest
on each Interest Payment Date at the rates set forth below:
Maturity Date
( 1) Principal Amount Interest Rate
$
Interest on the 2016 Bonds will be payable on each Interest Payment Date to the person
whose name appears on the Registration Books as the Owner thereof as of the Record Date
immediately preceding each such Interest Payment Date, such interest to be paid by check of the
Trustee sent by first class mail on the applicable Interest Payment Date to the Owner at the address of
such Owner as it appears on the Registration Books (except that in the case of an Owner of one
million dollars ($1,000,000) or more in principal amount, such payment may, at such Owner's
option, be made by wire transfer of immediately available funds to an account in the United States in
accordance with written instructions provided to the Trustee by such Owner prior to the Record Date.
Principal of and premium (if any) on any 2016 Bond will be paid by check of the Trustee upon
presentation and surrender thereof at maturity or upon the prior redemption thereof, at the Office of
the Trustee. Both the principal of and interest and premium (if any) on the 2016 Bonds will be
payable in lawful money of the United States of America.
Each 2016 Bond will be dated the date of initial delivery, and will bear interest from the
Interest Payment Date next preceding the date of authentication thereof unless: (a) it is authenticated
after a Record Date and on or before the following Interest Payment Date, in which event it will bear
interest from such Interest Payment Date; or (b) unless it is authenticated on or before 15,
2016, in which event it will bear interest from the date of initial delivery; provided, however, that if,
as of the date of authentication of any 2016 Bond, interest thereon is in default, such 2016 Bond will
bear interest from the Interest Payment Date to which interest has previously been paid or made
available for payment thereon. Interest on the 2016 Bonds will be calculated on the basis of a 360
day year composed of twelve 30 day months.
Section 2.03. Transfer of 2016 Bonds. Any 2016 Bond may, in accordance with its terms,
be transferred on the Registration Books by the person in whose name it is registered, in person or by
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his or her duly authorized attorney, upon surrender of such 2016 Bond at the Office of the Trustee for
cancellation, accompanied by delivery of a written instrument of transfer, duly executed in a form
acceptable to the Trustee. The Trustee is not required to register the transfer of any 2016 Bond
during the period in which the Trustee is selecting 2016 Bonds for redemption and any 2016 Bond
that has been selected for redemption.
Whenever any 2016 Bond or 2016 Bonds is surrendered for transfer, the City will execute
and the Trustee will authenticate and deliver a new 2016 Bond or 2016 Bonds of authorized
denomination or denominations for a like series and aggregate principal amount of the same
maturity. The Trustee will require the 2016 Bond Owner requesting such transfer to pay any tax or
other governmental charge required to be paid with respect to such transfer. Following any transfer
of 2016 Bonds, the Trustee will cancel and destroy the 2016 Bonds that it has received.
Section 2.04. Exchange of 2016 Bonds. 2016 Bonds may be exchanged at the Office of the
Trustee for a like aggregate principal amount of other authorized denominations of the same series
and maturity. The Trustee is not required to exchange any 2016 Bond during the period in which the
Trustee is selecting 2016 Bonds for redemption or any 2016 Bond that has been selected for
redemption. The Trustee will require the 2016 Bond Owner requesting such exchange to pay any tax
or other governmental charge required to be paid with respect to such exchange. Following any
exchange of 2016 Bonds, the Trustee will cancel and destroy the 2016 Bonds that it has received.
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 2016 Bonds,
which will upon reasonable notice and at reasonable times be open to inspection during regular
business hours by the City and the Owners; and, upon presentation for such purpose, the Trustee will,
under such reasonable regulations as it may prescribe, register, transfer or cause to be registered or
transferred, on such records, the ownership of the 2016 Bonds as provided in the Indenture.
The person in whose name any 2016 Bond is registered will be deemed the Owner thereof for
all purposes of the Indenture, and payment of or on account of the interest on and principal and
Redemption Price of by such 2016 Bonds will be made only to or upon the order in writing of such
registered Owner, which payments will be valid and effectual to satisfy and discharge liability upon
such 2016 Bond to the extent of the sum or sums so paid.
Section 2.06. Form and Execution of 2016 Bonds. The 2016 Bonds will be in substantially
the form set forth in Exhibit A. The 2016 Bonds will be executed in the name and on behalf of the
City with the manual or facsimile signature of its Mayor or Vice - Mayor. The 2016 Bonds may carry
a seal, and such seal may be in the form of a facsimile of the City's seal and may be reproduced,
imprinted or impressed on the 2016 Bonds. The 2016 Bonds will be delivered to the Trustee for
authentication. In case any of the officers who have signed or attested any of the 2016 Bonds cease
to be such officer or officers of the City before the 2016 Bonds so signed or attested have been
authenticated or delivered by the Trustee, or issued by the City, such 2016 Bonds may nevertheless
be authenticated, delivered and issued and, upon such authentication, delivery and issue, will be as
binding upon the City as though those who signed and attested the same had continued to be such
officers of the City. Any 2016 Bonds may be signed and attested on behalf of the City by persons as
who are proper officers of the City at the time of such signature and attestation although at the
nominal date of such 2016 Bonds any such persons are not such officers of the City.
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Only 2016 Bonds that bear a certificate of authentication substantially in the form set forth
in Exhibit A, manually executed by the Trustee, will be valid or obligatory for any purpose or
entitled to the benefits of the Indenture, and such certificate of or on behalf of the Trustee is
conclusive evidence that the 2016 Bonds so authenticated have been duly executed, authenticated
and delivered under the Indenture and are entitled to the benefits of the Indenture.
Section 2.07. 2016 Bonds Mutilated, Lost, Destroyed or Stolen. If any 2016 Bond becomes
mutilated, the City, at the expense of the Owner of said 2016 Bond, will execute, and the Trustee will
thereupon authenticate and deliver, a new 2016 Bond of like tenor, series and authorized
denomination in exchange and substitution for the 2016 Bonds so mutilated, but only upon surrender
to the Trustee of the 2016 Bond so mutilated. Every mutilated 2016 Bond so surrendered to the
Trustee will be canceled by it and upon the Written Request of the City delivered to, or upon the
order of, the City. If any 2016 Bond is lost, destroyed or stolen, evidence of such loss, destruction or
theft may be submitted to the Trustee and, if such evidence be satisfactory to the Trustee and
indemnity satisfactory to the Trustee is given, the City, at the expense of the Owner, will execute,
and the Trustee will thereupon authenticate and deliver, a new 2016 Bond of like tenor, series and
authorized denomination in lieu of and in substitution for the 2016 Bond so lost, destroyed or stolen
(or if any such 2016 Bond has matured or is about to mature, instead of issuing a substitute 2016
Bond, the Trustee may pay the same without surrender thereof). The City may require payment by
the Owner of a sum not exceeding the actual cost of preparing each new 2016 Bond and of the
expenses which may be incurred by the City and the Trustee with respect thereto. Any 2016 Bond
issued under the provisions of the Indenture in lieu of any 2016 Bond alleged to be lost, destroyed or
stolen will constitute an original additional contractual obligation on the part of the City, whether or
not the 2016 Bond so alleged to be lost, destroyed, or stolen is at any time enforceable by anyone,
and will be entitled to the benefits of the Indenture with all other 2016 Bonds secured by the
Indenture. Notwithstanding any other provision of the Indenture, in lieu of delivering a new 2016
Bond for a 2016 Bond which has been mutilated, lost, destroyed or stolen and which has matured or
has been selected for redemption, the Trustee may make payment of such 2016 Bond upon receipt of
indemnity satisfactory to the Trustee.
Section 2.08. Book Entry S sue.
(a) Election of Book Entry, sue. Prior to the issuance of the 2016 Bonds, the
City may provide that such 2016 Bonds will be initially issued as book entry 2016 Bonds. If the City
elects to deliver any 2016 Bonds in book entry form, the City will cause the delivery of a separate
single fully registered bond (which may be typewritten) for each maturity date of such 2016 Bonds in
an authorized denomination corresponding to the total principal amount of the 2016 Bonds
designated to mature on such date. Upon initial issuance, the ownership of each such 2016 Bond will
be registered in the 2016 Bond Registration Books in the name of the Nominee, as nominee of the
Depository, and ownership of the 2016 Bonds, or any portion thereof may not thereafter be
transferred except as provided in Section 2.08(e)..
With respect to book entry 2016 Bonds, the City and the Trustee have no responsibility or
obligation to any Participant or to any person on behalf of which such a Participant holds an interest
in such book entry 2016 Bonds. Without limiting the immediately preceding sentence, the City and
the Trustee have no responsibility or obligation with respect to: (i) the accuracy of the records of the
Depository, the Nominee, or any Participant with respect to any ownership interest in book entry
2016 Bonds; (ii) the delivery to any Participant or any other person, other than an Owner as shown in
the 2016 Bond Registration Books, of any notice with respect to book entry 2016 Bonds, including
16
any notice of redemption; (iii) the selection by the Depository and its Participants of the beneficial
interests in book entry 2016 Bonds to be redeemed in the event that the City redeems the 2016 Bonds
in part; or (iv) the payment by the Depository or any Participant or any other person, of any amount
of principal of, premium, if any, or interest on book entry 2016 Bonds. The City and the Trustee may
treat and consider the person in whose name each book entry 2016 Bond is registered in the 2016
Bond Registration Books as the absolute Owner of such book entry 2016 Bond for the purpose of
payment of principal of, premium and interest on such 2016 Bond, for the purpose of giving notices
of redemption and other matters with respect to such 2016 Bond, for the purpose of registering
transfers with respect to such 2016 Bond, and for all other purposes whatsoever. The Trustee will
pay all principal of, premium, if any, and interest on the 2016 Bonds only to or upon the order of the
respective Owner, as shown in the 2016 Bond Registration Books, or such Owner's respective
attorney duly authorized in writing, and all such payments will be valid and effective to fully satisfy
and discharge the City's obligations with respect to payment of principal of, premium, if any, and
interest on the 2016 Bonds to the extent of the sum or sums so paid. No person other than an Owner,
as shown in the 2016 Bond Registration Books, may receive a 2016 Bond evidencing the obligation
to make payments of principal of, premium, if any, and interest on the 2016 Bonds. Upon delivery
by the Depository to the City and the Trustee, of written notice to the effect that the Depository has
determined to substitute a new nominee in place of the Nominee, and subject to the provisions in the
Indenture with respect to Record Dates, the word Nominee in the Indenture will refer to such
nominee of the Depository.
(b) Delivery of Letter of Representations. In order to qualify the book entry 2016
Bonds for the Depository's book entry system, the City and the Trustee (if required by the
Depository) will execute and deliver to the Depository a Letter of Representations. The execution
and delivery of a Letter of Representations does not in any way impose upon the City or the Trustee
any obligation whatsoever with respect to persons having interests in such book entry 2016 Bonds
other than the Owners, as shown on the 2016 Bond Registration Books. By executing a Letter of
Representations, the Trustee will agree to take all action necessary at all times so that the Trustee will
be in compliance with all representations of the Trustee in such Letter of Representations. In
addition to the execution and delivery of a Letter of Representations, the City and the Trustee will
take such other actions, not inconsistent with the Indenture, as are reasonably necessary to qualify
book entry 2016 Bonds for the Depository's book entry program.
(c) Selection of Depository. In the event that: (i) the Depository determines not
to continue to act as securities depository for book entry 2016 Bonds; or (ii) the City determines that
continuation of the book entry system is not in the best interest of the beneficial owners of the 2016
Bonds or the City, then the City will discontinue the book entry system with the Depository. If the
City determines to replace the Depository with another qualified securities depository, the City will
prepare or direct the preparation of a new single, separate, fully registered 2016 Bond for each of the
maturity dates of such book entry 2016 Bonds, registered in the name of such successor or substitute
qualified securities depository or its Nominee as provided in subsection (e) below. If the City fails to
identify another qualified securities depository to replace the Depository, then the 2016 Bonds will
no longer be restricted to being registered in such 2016 Bond Registration Books in the name of the
Nominee, but may be registered in whatever name or names the Owners transferring or exchanging
such 2016 Bonds designate, in accordance with the provisions of Sections 2.03 and 2.04.
(d) Payments To Depository. Notwithstanding any other provision of the
Indenture to the contrary, so long as all Outstanding 2016 Bonds are held in book entry form and
registered in the name of the Nominee, all payments of principal of, redemption premium, if any, and
17
interest on such 2016 Bonds and all notices with respect to such 2016 Bonds will be made and given,
respectively to the Nominee, as provided in the Letter of Representations or as otherwise instructed
by the Depository and agreed to by the Trustee notwithstanding any inconsistent provisions in the
Indenture.
(e) Transfer of 2016 Bonds to Substitute Depository.
(i) The 2016 Bonds will be initially issued as provided in Section 2.01.
Registered ownership of such 2016 Bonds, or any portions thereof, may not thereafter be transferred
except:
(A) to any successor of DTC or its nominee, or of any substitute
depository designated pursuant to clause (B) of subsection (i) of this Section 2.08(e) ( "Substitute
Depository "); provided that any successor of DTC or Substitute Depository is qualified under any
applicable laws to provide the service proposed to be provided by it;
(B) to any Substitute Depository, upon: (1) the resignation of
DTC or its successor (or any Substitute Depository or its successor) from its functions as depository;
or (2) a determination by the City that DTC (or its successor) is no longer able to carry out its
functions as depository; provided that any such Substitute Depository is qualified under any
applicable laws to provide the services proposed to be provided by it; or
(C) to any person as provided below, upon: (1) the resignation of
DTC or its successor (or any Substitute Depository or its successor) from its functions as depository;
or (2) a determination by the City that DTC or its successor (or Substitute Depository or its
successor) is no longer able to carry out its functions as depository.
(ii) In the case of any transfer pursuant to clause (A) or clause (B) of
subsection (i) of this Section 2.08(e), upon receipt of all Outstanding 2016 Bonds by the Trustee,
together with a Written Request of the City to the Trustee designating the Substitute Depository, a
single new 2016 Bond, which the City will prepare or cause to be prepared, will be issued for each
maturity of 2016 Bonds then Outstanding, registered in the name of such successor or such Substitute
Depository or their Nominees, as the case may be, all as specified in such Written Request of the
City. In the case of any transfer pursuant to clause (C) of subsection (i) of this Section 2.08(e), upon
receipt of all Outstanding 2016 Bonds by the Trustee, together with a Written Request of the City to
the Trustee, new 2016 Bonds, which the City will prepare or cause to be prepared, shwillall be issued
in such denominations and registered in the names of such persons as are requested in such Written
Request of the City, subject to the limitations of Section 2.01, provided that the Trustee is not
required to deliver such new 2016 Bonds within a period of less than sixty (60) days from the date of
receipt of such Written Request from the City.
(iii) In the case of a partial redemption or an advance refunding of any
2016 Bonds evidencing a portion of the principal maturing in a particular year, DTC or its successor
(or any Substitute Depository or its successor) will make an appropriate notation on such 2016 Bonds
indicating the date and amounts of such reduction in principal, in form acceptable to the Trustee, all
in accordance with the Letter of Representations. The Trustee is not liable for such Depository's
failure to make such notations or errors in making such notations and the records of the Trustee as to
the Outstanding principal amount of such 2016 Bonds will be controlling.
(iv) The City and the Trustee are entitled to treat the person in whose
name any 2016 Bond is registered as the Owner thereof for all purposes of the Indenture and any
applicable laws, notwithstanding any notice to the contrary received by the Trustee or the City; and
the City and the Trustee have no responsibility for transmitting payments to, communicating with,
notifying, or otherwise dealing with any beneficial owners of the 2016 Bonds. Neither the City nor
the Trustee have any responsibility or obligation, legal or otherwise, to any such beneficial owners or
to any other parry, including DTC or its successor (or Substitute Depository or its successor), except
to the Owner of any 2016 Bonds, and the Trustee may rely conclusively on its records as to the
identity of the Owners of the 2016 Bonds.
ARTICLE III
ISSUANCE OF 2016 BONDS; APPLICATION OF PROCEEDS
Section 3.01. Issuance of the 2016 Bonds. At any time after the execution of the Indenture,
the City may execute and the Trustee will authenticate and, upon Written Request of the City, deliver
the 2016 Bonds in the aggregate principal amount of $
Section 3.02. Application of Proceeds of the 2016 Bonds. The proceeds of the sale of the
2016 Bonds, less the amount of $ to be paid directly to the Bond Insurer as the premium for the
Policy and the Reserve Policy, will be deposited with the Trustee, who will deposit the amount of
$ into the Bond Proceeds Fund and the amount of $ into the Costs of Issuance Fund.
The Trustee may establish temporary funds or accounts in its records to record and facilitate such
transfer and deposit.
Section 3.03. Establishment and Application of Costs of Issuance Fund. The Trustee will
establish, maintain and hold in trust a separate fund designated as the "Costs of Issuance Fund." The
moneys in the Costs of Issuance Fund will be used and withdrawn by the Trustee to pay the Costs of
Issuance upon submission of Requisitions of the City stating the person to whom payment is to be
made, the amount to be paid, the purpose for which the obligation was incurred, that such payment is
proper charge against said fund and that payment for such charge has not previously been made. On
the six month anniversary of the Closing Date, or upon the earlier Written Request of the City, all
amounts remaining in the Costs of Issuance Fund will be transferred by the Trustee to the Interest
Account, and the Costs of Issuance Fund will be closed. Investment earnings on amounts on deposit
in the Costs of Issuance Fund will be applied in accordance with Section 5.07.
Section 3.04. Validity of 2016 Bonds. The validity of the authorization and issuance of the
2016 Bonds is not dependent on and will not be affected in any way by any proceedings taken by the
City or the Trustee with respect to any other agreement. The recital contained in the 2016 Bonds that
the same are issued pursuant to the Constitution and laws of the State is conclusive evidence of the
validity and of compliance with the provisions of law in their issuance.
Section 3.05. Establishment and Application of Bond Proceeds Fund. The Trustee will
establish, maintain and hold in trust a separate fund designated as the "Bond Proceeds Fund." Upon
the receipt of moneys in the Bond Proceeds Fund, the Trustee will: (i) promptly transfer $ to
the Escrow Agent for deposit in the escrow fund created pursuant to the Escrow Agreement (2005
Installment Sale Agreement); and (ii) retain the remaining moneys in the Bond Proceeds Fund
uninvested until April 1, 2016, at which time, in accordance with instructions provided by the City,
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the Trustee will deliver a check to the State of California Department of Water Resources in the
amount of $ to prepay the State Loan. The Bond Proceeds Fund will thereafter be closed.
ARTICLE IV
REDEMPTION OF 2016 BONDS
Section 4.01. Terms of Redemption.
(a) The 2016 Bonds with stated maturities on or after — 1,20 —, are subject
to redemption prior to their respective stated maturities, as a whole or in part, on any date on or after
1, 20_, as directed by the City in a Written Request provided to the Trustee at least 35 days
(or such lesser number of days acceptable to the Trustee in the sole discretion of the Trustee, such
notice being for the convenience of the Trustee) prior to the Redemption Date, and by lot within each
maturity in integral multiples of $5,000, at a Redemption Price equal to the principal amount thereof
plus accrued interest thereon to the Redemption Date, without premium.
(b) The 2016 Bonds maturing on 1, 20 are subject to mandatory sinking
fund redemption in part (by lot) on each 1 on and after 1, 20 , in integral multiples of
$5,000, at a Redemption Price equal to the principal amount thereof plus accrued interest to the
Redemption Date, without premium, in accordance with the below schedule. On each of the
following payment dates, the Trustee will pay from the Redemption Fund an amount equal to the
payment or payments due on such date as set forth below.
Mandatory Sinking
Fund Redemption
Date ( 1) Principal Amount
(maturity)
If some, but not all, of the 2016 Bonds maturing on 1, 20_ have been redeemed under
subsection (a) of this Section, the total amount of all future sinking fund payments will be reduced by
the aggregate principal amount of such 2016 Bonds so redeemed, to be allocated among such sinking
fund payments on a pro rata basis as determined by the City, which will notify the Trustee in writing
of such determination.
(c) The 2016 Bonds are subject to extraordinary redemption prior to their
respective stated maturities, as a whole or in part on any date in the order of maturity and within
maturities as directed by the City in a Written Request provided to the Trustee at least 35 days (or
such lesser number of days acceptable to the Trustee in the sole discretion of the Trustee, such notice
being for the convenience of the Trustee) prior to such date and by lot within each maturity in
integral multiples of $5,000 from Net Proceeds, upon the terms and conditions of, and as provided
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for in, Sections 6.19 and 6.23, at a Redemption Price equal to the principal amount thereof plus
accrued interest thereon to the date fixed for redemption, without premium.
Section 4.02. Selection of 2016 Bonds for Redemption. Whenever provision is made in the
Indenture for the redemption of less than all of the 2016 Bonds, the Trustee will select the 2016
Bonds for redemption as a whole or in part on any date as directed by the City and by lot within each
maturity in integral multiples of $5,000 in accordance with Section 4.01, and in the absence of such
direction, in inverse order of maturity. The Trustee will promptly notify the City in writing of the
numbers of the 2016 Bonds or portions thereof so selected for redemption.
Section 4.03. Notice of Redemption. Notice of redemption will be mailed by first class
mail at least twenty (20) days but not more than sixty (60) days before any Redemption Date, to the
respective Owners of any 2016 Bonds designated for redemption at their addresses appearing on the
Registration Books, to the Securities Depositories and the Information Services; provided that, in the
case of notice of optional redemption not related to an advance or current refunding, such notice may
be given only if sufficient funds have been deposited with the Trustee to pay the applicable
Redemption Price of the 2016 Bonds to be redeemed; and provided further, that such notice may be
cancelled by the City upon Written Request delivered to the Trustee not less than five (5) days prior
to such Redemption Date. Each notice of redemption must: (a) state the date of notice, the
Redemption Date, the place or places of redemption and the Redemption Price; and (b) designate the
maturities, CUSIP numbers, if any, and, if less than all 2016 Bonds of any such maturity are to be
redeemed, the serial numbers of the 2016 Bonds of such maturity to be redeemed by giving the
individual number of each 2016 Bond or by stating that all 2016 Bonds between two stated numbers,
both inclusive, have been called for redemption and, in the case of 2016 Bonds to be redeemed in
part only, the respective portions of the principal amount thereof to be redeemed. Each such notice
must also state that on the Redemption Date there will become due and payable on each of said 2016
Bonds or parts thereof designated for redemption the Redemption Price thereof, or of said specified
portion of the principal thereof in the case of a 2016 Bond to be redeemed in part only, together with
interest accrued thereon to the Redemption Date, and that (provided that moneys for redemption have
been deposited with the Trustee) from and after such Redemption Date interest thereon will cease to
accrue, and will require that such 2016 Bonds be then surrendered to the Trustee. Neither the failure
to receive such notice nor any defect in the notice or the mailing thereof will affect the validity of the
redemption of any 2016 Bond. Notice of redemption of 2016 Bonds will be given by the Trustee, at
the expense of the City, for and on behalf of the City.
With respect to any notice of optional redemption of 2016 Bonds, such notice may state that
such redemption is 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 such 2016
Bonds to be redeemed and that, if such moneys have not been so received, said notice will be of no
force and effect and the Trustee will not be required to redeem such 2016 Bonds. In the event that
such notice of redemption contains such a condition and such moneys are not so received, the
redemption will not be made, and the Trustee will within a reasonable time thereafter give notice, in
the manner in which the notice of redemption was given, that such moneys were not so received.
Section 4.04. Partial Redemption of 2016 Bonds. Upon surrender of any 2016 Bond
redeemed in part only, the City will execute and the Trustee will authenticate and deliver to the
Owner thereof, at the expense of the City, a new 2016 Bond or 2016 Bonds of authorized
denominations equal in aggregate principal amount to the unredeemed portion of the 2016 Bonds
surrendered and of the same series, interest rate and maturity.
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Section 4.05. Effect of Redemption. Notice of redemption having been duly given as
aforesaid, and moneys for payment of the Redemption Price of, together with interest accrued to the
date fixed for redemption on, the 2016 Bonds (or portions thereof) so called for redemption being
held by the Trustee, on the Redemption Date designated in such notice, the 2016 Bonds (or portions
thereof) so called for redemption will become due and payable, interest on the 2016 Bonds so called
for redemption will cease to accrue, said 2016 Bonds (or portions thereof) will cease to be entitled to
any benefit or security under the Indenture, and the Owners of said 2016 Bonds will have no rights in
respect thereof except to receive payment of the Redemption Price thereof. The Trustee will, upon
surrender for payment of any of the 2016 Bonds to be redeemed on their Redemption Dates, pay such
2016 Bonds at the Redemption Price.
All 2016 Bonds redeemed pursuant to the foregoing provisions will be canceled upon
surrender thereof.
ARTICLE V
REVENUES, FUNDS AND ACCOUNTS; PAYMENT OF PRINCIPAL AND INTEREST
Section 5.01. Pledge and Assignment; Revenue Fund.
(a) All of the Revenues, all amounts held in the Revenue Fund described in
subsection (b) below, the Reserve Fund described in Section 5.03 and amounts transferred from the
Rate Stabilization Fund to the Revenue Fund described in Section 5.09 and any other amounts
(including proceeds of the sale of the 2016 Bonds) held in any fund or account established pursuant
to the Indenture (except the Rebate Fund and the Rate Stabilization Fund (other than those amounts
transferred by the City from the Rate Stabilization Fund to the Revenue Fund)) are hereby
irrevocably pledged to secure the payment of the principal of and interest, and the premium, if any,
on the 2016 Bonds in accordance with their terms and the provisions of the Indenture, and the
Revenues may not be used for any other purpose while the 2016 Bonds remain Outstanding;
provided that out of the Revenues there may be apportioned such sums for such purposes as are
expressly permitted in the Indenture. The foregoing pledge, together with the pledge created by all
other Contracts and Bonds, constitutes a first lien on and security interest in Revenues and, subject
to application of Revenues and all amounts on deposit therein as permitted in the Indenture, the
Revenue Fund and other funds and accounts created under the Indenture for the payment of the
principal of and interest, and the premium, if any, on the 2016 Bonds and all Contracts and Debt
Service on Bonds in accordance with the terms of the Indenture. Such pledge will attach, be
perfected and be valid and binding from and after the Closing Date, without any physical delivery
thereof or further act, and will be valid and binding against all parties having claims of any kind in
tort, contract or otherwise against the City, irrespective of whether such parties have notice of the
Indenture.
(b) In order to carry out and effectuate the pledge and lien contained in the
Indenture, the City agrees and covenants that all Revenues will be received by the City in trust and
deposited when and as received in the Revenue Fund, which fund the City agrees and covenants to
maintain and to hold separate and apart from other funds so long as the 2016 Bonds and any
Contracts or Debt Service on Bonds remain unpaid. Moneys in the Revenue Fund will be used and
applied by the City as provided in the Indenture. All moneys in the Revenue Fund will be held in
trust and applied, used and withdrawn for the purposes set forth in the Indenture.
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The City will, from the moneys in the Revenue Fund, pay all Operation and Maintenance
Costs (including amounts reasonably required to be set aside in contingency reserves for Operation
and Maintenance Costs, the payment of which is not then immediately required) as such Operation
and Maintenance Costs become due and payable. All remaining moneys in the Revenue Fund will be
set aside by the City at the following times for the transfer to the following respective special funds
in the following order of priority:
(i) Interest and Principal Payments. Not later than the Business Day
prior to each Interest Payment Date, the City will, from the moneys in the Revenue Fund, transfer to
the Trustee for deposit in the Payment Fund or the Redemption Fund the payments of interest and
principal or mandatory sinking fund payments, as applicable, on the 2016 Bonds due and payable on
such Interest Payment Date. The City will also, from the moneys in the Revenue Fund, transfer to
the applicable trustee for deposit in the respective payment fund, without preference or priority, and
in the event of any insufficiency of such moneys ratably without any discrimination or preference,
any other Debt Service in accordance with the provisions of any Bond or Contract.
(ii) Reserve Funds. On or before each Interest Payment Date, the City
will, from the remaining moneys in the Revenue Fund, thereafter, without preference or priority and
in the event of any insufficiency of such moneys ratably without any discrimination or preference,
transfer to the applicable trustee for such reserve funds and/or accounts, if any, as may have been
established in connection with Bonds or Contracts, that sum, if any, necessary to restore such funds
or accounts to an amount equal to the reserve requirement with respect thereto.
(iii) Surplus. Moneys on deposit in the Revenue Fund on any date when
the City reasonably expects that such moneys will not be needed for the payment of Operation and
Maintenance Costs or any of the purposes described in clauses (b)(i) or (b)(ii) may be expended by
the City at any time for any purpose permitted by law or deposited in the Rate Stabilization Fund.
(iv) Investments. All moneys held by the City in the Revenue Fund may
be invested in Permitted Investments, and the investment earnings thereon will remain on deposit in
such fund, except as otherwise provided in the Indenture.
Section 5.02. Allocation of Revenues. There is hereby established with the Trustee the
Payment Fund, which the Trustee covenants to maintain and hold in trust separate and apart from
other funds held by it so long as any principal of and interest on the 2016 Bonds remain unpaid.
Except as directed in the Indenture, all payments of interest and principal on the 2016 Bonds received
by the Trustee pursuant to Section 5.01(b) will be promptly deposited by the Trustee upon receipt
thereof into the Payment Fund; except that all moneys received by the Trustee and required by the
Indenture to be deposited in the Redemption Fund will be promptly deposited therein. All payments
of interest and principal on the 2016 Bonds deposited with the Trustee will be held, disbursed,
allocated and applied by the Trustee only as provided in the Indenture. The Trustee will establish
and hold an Interest Account and a Principal Account within the Payment Fund.
The Trustee will transfer from the Payment Fund and deposit into the following respective
accounts, the following amounts in the following order of priority and at the following times, the
requirements of each such account (including the making up of any deficiencies in any such account
resulting from lack of Revenues sufficient to make any earlier required deposit) at the time of deposit
to be satisfied before any transfer is made to any account subsequent in priority:
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(a) Not later than the Business Day preceding each Interest Payment Date, the
Trustee will deposit in the Interest Account that sum, if any, required to cause the aggregate amount
on deposit in the Interest Account to be at least equal to the amount of interest becoming due and
payable on such date on all 2016 Bonds then Outstanding. No deposit needs to be made into the
Interest Account if there is in such fund an amount sufficient to pay the interest becoming due and
payable on such date on all 2016 Bonds then Outstanding.
(b) Not later than the Business Day preceding each date on which the principal of
the 2016 Bonds becomes due and payable under the Indenture, the Trustee will deposit in the
Principal Account that sum, if any, required to cause the aggregate amount on deposit in the Principal
Account to equal the principal amount of the 2016 Bonds coming due and payable on such date. No
deposit needs to be made into the Principal Account if there is in such fund moneys sufficient to pay
the principal becoming due and payable on such date on all 2016 Bonds then Outstanding.
Section 5.03. Reserve Fund. [TO BE REVISED TO CONFORM TO INSURANCE
REQUIREMENTS] The Trustee shall establish and maintain as security solely for the 2016 Bonds a
separate fund designated the "Reserve Fund." The Reserve Policy will be deposited in the Reserve
Fund on the Closing Date. Upon the prior written consent of the Reserve Insurer (so long as the
Reserve Policy is in full force and effect and the Reserve Insurer has not defaulted on its obligations
thereunder), the City may substitute another Credit Facility (other than the Reserve Policy) for all or
part of the moneys on deposit in the Reserve Fund by depositing such Credit Facility with the
Trustee; provided that, at the time of such substitution, the amount on deposit in the Reserve Fund,
together with the amount available under all Credit Facilities (including the Reserve Policy), is at
least equal to the Reserve Requirement. Moneys for which a Credit Facility has been substituted as
provided herein will be transferred, at the election of the City, to the Interest Account.
(a) Amounts on deposit in the Reserve Fund which were not derived from
payments under the Reserve Policy or another Credit Facility credited to the Reserve Fund to satisfy
a portion of the Reserve Requirement will be used and withdrawn by the Trustee prior to using and
withdrawing any amounts derived from payments under the Reserve Policy or other Credit Facility.
In order to accomplish the use and withdrawal of such amounts not derived from payments under the
Reserve Policy or another Credit Facility, the Trustee will, as and to the extent necessary, liquidate
any investments purchased with such amounts.
(b) At least five (5) Business Days before any Interest Payment Date, the Trustee
will ascertain the necessity for a claim under the Reserve Policy or other Credit Facility in
accordance with the terms hereof, and will provide notice to the Reserve Insurer and the provider of
any other Credit Facility at least five (5) Business Days prior to each date upon which interest or
principal is due on the 2016 Bonds.
If five (5) Business Days before any Interest Payment Date, the moneys available in the
Payment Fund do not equal the amount of the principal of and interest on the 2016 Bonds then
coming due and payable, the Trustee will apply the moneys available in the Reserve Fund to make
delinquent payments of principal of and interest on the 2016 Bonds on behalf of the City by
transferring the amount necessary for such purpose to the Payment Fund. All cash and investments
in the Reserve Fund will be transferred to the Payment Fund before any drawing may be made on the
Reserve Policy or any other Credit Facility. The Trustee will take whatever action is necessary to
liquidate or draw upon investments of funds held in the Reserve Fund or draw upon the Reserve
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Policy or other Credit Facility to make such funds available for application as provided in the
Indenture on the Interest Payment Date.
Draws on all Credit Facilities (including the Reserve Policy) on which there is available
coverage will be made on a pro -rata basis (calculated by reference to the coverage then available
thereunder) after applying all available cash and investments in the Reserve Fund. "Available
coverage" means the coverage then available for disbursement pursuant to the terms of the applicable
Credit Facilities without regard to the legal or financial ability or willingness of the provider of such
instrument to honor a claim or draw thereon or the failure of such provide to honor any such claim or
draw.
The Trustee will repay the Reserve Insurer any draws under the Reserve Policy, together with
interest thereon, at the Late Payment Rate from Revenues received from the City. The Trustee will
also pay all related reasonable expenses incurred by the Reserve Insurer, together with interest
thereon, at the Late Payment Rate from Revenues received from the City.
Repayment of draws under the Reserve Policy and payment of expenses and accrued interest
thereon at the Late Payment Rate (collectively, "Policy Costs ") will commence in the first month
following each draw, and each such monthly payment will be in an amount at least equal to 1/12 of
the aggregate of Policy Costs related to such draw. Payment of any Policy Costs and reimbursements
of amounts with respect to other Credit Facilities will be made on a pro -rata basis prior to
replenishment of any cash drawn from the Reserve Fund.
Amounts in respect of Policy Costs paid to the Reserve Insurer will be credited first to
interest due, then to the expenses due and then to principal due. As and to the extent that payments
are made to the Reserve Insurer on account of principal drawn on the Reserve Policy, the coverage
under the Reserve Policy will be increased by a like amount, subject to the terms of the Reserve
Policy.
If the City fails to pay any Policy Costs in accordance with the requirements of the Indenture,
the Reserve Insurer will be entitled to exercise any and all legal and equitable remedies available to
it, including those provided under the Indenture, other than remedies which would adversely affect
owners of the 2016 Bonds. The Indenture may not be discharged or terminated until all Policy Costs
that are owed to the Reserve Insurer have been paid in full. The City's obligation to pay such
amounts will expressly survive payment in full of the 2016 Bonds.
Moneys, if any, on deposit in the Reserve Fund (or the applicable account therein) will be
withdrawn and applied by the Trustee for the final payment or payments of principal of and interest
on the 2016 Bonds (or the applicable account therein,) respectively.
(c) In the event of any transfer from the Reserve Fund or the making of any claim
under a Credit Facility, the Trustee will, within five days thereafter, provide written notice to the City
of the amount and the date of such transfer or claim.
(d) So long as no Event of Default has occurred and is continuing, any amount in
the Reserve Fund (or the applicable account therein) in excess of the Reserve Requirement (or
applicable reserve requirement) on February 15 or August 15 of each year will be withdrawn from
the Reserve Fund (or the applicable account therein) by the Trustee, and such amount will be
deposited in the Interest Account.
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(e) In no event will amounts in the Reserve Fund be applied to payment of any
Bonds or Contracts other than the 2016 Bonds.
Section 5.04. Application of Interest Account. All amounts in the Interest Account will be
used and withdrawn by the Trustee solely for the purpose of paying interest on the 2016 Bonds as it
becomes due and payable (including accrued interest on any 2016 Bonds purchased or accelerated
prior to maturity pursuant to the Indenture).
Section 5.05. Application of Principal Account. All amounts in the Principal Account will
be used and withdrawn by the Trustee solely to pay the principal amount of the 2016 Bonds at
maturity, purchase or acceleration; provided, however, that at any time prior to selection for
redemption of any such 2016 Bonds, upon written direction of the City, the Trustee may apply such
amounts to the purchase of 2016 Bonds at public or private sale, as and when and at such prices
(including brokerage and other charges, but excluding accrued interest, which is payable from the
Interest Account) as directed pursuant to a Written Request of the City, except that the purchase price
(exclusive of accrued interest) may not exceed the Redemption Price then applicable to the 2016
Bonds.
Section 5.06. Application of Redemption Fund. There is hereby established with the
Trustee a special fund designated as the "Redemption Fund." All amounts in the Redemption Fund
will be used and withdrawn by the Trustee solely for the purpose of paying the Redemption Price of
the 2016 Bonds to be redeemed on any Redemption Date pursuant to Section 4.01; provided,
however, that at any time prior to selection for redemption of any such 2016 Bonds, upon written
direction of the City, the Trustee may apply such amounts to the purchase of 2016 Bonds at public or
private sale, as and when and at such prices (including brokerage and other charges, but excluding
accrued interest, which is payable from the Interest Account) as directed pursuant to a Written
Request of the City, except that the purchase price (exclusive of accrued interest) may not exceed the
Redemption Price then applicable to the 2016 Bonds.
Section 5.07. Investments. All moneys in any of the funds or accounts established with the
Trustee pursuant to the Indenture will be invested by the Trustee solely in Permitted Investments.
Such investments will be directed by the City pursuant to a Written Request of the City filed with the
Trustee at least two (2) Business Days in advance of the making of such investments (which
directions will be promptly confirmed to the Trustee in writing). In the absence of any such
directions from the City, the Trustee will invest any such moneys in Permitted Investments described
in clause (b)(5) of the definition thereof; provided, however, that any such investment will be made
by the Trustee only if, prior to the date on which such investment is to be made, the Trustee has
received a written direction from the City specifying a specific money market fund and, if no such
written direction from the City is so received, the Trustee will hold such moneys uninvested.
Obligations purchased as an investment of moneys in any fund will be deemed to be part of such
fund or account.
All interest or gain derived from the investment of amounts in any of the funds or accounts
established under the Indenture will be deposited in the Interest Account unless otherwise provided
in the Indenture. For purposes of acquiring any investments under the Indenture, the Trustee may
commingle funds (other than the Rebate Fund) held by it upon the Written Request of the City. The
Trustee may act as principal or agent in the acquisition or disposition of any investment and may
impose its customary charges therefor. The Trustee will incur no liability for losses arising from any
investments made pursuant to the Indenture.
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The Trustee will furnish the City periodic cash transaction statements which include detail
for all investment transactions effected by the Trustee or brokers selected by the City. Upon the
City's election, such statements will be delivered via the Trustee's online service and upon electing
such service, paper statements will be provided only upon request. The City waives the right to
receive brokerage confirmations of security transactions effected by the Trustee as they occur, to the
extent permitted by law. The City further understands that trade confirmations for securities
transactions effected by the Trustee will be available upon request and at no additional cost and other
trade confirmations may be obtained from the applicable broker.
The Trustee or any of its affiliates may act as sponsor, advisor or manager in connection with
any investments made by the Trustee under the Indenture.
The City will invest, or cause to be invested, all moneys in any fund or accounts established
with the Trustee as provided in the Tax Certificate.
For investment purposes, the Trustee may commingle the funds and accounts established
under the Indenture, but will account for each separately. In making any valuations of investments
under the Indenture, the Trustee may utilize and rely on computerized securities pricing services that
may be available to the Trustee, including those available through the Trustee accounting system.
Section 5.08. Rebate Fund.
(a) Establishment. The Trustee will establish a fund for the 2016 Bonds
designated the "Rebate Fund" when required in accordance with the Indenture. Absent an opinion of
Bond Counsel that the exclusion from gross income for federal income tax purposes of interest on the
2016 Bonds will not be adversely affected, the City will cause to be deposited in the Rebate Fund
such amounts as are required to be deposited therein pursuant to the Indenture and the Tax
Certificate. All money at any time deposited in the Rebate Fund will be held by the Trustee in trust
for payment to the United States Treasury. All amounts on deposit in the Rebate Fund for the 2016
Bonds will be governed by this Section and the Tax Certificate, unless and to the extent that the City
delivers to the Trustee an opinion of Bond Counsel that the exclusion from gross income for federal
income tax purposes of interest on the 2016 Bonds will not be adversely affected if such
requirements are not satisfied. Notwithstanding anything to the contrary contained in the Indenture
or in the Tax Certificate, the Trustee: (i) will be deemed conclusively to have complied with the
provisions thereof if it follows all Requests of the City; (ii) has no liability or responsibility to
enforce compliance by the City with the terms of the Tax Certificate; (iii) may rely conclusively on
the City's calculations and determinations and certifications relating to rebate matters; and (iv) has
no responsibility to independently make any calculations or determinations or to review the City's
calculations or determinations thereunder.
(i) Annual Computation. Within 55 days of the end of each Bond Year
(as such term is defined in the Tax Certificate), the City will 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 "P /2% Penalty ") has been made), for such purpose
treating the last day of the applicable Bond Year as a computation date, within the meaning of
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Section 1.148 -1(b) of the Treasury Regulations (the "Rebatable Arbitrage "). The City will 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 Bond Year, upon
the Written Request of the City, an amount will be deposited to the Rebate Fund by the Trustee from
any Net Revenues legally available for such purpose (as specified by the City in the aforesaid
Written Request), if and to the extent required so that the balance in the Rebate Fund equals 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 City, the Trustee will withdraw the excess from the Rebate Fund and
credit the excess to the Payment Fund.
(iii) Payment to the Treasury. The Trustee will pay, as directed by
Written Request of the City, 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 the 2016
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
City will 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) will be made to the Internal
Revenue Service Center, Ogden, Utah 84201 on or before the date on which such payment is due,
and will be accompanied by Internal Revenue Service Form 8038 -T (prepared by the City), or will 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 2016 Bonds and the payments described in subsection (a) above
being made may be withdrawn by the City and utilized in any manner by the City.
(c) Survival of Defeasance. Notwithstanding anything in this Section to the
contrary, the obligation to comply with the requirements of this Section will survive the defeasance
or payment in full of the 2016 Bonds.
Section 5.09. Rate Stabilization Fund. There is hereby continued a special fund designated
as the "Rate Stabilization Fund" to be held by the City in trust under the Indenture, which fund the
City agrees and covenants to maintain and to hold separate and apart from other funds so long as any
Contracts or Bonds remain unpaid. Money transferred by the City from the Revenue Fund to the
Rate Stabilization Fund in accordance with Section 5.01(b)(iii) will be held in the Rate Stabilization
Fund and applied in accordance with the Indenture.
The City may withdraw all or any portion of the amounts on deposit in the Rate Stabilization
Fund and transfer such amounts to the Revenue Fund for application in accordance with Section 5.01
or, in the event that all or a portion of the 2016 Bonds are discharged in accordance with Article X,
transfer all or any portion of such amounts for application in accordance with Article X. Any such
amounts transferred from the Rate Stabilization Fund to the Revenue Fund in accordance with the
Indenture constitute pledged Revenues.
Section 5.10. Application of Funds and Accounts When No 2016 Bonds are Outstanding.
On the date on which all 2016 Bonds are retired or provision made therefor pursuant to Article X,
and after payment of all amounts due the Trustee under the Indenture, all moneys then on deposit in
any of the funds or accounts (other than the Rebate Fund) established with the Trustee pursuant to the
Indenture will be withdrawn by the Trustee and paid to the City for use by the City at any time for
any purpose permitted by law.
ARTICLE VI
PARTICULAR COVENANTS
Section 6.01. Punctual Payment. The City will punctually pay, or cause to be paid, the
principal and interest to become due in respect of all of the 2016 Bonds, in strict conformity with the
terms of the 2016 Bonds and of the Indenture, according to the true intent and meaning thereof, but
only out of Net Revenues and other assets pledged for such payment as provided in the Indenture.
Section 6.02. Extension of Payment of 2016 Bonds. The City will not directly or indirectly
extend or assent to the extension of the maturity of any of the 2016 Bonds or the time of payment of
any claims for interest by the purchase of such 2016 Bonds or by any other arrangement, and in case
the maturity of any of the 2016 Bonds or the time of payment of any such claims for interest is
extended, such 2016 Bonds or claims for interest will not be entitled, in case of any default under the
Indenture, to the benefits of the Indenture, except subject to the prior payment in full for the principal
of all of the 2016 Bonds then Outstanding and of all claims for interest thereon which have not been
so extended. Nothing in the Indenture will be deemed to limit the right of the City to issue Bonds for
the purpose of refunding any Outstanding 2016 Bonds, and such issuance will not be deemed to
constitute an extension of maturity of 2016 Bonds.
Section 6.03. Against Encumbrances. The City will not make any pledge of, or place any
lien on, Revenues or the moneys in the Revenue Fund except as provided in the Indenture. The City
may at any time, or from time to time, execute Contracts or issue Bonds as permitted in the
Indenture. The City may also at any time, or from time to time, incur evidences of indebtedness, or
incur other obligations, for any lawful purpose which are payable from and secured by a pledge of
lien on Revenues on any moneys in the Revenue Fund as may from time to time be deposited therein,
provided that such pledge and lien is subordinate in all respects to the pledge of and lien thereon
provided in the Indenture.
Section 6.04. Power to Issue 2016 Bonds and Make Pledge and Assignment. The City is
duly authorized pursuant to law to issue the 2016 Bonds, to enter into the Indenture and to pledge and
assign the Revenues and other assets purported to be pledged and assigned under the Indenture in the
manner and to the extent provided in the Indenture. The 2016 Bonds and the provisions of the
Indenture are and will be the legal, valid and binding special obligations of the City in accordance
with their terms, and the City and the Trustee will at all times, subject to the provisions of Article
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VIII and to the extent permitted by law, defend, preserve and protect said pledge and assignment of
Revenues and other assets and all the rights of the 2016 Bond Owners under the Indenture against all
claims and demands of all persons whomsoever.
Section 6.05. Accounting Records and Financial Statements.
(a) The Trustee will at all times keep, or cause to be kept, proper books of record
and account, prepared in accordance with corporate trust industry standards, in which complete and
accurate entries are made of all transactions made by it relating to the proceeds of 2016 Bonds and all
funds and accounts established by it pursuant to the Indenture. Such books of record and account
will be available for inspection by the City upon reasonable prior notice during business hours and
under reasonable circumstances.
(b) The City will keep appropriate accounting records in which complete and
correct entries are made of all transactions relating to the Water System, which records will be
available for inspection by the Trustee (which has no duty to inspect such records) at reasonable
hours and under reasonable conditions.
(c) The City will prepare and file with the Trustee annually, within two hundred
seventy (270) days of each Fiscal Year (commencing with the Fiscal Year ending June 30, 2016),
financial statements of the City for the preceding Fiscal Year prepared in accordance with Generally
Accepted Accounting Principles, together with an Accountant's Report thereon. The Trustee has no
duty to review such financial statements.
Section 6.06. Tax Covenants. Notwithstanding any other provision of the Indenture, absent
an opinion of Bond Counsel that the exclusion from gross income of the portion of interest on the
2016 Bonds will not be adversely affected for federal income tax purposes, the City covenants to
comply with all applicable requirements of the Code necessary to preserve such exclusion from gross
income with respect to the 2016 Bonds, and specifically covenants, without limiting the generality of
the foregoing, as follows:
(a) Private Activity. The City will take no action or refrain from taking any
action or make any use of the proceeds of the 2016 Bonds or of any other moneys or property which
would cause the 2016 Bonds to be "private activity bonds" within the meaning of Section 141 of the
Code;
(b) Arbitrage. The City will make no use of the proceeds of the 2016 Bonds or of
any other amounts or property, regardless of the source, or take any action or refrain from taking any
action which will cause the 2016 Bonds to be "arbitrage bonds" within the meaning of Section 148 of
the Code;
(c) Federal Guarantee. The City will make no use of the proceeds of the 2016
Bonds or take or omit to take any action that would cause the 2016 Bonds to be "federally
guaranteed" within the meaning of Section 149(b) of the Code;
(d) Information Reporting. The City will take or cause to be taken all necessary
action to comply with the informational reporting requirement of Section 149(e) of the Code
necessary to preserve the exclusion of interest on the 2016 Bonds pursuant to Section 103(a) of the
Code;
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(e) Hedge Bonds. The City will make no use of the proceeds of the 2016 Bonds
or any other amounts or property, regardless of the source, or take any action or refrain from taking
any action that would cause the 2016 Bonds to be considered "hedge bonds" within the meaning of
Section 149(g) of the Code unless the City takes all necessary action to assure compliance with the
requirements of Section 149(8) of the Code to maintain the exclusion from gross income of interest
on the 2016 Bonds for federal income tax purposes; and
(f) Miscellaneous. The City will take no action or refrain from taking any action
inconsistent with its expectations stated in the Tax Certificate executed by the City in connection
with the issuance of the 2016 Bonds and will comply with the covenants and requirements stated
therein and incorporated by reference in the Indenture.
The foregoing covenants are not applicable to, and nothing contained in the Indenture will be
deemed to prevent the City from causing the Trustee to issue revenue bonds or to execute and deliver
contracts payable on a parity with the 2016 Bonds, the interest with respect to which has been
determined by Bond Counsel to be subject to federal income taxation.
Section 6.07. Waiver of Laws. The City will not at any time insist upon or plead in any
manner whatsoever, or claim or take the benefit or advantage of, any stay or extension law now or at
any time later in force that may affect the covenants and agreements contained in the Indenture or in
the 2016 Bonds, and all benefit or advantage of any such law or laws is expressly waived by the City
to the extent permitted by law.
Section 6.08. Further Assurances. The City will make, execute and deliver any and all such
further indentures, instruments and assurances as may be reasonably necessary or proper to carry out
the intention or to facilitate the performance of the Indenture and for the better assuring and
confirming unto the Owners of the 2016 Bonds of the rights and benefits provided in the Indenture.
Section 6.09. Buffets. On or prior to the fifteenth day of each Fiscal Year, the City will
certify to the Trustee that the amounts budgeted for payment of the principal of and interest on the
2016 Bonds are fully adequate for the payment of all such payments for such Fiscal Year. If the
amounts so budgeted are not adequate for the payment of the principal of and interest on the 2016
Bonds due under the Indenture, the City will take such action as may be necessary to cause such
annual budget to be amended, corrected or augmented so as to include therein the amounts required
to be raised by the City in the then ensuing Fiscal Year for the payment of the principal of and
interest on the 2016 Bonds due under the Indenture and will notify the Trustee of the proceedings
then taken or proposed to be taken by the City.
Section 6.10. Observance of Laws and Regulations. To the extent necessary to assure its
performance under the Indenture, the City will well and truly keep, observe and perform all valid and
lawful obligations or regulations now or later imposed on the City by contract, or prescribed by any
law of the United States of America, or of the State, or by any officer, board or commission having
jurisdiction or control, as a condition of the continued enjoyment of any and every right, privilege or
franchise now owned or later acquired by the City, respectively, including its right to exist and carry
on its business, to the end that such contracts, rights and franchises will be maintained and preserved,
and will not become abandoned, forfeited or in any manner impaired.
Section 6.11. Compliance with Contracts. The City will neither take nor omit to take any
action under any contract if the effect of such act or failure to act would in any manner impair or
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adversely affect the ability of the City to pay principal of or interest on the 2016 Bonds; and the City
will comply with, keep, observe and perform all agreements, conditions, covenants and terms,
express or implied, required to be performed by it contained in all other contracts affecting or
involving the Water System, to the extent that the City is a party thereto.
Section 6.12. Prosecution and Defense of Suits. The City will promptly, upon request of
the Trustee or any 2016 Bond Owner, from time to time take such action as may be necessary or
proper to remedy or cure any defect in or cloud upon the title to the Water System or any part
thereof, whether now existing or later developing, prosecute all such suits, actions and other
proceedings as may be appropriate for such purpose and indemnify and save the Trustee (including
all of its employees, officers and directors) and every 2016 Bond Owner harmless from all loss, cost,
damage and expense, including attorneys' fees, which they or any of them may incur by reason of
any such defect, cloud, suit, action or proceeding.
The City will defend against every suit, action or proceeding at any time brought against the
Trustee (including all of its employees, officers and directors) or any 2016 Bond Owner upon any
claim arising out of the receipt, application or disbursement of any of the payments of principal of or
interest on the 2016 Bonds or involving the rights of the Trustee or any 2016 Bond Owner under the
Indenture; provided that the Trustee or any 2016 Bond Owner at such party's election may appear in
and defend any such suit, action or proceeding. The City will indemnify and hold harmless the
Trustee and the 2016 Bond Owners against any and all liability claimed or asserted by any person,
arising out of such receipt, application or disbursement, and will indemnify and hold harmless the
2016 Bond Owners against any attorneys' fees or other expenses which any of them may incur in
connection with any litigation (including pre - litigation activities) to which any of them may become
a party by reason of ownership of 2016 Bonds. The City will promptly reimburse any 2016 Bond
Owner in the full amount of any attorneys' fees or other expenses which such Owner may incur in
litigation or otherwise in order to enforce such party's rights under the Indenture or the 2016 Bonds,
provided that such litigation is concluded favorably to such party's contentions therein.
Section 6.13. Continuing; Disclosure. The City hereby covenants and agrees that it will
comply with and carry out all of its obligations under the Continuing Disclosure Certificate to be
executed and delivered by the City in connection with the issuance of the 2016 Bonds.
Notwithstanding any other provision of the Indenture, failure of the City to comply with the
Continuing Disclosure Certificate will not be considered an Event of Default; however, any Owner or
Beneficial Owner may take such actions as may be necessary and appropriate, including seeking
mandate or specific performance by court order, to cause the City to comply with the foregoing
obligations. For purposes of this Section, `Beneficial Owner" means any person which has or shares
the power, directly or indirectly, to make investment decisions concerning ownership of any 2016
Bonds (including persons holding 2016 Bonds through nominees, depositories or other
intermediaries).
Section 6.14. Additional Contracts and Bonds.
The City may at any time execute any Contract or issue any Bonds, as the case may be,
provided that:
(a) The Net Revenues (which, when calculated for purposes of this subsection,
do not include amounts transferred from the Rate Stabilization Fund to the Revenue Fund pursuant
to Section 5.09 that are in excess of twenty percent (20 %) of Debt Service for such Fiscal Year) for
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the most recent audited Fiscal Year preceding the date of adoption by the City Council of the
resolution authorizing the issuance of such Bonds or the date of the execution of such Contract, as
the case may be, as evidenced by both a calculation prepared by the City and a special report
prepared by an Independent Certified Public Accountant or an Independent Financial Consultant on
such calculation on file with the City, produce a sum equal to at least one hundred twenty percent
(120 %) of the Debt Service for such Fiscal Year; and
(b) The Net Revenues (which, when calculated for purposes of this subsection,
do not include amounts transferred from the Rate Stabilization Fund to the Revenue Fund pursuant
to Section 5.09 that are in excess of twenty percent (20 %) of Debt Service for such Fiscal Year) for
the most recent audited Fiscal Year preceding the date of adoption by the City Council of the
resolution authorizing the issuance of such Bonds or the date of the execution of such Contract, as
the case may be, including adjustments to give effect as of the first day of such Fiscal Year to
increases or decreases in rates and charges for the Water Service approved and in effect as of the
date of calculation, as evidenced by a calculation prepared by the City, produce a sum equal to at
least one hundred twenty percent (120 %) of the Debt Service for such Fiscal Year, plus the Debt
Service which would have accrued on any Contracts executed or Bonds issued since the end of
such Fiscal Year, assuming that such Contracts had been executed or Bonds had been issued at the
beginning of such Fiscal Year, plus the Debt Service which would have accrued had such proposed
additional Contract been executed or proposed additional Bonds been issued at the beginning of
such Fiscal Year.
(c) Notwithstanding the foregoing, Bonds or Contracts may be issued or incurred
to refund outstanding Bonds or Contracts if, after giving effect to the application of the proceeds
thereof, total Debt Service will not be increased in any Fiscal Year in which Bonds or Contracts
(outstanding on the date of issuance or incurrence of such refunding Bonds or Contracts, but
excluding such refunding Bonds or Contracts) not being refunded are outstanding.
(d) Nothing contained in this Section limits the issuance of any obligations
payable from Net Revenues on a subordinate basis to the Contracts and Bonds.
Section 6.15. Aszainst Sale or Other Disposition of Property. The City will not enter into
any agreement or lease which impairs the operation of the Water System or any part thereof
necessary to secure adequate Revenues for the payment of the principal of and interest on the 2016
Bonds, or which would otherwise impair the operation of the Water System. Any real or personal
property which has become nonoperative or which is not needed for the efficient and proper
operation of the Water System, or any material or equipment which has become worn out, may be
sold so long as such sale will not impair the ability of the City to pay the principal of and interest on
the 2016 Bonds and if the proceeds of such sale are deposited in the Revenue Fund.
Nothing in the Indenture restricts the ability of the City to sell any portion of the Water
System so long as such portion is immediately repurchased by the City, and so long as such
arrangement cannot by its terms result in the purchaser of such portion of the Water System
exercising any remedy which would deprive the City of, or otherwise interfere with, its right to own
and operate such portion of the Water System.
Section 6.16. Against Competitive Facilities. To the extent that it can so legally obligate
itself, the City covenants that it will not acquire, construct, maintain or operate and will not, to the
extent permitted by law and within the scope of its powers, permit any other public or private agency,
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corporation, district or political subdivision or any person whomsoever to acquire, construct,
maintain or operate within the Water Service area any water system competitive with the Water
System.
Section 6.17. Maintenance and Operation of the Water S,, sue. The City will maintain and
preserve the Water System in good repair and working order at all times, operate the Water System
in an efficient and economical manner and pay all Operation and Maintenance Costs as they become
due and payable.
Section 6.18. Payment of Claims. The City will pay and discharge any and all lawful
claims for labor, materials or supplies which, if unpaid, might become a lien on the Revenues or the
funds or accounts created under the Indenture or on any funds in the hands of the City pledged to pay
the principal of or interest on the 2016 Bonds or to the Owners prior or superior to the lien under the
Indenture.
Section 6.19. Insurance.
(a) The City will procure and maintain, or cause to be procured and maintained,
insurance on the Water System with responsible insurers in such amounts and against such risks
(including damage to or destruction of the Water System) as are typically covered in connection with
facilities similar to the Water System so long as such insurance is available from reputable insurance
companies.
In the event of any damage to or destruction of the Water System caused by the perils
covered by such insurance, the Net Proceeds thereof will be applied to the reconstruction, repair or
replacement of the damaged or destroyed portion of the Water System. The City will begin such
reconstruction, repair or replacement promptly after such damage or destruction occurs, and will
continue and properly complete such reconstruction, repair or replacement as expeditiously as
possible, and will pay out of such Net Proceeds all costs and expenses in connection with such
reconstruction, repair or replacement so that the same are completed and the Water System is free
and clear of all claims and liens.
If such Net Proceeds exceed the costs of such reconstruction, repair or replacement portion of
the Water System, and/or the cost of the construction of additions, betterments, extensions or
improvements to the Water System, then the excess Net Proceeds will be applied in part to the
redemption of 2016 Bonds as provided in Section 4.01(c) and in part to such other fund or account as
may be appropriate and used for the retirement of Bonds and Contracts in the same proportion which
the aggregate unpaid principal balance of 2016 Bonds then bears to the aggregate unpaid principal
amount of such Bonds and Contracts. If such Net Proceeds are sufficient to enable the City to retire
the entire obligation evidenced by the 2016 Bonds prior to the final due date of the 2016 Bonds, as
well as the entire obligations evidenced by Bonds and Contracts then remaining unpaid prior to their
final respective due dates, the City may elect not to reconstruct, repair or replace the damaged or
destroyed portion of the Water System, and/or not to construct other additions, betterments,
extensions or improvements to the Water System; and thereupon such Net Proceeds will be applied
to the redemption of 2016 Bonds as provided in Section 4.01(c) and to the retirement of such Bonds
and Contracts.
(b) The City will procure and maintain such other insurance as it deems advisable
or necessary to protect its interests and the interests of the 2016 Bond Owners, which insurance
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affords protection in such amounts and against such risks as are usually covered in connection with
municipal water systems similar to the Water System.
(c) Any insurance required to be maintained by paragraph (a) above and, if the
City determines to procure and maintain insurance pursuant to paragraph (b) above, such insurance,
may be maintained under a self - insurance program so long as such self - insurance is maintained in the
amounts and manner usually maintained in connection with water systems similar to the Water
System and is, in the opinion of an accredited actuary, actuarially sound.
Section 6.20. Payment of Taxes and Compliance with Governmental Regulations. The City
will pay and discharge all taxes, assessments and other governmental charges which may be lawfully
imposed upon the Water System or any part thereof or upon the Revenues when the same become
due. The City will duly observe all valid regulations and requirements of any governmental authority
relative to the operation of the Water System, or any part thereof, but the City is not required to
comply with any regulations or requirements so long as the validity or application thereof is
contested in good faith.
Section 6.21. Amount of Rates and Charges.
(a) In any Fiscal Year in which the amount on deposit in the Rate Stabilization
Fund on the first day of such Fiscal Year is less than the Debt Service on the 2016 Bonds payable
in such Fiscal Year, to the fullest extent permitted by law, the City will fix and prescribe, at the
commencement of each such Fiscal Year, rates and charges for the Water Service provided by the
Water System that are reasonably expected, at the commencement of such Fiscal Year, to be at
least sufficient to yield during such Fiscal Year Net Revenues (which, when calculated for
purposes of this subsection, do not include amounts transferred from the Rate Stabilization Fund
pursuant to Section 5.09 that are in excess of twenty percent (20 %) of Debt Service for such Fiscal
Year) equal to one hundred twenty percent (120 %) of Debt Service for such Fiscal Year.
(b) In any Fiscal Year in which the amount on deposit in the Rate Stabilization
Fund on the first day of such Fiscal Year is at least equal to the Debt Service on the 2016 Bonds
payable in such Fiscal Year, to the fullest extent permitted by law, the City will fix and prescribe,
at the commencement of each such Fiscal Year, rates and charges for the Water Service provided
by the Water System that are reasonably expected, at the commencement of such Fiscal Year, to be
at least sufficient to yield during such Fiscal Year Revenues (which, when calculated for purposes
of this subsection, do not include amounts transferred from the Rate Stabilization Fund pursuant to
Section 5.09) equal to one hundred twenty percent (120 %) of Operation and Maintenance Costs for
such Fiscal Year.
(c) The City may make, or permit to be made, adjustments from time to time in
such rates, fees and charges and may make, or permit to be made, such classification thereof as it
deems necessary, but may not reduce or permit to be reduced such rates, fees and charges below
those then in effect, unless the Revenues from such reduced rates, fees and charges will at all times
be sufficient to meet the foregoing requirements.
Section 6.22. Collection of Rates and Charges. The City will have in effect at all times
by -laws, rules and regulations requiring each customer to pay the rates and charges applicable to the
Water Service and providing for the billing thereof and for a due date and a delinquency date for
each bill.
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Section 6.23. Eminent Domain Proceeds. If all or any part of the Water System is taken by
eminent domain proceedings, the Net Proceeds thereof will be applied as follows:
(a) I£ (1) the City files with the Trustee a certificate showing: (i) the estimated
loss of annual Net Revenues, if any, suffered or to be suffered by the City by reason of such eminent
domain proceedings; (ii) a general description of the additions, betterments, extensions or
improvements to the Water System proposed to be acquired and constructed by the City from such
Net Proceeds; and (iii) an estimate of the additional annual Net Revenues to be derived from such
additions, betterments, extensions or improvements; and (2) the City, on the basis of such certificate
filed with the Trustee, determines that the estimated additional annual Net Revenues will sufficiently
offset the estimated loss of annual Net Revenues resulting from such eminent domain proceedings so
that the ability of the City to meet its obligations under the Indenture will not be substantially
impaired (which determination will be final and conclusive), then the City will promptly proceed
with the acquisition and construction of such additions, betterments, extensions or improvements
substantially in accordance with such certificate, and such Net Proceeds will be applied for the
payment of the costs of such acquisition and construction, and any balance of such Net Proceeds not
required by the City for such purpose will be deposited in the Revenue Fund.
(b) If the foregoing conditions are not met, then such Net Proceeds will be
applied by the City in part to the redemption of 2016 Bonds as provided in Section 4.01(c) and in
part to such other fund or account as may be appropriate and used for the retirement of Bonds and
Contracts in the same proportion which the aggregate unpaid principal balance of 2016 Bonds then
bears to the aggregate unpaid principal amount of such Bonds and Contracts.
Section 6.24. Enforcement of Contracts. The City will not voluntarily consent to or permit
any rescission of, nor will it consent to any amendment to or otherwise take any action under or in
connection with, any contracts previously or later entered into if such rescission or amendment would
in any manner impair or adversely affect the ability of the City to pay principal of and interest on the
2016 Bonds.
ARTICLE VII
EVENTS OF DEFAULT AND REMEDIES OF 2016 BOND OWNERS
Section 7.01. Events of Default. The following events are Events of Default under the
Indenture:
(a) Default by the City in the due and punctual payment of the principal of any
2016 Bonds, the principal of any Bonds or the principal with respect to any Contract, when and as
the same become due and payable, whether at maturity as therein expressed, by proceedings for
redemption, by acceleration or otherwise.
(b) Default by the City in the due and punctual payment of any installment of
interest on any 2016 Bonds, any installment of interest on any Bond or any installment of interest
with respect to any Contract, when and as the same become due and payable.
(c) Default by the City in the observance of any of the other covenants,
agreements or conditions on its part in the Indenture or in the 2016 Bonds, or required by any Bond
or indenture relating thereto or by any Contract, if such default continues for a period of sixty (60)
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days after written notice thereof, specifying such default and requiring the same to be remedied, has
been given to the City by the Trustee or by the Owners of not less than a majority in aggregate
principal amount of 2016 Bonds Outstanding, a majority in principal amount of such Bonds
outstanding, or a majority in principal amount outstanding with respect to such Contract, as
applicable; provided, however, that if in the reasonable opinion of the City the default stated in the
notice can be corrected, but not within such sixty (60) day period, and corrective action is instituted
by the City within such sixty (60) day period and diligently pursued in good faith until the default is
corrected, such default will not be an Event of Default.
(d) The City files a petition or answer seeking arrangement or reorganization
under the federal bankruptcy laws or any other applicable law of the United States of America or any
state therein, or if a court of competent jurisdiction approves a petition filed with or without the
consent of the City seeking arrangement or reorganization under the federal bankruptcy laws or any
other applicable law of the United States of America or any state therein, or if under the provisions of
any other law for the relief or aid of debtors any court of competent jurisdiction assumes custody or
control of the City or of the whole or any substantial part of its property.
(e) Payment of the principal of any Bond or with respect to any Contract is
accelerated in accordance with its terms.
Section 7.02. Remedies Upon Event of Default. If any Event of Default specified in
Section 7.01(d) or (e) occurs and is continuing, the Trustee will, and for any other Event of Default,
the Trustee may, and, provided that the Policy is in full force and effect and the Bond Insurer is not
in default thereunder, at the direction of the Bond Insurer, and upon being indemnified to its
reasonable satisfaction therefor, will, in each case, upon notice in writing to the City and the Bond
Insurer, declare the principal of all of the 2016 Bonds then Outstanding, and the interest accrued
thereon, to be due and payable immediately, and upon any such declaration the same will become
and be immediately due and payable, anything in the Indenture or in the 2016 Bonds contained to the
contrary notwithstanding.
Nothing contained in the Indenture permits or requires the Trustee to accelerate payments
due under the Indenture if the City is not in default of its obligation thereunder.
Any such declaration is subject to the condition that if, at any time after such declaration and
before any judgment or decree for the payment of the moneys due has been obtained or entered, the
City or the Bond Insurer deposits with the Trustee a sum sufficient to pay all of the principal of and
installments of interest on the 2016 Bonds payment of which is overdue, with interest on such
overdue principal at the rate borne by the respective 2016 Bonds to the extent permitted by law, and
the reasonable charges and expenses of the Trustee and the Bond Insurer, or deposits with the
applicable trustee with respect to any Contract a sum sufficient to pay all of the principal and
installments of interest with respect to such Contract payment of which is overdue, with interest on
such overdue principal at the rate borne by such Contract to the extent permitted by law, and the
reasonable charges and expenses of the applicable trustee with respect to such Contract, or deposits
with the applicable trustee with respect to any Bond a sum sufficient to pay all of the principal of and
installments of interest on such Bond payment of which is overdue, with interest on such overdue
principal at the rate borne by such Bonds to the extent permitted by law, and the reasonable charges
and expenses of the applicable trustee with respect to such Bonds, and any and all other Events of
Default known to the Trustee or the applicable trustee with respect to such Contract or Bonds (other
than in the payment of principal of and interest on the 2016 Bonds, payment of principal and interest
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with respect to such Contract or payment of principal and interest on such Bond, as applicable, due
and payable solely by reason of such declaration) has been made good or cured to the satisfaction of
the Trustee and the Bond Insurer, provided that the Policy is in full force and effect and the Bond
Insurer is not in default thereunder, or provision deemed by the Trustee to be adequate has been
made therefor, then, and in every such case the Trustee will, on behalf of the Bond Insurer and the
Owners of all of the 2016 Bonds, rescind and annul such declaration and its consequences and waive
such Event of Default; but no such rescission and annulment will extend to or affect any subsequent
Event of Default, or impair or exhaust any right or power consequent thereon.
Section 7.03. Application of Revenues and Other Funds After Default. If an Event of
Default occurs and is continuing, all Revenues held or thereafter received by the Trustee and all
amounts in any other funds then held or thereafter received by the Trustee under any of the
provisions of the Indenture (other than amounts held in the Rebate Fund and the Rate Stabilization
Fund) will be applied in the following order:
(a) To the payment of any expenses necessary in the opinion of the
Trustee to protect the interests of the Bond Insurer, provided that the Policy is in full force and effect
and the Bond Insurer is not in default thereunder, the Owners of the 2016 Bonds, Contract or Bonds
and payment of reasonable fees and expenses of the Trustee (including reasonable fees and
disbursements of its counsel) incurred in and about the performance of its powers and duties under
the Indenture;
(b) To the payment of Operation and Maintenance Costs; and
(c) To the payment of the principal of and interest then due on the 2016
Bonds (upon presentation of the 2016 Bonds to be paid, and stamping or otherwise noting thereon of
the payment if only partially paid, or surrender thereof if fully paid), in accordance with the
provisions of the Indenture, the payment of the principal and interest then due with respect to such
Contract in accordance with the provisions thereof and the payment of the principal of and interest
then due on such Bonds in accordance with the provisions thereof and of any indenture related
thereto, in the following order of priority:
First: To the payment to the persons entitled thereto of all installments
of interest then due on the 2016 Bonds, with respect to such Contract or on such Bonds, as
applicable, in the order of the maturity of such installments, and, if the amount available is not
sufficient to pay in full any installment or installments maturing on the same date, then to the
payment thereof ratably, according to the amounts due thereon, to the persons entitled thereto,
without any discrimination or preference; and
Second: To the payment to the persons entitled thereto of the unpaid
principal of any 2016 Bonds, principal with respect to such Contract or principal of any Bonds, as
applicable, which have become due, whether at maturity or by acceleration or redemption, with
interest on the overdue principal at the rate of eight percent (8 %) per annum, and, if the amount
available is not sufficient to pay in full all the 2016 Bonds, all amounts due under such Contract or
all of the Bonds, as applicable, together with such interest, then to the payment thereof ratably,
according to the amounts of principal due on such date to the persons entitled thereto, without any
discrimination or preference; and
Third: If there is any remainder after the foregoing payments, such
remainder will be paid to the City.
Section 7.04. Trustee to Represent 2016 Bond Owners. The Trustee is hereby irrevocably
appointed (and the successive respective Owners of the 2016 Bonds, by taking and holding the same,
will be conclusively deemed to have so appointed the Trustee) as trustee and true and lawful attorney
in fact of the Owners of the 2016 Bonds for the purpose of exercising and prosecuting on their behalf
such rights and remedies as may be available to such Owners under the provisions of the 2016 Bonds
or the Indenture and applicable provisions of law. Upon the occurrence and continuance of an Event
of Default or other occasion giving rise to a right in the Trustee to represent the 2016 Bond Owners,
the Trustee in its discretion may, and upon the written request of the Bond Insurer, provided that the
Policy is in full force and effect and the Bond Insurer is not in default thereunder, or the Owners of a
majority in aggregate principal amount of the 2016 Bonds then Outstanding, and upon being
indemnified to its satisfaction therefor, will proceed to protect or enforce its rights or the rights of the
Bond Insurer and such Owners by such appropriate action, suit, mandamus or other proceedings as it
deems most effectual to protect and enforce any such right, at law or in equity, either for the specific
performance of any covenant or agreement contained in the Indenture, or in aid of the execution of
any power granted in the Indenture, or for the enforcement of any other appropriate legal or equitable
right or remedy vested in the Trustee or in the Bond Insurer and such Owners under the 2016 Bonds
or the Indenture or any law; and upon instituting such proceeding, the Trustee will be entitled, as a
matter of right, to the appointment of a receiver of the Revenues and other assets pledged under the
Indenture, pending such proceedings. All rights of action under the Indenture or the 2016 Bonds or
otherwise may be prosecuted and enforced by the Trustee without the possession of any of the 2016
Bonds or the production thereof in any proceeding relating thereto, and any such suit, action or
proceeding instituted by the Trustee will be brought in the name of the Trustee for the benefit and
protection of the Bond Insurer and all of the Owners of such 2016 Bonds, subject to the provisions of
the Indenture.
Section 7.05. 2016 Bond Owners' Direction of Proceedings. The Owners of a majority in
aggregate principal amount of the 2016 Bonds then Outstanding have the right, by an instrument or
concurrent instruments in writing executed and delivered to the Trustee, and upon indemnification of
the Trustee to its reasonable satisfaction to direct the method of conduct in all remedial proceedings
taken by the Trustee under the Indenture, provided that such direction must be in accordance with
law and the provisions of the Indenture, and that the Trustee has the right to decline to follow any
such direction which in the opinion of the Trustee would be unjustly prejudicial to 2016 Bond
Owners not parties to such direction.
Section 7.06. Suit by Owners. No Owner of any 2016 Bonds has the right to institute any
suit, action or proceeding at law or in equity, for the protection or enforcement of any right or
remedy under the Indenture with respect to such 2016 Bonds, unless: (a) such Owners have given to
the Trustee written notice of the occurrence of an Event of Default; (b) the Owners of not less than
fifty percent (50 %) in aggregate principal amount of the 2016 Bonds then Outstanding have made
written request upon the Trustee to exercise the powers granted in the Indenture or to institute such
suit, action or proceeding in its own name; (c) such Owner or Owners have tendered to the Trustee
reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with
such request; (d) the Trustee has failed to comply with such request for a period of sixty (60) days
after such written request has been received by, and said tender of indemnity has been made to, the
Trustee; and (e) no direction inconsistent with such written request has been given to the Trustee
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during such sixty (60) day period by the Owners of a majority in aggregate principal amount of the
2016 Bonds then Outstanding.
Such notification, request, tender of indemnity and refusal or omission are, in every case,
conditions precedent to the exercise by any Owner of 2016 Bonds of any remedy under the Indenture
or under law; it being understood and intended that no one or more Owners of 2016 Bonds have any
right in any manner whatever by their actions to affect, disturb or prejudice the security of the
Indenture or the rights of any other Owners of 2016 Bonds, or to enforce any right under the 2016
Bonds, the Indenture, or applicable law with respect to the 2016 Bonds, except in the manner
provided in the Indenture, and that all proceedings at law or in equity to enforce any such right will
be instituted, had and maintained in the manner provided in the Indenture and for the benefit and
protection of all Owners of the Outstanding 2016 Bonds, subject to the provisions of the Indenture.
Section 7.07. Absolute Obligation of the City. Nothing in the Indenture or in the 2016
Bonds affects or impairs the obligation of the City, which is absolute and unconditional, to pay the
principal of and interest on the 2016 Bonds to the respective Owners of the 2016 Bonds at their
respective dates of maturity, or upon call for redemption, as provided in the Indenture, but only out
of the Revenues and other assets pledged therefor in the Indenture, or affects or impairs the right of
such Owners, which is also absolute and unconditional, to enforce such payment by virtue of the
contract embodied in the 2016 Bonds.
Section 7.08. Remedies Not Exclusive. No remedy conferred upon or reserved to the
Trustee or to the Owners of the 2016 Bonds in the Indenture is intended to be exclusive of any other
remedy or remedies, and each and every such remedy, to the extent permitted by law, will be
cumulative and in addition to any other remedy given under the Indenture or now or later existing at
law or in equity or otherwise.
Section 7.09. No Waiver of Default. No delay or omission of the Trustee or of any Owner
of the 2016 Bonds to exercise any right or power arising upon the occurrence of any Event of Default
will impair any such right or power or be construed to be a waiver of any such Event of Default or an
acquiescence therein. No default or Event of Default may be waived without Bond Insurer's express
written consent.
Section 7.10. [BOND INSURER PROVISIONS TO COME].
ARTICLE VIII
THE TRUSTEE
Section 8.01. Duties, Immunities and Liabilities of Trustee.
(a) The Trustee will, prior to an Event of Default, and after the curing or waiving
of all Events of Default which may have occurred, perform such duties and only such duties as are
expressly and specifically set forth in the Indenture, and no implied covenants or duties will be read
into the Indenture against the Trustee. The Trustee will, during the existence of any Event of Default
(which has not been cured or waived), exercise such of the rights and powers vested in it by the
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 such person's own affairs.
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(b) The City may, with the written consent of the Bond Insurer, provided that the
Policy is in full force and effect and the Bond Insurer is not in default thereunder, remove the
Trustee at any time, unless an Event of Default has occurred and is then continuing, and, with the
written consent of the Bond Insurer, provided that the Policy is in full force and effect and the
Bond Insurer is not in default thereunder, will remove the Trustee if at any time requested to do so
by an instrument or concurrent instruments in writing signed by the Owners of not less than a
majority in aggregate principal amount of the 2016 Bonds then Outstanding (or their attorneys duly
authorized in writing) or if at any time the Trustee ceases to be eligible in accordance with
subsection (e) of this Section or becomes incapable of acting, or is adjudged a bankrupt or
insolvent, or a receiver of the Trustee or its property is appointed, or any public officer takes
control or charge of the Trustee or of its property or affairs for the purpose of rehabilitation,
conservation or liquidation, in each case by giving written notice of such removal to the Trustee.
The City will thereafter promptly appoint a successor Trustee by an instrument in writing.
(c) The Trustee may at any time resign by giving written notice of such
resignation to the City and the Bond Insurer and by giving the 2016 Bond Owners notice of such
resignation by mail at the addresses shown on the Registration Books. Upon receiving such notice
of resignation, the City will promptly appoint a successor Trustee acceptable to the Bond Insurer,
provided that the Policy is in full force and effect and the Bond Insurer is not in default thereunder,
by an instrument in writing.
(d) Any removal or resignation of the Trustee and appointment of a successor
Trustee will become effective upon acceptance of appointment by the successor Trustee. If no
successor Trustee has been appointed and accepted appointment within forty -five (45) days of giving
notice of removal or notice of resignation as aforesaid, the resigning Trustee or any 2016 Bond
Owner (on behalf of such Owner and all other 2016 Bond Owners) may petition any court of
competent jurisdiction for the appointment of a successor Trustee, and such court may thereupon,
after such notice (if any) as it may deem proper, appoint such successor Trustee. Any successor
Trustee appointed under the Indenture will signify its acceptance of such appointment by executing
and delivering to the City and to its predecessor Trustee a written acceptance thereof, and thereupon
such successor Trustee, without any further act, deed or conveyance, will become vested with all of
the moneys, estates, properties, rights, powers, trusts, duties and obligations of such predecessor
Trustee, with like effect as if originally named Trustee in the Indenture; but, nevertheless at the
Written Request of the City or the request of the successor Trustee, such predecessor Trustee will
execute and deliver any and all instruments of conveyance or further assurance and do such other
things as may reasonably be required for more fully and certainly vesting in and confirming to such
successor Trustee all of the right, title and interest of such predecessor Trustee in and to any property
held by it under the Indenture and will pay over, transfer, assign and deliver to the successor Trustee
any money or other property subject to the trusts and conditions set forth in the Indenture. Upon
request of the successor Trustee, the City will execute and deliver any and all instruments as may be
reasonably required for more fully and certainly vesting in and confirming to such successor Trustee
all such moneys, estates, properties, rights, powers, trusts, duties and obligations. Upon acceptance
of appointment by a successor Trustee as provided in this subsection, the City will mail or cause the
successor trustee to mail a notice of the succession of such Trustee to the trusts under the Indenture
to each rating agency which is then rating the 2016 Bonds and to the 2016 Bond Owners at the
addresses shown on the Registration Books. If the City fails to mail such notice within fifteen (15)
days after acceptance of appointment by the successor Trustee, the successor Trustee will cause such
notice to be mailed at the expense of the City.
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(e) Any Trustee appointed under the provisions of this Section in succession to
the Trustee must be a trust company, banking association or bank having the powers of a trust
company, having a combined capital and surplus of at least Seventy Five Million Dollars
($75,000,000), and subject to supervision or examination for federal or state authority, or an entity
otherwise approved by the Bond Insurer in writing, provided that the Policy is in full force and
effect and the Bond Insurer is not in default thereunder. If such bank, banking association or trust
company 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 purpose of this subsection
the combined capital and surplus of such trust company, banking association or bank will be
deemed to be its combined capital and surplus as set forth in its most recent report of condition so
published. In case at any time the Trustee ceases to be eligible in accordance with the provisions of
this subsection (e), the Trustee resign immediately in the manner and with the effect specified in
this Section.
Section 8.02. Merger or Consolidation. Any trust company, banking association or bank
into which the Trustee may be merged or converted or with which it may be consolidated, or any
trust company, banking association or bank resulting from any merger, conversion or consolidation
to which it is a party, or any trust company, banking association or bank to which the Trustee may
sell or transfer all or substantially all of its corporate trust business, provided that such trust
company, banking association or bank is eligible under subsection (e) of Section 8.01, will be the
successor to such Trustee, without the execution or filing of any paper or any further act, anything in
the Indenture to the contrary notwithstanding.
Section 8.03. Liability of Trustee.
(a) The recitals of facts in the Indenture and in the 2016 Bonds will be taken as
statements of the City, and the Trustee does not assume responsibility for the correctness of the same,
or make any representations as to the validity or sufficiency of the Indenture or the 2016 Bonds, nor
will the Trustee incur any responsibility in respect thereof, other than as expressly stated in the
Indenture in connection with the respective duties or obligations therein or in the 2016 Bonds
assigned to or imposed upon it. The Trustee is, however, responsible for its representations
contained in its certificate of authentication on the 2016 Bonds. The Trustee will not be liable in
connection with the performance of its duties under the Indenture, except for its own negligence or
willful misconduct. The Trustee may become the Owner of 2016 Bonds with the same rights it
would have if it were not Trustee, and, to the extent permitted by law, may act as depository for and
permit any of its officers or directors to act as a member of, or in any other capacity with respect to,
any committee formed to protect the rights of 2016 Bond Owners, whether or not such committee
represents the Owners of a majority in principal amount of the 2016 Bonds then Outstanding.
(b) The Trustee is not liable for any error of judgment made in good faith by a
responsible officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent
facts.
(c) The Trustee is not liable with respect to any action taken or omitted to be
taken by it in good faith in accordance with the direction of the Owners of not less than a majority (or
such other percentage provided for in the Indenture) in aggregate principal amount of the 2016 Bonds
at the time Outstanding relating to the time, method and place of conducting any proceeding for any
remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee under
the Indenture.
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(d) The Trustee is not liable for any action taken by it in good faith and believed
by it to be authorized or within the discretion or rights or powers conferred upon it by the Indenture.
(e) The Trustee will not be deemed to have knowledge of any default or Event of
Default under the Indenture or any other event which, with the passage of time, the giving of notice,
or both, would constitute an Event of Default under the Indenture unless and until a Responsible
Officer of the Trustee has actual knowledge of such event or the Trustee has been notified in writing,
in accordance with Section 11.07, of such event by the City or the Owners of not less than fifty
percent (50 %) of the 2016 Bonds then Outstanding. Except as otherwise expressly provided in the
Indenture, the Trustee is not bound to ascertain or inquire as to the performance or observance by the
City of any of the terms, conditions, covenants or agreements of the Indenture, any of the documents
executed in connection with the 2016 Bonds or the existence of an Event of Default thereunder or an
event which would, with the giving of notice, the passage of time, or both, constitute an Event of
Default thereunder. The Trustee is not responsible for the validity, effectiveness or priority of any
collateral given to or held by it.
(f) No provision of the Indenture requires the Trustee to expend or risk its own
funds or otherwise incur any financial liability in the performance of its duties thereunder, or in the
exercise of any of its rights or powers.
(g) The Trustee is under no obligation to exercise any of the rights or powers
vested in it by the Indenture at the request, order or direction of any of the Owners pursuant to the
Indenture, unless such Owners have offered to the Trustee reasonable security or indemnity against
the costs, expenses and liabilities which might be incurred by it in compliance with such request or
direction. No permissive power, right or remedy conferred upon the Trustee under the Indenture will
be construed to impose a duty to exercise such power, right or remedy.
(h) Whether or not expressly so provided, every provision of the Indenture
relating to the conduct or affecting the liability of or affording protection to the Trustee is subject to
the provisions of this Article VIII.
(i) The Trustee has no responsibility or liability with respect to any information,
statement, or recital in any official statement, offering memorandum or any other disclosure material
prepared or distributed with respect to the 2016 Bonds.
0) The immunities extended to the Trustee also extend to its directors, officers,
employees and agents.
(k) The Trustee may execute any of the trusts or powers of the Indenture and
perform any of its duties through attorneys, agents and receivers and is not answerable for the
conduct of the same if appointed by it with reasonable care.
(1) The Trustee will not be considered in breach of or in default in its obligations
under the Indenture or progress in respect thereto in the event of enforced delay ( "unavoidable
delay ") in the performance of such obligations due to unforeseeable causes beyond its control and
without its fault or negligence, including, but not limited to, Acts of God or of the public enemy or
terrorists, acts of a government, acts of the other party, fires, floods, epidemics, quarantine
restrictions, strikes, freight embargoes, earthquakes, explosion, mob violence, riot, inability to
procure or general sabotage or rationing of labor, equipment, facilities, sources of energy, material or
:,
supplies in the open market, litigation or arbitration involving a party or others relating to zoning or
other governmental action or inaction pertaining to the Water System, malicious mischief,
condemnation, and unusually severe weather or delays of suppliers or subcontractors due to such
causes or any similar event and/or occurrences beyond the control of the Trustee.
(m) The Trustee agrees to accept and act upon instructions or directions pursuant
to the Indenture sent by unsecured electronic mail, facsimile transmission or other similar unsecured
electronic methods, provided, however, that, the Trustee must have received an incumbency
certificate listing persons designated to give such instructions or directions and containing specimen
signatures of such designated persons, which such incumbency certificate will be amended and
replaced whenever a person is to be added or deleted from the listing. If the City elects to give the
Trustee e -mail or facsimile instructions (or instructions by a similar electronic method) and the
Trustee in its discretion elects to act upon such instructions, the Trustee's understanding of such
instructions will be deemed controlling. The Trustee is not liable for any losses, costs or expenses
arising directly or indirectly from the Trustee's reliance upon and compliance with such instructions
notwithstanding the fact that such instructions conflict or are inconsistent with a subsequent written
instruction. The City agrees to assume all risks arising out of the use of such electronic methods to
submit instructions and directions 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.
(n) The Trustee is not concerned with or accountable to anyone for the
subsequent use or application of any moneys which are released or withdrawn in accordance with the
provisions of the Indenture.
(o) The Trustee is under no obligation to exercise any of the rights or powers
vested in it by the Indenture at the request, order or direction of any of the Owners pursuant to the
provisions of the Indenture unless such Owners have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which may be incurred therein or thereby.
(p) The permissive right of the Trustee to do things enumerated in the Indenture
will not be construed as a duty, and the Trustee is not answerable for other than its negligence or
willful misconduct.
Section 8.04. Right to Rely on Documents. The Trustee will be protected in acting upon
any notice, resolution, requisition, request, consent, order, certificate, report, opinion, notes,
direction, facsimile transmission, electronic mail or other paper or document believed by it to be
genuine and to have been signed or presented by the proper party or parties. The Trustee may
consult with counsel, who may be counsel of or to the City, with regard to legal questions, and the
opinion of such counsel will be full and complete authorization and protection in respect of any
action taken or suffered by it under the Indenture in good faith and in accordance therewith.
The Trustee may treat the Owners of the 2016 Bonds appearing in the Trustee's Registration
Books as the absolute owners of the 2016 Bonds for all purposes and the Trustee will not be affected
by any notice to the contrary.
Whenever in the administration of the trusts imposed upon it by the Indenture the Trustee
deems it necessary or desirable that a matter be proved or established prior to taking or suffering any
action under the Indenture, such matter (unless other evidence in respect thereof is specifically
prescribed in the Indenture) may be deemed to be conclusively proved and established by a
►11
Certificate, Request or Requisition of the City, and such Certificate, Request or Requisition will be
full warrant to the Trustee for any action taken or suffered in good faith under the provisions of the
Indenture in reliance upon such Certificate, Request or Requisition, but in its discretion the Trustee
may, in lieu thereof, accept other evidence of such matter or may require such additional evidence as
it may deem reasonable.
Section 8.05. Preservation and Inspection of Documents. All documents received by the
Trustee under the provisions of the Indenture will be retained in the Trustee's possession and will be
subject at all reasonable times to the inspection of the City and any 2016 Bond Owner, and their
agents and representatives duly authorized in writing, at reasonable hours and under reasonable
conditions.
Section 8.06. Compensation and Indemnification. The City will pay to the Trustee from
time to time all reasonable compensation for all services rendered under the Indenture and all
reasonable expenses, charges, legal and consulting fees and other disbursements and those of the
Trustee's attorneys, agents and employees, incurred in and about the performance of their powers
and duties under the Indenture.
The City will indemnify, defend and hold harmless the Trustee, its officers, employees,
directors and agents from and against any loss, costs, claims, liability or expense (including fees and
expenses of its attorneys and advisors) incurred without negligence or bad faith on its part, arising
out of or in connection with the execution of the Indenture, acceptance or administration of the trust
therein, including costs and expenses of defending itself against any claim or liability in connection
with the exercise or performance of any of its powers thereunder. The rights of the Trustee and the
obligations of the City under this Section 8.06 will survive removal or resignation of the Trustee or
the discharge of the 2016 Bonds and the Indenture.
ARTICLE IX
MODIFICATION OR AMENDMENT OF THE INDENTURE
Section 9.01. Amendments Permitted.
(a) The Indenture and the rights and obligations of the City, the Owners of the
2016 Bonds and the Trustee may be modified or amended from time to time and at any time by an
indenture or indentures supplemental thereto, which the City and the Trustee may enter into when the
written consent of the Bond Insurer, provided that the Policy is in full force and effect and the Bond
Insurer is not in default thereunder, and the Owners of a majority in aggregate principal amount of all
2016 Bonds then Outstanding, exclusive of 2016 Bonds disqualified as provided in Section 11.09,
have been filed with the Trustee. No such modification or amendment may: (1) extend the fixed
maturity of any 2016 Bonds, or reduce the amount of principal thereof or premium (if any) thereon,
or extend the time of payment, or change the rate of interest or the method of computing the rate of
interest thereon, or extend the time of payment of interest thereon, without the consent of the Bond
Insurer, provided that the Policy is in full force and effect and the Bond Insurer is not in default
thereunder, Owner of each 2016 Bond so affected; or (2) reduce the aforesaid percentage of 2016
Bonds the consent of the Owners of which is required to affect any such modification or amendment,
or permit the creation of any lien on the Revenues and other assets pledged under the Indenture prior
to or on a parity with the lien created by the Indenture except as permitted in the Indenture, or
deprive the Owners of the 2016 Bonds of the lien created by the Indenture on such Revenues and
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other assets except as permitted in the Indenture, without the consent of the Owners of all of the 2016
Bonds then Outstanding. It is not necessary for the consent of the Bond Insurer, if required, or the
2016 Bond Owners to approve the particular form of any Supplemental Indenture, but it is sufficient
if such consent approves the substance thereof. Promptly after the execution by the City and the
Trustee of any Supplemental Indenture pursuant to this subsection (a), the Trustee will mail a notice,
setting forth in general terms the substance of such Supplemental Indenture, to each Rating Agency,
the Bond Insurer and the Owners of the 2016 Bonds at the respective addresses shown on the
Registration Books. Any failure to give such notice, or any defect therein, will not, however, in any
way impair or affect the validity of any such Supplemental Indenture.
(b) The Indenture and the rights and obligations of the City, the Trustee and the
Owners of the 2016 Bonds may also be modified or amended from time to time and at any time by a
Supplemental Indenture, which the City and the Trustee may enter into without the consent of any
2016 Bond Owners or the Bond Insurer, if the Trustee receives an opinion of Bond Counsel to the
effect that the provisions of such Supplemental Indenture do not materially adversely affect the
interests of the Owners of the Outstanding 2016 Bonds, including, without limitation, for any one or
more of the following purposes:
(1) to add to the covenants and agreements of the City contained in the
Indenture other covenants and agreements thereafter to be observed, to pledge or assign additional
security for the 2016 Bonds (or any portion thereof), or to surrender any right or power reserved to or
conferred upon the City in the Indenture;
(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 the
Indenture, or in regard to matters or questions arising under the Indenture, as the City may deem
necessary or desirable;
(3) to modify, amend or supplement the Indenture in such manner as to
permit the qualification of the Indenture under the Trust Indenture Act of 1939, as amended, or any
similar federal statute, and to add such other terms conditions and provisions as may be permitted by
said act or similar federal statute; and
(4) to modify, amend or supplement the Indenture in such manner as to
cause interest on the 2016 Bonds to remain excludable from gross income under the Code.
(c) The Trustee may in its discretion, but is not obligated to, enter into any such
Supplemental Indenture authorized by subsections (a) or (b) of this Section which materially
adversely affects the Trustee's own rights, duties or immunities under the Indenture or otherwise.
(d) Prior to the Trustee entering into any Supplemental Indenture, there will be
delivered to the Trustee an opinion of Bond Counsel stating, in substance, that such Supplemental
Indenture has been adopted in compliance with the requirements of the Indenture and that the
adoption of such Supplemental Indenture will not, in and of itself, adversely affect the exclusion of
interest on the 2016 Bonds from federal income taxation and from state income taxation.
Section 9.02. Effect of Supplemental Indenture. Upon the execution of any Supplemental
Indenture pursuant to this Article, the Indenture will be deemed to be modified and amended in
accordance therewith, and the respective rights, duties and obligations under the Indenture of the
►,
City, the Trustee and all Owners of 2016 Bonds Outstanding will thereafter be determined, exercised
and enforced thereunder subject in all respects to such modification and amendment, and all the
terms and conditions of any such Supplemental Indenture will be deemed to be part of the terms and
conditions of the Indenture for any and all purposes.
Section 9.03. Endorsement of 2016 Bonds; Preparation of New 2016 Bonds. 2016 Bonds
delivered after the execution of any Supplemental Indenture pursuant to this Article may, and if the
Trustee so determines will, bear a notation by endorsement or otherwise in form approved by the
City and the Trustee as to any modification or amendment provided for in such Supplemental
Indenture, and, in that case, upon demand on the Owner of any 2016 Bonds Outstanding at the time
of such execution and presentation of his or her 2016 Bonds for the purpose at the Office of the
Trustee or at such additional offices as the Trustee may select and designate for that purpose, a
suitable notation is made on such 2016 Bonds. If the Supplemental Indenture so provides, new 2016
Bonds so modified as to conform, in the opinion of the City and the Trustee, to any modification or
amendment contained in such Supplemental Indenture, will be prepared and executed by the City and
authenticated by the Trustee, and upon demand on the Owners of any 2016 Bonds then Outstanding
will be exchanged at the Office of the Trustee, without cost to any 2016 Bond Owner, for 2016
Bonds then Outstanding, upon surrender for cancellation of such 2016 Bonds, in equal aggregate
principal amount of the same maturity.
Section 9.04. Amendment of Particular 2016 Bonds. The provisions of this Article do not
prevent any 2016 Bond Owner from accepting any amendment as to the particular 2016 Bonds held
by such Owner.
ARTICLE X
DEFEASANCE
Section 10.01. Discharge of Indenture. The 2016 Bonds may be paid by the City in any of
the following ways, provided that the City also pays or causes to be paid any other sums payable
under the Indenture by the City:
(a) by paying or causing to be paid the principal of and interest and redemption
premiums (if any) on the 2016 Bonds, as and when the same become due and payable;
(b) by depositing with the Trustee, in trust, at or before maturity, money or
securities in the necessary amount (as provided in Section 10.03) to pay or redeem all 2016 Bonds
then Outstanding; or
(c) by delivering to the Trustee, for cancellation by it, all of the 2016 Bonds then
Outstanding.
If the City also pays or causes to be paid all other sums payable under the Indenture by the
City, then and in that case, at the election of the City (as evidenced by a Certificate of the City, filed
with the Trustee and the Bond Insurer, provided that the Policy is in full force and effect and the
Bond Insurer is not in default thereunder, signifying the intention of the City to discharge all such
indebtedness and the Indenture), and notwithstanding the fact that any 2016 Bonds have not been
surrendered for payment, the Indenture and the pledge of Revenues and other assets made under the
Indenture and all covenants, agreements and other obligations of the City under the Indenture will
:ill
cease, terminate, become void and be completely discharged and satisfied. In such event, upon the
Written Request of the City, the Trustee will execute and deliver to the City all such instruments as
may be necessary or desirable to evidence such discharge and satisfaction, and the Trustee will pay
over, transfer, assign or deliver all moneys or securities or other property held by it pursuant to the
Indenture which are not required for the payment or redemption of 2016 Bonds not theretofore
surrendered for such payment or redemption to the City.
Section 10.02. Discharge of Liability on 2016 Bonds. Upon the deposit with the Trustee, in
trust, at or before maturity, of money or securities in the necessary amount (as provided in Section
10.03) to pay or redeem any Outstanding 2016 Bonds (whether upon or prior to the maturity or the
Redemption Date of such 2016 Bonds), provided that, if such Outstanding 2016 Bonds are to be
redeemed prior to maturity, notice of such redemption has been given as provided in Article IV or
provisions satisfactory to the Trustee have been made for the giving of such notice, then all liability
of the City in respect of such 2016 Bonds will cease, terminate and be completely discharged, and the
Owners thereof will thereafter be entitled only to payment out of such money or securities deposited
with the Trustee as aforesaid for their payment, subject however, to the provisions of Section 10.04.
The City may at any time surrender to the Trustee for cancellation by it any 2016 Bonds
previously issued and delivered, which the City may have acquired in any manner whatsoever, and
such 2016 Bonds, upon such surrender and cancellation, will be deemed to be paid and retired.
[BOND INSURER REQUIREMENTS TO COME]
Section 10.03. Deposit of Money or Securities with Trustee. Whenever in the Indenture it is
provided or permitted that there be deposited with or held in trust by the Trustee money or securities
in the necessary amount to pay or redeem any 2016 Bonds, the money or securities so to be deposited
or held may include money or securities held by the Trustee in the funds and accounts established
pursuant to the Indenture and will be:
(a) lawful money of the United States of America in an amount equal to the
principal amount of such 2016 Bonds and all unpaid interest thereon to maturity, except that, in the
case of 2016 Bonds which are to be redeemed prior to maturity and in respect of which notice of such
redemption has been given as provided in Article IV or provisions satisfactory to the Trustee have
been made for the giving of such notice, the amount to be deposited or held will be the principal
amount of such 2016 Bonds and all unpaid interest and premium, if any, thereon to the Redemption
Date; or
(b) Federal Securities the principal of and interest on which when due will, in the
written opinion of an Independent Certified Public Accountant or Independent Financial Consultant
filed with the City and the Trustee, provide money sufficient to pay the principal of and all unpaid
interest to maturity, or to the Redemption Date (with premium, if any), as the case may be, on the
2016 Bonds to be paid or redeemed, as such principal, interest and premium, if any, become due,
provided that in the case of 2016 Bonds which are to be redeemed prior to the maturity thereof,
notice of such redemption has been given as provided in Article IV or provisions satisfactory to the
Trustee have been made for the giving of such notice;
provided, in each case, that: (i) the Trustee will be irrevocably instructed (by the terms of the
Indenture or by Written Request of the City) to apply such money to the payment of such principal,
interest and premium, if any, with respect to such 2016 Bonds; and (ii) the City will delivered to the
W.
Trustee an opinion of Bond Counsel addressed to the City and the Trustee to the effect that such
2016 Bonds have been discharged in accordance with the Indenture (which opinion may rely upon
and assume the accuracy of the Independent Certified Public Accountant's or Independent Financial
Consultant's opinion referred to above).
Section 10.04. Payment of 2016 Bonds After Discharge of Indenture. Notwithstanding any
provisions of the Indenture, any moneys held by the Trustee in trust for the payment of the principal
of, or interest on, any 2016 Bonds and remaining unclaimed for two (2) years after the principal of all
of the 2016 Bonds has become due and payable (whether at maturity or upon call for redemption or
by acceleration as provided in the Indenture), if such moneys were so held at such date, or two (2)
years after the date of deposit of such moneys if deposited after said date when all of the 2016 Bonds
became due and payable, will be repaid to the City free from the trusts created by the Indenture upon
receipt of an indemnification agreement acceptable to the City and the Trustee indemnifying the
Trustee with respect to claims of Owners of 2016 Bonds which have not yet been paid, and all
liability of the Trustee with respect to such moneys will thereupon cease; provided, however, that
before the repayment of such moneys to the City as aforesaid, the Trustee will at the written direction
of the City (at the cost of the City) first mail to the Owners of 2016 Bonds which have not yet been
paid, at the addresses shown on the Registration Books, a notice, in such form as may be deemed
appropriate by the Trustee with respect to the 2016 Bonds so payable and not presented and with
respect to the provisions relating to the repayment to the City of the moneys held for the payment
thereof.
ARTICLE XI
MISCELLANEOUS
Section 11.01. Liability of City Limited to Revenues. Notwithstanding anything in the
Indenture or the 2016 Bonds, but subject to the priority of payment with respect to Operation and
Maintenance Costs, the City is not required to advance any moneys derived from any source other
than the Revenues, the Revenue Fund and other moneys pledged under the Indenture for any of the
purposes of the Indenture, whether for the payment of the principal of or interest on the 2016 Bonds
or for any other purpose of the Indenture. Nevertheless, the City may, but is not required to, advance
for any of the purposes of the Indenture any funds of the City which may be made available to it for
such purposes.
The obligation of the City to pay interest and principal on the 2016 Bonds is a special
obligation of the City payable solely from the Net Revenues, and does not constitute a debt of the
City or of the State of California or of any political subdivision thereof (other than the City) in
contravention of any constitutional or statutory debt limitation or restriction.
Section 11.02. Successor Is Deemed Included in All References to Predecessor. Whenever
in the Indenture either the City or the Trustee is named or referred to, such reference will be deemed
to include the successors or assigns thereof, and all of the covenants and agreements in the Indenture
contained by or on behalf of the City or the Trustee will bind and inure to the benefit of the
respective successors and assigns thereof whether so expressed or not.
Section 11.03. Limitation of Rights to Parties and 2016 Bond Owners. Nothing in the
Indenture or in the 2016 Bonds expressed or implied is intended or will be construed to give to any
person other than the City, the Trustee, the Bond Insurer and the Owners of the 2016 Bonds, any
&
legal or equitable right, remedy or claim under or in respect of the Indenture or any covenant,
condition or provision therein contained; and all such covenants, conditions and provisions are and
will be held to be for the sole and exclusive benefit of the City, the Trustee and the Owners of the
2016 Bonds.
Section 11.04. Waiver of Notice; Requirement of Mailed Notice. Whenever in the Indenture
the giving of notice by mail or otherwise is required, the giving of such notice may be waived in
writing by the person entitled to receive such notice, and in any such case the giving or receipt of
such notice is not a condition precedent to the validity of any action taken in reliance upon such
waiver. Whenever in the Indenture any notice is required to be given by mail, such requirement may
be satisfied by the deposit of such notice in the United States mail, postage prepaid, by first class
mail.
Section 11.05. Destruction of 2016 Bonds. Whenever in the Indenture provision is made for
the cancellation by the Trustee and the delivery to the City of any 2016 Bonds, the Trustee will
destroy such 2016 Bonds as may be allowed by law, and deliver a certificate of such destruction to
the City.
Section 11.06. Severability of Invalid Provisions. If any one or more of the provisions
contained in the Indenture or in the 2016 Bonds are for any reason be held to be invalid, illegal or
unenforceable in any respect, then such provision or provisions will be deemed severable from the
remaining provisions contained in the Indenture and such invalidity, illegality or unenforceability
will not affect any other provision of the Indenture, and the Indenture will be construed as if such
invalid or illegal or unenforceable provision had never been contained in the Indenture. The City
hereby declares that it would have entered into the Indenture and each and every other Section,
paragraph, sentence, clause or phrase thereof and authorized the issuance of the 2016 Bonds pursuant
thereto irrespective of the fact that any one or more Sections, paragraphs, sentences, clauses or
phrases of the Indenture may be held illegal, invalid or unenforceable.
Section 11.07. Notices. Any notice to or demand upon the City, the Trustee or the Bond
Insurer will be deemed to have been sufficiently given or served for all purposes by being sent by
facsimile, electronic mail, overnight mail or courier, or by being deposited, first class mail, postage
prepaid, in a post office letter box, addressed, as the case may be, to the City at City of Ukiah, 300
Seminary Avenue, Ukiah, California 95482, Attention: Finance Director (or such other address as
may have been filed in writing by the City with the Trustee), to the Trustee at its Office, or to the
Bond Insurer at []. Notwithstanding the foregoing provisions of this Section 11.07, the Trustee
will not be deemed to have received, and will not be liable for failing to act upon the contents of, any
notice unless and until the Trustee actually receives such notice.
Section 11.08. Evidence of Rights of 2016 Bond Owners. Any request, consent or other
instrument required or permitted by the Indenture to be signed and executed by 2016 Bond Owners
may be in any number of concurrent instruments of substantially similar tenor and will be signed or
executed by such 2016 Bond Owners in person or by an agent or agents duly appointed in writing.
Proof of the execution of any such request, consent or other instrument or of a writing appointing any
such agent, or of the holding by any person of 2016 Bonds transferable by delivery, will be sufficient
for any purpose of the Indenture and will be conclusive in favor of the Trustee and the City if made
in the manner provided in this Section.
50
The fact and date of the execution by any person of any such request, consent or other
instrument or writing may be proved by the certificate of any notary public or other officer of any
jurisdiction, authorized by the laws thereof to take acknowledgments of deeds, certifying that the
person signing such request, consent or other instrument acknowledged to such notary public or other
officer the execution thereof, or by an affidavit of a witness of such execution duly sworn to before
such notary public or other officer.
The Ownership of 2016 Bonds will be proved by the Registration Books.
Any request, consent, or other instrument or writing of the Owner of any 2016 Bond will
bind every future Owner of the same 2016 Bond and the Owner of every 2016 Bond issued in
exchange therefor or in lieu thereof, in respect of anything done or suffered to be done by the Trustee
or the City in accordance therewith or reliance thereon.
Section 11.09. Disqualified 2016 Bonds. In determining whether the Owners of the requisite
aggregate principal amount of 2016 Bonds have concurred in any demand, request, direction, consent
or waiver under the Indenture, 2016 Bonds which are known by the Trustee to be owned or held by
or for the account of the City, or by any other obligor on the 2016 Bonds, or by any person directly or
indirectly controlling or controlled by, or under direct or indirect common control with, the City or
any other obligor on the 2016 Bonds, will be disregarded and deemed not to be Outstanding for the
purpose of any such determination. 2016 Bonds so owned which have been pledged in good faith
may be regarded as Outstanding for the purposes of this Section if the pledgee establishes to the
satisfaction of the Trustee the pledgee's right to vote such 2016 Bonds and that the pledgee is not a
person directly or indirectly controlling or controlled by, or under direct or indirect common control
with, the City or any other obligor on the 2016 Bonds. In case of a dispute as to such right, any
decision by the Trustee taken upon the advice of counsel will be full protection to the Trustee. Upon
request, the City will certify to the Trustee those 2016 Bonds that are disqualified pursuant to this
Section 11.09 and the Trustee may conclusively rely on such certificate.
Section 11.10. Money Held for Particular 2016 Bonds. The money held by the Trustee for
the payment of the interest, principal or premium due on any date with respect to particular 2016
Bonds (or portions of 2016 Bonds in the case of registered 2016 Bonds redeemed in part only) will,
on and after such date and pending such payment, be set aside on its books and held in trust by it for
the Owners of the 2016 Bonds entitled thereto, subject, however, to the provisions of Section 10.04
but without any liability for interest thereon.
Section 11.11. Funds and Accounts. Any fund or account required by the Indenture to be
established and maintained by the Trustee may be established and maintained in the accounting
records of the Trustee, either as a fund or an account, and may, for the purposes of such records, any
audits thereof and any reports or statements with respect thereto, be treated either as a fund or as an
account; but all such records with respect to all such funds and accounts will at all times be
maintained in accordance with corporate trust industry standards to the extent practicable, and with
due regard for the requirements of Section 6.05(a) and for the protection of the security of the 2016
Bonds and the rights of every Owner thereof.
Section 11.12. Waiver of Personal Liability. No member, officer, agent, employee,
consultant or attorney of the City will be individually or personally liable for the payment of the
principal of or premium or interest on the 2016 Bonds or be subject to any personal liability or
accountability by reason of the issuance thereof; but nothing contained in the Indenture relieves any
51
such member, officer, agent, employee, consultant or attorney from the performance of any official
duty provided by law or by the Indenture.
Section 11.13. Execution in Several Counterparts. The Indenture may be executed in any
number of counterparts, and each of such counterparts will for all purposes be deemed to be an
original; and all such counterparts, or as many of them as the City and the Trustee will preserve
undestroyed, will together constitute but one and the same instrument.
Section 11.14. CUSIP Numbers. Neither the Trustee nor the City is liable for any defect or
inaccuracy in the CUSIP number that appears on any 2016 Bond or in any redemption notice. The
Trustee may, in its discretion, include in any redemption notice a statement to the effect that the
CUSIP numbers on the 2016 Bonds have been assigned by an independent service and are included
in such notice solely for the convenience of the 2016 Bond Owners and that neither the City nor the
Trustee is liable for any inaccuracies in such numbers.
Section 11.15. Choice of Law. THE INDENTURE WILL BE GOVERNED BY THE
LAWS OF THE STATE OF CALIFORNIA.
Section 11.16. Paired Obligation Provider Guidelines. For purposes of Sections 6.14 and
6.2 1, Paired Obligations must comply with the following conditions:
(a) A Paired Obligation Provider must initially have a long -term rating of "A -" or
better by S &P and "A3" or better by Moody's.
(b) So long as the long -term rating of the Paired Obligation Provider is not
reduced below `Baa2" by S &P or "BBB" by Moody's, the interest rate of such Paired Obligation
will be deemed to be equal to the irrevocable fixed interest rate attributable thereto for purposes of
Sections 6.14 and 6.21.
In the event that a Paired Obligation Provider does not maintain the Minimum Rating
Requirement and the City does not replace such Paired Obligation Provider with another Paired
Obligation Provider which maintains the Initial Rating Requirement within ten (10) Business Days of
notice that the Paired Obligation Provider has not maintained the Minimum Rating Requirement,
interest with respect to such Paired Obligations will be computed for purposes of Sections 6.14 and
6.21 without regard to payments to be received from the Paired Obligation Provider.
Section 11.17. (BOND INSURER PROVISIONS TO COMET.
52
IN WITNESS WHEREOF, the City has caused the Indenture to be signed in its name by its
Mayor, and the Trustee, in token of its acceptance of the trusts created hereunder, has caused the
Indenture to be signed in its corporate name by its officer thereunto duly authorized, all as of the day
and year first above written.
CITY OF UKIAH
By:
Its:
Mayor
WELLS FARGO BANK, NATIONAL ASSOCIATION, as
Trustee
By:
Its: Authorized Officer
S -1
EXHIBIT A
FORM OF 2016 BOND
UNLESS THIS BOND IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY (AS DEFINED IN THE INDENTURE) TO THE TRUSTEE FOR
REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY BOND ISSUED
IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY (AND
ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY), ANY
TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR
TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF,
CEDE & CO., HAS AN INTEREST HEREIN.
No.
UNITED STATES OF AMERICA
STATE OF CALIFORNIA
CITY OF UKIAH
WATER REVENUE REFUNDING BOND, SERIES 2016
INTEREST RATE
REGISTERED OWNER
PRINCIPAL AMOUNT:
MATURITY DATE ORIGINAL ISSUE DATE CUSIP
1, 20 March , 2016
CEDE & CO.
DOLLARS
The CITY OF UKIAH, a municipal corporation duly organized and existing under the laws
of the State of California (the "City "), for value received, hereby promises to pay to the Registered
Owner specified above or registered assigns (the "Registered Owner "), on the Maturity Date
specified above (subject to any right of prior redemption hereinafter provided for), the Principal
Amount specified above, in lawful money of the United States of America, and to pay interest
thereon in like lawful money from the interest payment date next preceding the date of authentication
of this Bond (unless: (i) this Bond is authenticated after the fifteenth day of the calendar month
preceding an interest payment date, whether or not such day is a business day, and on or before the
following interest payment date, in which event it shall bear interest from such interest payment date;
or (ii) this Bond is authenticated on or before 15, 2016, in which event it shall bear interest
from the Original Issue Date identified above; provided, however, that if as of the date of
authentication of this Bond, interest is in default on this Bond, this Bond shall bear interest from the
interest payment date to which interest has previously been paid or made available for payment on
this Bond), at the Interest Rate per annum specified above, payable on 1, 2016 and each
1 and 1 thereafter, calculated on the basis of a 360 day year composed of twelve 30 day
months. Principal hereof and premium, if any, upon early redemption hereof are payable by check of
the Trustee upon presentation and surrender hereof at the Office (as defined in the hereinafter
described Indenture) of Wells Fargo Bank, National Association, as trustee (the "Trustee "). Interest
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hereon is payable by check of the Trustee sent by first class mail on the applicable interest payment
date to the Registered Owner hereof at the Registered Owner's address as it appears on the
registration books of the Trustee as of the close of business on the fifteenth day of the month
preceding each interest payment date (except that in the case of a Registered Owner of one million
dollars ($1,000,000) or more in principal amount, such payment may, at such Registered Owner's
option, be made by wire transfer of immediately available funds to an account in the United States in
accordance with written instructions provided to the Trustee by such Registered Owner prior to the
fifteenth (15th) day of the month preceding such interest payment date).
This Bond is not a debt of the State of California, or any of its political subdivisions (other
than the City), and neither the State, nor any of its political subdivisions (other than the City), is
liable hereon, nor in any event shall this Bond be payable out of any funds or properties of the City
other than the Net Revenues (as such term is defined in the Indenture of Trust, dated as of March 1,
2016 (the "Indenture "), by and between the City and the Trustee) and other moneys pledged therefor
under the Indenture. The obligation of the City to make payments in accordance with the Indenture
is a limited obligation of the City as set forth in the Indenture, and the City shall have no liability or
obligation in connection herewith except with respect to such payments to be made pursuant to the
Indenture. This Bond does not constitute an indebtedness of the City in contravention of any
constitutional or statutory debt limitation or restriction.
This Bond is one of a duly authorized issue of bonds of the City designated as the "City of
Ukiah Water Revenue Refunding Bonds, Series 2016" (the "2016 Bonds "), of an aggregate principal
amount of Dollars ($ ), all of like tenor and date
(except for such variation, if any, as may be required to designate varying series, numbers or interest
rates) and all issued pursuant to the provisions of Article 11 of Chapter 3 of Part 1 of Division 2 of
Title 5 of the Government Code of the State of California, including but not limited to Section 53583,
and pursuant to the Indenture and the resolution authorizing the issuance of the 2016 Bonds.
Reference is hereby made to the Indenture (copies of which are on file at the office of the City) and
all supplements thereto for a description of the terms on which the 2016 Bonds are issued, the
provisions with regard to the nature and extent of the Net Revenues, and the rights thereunder of the
Owners of the 2016 Bonds and the rights, duties and immunities of the Trustee and the rights and
obligations of the City hereunder, to all of the provisions of which the Registered Owner of this
Bond, by acceptance hereof, assents and agrees. The 2016 Bonds have been issued in fully registered
form without coupons in denominations of $5,000 or any integral multiple thereof.
The 2016 Bonds have been issued by the City to prepay and defease that certain Installment
Sale Agreement, dated as of September 1, 2005, by and between the City and the Association of Bay
Area Governments, as more fully described in the Indenture.
This Bond and the interest, premium, if any, hereon and all other 2016 Bonds and the interest
and premium, if any, thereon (to the extent set forth in the Indenture) are special obligations of the
City, secured by a pledge and lien on the Revenues and any other amounts on deposit in certain funds
and accounts created under the Indenture, and payable from the Net Revenues. As and to the extent
set forth in the Indenture, all of the Revenues are exclusively and irrevocably pledged in accordance
with the terms hereof and the provisions of the Indenture, to the payment of the principal of and
interest and premium (if any) on this Bond.
The Indenture and the rights and obligations of the City and the Owners of the 2016 Bonds
and the Trustee may be modified or amended from time to time and at any time with the written
A -2
consent of the Owners of a majority in aggregate principal amount of all 2016 Bonds then
Outstanding, exclusive of Bonds disqualified as set forth in the Indenture, in the manner, to the extent
and upon the terms provided in the Indenture, but no such modification or amendment shall: (i)
extend the fixed maturity of any 2016 Bonds, or reduce the amount of principal thereof or premium
(if any) thereon, or extend the time of payment, or change the method of computing the rate of
interest thereon, or extend the time of payment of interest thereon, without the consent of the owner
of each 2016 Bond so affected; or (ii) reduce the aforesaid percentage of 2016 Bonds the consent of
the Owners of which is required to affect any such modification or amendment, or permit the creation
of any lien on the Revenues and other assets pledged under the Indenture prior to or on a parity with
the lien created by the Indenture except as permitted in the Indenture, or deprive the Owners of the
2016 Bonds of the lien created by the Indenture on such Revenues and other assets, except as
expressly provided in the Indenture, without the consent of the Owners of all of the 2016 Bonds then
Outstanding.
The Indenture and the rights and obligations of the City, the Trustee and the Owners of the
2016 Bonds may also be modified or amended for certain purposes described more fully in the
Indenture at any time in the manner, to the extent and upon the terms provided in the Indenture by a
supplemental indenture, which the City and the Trustee may enter into without the consent of any
2016 Bond Owners, if the Trustee shall receive an opinion of Bond Counsel to the effect that the
provisions of such supplemental indenture will not materially adversely affect the interests of the
Owners of the Outstanding 2016 Bonds.
The 2016 Bonds with stated maturities on or after 1, 20_, shall be subject to
redemption prior to their respective stated maturities, as a whole or in part on any date or after
1,20 —, as directed by the City in a Written Request provided to the Trustee at least 35 days (or such
lesser number of days acceptable to the Trustee in the sole discretion of the Trustee, such notice
being for the convenience of the Trustee) and by lot within each maturity in integral multiples of
$5,000, at a Redemption Price equal to the principal amount thereof plus accrued interest thereon to
the Redemption Date, without premium.
The 2016 Bonds maturing on 1, 20_ are subject to mandatory sinking fund
redemption in part (by lot) on each 1 on and after 1, 20_, in integral multiples of
$5,000, at a Redemption Price equal to the principal amount thereof plus accrued interest to the
Redemption Date, without premium, in accordance with the below schedule. On each of the
following payment dates, the Trustee shall pay from the Redemption Fund an amount equal to the
payment or payments due on such date as set forth below.
A -3
Mandatory Sinking
Fund Redemption
Date ( 1) Principal Amount
(maturity)
If some but not all of the 2016 Bonds maturing on 1, 20 have been redeemed
pursuant to the optional redemption provisions, the total amount of all future sinking fund payments
will be reduced by the aggregate principal amount of such 2016 Bonds so redeemed, to be allocated
among such sinking fund payments on a pro rata basis as determined by the City, which shall notify
the Trustee in writing of such determination.
The 2016 Bonds are subject to extraordinary redemption prior to their respective stated
maturities, as a whole or in part on any date in the order of maturity and within maturities as directed
by the City in a Written Request provided to the Trustee at least 35 days (or such lesser number of
days acceptable to the Trustee in the sole discretion of the Trustee, such notice being for the
convenience of the Trustee) prior to such date and by lot within each maturity in integral multiples of
$5,000 from Net Proceeds, upon the terms and conditions of, and as provided for in, the Indenture at
a redemption price equal to the principal amount thereof plus accrued interest thereon to the date
fixed for redemption, without premium.
As provided in the Indenture, notice of redemption shall be mailed by the Trustee by first
class mail at least 20 days but not more than 60 days prior to the date fixed for redemption to the
respective Owners of any 2016 Bonds designated for redemption at their addresses appearing on the
registration books of the Trustee, but neither the failure to receive such notice nor any defect in the
notice or the mailing thereof shall affect the validity of the redemption.
If this Bond is called for redemption and payment is duly provided therefor as specified in the
Indenture, interest shall cease to accrue hereon from and after the date fixed for redemption.
If an Event of Default, as defined in the Indenture, shall occur, the principal of all of the 2016
Bonds and the interest accrued thereon may be declared due and payable upon the conditions, in the
manner and with the effect provided in the Indenture, but such declaration and its consequences may
be rescinded and annulled as further provided in the Indenture.
This Bond is transferable by the Registered Owner hereof, in person or by his or her duly
authorized attorney in writing, at the office of the Trustee but only in the manner, subject to the
limitations and upon payment of the taxes and charges provided in the Indenture and upon surrender
and cancellation of this Bond. Upon registration of such transfer, a new 2016 Bond or 2016 Bonds
of the same series, of authorized denomination or denominations, for the same aggregate principal
amount of the same maturity will be issued to the transferee in exchange therefor.
..
This Bond may be exchanged at said office of the Trustee for a like aggregate principal
amount of Bonds of other authorized denominations of the same series and same maturity, but only
in the manner, subject to the limitations and upon payment of the taxes and charges provided in the
Indenture.
The Trustee shall not be required to register the transfer or exchange of this Bond during the
period in which the Trustee is selecting 2016 Bonds for redemption or if this Bond has been selected
for redemption.
The City and the Trustee may treat the Registered Owner hereof as the absolute owner hereof
for all purposes, and the City and the Trustee shall not be affected by any notice to the contrary.
It is hereby certified that all of the things, conditions and acts required to exist, to have
happened or to have been performed precedent to and in the issuance of this Bond do exist, have
happened or have been performed in due and regular time, form and manner as required by the
Indenture and the laws of the State of California and that the amount of this Bond, together with all
other indebtedness of the City, does not exceed any limit under any laws of the State of California,
and is not in excess of the amount of 2016 Bonds permitted to be issued under the Indenture.
This Bond shall not be entitled to any benefit under the Indenture or become valid or
obligatory for any purpose until the certificate of authentication hereon endorsed shall have been
manually signed by the Trustee.
IN WITNESS WHEREOF, the City has caused this Bond to be executed in its name and on
its behalf with the manual or facsimile signature of its Mayor as of this day of March, 2016.
CITY OF UKIAH
By:
Its: Mayor
A -5
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION
TO APPEAR ON BONDS]
This is one of the Bonds described in the within - mentioned Indenture.
Dated: March , 2016
WELLS FARGO BANK, NATIONAL
ASSOCIATION, as Trustee
By:
Its:
Authorized Signatory
STATEMENT OF INSURANCE
[TO COME FROM BOND INSURER]
we
[FORM OF ASSIGNMENT]
For value received the undersigned hereby sells, assigns and transfers unto
(Name, Address and Tax Identification or
Social Security Number of Assignee)
the within registered Bond and hereby irrevocably constitute(s) and appoint(s)
attorney, to transfer the same on the registration books of the Trustee
with full power of substitution in the premises.
Dated:
Note: The signature(s) on this Assignment must
correspond with the name(s) as written on the
face of the within Bond in every particular
without alteration or enlargement or any
change whatsoever.
Signature Guaranteed:
Note: Signature guarantee shall be made by a
guarantor institution participating in
the Securities Transfer Agents
Medallion Program or in such other
guarantee program acceptable to the
Trustee.
A -7
$[ 1
CITY OF UKIAH
WATER REVENUE REFUNDING BONDS,
SERIES 2016
BOND PURCHASE AGREEMENT
City of Ukiah
300 Seminary Avenue
Ukiah, California 95482
Ladies and Gentlemen:
Attachment 3 - Exhibit B
NP DRAFT 1/26/16
92016
Raymond James & Associates, Inc. (the "Underwriter "), hereby offers to enter into this
Bond Purchase Agreement (this "Bond Purchase Agreement ") with the City of Ukiah, California
(the "City "), a municipal corporation and general law city duly organized and existing under the
laws of the State of California (the "State "), which upon written acceptance of this offer will be
binding upon the City and the Underwriter. This offer is made subject to the City's written
acceptance hereof on or before 11:59 p.m., California time, on the date hereof, and, if not so
accepted, will be subject to withdrawal by the Underwriter upon notice delivered to the City at
any time prior to the acceptance hereof by the City.
Capitalized terms used and not defined herein shall have the same meanings as set forth
in the Indenture (as defined below).
1. Purchase and Sale of the Bonds
Subject to the terms and conditions and in reliance upon the representations, warranties
and agreements set forth herein, the Underwriter hereby agrees to purchase from the City, and
the City hereby agrees to sell and deliver to the Underwriter, all (but not less than all) of the
$[ ] aggregate principal amount of City of Ukiah Water Revenue Refunding Bonds,
Series 2016 (the "Bonds "). The Bonds will be issued on the Closing Date (as hereinafter
defined), in the principal amount of $[ ]. The Bonds will bear interest at the rates and
will mature on the dates set forth on Schedule I attached hereto. The purchase price for the
Bonds shall be $[ ], being the principal amount of the Bonds, [plus /less [net]
original issue premium/discount of $[ ]], and less an Underwriter's discount of
$1 1.
The City acknowledges and agrees that (i) the purchase and sale of the Bonds pursuant to
this Bond Purchase Agreement is an arm's- length commercial transaction between the City and
the Underwriter; (ii) in connection with such transaction, including the process leading thereto,
the Underwriter is acting solely as a principal and not as an agent or a fiduciary of the City; (iii)
4826 - 6545- 3356.5
the Underwriter has neither assumed an advisory or fiduciary responsibility in favor of the City
with respect to the offering of the Bonds or the process leading thereto (whether or not the
Underwriter, or any affiliate of the Underwriter, has advised or is currently advising the City on
other matters) nor has it assumed any other obligation to the City except the obligations
expressly set forth in this Bond Purchase Agreement; (iv) the Underwriter has financial and other
interests that differ from those of the City; and (v) the City has consulted with its own legal and
financial advisors to the extent it deemed appropriate in connection with the offering of the
Bonds.
2. Description and Purpose of the Bonds
The Bonds shall be substantially in the form described in, shall be issued and secured
under the provisions of, and shall be payable as provided in the Indenture of Trust, dated as of
March 1, 2016 (the "Indenture ") by and between the City and [ ], as trustee (the
"Trustee "). The Bonds are subject to redemption as provided in the Indenture.
The Bonds are limited obligations of the City payable from and secured by a pledge of
the Trust Estate (as defined in the Indenture) on the terms and conditions set forth in the
Indenture.
The City is issuing the Bonds to (i) refinance the acquisition and construction of certain
water system capital improvements (collectively, the "2005 Project "), more particularly
described in the Installment Sale Agreement between the Association of Bay Area Governments
(the "Prior Issuer ") and the City dated as of September 1, 2005 (the "2005 Installment Sale
Agreement ") through the refunding of a portion of the Association of Bay Area Governments
2005 Water and Wastewater Revenue Bonds, Series A (the "2005 Bonds "); (ii) prepay the City's
obligations under Loan Contract No. E54304, dated September 30, 1988 (the "State Loan "), by
and between the City and the State of California Department of Water Resources ( "DWR "); to
(iii) fund a reserve fund, if required, and to (iv) pay the costs of issuance of the 2016 Bonds..
3. Public Offering
The Underwriter agrees to make a bona fide public offering of all the Bonds initially at
the public offering prices (or yields) set forth on Schedule I attached hereto and incorporated
herein by reference. Subsequent to the initial public offering, the Underwriter reserves the right
to change the public offering prices (or yields) as it deems necessary in connection with the
marketing of the Bonds, provided that the Underwriter shall not change the interest rates set forth
on Schedule I. The Bonds may be offered and sold to certain dealers at prices lower than such
initial public offering prices.
4. Delivery of Official Statement; Continuing Disclosure
(a) Preliminary Official Statement. The City has delivered or caused to be delivered
to the Underwriter prior to the execution of this Bond Purchase Agreement, copies of the
preliminary official statement with respect to the Bonds, dated [ ], 2016 (the
"Preliminary Official Statement "). Such Preliminary Official Statement is the official statement
deemed final by the City for purposes of Rule 15c2 -12 under the Securities Exchange Act of
1934 (the "Rule ") and approved for distribution by the Underwriter by resolution of the City
-2-
4826 - 6545- 3356.5
Council (the "City Council ") of the City. The City hereby ratifies and confirms its authorization
of the use by the Underwriter before the date hereof of the Preliminary Official Statement.
(b) Final Official Statement. Within seven (7) business days from the date hereof,
and in any event not later than two business days prior to the Closing Date, the City shall deliver
to the Underwriter a final Official Statement, executed on behalf of the City by authorized
representatives of the City, which shall include information permitted to be omitted from the
Preliminary Official Statement by paragraph (b)(1) of the Rule and with such other amendments
or supplements as shall have been approved by the City and the Underwriter (the "Final Official
Statement ") and such additional conformed copies thereof as the Underwriter may reasonably
request to meet potential customer requests for copies of the Official Statement to comply with
the Rule and rules of the Municipal Securities Rulemaking Board (the "MSRB "). It is
acknowledged by the City that the Underwriter may deliver the Preliminary Official Statement
and a Final Official Statement electronically over the internet and in printed paper form. For
purposes of this Bond Purchase Agreement, the printed paper form of the Preliminary Official
Statement and the Official Statement are deemed controlling. The Underwriter agrees to file a
copy of the Official Statement, including any supplements prepared by the City, with the MSRB
on its Electronic Municipal Markets Access ( "EMMA ") system. The Official Statement shall be
in substantially the same form as the Preliminary Official Statement and, other than information
previously permitted to have been omitted by the Rule, the City shall only make such other
additions, deletions, revisions and recent developments in the Official Statement as shall be
approved by the Underwriter. The Underwriter hereby agrees to cooperate and assist in the
preparation of the Official Statement. The City hereby agrees to deliver to the Underwriter an
electronic copy of the Official Statement in a form that permits the Underwriter to satisfy its
obligations under the rules and regulations of the MSRB and the U.S. Securities and Exchange
Commission ( "SEC "). The City hereby authorizes the Underwriter to use the Official Statement
and the information contained therein in connection with the offering and sale of the Bonds. The
Preliminary Official Statement and the Final Official Statement, including the cover pages, the
appendices thereto and all information incorporated therein by reference are hereinafter referred
collectively to as the "Official Statement."
(c) Continuing Disclosure Certificate. To enable the Underwriter to comply with the
Rule, the City will execute a Continuing Disclosure Certificate concurrently with issuance of the
Bonds substantially in the form attached as Appendix E to the Official Statement (the
"Continuing Disclosure Certificate ").
5. Closing
At 8:30 a.m. California time on [ ], 2016, or such other time as shall be
agreed upon by the Underwriter and the City (the "Closing Date "), the City will deliver or cause
to be delivered to the Underwriter at the offices of Stradling Yocca Carlson & Rauth, a
Professional Corporation, bond counsel to the City ( "Bond Counsel ") in Newport Beach,
California (or such other location as may be designated by the Underwriter and approved by the
City) the closing documents hereinafter mentioned and, in New York, New York through the
facilities of The Depository Trust Company (or such other location as may be designated by the
Underwriter and approved by the City), the Bonds in the form of registered book -entry bonds
evidenced by one certificate for each maturity, interest rate and series of Bonds (which may be
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typewritten) in denominations of $5,000 or any multiple thereof, duly executed by the City and
authenticated by the Trustee, and subject to the terms and conditions hereof the Underwriter will
accept delivery of the Bonds in book -entry form, and the Underwriter will pay the purchase price
of the Bonds set forth in Section I by Federal Funds wire (such delivery and payment being
herein referred to as "Closing ").
6. Representations, Warranties and Agreements of the City
The City represents, warrants and covenants with the Underwriter that:
(a) the City is a a municipal corporation and general law city duly organized and
existing under the laws of the State of California, with full legal right, power and authority to
issue, sell and deliver the Bonds to the Underwriter pursuant to the Indenture, and execute,
deliver and perform its obligations, as the case may be, under this Bond Purchase Agreement, the
Escrow Agreement (2005 Installment Sale Agreement) dated as of March 1, 2016 (the "Escrow
Agreement "), by and between the City and Wells Fargo Bank, National Association (the
"Escrow Agent "), as escrow agent, the Continuing Disclosure Certificate, the Bonds and the
Indenture (collectively, the "Legal Documents ") and to carry out and consummate all
transactions contemplated by each of the aforesaid documents and the Official Statement, and
compliance with the provisions of the Legal Documents will not materially conflict with or
constitute a breach of or default under any applicable constitutional provision, law,
administrative regulation, court order or consent decree or any applicable judgment or decree or
any loan agreement, note, resolution, indenture, agreement or other instrument to which the City
is a party or it or any of its assets may be otherwise subject;
(b) the resolution adopted by the City on [ _], 2016 approving and
authorizing the execution and delivery by the City of the Legal Documents and the preparation
and distribution of the Preliminary Official Statement and the Official Statement (the
"Resolution ") was duly adopted at a meeting of the City Council called and held pursuant to law
and with all public notice required by law and at which a quorum was present and acting
throughout, and is in full force and effect and has not been amended or repealed;
(c) when delivered by the City and paid for by the Underwriter in accordance with
the provisions of this Bond Purchase Agreement, the Bonds will have been duly authorized,
executed and delivered and will constitute the valid and binding limited obligations of the City in
conformity with, and entitled to the benefit and security of, the Indenture;
(d) the City will deliver the duly executed Indenture on the Closing Date, has duly
authorized and approved the execution and delivery of the Legal Documents and when executed
and delivered, the Legal Documents, assuming due authorization, execution and delivery by the
other respective parties thereto, as applicable, will constitute the legally valid and binding
obligations of the City enforceable in accordance with their respective terms, except as
enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar
laws or equitable principles relating to or affecting creditors' rights generally;
(e) at the date hereof and as of the Closing Date, except as otherwise disclosed in the
Preliminary Official Statement and the Official Statement, the City will be in compliance with
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the covenants and agreements contained in the Legal Documents, and no event of default and no
event has occurred and is continuing which, with the passage of time or giving of notice, or both,
would constitute an event of default thereunder shall have occurred and be continuing;
(f) all approvals, consents and orders of any governmental authority or agency
having jurisdiction in the matter which would constitute a condition precedent to the due
performance by the City of its obligations under the Legal Documents have been duly obtained
or made, and are, and will be as of the Closing Date, in full force and effect;
(g) the City will comply with the requirements of the Tax Certificate executed by the
City in connection with the delivery of the Bonds;
(h) any certificate signed by any officer of the City and delivered to the Underwriter
pursuant to the Legal Documents or any document contemplated hereby or thereby shall be
deemed a representation and warranty by the City to the Underwriter as to the statements made
therein and that such officer shall have been duly authorized to execute the same;
(i) to the best knowledge of the City, there is no public vote or referendum pending
or proposed, the results of which could materially adversely affect the transactions contemplated
by the Legal Documents or the Official Statement or the validity or enforceability of the Bonds;
0) the Indenture creates a valid pledge of and grant of a first, direct and exclusive
charge and lien on the Revenues purported to be pledged thereby, subject to no prior pledges,
liens or security interests;
(k) the Official Statement is, and at all times subsequent to the date of the Official
Statement up to and including the Closing will be, true and correct in all material respects, and
the Official Statement contains and up to and including the Closing will contain no misstatement
of any material fact and does not, and up to and including the Closing will not, omit any
statement necessary to make the statements contained therein, in the light of the circumstances in
which such statements were made, not misleading;
(1) the City will advise the Underwriter promptly of any proposal to amend or
supplement the Official Statement and will not effect or consent to any such amendment or
supplement without the consent of the Underwriter, which consent will not be unreasonably
withheld. The City will advise the Underwriter promptly of the institution of any proceedings
known to it by any governmental agency prohibiting or otherwise affecting the use of the
Official Statement in connection with the offering, sale or distribution of the Bonds;
(m) as of the time of acceptance hereof and as of the time of the Closing, the City is
not and will not be in breach of or in default under any applicable constitutional provision, law or
administrative rule or regulation of the State or the United States, or any applicable judgment or
decree or any trust agreement, loan agreement, bond, note, resolution, ordinance, agreement or
other instrument to which the City is a party or it or any of its assets is otherwise subject, and no
event has occurred and is continuing which, with the passage of time or the giving of notice, or
both, would constitute a default or event of default under any such instrument which breach or
default would materially adversely affect the security of the Bonds or the City's performance
under the Legal Documents; and, as of such times, except as disclosed in the Preliminary Official
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Statement and the Official Statement, the authorization, execution and delivery of the Legal
Documents and the Bonds and compliance with the provisions of each of such agreements or
instruments do not and will not conflict with or constitute a breach of or default under any
applicable constitutional provision, law or administrative rule or regulation of the State or the
United States or any applicable judgment, decree, license, permit, trust agreement, loan
agreement, bond, note, resolution, ordinance agreement or other instrument to which the City (or
any of its officers in their respective capacities as such) is subject, or by which it or any of its
properties is bound; nor will any such authorization, execution, delivery or compliance result in
the creation or imposition of any lien, charge or other security interest or encumbrance of any
nature whatsoever upon any of its assets or properties or under the terms of any such law,
regulation or instrument, except as may be provided by the Bonds and the Legal Documents;
(n) as of the time of acceptance hereof and the Closing, except as disclosed in the
Preliminary Official Statement and the Official Statement, no action, suit, proceeding, inquiry or
investigation, at law or in equity, before or by any court, government agency, public board or
body, is pending or to the best of the City's knowledge after reasonable investigation, threatened
(i) in any way questioning the corporate existence of the City or the titles of the officers of the
City to their respective offices; (ii) affecting, contesting or seeking to prohibit, restrain or enjoin
the issuance, sale or delivery of any of the Bonds, or the payment or collection of any amounts
pledged or to be pledged to pay the principal of and interest on the Bonds, or in any way
contesting or affecting the validity of the Bonds, the Legal Documents or the consummation of
the transactions contemplated thereby or hereby, or contesting the exclusion of the interest on the
Bonds from gross income for Federal income tax purposes or contesting the powers of the City
or its authority to issue the Bonds; (iii) which may result in any material adverse change relating
to the City; or (iv) contesting the completeness or accuracy of the Preliminary Official Statement
or the Official Statement or any supplement or amendment thereto or asserting that the
Preliminary Official Statement or the Official Statement contained any untrue statement of a
material fact or omitted to state any material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they were made, not
misleading, and there is no basis for any action, suit, proceeding, inquiry or investigation of the
nature described in clauses (i) through (iv) of this sentence;
(o) for purposes of the Rule, the City has heretofore deemed final the Preliminary
Official Statement prior to its use and distribution by the Underwriter, except for the information
specifically permitted to be omitted by paragraph (b)(1) of the Rule;
(p) [except as otherwise disclosed in the Preliminary Official Statement and the
Official Statement,] the City has not previously failed to comply with any continuing disclosure
obligation undertaken pursuant to the Rule; and
(q) except for information which is permitted to be omitted pursuant to the Rule, the
Preliminary Official Statement is, as of its date and as of the date hereof (excluding therefrom
the information relating to DTC and its book -entry only system and under the caption
"UNDERWRITING," as to which no representations or warranties are made) was and is true and
correct in all material respects and did not and does not contain any untrue or misleading
statement of a material fact or omitted or omits to state any material fact necessary to make the
4826 - 6545- 3356.5
statements therein, in the light of the circumstances under which they were made, not
misleading.
All representations, warranties and agreements of the City shall remain operative and in
full force and effect, regardless of any investigations made by or on the Underwriter' behalf, and
shall survive the delivery of the Bonds.
7. Conditions to the Obligations of the Underwriter
The Underwriter hereby enters into this Bond Purchase Agreement in reliance upon the
representations and warranties of the City contained herein and the representations and
warranties to be contained in the documents and instruments to be delivered on the Closing Date
and upon the performance by the City and the Trustee of their respective obligations both on and
as of the date hereof. Accordingly, the Underwriter's obligations under this Bond Purchase
Agreement to purchase, to accept delivery of and to pay for the Bonds on the Closing Date shall
be subject, at the option of the Underwriter, to the accuracy of the representations and warranties
of the City contained herein as of the date hereof and as of the Closing Date, to the accuracy of
the statements of the officers and other officials of the City and the Trustee made in any
certificate or document furnished pursuant to the provisions hereof, to the performance by the
City and the Trustee of their respective obligations to be performed hereunder and under the
Legal Documents at or prior to the date hereof and at or prior to the Closing Date, and also shall
be subject to the following additional conditions:
(a) On the Closing Date, the Legal Documents shall have been duly authorized,
executed and delivered by the City, all in substantially the forms heretofore submitted to the
Underwriter, with only such changes as shall have been agreed to in writing by the Underwriter,
and shall be in full force and effect; and there shall be in full force and effect such resolutions of
the City Council of the City as, in the opinion of the Bond Counsel, shall be necessary or
appropriate in connection with the transactions contemplated hereby;
(b) On the Closing Date, all necessary action of the City relating to the issuance and
sale of the Bonds will have been taken and will be in full force and effect and will not have been
amended, modified or supplemented;
(c) On or prior to the Closing Date, the Underwriter shall have received the following
documents, in each case satisfactory in form and substance to the Underwriter:
(i) one copy of the Bond Purchase Agreement and the Legal Documents, each
duly executed and delivered by the respective parties thereto;
(ii) the Official Statement, executed on behalf of the City by an authorized
representative of the City;
(iii) the approving opinion, dated the date hereof and addressed to the City, of
Bond Counsel in substantially the form of Appendix C to the Official Statement, and a
letter of such counsel, dated the Closing Date, and addressed to the Underwriter to the
effect that such opinion may be relied upon by the Underwriter to the same extent as if
such opinion were addressed to them;
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(iv) a supplemental opinion or opinions of Bond Counsel addressed to the
Underwriter, in form and substance acceptable to the Underwriter, and dated the date of
the Closing substantially to the following effect:
(A) the City has duly and validly executed the Bond Purchase
Agreement, and the Bond Purchase Agreement constitutes the
legal, valid and binding agreement of the City, subject to
bankruptcy, insolvency, reorganization, moratorium and other
similar laws affecting creditors' rights heretofore or hereafter
enacted and to the exercise of judicial discretion in appropriate
cases;
(B) the statements contained in the Preliminary Official Statement and
the Official Statement on the cover page and under the captions
"[THE 2016 BONDS (other than information relating to DTC and
its book -entry only system, as to which no opinion need be
expressed)," "SECURITY FOR THE 2016 BONDS," "TAX
MATTERS, "] and in Appendices [B and C] thereto, insofar as
such statements expressly summarize certain provisions of the
Bonds, the Indenture and Bond Counsel's final approving opinion
relating to the Bonds, are accurate in all material respects; and
(C) the Bonds are exempt from registration under the Securities Act of
1933, as amended, and the Indenture is exempt from qualification
under the Trust Indenture Act of 1939, as amended;
(v) a letter of Stradling Yocca Carlson & Rauth, a Professional Corporation,
disclosure counsel to the City ( "Disclosure Counsel "), dated the date of the Closing,
addressed to the City and the Underwriter substantially to the following effect: On the
basis of the information made available to such firm in the course of its participation in
the preparation of the Preliminary Official Statement and the Official Statement (but
without having undertaken to determine or verify independently, or assuming any
responsibility for the accuracy, completeness or fairness of any of the statements
contained in the Preliminary Official Statement and the Official Statement), no facts have
come to the attention of the personnel in such firm directly involved in rendering legal
advice and assistance to the City as Disclosure Counsel, including in connection with the
preparation of the Preliminary Official Statement and the Official Statement, which cause
such firm to believe that the Preliminary Official Statement, as of its date or as of the date
hereof, or the Official Statement as of its date and the Closing Date (excluding therefrom
financial, engineering and statistical data; forecasts, projections, estimates, assumptions
and expressions of opinions; information relating to the Depository Trust Company and
the book -entry only system; [and information [contained under the subheading "THE
BONDS — Reserve Surety Policy "] relating to the Surety Policy]; as to all of which such
firm expresses no view) contains any untrue statement of a material fact or omitted to
state a material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
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(vi) an opinion of Nixon Peabody LLP, counsel to the Underwriter, dated the
Closing Date, and addressed to the Underwriter, in form and substance acceptable to the
Underwriter;
(vii) the opinion of the City Attorney to the City dated the Closing Date and
addressed to the Underwriter, to the effect that: (A) the City is a municipal corporation
and general law city duly organized and existing under the laws of the State of California;
(B) the Resolution was duly adopted at a meeting of the City Council that was called and
held pursuant to law and with all public notice required by law and at which a quorum
was present and acting throughout, and is in full force and effect and has not been
amended or repealed; (C) other than as otherwise disclosed in the Preliminary Official
Statement and the Official Statement, there is no action, suit, proceeding or investigation
at law or in equity before or by any court, public board or body, pending or, to the best
knowledge of such counsel after reasonable investigation, threatened against or affecting
the City, to restrain or enjoin the execution, delivery or sale of the Bonds or the collection
or payment of Revenues that are the source of security for the Bonds, or the pledge
thereof, or in any way contesting or affecting the validity or enforceability of the Bonds
or the Legal Documents, or in any way contesting or affecting the existence of the City or
the title of any official of the City to such person's office, or contesting the power of the
City or its authority with respect to the Bonds or the Legal Documents or contesting the
exclusion of interest on the Bonds from gross income for Federal income tax purposes or
contesting the completeness or accuracy of the Preliminary Official Statement or the
Official Statement or any supplement or amendment thereto or asserting that the
Preliminary Official Statement or the Official Statement contained any untrue statement
of a material fact or omitted to state any material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances under which
they were made, not misleading; (D) the execution and delivery of the Legal Documents,
the adoption of the Resolution, and compliance by the City with the provisions of the
foregoing, under the circumstances contemplated thereby, do not and will not in any
material respect conflict with or constitute on the part of the City a breach or default
under any agreement or other instrument to which the City is a party or by which it is
bound or by any existing law, regulation, court order or consent decree to which the City
or any of its assets is subject; (E) the Legal Documents have been duly authorized,
executed and delivered by the City and, assuming due authorization, execution and
delivery by the other parties thereto, as applicable, constitute legal, valid and binding
agreements of the City enforceable in accordance with their respective terms, subject to
laws relating to bankruptcy, insolvency or other laws affecting the enforcement of
creditors' rights generally and the limitations on legal remedies against public agencies in
the State of California and the application of equitable principles if equitable remedies
are sought; and (F) no authorization, approval, consent, or other order of the United
States of America, the State of California, or any other governmental authority or agency
within the State of California having jurisdiction over the City is required for the valid
authorization, execution, delivery and performance by the City of the Legal Documents
or for the adoption of the Resolution which has not been obtained;
(viii) a certificate of a duly authorized official of the City, dated the Closing
Date, in form and substance satisfactory to the Underwriter, to the effect that (A) the
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City's representations and warranties contained in the Legal Documents and the Bond
Purchase Agreement are true and correct on and as of the Closing Date with the same
effect as if made on the Closing Date; (B) the Legal Documents have been executed and
are in full force and effect; (C) the City has complied or is then in compliance with all
agreements and has satisfied all conditions on its part to be observed or satisfied under
each Legal Document at or before the Closing; and (D) no event has occurred since the
date of the Official Statement which either makes untrue or incorrect in any material
respect as of the Closing Date any statement or information contained in the Official
Statement, as then supplemented or amended or is not reflected in the Official Statement
but should be reflected therein in order to make the statements therein, in light of the
circumstances under which they were made, not misleading in any material respect;
(ix) a certificate of a duly authorized official of the Trustee, dated the Closing
Date, to the effect that: (A) the Trustee is a national banking association organized and
existing under and by virtue of the laws of the United States, having the full power and
being qualified to enter into and perform its duties under the Indenture and to authenticate
and deliver the Bonds to the Underwriter; (B) the Trustee is duly authorized to enter into
the Indenture and to authenticate and deliver the Bonds to the Underwriter pursuant to the
Indenture; (C) when delivered to and paid for by the Underwriter at the Closing, the
Bonds will have been duly authenticated and delivered by the Trustee; (D) the execution
and delivery of the Indenture and compliance with the provisions on the Trustee's part
contained therein, will not conflict with or constitute a breach of or default under any
law, administrative regulation, judgment, decree, loan agreement, indenture, note,
resolution, agreement or other instrument to which the Trustee is a party or is otherwise
subject (except that no representation, warranty or agreement is made with respect to any
federal or state securities or blue sky laws or regulations), which conflict, breach or
default would materially impair the ability of the Trustee to perform its obligations under
the Indenture, nor will any such execution, delivery, adoption or compliance result in the
creation or imposition of any lien, charge or other security interest or encumbrance of any
nature whatsoever upon any of the properties or assets held by the Trustee pursuant to the
lien created by the Indenture under the terms of any such law, administrative regulation,
judgment, decree, loan agreement, indenture, bond, note, resolution, agreement or other
instrument, except as provided by the Indenture; and (E) to the best of the knowledge of
the Trustee, it has not been served with any action, suit, proceeding, inquiry or
investigation in law or in equity, before or by any court, governmental agency, public
board or body, nor is any such action or other proceeding threatened against the Trustee,
affecting the existence of the Trustee, or the titles of its officers to their respective offices
or seeking to prohibit, restrain, or enjoining the execution and delivery of the Bonds or
the collection of revenues to be applied to pay the principal, premium, if any, and interest
with respect to the Bonds, or the pledge thereof, or in any way contesting or affecting the
validity or enforceability of the Indenture, or contesting the powers of the Trustee or its
authority to enter into, adopt or perform its obligations under any of the foregoing to
which it is a party, wherein an unfavorable decision, ruling or funding would materially
adversely affect the validity or enforceability of the Indenture or the power and authority
of the Trustee to enter into and perform its duties under the Indenture and to authenticate
and deliver the Bonds to or upon the order of the Underwriter;
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(x) the opinion, dated the Closing Date and addressed to the Underwriter and
the City, of Counsel to the Trustee, to the effect that: (A) the Trustee has been duly
organized as a national banking association under the laws of the United States with trust
powers, having full power and authority to enter into and to perform its duties as Trustee
under the Indenture; (B) the Trustee has duly authorized, executed and delivered the
Indenture, and by all proper corporate action has authorized the acceptance of the trusts
of the Indenture; (C) the Indenture constitutes the legally valid and binding agreement of
the Trustee, enforceable against the Trustee in accordance with its terms, and (D) the
Bonds have been validly authenticated and delivered by the Trustee;
(xi) a certificate of a duly authorized official of the Escrow Agent, dated the
Closing Date, to the effect that: (A) the Escrow Agent is a national banking association
organized and existing under and by virtue of the laws of the United States, having the
full power and being qualified to enter into and perform its duties under the Escrow
Agreement and to authenticate and deliver the Bonds to the Underwriter; (B) the Escrow
Agent is duly authorized to enter into the Escrow Agreement; (C) ) the execution and
delivery of the Escrow Agreement and compliance with the provisions on the Escrow
Agent's part contained therein, will not conflict with or constitute a breach of or default
under any law, administrative regulation, judgment, decree, loan agreement, indenture,
note, resolution, agreement or other instrument to which the Escrow Agent is a party or is
otherwise subject (except that no representation, warranty or agreement is made with
respect to any federal or state securities or blue sky laws or regulations), which conflict,
breach or default would materially impair the ability of the Escrow Agent to perform its
obligations under the Escrow Agreement, nor will any such execution, delivery, adoption
or compliance result in the creation or imposition of any lien, charge or other security
interest or encumbrance of any nature whatsoever upon any of the properties or assets
held by the Escrow Agent under the terms of any such law, administrative regulation,
judgment, decree, loan agreement, indenture, bond, note, resolution, agreement or other
instrument, except as provided by the Escrow Agreement; and (E) to the best of the
knowledge of the Escrow Agent, it has not been served with any action, suit, proceeding,
inquiry or investigation in law or in equity, before or by any court, governmental agency,
public board or body, nor is any such action or other proceeding threatened against the
Escrow Agent, affecting the existence of the Escrow Agent, or the titles of its officers to
their respective offices or seeking to prohibit, restrain, or in any way contesting or
affecting the validity or enforceability of the Escrow Agreement, or contesting the
powers of the Escrow Agent or its authority to enter into, adopt or perform its obligations
under any of the foregoing to which it is a party, wherein an unfavorable decision, ruling
or funding would materially adversely affect the validity or enforceability of the Escrow
Agreement or the power and authority of the Escrow Agent to enter into and perform its
duties under the Escrow Agreement;
(xii) the opinion, dated the Closing Date and addressed to the Underwriter and
the City, of Counsel to the Escrow Agent, to the effect that: (A) the Escrow Agent has
been duly organized as a national banking association under the laws of the United States
with trust powers, having full power and authority to enter into and to perform its duties
as Escrow Agent under the Escrow Agreement; (B) the Escrow Agent has duly
authorized, executed and delivered the Escrow Agreement, and by all proper corporate
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action has authorized the acceptance of the Escrow Agreement; and (C) the Escrow
Agreement constitutes the legally valid and binding agreement of the Escrow Agent,
enforceable against the Escrow Agent in accordance with its terms;
(xiii) one certified copy of the general resolution of the Trustee authorizing the
execution and delivery of the Indenture;
(xiv) one copy of the Resolution, together with a certificate of the City Clerk,
dated as of the Closing Date, to the effect that such resolution is a true and complete copy
of the Resolution;
(xv) a Tax Certificate of the City in form and substance acceptable to Bond
Counsel;
(xvi) evidence that the federal tax information form 8038 -G has been prepared
for filing;
(xvii) a copy of the Notice of Proposed Sale and Report of Final Sale required to
be delivered to the California Debt and Investment Advisory Commission pursuant to
Section 8855(g) of the California Government Code;
(xviii) a copy of the District's executed Blanket Letter of Representation to The
Depository Trust Company;
(xix) [a certified copy of the municipal bond reserve surety policy issued by
, and any other documents executed in connection therewith;] and
(xx) evidence that the ratings on the Bonds as set forth in the Official
Statement are in full force and effect as of the Closing Date.
(xxi) such additional legal opinions, certificates, instruments or evidences
thereof and other documents as the Counsel to the Underwriter or Bond Counsel may
request to evidence the due authorization, execution and delivery of the Bonds and the
conformity of the Bonds and the Legal Documents with the terms of the Bonds and the
descriptions thereof in the Official Statement.
(d) the Underwriter shall have the right to terminate this Bond Purchase Agreement,
without liability therefor, by notification to the City if at any time at or prior to the Closing:
(i) any event shall occur or facts are discovered which causes any statement
contained in the Official Statement to be materially misleading or results in a failure of
the Official Statement to state a material fact necessary to make the statements in the
Official Statement, in the light of the circumstances under which they were made, not
misleading; or
(ii) the marketability of the Bonds or the market price thereof, in the opinion
of the Underwriter, has been materially and adversely affected by disruptive events,
occurrences or conditions in the securities or debt markets, including but not limited to,
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an amendment to the Constitution of the United States or by any legislation in or by the
Congress of the United States or by the State, or the amendment of legislation pending as
of the date of this Bond Purchase Agreement in the Congress of the United States, or the
recommendation to Congress or endorsement for passage (by press release, other form of
notice or otherwise) of legislation by the President of the United States, the Treasury
Department of the United States, the Internal Revenue Service or the Chairman or
ranking minority member of the Committee on Finance of the United States Senate or the
Committee on Ways and Means of the United States House of Representatives, or the
proposal for consideration of legislation by either such Committee or by any member
thereof, or the presentment of legislation for consideration as an option by either such
Committee, or by the staff of the Joint Committee on Taxation of the Congress of the
United States, or the favorable reporting for passage of legislation to either House of the
Congress of the United States by a Committee of such House to which such legislation
has been referred for consideration, or any decision of any Federal or State court or any
ruling or regulation (final, temporary or proposed) or official statement on behalf of the
United States Treasury Department, the Internal Revenue Service or other federal or State
authority materially adversely affecting the federal or State tax status of the City, or the
interest on bonds or notes or obligations of the general character of the Bonds; or
(iii) any legislation, ordinance, rule or regulation shall be introduced in, or be
enacted by any governmental body, department or agency of the State, or a decision by
any court of competent jurisdiction within the State or any court of the United States shall
be rendered which, in the opinion of the Underwriter, materially adversely affects the
market price of the Bonds; or
(iv) legislation shall be enacted by the Congress of the United States, or a
decision by a court of the United States shall be rendered, or a stop order, ruling,
regulation or official statement by, or on behalf of, the Securities and Exchange
Commission or any other governmental agency having jurisdiction of the subject matter
shall be issued or made to the effect that the issuance, offering or sale of obligations of
the general character of the Bonds, or the issuance, offering or sale of the Bonds,
including all underlying obligations, as contemplated hereby or by the Preliminary
Official Statement or the Official Statement, is in violation or would be in violation of, or
that obligations of the general character of the Bonds, or the Bonds, are not exempt from
registration under, any provision of the federal securities laws, including the Securities
Act of 1933, as amended and as then in effect, or that the Indenture needs to be qualified
under the Trust Indenture Act of 1939, as amended and as then in effect; or
(v) there shall have occurred any outbreak or escalation of hostilities or
terrorist activities or other local, national or international calamity or crisis, or a default
with respect to the debt obligations of, or the institution of proceedings under the federal
bankruptcy laws by or against, any state of the United States or agency thereof, or any
city in the United States having a population of over one million, the effect of which on
the financial markets of the United States will be such as in the Underwriter's judgment,
makes it impracticable for the Underwriter to market the Bonds or enforce contracts for
the sale of the Bonds; or
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4826 - 6545- 3356.5
(vi) there shall have occurred or any notice shall have been given of any
intended downgrading, suspension, withdrawal or negative change in credit watch status
by any national rating service to any of the City's obligations; or
(vii) the commencement of any action, suit or proceeding described in
Paragraph 6(n) hereof which, in the judgment of the Underwriter, materially adversely
affects the market price of the Bonds; or
(viii) the declaration of a general banking moratorium by federal, New York or
California authorities, the general suspension of trading on any national securities
exchange or a material disruption in securities settlement, payment or clearance services,
which event, in the judgment of the Underwriter, would materially adversely affect the
market price of the Bonds; or
(ix) the imposition by the New York Stock Exchange or other national
securities exchange, or any governmental authority, of any material restrictions not now
in force with respect to obligations of the general character of the Bonds or securities
generally, or the material increase of any such restrictions now in force, including those
relating to the extension of credit by, or the charge to net capital requirements of, the
Underwriter, which, in the judgment of the Underwriter, would materially adversely
affect the market price of the Bonds; or
(x) there shall have been any materially adverse change in the affairs of the
City which in the Underwriter's judgment materially adversely affects the ability of the
Underwriter to market the Bonds.
If the City shall be unable to satisfy the conditions contained in this Bond Purchase
Agreement, or if the obligations of the Underwriter shall be terminated for any reason permitted
by this Bond Purchase Agreement, this Bond Purchase Agreement shall terminate and neither the
Underwriter nor the City shall be under further obligation hereunder, except as further set forth
in Section 8 and Section 9 hereof.
8. Expenses
The Underwriter shall be under no obligation to pay, and the City shall pay or cause to be
paid the expenses incident to the performance of the obligations of the City hereunder including
but not limited to (a) the costs of the preparation and printing, or other reproduction (for
distribution on or prior to the date hereof) of the Legal Documents and the cost of preparing,
printing, issuing and delivering the definitive Bonds, (b) the fees and disbursements of any
counsel, financial advisors, accountants, verification agents or other experts or consultants
retained by the City, (c) the fees and disbursements of Bond Counsel, (d) the fees and
disbursements of Disclosure Counsel, (e) the fees and disbursements of the Trustee, and (f) the
cost of preparation and printing of the Preliminary Official Statement and any supplements and
amendments thereto and the cost of preparation and printing of the Official Statement and any
supplements and amendments thereto, including the requisite number of copies thereof for
distribution by the Underwriter. The City and the Underwriter intend that the City will pay all
expenses of the City's employees that are incidental to implementing this Bond Purchase
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Agreement, including, but not limited to, meals, transportation, and lodging, of those employees,
and the City shall reimburse the Underwriter if the Underwriter pays for any of such expenses on
behalf of the City.
All out -of- pocket expenses of the Underwriter, including the California Debt and
Investment Advisory Commission fee, fees of Underwriter' counsel, and other expenses (except
as provided above), shall be paid by the Underwriter from the Underwriter's discount set forth in
Section 1.
9. Covenants of the City
The City covenants with the Underwriter that:
(a) If between the date hereof and the date which is not less than 25 days after the
End of the Underwriting Period for the Bonds (as defined below), an event occurs, or facts or
conditions become known of which the City has knowledge which in the opinion of counsel to
the Underwriter or counsel to the City, might or would cause the information contained in the
Official Statement, as then supplemented or amended, to contain an untrue statement of a
material fact or to omit to state a material fact required to be stated therein or necessary to make
such information therein, in the light of the circumstances under which it was made, not
misleading, the City will notify the Underwriter, and, if in the opinion of the Underwriter, such
event requires the preparation and publication of a supplement or amendment to the Official
Statement, the City will forthwith prepare and furnish to the Underwriter (at the expense of the
City) a reasonable number of copies of an amendment of or supplement to the Official Statement
(in the form and substance satisfactory to the Underwriter) which will amend or supplement the
Official Statement so that it will not contain an untrue statement of a material fact or omit to state
a material fact necessary in order to make the statements therein, in the light of the circumstances
existing at the time the Official Statement is delivered to prospective purchasers, not misleading.
If such notification shall be after the Closing, the City shall forthwith provide to the Underwriter
such certificates as the Underwriter may deem necessary to evidence the truth and accuracy of
such supplement or amendment to the Official Statement. For the purposes of this subsection,
between the date hereof and the date which is 25 days after the End of the Underwriting Period
for the Bonds, the City will furnish such information with respect to itself as the Underwriter
may from time to time reasonably request;
(b) If the information contained in the Official Statement is amended or
supplemented pursuant to subparagraph (a) of this Section 9, at the time of such supplement or
amendment thereto and (unless subsequently again supplemented or amended pursuant to such
subparagraph) at all times subsequent thereto up to and including the date which is 25 days after
the End of the Underwriting Period for the Bonds, the portions of the Official Statement so
supplemented or amended (including any financial and statistical data contained therein),
excluding statements and information under the caption "UNDERWRITING" and information as
to bond prices on the inside front cover of the Official Statement, will not contain any untrue
statement of a material fact or omit to state a material fact required to be stated therein or
necessary to make such information therein, in the light of the circumstances under which it was
made, not misleading;
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(c) As used herein and for the purposes of the foregoing, the term "End of
Underwriting Period" for the Bonds shall mean the earlier of (i) the Closing Date unless the City
shall have been notified in writing to the contrary by the Underwriter on or prior to the Closing
Date or (ii) the date on which the End of the Underwriting Period for the Bonds has occurred
under the Rule, provided, however, that the City may treat as the End of the Underwriting Period
for the Bonds the date specified as such in a notice from the Underwriter stating the date which is
the End of the Underwriting Period;
(d) The City will advise the Underwriter immediately of receipt by the City of any
notification with respect to the suspension of the qualification of the Bonds for sale in any
jurisdiction or the initiation or threat of any proceeding for that purpose;
(e) The City will furnish such information, execute such instruments and take such
other action in cooperation with the Underwriter as the Underwriter may request to qualify the
Bonds for offer and sale under the Blue Sky or other securities laws and regulations of such
states and other jurisdictions of the United States as the Underwriter may designate; provided,
however, that the City shall not be required to register as a dealer or broker or foreign
corporation in any such state or jurisdiction or consent to service of process therein; and
(f) The City will perform all actions as may be requested by the Underwriter
(including delivery of an appropriate certificate with respect to the Preliminary Official
Statement) in order for the Underwriter to comply with the applicable provisions of the Rule.
(g) Between the date hereof and the Closing Date, without the prior written consent
of the Underwriter, the City will not have issued any bonds, notes, or other obligations for
borrowed money, in each case payable from Revenues.
10. Notices
Any notice or other communication to be given to the City under this Bond Purchase
Agreement may be given by delivering the same in writing at the City's address set forth above
and any such notice or other communication to be given to the Underwriter shall be delivered to
the following address:
Raymond James & Associates, Inc.
One Embarcadero, Suite 650
San Francisco, CA 94111
Attention: Wing -See L. Fox
Telephone: (415) 616 -8939
Facsimile: (415) 616 -8070
11. Parties in Interest
This Bond Purchase Agreement is made solely for the benefit of the City and the
Underwriter and no other person shall acquire or have any right hereunder or by virtue hereof.
All the representations and warranties of the parties hereto contained in this Bond Purchase
Agreement shall remain operative and in full force and effect regardless of any investigation
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4826 - 6545- 3356.5
made by or on behalf of the Underwriter or the City until the earlier of (a) delivery of and
payment for the Bonds hereunder and (b) any termination of this Bond Purchase Agreement.
12. Counterparts
This Bond Purchase Agreement may be executed in any number of counterparts, each of
which shall be an original, and all of which shall constitute but one and the same instrument.
13. Effectiveness
This Bond Purchase Agreement shall become effective and binding upon the respective
parties hereto upon the execution of the acceptance hereof by the duly authorized officers of the
City and shall be valid and enforceable as of the time of such acceptance.
14. Choice of Law
The validity, interpretation and performance of this Bond Purchase Agreement shall be
governed by the laws of the State of California, without regard to conflicts of law.
15. Severability
In the event any provision of this Bond Purchase Agreement shall be held invalid or
unenforceable by any court of competent jurisdiction, such holding shall not invalidate or render
unenforceable any other provision hereof.
16. Entire Agreement
The Bond Purchase Agreement, when accepted by the City in writing as heretofore
specified, shall constitute the entire agreement among the City and the Underwriter.
17. Headings
The headings of the sections of this Bond Purchase Agreement are inserted for
convenience only and shall not be deemed to be part hereof.
18. No Assignment
The rights and obligations created by this Bond Purchase Agreement shall not be subject
to assignment by the Underwriter or the City without the prior written consent of the other
parties hereto.
[The remainder of this page intentionally left blank.]
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4826 - 6545- 3356.5
IN WITNESS WHEREOF, the parties hereto, by their officers thereunto duly authorized,
have executed and delivered this Agreement, effective as of the day and year first above written.
RAYMOND JAMES & ASSOCIATES, INC.
RN
Accepted at as of the date hereof:
CITY OF UKIAH
wo
Name:
Title:
S -1
4826 - 6545- 3356.5
Vice President
SCHEDULEI
Maturity Date
(September 1) Principal Amount Interest Rate Yield Price
* Term Bond
C Priced to call date of 1, 20_
4826 - 6545- 3356.5
Attachment 4 - Exhibit C
Stradling Yocca Carlson & Rauth
Draft of 1127116
ESCROW AGREEMENT (2005 INSTALLMENT SALE AGREEMENT)
By and Between
CITY OF UKIAH
and
WELLS FARGO BANK, NATIONAL ASSOCIATION,
as Escrow Agent
Dated as of March 1, 2016
Relating to
INSTALLMENT SALE AGREEMENT, DATED AS OF SEPTEMBER 1, 2005, BY AND
BETWEEN THE CITY OF UKIAH AND THE ASSOCIATION OF BAY AREA
GOVERNMENTS
ESCROW AGREEMENT (2005 INSTALLMENT SALE AGREEMENT)
THIS ESCROW AGREEMENT (2005 INSTALLMENT SALE AGREEMENT), dated as of
March 1, 2016 (the "Escrow Agreement "), by and between the City of Ukiah (the "City ") and Wells
Fargo Bank, National Association, as Escrow Agent (the "Escrow Agent ") and as Prior Trustee (as
such term is defined below), is entered into in accordance with a resolution of the City Council of the
City adopted on February 3, 2016 and an Indenture of Trust, dated as of March 1, 2016 (the
"Indenture "), by and between the City and Wells Fargo Bank, National Association, as trustee (the
"Trustee "), to prepay all amounts due under the Installment Sale Agreement, dated as of September
1, 2005 (the "2005 Installment Sale Agreement'), by and between the Association of Bay Area
Governments (the "Prior Issuer ") and the City. The payments under the 2005 Installment Sale
Agreement secure a portion of the Association of Bay Area Governments 2005 Water and
Wastewater Revenue Bonds, Series A (the "2005 Bonds "), which were issued pursuant to an
Indenture of Trust, dated as of September 1, 2005 (the "Prior Indenture "), by and between the Prior
Issuer and Wells Fargo Bank, National Association, as trustee (the "Prior Trustee ").
RECITALS
A. The 2005 Installment Sale Agreement was delivered in the aggregate principal
amount of $14,355,000, of which $11,485,000 is currently outstanding.
B. The City has determined to issue its Water Revenue Refunding Bonds, Series 2016A
in the aggregate principal amount of $ (the "2016A Bonds "), a portion of the proceeds of
which will be used to optionally prepay all amounts due under the 2005 Installment Sale Agreement
on March 1, 2016 (the "Prepayment Date ") at a price equal to 100% of the outstanding aggregate
principal amount thereof, together with interest accrued with respect thereto through the Prepayment
Date (the "Prepayment Price ").
C. By irrevocably depositing with the Escrow Agent moneys (as permitted by, in the
manner prescribed by, and all in accordance with the 2005 Installment Sale Agreement), which
moneys will be used to purchase securities as described in Schedule A (the "Federal Securities "),
which Federal Securities satisfy the criteria for "Permitted Investments" set forth in Section 9.03 of
the Prior Indenture, provided that the principal of and the interest on the Federal Securities when paid
will provide money which[, together with the moneys deposited with the Escrow Agent at the same
time pursuant to this Escrow Agreement,] will be fully sufficient to pay and discharge the 2005
Installment Sale Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements in this
Escrow Agreement, the City and the Escrow Agent agree as follows:
SECTION 1. Deposit of Moneys. The City hereby deposits with the Escrow Agent
$ , comprised of a portion of the net sale proceeds of the 2016A Bonds[, and instructs the Prior
Trustee to transfer to the Escrow Agent $ , consisting of moneys held in the funds and accounts
established under the Prior Indenture with respect to the 2005 Installment Sale Agreement,] to be
held in irrevocable escrow by the Escrow Agent separate and apart from all other securities,
investments or moneys on deposit with the Escrow Agent, in a fund hereby created and established
and to be known as the "Escrow Fund," and to be applied solely as provided in this Escrow
Agreement. The City represents that such moneys are at least equal to an amount sufficient: (a) to
purchase the Federal Securities listed in Schedule A; and (b) to hold $ uninvested as cash.
SECTION 2. Investment of Moneys. The Escrow Agent acknowledges receipt of the
moneys described in Section 1 and agrees immediately: (a) to invest such moneys in the Federal
Securities listed in Schedule A; and (b) to deposit such Federal Securities in the Escrow Fund. The
Escrow Agent shall be entitled to rely upon the conclusion of (the "Verification Agent "), that
the Federal Securities listed in Schedule A mature and bear interest payable in such amounts and at
such times as, together with cash on deposit in the Escrow Fund, will be sufficient to pay when due
all regularly scheduled payments of interest and principal with respect to the 2005 Installment Sale
Agreement on and prior to the Prepayment Date and to pay on the Prepayment Date the Prepayment
Price of the 2005 Installment Sale Agreement.
SECTION 3. Investment of Any Remaining Moneys. At the written direction of the City,
the Escrow Agent shall reinvest any other amount of principal and interest, or any portion thereof,
received from the Federal Securities prior to the date on which such payment is required for the
purposes set forth herein, in noncallable Federal Securities maturing not later than the date on which
such payment or portion thereof is required for the purposes set forth in Section 5, at the written
direction of the City, as verified in a report (prepared by an independent certified public accountant
or firm of certified public accountants of favorable national reputation experienced in the refunding
of obligations of political subdivisions) to the effect that the reinvestment described in said report
will not adversely affect the sufficiency of the amounts of securities, investments and money in the
Escrow Fund to pay when due all regularly scheduled payments of interest and principal with respect
to the 2005 Installment Sale Agreement on and prior to the Prepayment Date, and to pay on the
Prepayment Date the Prepayment Price of the 2005 Installment Sale Agreement, and provided that
the City has obtained and delivered to the Escrow Agent an unqualified opinion of Stradling Yocca
Carlson & Rauth, a Professional Corporation, that such reinvestment will not adversely affect the
exclusion from gross income for federal income tax purposes of the interest portion of the Installment
Payments (as such term is defined in the 2005 Installment Sale Agreement) payable by the City or
interest on the 2016A Bonds. Any interest income resulting from investment or reinvestment of
moneys pursuant to this Section 3 which is not required for the purposes set forth in Section 5, as
verified in the letter of the Verification Agent originally obtained by the City with respect to the
prepayment of all amounts payable under the 2005 Installment Sale Agreement or in any other report
prepared by an independent certified public accountant or firm of certified public accountants of
favorable national reputation experienced in the refunding of tax - exempt obligations of political
subdivisions, shall be paid to the City promptly upon the receipt of such interest income by the
Escrow Agent. The determination of the City as to whether an accountant qualifies under this
Escrow Agreement shall be conclusive.
SECTION 4. Substitution of Securities. Upon the written request of the City, and subject
to the conditions and limitations herein set forth and applicable governmental rules and regulations,
the Escrow Agent shall sell, redeem or otherwise dispose of the Federal Securities, provided that
there are substituted therefor from the proceeds of the Federal Securities other Federal Securities, but
only after the City has obtained and delivered to the Escrow Agent: (a) an unqualified opinion of
Stradling Yocca Carlson & Rauth, a Professional Corporation, to the effect that the substitution of
securities is permitted under the 2005 Installment Sale Agreement and the Prior Indenture and that
such reinvestment will not adversely affect the exclusion from gross income for federal income tax
purposes of the interest portion of the Installment Payments payable by the City or interest with
respect to the 2016A Bonds; and (b) a report by a firm of independent certified public accountants to
2
the effect that the reinvestment described in said report will not adversely affect the sufficiency of the
amounts of securities, investments and money in the Escrow Fund to pay when due all regularly
scheduled payments of interest and principal with respect to the 2005 Installment Sale Agreement on
and prior to the Prepayment Date, and to pay on the Prepayment Date the Prepayment Price of the
2005 Installment Sale Agreement. The Escrow Agent shall not be liable or responsible for any loss
resulting from any reinvestment made pursuant to this Escrow Agreement and in full compliance
with the provisions hereof.
SECTION 5. Refunding of the 2005 Installment Sale Agreement.
(a) Payment. From the maturing principal of the Federal Securities, the
investment income and other earnings thereon and other moneys on deposit in the Escrow Fund, the
Escrow Agent shall pay the Prepayment Price of the 2005 Installment Sale Agreement on the
Prepayment Date, all as set forth in Exhibit 1 hereto.
(b) Required Notices. The Escrow Agent acknowledges that the prepayment of
the 2005 Installment Sale Agreement will cause a corresponding redemption and defeasance of that
portion of the 2005 Bonds that is secured by payments under the 2005 Installment Sale Agreement.
The Escrow Agent further acknowledges that, upon the funding of the Escrow Fund as
provided herein and the receipt of the Irrevocable Instructions and Request to Prior Trustee and
Escrow Agent attached hereto as Exhibit 2: (1) the Escrow Agent is in receipt of the items that
constitute all of the conditions precedent to the prepayment of the 2005 Installment Sale Agreement
and the corresponding redemption and defeasance of that portion of the 2005 Bonds that is secured
by payments under the 2005 Installment Sale Agreement; (2) the 2005 Installment Sale Agreement
shall be prepaid in accordance with its terms; and (3) that portion of the 2005 Bonds that is secured
by payments under the 2005 Installment Sale Agreement shall be paid in accordance with the Prior
Indenture and shall cease to be entitled to any lien, benefit or security under the Prior Indenture.
By executing the Irrevocable Instructions and Request to Prior Trustee and Escrow Agent
attached hereto as Exhibit 2, the Escrow Bank has agreed to mail a notice of redemption and a notice
of defeasance of that portion of the 2005 Bonds that is secured by payments under the 2005
Installment Sale Agreement in accordance with Sections 2.03(c) and 9.03, respectively, of the Prior
Indenture, as required to provide for the redemption of that portion of the 2005 Bonds that is secured
by payments under the 2005 Installment Sale Agreement in accordance with this Section 5.
(c) Unclaimed Moneys. Any moneys which remain unclaimed for two years
after March 1, 2016 shall be repaid by the Escrow Agent to the City.
(d) Priority of Payments. The Prior Trustee, on behalf of the owners of those
2005 Bonds that are secured by payments under the 2005 Installment Sale Agreement, shall have a
first and exclusive lien on all moneys and securities in the Escrow Fund until such moneys and such
securities are used and applied as provided in this Escrow Agreement.
(e) Termination of Obligation. As provided in the 2005 Installment Sale
Agreement, upon the deposit of moneys with the Escrow Agent in the Escrow Fund as set forth in
Section 1 hereof and the purchase of the various Federal Securities as provided in Section 2 hereof,
all obligations of the City under the 2005 Installment Sale Agreement shall cease, terminate and
become void (except for the rights of the Prior Trustee and the obligation of the City to have the
Federal Securities and moneys on deposit in the Escrow Fund applied to Installment Payments).
SECTION 6. Application of Certain Terms of the 2005 Installment Sale Agreement and the
Prior Indenture. All of the terms of the 2005 Installment Sale Agreement relating to notices to the
Prior Trustee, the Prior Issuer and the City and the making of payments of principal and interest
under the 2005 Installment Sale Agreement are incorporated in this Escrow Agreement as if set forth
in full herein. The procedures set forth in Article VI of the Prior Indenture relating to the resignation
and removal and merger of the Prior Trustee under the Prior Indenture are also incorporated in this
Escrow Agreement as if set forth in full herein and shall be the procedures to be followed with
respect to any resignation or removal of the Escrow Agent hereunder.
SECTION 7. Performance of Duties. The Escrow Agent agrees to perform the duties set
forth herein and shall have no responsibility to take any action or omit to take any action not set forth
herein.
SECTION 8. Escrow Agent's Authority to Make Investments. Except as provided in
Section 2 hereof, the Escrow Agent shall have no power or duty to invest any funds held under this
Escrow Agreement or to sell, transfer or otherwise dispose of the moneys or Federal Securities held
hereunder.
SECTION 9. Indemnity. The City hereby assumes liability for, and hereby agrees (whether
or not any of the transactions contemplated hereby are consummated) to indemnify, protect, save and
keep harmless the Escrow Agent and its respective successors, assigns, directors, agents, employees
and servants, from and against any and all liabilities, obligations, losses, damages, penalties, claims,
actions, suits, costs, expenses and disbursements (including reasonable legal fees and disbursements)
of whatsoever kind and nature which may be imposed on, incurred by, or asserted against, the
Escrow Agent at any time (whether or not also indemnified against the same by the City or any other
person under any other agreement or instrument, but without double indemnity) in any way relating
to or arising out of the execution, delivery and performance of this Escrow Agreement, the
establishment hereunder of the Escrow Fund, the acceptance of the funds deposited therein, the
acceptance of the funds and securities deposited therein, the retention of the proceeds thereof and any
payment, transfer or other application of moneys by the Escrow Agent in accordance with the
provisions of this Escrow Agreement; provided, however, that the City shall not be required to
indemnify the Escrow Agent against the Escrow Agent's own negligence or willful misconduct or
the negligent or willful misconduct of the Escrow Agent's respective agents and employees or the
breach by the Escrow Agent of the terms of this Escrow Agreement. In no event shall the City or the
Escrow Agent be liable to any person by reason of the transactions contemplated hereby other than to
each other as set forth in this Section. The indemnities contained in this Section shall survive the
termination of this Escrow Agreement.
SECTION 10. Responsibilities of the Escrow Agent. The Escrow Agent and its respective
successors, assigns, agents and servants shall not be held to any personal liability whatsoever, in tort,
contract or otherwise, in connection with the execution and delivery of this Escrow Agreement, the
establishment of the Escrow Fund, the acceptance of the moneys or securities deposited therein, the
retention of the Federal Securities or the proceeds thereof, the sufficiency of the Federal Securities to
pay the regularly scheduled payments under the 2005 Installment Sale Agreement through the
Prepayment Date and to pay the Prepayment Price of the 2005 Installment Sale Agreement on the
Prepayment Date or any payment, transfer or other application of moneys or obligations by the
E
Escrow Agent in accordance with the provisions of this Escrow Agreement or by reason of any non -
negligent act, non - negligent omission or non - negligent error of the Escrow Agent made in good faith
in the conduct of its duties. The recitals of fact herein shall be taken as the statements of the City,
and the Escrow Agent assumes no responsibility for the correctness thereof. The Escrow Agent
makes no representation as to the sufficiency of the funds deposited in the Escrow Fund to
accomplish the prepayment of all amounts payable under the 2005 Installment Sale Agreement on
the Prepayment Date or to the validity of this Escrow Agreement as to the City and, except as
otherwise provided herein, the Escrow Agent shall incur no liability with respect thereto. The
Escrow Agent shall not be liable in connection with the performance of its duties under this Escrow
Agreement except for its own negligence, willful misconduct or default, and the duties and
obligations of the Escrow Agent shall be determined by the express provisions of this Escrow
Agreement. The Escrow Agent may consult with counsel, who may or may not be counsel to the
City, and in reliance upon the written opinion of such counsel shall have full and complete
authorization and protection with respect to any action taken, suffered or omitted by it in good faith
in accordance therewith. Whenever the Escrow Agent shall deem it necessary or desirable that a
matter be proved or established prior to taking, suffering, or omitting any action under this Escrow
Agreement, such matter may be deemed to be conclusively established by a certificate signed by an
authorized officer of the City.
The liability of the Escrow Agent to make the payments required by this Escrow Agreement
shall be limited to the moneys in the Escrow Fund.
No provision of this Escrow Agreement shall require the Escrow Agent to expend or risk its
own funds or otherwise incur any financial liability in the performance or exercise of any of its duties
hereunder, or in the exercise of its rights or powers.
The Escrow Agent shall not be liable for the accuracy of any calculations provided herein.
Any company into which the Escrow Agent may be merged or converted or with which it
may be consolidated or any company resulting from any merger, conversion or consolidation to
which it shall be a party or any company to which the Escrow Agent may sell or transfer all or
substantially all of its corporate trust business shall be the successor to the Escrow Agent without the
execution or filing of any paper or further act, anything herein to the contrary notwithstanding.
The City shall pay the Escrow Agent full compensation for its duties under this Escrow
Agreement, including out -of- pocket costs such as publication costs, redemption or redemption
expenses, legal fees and other costs and expenses relating hereto. Under no circumstances shall
amounts deposited in the Escrow Fund be deemed to be available for said purposes.
The Escrow Agent may execute any of the trusts or powers hereunder or perform any duties
hereunder either directly or by or through agents, attorneys, custodians or nominees appointed with
due care, and shall not be responsible for any willful misconduct or negligence on the part of any
agent, attorney, custodian or nominee so appointed.
The Escrow Agent agrees to accept and act upon instructions or directions pursuant to this
Escrow Agreement sent by unsecured e-mail, facsimile transmission or other similar unsecured
electronic methods, provided, however, that, the Escrow Agent shall have received an incumbency
certificate listing persons designated to give such instructions or directions and containing specimen
signatures of such designated persons, which such incumbency certificate shall be amended and
5
replaced whenever a person is to be added or deleted from the listing. If the City elects to give the
Escrow Agent e -mail or facsimile instructions (or instructions by a similar electronic method) and the
Escrow Agent in its discretion elects to act upon such instructions, the Escrow Agent's understanding
of such instructions shall be deemed controlling. The Escrow Agent shall not be liable for any
losses, costs or expenses arising directly or indirectly from the Escrow Agent's reliance upon and
compliance with such instructions notwithstanding that such instructions conflict or are inconsistent
with a subsequent written instruction. The City agrees to assume all risks arising out of the use of
such electronic methods to submit instructions and directions to the Escrow Agent, including without
limitation the risk of the Escrow Agent acting on unauthorized instructions, and the risk of
interception and misuse by third parties.
The Escrow Agent shall furnish the City with periodic cash transaction statements that
include detail for all investment transactions effected by the Escrow Agent or brokers selected by the
City. Upon the City's election, such statements will be delivered via the Escrow Agent's online
service and upon electing such service, paper statements will be provided only upon request. The
City waives the right to receive brokerage confirmations of security transactions effected by the
Escrow Agent as they occur, to the extent permitted by law. The City further understands that trade
confirmations for securities transactions effected by the Escrow Agent will be available upon request
and at no additional cost and other trade confirmations may be obtained from the applicable broker.
SECTION 11. Amendments. This Escrow Agreement is made for the benefit of the City, the
Prior Issuer and the owners of the 2005 Bonds, and it shall not be repealed, revoked, altered or
amended without the written consent of all such owners, the Escrow Agent and the City; provided,
however, that upon the receipt by the Escrow Agent of an opinion of nationally recognized bond
counsel that the exclusion from gross income of interest on the 2016A Bonds and the 2005
Installment Sale Agreement will not be adversely affected for federal income tax purposes, the City
and the Escrow Agent may, without the consent of, or notice to, such owners, amend this Escrow
Agreement or enter into such agreements supplemental to this Escrow Agreement as shall not
adversely affect the rights of such owners and as shall not be inconsistent with the terms and
provisions of this Escrow Agreement for any one or more of the following purposes: (a) to cure any
ambiguity or formal defect or omission in this Escrow Agreement; (b) to grant to, or confer upon, the
Escrow Agent any additional rights, remedies, powers or authority that may lawfully be granted to,
or conferred upon, such owners or the Escrow Agent; and (c) to include under this Escrow
Agreement additional funds, securities or properties. The Escrow Agent shall be entitled to rely
conclusively upon an unqualified opinion of nationally recognized bond counsel with respect to
compliance with this Section, including the extent, if any, to which any change, modification,
addition or elimination affects the rights of the Prior Issuer or that any instrument executed hereunder
complies with the conditions and provisions of this Section.
SECTION 12. Term. This Escrow Agreement shall commence upon its execution and
delivery and shall terminate on the later to occur of either: (a) the date upon which the 2005
Installment Sale Agreement has been prepaid in accordance with this Escrow Agreement; or (b) the
date upon which no unclaimed moneys remain on deposit with the Escrow Agent and all amounts
owed to the Escrow Agent shall have been paid in full. Any unclaimed money which remains in the
Escrow Fund for two years from the date upon which the 2005 Installment Sale Agreement has been
prepaid in accordance with this Escrow Agreement shall be remitted by the Escrow Agent to the
City.
M
SECTION 13. Compensation. The Escrow Agent shall receive its reasonable fees and
expenses as previously agreed to and any other reasonable fees and expenses of the Escrow Agent
approved by the City; provided, however, that under no circumstances shall the Escrow Agent be
entitled to any lien, nor will it assert any lien whatsoever, on any moneys or obligations in the
Escrow Fund for the payment of fees and expenses for services rendered by the Escrow Agent under
this Escrow Agreement.
SECTION 14. Severability. If any one or more of the covenants or agreements to be
performed by the City or the Escrow Agent under this Escrow Agreement should be determined by a
court of competent jurisdiction to be contrary to law, such covenants or agreements shall be null and
void and shall be deemed separate from the remaining covenants and agreements herein contained
and shall in no way affect the validity of the remaining provisions of this Escrow Agreement.
SECTION 15. Counterparts. This Escrow Agreement may be executed in several
counterparts, all or any of which shall be regarded for all purposes as one original and shall constitute
and be but one and the same instrument.
SECTION 16. Governing Law. This Escrow Agreement shall be construed under the laws
of the State of California.
SECTION 17. Holidays. If the date for making any payment or the last date for performance
of any act or the exercising of any right, as provided in this Escrow Agreement, shall be a legal
holiday or a day on which banking institutions in the City in which is located the principal office of
the Escrow Agent are authorized by law to remain closed, such payment may be made or act
performed or right exercised on the next succeeding day not a legal holiday or a day on which such
banking institutions are authorized by law to remain closed, with the same force and effect as if done
on the nominal date provided in this Escrow Agreement, and no interest shall accrue for the period
after such nominal date.
SECTION 18. Notices. Any notice or demand which by any provision of this Escrow
Agreement is required or permitted to be given may be given or served by being deposited postage
prepaid in a post office letter box, delivered via courier or overnight mail or sent via fax or electronic
transmission addressed as follows:
If to the Escrow Agent: Wells Fargo Bank, National Association
333 Market Street, 18th Floor
San Francisco, California 94105
If to the City: City of Ukiah
300 Seminary Avenue
Ukiah, California 95842
Attention: City Manager
SECTION 19. Assignment. This Escrow Agreement shall not be assigned by the Escrow
Agent or any successor thereto without the prior written consent of the City.
[REMAINDER OF PAGE INTENTIONALL Y LEFT BLANK]
7
IN WITNESS WHEREOF, the parties hereto have caused this Escrow Agreement to be
executed by their duly authorized officers and attested as of the date and year first written above.
ATTEST:
City Clerk
CITY OF UKIAH
Mayor
[SIGNATURES CONTINUED ON NEXT PAGE.I
S -1
[SIGNATURE PAGE CONTINUED.]
WELLS FARGO BANK, NATIONAL
ASSOCIATION, as Escrow Agent and as Prior
Trustee
M.
Authorized Officer
The foregoing Escrow Agreement (2005 Installment Sale Agreement), dated as of March 1, 2015, by
and between the City of Ukiah and Wells Fargo Bank, National Association, is hereby
acknowledged.
ASSOCIATION OF BAY AREA GOVERNMENTS
am
Authorized Officer
S -2
SCHEDULE A
FEDERAL SECURITIES
Principal Interest
Security Maturity Amount Rate
A -1
EXHIBIT 1
ESCROW FUND PAYMENT SCHEDULE
Date
Princi alAmount
InterestAmount
Total
March 1, 2016
$
$
$
1 -1
EXHIBIT 2
IRREVOCABLE INSTRUCTIONS AND REQUEST TO
PRIOR TRUSTEE AND ESCROW BANK
Wells Fargo Bank, National Association
San Francisco, California
ASSOCIATION OF BAY AREA GOVERNMENTS
2005 WATER AND WASTEWATER REVENUE BONDS,
SERIES A
BASE CUSIP 07201R
Ladies and Gentlemen:
January 26, 2016
As trustee for the above - captioned obligations (the "2005 Bonds "), which were issued
pursuant to an Indenture of Trust, dated as of September 1, 2005 (the "2005 Indenture "), by and
between the Association of Bay Area Governments (the "Prior Issuer ") and Wells Fargo Bank,
National Association, as trustee (the "Prior Trustee "), you are hereby notified of the election of the
City of Ukiah (the "City ") to prepay on March 1, 2016 all outstanding amounts under the Installment
Sale Agreement, dated as of September 1, 2005 (the "2005 Installment Sale Agreement "), by and
between the City and the Prior Issuer, which will cause a corresponding redemption and defeasance
of a portion of the 2005 Bonds (such portion, the "Refunded Bonds ") in accordance with the 2005
Indenture.
You are hereby further instructed: (a) to mail on January 29, 2016 a notice of redemption of
the Refunded Bonds in substantially the form attached hereto as Exhibit 2 -A to the parties described
in and in accordance with Section 2.03(c) of the 2005 Indenture; and (b) to mail and to file with the
Municipal Securities Rulemaking Board's Electronic Municipal Market Access System upon the
defeasance of the Refunded Bonds a notice of defeasance in substantially the form attached hereto
as Exhibit 2 -B to the parties described in and in accordance with Section 9.03 of the 2005 Indenture.
2 -1
CITY OF UKIAH
City Manager
RECEIPT ACKNOWLEDGED AND CONSENTED TO:
WELLS FARGO BANK, NATIONAL ASSOCIATION
as Prior Trustee and Escrow Bank
Authorized Officer
2 -2
EXHIBIT 2 -A
NOTICE OF REDEMPTION
ASSOCIATION OF BAY AREA GOVERNMENTS
2005 WATER AND WASTEWATER REVENUE BONDS,
SERIES A
BASE CUSIP O72OIR
NOTICE IS HEREBY GIVEN to the owners of the above - captioned bonds (the "2005
Bonds ") pursuant to the Indenture of Trust, dated as of September 1, 2005 (the "Indenture "), by and
between the Association of Bay Area Governments (the "Prior Issuer ") and Wells Fargo Bank,
National Association, as trustee (the "Trustee "), that a portion of the outstanding 2005 Bonds in the
aggregate principal amount of $11,485,000 (the "Refunded Bonds "), which Refunded Bonds are
payable from Installment Payments made by the City of Ukiah (the "City ") to the Prior Issuer under
the Installment Sale Agreement, dated as of September 1, 2005, by and between the City and the
Prior Issuer, have been called for redemption on March 1, 2016 (the "Redemption Date "). The
Refunded Bonds to be called, which were originally issued on September 13, 2005, are as follows:
The Refunded Bonds will be payable on the Redemption Date at a price of 100% of the
principal amount plus accrued interest with respect thereto to such date (the "Redemption Price ").
The Redemption Price of the Refunded Bonds will become due and payable on the Redemption Date.
From and after the Redemption Date, interest on the Refunded Bonds to be redeemed will cease to
accrue, and such Refunded Bonds will be surrendered to the Trustee.
Funds sufficient to pay the Redemption Price of the Refunded Bonds will be on deposit with
the Trustee on the Redemption Date.
Redemption of the Refunded Bonds is conditional upon the receipt by the Trustee on or prior
to the Redemption Date of moneys sufficient to pay the principal of and interest on the Refunded
Bonds and, if such moneys have not been so received, this notice shall be of no force and effect and
2 -A -1
Amount of
Amount of 2005
Outstandiniz
Re unded
Bonds to
Original
Maturi
Amount of 2005
Bonds to be
Remain
CUSIP
(September 1)
Rate
Bonds
Deeased
Price
Outstandine
BQ4
2016
4.100%
$ 550,000
$ 375,000
100%
$ 175,000
BR2
2017
4.100
570,000
390,000
100
180,000
BSO
2018
4.100
595,000
405,000
too
190,000
BT8
2019
4.100
620,000
425,000
100
195,000
BU5
2020
4.200
640,000
435,000
100
205,000
BV3
2021
4.250
670,000
455,000
100
215,000
BWl
2022
4.250
700,000
475,000
100
225,000
BX9
2023
4.250
730,000
495,000
100
235,000
BY7
2024
4.375
765,000
520,000
100
245,000
BZ4
2025
4.400
795,000
540,000
100
255,000
CA8
2026
4.400
565,000
565,000
100
-
CB6
2027
4.400
590,000
590,000
100
CC4
2028
4.400
620,000
620,000
100
CD2
2029
4.500
645,000
645,000
100
CEO
2035
4.500
4,550,000
4,550,000
loo
The Refunded Bonds will be payable on the Redemption Date at a price of 100% of the
principal amount plus accrued interest with respect thereto to such date (the "Redemption Price ").
The Redemption Price of the Refunded Bonds will become due and payable on the Redemption Date.
From and after the Redemption Date, interest on the Refunded Bonds to be redeemed will cease to
accrue, and such Refunded Bonds will be surrendered to the Trustee.
Funds sufficient to pay the Redemption Price of the Refunded Bonds will be on deposit with
the Trustee on the Redemption Date.
Redemption of the Refunded Bonds is conditional upon the receipt by the Trustee on or prior
to the Redemption Date of moneys sufficient to pay the principal of and interest on the Refunded
Bonds and, if such moneys have not been so received, this notice shall be of no force and effect and
2 -A -1
the Trustee shall not be required to redeem such Refunded Bonds. In such event, the Trustee has the
right to rescind this notice.
To receive payment on the Redemption Date, owners of the Refunded Bonds should present
and surrender said Refunded Bonds on the Redemption Date at the address of the Trustee set forth
below:
By Registered or Certified Mail By Air Courier: If in person, by
Wells Fargo Bank Minnesota, N.A. Wells Fargo Bank Minnesota, N.A. Wells Fargo Bank, NA
Corporate Trust Operations Corporate Trust Operations Northstar East Building
P.O. Box 1517 N9303 -121 6082 nd Ave. So., 12th Fl.
Minneapolis, MN 55480 -1517 6th & Marquette Avenue Minneapolis, MN 55479
Minneapolis, MN 55479
If the Owner of any Refunded Bond subject to optional redemption fails to deliver such
Refunded Bond to the Trustee on the Redemption Date, such Refunded Bond shall nevertheless be
deemed redeemed on the Redemption Date and the Owner of such Refunded Bond shall have no
rights in respect thereof except to receive payment of the Redemption Price from funds held by the
Trustee for such payment.
Wells Fargo Bank, N.A. policy does not allow the safekeeping of securities within Corporate
Trust Operations for a period of longer than 30 days. Please DO NOT submit your securities for
payment more than 30 days in advance of the Prepayment Date. A signed W -9 is required to
accompany the Certificates or 28% of the Certificate prepayment proceeds will be withheld. If you
request payment of principal and /or interest via wire transfer, please be advised that there is a
$25.00 fee which will be deducted from your payment. Questions pertaining to the delivery of and
payment of Certificate tenders should be directed to customer service at 612- 667 -9764 or Toll Free
at 1- 800 - 344 -5128.
Note: The City and the Trustee shall not be responsible for the selection or use of the CUSIP
numbers selected, nor is any representation made as to their correctness in the notice or as printed
on any Refunded Bond. They are included solely for the convenience of the holders.
Dated this 29th day of January, 2016.
By: WELLS FARGO BANK, NATIONAL
ASSOCIATION, as Trustee
2 -A -2
EXHIBIT 2 -B
NOTICE OF DEFEASANCE
ASSOCIATION OF BAY AREA GOVERNMENTS
2005 WATER AND WASTEWATER REVENUE BONDS,
SERIES A
BASE CUSIP 07201 R
Notice is hereby given to the owners of a portion of the outstanding bonds described below
(collectively, the "Refunded Bonds ") that: (i) there have been deposited on the date hereof with
Wells Fargo Bank, National Association, as trustee (the "Trustee ") under the Indenture of Trust,
dated as of September 1, 2005 (the "Indenture "), by and between the Association of Bay Area
Governments (the "Prior Issuer ") and the Trustee, moneys and Permitted Investments as permitted by
the Indenture that are sufficient and available to pay or redeem, as applicable, the Refunded Bonds
on March 1, 2016 at a price equal to 100% of the aggregate principal amount of the Refunded Bonds
plus accrued interest with respect thereto; (ii) the Refunded Bonds are deemed to be paid; (iii) the
pledge of the Revenues and other funds provided for in the Indenture with respect to the Refunded
Bonds, and all other pecuniary obligations of the Prior Issuer under the Indenture with respect to all
such Refunded Bonds has ceased and terminated except as set forth in the Indenture; (iv) the lien of
the Indenture has been released with respect to the Refunded Bonds in accordance with Section 9.03
thereof, (v) the right, title and interest of the City of Ukiah (the "City ") under the Installment Sale
Agreement, dated as of September 1, 2005 (the "2005 Installment Sale Agreement "), by and between
the City and the Prior Issuer, and the obligations of the City under the 2005 Installment Sale
Agreement have ceased, terminated, become void and been completely discharged and satisfied; and
(vi) all obligations of the City, the Prior Issuer and the Trustee under the Indenture with respect to the
Refunded Bonds have ceased, terminated and become void. In addition, all obligations of the City
under the Continuing Disclosure Certificate executed by the City with respect to the Refunded Bonds
have ceased and terminated.
The Refunded Bonds consist of the portion of the Association of Bay Area Governments
2005 Water and Wastewater Revenue Bonds, Series A described in the fifth column below:
2 -B -1
By Registered or Certified Mail
Wells Fargo Bank Minnesota, N.A.
Corporate Trust Operations
P.O. BOX 1517
Minneapolis, MN 55480 -1517
By Air Courier:
Wells Fargo Bank Minnesota, N.A.
Corporate Trust Operations
N9303 -121
6th & Marquette Avenue
Minneapolis, MN 55479
New CUSIP for
2005 Bonds to
Remain
Outstanding
N/A
N/A
N/A
N/A
N/A
N/A
If in person, by
New CUSIP for
Defeased 2005
Bonds
N/A
N/A
N/A
N/A
N/A
N/A
Wells Fargo Bank, NA
Northstar East Building
6082 nd Ave. So., 12th Fl.
Minneapolis, MN 55479
No representation is made as to the correctness of the CUSIP number either as printed on any
Refunded Bond or as contained herein and any error in the CUSIP number shall not affect the
validity of the proceedings for redemption of the Refunded Bonds.
Dated this 1 st day of March, 2016.
WELLS FARGO BANK,
ASSOCIATION, as Trustee
2 -B -2
NATIONAL
Amount o
Amount of 2005
Outstanding
Re unded
Bonds to
Original
Maturi
Amount of2005
Bonds to be
Remain
CUSIP
(September 1)
Rate
Bonds
De eased
Price
Outstanding
BQ4
2016
4.100%
$ 550,000
$ 375,000
100%
$ 175,000
BR2
2017
4.100
570,000
390,000
100
180,000
BSO
2018
4.100
595,000
405,000
100
190,000
BT8
2019
4.100
620,000
425,000
100
195,000
BU5
2020
4.200
640,000
435,000
100
205,000
BV3
2021
4.250
670,000
455,000
100
215,000
BWl
2022
4.250
700,000
475,000
100
225,000
BX9
2023
4.250
730,000
495,000
100
235,000
BY7
2024
4.375
765,000
520,000
100
245,000
BZ4
2025
4.400
795,000
540,000
100
255,000
CA8
2026
4.400
565,000
565,000
100
-
CB6
2027
4.400
590,000
590,000
100
CC4
2028
4.400
620,000
620,000
100
CD2
2029
4.500
645,000
645,000
100
CEO
2035
4.500
4,550,000
4,550,000
100
All Refunded
Bonds shall be surrendered at the following address:
By Registered or Certified Mail
Wells Fargo Bank Minnesota, N.A.
Corporate Trust Operations
P.O. BOX 1517
Minneapolis, MN 55480 -1517
By Air Courier:
Wells Fargo Bank Minnesota, N.A.
Corporate Trust Operations
N9303 -121
6th & Marquette Avenue
Minneapolis, MN 55479
New CUSIP for
2005 Bonds to
Remain
Outstanding
N/A
N/A
N/A
N/A
N/A
N/A
If in person, by
New CUSIP for
Defeased 2005
Bonds
N/A
N/A
N/A
N/A
N/A
N/A
Wells Fargo Bank, NA
Northstar East Building
6082 nd Ave. So., 12th Fl.
Minneapolis, MN 55479
No representation is made as to the correctness of the CUSIP number either as printed on any
Refunded Bond or as contained herein and any error in the CUSIP number shall not affect the
validity of the proceedings for redemption of the Refunded Bonds.
Dated this 1 st day of March, 2016.
WELLS FARGO BANK,
ASSOCIATION, as Trustee
2 -B -2
NATIONAL
Attachment 5
„ Stradling Yocca Carlson & Rauth
o � Draft of 215116
PRELIMINARY OFFICIAL STATEMENT DATED FEBRUARY _, 2016
8 NEW ISSUE — BOOK ENTRY ONLY RATINGS: See the caption "RATINGS"
In the opinion of Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California ( "Bond Counsel'), under
o existing statutes, regulations, rulings and judicial decisions, and assuming the accuracy of certain representations and compliance with certain
w covenants and requirements described herein, interest (and original issue discount) on the 2016 Bonds is excluded from gross income for federal
o income tax purposes and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals
wand corporations. In the further opinion of Bond Counsel, interest (and original issue discount) on the Bonds is exempt from State of California
o personal income tax. Seethe caption "TAXMATTERS.'°
o �
o CITY OF UKIAH
° WATER REVENUE REFUNDING BONDS, SERIES 2016
b
o Dated: Date of Issuance Due: September 1, as set forth on the inside front cover page
° N The 2016 Bonds are being issued in fully registered form and, when issued, will be registered in the name of Cede & Co., as nominee
0
fl ;, of The Depository Trust Company, New York, New York. Purchasers of the 2016 Bonds will not receive securities representing their beneficial
oownership in the 2016 Bonds purchased. Interest on the 2016 Bonds is payable on September 1, 2016 and each March 1 and September 1
thereafter, until the maturity thereof. The principal of and interest on the 2016 Bonds are payable by the Trustee to Cede & Co., and such interest
F „ and principal payments are to be disbursed to the Beneficial Owners of the 2016 Bonds through their nominees.
The 2016 Bonds are subject to optional, mandatory sinking fund and extraordinary redemption as more fully described herein.
The 2016 Bonds are being issued to provide funds, together with certain other moneys: (i) to prepay all amounts payable under the
Installment Sale Agreement, dated as of September 1, 2005, by and between the City and the Association of Bay Area Governments; (ii) to
prepay all amounts payable under a loan contract with the State of California Department of Water Resources; (iii) to purchase a municipal bond
0 insurance policy from to guarantee the payment of principal of and interest on the 2016 Bonds; (iv) to purchase a municipal bond debt
service reserve insurance policy from for deposit in the Reserve Fund for the 2016 Bonds; and (v) to pay costs of issuance of the 2016
Bonds, all as more fully described herein.
d w The 2016 Bonds are being ssued pursuant to the Indenture of Trust, dated as of March 1, 2016, b and between the City of Ukiah and
a0i p- g p Y ty
Wells Fargo Bank, National Association, as trustee. The 2016 Bonds are limited obligations of the City payable solely from Net Revenues,
which consist of Revenues of the City's municipal water system remaining after payment of Operation and Maintenance Costs, and from
° •� amounts on deposit in certain funds and accounts created under the Indenture.
The City may incur additional obligations payable from Net Revenues on a parity with the obligation to a principal of and interest on
° h' Y g pY p ty g pY
p a the 2016 Bonds, subject to the terms and conditions of the Indenture, as more fully described herein.
y THE OBLIGATION OF THE CITY TO PAY PRINCIPAL OF AND INTEREST ON THE 2016 BONDS PURSUANT TO THE
°
o INDENTURE DOES NOT CONSTITUTE AN OBLIGATION FOR WHICH THE CITY IS OBLIGATED TO LEVY OR PLEDGE ANY
c FORM OF TAXATION OR FOR WHICH THE CITY HAS LEVIED OR PLEDGED ANY FORM OF TAXATION. THE OBLIGATION OF
o THE CITY TO PAY PRINCIPAL OF AND INTEREST ON THE 2016 BONDS IS A SPECIAL OBLIGATION OF THE CITY PAYABLE
= SOLELY FROM NET REVENUES, AND DOES NOT CONSTITUTE A DEBT OF THE CITY OR OF THE STATE OF CALIFORNIA OR
OF ANY POLITICAL SUBDIVISION THEREOF IN CONTRAVENTION OF ANY CONSTITUTIONAL OR STATUTORY DEBT
•E o LIMITATION OR RESTRICTION.
The scheduled payment of principal of and interest on the 2016 Bonds when due will be guaranteed under an insurance policy to be issued
Q o concurrently with the delivery of the 2016 Bonds by
d [BOND INSURER LOGO]
>~ D
° THIS COVER PAGE CONTAINS CERTAIN INFORMATION FOR REFERENCE ONLY. IT IS NOT A SUMMARY OF THIS
o ISSUE. INVESTORS ARE ADVISED TO READ THE ENTIRE OFFICIAL STATEMENT TO OBTAIN INFORMATION ESSENTIAL TO
THE MAKING OF AN INFORMED INVESTMENT DECISION.
MATURITY SCHEDULE — See Inside Front Cover Page
The 2016 Bonds are offered when, as and if issued and received by the Underwriter, subject to the approval of the valid, legal and
.� binding nature of the 2016 Bonds by Stradling Yocca Carlson & Rauth, a Professional Corporation, Bond Counsel, and certain other conditions.
I .y Certain legal matters will be passed upon for the City by Stradling Yocca Carlson & Rauth, a Professional Corporation, as Disclosure Counsel,
C' 5 3 and by David Rapport, City Attorney, for the Underwriter by its counsel, Jones Hall, A Professional Law Corporation, for the Insurer by its
counsel and for the Trustee by its counsel. It is anticipated that the 2016 Bonds will be available for delivery through the facilities of The
�, Depository Trust Company on or about March 1, 2016.
O Raymond James
w y
p o Dated: February_, 2016
a � �
APreliminary; subject to change.
MATURITY SCHEDULE
BASE CUSIP ®t
CITY OF UKIAH
WATER REVENUE REFUNDING BONDS, SERIES 2016
Maturity Date
(September 1) Principal Amount InterestRate Yield Price
Term 2016 Bonds maturing September 1, 20_, Yield %, Price
CUSIP",
Suffix
, CUSIP ®t Suffix
Preliminary; subject to change.
t CUSIP® is a registered trademark of the American Bankers Association. CUSIP Global Services (CGS) is managed on behalf of the American
Bankers Association by S&P Capital IQ. Copyright® 2016 CUSIP Global Services. All rights reserved. CUSIP" data herein is provided by
CUSIP Global Services. This data is not intended to create a database and does not serve in any way as a substitute for the CGS database.
CUSIP' numbers are provided for convenience of reference only. Neither the City nor the Underwriter takes any responsibility for the accuracy
ofsuch numbers.
No dealer, broker, salesperson or other person has been authorized by the City or the Underwriter to give any
information or to make any representations other than those contained in this Official Statement in connection with the
offering made hereby and, if given or made, such other information or representations must not be relied upon as having
been authorized by the City or the Underwriter. This Official Statement does not constitute an offer to sell or the
solicitation of an offer to buy, nor shall there be any sale of the 2016 Bonds by a person in any jurisdiction in which it is
unlawful for such person to make such an offer, solicitation or sale.
This Official Statement is not to be construed as a contract with the purchasers of the 2016 Bonds. Statements
contained in this Official Statement which involve estimates, forecasts or matters of opinion, whether or not expressly so
described herein, are intended solely as such and are not to be construed as a representation of facts.
The Underwriter has provided the following sentence for inclusion in this Official Statement:
The Underwriter has reviewed the information in this Official Statement in
accordance with, and as a part of, its responsibilities to investors under the federal
securities laws as applied to the facts and circumstances of this transaction, but the
Underwriter does not guarantee the accuracy or completeness of such information.
The information set forth herein has been obtained from official sources which are believed to be reliable but it is
not guaranteed as to accuracy or completeness, and is not to be construed as a representation by the Underwriter. The
information and expression of opinions herein are subject to change without notice and neither delivery of this Official
Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no
change in the affairs of the City since the date hereof.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVERALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE 2016 BONDS AT A LEVEL
THAT MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY
BE DISCONTINUED AT ANY TIME. THE UNDERWRITER MAY OFFER AND SELL THE 2016 BONDS TO
CERTAIN DEALERS AND DEALER BANKS AND BANKS ACTING AS AGENT AND OTHERS AT PRICES
LOWER THAN THE PUBLIC OFFERING PRICES STATED ON THE COVER PAGE HEREOF AND SAID PUBLIC
OFFERING PRICES MAY BE CHANGED FROM TIME TO TIME BY THE UNDERWRITER.
CERTAIN STATEMENTS CONTAINED IN THIS OFFICIAL STATEMENT REFLECT NOT HISTORICAL
FACTS BUT FORECASTS AND "FORWARD- LOOKING STATEMENTS." NO ASSURANCE CAN BE GIVEN
THAT THE FUTURE RESULTS DISCUSSED HEREIN WILL BE ACHIEVED, AND ACTUAL RESULTS MAY
DIFFER MATERIALLY FROM THE FORECASTS DESCRIBED HEREIN. IN THIS RESPECT, THE WORDS
"ESTIMATE," "PROJECT," "ANTICIPATE," "EXPECT," "INTEND," "BELIEVE" AND SIMILAR EXPRESSIONS
ARE INTENDED TO IDENTIFY FORWARD - LOOKING STATEMENTS WITHIN THE MEANING OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995, SECTION 21E OF THE UNITED STATES
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND SECTION 27A OF THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED. ALL PROJECTIONS, FORECASTS, ASSUMPTIONS, EXPRESSIONS
OF OPINIONS, ESTIMATES AND OTHER FORWARD - LOOKING STATEMENTS ARE EXPRESSLY QUALIFIED
IN THEIR ENTIRETY BY THE CAUTIONARY STATEMENTS SET FORTH IN THIS OFFICIAL STATEMENT.
The 2016 Bonds have not been registered under the Securities Act of 1933, as amended, in reliance upon an
exemption contained in such act. The 2016 Bonds have not been registered or qualified under the securities laws of any
state. The Indenture has not been qualified under the Trust Indenture Act of 1939, as amended, in reliance upon an
exemption contained in such act.
The City maintains a website. However, the information presented there is not part of this Official Statement and
should not be relied upon in making an investment decision with respect to the 2016 Bonds.
[BOND INSURANCE LANGUAGE TO COME]
CITY OF UKIAH
COUNTY OF MENDOCINO
STATE OF CALIFORNIA
MAYOR AND MEMBERS OF THE CITY COUNCIL
Steve Scalmanini, Mayor
Jim Brown, Vice Mayor
Kevin Doble, Council Member
Maureen Mulheren, Council Member
Douglas Crane, Council Member
STAFF
Sage Sangiacomo, City Manager
Karen Scalabrini, Finance Director
Kristine Lawler, City Clerk
Tim Eriksen, Public Works Director /City Engineer
Sean White, Water and Sewer Utilities Director
SPECIAL SERVICES
City Attorney
David Rapport
Rapport & Marston
Ukiah, California
Financial Advisor
Public Financial Management Inc.
San Francisco, California
Bond Counsel and Disclosure Counsel
Stradling Yocca Carlson & Rauth, a Professional Corporation
Newport Beach, California
Trustee
Wells Fargo Bank, National Association
San Francisco, California
TABLE OF CONTENTS
SUMMARY STATEMENT .................... ...............................
WATER REVENUE REFUNDING BONDS, SERIES 2016
INTRODUCTION ................................... ...............................
REFUNDING PLAN ............................... ...............................
2005 Installment Sale Agreement ..... ...............................
StateLoan ......................................... ...............................
THE2016 BONDS ............................................................. ...............................
General Provisions ....................................................... ...............................
Transfers and Exchanges Upon Termination of Book Entry Only System.
Redemption of the 2016 Bonds .................................... ...............................
Noticeof Redemption .................................................. ...............................
BookEntry Only System ............................................. ...............................
DEBT SERVICE PAYMENT SCHEDULE
SECURITY FOR THE 2016 BONDS ..............................
Limited Obligations Payable From Net Revenues.....
Rate Covenant ............................. ...............................
Additional Indebtedness .............................................
ReserveFund .............................. ...............................
Insurance; Reconstruction, Repair and Replacement.
Rate Stabilization Fund ............... ...............................
ESTIMATED SOURCES AND USES OF FUNDS
BOND INSURANCE
Page
2
2
2
2
2
3
4
4
5
5
.6
.6
.6
.7
.8
.9
10
10
11
THECITY OF UKIAH ....................................................................................................... ............................... 11
General.......................................................................................................................... ............................... 11
Service Area and Land Use ........................................................................................... ............................... 11
CityCouncil .................................................................................................................. ............................... 11
Employeesand Management ........................................................................................ ............................... 12
Defined Benefit Pension Plan ....................................................................................... ............................... 13
No Other Post - Employment Benefits ............................................................................ ............................... 17
BudgetProcess .............................................................................................................. ............................... 17
CityInsurance ............................................................................................................... ............................... 17
NoParity Obligations .................................................................................................... ............................... 17
SeismicConsiderations ................................................................................................. ............................... 18
FinancialStatements ..................................................................................................... ............................... 18
THE WATER SYSTEM OF THE CITY ............................................................................. ............................... 18
General.......................................................................................................................... ............................... 18
WaterSupply ................................................................................................................ ............................... 19
DroughtMeasures ........................................................................................................... .............................20
TheWater System ......................................................................................................... ............................... 23
Largest Water System Customers ................................................................................. ............................... 26
Water System Rates and Charges ................................................................................. ............................... 26
Future Water System Improvements ............................................................................. ............................... 28
WaterSystem Reserves ................................................................................................. ............................... 28
Historic Water System Operating Results and Debt Service Coverage .......................... .............................29
Projected Water System Operating Results and Debt Service Coverage ...................... ............................... 30
CONSTITUTIONAL LIMITATIONS ON APPROPRIATIONS AND CHARGES .......... ............................... 31
ArticleX11I13 ................................................................................................................. ............................... 31
TABLE OF CONTENTS
(continued)
Page
Proposition218 ............................................................................................................. ...............................
31
Proposition26 ............................................................................................................... ...............................
33
FutureInitiatives ........................................................................................................... ...............................
33
CERTAIN RISKS TO BONDHOLDERS ........................................................................... ...............................
34
LimitedObligations ...................................................................................................... ...............................
34
Accuracyof Assumptions ............................................................................................. ...............................
34
SystemDemand ............................................................................................................ ...............................
34
SystemExpenses ........................................................................................................... ...............................
34
LimitedRecourse on Default ........................................................................................ ...............................
34
Rate - Setting Process under Proposition 218 ................................................................. ...............................
35
Statutory and Regulatory Compliance .......................................................................... ...............................
35
NaturalDisasters ........................................................................................................... ...............................
35
Limitationson Remedies .............................................................................................. ...............................
35
Lossof Tax Exemption ................................................................................................. ...............................
36
SecondaryMarket ......................................................................................................... ...............................
36
ParityObligations ......................................................................................................... ...............................
36
Risks Associated with Bond Insurance ......................................................................... ...............................
37
APPROVAL OF LEGAL PROCEEDINGS ........................................................................ ...............................
37
LITIGATION...................................................................................................................... ...............................
37
TAXMATTERS .................................................................................................................... .............................38
RATINGS............................................................................................................................ ...............................
39
UNDERWRITING.............................................................................................................. ...............................
40
CONTINUING DISCLOSURE UNDERTAKING ............................................................... .............................41
FINANCIAL ADVISOR ..................................................................................................... ...............................
41
FINANCIALINTERESTS .................................................................................................... .............................41
MISCELLANEOUS............................................................................................................ ...............................
42
APPENDIX A FINANCIAL STATEMENTS ............................................................ ...............................
A -1
APPENDIX B DEFINITIONS AND SUMMARY OF THE INDENTURE .............. ...............................
B -I
APPENDIX C FORM OF OPINION OF BOND COUNSEL .................................... ...............................
C -1
APPENDIX D INFORMATION CONCERNING DTC ................................................ ............................D
-1
APPENDIX E FORM OF CONTINUING DISCLOSURE CERTIFICATE ............. ...............................
E -1
APPENDIX F SPECIMEN MUNICIPAL BOND INSURANCE POLICY .................. ............................F
-1
I
SUMMARY STATEMENT
This Summary Statement is subject in all respects to the more complete information contained in this
Official Statement, and the offering of the 2016 Bonds to potential investors is made only by means of the
entire Official Statement. Capitalized terms used and not otherwise defined in this Summary Statement have
the meanings ascribed to them in this Official Statement.
Purpose. The 2016 Bonds are being issued to provide funds, together with certain other moneys: (i)
to prepay all amounts payable under the Installment Sale Agreement, dated as of September 1, 2005, by and
between the City and the Association of Bay Area Governments; (ii) to prepay all amounts payable under a
loan contract with the State of California Department of Water Resources; (iii) to purchase a municipal bond
insurance policy from to guarantee the payment of principal of and interest on the 2016 Bonds; (iv) to
purchase a municipal bond debt service reserve insurance policy from for deposit in the Reserve Fund
for the 2016 Bonds; and (v) to pay costs of issuance of the 2016 Bonds, all as more fully described herein. See
the captions "REFUNDING PLAN," "BOND INSURANCE" and "ESTIMATED SOURCES AND USES OF
FUNDS."
Security for the 2016 Bonds. The 2016 Bonds are limited obligations of the City payable solely from
Net Revenues, which consist of Revenues of the City's municipal water system remaining after payment of
Operation and Maintenance Costs, and from amounts on deposit in certain funds and accounts created under
the Indenture. The City may incur additional obligations payable on a parity with the obligation to pay
principal of and interest on the 2016 Bonds in the future as described herein.
THE OBLIGATION OF THE CITY TO PAY PRINCIPAL OF AND INTEREST ON THE 2016
BONDS PURSUANT TO THE INDENTURE DOES NOT CONSTITUTE AN OBLIGATION FOR WHICH
THE CITY IS OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION OR FOR WHICH THE
CITY HAS LEVIED OR PLEDGED ANY FORM OF TAXATION. THE OBLIGATION OF THE CITY TO
PAY PRINCIPAL OF AND INTEREST ON THE 2016 BONDS IS A SPECIAL OBLIGATION OF THE
CITY PAYABLE SOLELY FROM NET REVENUES, AND DOES NOT CONSTITUTE A DEBT OF THE
CITY OR OF THE STATE OF CALIFORNIA OR ANY POLITICAL SUBDIVISION THEREOF IN
CONTRAVENTION OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMITATION OR
RESTRICTION.
See the caption "SECURITY FOR THE 2016 BONDS."
Refunding Plan. A portion of the proceeds of the 2016 Bonds will be transferred to Wells Fargo
Bank, National Association, as trustee with respect to the 2005 Installment Sale Agreement, on the date of
issuance of the 2016 Bonds. The amount transferred to Wells Fargo Bank, National Association will be
applied on such date to prepay the $11,485,000 principal amount outstanding under the 2005 Installment Sale
Agreement, plus accrued interest with respect thereto, and delivered to the State of California Department of
Water Resources to prepay all amounts payable under a loan contract with the State of California Department
of Water Resources. See the caption "REFUNDING PLAN."
Rate Covenant. The Indenture requires the City, at all times while any of the 2016 Bonds remain
unpaid, to the fullest extent permitted by law, to fix and prescribe, at the commencement of each Fiscal Year,
rates and charges for the Water Service provided by the Water System which are reasonably expected, at the
commencement of such Fiscal Year, to be at least sufficient to yield during such Fiscal Year Net Revenues
(which, when calculated for purposes of the foregoing covenant, do not include amounts transferred from the
Rate Stabilization Fund pursuant to the Indenture that are in excess of 20% of Debt Service for such Fiscal
Year) equal to 120% of Debt Service for such Fiscal Year. See the caption "SECURITY FOR THE 2016
BONDS —Rate Covenant."
Additional Contracts and Bonds. The Indenture permits the City to execute any Contracts or issue
any Bonds on a parity with the obligation to pay principal of and interest on the 2016 Bonds, provided that
certain conditions are satisfied as described herein. See the caption "SECURITY FOR THE 2016 BONDS —
Additional Indebtedness." The Indenture also permits the City to execute or issue obligations payable on a
subordinate basis to the 2016 Bonds.
Bond Insurance. Payment of the principal of and interest on the 2016 Bonds will be insured by a
municipal bond insurance policy to be issued by concurrently with the issuance of the 2016 Bonds. See
the caption "BOND INSURANCE."
Reserve Fund. A Reserve Fund for the 2016 Bonds has been established pursuant to the Indenture.
has committed to issue, concurrently with the issuance of the 2016 Bonds, a municipal bond debt service
reserve insurance policy for the benefit of the 2016 Bonds in the initial principal amount of $ ,* which
constitutes the Reserve Fund Requirement. The Reserve Policy will be deposited in the Reserve Fund. The
City is not obligated: (i) to make any additional deposits into the Reserve Fund in the event that defaults
on its obligation to make payments under the Reserve Policy; or (ii) to replace the Reserve Policy in the event
of a rating downgrade of _. See the caption "SECURITY FOR THE 2016 BONDS — Reserve Fund."
Redemption. The 2016 Bonds are subject to optional, mandatory sinking fund and extraordinary
redemption prior to maturity as described herein. See the caption "THE 2016 BONDS — Redemption of the
2016 Bonds."
The City and the Water System. The City encompasses approximately five square miles and is
located in Mendocino County (the "County "), approximately 100 miles north of San Francisco in the northern
coastal region of the State on U.S. Highway 101. The area is centrally located between the San Francisco Bay
area, Eureka and Sacramento. The City was incorporated in 1876 and is a general law city operating under a
City Council /City Manager form of government. The City has an estimated population of approximately
16,075 people.
In Fiscal Year 2015, the Water System supplied approximately 2,156 acre -feet of potable water
through approximately 4,570 single- family residential and 1,151 multi - family residential and commercial
(including governmental, landscape, fire service and other) connections.
The Water System's service area includes the incorporated area of the City and certain adjacent
unincorporated areas.
The City's primary source of water is surface water, which is supplied by the Russian River and two
alluvial wells adjacent thereto. The City also extracts groundwater from three wells located in the Ukiah
Valley Groundwater Basin.
For information concerning the Water System, see the caption "THE WATER SYSTEM OF THE
CITY." For general information regarding the City, see the caption "THE CITY OF UKIAH" and Appendix
A.
Preliminary; subject to change.
ii
CITY OF UKIAH
WATER REVENUE REFUNDING BONDS, SERIES 2016
INTRODUCTION
This Official Statement, including the front cover page, the inside front cover page and all appendices
hereto, provides certain information concerning the sale and delivery of the City of Ukiah Water Revenue
Refunding Bonds, Series 2016 (the "2016 Bonds "). The 2016 Bonds are being issued pursuant to an Indenture
of Trust, dated as of March 1, 2016 (the "Indenture "), by and between the City of Ukiah (the "City") and Wells
Fargo Bank, National Association, San Francisco, California, as trustee (the "Trustee "). Descriptions and
summaries of various documents set forth in this Official Statement do not purport to be comprehensive or
definitive, and reference is made to each document for complete details of all terms and conditions. All
statements herein are qualified in their entirety by reference to each document. Capitalized terms used and not
otherwise defined herein have the meanings ascribed to them in Appendix B.
The 2016 Bonds are being issued to provide funds, together with certain other moneys: (i) to prepay
all amounts payable under the Installment Sale Agreement, dated as of September 1, 2005 (the "2005
Installment Sale Agreement "), by and between the City and the Association of Bay Area Governments
( "ABAG "), which is currently outstanding in the principal amount of $11,485,000; (ii) to prepay all amounts
payable under Loan Contract No. E54304, dated September 30, 1988 (the "State Loan "), by and between the
City and the State of California Department of Water Resources ( "DWR" ); (iii) to purchase a municipal bond
insurance policy (the "Policy ") from ( "_" or the "Insurer ") to guarantee the payment of principal of
and interest on the 2016 Bonds; (iv) to purchase a municipal bond debt service reserve insurance policy (the
"Reserve Policy ") from the Insurer for deposit in the Reserve Fund for the 2016 Bonds; and (v) to pay costs of
issuance of the 2016 Bonds. See the captions "REFUNDING PLAN," "BOND INSURANCE" and
"ESTIMATED SOURCES AND USES OF FUNDS."
The 2016 Bonds are limited obligations of the City payable solely from Net Revenues, which consist
of Revenues of the City's municipal water system (the "Water System ") remaining after payment of Operation
and Maintenance Costs of the Water System, as such terms are defined in Appendix B, and from amounts on
deposit in certain funds and accounts created under the Indenture.
The City may incur additional obligations payable on a parity with the obligation to pay principal of
and interest on the 2016 Bonds in the future as described under the caption "SECURITY FOR THE 2016
BOND S— Additional Indebtedness."
The 2016 Bonds are subject to optional, mandatory sinking fund and extraordinary redemption prior to
maturity as described herein. See the caption "THE 2016 BONDS— Redemption of the 2016 Bonds."
Payment of the principal of and interest on the 2016 Bonds will be insured by the Policy to be issued
by the Insurer concurrently with the issuance of the 2016 Bonds. See the caption "BOND INSURANCE."
A Reserve Fund for the 2016 Bonds has been established pursuant to the Indenture. The Insurer has
committed to issue, concurrently with the issuance of the 2016 Bonds, the Reserve Policy for the benefit of the
2016 Bonds in the initial principal amount of $ ,* which constitutes the Reserve Fund Requirement. The
Reserve Policy will be deposited in the Reserve Fund. The City is not obligated: (i) to make any additional
deposits into the Reserve Fund in the event that the Insurer defaults on its obligation to make payments under
the Reserve Policy; or (ii) to replace the Reserve Policy in the event of a rating downgrade of the Insurer. See
the caption "SECURITY FOR THE 2016 BONDS — Reserve Fund."
Preliminary; subject to change.
The summaries and references to the Indenture and all documents, statutes, reports and other
instruments referred to herein do not purport to be complete, comprehensive or definitive, and each such
summary or reference is qualified in its entirety by reference to the full Indenture or the respective document,
statute, report or instrument, copies of which are available for inspection at the offices of the City in Ukiah,
California and will be available from the Trustee upon request and payment of duplication cost. The
capitalization of any word not conventionally capitalized or otherwise defined herein indicates that such word
is defined in the Indenture and, as used herein, has the meaning given to it in the Indenture. Unless otherwise
indicated, all financial and statistical information herein has been provided by the City.
The City regularly prepares a variety of reports, including audits, budgets and related documents. Any
registered owner of the 2016 Bonds may obtain a copy of such reports, as available, from the Trustee or the
City. Additional information regarding the Official Statement may be obtained by contacting the Trustee or
the City of Ukiah, 300 Seminary Avenue, Ukiah, California 95482, Attention: Finance Director.
REFUNDING PLAN
2005 Installment Sale Agreement
The City entered into the 2005 Installment Sale Agreement, which is currently outstanding in the
principal amount of $11,485,000, to finance certain capital improvements to the Water System. The City plans
to apply a portion of the proceeds of the 2016 Bonds, to pay all outstanding amounts under the 2005
Installment Sale Agreement on March 1, 2016 (the "Prepayment Date ") at a prepayment price equal to the
outstanding principal amount thereof, plus accrued interest with respect thereto, without premium (the
"Prepayment Price ").
Assuming the sufficiency of the moneys deposited with for such purposes, as a result of the deposit
and application of funds as provided above, the 2005 Installment Sale Agreement will be defeased pursuant to
the provisions thereof as of the date of issuance of the 2016 Bonds.
The portion of the proceeds of the 2016 Bonds constituting the Prepayment Price is pledged solely to
the payment of the Prepayment Price of the 2005 Installment Sale Agreement, and will not be available for the
payments of principal of and interest on the 2016 Bonds.
State Loan
The City entered into the State Loan, which is currently outstanding in the principal amount of
$768,905, to finance certain capital improvements to the Water System. On the date of issuance of the 2016
Bonds, the City will deliver a portion of the proceeds of the 2016 Bonds, which, together with amounts held in
the debt service fund for the State Loan, are sufficient to pay all outstanding amounts under the State Loan to
the Trustee. The Trustee will hold such moneys uninvested until April 1, 2016, on which date the Trustee will
pay all outstanding amounts under the State Loan at a prepayment price equal to the outstanding principal
amount thereof, plus accrued interest with respect thereto, without premium.
THE 2016 BONDS
General Provisions
The 2016 Bonds will be issued in the aggregate principal amount of $ The 2016 Bonds will be
dated as of the date of initial issuance thereof (the "Issuance Date "), will bear interest from such date at the
rates per annum set forth on the inside front cover page hereof, payable on September 1, 2016 and each March
1 and September 1 thereafter (each, an "Interest Payment Date "), and will mature on the dates set forth on the
Preliminary; subject to change.
2
inside cover page hereof. Interest on the 2016 Bonds will be computed on the basis of a 360 day year
composed of twelve 30 day months.
The 2016 Bonds will be issued only in fully registered form and, when issued, will be registered in the
name of Cede & Co., as nominee of The Depository Trust Company, New York, New York ( "DTC "). DTC
will act as securities depository for the 2016 Bonds. Ownership interests in the 2016 Bonds may be purchased
in book entry form, in denominations of $5,000 or any integral multiple thereof. See the caption " —Book
Entry Only System" below and Appendix D.
In the event that the book entry only system described below is discontinued, the principal of and
redemption premium (if any) on the 2016 Bonds are payable by check or draft of the Trustee upon presentation
and surrender thereof at maturity or upon prior redemption at the office of the Trustee in San Francisco,
California (the "Office of the Trustee "). Interest on the 2016 Bonds is payable on each Interest Payment Date
to the person whose name appears on the registration books maintained by the Trustee (the "Registration
Books ") as the Owner thereof as of the close of business on the fifteenth day of the calendar month preceding
the Interest Payment Date (the "Record Date "), such interest to be paid by check of the Trustee, sent by first
class mail on the applicable Interest Payment Date to the Owner at such Owner's address as it appears on the
Registration Books. An Owner of $1,000,000 or more in principal amount of 2016 Bonds may, at such
Owner's option, be paid by wire transfer of immediately available funds to an account in the United States in
accordance with written instructions provided to the Trustee by such Owner prior to the applicable Record
Date. The principal of and interest and premium, if any, on the 2016 Bonds will be payable in lawful money
of the United States.
Each 2016 Bond will bear interest from the Interest Payment Date next preceding the date of
authentication thereof unless: (a) it is authenticated after a Record Date and on or before the following Interest
Payment Date, in which event it will bear interest from such Interest Payment Date; or (b) unless it is
authenticated on or before August 15, 2016, in which event it will bear interest from the Issuance Date;
provided, however, that if, as of the date of authentication of any 2016 Bond, interest thereon is in default,
such 2016 Bond will bear interest from the Interest Payment Date to which interest has previously been paid or
made available for payment thereon.
Transfers and Exchanges Upon Termination of Book Entry Only System
In the event that the book entry system described under the caption " —Book Entry Only System" is
abandoned, the 2016 Bonds will be printed and delivered as provided in the Indenture. Thereafter, any 2016
Bond may, in accordance with its terms, be transferred on the Registration Books by the person in whose name
it is registered, in person or by such person's duly authorized attorney, upon surrender of such 2016 Bond at
the Office of the Trustee for cancellation, accompanied by delivery of a written instrument of transfer, duly
executed in a form acceptable to the Trustee. The Trustee is not required to register the transfer of any 2016
Bond during the period in which the Trustee is selecting 2016 Bonds for redemption and any 2016 Bond that
has been selected for redemption.
Whenever any 2016 Bond or 2016 Bonds are surrendered for transfer, the City will execute and the
Trustee will authenticate and deliver a new 2016 Bond or 2016 Bonds of authorized denomination or
denominations for a like series and aggregate principal amount of the same maturity. The Trustee will require
the 2016 Bond Owner requesting such transfer to pay any tax or other governmental charge required to be paid
with respect to such transfer. Following any transfer of 2016 Bonds, the Trustee will cancel and destroy the
2016 Bonds that it has received.
2016 Bonds may be exchanged at the Office of the Trustee for a like aggregate principal amount of
other authorized denominations of the same series and maturity. The Trustee is not required to exchange any
2016 Bond during the period in which the Trustee is selecting 2016 Bonds for redemption and any 2016 Bond
that has been selected for redemption. The Trustee will require the 2016 Bond Owner requesting such
exchange to pay any tax or other governmental charge required to be paid with respect to such exchange.
Following any exchange of 2016 Bonds, the Trustee will cancel and destroy the 2016 Bonds that it has
received.
Redemption of the 2016 Bonds
Optional Redemption. The 2016 Bonds with stated maturities on or after September 1, 20_, are
subject to redemption prior to their respective stated maturities, as a whole or in part, on September 1, 20_ or
any date thereafter, as directed by the City in a Written Request provided to the Trustee at least 35 days (or
such lesser number of days acceptable to the Trustee in the sole discretion of the Trustee, such notice being for
the convenience of the Trustee) prior to the Redemption Date, and by lot within each maturity in integral
multiples of $5,000, at a Redemption Price equal to the principal amount thereof plus accrued interest thereon
to the Redemption Date, without premium.
Mandatory Sinking Fund Redemption. The 2016 Bonds maturing on September 1, 20_ are subject
to mandatory sinking fund redemption in part (by lot) on each September 1 on and after September 1, 20 , in
integral multiples of $5,000, at a Redemption Price equal to the principal amount thereof plus accrued interest
to the Redemption Date, without premium, in accordance with the below schedule. On each of the following
payment dates, the Trustee will pay from the Redemption Fund an amount equal to the payment or payments
due on such date as set forth below.
Mandatory Sinking
Fund Redemption
Date (September 1) Principal Amount
(maturity)
If some, but not all, of the 2016 Bonds maturing on September 1, 20 have been redeemed under the
optional redemption provisions of the Indenture (as set forth under the caption "optional Redemption "), the
total amount of all future sinking fund payments will be reduced by the aggregate principal amount of such
2016 Bonds so redeemed, to be allocated among such sinking fund payments on a pro rata basis as determined
by the City, which will notify the Trustee in writing of such determination.
Extraordinary Redemption. The 2016 Bonds are subject to extraordinary redemption prior to their
respective stated maturities, as a whole or in part on any date in the order of maturity and within maturities as
directed by the City in a Written Request provided to the Trustee at least 35 days (or such lesser number of
days acceptable to the Trustee in the sole discretion of the Trustee, such notice being for the convenience of
the Trustee) prior to such date and by lot within each maturity in integral multiples of $5,000 from Net
Proceeds, upon the terms and conditions of, and as provided for in, the Indenture, at a Redemption Price equal
to the principal amount thereof plus accrued interest thereon to the date fixed for redemption, without
premium.
Notice of Redemption
Notice of redemption will be mailed by first class mail at least 20 days but not more than 60 days
before any Redemption Date, to the respective Owners of any 2016 Bonds designated for redemption at their
4
addresses appearing on the Registration Books, to the Securities Depositories and the Information Services;
provided that, in the case of notice of optional redemption not related to an advance or current refunding, such
notice may be given only if sufficient funds have been deposited with the Trustee to pay the applicable
Redemption Price of the 2016 Bonds to be redeemed; and provided further, that such notice may be cancelled
by the City upon Written Request delivered to the Trustee not less than five days prior to such Redemption
Date. Each notice of redemption will: (a) state the date of notice, the Redemption Date, the place or places of
redemption and the Redemption Price; and (b) designate the maturities, CUSIP numbers, if any, and, if less
than all 2016 Bonds of any such maturity are to be redeemed, the serial numbers of the 2016 Bonds of such
maturity to be redeemed by giving the individual number of each 2016 Bond or by stating that all 2016 Bonds
between two stated numbers, both inclusive, have been called for redemption and, in the case of 2016 Bonds to
be redeemed in part only, the respective portions of the principal amount thereof to be redeemed. Each such
notice will also state that on the Redemption Date there will become due and payable on each of said 2016
Bonds or parts thereof designated for redemption the Redemption Price thereof, or of said specified portion of
the principal thereof in the case of a 2016 Bond to be redeemed in part only, together with interest accrued
thereon to the Redemption Date, and that (provided that moneys for redemption have been deposited with the
Trustee) from and after such Redemption Date, interest thereon will cease to accrue, and will require that such
2016 Bonds be then surrendered to the Trustee. Neither the failure to receive such notice nor any defect in the
notice or the mailing thereof will affect the validity of the redemption of any 2016 Bond. Notice of
redemption of 2016 Bonds will be given by the Trustee, at the expense of the City, for and on behalf of the
City.
With respect to any notice of optional redemption of 2016 Bonds, such notice may state that such
redemption is 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 such 2016 Bonds to be redeemed
and that, if such moneys have not been so received, said notice will be of no force and effect and the Trustee
will not be required to redeem such 2016 Bonds. In the event that such notice of redemption contains such a
condition and such moneys are not so received, the redemption will not be made, and the Trustee will within a
reasonable time thereafter give notice, in the manner in which the notice of redemption was given, that such
moneys were not so received.
Book Entry Only System
One fully- registered 2016 Bond of each maturity will be issued in the principal amount of the 2016
Bonds of such maturity. Such 2016 Bond will be registered in the name of Cede & Co. and will be deposited
with DTC.
The City may decide to discontinue use of the system of book entry transfers through DTC (or a
successor securities depository). In that event, the 2016 Bonds will be printed and delivered and will be
governed by the provisions of the Indenture with respect to payment of principal and interest and rights of
exchange and transfer. See the caption "— Transfers and Exchanges Upon Termination of Book Entry Only
System."
The City cannot and does not give any assurances that DTC Participants or others will distribute
payments of principal of and interest on the 2016 Bonds received by DTC or its Nominee as the registered
Owner, or any redemption or other notices, to the Beneficial Owners (as such term is defined in Appendix D),
that they will do so on a timely basis or that DTC will service and act in the manner described in this Official
Statement. See Appendix D for additional information concerning DTC.
DEBT SERVICE PAYMENT SCHEDULE
Set forth below is an annualized schedule of principal of and interest on the 2016 Bonds for the period
ending June 30 in each of the years indicated.
Period Ending 2016Bonds 2016 Bonds 2016Bonds
June 30 Principal Interest Total
2016'1 $
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
TOTAL $ $ $
Period ending September 1, 2016 excludes debt service on the 2005 Installment Sale Agreement and the State Loan, which are being
refunded from proceeds of the 2016 Bonds as described under the caption "REFUNDING PLAN."
Source: Raymond James & Associates, Inc.
SECURITY FOR THE 2016 BONDS
Limited Obligations Payable From Net Revenues
The City is obligated to make payments of principal of and interest on the 2016 Bonds solely from Net
Revenues. The term "Net Revenues" means, for any period, the Revenues for such period less the Operation
and Maintenance Costs for such period. When held by the Trustee in any funds or accounts established under
the Indenture, Net Revenues will include all interest or gain derived from the investment of amounts in any of
such funds or accounts. See Appendix B for a detailed discussion of the terms of the Indenture.
THE OBLIGATION OF THE CITY TO PAY PRINCIPAL OF AND INTEREST ON THE 2016
BONDS PURSUANT TO THE INDENTURE DOES NOT CONSTITUTE AN OBLIGATION FOR WHICH
THE CITY IS OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION OR FOR WHICH THE
CITY HAS LEVIED OR PLEDGED ANY FORM OF TAXATION. THE OBLIGATION OF THE CITY TO
PAY PRINCIPAL OF AND INTEREST ON THE 2016 BONDS IS A SPECIAL OBLIGATION OF THE
CITY PAYABLE SOLELY FROM NET REVENUES, AND DOES NOT CONSTITUTE A DEBT OF THE
CITY OR OF THE STATE OF CALIFORNIA OR OF ANY POLITICAL SUBDIVISION THEREOF IN
CONTRAVENTION OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMITATION OR
RESTRICTION.
Rate Covenant
In any Fiscal Year in which the amount on deposit in the Rate Stabilization Fund (as described under
the caption " —Rate Stabilization Fund ") on the first day of such Fiscal Year is less than the Debt Service on
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the 2016 Bonds payable in such Fiscal Year, to the fullest extent permitted by law, the City will fix and
prescribe, at the commencement of each such Fiscal Year, rates and charges for the Water Service provided by
the Water System that are reasonably expected, at the commencement of such Fiscal Year, to be at least
sufficient to yield during such Fiscal Year Net Revenues (which, when calculated for purposes of the foregoing
covenant, do not include amounts transferred from the Rate Stabilization Fund pursuant to the Indenture that
are in excess of 20% of Debt Service for such Fiscal Year) equal to 120% of Debt Service for such Fiscal
Year.
In any Fiscal Year in which the amount on deposit in the Rate Stabilization Fund on the first day of
such Fiscal Year is at least equal to the Debt Service on the 2016 Bonds payable in such Fiscal Year, to the
fullest extent permitted by law, the City will fix and prescribe, at the commencement of each such Fiscal Year,
rates and charges for the Water Service provided by the Water System that are reasonably expected, at the
commencement of such Fiscal Year, to be at least sufficient to yield during such Fiscal Year Revenues (which,
when calculated for purposes of the foregoing covenant, do not include amounts transferred from the Rate
Stabilization Fund pursuant to the Indenture) equal to 120% of Operation and Maintenance Costs for such
Fiscal Year.
The City may make, or permit to be made, adjustments from time to time in such rates, fees and
charges and may make, or permit to be made, such classification thereof as it deems necessary, but may not
reduce or permit to be reduced such rates, fees and charges below those then in effect, unless the Revenues
from such reduced rates, fees and charges will at all times be sufficient to meet the foregoing requirements..
Additional Indebtedness
Pursuant to the Indenture, the City may at any time execute any Contract or issue any Bonds, as the
case may be, payable from Net Revenues on a parity with the 2016 Bonds, provided that:
(a) The Net Revenues (which, when calculated for purposes of the below, do not include amounts
transferred from the Rate Stabilization Fund to the Revenue Fund pursuant to the Indenture that are in excess
of 20% of Debt Service for such Fiscal Year) for the most recent audited Fiscal Year preceding the date of
adoption by the City Council of the resolution authorizing the issuance of such Bonds or the date of the
execution of such Contract, as the case may be, as evidenced by both a calculation prepared by the City and a
special report prepared by an Independent Certified Public Accountant or an Independent Financial Consultant
on such calculation on file with the City, produce a sum equal to at least 120% of the Debt Service for such
Fiscal Year; and
(b) The Net Revenues (which, when calculated for purposes of the below, do not include amounts
transferred from the Rate Stabilization Fund to the Revenue Fund pursuant to the Indenture that are in excess
of 20% of Debt Service for such Fiscal Year) for the most recent audited Fiscal Year preceding the date of
adoption by the City Council of the resolution authorizing the issuance of such Bonds or the date of the
execution of such Contract, as the case may be, including adjustments to give effect as of the first day of such
Fiscal Year to increases or decreases in rates and charges for the Water Service approved and in effect as of the
date of calculation, as evidenced by a calculation prepared by the City, produce a sum equal to at least 120% of
the Debt Service for such Fiscal Year, plus the Debt Service which would have accrued on any Contracts
executed or Bonds issued since the end of such Fiscal Year, assuming that such Contracts had been executed or
Bonds had been issued at the beginning of such Fiscal Year, plus the Debt Service which would have accrued
had such proposed additional Contract been executed or proposed additional Bonds been issued at the
beginning of such Fiscal Year.
Notwithstanding the foregoing, Bonds or Contracts may be issued or incurred to refund outstanding
Bonds or Contracts if, after giving effect to the application of the proceeds thereof, total Debt Service will not
be increased in any Fiscal Year in which Bonds or Contracts (outstanding on the date of issuance or incurrence
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of such refunding Bonds or Contracts, but excluding such refunding Bonds or Contracts) not being refunded
are outstanding.
Nothing contained in the Indenture limits the issuance of any obligations payable from Net Revenues
on a subordinate basis to the Contracts and Bonds.
Reserve Fund
The Trustee will establish and maintain a separate fund to be known as the "Reserve Fund." On the
date of issuance of the 2016 Bonds, the Reserve Policy will be deposited in the Reserve Fund for the benefit of
the 2016 Bonds. The Reserve Policy will be applied by the Trustee solely for the purposes set forth in the
Indenture.
The City is not obligated: (i) to make any additional deposits into the Reserve Fund in the event that
the Insurer defaults on its obligation to make payments under the Reserve Policy; or (ii) to replace the Reserve
Policy in the event of a rating downgrade of the Insurer.
At least five Business Days before any Interest Payment Date, the Trustee will ascertain the necessity
for a claim under the Reserve Policy in accordance with the terms of the Indenture, and will provide notice to
the Reserve Insurer at least five Business Days prior to each date upon which interest or principal is due on the
2016 Bonds.
If five Business Days before any Interest Payment Date, the moneys available in the Payment Fund do
not equal the amount of the principal of and interest on the 2016 Bonds then coming due and payable, the
Trustee will apply the moneys available in the Reserve Fund to make delinquent payments of principal of and
interest on the 2016 Bonds on behalf of the City by transferring the amount necessary for such purpose to the
Payment Fund. All cash and investments in the Reserve Fund will be transferred to the Payment Fund before
any drawing may be made on the Reserve Policy or any other Credit Facility. The Trustee will take whatever
action is necessary to liquidate or draw upon investments of funds held in the Reserve Fund or draw upon the
Reserve Policy or other Credit Facility to make such funds available for application as provided in the
Indenture on the Interest Payment Date.
The Trustee will repay the Reserve Insurer any draws under the Reserve Policy, together with interest
thereon, at the Late Payment Rate from Revenues received from the City. The Trustee will also pay all related
reasonable expenses incurred by the Reserve Insurer, together with interest thereon, at the Late Payment Rate
from Revenues received from the City.
Repayment of draws under the Reserve Policy and payment of expenses and accrued interest thereon
at the Late Payment Rate (collectively, "Policy Costs ") will commence in the first month following each draw,
and each such monthly payment will be in an amount at least equal to 1/12 of the aggregate of Policy Costs
related to such draw. Payment of any Policy Costs and reimbursements of amounts with respect to other
Credit Facilities will be made on a pro -rata basis prior to replenishment of any cash drawn from the Reserve
Fund.
Amounts in respect of Policy Costs paid to the Reserve Insurer will be credited first to interest due,
then to the expenses due and then to principal due. As and to the extent that payments are made to the Reserve
Insurer on account of principal drawn on the Reserve Policy, the coverage under the Reserve Policy will be
increased by a like amount, subject to the terms of the Reserve Policy.
If the City fails to pay any Policy Costs in accordance with the requirements of the Indenture, the
Reserve Insurer will be entitled to exercise any and all legal and equitable remedies available to it, including
those provided under the Indenture, other than remedies which would adversely affect owners of the 2016
Bonds. The Indenture may not be discharged or terminated until all Policy Costs that are owed to the Reserve
Insurer have been paid in full. The City's obligation to pay such amounts will expressly survive payment in
full of the 2016 Bonds.
Insurance; Reconstruction, Repair and Replacement
Casualty Events. The City has covenanted to maintain insurance on the Water System with
responsible insurers in amounts and against such risks (including accident to or destruction of the Water
System) as are usually covered in connection with facilities similar to the Water System so long as such
insurance is available from reputable insurance companies at reasonable rates. The City maintains insurance
coverages as described under the caption "THE CITY OF UKIAH —City Insurance," including earthquake
insurance. See Appendix B under the caption "PARTICULAR COVENANTS — Insurance" for a description
of the insurance coverages required by the Indenture.
In the event of any damage to or destruction of the Water System caused by the perils covered by such
insurance, the Net Proceeds thereof will be applied to the reconstruction, repair or replacement of the damaged
or destroyed portion of the Water System. The City will begin such reconstruction, repair or replacement
promptly after such damage or destruction occurs, and will continue and properly complete such
reconstruction, repair or replacement as expeditiously as possible, and will pay out of such Net Proceeds all
costs and expenses in connection with such reconstruction, repair or replacement so that the same are
completed and the Water System is free and clear of all claims and liens.
If such Net Proceeds exceed the costs of such reconstruction, repair or replacement portion of the
Water System, and/or the cost of the construction of additions, betterments, extensions or improvements to the
Water System, then the excess Net Proceeds will be applied in part to the redemption of 2016 Bonds as
provided in the Indenture (see the caption "THE 2016 BONDS — Redemption of the 2016 Bonds —
Extraordinary Redemption ") and in part to such other fund or account as may be appropriate and used for the
retirement of Bonds and Contracts in the same proportion which the aggregate unpaid principal balance of
2016 Bonds then bears to the aggregate unpaid principal amount of such Bonds and Contracts. If such Net
Proceeds are sufficient to enable the City to retire the entire obligation evidenced by the 2016 Bonds prior to
the final due date of the 2016 Bonds as well as the entire obligations evidenced by Bonds and Contracts then
remaining unpaid prior to their final respective due dates, the City may elect not to reconstruct, repair or
replace the damaged or destroyed portion of the Water System, and/or not to construct other additions,
betterments, extensions or improvements to the Water System; and thereupon such Net Proceeds will be
applied to the redemption of 2016 Bonds as provided in the Indenture and to the retirement of such Bonds and
Contracts. See the captions "CERTAIN RISKS TO BONDHOLDERS — System Expenses" and "CERTAIN
RISKS TO BONDHOLDERS — Natural Disasters."
The City will procure and maintain such other insurance as it deems advisable or necessary to protect
its interests and the interests of the 2016 Bond Owners, which insurance affords protection in such amounts
and against such risks as are usually covered in connection with municipal water systems similar to the Water
System.
Any insurance required to be maintained as described above may be maintained under a self - insurance
program so long as such self - insurance is maintained in the amounts and manner usually maintained in
connection with water systems similar to the Water System and is, in the opinion of an accredited actuary,
actuarially sound.
Eminent Domain Events. If all or any part of the Water System is taken by eminent domain
proceedings, the Net Proceeds thereof will be applied as follows:
(a) If: (1) the City files with the Trustee a certificate showing: (i) the estimated loss of annual Net
Revenues, if any, suffered or to be suffered by the City by reason of such eminent domain proceedings; (ii) a
general description of the additions, betterments, extensions or improvements to the Water System proposed to
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be acquired and constructed by the City from such Net Proceeds; and (iii) an estimate of the additional annual
Net Revenues to be derived from such additions, betterments, extensions or improvements; and (2) the City, on
the basis of such certificate filed with the Trustee, determines that the estimated additional annual Net
Revenues will sufficiently offset the estimated loss of annual Net Revenues resulting from such eminent
domain proceedings so that the ability of the City to meet its obligations under the Indenture will not be
substantially impaired (which determination will be final and conclusive), then the City will promptly proceed
with the acquisition and construction of such additions, betterments, extensions or improvements substantially
in accordance with such certificate and such Net Proceeds will be applied for the payment of the costs of such
acquisition and construction, and any balance of such Net Proceeds not required by the City for such purpose
will be deposited in the Water System Revenue Fund.
(b) If the foregoing conditions are not met, then such Net Proceeds will be applied by the City in
part to the redemption of 2016 Bonds as provided in the Indenture (see the caption "THE 2016 BONDS —
Redemption of the 2016 Bonds — Extraordinary Redemption ") and in part to such other fund or account as may
be appropriate and used for the retirement of Bonds and Contracts in the same proportion which the aggregate
unpaid principal balance of 2016 Bonds then bears to the aggregate unpaid principal amount of such Bonds
and Contracts.
Rate Stabilization Fund
The City will maintain a special fund designated as the "Rate Stabilization Fund," which fund the City
has agreed and covenanted to maintain and to hold separate and apart from other funds so long as any
Contracts or Bonds remain unpaid. Money transferred by the City from the Revenue Fund to the Rate
Stabilization Fund in accordance with the Indenture will be held in the Rate Stabilization Fund and applied in
accordance with the Indenture.
The City may withdraw all or any portion of the amounts on deposit in the Rate Stabilization Fund
and transfer such amounts to the Revenue Fund to be applied to the payment of principal of and interest on the
2016 Bonds or, in the event that all or a portion of the 2016 Bonds are discharged, transfer all or any portion of
such amounts for application in accordance with the Indenture. Any such amounts transferred from the Rate
Stabilization Fund to the Revenue Fund in accordance with the Indenture constitute pledged Revenues.
ESTIMATED SOURCES AND USES OF FUNDS
The following table sets forth the estimated sources and uses of funds:
Sources(i):
Principal Amount $
Plus/Less Net Original Issue Premium/Discount
Additional Moneys (2)
Total Sources $
Uses('):
Prepayment of 2005 Installment Sale Agreement $
Prepayment of State Loan
Costs of Issuance (3)
Total Uses $
(1) All amounts rounded to the nearest dollar. Totals may not add due to rounding.
(z) Reflects moneys held in funds and accounts established in connection with the State Loan.
(3) Includes Underwriter's discount, premium for the Policy and the Reserve Policy and certain legal, rating agency, printing
and other financing- related costs.
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BOND INSURANCE
The information under this caption has been prepared by the Insurer for inclusion in this Official
Statement. Neither the City nor the Underwriter has reviewed this information, nor do the City or the
Underwriter make any representation with respect to the accuracy or completeness thereof. The following
information is not a complete summary of the terms of the Policy and reference is made to Appendix F for a
specimen of the Policy.
[TO COME FROM BOND INSURER].
THE CITY OF UKIAH
General
The City encompasses approximately five square miles and is located in Mendocino County (the
"County "), approximately 100 miles north of San Francisco in the northern coastal region of the State on U.S.
Highway 101. The area is centrally located between the San Francisco Bay area, Eureka and Sacramento. The
City was incorporated in 1876 and is a general law city operating under a City Council /City Manager form of
government. The City has an estimated population of approximately 16,075 people.
The City provides police, fire, street and infrastructure maintenance, storm drain, park and community
recreation, museum, community development and other services to residents. The City also provides water,
wastewater and electric services through the operations of its utility enterprises and operates an airport and
civic center. The City's water utility (the "Water System ") is operated by the Water Utility Division of the
Public Works Department.
The City's primary source of water is surface water, which is supplied by the Russian River and two
alluvial wells adjacent thereto. The City also extracts groundwater from three wells located in the Ukiah
Valley Groundwater Basin. Over the past five Fiscal Years, an average of approximately 46% of the water
delivered by the City has been supplied by the Russian River and approximately 54% of the water delivered by
the City has been supplied by the City's groundwater wells and water diverted from Lake Mendocino. See the
caption "THE WATER SYSTEM OF THE CITY."
Service Area and Land Use
The Water System's service area includes the incorporated area of the City and certain adjacent
unincorporated areas. With limited exceptions, new residents and businesses in the City are required to
connect to the Water System.
The City is substantially built out and significant new development is not expected in the future. Land
use within the City is primarily residential, with some commercial /governmental and park/landscape uses. The
City currently has approximately 4,570 single - family residential customers and 1,151 multi - family residential,
commercial, governmental, fire service and other customers. All accounts are metered.
City Council
The City is governed by a five member City Council. City Councilmembers are elected at large and
serve staggered four -year terms. The current City Councilmembers and the expiration dates of their terms are
set forth below.
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Council Members Expiration of Term
Steve Scalmanini, Mayor
November 2016
Jim Brown, Vice Mayor
November 2018
Kevin Doble, Council Member
November 2018
Maureen Mulheren, Council Member
November 2018
Douglas Crane, Council Member
November 2016
Employees and Management
As of June 30, 2015, the City had approximately 187 full -time equivalent employees, of which
approximately 12 work for the Water Utility Division of the Public Works Department. Non - management
Public Works Department employees are represented by the Operating Engineers Local No. 3 ( "Local No. 3 ")
and certain Public Works Department managers are represented by the Management Unit (the "Managers
Association "). Relations between the City and these bargaining units are governed by memoranda of
understanding (each, an "MOU "). The current MOUs with Local No. 3 and the Managers Association expired
in September 2015. The City and Local No. 3 and the City and the Managers Association are currently
operating under the terms of the expired MOUs while new MOUs are being negotiated. Other City employees
are also represented by bargaining units. The City has never experienced a strike, slowdown or work stoppage.
The Water System is overseen by the City Manager, the Public Works Director /City Engineer, the
Water and Sewer Utilities Director and the Finance Director. Legal services are provided to the City by David
Rapport, City Attorney.
Day -to -day management of the City is delegated to the City Manager, Sage Sangiacomo. Mr.
Sangiacomo has served as the City Manager since June 2015 and has over 17 years of experience in municipal
administration. In his role as City Manager, Mr. Sangiacomo serves as the administrative head of the City and
is responsible for the operation of all City departments. Prior to becoming City Manager, Mr. Sangiacomo
served the City as a Community Services Supervisor from 1998 to 2006, the Community Services Director
from 2006 to 2010 and an Assistant City Manager from 2010 to 2015. Mr. Sangiacomo is a credentialed city
manager by the International City Managers Association and holds a Bachelor's degree from the University of
California, Davis.
Tim Eriksen serves as the City's Public Works Director /City Engineer. Mr. Eriksen has served in this
capacity since 2006. Mr. Eriksen has been with the City since 2000, initially as a Senior Civil Engineer.
Before joining the City, he worked for the County of San Mateo and a private civil engineering firm. Mr.
Eriksen received his Bachelor of Science degree in Civil Engineering from California State University at San
Jose in 1998. In addition, Mr. Eriksen has been a registered Professional Engineer in California since 2001.
Sean White serves as the City's Water and Sewer Utilities Director. Mr. White has been with the City
since 2015 and has worked on regional water issues since 1994 after being elected to the Marin Municipal
Water District Board of Directors. Mr. White also previously led the Natural Resources Section of the Sonoma
County Water Agency and served as general manager of the Mendocino County Russian River Flood Control
and Water Conservation Improvement District. Mr. White received his Bachelor of Science Degree in
Fisheries Biology from Humboldt State University as an Honors Graduate in 1991.
Karen Scalabrini serves as the City's Finance Director. Ms. Scalabrini has been with the City since
2014. Ms. Scalabrini previously served as Finance Director for the City of St. Helena for approximately ten
years and as an accountant for the City of Healdsburg for just over nine years. She also previously worked in
the private sector implementing and supporting accounting systems. Ms. Scalabrini received her Bachelor's
Degree in Business Administration with a concentration in Accounting from California State University at
Sonoma.
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David Rapport serves as the City Attorney. Mr. Rapport has served as the City Attorney since 1983.
Mr. Rapport has practiced law since 1972 and holds a bachelor's degree from the University of California,
Davis and a law degree from the University of California, Berkeley.
Defined Benefit Pension Plan
This caption contains certain information relating to the California Public Employees Retirement
System ( "CalPERS'). The information is primarily derived from information produced by CaIPERS, its
independent accountants and actuaries. The City has not independently verified the information provided by
CalPERS and neither makes any representations nor expresses any opinion as to the accuracy of the
information provided by CalPERS.
The comprehensive annual financial reports of CaIPERS are available on its Internet website at
www.calpers.ca.gov. The CalPERS website also contains CalPERS' most recent actuarial valuation reports
and other information concerning benefits and other matters. The textual reference to such Internet website is
provided for convenience only. None of the information on such Internet website is incorporated by reference
herein. The City cannot guarantee the accuracy of such information. Actuarial assessments are
forward- looking statements that reflect the judgment of the fiduciaries of the pension plans, and they are based
upon a variety of assumptions, one or more of which may not materialize or be changed in the
future. Actuarial assessments will change with the future experience of the pension plans.
Plan Description. The City contributes to the California Public Employees' Retirement System
("CalPERS"), an agent multiple - employer public employee defined benefit pension plan. CalPERS provides
retirement and disability benefits, annual cost -of- living adjustments, and death benefits to plan members and
beneficiaries. CalPERS acts as a common investment and administrative agent for participating public entities
within the State, including the City. Benefit provisions and all other requirements are established pursuant to
State statute and City ordinance.
Public Works Department employees participate in two Miscellaneous Plans: (i) a 2.7% at 55 Plan
(the "Classic Plan ") for employees hired prior to January 1, 2013; and (ii) a 2.0% at 67 Plan (the " PEPRA
Plan ") for employees hired on or after January 1, 2013 who were not previously CalPERS members.
Participants in the Classic Plan are required by State statute to contribute 8% of their annual covered salary.
Participants in the PEPRA Plan are required by State statute to contribute 7% of their annual covered salary.
The City does not make any portion of such contributions for Classic Plan or PEPRA Plan members.
Funding Policy. Required employer and employee contributions are determined from rates
established by CalPERS based upon various actuarial assumptions which are revised annually. The City
currently funds the normal pension costs, which are determined by CalPERS using the Entry Age Normal
Actuarial Cost Method, as well as an amortization of the City's unfunded actuarial liability. For Fiscal Years
2014 and 2015, the City's required and actual employer contributions to CalPERS for the City's Miscellaneous
Plans (from all funds, including the Water Fund) were $1,995,467 and $2,488,643, respectively. Such
contributions were equal to the respective annual required contributions described below.
Based on the actuarial valuation of CalPERS assets, the City's required employer contribution to the
retirement plans for Fiscal Years 2014 and 2015 was 26.237% and 27.955 %, respectively, of annual covered
payroll for Miscellaneous Plan members. The City made contributions to CalPERS in such amounts.
The required employer contribution for Fiscal Year 2015 was determined as part of the June 30, 2012,
actuarial valuation using the Entry Age Normal Actuarial Cost Method. The actuarial assumptions for the
June 30, 2012 valuation included: (a) 7.50% investment rate of return (net of administrative expenses);
(b) projected annual salary increases that vary from 3.30% to 14.20 %; and (c) a 2.75% inflation component.
The actuarial value of CalPERS assets was determined using a technique that smoothes the effect of volatility
in the market value of investments over a fifteen -year period. CalPERS' initial unfunded liabilities are
13
amortized over a closed period that depends on the plan's date of entry into CalPERS. Subsequent plan
amendments are amortized as a level percentage of pay over a closed 20 -year period.
Subsequent to the June 30, 2012 actuarial valuation, CalPERS made changes to actuarial assumptions
and methods. These changes include: moving from using smoothing of the market value of assets to obtain the
actuarial value of assets to direct smoothing of employer contribution rates; increased life expectancy; changes
to retirement ages (earlier for some groups and later for others); lower rates of disability retirement; and other
changes. CalPERS has not provided current estimates of the effects of these changes which are specific to the
City.
The City's annual pension cost for Fiscal Years 2012 through 2015 for Miscellaneous Plan members
is shown below:
Annual Pension Cost
Fiscal Year (APC)(')
06/30/2012
$1,826,673
06/30/2013
2,038,799
06/30/2014
1,995,467
06/30/2015
2,488,643
Percentage of APC Net Pension
Contributed Obligation
100% $-
100 -
100 -
100 -
Includes City - funded employee contributions. The annual pension cost (the "APC') is equal to the annual required
contribution plus an adjustment for the cumulative difference between the APC and the City's actual plan contributions for
the year. The cumulative difference is called the net pension obligation. The City does not have a net pension obligation; its
annual pension cost is equal to its annual required contribution.
Source: Audited Financial Statements for Fiscal Year 2015, Note 4.17.
AB 340, Public Employee Pension Reform Act of 2013 (PEPRA). On September 12, 2012, the
California Governor signed Assembly Bill 340 ( "AB 340 "), which implements pension reform in California.
Effective January 1, 2013, AB 340: (i) requires public retirement systems and their participating employers to
share equally with employees the normal cost rate for such retirement systems; (ii) prohibits employers from
paying employer -paid member contributions to such retirement systems for employees hired after January 1,
2013 who were not already enrolled in CalPERS; (iii) establishes a compulsory maximum non -safety benefit
formula of 2.5% at age 67; (iv) defines final compensation as the highest average annual pensionable
compensation earned during a 36 -month period; and (v) caps pensionable income at a 2013 level of $110,100
($132,120 for employees not enrolled in Social Security), subject to annual Consumer Price Index increases.
Other provisions reduce the risk of the City incurring additional unfunded liabilities, including prohibiting
retroactive benefits increases, generally prohibiting contribution holidays, and prohibiting purchases of
additional non - qualified service credit.
Pursuant to AB 340, the City established a new pension tier (2.0% at 67) for employees hired on or
after January 1, 2013 who were not previously CalPERS members.
Ca/PERS Plan Actuarial Methods. The staff actuaries at CalPERS prepare annually an actuarial
valuation which is typically delivered in October of each year, approximately 15 months following the
valuation date (thus, the actuarial valuation dated October 2015 covered Ca1PERS' Fiscal Year ended June 30,
2014). The actuarial valuations express the City's required contribution rates in percentages of covered
payroll, which percentages the City must contribute in the Fiscal Year immediately following the Fiscal Year
in which the actuarial valuation is prepared (thus, the City's contribution rate derived from the actuarial
valuation as of June 30, 2014 affects the City's Fiscal Year 2017 required contribution rate). Ca1PERS rules
require the City to implement the actuary's recommended rates.
The annual actuarially required contribution rates consist of two components: the normal cost and the
unfunded actuarial accrued liability ( "UAAL "). The normal cost represents the actuarial present value of
benefits that CalPERS will fund under the CalPERS plans that are attributed to the current year, and the
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actuarial accrued liability (the "AAL ") represents the actuarial present value of benefits that CalPERS will
fund that are attributed to past years. The UAAL represents an estimate of the actuarial shortfall between
actuarial value of assets on deposit at CalPERS and the present value of the benefits that CalPERS will pay
under the CalPERS plans to retirees and active employees upon their retirement. The UAAL is based on
several assumptions such as, among others, the expected rate of investment return, average life expectancy,
average age of retirement, inflation, salary increases and occurrences of disabilities. In addition, the UAAL
includes certain actuarial adjustments such as, among others, the actuarial practice of smoothing losses and
gains over multiple years (which is described in more detail below). As a result, the UAAL may be considered
an estimate of the unfunded actuarial present value of the benefits that CalPERS will pay under the CalPERS
plans to retirees and active employees upon their retirement and not as a fixed expression of the liability the
City owes to CalPERS under its CalPERS plans.
In the June 30, 2014 actuarial valuation, the CalPERS actuary estimated the actuarial value of the
assets (the "Actuarial Value ") of the CalPERS plans at the end of the Fiscal Year (which assumes, among other
things, that the rate of return during that Fiscal Year equaled the assumed rate of return of 7.50 %). The
CalPERS actuary uses a smoothing technique to determine Actuarial Value that is calculated based on certain
policies. As described below, these policies and actuarial assumptions have changed significantly in recent
years and are expected to change or be modified further by CalPERS in the future. Certain significant recent
changes in assumptions include the following:
1. On March 14, 2012, the CalPERS Board approved a change in the inflation assumption used
in the actuarial assumptions used to determine employer contribution rates. This reduced the assumed
investment return from 7.75% to 7.50 %, reduced the long -term payroll growth assumption from 3.25% to
3.0 %, and adjusted the inflation component of individual salary scales from 3.25% to a merit scale varying by
duration of employment, an assumed annual inflation component of 3% and an annual production growth of
0.25 %. Although the full impact of such changes is not yet clear, CalPERS has estimated that they could result
in net increases in future contribution levels of approximately 1% to 2 %.
2. On April 17, 2013, the CalPERS Board of Administration approved a plan: (i) to replace the
current 15 -year asset - smoothing policy with a 5 -year direct -rate smoothing process; and (ii) to replace the
current 30 -year rolling amortization of unfunded liabilities with a 30 -year fixed amortization period.
Ca1PERS' Chief Actuary has stated that the revised approach provides a single measure of funded status and
unfunded liabilities, less rate volatility in extreme years, a faster path to full funding and more transparency to
employers such as the City about future contribution rates. These changes are expected to accelerate the
repayment of unfunded liabilities of the City's plans in the near term; the exact magnitude of the potential
contribution rate increases is not known at this time, but may be significant. These changes will be reflected
beginning with the June 30, 2014 actuarial valuation affecting contribution rates for Fiscal Year 2016 and
thereafter. As a preliminary estimate, the City has currently budgeted for annual increases in its pension
contributions of approximately 3% per year through Fiscal Year 2024.
3. On February 18, 2014, the CalPERS Board approved changes to actuarial assumptions and
methods based upon a recently completed experience study. These changes include: moving from using
smoothing of the market value of assets to obtain the actuarial value of assets to direct smoothing of employer
contribution rates; increased life expectancy; changes to retirement ages (earlier for some groups and later for
others); lower rates of disability retirement; and other changes.
4. On November 17, 2015, the CalPERS Board approved changes that could affect the assumed
investment return rate in the future. In years in which Ca1PERS' investment returns are more than 2% greater
than forecast, the long -term assumed investment return rate will be reduced by a maximum of 0.25 %.
CalPERS estimates that this change will reduce the assumed investment return rate by approximately 1% (to
6.5 %) within 20 years.
15
Reporting obligations under Governmental Accounting Standards Board Statement No. 68 ( "GASB
68 ") commenced with financial statements for Fiscal Year 2015. Under GASB 68, an employer reports the net
pension liability, pension expense and deferred outflows /deferred inflows of resources (as such terms are
described in the following paragraph) related to pensions in its financial statements as part of its financial
position. As a result of this change in accounting standards, the City's total net position attributable to the
Water System decreased by approximately $2,719,769 in Fiscal Year 2015, primarily due to a $2,504,440
adjustment to the unrestricted net position balance as a result of the adoption of GASB 68.
The net pension liability is the plan's total pension liability based on the Entry Age Normal Actuarial
Cost Method less the plan's fiduciary net position. The pension expense is the change in net pension liability
from the previous fiscal year to the current fiscal year, less adjustments. Deferred outflows and deferred
inflows of resources related to pensions are certain changes in total pension liability and fiduciary net position
that are to be recognized in future pension expense. Under GASB 68, deferred inflows and deferred outflows
of resources related to pensions are recognized in pension expense systematically over time. The first
amortized amounts are recognized in pension expense for the year in which the gain or loss occurs. The
remaining amounts are categorized as deferred inflows and deferred outflows to be recognized in future
pension expense.
GASB 68 is a change in accounting reporting standards, but it does not change the District's CalPERS
plan funding obligations.
Funded Status; UAAL. As of the most recent actuarial study dated June 30, 2014, the Miscellaneous
Plans were 66.0% funded.
The City had an unfunded accrued liability of $25,599,971 for its Miscellaneous Plans as of June 30,
2014, based on a market value of assets of $49,753,237, as set forth in the most recent actuarial report prepared
by CalPERS.
The following table sets forth the schedule of funding progress for the City's Miscellaneous Plans.
The employer contribution rate for Fiscal Year 2016 is 30.134% of annual covered payroll.
(z) Beginning with the 6/30/2013 actual valuation, the actuarial value of assets equals the market value of assets
Source: CalPERS Actuarial Report Dated October 2015, as of June 30, 2014.
For additional information relating to the City's CalPERS Plan, see Note 4.17 to the City's financial
statements set forth in Appendix A.
LG
Entry Age
Normal
Annual
Valuation
Accrued
Actuarial Value
Funded
Covered
Date
Liability
of Assets
UAAL
Ratio
Payroll
06/30/2011
$64,706,927
$45,539,395
$19,167,532
70.4%
$8,358,294
06/30/2012
67,126,262
46,891,536
20,234,726
69.9
8,146,799
06/30/2013
69,916,982
43,152,382(2)
26,764,600
61.7
8,097,337
06/30/2014
75,353,208
49,753,237
25,599,971
66.0
7,775,108
(z) Beginning with the 6/30/2013 actual valuation, the actuarial value of assets equals the market value of assets
Source: CalPERS Actuarial Report Dated October 2015, as of June 30, 2014.
For additional information relating to the City's CalPERS Plan, see Note 4.17 to the City's financial
statements set forth in Appendix A.
LG
No Other Post - Employment Benefits
The City does not provide any other post - employment benefits to retired employees.
Budget Process
The City prepares and adopts a budget for each Fiscal Year. The budgeting process generally spans
an eight -month timeframe beginning in November of each year and involves extensive coordination with all
City departments. Prior to June 30 of each year, the City Manager submits to the City Council a proposed
budget for the Fiscal Year commencing the following July 1. The budget includes proposed expenditures and
the means of financing them. Prior to June 30, budgetary review sessions are conducted to obtain input from
various City departments and the budget is legally enacted through the passage of a resolution. The City
Council adopted the budget for Fiscal Year 2016 on August 19, 2015, with Fiscal Year 2015 appropriations
continuing until the adoption of such budget.
City Insurance
The City is exposed to various risks of losses related to torts, theft of, damage to and destruction of
assets, errors and omissions, injuries to employees and natural disasters. The City maintains property, liability
and worker's compensation insurance through the Redwood Empire Municipal Insurance Fund ( "REMIF "), a
public entity risk pool that operating as a common risk management and insurance program for several
Northern California municipalities. The City pays quarterly and annual premiums to the REMIF for its general
insurance coverage. REMIF is self - sustaining for liability insurance through member premiums and reinsures
through commercial companies for other coverage.
The REMIF cost sharing pool provides coverage between the City's deductible and $500,000 (liability
program) and $1,000,000 (workers' compensation program). Losses in excess of the REMIF cost sharing pool
limits are covered by REMIF through the California Joint Powers Risk Management Authority and
commercial insurance policies. Loss limits are $39,500,000 (liability), $300,000,000 (property), $21,245,000
(boiler and machinery), $9,990,000 (automobile) and $3,000,000 (workers' compensation), in each case per
occurrence. Losses exceeding these limits are the responsibility of the City.
The City's deductibles are $10,000 for worker's compensation, property and automobile losses and
fidelity coverage, $25,000 for liability losses, $5,000 for boiler and machinery losses and $100,000 or 5% of
building value for earthquake and flood losses, in each case per occurrence. The City continues to carry
commercial insurance for all other risks of loss, including employee health and accident, coverage of the
municipal airport and bonding of certain employees and elected officials. Settled claims resulting from these
risks have not exceeded commercial insurance coverage in any of the past three fiscal years.
The City's property damage insurance covers Water System treatment facilities, but Water System
pipelines are not insured.
There can be no assurance that incurred losses of the City will be covered up to the amount of loss, if
at all. See the caption "CERTAIN RISKS TO BONDHOLDERS — Natural Disasters."
For additional information relating to the City's insurance coverages, see Note 4.A to the City's
financial statements set forth in Appendix A.
No Parity Obligations
Upon the prepayment of the 2005 Installment Sale Agreement and the State Loan as described under
the caption "THE REFUNDING PLAN," the City will have no other obligations payable from Net Revenues
17
or secured by a pledge of Revenues on a parity with the obligation of the City to pay principal of and interest
on the 2016 Bonds.
Seismic Considerations
The City is located in a seismically active region. Significant faults are located near the City. There is
potential for destructive ground shaking during the occurrence of a major seismic event. In addition, land
along fault lines may be subject to liquefaction during the occurrence of such an event. In the event of a severe
earthquake, there may be significant damage to both property and infrastructure within the City.
Newer Water System facilities are designed to withstand earthquakes with minimal damage, as
earthquake loads are taken into consideration in the design of project structures. The impact of lesser
magnitude events is expected by the City to be temporary, localized and repairable. To date, no City facilities
have suffered any significant earthquake damage.
The City maintains earthquake insurance on certain Water System facilities. However, there can be
no assurance that coverage will be provided under such insurance in sufficient amounts to cover losses in the
event of an earthquake. See the captions " —City Insurance" and "CERTAIN RISKS TO BONDHOLDERS —
Natural Disasters."
Financial Statements
Copies of the most recent audited financial statements of the City prepared by Davis Hammon & Co.,
Certified Public Accountants, Oroville, California (the "Auditor ") are attached as Appendix A hereto (the
"Financial Statements "). The Auditor's letter dated January 9, 2015 is set forth therein. The Financial
Statements should be read in their entirety.
The Financial Statements are public documents and the City has not sought the approval of the
Auditor to append the Financial Statements to this Official Statement. The Auditor has neither performed any
post -audit review of the financial condition of the City nor reviewed or audited this Official Statement.
THE WATER SYSTEM OF THE CITY
General
In Fiscal Year 2015, the Water System supplied approximately 2,156 acre -feet of potable water
through approximately 4,570 single - family residential and 1,151 multi - family residential and commercial
(including governmental, landscape, fire service and other) connections. The Water System includes two
alluvial wells adjacent to the Russian River and three active groundwater wells, facilities for the diversion of
surface water from the Russian River, eight water tanks and reservoirs with a combined storage capacity of
approximately 6.1 million gallons and approximately 60 miles of pipelines, including transmission lines
ranging in size from 2 inches to 16 inches in diameter. The Water System's average daily demand is
approximately 2 million gallons per day ( "MGD "), while the peak daily demand is approximately 4 MGD.
Water provided by the Water System is treated at the City's Water Treatment Plant (the "Treatment
Plant ") prior to delivery to customers. The Treatment Plant has a design capacity of between 5.0 and 5.5 MGD
(depending upon the intake's turbidity), with average daily flow of approximately 1.2 MGD. The treatment
process includes chemical clarification by coagulation and flocculation and filtration. The water is then
filtered and chlorinated before delivery to Water System customers. The Treatment Plant also includes a high
capacity pumping station. The water delivered by the Water System meets all applicable State and federal
drinking water and health standards.
18
Approximately 97% of the Water System is supplied by gravity, although three additional zones with
small numbers of connections require booster pump stations.
Water Supply
The City's primary source of water is the Russian River, which flows from north to south near the
City. The City diverts surface water from the Russian River and extracts water from two alluvial wells that are
located adjacent to the Russian River. The City also extracts groundwater from three groundwater wells
located within City boundaries. The City currently has rights to water stored in Lake Mendocino, which can
be diverted from the East Fork of the Russian River, but has terminated the agreement pursuant to which such
rights are held and does not expect to utilize this source in the future. The City also maintains interties to the
water systems of certain neighboring water service providers that would enable the City to serve its customers
in the event of a supply emergency.
Russian River. On January 25, 1954, the State Water Resources Control Board (the "SWRCB ")
issued Water Right Permit 12952 (Application 15704) (the "Permit "). The Permit grants the City a year -round
right to divert Russian River underflow for municipal purposes at a rate not to exceed 20.0 cubic feet per
second ( "CFS "), which is approximately five times the City's current usage. The City also has a pre -1914
right to appropriate surface water from the Russian River at a rate of 2.8 CFS.
The City exercises its rights to the Russian River through two alluvial wells, Wells #3 and #5, that are
located on the Russian River riverbank within City boundaries. Well #3 has a production capacity of
approximately 300 gallons per minute ( "GPM ") and Well #5 has a production capacity of approximately 150
GPM. The Water System also includes facilities, known as the Ranney Collector, to divert surface water from
the Russian River to the Treatment Plant. The Ranney Collector has a production capacity of approximately
3,200 GPM and is used in the dry season during times of low surface water turbidity.
Groundwater. The City's groundwater supply is obtained from three active groundwater wells with
an average depth of approximately 250 feet. The City's wells, which are located on City -owned land within
City boundaries, provide a combined capacity of approximately 1,800 GPM. The wells are located in the
Ukiah Valley Groundwater Basin (the "Basin "), an unadjudicated groundwater basin. The State Department of
Water Resources ( "DWR ") has estimated that the Basin holds a total of approximately 100,000 acre -feet of
water in storage.
On September 16, 2014, the State Governor signed Assembly Bill No. 1739 and Senate Bill Nos. 1168
and 1319 (collectively, the Sustainable Groundwater Management Act, or "SGMA ") into law. The SGMA
constitutes a legislative effort to regulate groundwater on a Statewide basis. Under the SGMA, DWR
designated groundwater basins in the State as high, medium, low or very low priority for purposes of
groundwater management by January 31, 2015. By January 31, 2017, local groundwater producers must
establish or designate an entity (referred to as a groundwater sustainability agency, or "GSA "), subject to
DWR's approval, to manage each high and medium priority groundwater basin. Each GSA is tasked with
submitting a groundwater sustainability plan for DWR's approval by January 31, 2020. Alternatively,
groundwater producers can submit a groundwater management plan under Part 2.75 of the California Water
Code or an analysis for DWR's review demonstrating that a groundwater basin has operated within its
sustainable yield for at least 10 years. Such alternative plan must be submitted by January 31, 2017 and
updated every five years thereafter.
GSAs must consider the interests of all groundwater users in the basin and may require registration of
groundwater users, the installation of flow meters to measure groundwater extractions and annual reporting of
extractions up to an amount specified in the groundwater sustainability plan. In addition, GSAs are authorized
to impose spacing requirements on new wells, monitor, regulate and limit or condition groundwater production
and establish production allocations among groundwater producers, among other powers. GSAs are authorized
to impose fees to fund such activities and to fine or issue cease and desist orders against producers that violate
19
the GSA's regulations. Groundwater sustainability plans must include sustainability goals and a plan to
implement such goals within 20 years.
The Basin has been designated as a medium priority groundwater basin. Although a GSA has not
been appointed for the Basin, the City currently anticipates that the County will ultimately become the GSA.
The City does not currently expect its groundwater extraction rights or costs in the Basin to change
significantly as a result of the enactment of the SGMA. All of the City's groundwater wells are currently
metered, as required by the SGMA.
No assurance can be provided as to whether or when a GSA will be appointed for any portion of the
Basin. The City does not currently expect the enactment of the SGMA or the appointment of a GSA with
respect thereto to have a material adverse effect on the City's ability to generate sufficient Net Revenues to pay
the 2016 Bonds.
Lake Mendocino. The Mendocino County Russian River Flood Control and Water Conservation
Improvement District (the "District ") holds a water rights permit that entitles the District to store and use up to
8,000 acre feet of water in Lake Mendocino, which is located approximately five miles from the City. In 2004,
the City and the District entered into an agreement (the "Water Supply Agreement ") that allowed the City to
use up to 800 acre -feet per year of the District's supply. The City's right to receive water was subject to a
number of restrictions, including during times of drought. The City and the District have terminated the Water
Supply Agreement, and the City anticipates that such termination will become effective in spring 2016. The
City does not expect to divert water by agreement with the District in the future and believes that its water
supply from the Russian River and groundwater wells is sufficient to meet the demands of its customers.
Drought Measures
State Orders. On January 17, 2014, the State Governor declared a drought state of emergency (the
"Declaration ") with immediate effect. The Declaration includes the following orders, among others: (a) local
urban water suppliers, including the City, are encouraged to implement their local water shortage contingency
plans; the City's plan is discussed under the caption " —City Response to Drought;" (b) local urban water
suppliers, including the City, are encouraged to update their urban water management plans to prepare for
extended drought conditions; (c) DWR and the SWRCB are directed to expedite the processing of water
transfers; (d) the SWRCB is directed to put water rights holders on notice that they may be required to cease or
reduce water diversions in the future; (e) the SWRCB is directed to consider modifying requirements for
reservoir releases or diversion limitations; and (f) DWR is directed to take necessary actions to protect water
quality and supply in the Sacramento -San Joaquin River Delta/San Francisco Bay Estuary (the "Bay - Delta "),
including the installation of temporary barriers or temporary water supply connections, while minimizing
impacts to aquatic species. In addition, on July 15, 2014, the SWRCB adopted emergency measures requiring
water suppliers to implement mandatory Statewide water conservation actions.
On March 17, 2015, the SWRCB adopted additional emergency regulations limiting outdoor irrigation
to two days per week, extending certain measures set forth in the July 15, 2014 action for an additional 270
days, prohibiting outdoor irrigation for 48 hours following rain and prohibiting restaurants from serving water
to customers unless requested. It is anticipated that the City will comply with these regulations through its
Water Shortage Contingency Plan (the "Drought Plan "), as discussed under the caption " —City Response to
Drought."
On April 1, 2015, the Governor issued an executive order extending the measures set forth in the
Declaration and adopting the following additional orders, among others: (i) the SWRCB is directed to impose
restrictions to reduce potable urban water usage, including usage by commercial, industrial and institutional
properties and golf courses, by 25% from 2013 amounts through February 28, 2016; portions of a water
supplier's service area with higher per capita use must achieve proportionally greater reductions than areas
20
with lower per capita use; (ii) DWR is directed to lead a statewide initiative to replace 50 million square feet of
lawns with drought tolerant landscaping; (iii) the California Energy Commission is directed to implement a
rebate program for replacement of inefficient appliances; (iv) urban water suppliers are required to provide
monthly water usage, conservation and enforcement information; (v) service providers are required to monitor
groundwater basin levels in accordance with California Water Code § 10933; (vi) permitting agencies are
required to prioritize approval of water infrastructure and supply projects; and (vii) DWR is required to plan
salinity barriers in the Bay - Delta.
On May 6, 2015, the SWRCB adopted regulations in response to the Governor's executive order that
require the City to effect a 20% reduction from 2013 water usage. On November 13, 2015, the Governor
issued Executive Order B- 36 -15, which calls for an extension of urban water use restrictions until October 31,
2016 should drought conditions persist through January 2016.
On February 2, 2016, the SWRCB extended its previous emergency regulations through October 2016
while making available credits and adjustments of up to 8% in urban water suppliers' conservation mandates
based upon climate, water - efficient growth and investments in drought- resilient supply sources. The City is
unable to determine at this time whether it will be eligible for any credits or adjustments. The SWRCB will
review the February 2, 2016 regulations in May 2016 to determine whether to give urban water suppliers more
flexibility based on updated water supply information through April 2016.
City Response to Drought. Under the Drought Plan, the City responds to water supply shortages in
stages. Stage 1 of the Drought Plan, which is intended to reduce water usage by 10% to 20 %, limits the
following activities:
• The application of potable water to outdoor landscapes in a manner that causes runoff such
that water flows onto adjacent property, non - irrigated areas, private and public walkways, roadways, parking
lots or structures;
• Broadcast (non -drip) irrigation from sunup to sundown and more frequently than: (i) every
other day; or (ii) more than four days per week and at a rate that causes ponding or puddling in the irrigated
area, or drip irrigation at a rate that causes ponding or puddling in the irrigated area;
• The use of a hose that dispenses potable water to wash a motor vehicle, except where the hose
is fitted with a shut -off nozzle or device attached to it that causes it to cease dispensing water immediately
when not in use;
• The application of potable water to driveways and sidewalks; and
• The use of potable water in a fountain or other decorative water feature except where the
water is part of a recirculating system.
Under Stage 2 of the Drought Plan, which is intended to reduce water usage by 20% to 35 %, a 15%
surcharge is imposed on water consumption rates and the following water uses are prohibited:
Use of water from public hydrants for any purpose other than fire protection and/or
prevention;
• Use of water through any meter when the consumer has been given two days' notice to repair
one or more leaks and has failed to complete such repairs;
• Use of water by a golf course to irrigate any portion of its grounds except those areas
designated as tees and greens, unless the City determines that any such use is nonessential;
21
• Use of water to irrigate grass, lawns, ground cover, shrubbery, vegetable gardens, trees or
other outdoor vegetation unless drip irrigation is used;
Use of water for the construction of any structure, including such use in dust control;
• Use of water to wash any sidewalk, walkways, driveway, street, parking lot, tennis court or
other hard surfaced area by hosing or by otherwise direct use of water from faucets or other outlets;
• Use of water to wash any motor vehicle, trailer, airplane or boat by hosing or otherwise using
water directly from a faucet or other outlet;
Use of water to fill or refill any swimming pool; and
Use of water to add to any swimming pool that is not equipped with and using a pool cover.
Stage 3 of the Drought Plan, which is intended to reduce water usage by 35% to 50 %, imposes a 25%
surcharge on water consumption rates and imposes additional restrictions on water usage. Stage 4 of the
Drought Plan, which is intended to reduce water usage by 50% or more, imposes a 35% surcharge on water
consumption rates and imposes additional restrictions on water usage.
The City is currently implementing Stage 1 of the Drought Plan. The City believes that such actions
will enable it to reduce water usage by up to 20% from 2013 amounts in accordance with the regulations
adopted by the SWRCB on May 6, 2015. To date, reductions in water usage by Water System customers have
exceeded 33 %.
In some cases, actions taken pursuant to the Declaration could result in additional water being made
available to the City, while in other cases, actions taken pursuant to the Declaration could reduce water
supplies. The City believes that implementation of the Drought Plan is likely to reduce water sales revenues in
Fiscal Year 2016. While implementation of the Drought Plan in future years may result in lower water sales
revenues, it is also likely to result in lower operating costs, in particular pumping and energy costs related to
water production and delivery. The projected operating results set forth under the caption "PROJECTED
OPERATING RESULTS" reflect the implementation of the Drought Plan through the end of Fiscal Year
2020. The City does not believe that the implementation of the Drought Plan will have a material adverse
effect on its ability to generate sufficient Net Revenues to pay the principal of and interest on the 2016 Bonds
when due. See the Official Statement under the caption "SECURITY FOR THE 2016 BONDS— Limited
Obligations Payable from Net Revenues."
If a water shortage should arise, legal issues exist as to whether different California Water Code
provisions should be invoked to require reasonable regulations for the allocation of water in time of shortage.
Any curtailment that is accompanied by an increase in pumping charges or costs of diverting water from the
Russian River could necessitate an increase in the City's water rates to City customers. See the caption
"CONSTITUTIONAL LIMITATIONS ON APPROPRIATIONS AND CHARGES — Proposition 218."
22
The Water System
Historic Water Production. The following table shows historic water production of the Water System
for the five most recent Fiscal Years:
CITY OF UKIAH WATER SYSTEM
Historic Water Production in Acre -Feet
(1) Includes surface water diversions and extractions from alluvial wells. See the caption" —Water Supply — Russian River."
(2) Decreases in water production reflect water conservation measures and State orders relating to drought. See the caption "-
Drought Measures." See the caption "— Historic Water Sales Revenues" for historic water sales revenues in such years.
Source: City.
Historic Water Sales. The following table shows historic water sales of the Water System for the five
most recent Fiscal Years:
CITY OF UKIAH WATER SYSTEM
Historic Water Sales in Acre -FeeP
Fiscal
Residential Water
Groundwater/
% Increase/
Fiscal Year
Russian River(')
Lake Mendocino
Total
(Decrease)
2011
1,531
1,382
2,918
N /A%
2012
1,827
1,543
3,370
15.49
2013
2,038
1,483
3,521
4.48
2014 (2)
1,183
1,632
2,815
(20.05)
201 5(2)
1,442
1,248
2,690
(4.44)
(1) Includes surface water diversions and extractions from alluvial wells. See the caption" —Water Supply — Russian River."
(2) Decreases in water production reflect water conservation measures and State orders relating to drought. See the caption "-
Drought Measures." See the caption "— Historic Water Sales Revenues" for historic water sales revenues in such years.
Source: City.
Historic Water Sales. The following table shows historic water sales of the Water System for the five
most recent Fiscal Years:
CITY OF UKIAH WATER SYSTEM
Historic Water Sales in Acre -FeeP
Fiscal
Residential Water
Commercial /Other
%Increase/
Year
Sales
Water Sales
Total Water Sales
(Decrease)
2011
1,582
1,027
2,608
N /A%
2012
1,705
1,102
2,808
7.67
2013
1,738
1,124
2,862
1.92
2014 (2)
1,498
958
2,456
(14.19)
2015 (2)
1,332
825
2,156
(12.21)
Differences between water sales and water production set forth under the caption "— Historic Water Production" reflect
Water System losses, evaporation, unbilled water use, fire hydrant testing and fire hydrant use in emergencies.
(2) Decreases in water production reflect water conservation measures and State orders relating to drought. See the caption "-
Drought Measures." See the caption "— Historic Water Sales Revenues" for historic water sales revenues in such years.
Source: City.
23
Historic Water System Connections. The following table shows historic billed connections to the
Water System for the five most recent Fiscal Years:
CITY OF UKIAH WATER SYSTEM
Historic Water System Connections(t)
Fiscal
Residential
Commercial /Other
Total Water Sales
%Increase/
Year
Connections
Connections
Total Connections
(Decrease)
2011
4,511
1,130
5,641
N /A%
2012
4,533
1,141
5,674
5.85
2013
4,533
1,141
5,674
0.00
2014
4,556
1,143
5,699
0.44
2015
4,570
1,151
5,721
0.39
Source: City
Historic Water Sales Revenues. The following table shows historic water sales revenues of the Water
System for the five most recent Fiscal Years. Increases in water revenues reflect the five -year rate increases
adopted in 2010. See the caption" —Water System Rates and Charges — General."
CITY OF UKIAH WATER SYSTEM
Historic Water Sales Revenues
Fiscal
Residential Water
Commercial /Other
Total Water Sales
%Increase/
Year
Sales R even u es
Water Sales R even a es
R even a es
(Decrease)
2011
$2,413,867
$1,609,244
$4,023,111
N /A%
2012
2,937,127
1,958,084
4,895,211
21.68
2013
3,418,379
2,278,919
5,697,298
16.39
2014
3,561,222
2,374,148
5,935,370
4.18
2015(')
3,390,067
2,167,420
5,557,487
(6.37)
Reflects unaudited actual Fiscal Year 2015 amounts. Decrease reflects reduced water use as a result of mandatory
conservation orders in light of Statewide drought. See the caption "— Drought Measures."
Source: City.
Projected Water Production. The following table shows projected water production of the Water
System for the current and next four Fiscal Years:
Source: City.
CITY OF UKIAH WATER SYSTEM
Projected Water Production in Acre -Feet
% In crease/
Fiscal Year
Russian River('
Groundwater
Total
(Decrease)
2016
1,447
1,184
21630
(2.23)%
2017
1,541
1,261
21801
6.50
2018
1,641
1,342
21983
6.50
2019
1,699
1,390
35089
3.55
2020
1,708
1,397
35105
0.52
24
Projected Water Sales. The following table shows projected water sales of the Water System for the
current and next four Fiscal Years:
CITY OF UKIAH WATER SYSTEM
Projected Water Sales in Acre-Feet(l)
Fiscal Residential Water Commercial /Other Total Water %Increase/
Year Sales Water Sales Sales(') (Decrease)
2016
1,372
915
2,287
6.08%
2017
1,462
974
2,436
6.52
2018
1,556
1,038
2,594
6.49
2019
1,612
1,074
2,686
3.55
2020
1,620
1,080
2,700
0.52
Differences between water sales and water production set forth under the caption "— Projected Water Production" reflect
Water System losses, evaporation, unbilled water use, fire hydrant testing and fire hydrant use in emergencies.
Source: City.
Projected Water System Connections. The following table shows projected billed connections to the
Water System for the current and next four Fiscal Years:
CITY OF UKIAH WATER SYSTEM
Projected Water System Connections
Fiscal
Residential
Commercial /Other
Total Water Sales
%Increase/
Year
Connections
Connections
Total Connections
(Decrease)
2016
4,570
1,151
5,721
0.00%
2017
4,616
1,163
5,779
1.01
2018
4,662
1,174
5,836
0.99
2019
4,708
1,186
5,894
0.99
2020
4,756
1,198
5,954
1.02
Source: City
Projected Water Sales Revenues. The following table shows projected water sales revenues of the
Water System for the current and next four Fiscal Years:
CITY OF UKIAH WATER SYSTEM
Projected Water Sales Revenues
Fiscal
Residential Water
Commercial /Other
Total Water Sales
%Increase/
Year
Sales Revenues
Water Sales Revenues
Revenues
(Decrease)
2016
$3,353,938
$2,235,959
$5,589,897
0.58%
2017
3,598,200
2,398,800
5,997,000
7.28
2018
3,840,600
2,560,400
6,401,000
6.74
2019
4,038,000
2,692,000
6,730,000
5.14
2020
4,177,800
2,785,200
6,963,000
3.46
Source: City
Projected water sales revenues assume continued drought conditions and the continued
implementation of the City's Drought Plan through the end of Fiscal Year 2020, the projected Water System
connections set forth under the caption "— Projected Water System Connections" and adoption of the projected
25
rate increases described under the caption " —Water System Rates and Charges — General." See the caption
"CERTAIN RISKS TO BONDHOLDERS — Accuracy of Assumptions."
Largest Water System Customers
The following table sets forth the ten largest customers of the Water System of the City (other than the
City itself) as of June 30, 2015, as determined by the amount of their respective payments.
CITY OF UKIAH WATER SYSTEM
Largest Water System Customers — Fiscal Year 2014 -15
Hundred Cubic
Customer
Revenues
Feet Purchased
% of TotaP
Ukiah Golf Course
$165,993
56,070
2.99%
Ukiah Unified School District
148,851
47,438
2.68
Manor Oaks Mobile Estates
121,467
12,059
2.19
County of Mendocino
36,088
11,802
0.65
Mendocino Brewing Company
34,772
11,320
0.63
Russian River Cemetery District
34,728
10,354
0.62
Orchard Manor Apartments
33,312
11,451
0.60
Todd Grove Park City
29,314
8,371
0.53
Home Depot
19,885
7,980
0.36
Walmart
19,159
7,489
0.34
TOP TEN TOTAL
$643,569
184,334
11.59%
1 ) Percentage of total Water System Revenues.
Source: City.
These ten customers accounted for approximately 11.59% of total water sales revenues of $5,557,487
for Fiscal Year 2015.
Water System Rates and Charges
General. Water System Revenues are derived from water sales (consumption charges) and fixed
charges. Fixed charges are dependent on a customer's meter size.
The City Council has rate setting authority and the City's rates are not subject to review or approval
by the California Public Utilities Commission or any other agency. See the caption "CONSTITUTIONAL
LIMITATIONS ON APPROPRIATIONS AND CHARGES— Proposition 218" for a discussion of certain
limitations of the rate setting authority of the City Council.
On July 1, 2010, the City adopted five -year rate increases for the Water System in compliance with
the notice, hearing and protest provisions of Proposition 218. Water rates effective July 1, 2014 are set forth
below.
CITY OF UKIAH WATER SYSTEM
Water Consumption Rate Per Hundred Cubic Feet
Zone
1 2 3 4
Rate per Hundred Cubic Feet $2.73 $2.73 $2.73 $2.73
Water System customers also pay a fixed monthly charge that varies depending upon meter size, as set
forth below. Most residential customers have a 1" or smaller diameter meter.
CITY OF UKIAH WATER SYSTEM
Fixed Water Charges by Meter Size
Bimonthly
Meter Size Fixed Rate
0.75"
$ 32.25
1"
54.81
1.5"
106.40
2"
170.88
3"
322.41
4"
538.45
6"
1,073.66
Fire Service 2"
34.18
Fire Service 3"
64.48
Fire Service 4"
107.69
Fire Service 6"
214.72
Source: City.
In 2015, the City engaged The Reed Group, Inc. (the "Consultant ") to prepare a water rate study (the
"Rate Study ") analyzing the Water System's capital needs and current rate structure. Although the Rate Study
has not yet been completed, the Consultant is expected to recommend that the City adopt water rate increases
of approximately 3% per annum beginning in spring 2016. The projected water sales revenues set forth under
the caption " —The Water System — Projected Water Sales Revenues" reflect projected water rate increases of
approximately 3% per annum in Fiscal Years 2017 through 2020 in accordance with the Rate Study. All water
rate increases are subject to the notice, hearing and protest provisions of Proposition 218 described under the
caption "CONSTITUTIONAL LIMITATIONS ON APPROPRIATIONS AND CHARGES— Proposition
218." There can be no assurance that the City Council will adopt additional rate increases in the future.
However, the City has covenanted to set rates and charges in amounts that are expected to be sufficient to pay
debt service while the 2016 Bonds are outstanding. See the caption "SECURITY FOR THE 2016 BONDS —
Rate Covenant."
Comparative Water Rates. Set forth below is a schedule of estimated comparative water rates for the
City and water service providers located near the City effective as of January 1, 2016. Because each service
provider has a different rate structure, an average monthly water bill was calculated based on 11 hundred cubic
feet of usage per single family residence per month.
27
CITY OF UKIAH WATER SYSTEM
Comparative Water Rates
(1) Estimated for service providers other than the City. Charge applicable to 1/4" meter.
Source: Reed Group, Inc. Water Rate Study.
Collection Procedures. All charges for water service are billed monthly on a consolidated basis with
sewer, solid waste and electric service. If payment is not received 36 days after billing, a late charge of $5.00
is assessed and a delinquent bill is sent allowing 10 more days for payment. If payment is not received after
such period, a final notice of non - payment is sent and another $5.00 late charge is assessed allowing an
additional 7 days for payment. A 48 hour shut -off notice will be hand delivered the next working day after the
due date of the final notice. If payment is not received within such 48 hour period, electric service is shut off.
Service is not restored until all charges, including a reconnection fee of $25.00, has been paid in full. An
additional deposit may be required. After 10 days of non - payment all services, including water, are shut -off
and the account is closed.
Currently, approximately 10% of water accounts are delinquent in the total amount of approximately
$46,312. The City reports that most customers pay delinquent bills prior to shut -off
Future Water System Improvements
The City projects capital improvements to the Water System of approximately $15,370,000 over the
current and next four Fiscal Years, including pipeline improvements, the development of an additional
groundwater well, the rehabilitation of an existing well, improvements to existing wells and the Treatment
Plan, water meter upgrades and other improvements. The City currently projects funding such capital
improvements through a combination of grants, Net Revenues remaining after payment of the 2016 Bonds and
Water System reserves. The City does not expect to issue additional Bonds or enter into additional Contracts
to finance such improvements in the current or next four Fiscal Years.
Water System Reserves
The City maintains an operating reserve equal to 25% of annual Operation and Maintenance Costs and
debt service of the Water System. The operating reserve provides working capital and funds for unplanned
operation and maintenance expenditures. As of January 1, 2016, approximately $1,001,000 was held in the
operating reserve.
The City also maintains a rate stabilization reserve equal to 50% of annual Operation and Maintenance
Costs of the Water System. The rate stabilization reserve provides a source of available funds in the event of a
drought or other emergency. As of January 1, 2016, approximately $1,480,000 was held in the rate
stabilization reserve.
28
Average
Monthly Water
Water Service Provider
Charge(l)
City of Fort Bragg
$82.00
City of Healdsburg
68.00
City of Cloverdale
63.00
City of Uldah
62.28
Millview County Water District
61.00
Rogina Water Company
58.00
(1) Estimated for service providers other than the City. Charge applicable to 1/4" meter.
Source: Reed Group, Inc. Water Rate Study.
Collection Procedures. All charges for water service are billed monthly on a consolidated basis with
sewer, solid waste and electric service. If payment is not received 36 days after billing, a late charge of $5.00
is assessed and a delinquent bill is sent allowing 10 more days for payment. If payment is not received after
such period, a final notice of non - payment is sent and another $5.00 late charge is assessed allowing an
additional 7 days for payment. A 48 hour shut -off notice will be hand delivered the next working day after the
due date of the final notice. If payment is not received within such 48 hour period, electric service is shut off.
Service is not restored until all charges, including a reconnection fee of $25.00, has been paid in full. An
additional deposit may be required. After 10 days of non - payment all services, including water, are shut -off
and the account is closed.
Currently, approximately 10% of water accounts are delinquent in the total amount of approximately
$46,312. The City reports that most customers pay delinquent bills prior to shut -off
Future Water System Improvements
The City projects capital improvements to the Water System of approximately $15,370,000 over the
current and next four Fiscal Years, including pipeline improvements, the development of an additional
groundwater well, the rehabilitation of an existing well, improvements to existing wells and the Treatment
Plan, water meter upgrades and other improvements. The City currently projects funding such capital
improvements through a combination of grants, Net Revenues remaining after payment of the 2016 Bonds and
Water System reserves. The City does not expect to issue additional Bonds or enter into additional Contracts
to finance such improvements in the current or next four Fiscal Years.
Water System Reserves
The City maintains an operating reserve equal to 25% of annual Operation and Maintenance Costs and
debt service of the Water System. The operating reserve provides working capital and funds for unplanned
operation and maintenance expenditures. As of January 1, 2016, approximately $1,001,000 was held in the
operating reserve.
The City also maintains a rate stabilization reserve equal to 50% of annual Operation and Maintenance
Costs of the Water System. The rate stabilization reserve provides a source of available funds in the event of a
drought or other emergency. As of January 1, 2016, approximately $1,480,000 was held in the rate
stabilization reserve.
28
The Rate Study discussed under the caption " —Water System Rates and Charges — General"
recommends the creation of an additional reserve: a water connection fee fund. The City is currently exploring
whether to establish such fund.
Historic Water System Operating Results and Debt Service Coverage
The following table is a summary of operating results of the Water System for the last five Fiscal
Years. These results have been derived from the Financial Statements and audited financial statements of the
City for prior Fiscal Years but exclude certain non -cash items and include certain other adjustments. The table
has not been reviewed or audited by the Auditor.
CITY OF UKIAH WATER SYSTEM
Historic Water System Operating Results and Debt Service Coverage
Fiscal Year Ended June 30
Reflects unaudited actual Fiscal Year 2015 amounts. Decrease in water sales revenues reflects effect of reduced water sales
resulting from the Statewide drought and related State orders. See the caption "— Drought Measures."
(2) Differs from historic water sales revenues set forth under the caption " —The Water System— Historic Water Sales Revenues"
because includes fire line service charges, penalties and other water service revenues.
(3) Includes connection fees.
(4) Includes production, distribution, meter reading and other Water System Operation and Maintenance Costs.
(5) This obligation is being prepaid from proceeds of the 2016 Bonds. See the caption "REFUNDING PLAN."
(6) Net Revenues divided by Total Debt Service.
(7) Net Revenues less Total Debt Service.
Source: City.
29
2011
2012
2013
2014
2015")
Revenues
Water Service Charges (2)
$4,036,531
$4,935,691
$5,710,278
$5,997,957
$5,576,979
Interest Earnings
25,469
2,359
33,497
56,550
45,845
Miscellaneous Revenues (3)
3,226
103,421
8,718
2,148
Total Revenues
$4,065,226
$4,938,050
$5,847,196
$6,063,225
$5,624,972
Operation and Maintenance Costs
City Administration
$ 672,782
$ 614,070
$ 707,455
$ 708,320
$ 983,373
Operations and Maintenance (4)
1,362,088
1,560,178
1,739,054
1,779,625
1,855,345
Total Operation and Maintenance Costs
$2,034,870
$2,174,248
$2,446,509
$2,487,945
$2,838,718
Net Revenues
$2,030,356
$2,763,802
$3,400,687
$3,575,280
$2,786,254
Debt Service
State Loan (5)
$ 180,958
$ 180,320
$ 181,407
$ 180,305
$ 182,036
2005 Installment Purchase Agreement(5)
887,123
884,523
876,623
873,423
874,548
Total Debt Service
$1,068,081
$1,064,843
$1,058,030
$1,053,728
$1,056,584
Debt Service Coverage (6)
1.90
2.60
3.21
3.39
2.64
Remaining Revenues (7)
$ 962,275
$1,698,959
$2,342,657
$2,521,552
$1,729,670
Reflects unaudited actual Fiscal Year 2015 amounts. Decrease in water sales revenues reflects effect of reduced water sales
resulting from the Statewide drought and related State orders. See the caption "— Drought Measures."
(2) Differs from historic water sales revenues set forth under the caption " —The Water System— Historic Water Sales Revenues"
because includes fire line service charges, penalties and other water service revenues.
(3) Includes connection fees.
(4) Includes production, distribution, meter reading and other Water System Operation and Maintenance Costs.
(5) This obligation is being prepaid from proceeds of the 2016 Bonds. See the caption "REFUNDING PLAN."
(6) Net Revenues divided by Total Debt Service.
(7) Net Revenues less Total Debt Service.
Source: City.
29
Projected Water System Operating Results and Debt Service Coverage
The estimated projected operating results for the Water System of the City for the current and next
four Fiscal Years are set forth below, reflecting certain significant assumptions concerning future events and
circumstances. The financial forecast represents the City's estimate of projected Water System financial
results based upon its judgment of the most probable occurrence of certain important future events. The
projections of Revenues reflect continued drought restrictions and the City's estimates of water use set forth
under the caption " —The Water System — Projected Water Sales" and the projected water rate increases
described under the caption ' —Water System Rates and Charges — General." All water rate increases are
subject to the notice, hearing and protest provisions of Proposition 218 described under the caption
"CONSTITUTIONAL PROVISIONS AFFECTING WATER SYSTEM REVENUES AND
EXPENDITURES— Proposition 218: Article XIIIC and Article XIIlD." There can be no assurance that the
City Council will adopt additional rate increases as currently projected.
The assumptions set forth herein and in the footnotes to the chart below are material in the
development of the financial projections of the City, and variations in the assumptions may produce
substantially different financial results. Actual operating results achieved during the projection period may
vary from those presented in the forecast and such variations may be material. See the caption
"BONDOWNERS' RISKS— Accuracy of Assumptions."
CITY OF UKIAH WATER SYSTEM
Projected Water System Operating Results and Debt Service Coverage
$1,115,183
$1,148,600
Fiscal Year Ending June 30
$1,218,500
$1,255,100
Operations and Maintenance (6)
1,838,441
2016(') 2017
2018
2019
2020
Revenues
$2,953,624
$3,119,400
$3,297,100
$3,448,000
Water Service Charges (2)
$5,589,897 $5,997,000
$6,401,000
$6,730,000
$6,963,000
Interest Earnings (3)
24,800 27,200
20,600
22,700
17,300
Miscellaneous Revenues (4)
28,671 29,500
30,400
31,300
32,200
Total Revenues
$5,643,368 $6,053,700
$6,452,000
$6,784,000
$7,012,500
Operation and Maintenance Costs
City Administrations)
$1,115,183
$1,148,600
$1,183,000
$1,218,500
$1,255,100
Operations and Maintenance (6)
1,838,441
1,970,800
2,114,100
2,229,500
2,308,000
Total Operation and Maintenance Costs
$2,953,624
$3,119,400
$3,297,100
$3,448,000
$3,563,100
Net Revenues
$2,689,744
$2,934,300
$3,154,900
$3,336,000
$3,449,400
Debt Service
State Loan(7) $ 182,000 $ - $ - $ - $ -
2005 Installment Purchase Agreement (7) 870,000 - - - -
2016 Bonds* 928,544 930,069 928,494 926,469
Total Debt Service* $1,052,000 $ 928,544 $ 930,069 $ 928,494 $ 926,469
Debt Service Coverage (10). 2.56 3.16 3.39 3.60 3.72
Remaining Revenues (11)* $1,637,744 $2,005,756 $2,224,831 $2,407,506 $2,522,931
1'1 Reflects projected Fiscal Year 2016 results set forth in the Rate Study. See the caption " —Water System Rates and
Charges — General."
(2) Reflects projected rate increases of approximately 3% per annum in Fiscal Years 2017 through 2020 that have not yet been
adopted. There can be no assurance that the City Council will adopt such rate increases as currently projected. All water rate
increases are subject to the notice, hearing and protest provisions of Proposition 218 described under the caption
"CONSTITUTIONAL LIMITATIONS ON APPROPRIATIONS AND CHARGES— Proposition 218."
(3) Projected at 0.5% on Water System reserves in Fiscal Years 2016 and 2017 and at 0.75% on Water System reserves
thereafter.
Preliminary; subject to change.
30
(4) Includes connection fees. Projected to increase approximately 3% per annum from Fiscal Year 2016 budgeted amount.
(5) Projected to increase approximately 3% per annum from Fiscal Year 2016 budgeted amount.
(6) Includes production, distribution, meter reading and other Water System Operation and Maintenance Costs. Projected to
increase approximately 7% per annum from Fiscal Year 2016 budgeted amount in Fiscal Years 2017 and 2018,
approximately 5.5% from Fiscal Year 2018 amount in Fiscal Year 2019 and approximately 3.5% per annum thereafter.
(7) This obligation is being prepaid from proceeds of the 2016 Bonds. See the caption "REFUNDING PLAN."
(8) Net Revenues divided by Total Debt Service.
(9) Net Revenues less Total Debt Service.
Source: City.
CONSTITUTIONAL LIMITATIONS ON APPROPRIATIONS AND CHARGES
Article XIIIB
Article XIIIB of the California Constitution limits the annual appropriations of the State and of any
city, county, school district, authority or other political subdivision of the State to the level of appropriations of
the particular governmental entity for the prior fiscal year, as adjusted for changes in the cost of living and
population. The "base year" for establishing such appropriation limit is the 1978 -79 State fiscal year and the
limit is to be adjusted annually to reflect changes in population and consumer prices. Adjustments in the
appropriations limit of an entity may also be made if. (i) the financial responsibility for a service is transferred
to another public entity or to a private entity; (ii) the financial source for the provision of services is transferred
from taxes to other revenues; or (iii) the voters of the entity approve a change in the limit for a period of time
not to exceed four years.
Appropriations subject to Article XIIIB generally include the proceeds of taxes levied by or for the
State or other entity of local government, exclusive of certain State subventions, refunds of taxes and benefit
payments from retirement, unemployment, insurance and disability insurance funds. "Proceeds of taxes"
include, but are not limited to, all tax revenues and the proceeds to an entity of government from:
(a) regulatory licenses, user charges, and user fees (but only to the extent such proceeds exceed the cost
reasonably borne by the entity in providing the service or regulation); and (b) the investment of tax revenues.
Article XIIIB includes a requirement that if an entity's revenues in any year exceed the amounts permitted to
be spent, the excess would have to be returned by revising tax rates or fee schedules over the subsequent two
years.
Certain expenditures are excluded from the appropriations limit, including payments of indebtedness
existing or legally authorized as of January 1, 1979, or of bonded indebtedness thereafter approved by a vote of
electors of the issuing entity and payments required to comply with court or federal mandates which without
discretion require an expenditure for additional services or which unavoidably make the provision of existing
services more costly.
The City is of the opinion that its charges for Water Service do not exceed the costs that it reasonably
bears in providing such service and therefore are not subject to the limits of Article XIIIB. The City has
covenanted in the Indenture that it will, at all times while any of the 2016 Bonds remain unpaid, to the fullest
extent permitted by law, fix and prescribe, at the commencement of each Fiscal Year, rates and charges for the
Water Service that are reasonably expected, at the commencement of such Fiscal Year, to be at least sufficient
to yield during such Fiscal Year Net Revenues (which, when calculated for purposes of the foregoing
covenant, do not include amounts transferred from the Rate Stabilization Fund pursuant to the Indenture that
are in excess of 20% of Debt Service for such Fiscal Year) equal to 120% of Debt Service for such Fiscal
Year. See the caption "SECURITY FOR THE 2016 BONDS —Rate Covenant."
Proposition 218
General. An initiative measure entitled the "Right to Vote on Taxes Act" (the "Initiative ") was
approved by the voters of the State at the November 5, 1996 general election. The Initiative added
Article XIIIC and Article XIIID to the California Constitution. According to the "Title and Summary" of the
31
Initiative prepared by the California Attorney General, the Initiative limits "the authority of local governments
to impose taxes and property- related assessments, fees and charges."
Article XIIID. Article XIIID defines the terms "fee" and "charge" to mean "any levy other than an
ad valorem tax, a special tax or an assessment, imposed by an agency upon a parcel or upon a person as an
incident of property ownership, including user fees or charges for a property- related service." A
"property- related service" is defined as "a public service having a direct relationship to property ownership."
Article XIIID further provides that reliance by an agency on any parcel map (including an assessor's parcel
map) may be considered a significant factor in determining whether a fee or charge is imposed as an incident
of property ownership.
Article XIIID requires that any agency imposing or increasing any property - related fee or charge must
provide written notice thereof to the record owner of each identified parcel upon which such fee or charge is to
be imposed and must conduct a public hearing with respect thereto. The proposed fee or charge may not be
imposed or increased if a majority of owners of the identified parcels file written protests against it. As a
result, if and to the extent that a fee or charge imposed by a local government for water service is ultimately
determined to be a "fee" or "charge" as defined in Article XIIID, the local government's ability to increase
such fee or charge may be limited by a majority protest.
In addition, Article XIIID includes a number of limitations applicable to existing fees and charges,
including provisions to the effect that: (i) revenues derived from the fee or charge may not exceed the funds
required to provide the property- related service; (ii) such revenues may not be used for any purpose other than
that for which the fee or charge was imposed; (iii) the amount of a fee or charge imposed upon any parcel or
person as an incident of property ownership may not exceed the proportional cost of the service attributable to
the parcel; and (iv) no such fee or charge may be imposed for a service unless that service is actually used by,
or immediately available to, the owner of the property in question. Property- related fees or charges based on
potential or future use of a service are not permitted.
Based upon the California Court of Appeal decision in Howard Jarvis Taxpayers Association v. City
of Los Angeles, 85 Cal. App. 4th 79 (2000), which was denied review by the State Supreme Court, it was
generally believed that Article XIIID did not apply to charges for water services that are "primarily based on
the amount consumed" (i.e., metered water rates), which had been held to be commodity charges related to
consumption of the service, not property ownership. The Supreme Court stated in Bighorn- Desert View Water
Agency v. Verid, 39 Cal. 4th 205 (2006) (the "Bighorn Case "), however, that fees for ongoing water service
through an existing connection were property- related fees and charges. The Supreme Court specifically
disapproved the holding in Howard Jarvis Taxpayers Association v. City of Los Angeles that metered water
rates are not subject to Proposition 218. The City has complied with the notice and public hearing
requirements of Article XIIID in determining whether to change Water System rates and charges since [_].
On April 20, 2015, the California Court of Appeal, Fourth District, issued an opinion in Capistrano
Taxpayers Association, Inc. v. City of San Juan Capistrano, 235 Cal. App. 4th 1493 (2015) (the "SJC Case ")
upholding tiered water rates under Proposition 218 provided that the tiers correspond to the actual cost of
furnishing service at a given level of usage. The opinion was specific to the facts of the case, including a
finding that the City of San Juan Capistrano did not attempt to calculate the actual costs of providing water at
various tier levels. The City's water rates, which are described under the caption "THE WATER SYSTEM OF
THE CITY — System Rates and Charges," do not currently include tiered rates based on usage. The City does
not currently expect the decision in the SJC Case to affect its water rate structure. The City believes that its
current water rates comply with the requirements of Proposition 218 and expects that any future water rate
increases will comply with Proposition 218's procedural and substantive requirements to the extent applicable
thereto.
Article XIIIC. Article XIIIC provides that the initiative power may not be prohibited or otherwise
limited in matters of reducing or repealing any local tax, assessment, fee or charge and that the power of
32
initiative to affect local taxes, assessments, fees and charges is applicable to all local governments. Article
XIIIC does not define the terms "local tax," "assessment," "fee" or "charge," so it was unclear whether the
definitions set forth in Article XIIID referred to above were applicable to Article XIIIC. Moreover, the
provisions of Article XIIIC are not expressly limited to local taxes, assessments, fees and charges imposed
after November 6, 1996. On July 24, 2006, the State Supreme Court held in the Bighorn Case that the
provisions of Article XIIIC included rates and fees charged for domestic water use. In the decision, the Court
noted that the decision did not address whether an initiative to reduce fees and charges could override statutory
rate setting obligations. In any event, the City does not believe that Article XIIIC grants to the voters within
the City the power to repeal or reduce rates and charges for the Water Service in a manner which would be
inconsistent with the contractual obligations of the City. However, there can be no assurance of the
availability of particular remedies adequate to protect the Beneficial Owners of the 2016 Bonds. Remedies
available to Beneficial Owners of the 2016 Bonds in the event of a default by the City are dependent upon
judicial actions which are often subject to discretion and delay and could prove both expensive and time
consuming to obtain. So long as the 2016 Bonds are held in book -entry form, DTC (or its nominee) will be the
sole registered owner of the 2016 Bonds and the rights and remedies of the 2016 Bond Owners will be
exercised through the procedures of DTC.
In addition to the specific limitations on remedies contained in the applicable documents themselves,
the rights and obligations with respect to the 2016 Bonds and the Indenture are subject to bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance and other similar laws affecting creditors'
rights, to the application of equitable principles if equitable remedies are sought, and to the exercise of judicial
discretion in appropriate cases and to limitations on legal remedies against public agencies in the State. The
various opinions of counsel to be delivered with respect to such documents, including the opinion of Bond
Counsel (the form of which is attached as Appendix C), will be similarly qualified.
Proposition 26
On November 2, 2010, voters in the State approved Proposition 26. Proposition 26 amends
Article XIIIC of the California Constitution to expand the definition of "tax" to include "any levy, charge, or
exaction of any kind imposed by a local government" except the following: (a) a charge imposed for a specific
benefit conferred or privilege granted directly to the payor that is not provided to those not charged, and which
does not exceed the reasonable costs to the local government of conferring the benefit or granting the privilege;
(b) a charge imposed for a specific government service or product provided directly to the payor that is not
provided to those not charged, and which does not exceed the reasonable costs to the local government of
providing the service or product; (c) a charge imposed for the reasonable regulatory costs to a local
government for issuing licenses and permits, performing investigations, inspections, and audits, enforcing
agricultural marketing orders, and the administrative enforcement and adjudication thereof, (d) a charge
imposed for entrance to or use of local government property, or the purchase, rental or lease of local
government property; (e) a fine, penalty or other monetary charge imposed by the judicial branch of
government or a local government as a result of a violation of law; (f) a charge imposed as a condition of
property development; and (g) assessments and property - related fees imposed in accordance with the
provisions of Article XIIID. Proposition 26 applies to charges imposed or increased after November 2, 2010
and provides that the local government bears the burden of proving by a preponderance of the evidence that a
levy, charge, or other exaction is not a tax, that the amount is no more than necessary to cover the reasonable
costs of the governmental activity, and that the manner in which those costs are allocated to a payor bear a fair
or reasonable relationship to the payor's burdens on, or benefits received from, the governmental activity. The
City believes that its water rates and charges are not taxes under Proposition 26.
Future Initiatives
Articles XHIB, XIIIC and XIIID and Proposition 26 were adopted as measures that qualified for the
ballot pursuant to the State's initiative process. From time to time other initiatives could be proposed and
adopted affecting the City's revenues or ability to increase revenues.
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CERTAIN RISKS TO BONDHOLDERS
The following information should be considered by prospective investors in evaluating the 2016
Bonds. However, the following does not purport to be an exhaustive listing of risks and other considerations
may be relevant to making an investment decisions with respect to the 2016 Bonds. In addition, the order in
which the following information is presented is not intended to reflect the relative importance of any such
risks.
Limited Obligations
The obligation of the City to pay the 2016 Bonds is a limited obligation of the City and is not secured
by a legal or equitable pledge or charge or lien upon any property of the City or any of its income or receipts,
except the Revenues. The obligation of the City to pay the 2016 Bonds does not constitute an obligation of the
City to levy or pledge any form of taxation or for which the City has levied or pledged any form of taxation.
Accuracy of Assumptions
To estimate the revenues available to pay Debt Service on the 2016 Bonds, the City has made certain
assumptions with regard to the rates and charges to be imposed in future years, the expenses associated with
operating the Water System and the interest rate at which funds will be invested. The City believes these
assumptions to be reasonable, but to the extent that any of these assumptions fail to materialize, the Net
Revenues available to pay Debt Service on the 2016 Bonds will, in all likelihood, be less than those projected
herein. See the caption "THE WATER SYSTEM OF THE CITY— Projected Water System Operating Results
and Debt Service Coverage." Projected Water System operating results assume the implementation of certain
rate increases in future years; however, all such rate increases are subject to the substantive and procedural
requirements of Proposition 218 and there can be no assurance that such rate increases will be adopted. See
the caption "— Rate - Setting Process under Proposition 218." The City may choose to maintain compliance
with the rate covenant set forth in the Indenture in part by means of contributions from available reserves or
resources. In such event, Net Revenues may generate amounts which are less than 1.20 times Debt Service in
any given Fiscal Year. See the caption "SECURITY FOR THE 2016 BONDS —Rate Covenant."
System Demand
There can be no assurance that the demand for Water Service will occur as described in this Official
Statement. Reduction in levels of demand could require an increase in rates or charges in order to comply with
the rate covenant. Demand for water services could be reduced as a result of hydrological conditions,
conservation efforts (including in response to the current drought as described under the caption "THE
WATER SYSTEM OF THE CITY — Drought Measures" or future droughts) and other factors.
System Expenses
There can be no assurance that the City's expenses will be consistent with the descriptions in this
Official Statement. Operation and Maintenance Costs may vary with labor costs (including costs related to
pension liabilities), treatment costs, regulatory compliance costs and other factors. Increases in expenses could
require an increase in rates or charges in order to comply with the rate covenant. See the caption "SECURITY
FOR THE 2016 BONDS —Rate Covenant."
Limited Recourse on Default
If the City defaults on its obligation to pay the principal of and interest on the 2016 Bonds, the Trustee
has the right to declare the total unpaid principal of the 2016 Bonds, together with the accrued interest thereon
to be immediately due and payable. However, in the event of a default and such acceleration, there can be no
34
assurance that the City will have sufficient fiords to pay the accelerated amounts due on the 2016 Bonds from
Net Revenues.
Rate - Setting Process under Proposition 218
Proposition 218, which added Articles XIIIC and XIIID to the California Constitution, affects the
City's ability to maintain existing rates and impose rate increases, and no assurance can be given that future
rate increases will not encounter majority protest opposition or be challenged by initiative action authorized
under Proposition 218. In the event that future proposed rate increases cannot be imposed as a result of
majority protest or initiative, the City might thereafter be unable to generate Net Revenues in the amounts
required by the Indenture to pay the 2016 Bonds. The City believes that the current water rates approved by
the City Council were effected under the public hearing and majority protest provisions of Proposition 218.
See the caption "CONSTITUTIONAL LIMITATIONS ON APPROPRIATIONS AND CHARGES —
Proposition 218."
Statutory and Regulatory Compliance
Laws and regulations governing the treatment and delivery of water are enacted and promulgated by
federal, State and local government agencies. Compliance with these laws and regulations is and will continue
to be costly, and, as more stringent standards are developed, such costs will likely increase.
Claims against the Water System for failure to comply with applicable laws and regulations could be
significant. Such claims may be payable from assets of the Water System or from other legally available
sources. In addition to claims by private parties, changes in the scope and standards for public agency water
systems such as that operated by the City may also lead to administrative orders issued by federal or State
regulators. Future compliance with such orders can also impose substantial additional costs on the City. No
assurance can be given that the cost of compliance with such laws, regulations and orders would not adversely
affect the ability of the City to generate Net Revenues sufficient to pay the 2016 Bonds.
Natural Disasters
The occurrence of any natural disaster in the City, including, without limitation, fire, earthquake,
landslide, high winds, drought or flood, could have an adverse material impact on the economy within the
City, the Water System and the Net Revenues available for the payment of the 2016 Bonds. Portions of the
Water System may be at risk of damage or destruction from wildfires or subject to unpredictable seismic
activity.
The occurrence of natural disasters in the area of the Water System could result in substantial damage
to the Water System which, in turn, could substantially reduce revenue generated by the Water System and
affect the ability of the City to pay the 2016 Bonds. The City maintains liability insurance for the Water
System and earthquake and property casualty insurance for certain portions of the Water System. See the
caption "THE CITY OF UKIAH —City Insurance." However, there can be no assurance that specific losses
will be covered by insurance or, if covered, that claims will be paid in full by the applicable insurers.
Furthermore, as described under the caption "THE CITY OF UKIAH —City Insurance," significant
portions of the Water System, including pipelines, are not covered by property casualty insurance. Damage to
such portions of the Water System as a result of natural disasters would result in uninsured losses to the City.
Limitations on Remedies
The ability of the City to comply with its covenants under the Indenture and to generate Net Revenues
in amounts that are sufficient to pay principal of and interest on the 2016 Bonds may be adversely affected by
actions and events that are outside of the control of the City or actions taken (or not taken) by voters, property
35
owners, taxpayers or persons obligated to pay assessments, fees and charges. See the caption
"CONSTITUTIONAL LIMITATIONS ON APPROPRIATIONS AND CHARGES — Proposition 218."
Furthermore, the remedies available to the owners of the 2016 Bonds upon the occurrence of an event of
default under the Indenture are in many respects dependent upon judicial actions which are often subject to
discretion and delay and could prove both expensive and time consuming to obtain.
In addition, usual equity principles may limit the specific enforcement under State law of certain
remedies, as may the exercise by the United States of America of the powers delegated to it by the federal
Constitution, and the reasonable and necessary exercise, in certain exceptional situations, of the police power
inherent in the sovereignty of the State and its governmental bodies in the interest of serving a significant and
legitimate public purpose. Bankruptcy proceedings, or the exercise of powers by the federal or state
government, if initiated, could subject the owners of the 2016 Bonds to judicial discretion and interpretation of
their rights in bankruptcy or otherwise, and consequently may entail risks of delay, limitations, or modification
of their rights. Remedies may be limited because the Water System serves an essential public purpose.
In addition to the limitations on remedies contained in the Indenture, the rights and obligations under
the Indenture may be subject to bankruptcy, insolvency, reorganization, arrangement, fraudulent conveyance,
moratorium and other laws relating to or affecting creditors' rights, to the application of equitable principles, to
the exercise of judicial discretion in appropriate cases and to limitations on legal remedies against cities in the
State. The opinion to be delivered by Bond Counsel concurrently with the issuance of the 2016 Bonds will be
subject to such limitations and the various other legal opinions to be delivered concurrently with the issuance
of the 2016 Bonds will be similarly qualified. See Appendix C. In the event that the City fails to comply with
its covenants under the Indenture or fails to pay principal of and interest on the 2016 Bonds, there can be no
assurance of the availability of remedies adequate to protect the interest of the holders of the 2016 Bonds.
Loss of Tax Exemption
In order to maintain the exclusion from gross income for federal income tax purposes of interest on
the 2016 Bonds, the City has covenanted in the Indenture to comply with the applicable requirements of the
Internal Revenue Code of 1986, as amended (the "Code "), and not to take any action or fail to take any action
if such action or failure to take such action would adversely affect the exclusion from gross income of interest
on the 2016 Bonds under Section 103 of the Code. Interest on the 2016 Bonds could become includable in
gross income for purposes of federal income taxation retroactive to the date of issuance of such 2016 Bonds as
a result of acts or omissions of the City in violation of this or other covenants in the Indenture applicable to the
2016 Bonds. The 2016 Bonds are not subject to redemption or any increase in interest rates should an event of
taxability occur and will remain outstanding until maturity or prior redemption in accordance with the
provisions contained in the Indenture. See the caption "TAX MATTERS."
Secondary Market
There can be no guarantee that there will be a secondary market for the 2016 Bonds or, if a secondary
market exists, that the 2016 Bonds can be sold for any particular price. Occasionally, because of general
market conditions, adverse history or economic prospects connected with a particular issue, secondary
marketing practices are suspended or terminated. Additionally, prices of issues for which a market is being
made will depend upon then prevailing circumstances. Such prices could be substantially different from the
original purchase price.
Parity Obligations
The Indenture permits the City to enter into Contracts or issue Bonds payable from Net Revenues on a
parity with the 2016 Bonds, subject to the terms and conditions set forth therein. The entry into of Contracts or
the issuance of Bonds could result in reduced Net Revenues available to pay the 2016 Bonds. The City has
W01
covenanted to maintain Debt Service coverage of 120 %, as further described under the caption "SECURITY
FOR THE 2016 BONDS— Additional Indebtedness."
Risks Associated with Bond Insurance
In the event that the City defaults in the payment of principal of or interest on the 2016 Bonds when
due, the owners of the 2016 Bonds will have a claim under the Policy for such payments. See the caption
"BOND INSURANCE." In the event that the Insurer becomes obligated to make payments with respect to the
2016 Bonds, no assurance can be given that such event will not adversely affect the market for the 2016
Bonds. In the event that the Insurer is unable to make payment of principal of and interest on the 2016 Bonds
when due under the Policy, the 2016 Bonds will be payable solely from Revenues and amounts held in certain
funds and accounts established under the Trust Agreement, as described under the caption "SECURITY FOR
THE 2016 BONDS."
The long -term rating on the 2016 Bonds is dependent in part on the financial strength of the Insurer
and its claims - paying ability. The Insurer's financial strength and claims - paying ability are predicated upon a
number of factors which could change over time. If the long -term ratings of the Insurer are lowered, such
event could adversely affect the market for the 2016 Bonds. See the caption "RATINGS."
Neither the City nor the Underwriter have made an independent investigation of the claims - paying
ability of the Insurer, and no assurance or representation regarding the financial strength or projected financial
strength of the Insurer is being made by the City or the Underwriter in this Official Statement. Therefore,
when making an investment decision with respect to the 2016 Bonds, potential investors should carefully
consider the ability of the City to pay principal and interest on the 2016 Bonds, assuming that the Policy is not
available for that purpose, and the claims - paying ability of the Insurer through final maturity of the 2016
Bonds.
So long as the Policy remains in effect and the Insurer is not in default of its obligations thereunder,
the Insurer has certain notice, consent and other rights under the Indenture and will have the right to control all
remedies in the event of a default under the Indenture. The Insurer is not required to obtain the consent of the
owners of the 2016 Bonds with respect to the exercise of remedies. See Appendix B.
APPROVAL OF LEGAL PROCEEDINGS
The valid, legal and binding nature of the 2016 Bonds is subject to the approval of Stradling Yocca
Carlson & Rauth, a Professional Corporation, acting as Bond Counsel. The form of such legal opinion is
attached hereto as Appendix C and such legal opinion will be attached to each 2016 Bond. Certain legal
matters will be passed upon for the City by Stradling Yocca Carlson & Rauth, a Professional Corporation, as
Disclosure Counsel, and by David Rapport, City Attorney, for the Underwriter by its counsel, Jones Hall, A
Professional Law Corporation, for the Insurer by its counsel and for the Trustee by its counsel.
From time to time Bond Counsel represents the Underwriter on matters unrelated to the issuance of
the 2016 Bonds or other City obligations.
LITIGATION
At the time of delivery of and payment for the 2016 Bonds, the City will certify that there is no action,
suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, regulatory agency, public
board or body, pending or, to the knowledge of the City, threatened against the City affecting the existence of
the City or the titles of its directors or officers to their respective offices or seeking to restrain or to enjoin the
sale or delivery of the 2016 Bonds, the application of the proceeds thereof in accordance with the Indenture, or
in any way contesting or affecting the validity or enforceability of the 2016 Bonds, the Indenture, or any action
of the City contemplated by any of said documents, or in any way contesting the completeness or accuracy of
37
this Official Statement or any amendment or supplement thereto, or contesting the powers of the City or its
authority with respect to the 2016 Bonds or any action of the City contemplated by any of said documents, nor
to the knowledge of the City, is there any basis therefor.
TAX MATTERS
In the opinion of Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach,
California, Bond Counsel, under existing statutes, regulations, rulings and judicial decisions, and assuming the
accuracy of certain representations and compliance with certain covenants and requirements described herein,
interest (and original issue discount) on the 2016 Bonds is excluded from gross income for federal income tax
purposes and is not an item of tax preference for purposes of calculating the federal alternative minimum tax
imposed on individuals and corporations. In the further opinion of Bond Counsel, interest (and original issue
discount) on the 2016 Bonds is exempt from State of California personal income tax. Bond Counsel notes that,
with respect to corporations, interest on the 2016 Bonds may be included as an adjustment in the calculation of
alternative minimum taxable income, which may affect the alternative minimum tax liability of such
corporations.
Bond Counsel's opinion as to the exclusion from gross income for federal income tax purposes of
interest (and original issue discount) on the 2016 Bonds is based upon certain representations of fact and
certifications made by the City and others and is subject to the condition that the City complies with all
requirements of the Code that must be satisfied subsequent to the issuance of the 2016 Bonds to assure that
interest (and original issue discount) on the 2016 Bonds will not become includable in gross income for federal
income tax purposes. Failure to comply with such requirements of the Code might cause interest (and original
issue discount) on the 2016 Bonds to be included in gross income for federal income tax purposes retroactive
to the date of issuance of the 2016 Bonds. The City has covenanted to comply with all such requirements.
In the opinion of Bond Counsel, the difference between the issue price of a 2016 Bond (the first price
at which a substantial amount of the 2016 Bonds of a maturity is to be sold to the public) and the stated
redemption price at maturity of such 2016 Bond constitutes original issue discount. Original issue discount
accrues under a constant yield method, and original issue discount will accrue to a Beneficial Owner before
receipt of cash attributable to such excludable income. The amount of original issue discount deemed received
by a Beneficial Owner will increase the Beneficial Owner's basis in the applicable 2016 Bond. The amount of
original issue discount that accrues to the Beneficial Owner of a 2016 Bond is excluded from the gross income
of such Beneficial Owner for federal income tax purposes, is not an item of tax preference for purposes of the
federal alternative minimum tax imposed on individuals and corporations, and is exempt from State of
California personal income tax.
The amount by which a 2016 Bond Owner's original basis for determining loss on sale or exchange in
the applicable 2016 Bond (generally, the purchase price) exceeds the amount payable on maturity (or on an
earlier call date) constitutes amortizable bond premium, which must be amortized under Section 171 of the
Code; such amortizable bond premium reduces the 2016 Bond Owner's basis in the applicable 2016 Bond (and
the amount of tax - exempt interest received with respect to the 2016 Bonds), and is not deductible for federal
income tax purposes. The basis reduction as a result of the amortization of bond premium may result in a 2016
Bond Owner realizing a taxable gain when a 2016 Bond is sold by the Owner for an amount equal to or less
(under certain circumstances) than the original cost of the 2016 Bond to the Owner. Purchasers of the 2016
Bonds should consult their own tax advisors as to the treatment, computation and collateral consequences of
amortizable bond premium.
The Internal Revenue Service (the "IRS ") has initiated an expanded program for the auditing of
tax - exempt bond issues, including both random and targeted audits. It is possible that the 2016 Bonds will be
selected for audit by the IRS. It is also possible that the market value of the 2016 Bonds might be affected as a
result of such an audit of the 2016 Bonds (or by an audit of similar municipal obligations). No assurance can
be given that in the course of an audit, as a result of an audit, or otherwise, Congress or the IRS might not
38
change the Code (or interpretation thereof) subsequent to the issuance of the 2016 Bonds to the extent that it
adversely affects the exclusion from gross income of interest (and original issue discount) on the 2016 Bonds
or their market value.
SUBSEQUENT TO THE ISSUANCE OF THE 2016 BONDS, THERE MIGHT BE FEDERAL,
STATE OR LOCAL STATUTORY CHANGES (OR JUDICIAL OR REGULATORY INTERPRETATIONS
OF FEDERAL, STATE OR LOCAL LAW) THAT AFFECT THE FEDERAL, STATE OR LOCAL TAX
TREATMENT OF THE 2016 BONDS OR THE MARKET VALUE OF THE 2016 BONDS. LEGISLATIVE
CHANGES HAVE BEEN PROPOSED IN CONGRESS, WHICH, IF ENACTED, WOULD RESULT IN
ADDITIONAL FEDERAL INCOME TAX BEING IMPOSED ON CERTAIN OWNERS OF TAX - EXEMPT
STATE OR LOCAL OBLIGATIONS, SUCH AS THE 2016 BONDS. THE INTRODUCTION OR
ENACTMENT OF ANY OF SUCH CHANGES COULD ADVERSELY AFFECT THE MARKET VALUE
OR LIQUIDITY OF THE 2016 BONDS. NO ASSURANCE CAN BE GIVEN THAT, SUBSEQUENT TO
THE ISSUANCE OF THE 2016 BONDS, SUCH CHANGES (OR OTHER CHANGES) WILL NOT BE
INTRODUCED OR ENACTED OR INTERPRETATIONS WILL NOT OCCUR. BEFORE PURCHASING
ANY OF THE 2016 BONDS, ALL POTENTIAL PURCHASERS SHOULD CONSULT THEIR TAX
ADVISORS REGARDING POSSIBLE STATUTORY CHANGES OR JUDICIAL OR REGULATORY
CHANGES OR INTERPRETATIONS, AND THEIR COLLATERAL TAX CONSEQUENCES RELATING
TO THE 2016 BONDS.
Bond Counsel's opinions may be affected by actions taken (or not taken) or events occurring (or not
occurring) after the date hereof. Bond Counsel has not undertaken to determine, or to inform any person,
whether any such actions or events are taken or do occur. The Indenture and the Tax Certificate relating to the
2016 Bonds permit certain actions to be taken or to be omitted if a favorable opinion of Bond Counsel is
provided with respect thereto. Bond Counsel expresses no opinion as to the effect on the exclusion from gross
income of interest (and original issue discount) for federal income tax purposes with respect to any 2016 Bond
if any such action is taken or omitted based upon the advice of counsel other than Stradling Yocca Carlson &
Rauth, a Professional Corporation.
Although Bond Counsel has rendered an opinion that interest (and original issue discount) on the 2016
Bonds is excluded from gross income for federal income tax purposes provided that the City continues to
comply with certain requirements of the Code, the ownership of the 2016 Bonds and the accrual or receipt of
interest (and original issue discount) on the 2016 Bonds may otherwise affect the tax liability of certain
persons. Bond Counsel expresses no opinion regarding any such tax consequences. Accordingly, before
purchasing any of the 2016 Bonds, all potential purchasers should consult their tax advisors with respect to
collateral tax consequences relating to the 2016 Bonds.
Should interest (and original issue discount) on the 2016 Bonds become includable in gross income
for federal income tax purposes, the 2016 Bonds are not subject to early redemption and will remain
outstanding until maturity or until redeemed in accordance with the Indenture.
A complete copy of the proposed opinion of Bond Counsel is set forth in Appendix C.
RATINGS
Standard and Poor's Ratings Services, a Standard & Poor's Financial Services LLC business ( "S &P "),
is expected to assign the 2016 Bonds the rating of " " based upon the delivery of the Policy by the Insurer at
the time of issuance of the 2016 Bonds. S &P is also expected to assign the 2016 Bonds the rating of
notwithstanding the delivery of the Policy.
There is no assurance that any credit rating given to the 2016 Bonds will be maintained for any period
of time or that a rating may not be lowered or withdrawn entirely by S &P if, in the judgment of S &P,
circumstances so warrant. Any downward revision or withdrawal of such rating may have an adverse effect on
39
the market price of the 2016 Bonds. The ratings reflect only the views of S &P, and an explanation of the
significance of such ratings may be obtained from S &P. Generally, rating agencies base their ratings on
information and materials furnished to them (which may include information and material from the City that is
not included in this Official Statement) and on investigations, studies and assumptions by the rating agencies.
Neither the City nor the Underwriter makes any representation as to the Insurer's creditworthiness and
no representation that the Insurer's credit rating will be maintained in the future. The rating agencies have
previously taken action to downgrade the ratings of certain municipal bond insurers and have published
various releases outlining the processes that they intends to follow in evaluating the ratings of financial
guarantors. For some financial guarantors, the result of such evaluations could be a rating affirmation, a
change in rating outlook, a review for downgrade or a downgrade. Potential investors are directed to the rating
agencies for additional information on the applicable rating agencies' evaluations of the financial guaranty
industry and individual financial guarantors, including the Insurer. See the caption `BOND INSURANCE" for
further information relating to the Insurer.
UK11 MAT1 - - L
The 2016 Bonds will be purchased by Raymond James & Associates, Inc. (the "Underwriter ")
pursuant to a Bond Purchase Agreement, dated February _, 2016, by and between the City and the
Underwriter (the "Purchase Contract "). Under the Purchase Contract, the Underwriter has agreed to purchase
all, but not less than all, of the 2016 Bonds for an aggregate purchase price of $ (representing the
principal amount of the 2016 Bonds, less an Underwriter's discount of $ , plus /less a net original issue
premium/discount of $). The Purchase Contract provides that the Underwriter will purchase all of the
2016 Bonds if any are purchased, the obligation to make such a purchase being subject to certain terms and
conditions set forth in the Purchase Contract, the approval of certain legal matters by counsel and certain other
conditions.
The initial public offering prices stated on the inside cover page of this Official Statement may be
changed from time to time by the Underwriter. The Underwriter may offer and sell the 2016 Bonds to certain
dealers (including dealers depositing 2016 Bonds into investment trusts), dealer banks, banks acting as agents
and others at prices lower than said public offering prices.
The Underwriter and its affiliates are full service financial institutions engaged in various activities,
which may include securities trading, commercial and investment banking, financial advisory, investment
management, principal investment, hedging, financing and brokerage services. The Underwriter and its
affiliates have, from time to time, performed, and may in the future perform, various financial advisory and
investment banking services for the City, for which they received or will receive customary fees and expenses.
In the ordinary course of their various business activities, the Underwriter and its affiliates may make
or hold a broad array of investments and actively trade debt and equity securities (or related derivative
securities, which may include credit default swaps) and financial instruments (including bank loans) for their
own account and for the accounts of their customers and may at any time hold long and short positions in such
securities and instruments. Such investment and securities activities may involve securities and instruments of
the City.
The Underwriter and its affiliates may also communicate independent investment recommendations,
market color or trading ideas and/or publish or express independent research views in respect of such assets,
securities or instruments and may at any time hold, or recommend to clients that they should acquire, long
and/or short positions in such assets, securities and instruments.
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CONTINUING DISCLOSURE UNDERTAKING
The City has covenanted in a Continuing Disclosure Certificate for the benefit of the holders and
Beneficial Owners of the 2016 Bonds to provide certain financial information and operating data relating to the
City by not later than April 1 following the end of the City's Fiscal Year (currently its Fiscal Year ends on
June 30) (the "Annual Report"), commencing with the report for Fiscal Year ending June 30, 2016, and to
provide notices of the occurrence of certain enumerated events. The Annual Report and the notices of
enumerated events will be filed by the City with the Municipal Securities Rulemaking Board's Electronic
Municipal Market Access System for municipal securities disclosures, maintained on the Internet at
http: / /emma.msrb.org /. The specific nature of the information to be contained in the Annual Report and the
notice of material events is set forth in Appendix E. These covenants have been made in order to assist the
Underwriter in complying with subsection (b)(5) of Rule 15c2 -12 adopted by the Securities and Exchange
Commission.
[RESULTS OF CONTINUING DISCLOSURE COMPLIANCE REVIEW TO COME].
Except as disclosed in the prior paragraph, the City has not in the past five years failed to comply with
any previous continuing disclosure undertaking in any material respect.
FINANCIAL ADVISOR
The District has retained Public Financial Management Inc., San Francisco, California, as financial
advisor (the "Financial Advisor ") in connection with the issuance of the Bonds. The Financial Advisor is not
obligated to undertake, and has not undertaken to make, an independent verification or to assume any
responsibility for the accuracy, completeness or fairness of the information contained in this Official
Statement.
The Financial Advisor is an independent advisory firm and is not engaged in the business of
underwriting, trading or distributing municipal or other public securities.
FINANCIAL INTERESTS
The fees being paid to the Underwriter, Bond Counsel, Disclosure Counsel and counsel to the
Underwriter and the Trustee are contingent upon the issuance and delivery of the Bonds. From time to time,
Bond Counsel represents the Underwriter on matters unrelated to the Bonds.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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MISCELLANEOUS
Insofar as any statements made in this Official Statement involve matters of opinion or of estimates,
whether or not expressly stated, they are set forth as such and not as representations of fact. No representation
is made that any of such statements made will be realized. Neither this Official Statement nor any statement
which may have been made verbally or in writing is to be construed as a contract with the Owners of the 2016
Bonds.
The execution and delivery of this Official Statement have been duly authorized by the City.
CITY OF UKIAH
i
42
City Manager
APPENDIX A
FINANCIAL STATEMENTS
APPENDIX B
DEFINITIONS AND SUMMARY OF THE INDENTURE
The following is a summary of certain provisions of the Indenture which are not described elsewhere.
This summary does not purport to be comprehensive and reference should be made to the Indenture for a full
and complete statement of the provisions thereof.
[TO COME]
APPENDIX C
FORM OF OPINION OF BOND COUNSEL
Upon issuance of the 2016 Bonds, Stradling Yocca Carlson & Rauth, a Professional Corporation,
Bond Counsel, proposes to render its final approving opinion in substantially the following form:
February _, 2016
City of Ukiah
300 Seminary Avenue
Ukiah, California 95482
Re: City of Ukiah Water Revenue Refunding Bonds, Series 2016
Members of the City Council:
We have examined a certified copy of the record of the proceedings of the City of Ukiah (the "City ")
relative to the issuance of the $ City of Ukiah Water Revenue Refunding Bonds, Series 2016 (the "2016
Bonds "), dated the date hereof, and such other information and documents as we consider necessary to render this
opinion. In rendering this opinion, we have relied upon certain representations of fact and certifications made by the
City, the initial purchaser of the 2016 Bonds and others. We have not undertaken to verify through independent
investigation the accuracy of the representations and certifications relied upon by us.
The 2016 Bonds are being issued pursuant to an Indenture of Trust, dated as of March 1, 2016 (the
"Indenture "), by and between the City and Wells Fargo Bank, National Association, as trustee (the "Trustee "). The
2016 Bonds mature on the dates and in the amounts referenced in the Indenture. The 2016 Bonds are dated their
date of delivery and bear interest at the rates per annum referenced in the Indenture. The 2016 Bonds are registered
in the form set forth in the Indenture.
Based on our examination as Bond Counsel of existing law, certified copies of such legal proceedings and
such other proofs as we deem necessary to render this opinion, we are of the opinion, as of the date hereof and under
existing law, that:
1. The proceedings of the City show lawful authority for the issuance and sale of the 2016 Bonds
under the laws of the State of California now in force and the Indenture has been duly authorized, executed and
delivered by the City. Assuming due authorization, execution and delivery by the Trustee, as appropriate, the 2016
Bonds and the Indenture are valid and binding obligations of the City enforceable against the City in accordance
with their terms.
2. The obligation of the City to make the payments of principal of and interest on the 2016 Bonds
from Net Revenues (as such term is defined in the Indenture) is an enforceable obligation of the City and does not
constitute an indebtedness of the City in contravention of any constitutional or statutory debt limit or restriction.
3. Under existing statutes, regulations, rulings and judicial decisions, and assuming the accuracy of
certain representations and compliance with certain covenants and requirements described herein, interest (and
original issue discount) on the 2016 Bonds is excluded from gross income for federal income tax purposes and is not
an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals and
corporations. It should be noted that, with respect to corporations, such interest may be included as an adjustment in
the calculation of alternative minimum taxable income, which may affect the alternative minimum tax liability of
such corporations.
4. Interest (and original issue discount) on the 2016 Bonds is exempt from State of California
personal income tax.
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5. The amount by which a 2016 Bond Owner's original basis for determining loss on sale or
exchange in the applicable 2016 Bond (generally, the purchase price) exceeds the amount payable on maturity (or on
an earlier call date) constitutes amortizable bond premium, which must be amortized under Section 171 of the
Internal Revenue Code of 1986, as amended (the "Code "); such amortizable bond premium reduces the 2016 Bond
Owner's basis in the applicable 2016 Bond (and the amount of tax - exempt interest received), and is not deductible
for federal income tax purposes. The basis reduction as a result of the amortization of 2016 Bond premium may
result in a 2016 Bond Owner realizing a taxable gain when a 2016 Bond is sold by the Owner for an amount equal to
or less (under certain circumstances) than the original cost of the 2016 Bond to the Owner. Purchasers of the 2016
Bonds should consult their own tax advisors as to the treatment, computation and collateral consequences of
amortizable bond premium.
6. The difference between the issue price of a 2016 Bond (the first price at which a substantial
amount of the 2016 Bonds of a maturity is to be sold to the public) and the stated redemption price at maturity of
such 2016 Bond constitutes original issue discount. Original issue discount accrues under a constant yield method,
and original issue discount will accrue to a 2016 Bond Owner before receipt of cash attributable to such excludable
income. The amount of original issue discount deemed received by a 2016 Bond Owner will increase the 2016
Bond Owner's basis in the applicable 2016 Bond. The amount of original issue discount that accrues to the Owner
of a 2016 Bond is excluded from the gross income of such 2016 Bond Owner for federal income tax purposes, is not
an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and
corporations, and is exempt from State of California personal income tax.
The opinions expressed herein as to the exclusion from gross income of interest on the 2016 Bonds are
based upon certain representations of fact and certifications made by the City and are subject to the condition that
the City comply with all requirements of the Code that must be satisfied subsequent to the issuance of the 2016
Bonds to assure that such interest (and original issue discount) on the 2016 Bonds will not become includable in
gross income for federal income tax purposes. Failure to comply with such requirements of the Code might cause
interest (and original issue discount) on the 2016 Bonds to be included in gross income for federal income tax
purposes retroactive to the date of issuance of the 2016 Bonds. The City has covenanted to comply with all such
requirements.
The opinions expressed herein may be affected by actions taken (or not taken) or events occurring (or not
occurring) after the date hereof We have not undertaken to determine, or to inform any person, whether any such
actions or events are taken or do occur. Our engagement ends as of the date of issuance of the 2016 Bonds. The
Indenture and the Tax Certificate relating to the 2016 Bonds permit certain actions to be taken or to be omitted if a
favorable opinion of Bond Counsel is provided with respect thereto. No opinion is expressed herein as to the effect
on the exclusion from gross income of interest (and original issue discount) on the 2016 Bonds for federal income
tax purposes with respect to any 2016 Bond if any such action is taken or omitted based upon the opinion or advice
of counsel other than ourselves. Other than expressly stated herein, we express no other opinion regarding tax
consequences with respect to the 2016 Bonds.
The opinions expressed herein are based upon our analysis and interpretation of existing laws, regulations,
rulings and judicial decisions and cover certain matters not directly addressed by such authorities. We call attention
to the fact that the rights and obligations under the Indenture and the 2016 Bonds are subject to bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance and other similar laws affecting creditors' rights, to
the application of equitable principles if equitable remedies are sought, to the exercise of judicial discretion in
appropriate cases and to limitations on legal remedies against public agencies in the State of California.
Our opinion is limited to matters governed by the laws of the State of California and federal law. We
assume no responsibility with respect to the applicability or the effect of the laws of any other jurisdiction.
We express no opinion herein as to the accuracy, completeness or sufficiency of the Official Statement
relating to the 2016 Bonds or other offering material relating to the 2016 Bonds and expressly disclaim any duty to
advise the owners of the 2016 Bonds with respect to matters contained in the Official Statement.
Respectfully submitted,
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APPENDIX D
INFORMATION CONCERNING DTC
The information in this section concerning DTC and DTC's book entry only system has been obtained
from sources that the City believes to be reliable, but the City takes no responsibility for the completeness or
accuracy thereof. The following description of the procedures and record keeping with respect to beneficial
ownership interests in the 2016 Bonds, payment of principal, premium, if any, accreted value, if any, and
interest on the 2016 Bonds to DTC Participants or Beneficial Owners, confirmation and transfers of beneficial
ownership interests in the 2016 Bonds and other related transactions by and between DTC, the DTC
Participants and the Beneficial Owners is based solely on information provided by DTC.
The Depository Trust Company ( "DTC "), New York, NY, will act as securities depository for the 2016
Bonds. The 2016 Bonds will be issued as fully- registered securities registered in the name of Cede & Co. (DTC's
partnership nominee) or such other name as may be requested by an authorized representative of DTC. One
fully- registered 2016 Bond will be issued for each annual maturity of the 2016 Bonds, each in the aggregate
principal amount of such annual maturity, and will be deposited with DTC.
DTC, the world's largest securities depository, is a limited - purpose trust company organized under the New
York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code,
and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of
1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non -U.S. equity issues,
corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC's
participants ( "Direct Participants ") deposit with DTC. DTC also facilitates the post -trade settlement among Direct
Participants of sales and other securities transactions in deposited securities, through electronic computerized book
entry transfers and pledges between Direct Participants' accounts. This eliminates the need for physical movement
of securities certificates. Direct Participants include both U.S. and non -U.S. securities brokers and dealers, banks,
trust companies, clearing corporations, and certain other organizations. DTC is a wholly -owned subsidiary of The
Depository Trust & Clearing Corporation ( "DTCC "). DTCC is the holding company for DTC, National Securities
Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC
is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both
U.S. and non -U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear
through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ( "Indirect
Participants "). DTC is rated AA+ by Standard & Poor's. The DTC Rules applicable to its Participants are on file
with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com.
Purchases of 2016 Bonds under the DTC system must be made by or through Direct Participants, which
will receive a credit for the 2016 Bonds on DTC's records. The ownership interest of each actual purchaser of each
2016 Bonds (`Beneficial Owner ") is in turn to be recorded on the Direct and Indirect Participants' records.
Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are,
however, expected to receive written confirmations providing details of the transaction, as well as periodic
statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into
the transaction. Transfers of ownership interests in the 2016 Bonds are to be accomplished by entries made on the
books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive
bonds representing their ownership interests in 2016 Bonds, except in the event that use of the book entry system for
the 2016 Bonds is discontinued.
To facilitate subsequent transfers, all 2016 Bonds deposited by Direct Participants with DTC are registered
in the name of DTC's partnership nominee, Cede & Co., or such other name as may be requested by an authorized
representative of DTC. The deposit of 2016 Bonds with DTC and their registration in the name of Cede & Co. or
such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual
Beneficial Owners of the 2016 Bonds; DTC's records reflect only the identity of the Direct Participants to whose
accounts such 2016 Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect
Participants will remain responsible for keeping account of their holdings on behalf of their customers.
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Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to
Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time.
Beneficial Owners of 2016 Bonds may wish to take certain steps to augment the transmission to them of notices of
significant events with respect to the 2016 Bonds, such as redemptions, tenders, defaults, and proposed amendments
to the 2016 Bonds documents. For example, Beneficial Owners of 2016 Bonds may wish to ascertain that the
nominee holding the 2016 Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In
the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that
copies of notices be provided directly to them.
Redemption notices shall be sent to DTC. If less than all of the 2016 Bonds within a maturity are being
redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such
maturity to be redeemed.
Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to 2016
Bonds unless authorized by a Direct Participant in accordance with DTC's MMI Procedures. Under its usual
procedures, DTC mails an Omnibus Proxy to the City as soon as possible after the record date. The Omnibus Proxy
assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts 2016 Bonds are
credited on the record date (identified in a listing attached to the Omnibus Proxy).
Redemption proceeds, distributions, and dividend payments on the 2016 Bonds will be made to Cede &
Co., or such other nominee as may be requested by an authorized representative of DTC. DTC's practice is to credit
Direct Participants' accounts upon DTC's receipt of funds and corresponding detail information from the City or the
Trustee, on payable date in accordance with their respective holdings shown on DTC's records. Payments by
Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case
with securities held for the accounts of customers in bearer form or registered in "street name," and will be the
responsibility of such Participant and not of DTC, the Trustee or the City, subject to any statutory or regulatory
requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend
payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the
responsibility of the City or the Trustee, disbursement of such payments to Direct Participants will be the
responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of
Direct and Indirect Participants.
A 2016 Bond Owner shall give notice to elect to have its 2016 Bonds purchased or tendered, through its
Participant, to the Trustee, and shall effect delivery of such 2016 Bond by causing the Direct Participant to transfer
the Participant's interest in the 2016 Bonds, on DTC's records, to the Trustee. The requirement for physical
delivery of 2016 Bond in connection with an optional tender or a mandatory purchase will be deemed satisfied when
the ownership rights in the 2016 Bond are transferred by Direct Participants on DTC's records and followed by a
book entry credit of tendered 2016 Bond to the Trustee's DTC account.
DTC may discontinue providing its services as depository with respect to the 2016 Bonds at any time by
giving reasonable notice to the City or the Trustee. Under such circumstances, in the event that a successor
depository is not obtained, physical certificates are required to be printed and delivered.
The City may decide to discontinue use of the system of book entry only transfers through DTC (or a
successor securities depository). In that event, 2016 Bonds will be printed and delivered to DTC.
THE TRUSTEE, AS LONG AS A BOOK ENTRY ONLY SYSTEM IS USED FOR THE 2016 BONDS,
WILL SEND ANY NOTICE OF REDEMPTION OR OTHER NOTICES TO OWNERS ONLY TO DTC. ANY
FAILURE OF DTC TO ADVISE ANY DTC PARTICIPANT, OR OF ANY DTC PARTICIPANT TO NOTIFY
ANY BENEFICIAL OWNER, OF ANY NOTICE AND ITS CONTENT OR EFFECT WILL NOT AFFECT THE
VALIDITY OF SUFFICIENCY OF THE PROCEEDINGS RELATING TO THE REDEMPTION OF THE 2016
BONDS CALLED FOR REDEMPTION OR OF ANY OTHER ACTION PREMISED ON SUCH NOTICE.
APPENDIX E
FORM OF CONTINUING DISCLOSURE CERTIFICATE
Upon issuance of the 2016 Bonds, the City proposes to enter into a Continuing Disclosure Certificate
in substantially the following form:
This Continuing Disclosure Certificate (the "Disclosure Certificate ") is executed and delivered by the
City of Ukiah (the "City ") in connection with the issuance of the $ City of Ukiah Water Revenue
Refunding Bonds, Series 2016 (the "Bonds "). The Bonds are being issued pursuant to an Indenture of Trust,
dated as of March 1, 2016 (the "Indenture "), by and between Wells Fargo Bank, National Association, as
trustee (the "Trustee ") and the City. The City covenants and agrees as follows:
1. Purpose of this Disclosure Certificate. This Disclosure Certificate is being executed and
delivered by the City for the benefit of the Bond Insurer and the Holders and Beneficial Owners of the Bonds
and in order to assist the Participating Underwriter in complying with the Rule.
2. Definitions. In addition to the definitions set forth in the Indenture, which apply to any
capitalized term used in this Disclosure Certificate unless otherwise defined in this Section, the following
capitalized terms shall have the following meanings:
Annual Report. The term "Annual Report" means any Annual Report provided by the City pursuant
to, and as described in, Sections 3 and 4 of this Disclosure Certificate.
Beneficial Owner. The term `Beneficial Owner" means any person which: (a) has the power, directly
or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Bonds (including persons
holding Bonds through nominees, depositories or other intermediaries); or (b) is treated as the owner of any
Bonds for federal income tax purposes.
EMMA. The term "EMMA" means the Municipal Securities Rulemaking Board's Electronic
Municipal Market Access System for municipal securities disclosures, maintained on the Internet at
http: / /emma.msrb.org /.
year.
Fiscal Year. The term "Fiscal Year" means the one -year period ending on the last day of June of each
Holder. The term "Holder" means a registered owner of the Bonds.
Listed Events. The term "Listed Events" means any of the events listed in Sections 5(a) and (b) of
this Disclosure Certificate.
Official Statement. The term "Official Statement" means the Official Statement dated February
2016 relating to the Bonds.
Participating Underwriter. The term "Participating Underwriter" means Raymond James &
Associates, Inc., the original underwriter of the Bonds required to comply with the Rule in connection with
offering of the Bonds.
Rule. The term "Rule" means Rule 15c2 -12 adopted by the Securities and Exchange Commission
under the Securities Exchange Act of 1934, as the same may be amended from time to time.
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Provision of Annual Reports.
(a) The City shall provide not later than April 1 following the end of its Fiscal Year
(commencing with Fiscal Year 2016) to EMMA an Annual Report relating to the immediately preceding
Fiscal Year which is consistent with the requirements of Section 4 of this Disclosure Certificate, which Annual
Report may be submitted as a single document or as separate documents comprising a package, and may cross -
reference other information as provided in Section 4 of this Disclosure Certificate.
(b) If the City is unable to provide to EMMA an Annual Report by the date required in
subsection (a), the City shall send to EMMA a notice in the manner prescribed by the Municipal Securities
Rulemaking Board.
4. Content of Annual Reports. The Annual Report shall contain or incorporate by reference the
following:
(a) The audited financial statements of the City for the prior Fiscal Year, prepared in
accordance with generally accepted accounting principles as promulgated to apply to governmental entities
from time to time by the Governmental Accounting Standards Board. If the City's audited financial statements
are not available by the time the Annual Report is required to be filed pursuant to Section 3(a), the Annual
Report shall contain unaudited financial statements in a format similar to the financial statements contained in
the final Official Statement, and the audited financial statements shall be filed in the same manner as the
Annual Report when they come available;
(b) Principal amount of the Bonds outstanding;
(c) Number of connections to the Water System in the prior Fiscal Year, in substantially
the form set forth in the Official Statement under the caption "THE WATER SYSTEM OF THE CITY —The
Water System— Historic Water System Connections;"
(d) Water sales revenues, in substantially the form set forth in the Official Statement
under the caption "THE WATER SYSTEM OF THE CITY —The Water System— Historic Water Sales
Revenues;"
(e) Ten largest Water System customers, in substantially the form set forth in the
Official Statement under the caption "THE WATER SYSTEM OF THE CITY — Largest Water System
Customers;" and
(d) Summary of historical operating results (with debt service and coverage ratio
shown), in substantially the form set forth in the Official Statement under the caption "THE WATER
SYSTEM OF THE CITY— Historic Water System Operating Results and Debt Service Coverage."
Any or all of the items listed above may be included by specific reference to other documents,
including official statements of debt issues of the City or related public entities, which have been submitted to
EMMA; provided, that if any document included by reference is a final official statement, it must be available
from the Municipal Securities Rulemaking Board; and provided further, that the City shall clearly identify each
such document so included by reference.
Reporting of Significant Events.
(a) Pursuant to the provisions of this Section 5, the City shall give, or cause to be given,
notice of the occurrence of any of the following events with respect to the Bonds in a timely manner not more
than ten (10) Business Days after the event:
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principal and interest payment delinquencies;
unscheduled draws on debt service reserves reflecting financial difficulties;
unscheduled draws on credit enhancements reflecting financial difficulties;
4. substitution of credit or liquidity providers, or their failure to perform;
5. adverse tax opinions, the issuance by the Internal Revenue Service of
proposed or final determinations of taxability or Notices of Proposed Issue (IRS Form 5701 TEB);
6. tender offers;
defeasances;
ratings changes; and
9. bankruptcy, insolvency, receivership or similar proceedings.
Note: For the purposes of the event identified in subparagraph (9), the event is considered to occur
when any of the following occur: the appointment of a receiver, fiscal agent or similar officer for an obligated
person in a proceeding under the U.S. Bankruptcy Code or in any other proceeding under state or federal law
in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or
business of the obligated person, or if such jurisdiction has been assumed by leaving the existing governmental
body and officials or officers in possession but subject to the supervision and orders of a court or governmental
authority, or the entry of an order confirming a plan of reorganization, arrangement or liquidation by a court or
governmental authority having supervision or jurisdiction over substantially all of the assets or business of the
obligated person.
(b) Pursuant to the provisions of this Section 5, the City shall give, or cause to be given,
notice of the occurrence of any of the following events with respect to the Bonds, if material:
1. unless described in Section 5(a)(5), other notices or determinations by the
Internal Revenue Service with respect to the tax status of the Bonds or other events affecting the tax status of
the Bonds;
2. modifications to the rights of Bond holders;
3. optional, unscheduled or contingent Bond redemptions;
4. release, substitution or sale of property securing repayment of the Bonds;
5. non - payment related defaults;
6. the consummation of a merger, consolidation, or acquisition involving the
City or the sale of all or substantially all of the assets of the City, other than in the ordinary course of business,
the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement
relating to any such actions, other than pursuant to its terms; and
a trustee.
appointment of a successor or additional trustee or the change of the name of
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(c) If the City determines that knowledge of the occurrence of a Listed Event under
Section 5(b) would be material under applicable federal securities laws, the City shall file a notice of such
occurrence with EMMA in a timely manner not more than ten (10) Business Days after the event.
6. Customarily Prepared and Public Information. Upon request, the City shall provide to any
person financial information and operating data regarding the City which is customarily prepared by the City
and is publicly available.
7. Termination of Obligation. The City's obligations under this Disclosure Certificate shall
terminate upon the legal defeasance, prior redemption or payment in full of all of the Bonds. If such
termination occurs prior to the final maturity of the Bonds, the City shall give notice of such termination in the
same manner as for a Listed Event under Section 5(a).
8. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Certificate, the
City may amend this Disclosure Certificate, and any provision of this Disclosure Certificate may be waived,
provided that, in the opinion of nationally recognized bond counsel, such amendment or waiver is permitted by
the Rule.
9. Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the
City from disseminating any other information, using the means of dissemination set forth in this Disclosure
Certificate or any other means of communication, or including any other information in any notice of
occurrence of a Listed Event, in addition to that which is required by this Disclosure Certificate. If the City
chooses to include any information in any notice of occurrence of a Listed Event in addition to that which is
specifically required by this Disclosure Certificate, the City shall not thereby have any obligation under this
Disclosure Certificate to update such information or include it in any future notice of occurrence of a Listed
Event.
10. Default. In the event of a failure of the City to comply with any provision of this Disclosure
Certificate, any the Bond Insurer or any Holders or Beneficial Owners of at least 50% aggregate principal
amount of the Bonds may take such actions as may be necessary and appropriate, including seeking mandate
or specific performance by court order, to cause the City to comply with its obligations under this Disclosure
Certificate. A default under this Disclosure Certificate shall not be deemed an Event of Default under the
Indenture, and the sole remedy under this Disclosure Certificate in the event of any failure of the City to
comply with this Disclosure Certificate shall be an action to compel performance.
No Holder or Beneficial Owner of the Bonds may institute such action, suit or proceeding to compel
performance unless they shall have first delivered to the City satisfactory written evidence of their status as
such, and a written notice of and request to cure such failure, and the City shall have refused to comply
therewith within a reasonable time.
11. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the City, the
Bond Insurer, the Participating Underwriter and Holders and Beneficial Owners from time to time of the
Bonds, and shall create no rights in any other person or entity.
Dated: March _, 2016 CITY OF UKIAH
By:
Its: City Manager
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APPENDIX F
SPECIMEN MUNICIPAL BOND INSURANCE POLICY
Attachment 6
Stradling Yocca Carlson & Rauth
Draft of 1118116
CONTINUING DISCLOSURE CERTIFICATE
This Continuing Disclosure Certificate (the "Disclosure Certificate ") is executed and
delivered by the City of Ukiah (the "City ") in connection with the issuance of the $ City of
Ukiah Water Revenue Refunding Bonds, Series 2016 (the "Bonds "). The Bonds are being issued
pursuant to an Indenture of Trust, dated as of March 1, 2016 (the "Indenture "), by and between Wells
Fargo Bank, National Association, as trustee (the "Trustee ") and the City. The City covenants and
agrees as follows:
1. Purpose of this Disclosure Certificate. This Disclosure Certificate is being executed
and delivered by the City for the benefit of the Bond Insurer and the Holders and Beneficial Owners
of the Bonds and in order to assist the Participating Underwriter in complying with the Rule.
2. Definitions. In addition to the definitions set forth in the Indenture, which apply to
any capitalized term used in this Disclosure Certificate unless otherwise defined in this Section, the
following capitalized terms shall have the following meanings:
Annual Report. The term "Annual Report" means any Annual Report provided by the City
pursuant to, and as described in, Sections 3 and 4 of this Disclosure Certificate.
Beneficial Owner. The term "Beneficial Owner" means any person which: (a) has the power,
directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Bonds
(including persons holding Bonds through nominees, depositories or other intermediaries); or (b) is
treated as the owner of any Bonds for federal income tax purposes.
EMMA. The term "EMMA" means the Municipal Securities Rulemaking Board's Electronic
Municipal Market Access System for municipal securities disclosures, maintained on the Internet at
http://emma.msrb.org/.
Fiscal Year. The term "Fiscal Year" means the one -year period ending on the last day of
June of each year.
Holder. The term "Holder" means a registered owner of the Bonds.
Listed Events. The term "Listed Events" means any of the events listed in Sections 5(a) and
(b) of this Disclosure Certificate.
Official Statement. The term "Official Statement" means the Official Statement dated
February _, 2016 relating to the Bonds.
Participating Underwriter. The term "Participating Underwriter" means Raymond James &
Associates, Inc., the original underwriter of the Bonds required to comply with the Rule in
connection with offering of the Bonds.
Rule. The term "Rule" means Rule 15c2 -12 adopted by the Securities and Exchange
Commission under the Securities Exchange Act of 1934, as the same may be amended from time to
time.
3. Provision of Annual Reports.
(a) The City shall provide not later than April 1 following the end of its Fiscal
Year (commencing with Fiscal Year 2016) to EMMA an Annual Report relating to the immediately
preceding Fiscal Year which is consistent with the requirements of Section 4 of this Disclosure
Certificate, which Annual Report may be submitted as a single document or as separate documents
comprising a package, and may cross- reference other information as provided in Section 4 of this
Disclosure Certificate.
(b) If the City is unable to provide to EMMA an Annual Report by the date
required in subsection (a), the City shall send to EMMA a notice in the manner prescribed by the
Municipal Securities Rulemaking Board.
4. Content of Annual Reports. The Annual Report shall contain or incorporate by
reference the following:
(a) The audited financial statements of the City for the prior Fiscal Year,
prepared in accordance with generally accepted accounting principles as promulgated to apply to
governmental entities from time to time by the Governmental Accounting Standards Board. If the
City's audited financial statements are not available by the time the Annual Report is required to be
filed pursuant to Section 3(a), the Annual Report shall contain unaudited financial statements in a
format similar to the financial statements contained in the final Official Statement, and the audited
financial statements shall be filed in the same manner as the Annual Report when they come
available;
(b) Principal amount of the Bonds outstanding;
(c) Number of connections to the Water System in the prior Fiscal Year, in
substantially the form set forth in the Official Statement under the caption "THE WATER SYSTEM
OF THE CITY —The Water System— Historic Water System Connections;"
(d) Water sales revenues, in substantially the form set forth in the Official
Statement under the caption "THE WATER SYSTEM OF THE CITY —The Water System
Historic Water Sales Revenues;"
(e) Ten largest Water System customers, in substantially the form set forth in the
Official Statement under the caption "THE WATER SYSTEM OF THE CITY Largest Water
System Customers;" and
(d) Summary of historical operating results (with debt service and coverage ratio
shown), in substantially the form set forth in the Official Statement under the caption "THE WATER
SYSTEM OF THE CITY Historic Water System Operating Results and Debt Service Coverage."
Any or all of the items listed above may be included by specific reference to other
documents, including official statements of debt issues of the City or related public entities, which
have been submitted to EMMA; provided, that if any document included by reference is a final
official statement, it must be available from the Municipal Securities Rulemaking Board; and
provided further, that the City shall clearly identify each such document so included by reference.
5. Reporting of Significant Events.
0a
(a) Pursuant to the provisions of this Section 5, the City shall give, or cause to be
given, notice of the occurrence of any of the following events with respect to the Bonds in a timely
manner not more than ten (10) Business Days after the event:
difficulties;
difficulties;
principal and interest payment delinquencies;
2. unscheduled draws on debt service reserves reflecting financial
unscheduled draws on credit enhancements reflecting financial
4. substitution of credit or liquidity providers, or their failure to perform;
5. adverse tax opinions, the issuance by the Internal Revenue Service of
proposed or final determinations of taxability or Notices of Proposed Issue (IRS Form 5701 TEB);
6. tender offers;
7. defeasances;
ratings changes; and
9. bankruptcy, insolvency, receivership or similar proceedings.
Note: For the purposes of the event identified in subparagraph (9), the event is considered to
occur when any of the following occur: the appointment of a receiver, fiscal agent or similar officer
for an obligated person in a proceeding under the U.S. Bankruptcy Code or in any other proceeding
under state or federal law in which a court or governmental authority has assumed jurisdiction over
substantially all of the assets or business of the obligated person, or if such jurisdiction has been
assumed by leaving the existing governmental body and officials or officers in possession but subject
to the supervision and orders of a court or governmental authority, or the entry of an order
confirming a plan of reorganization, arrangement or liquidation by a court or governmental authority
having supervision or jurisdiction over substantially all of the assets or business of the obligated
person.
(b) Pursuant to the provisions of this Section 5, the City shall give, or cause to be
given, notice of the occurrence of any of the following events with respect to the Bonds, if material:
1. unless described in Section 5(a)(5), other notices or determinations by
the Internal Revenue Service with respect to the tax status of the Bonds or other events affecting the
tax status of the Bonds;
2. modifications to the rights of Bond holders;
3. optional, unscheduled or contingent Bond redemptions;
4. release, substitution or sale of property securing repayment of the
Bonds;
5. non - payment related defaults;
6. the consummation of a merger, consolidation, or acquisition involving
the City or the sale of all or substantially all of the assets of the City, other than in the ordinary
course of business, the entry into a definitive agreement to undertake such an action or the
termination of a definitive agreement relating to any such actions, other than pursuant to its terms;
and
7. appointment of a successor or additional trustee or the change of the
name of a trustee.
(c) If the City determines that knowledge of the occurrence of a Listed Event
under Section 5(b) would be material under applicable federal securities laws, the City shall file a
notice of such occurrence with EMMA in a timely manner not more than ten (10) Business Days
after the event.
6. Customarily Prepared and Public Information. Upon request, the City shall provide
to any person financial information and operating data regarding the City which is customarily
prepared by the City and is publicly available.
7. Termination of Obli ag tion. The City's obligations under this Disclosure Certificate
shall terminate upon the legal defeasance, prior redemption or payment in full of all of the Bonds. If
such termination occurs prior to the final maturity of the Bonds, the City shall give notice of such
termination in the same manner as for a Listed Event under Section 5(a).
8. Amendment; Waiver. Notwithstanding any other provision of this Disclosure
Certificate, the City may amend this Disclosure Certificate, and any provision of this Disclosure
Certificate may be waived, provided that, in the opinion of nationally recognized bond counsel, such
amendment or waiver is permitted by the Rule.
9. Additional Information. Nothing in this Disclosure Certificate shall be deemed to
prevent the City from disseminating any other information, using the means of dissemination set
forth in this Disclosure Certificate or any other means of communication, or including any other
information in any notice of occurrence of a Listed Event, in addition to that which is required by this
Disclosure Certificate. If the City chooses to include any information in any notice of occurrence of
a Listed Event in addition to that which is specifically required by this Disclosure Certificate, the
City shall not thereby have any obligation under this Disclosure Certificate to update such
information or include it in any future notice of occurrence of a Listed Event.
10. Default. In the event of a failure of the City to comply with any provision of this
Disclosure Certificate, any the Bond Insurer or any Holders or Beneficial Owners of at least 50%
aggregate principal amount of the Bonds may take such actions as may be necessary and appropriate,
including seeking mandate or specific performance by court order, to cause the City to comply with
its obligations under this Disclosure Certificate. A default under this Disclosure Certificate shall not
be deemed an Event of Default under the Indenture, and the sole remedy under this Disclosure
Certificate in the event of any failure of the City to comply with this Disclosure Certificate shall be
an action to compel performance.
No Holder or Beneficial Owner of the Bonds may institute such action, suit or proceeding to
compel performance unless they shall have first delivered to the City satisfactory written evidence of
their status as such, and a written notice of and request to cure such failure, and the City shall have
refused to comply therewith within a reasonable time.
11. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the City,
the Bond Insurer, the Participating Underwriter and Holders and Beneficial Owners from time to
time of the Bonds, and shall create no rights in any other person or entity.
Dated: March , 2016 CITY OF UKIAH
By:
Its: City Manager
City of Ukiah
Water Revenue Refunding Bonds, Series 2016
S M T W T F S
S M T W T F
1 2 3
6 7 8 9 10 1
3 14 15 16 17 1
2 21 22 23 24
20 28 29 30 3112
1 2 3 4
Week of Nov 30
56
7
8 9 10 11
12
13
14
15 16 17''19
1 2 3 4 5 6
20
21
22 23 24 25 28
29 30
0 City Council Meeting
Holiday
FINANCING SCHEDULE
As of December 22, 2015
24 25 26 27 28 29 30 28 9
31
Attachment 7
S M T W T F S
1 2 3 4 5
8 9 10 11 12
13 14 15 16 17 18 19
20 L21 22 23 24 25 26
27 28 29 30 31 l
Date Activity Responsible
Party
Wed, Nov 18 Send Bond Counsel price bid request FA
Wed, Nov 25 Receive Bond Counsel Proposals FA, City
Week of Nov 23
Distribute Underwriter Proposal Summary
FA
Week of Nov 30
S
S M
T W T F S
S M T W T F S
5
Week of Dec 7
1 2
1 2 3 4 5 6
12
3
4
5
and Underwriter
7 8 9
7 8 9
10 11 12 13
S 19
10
11
12
13
14 15 16
14 15 16
17 18 19 20
i 26
17
Wed /Thu, Jan 13/14
19
FA /UW
21 22 23
21 22 23
24 25 26 27
24 25 26 27 28 29 30 28 9
31
Attachment 7
S M T W T F S
1 2 3 4 5
8 9 10 11 12
13 14 15 16 17 18 19
20 L21 22 23 24 25 26
27 28 29 30 31 l
Date Activity Responsible
Party
Wed, Nov 18 Send Bond Counsel price bid request FA
Wed, Nov 25 Receive Bond Counsel Proposals FA, City
Week of Nov 23
Distribute Underwriter Proposal Summary
FA
Week of Nov 30
Meeting or Conference Call to review Bond Counsel and
FA, City
Underwriter Proposals
Week of Dec 7
Finalize Bond Counsel and Underwriter
FA, City
Wed, Dec 16
City of Ukiah Council Meeting to approve new Bond Counsel
City
and Underwriter
Tue, Dec 12
Kick -Off Call
All
Tue, Jan 5
Follow -up Call
All
Week of Jan 4
Circulate 1st draft of Bond Documents and POS
BC /DC
Mon /Tue, Jan 11/12
Conference Call to review 1st draft of Bond Documents and POS
ALL
Wed /Thu, Jan 13/14
Circulate Vt draft of credit presentation
FA /UW
Tue, Jan 19
Circulate 2nd draft of Bond Documents and POS
BC /DC
Conference Call to review 1st draft of credit presentation
ALL
Wed, Jan 20
Circulate 2nd draft of credit presentation
FA /UW
Thu, Jan 21
Conference Call to review 2nd draft of credit presentation
Conference Call to review 2 d draft of Bond Documents and POS
Review the January 27th target date and revise game plan if needed
Mon /Tue, Jan 25/26 Distribute final drafts of Bond Documents and POS
Submit credit package to rating agency
Week of Jan 25 Credit Rating Meetings /Calls
ALL
ALL
BC /DC
FA /UW
City /FA /UW
Page 1 of 2
City of Ukiah
Water Revenue Refunding Bonds, Series 2016
FINANCING SCHEDULE
As of December 22, 2015
Date Activity Responsible
Party
Wed, Jan 27 Submit Bond Documents and POS to City for Council meeting BC /DC /City
Mon, Feb 1 Receive ratings?
Tue, Feb 2 Final comments due on POS for posting ALL
Wed, Feb 3 City of Ukiah Council Meeting to approve POS and bond City /BC /DC
documents
Thu, Feb 4
Week of Feb 8
Week of Feb 15
Print and post POS
Marketing
Pricing
DC /P
UW
City /FA /UW
Print and post final OS
Week of Feb 22
BC /DC /P
S M T W T F S
S M T W T F S
S M T W T F S
S M T
W T F S
S M T W T F S
1 2 3 4 ' 6 7
1 2 3 4 5
1 2
1 2
3 4 5 6
1 2 3 4 5
8 11 12 131
9 101 114
6 7 8 9 10 11 12
3 4 5 6 7 8 9
7'8 9
10 11 12 13
67 8 9 10 11112
15 16 171 19 20121
3 14_15 16 17 18 19
10 11 12 13 14 15 16
14 15 16
17 18 19 20
13114 15 16 17 181191
22 23 24 25 26 27 28
29 30
--
20 22 23 24 25 26
27 28 29 30 31
17 19 20 21 22 23
24 25 26 27128 29 30
21 22 23
28129
24 25 26 27
20 21 22 23 24 25 261
27'28 29 30 31
City Council Meeting
Holiday
TBD
31
Printer
TBD
P
Date Activity Responsible
Party
Wed, Jan 27 Submit Bond Documents and POS to City for Council meeting BC /DC /City
Mon, Feb 1 Receive ratings?
Tue, Feb 2 Final comments due on POS for posting ALL
Wed, Feb 3 City of Ukiah Council Meeting to approve POS and bond City /BC /DC
documents
Thu, Feb 4
Week of Feb 8
Week of Feb 15
Print and post POS
Marketing
Pricing
DC /P
UW
City /FA /UW
Page 2 of 2
Print and post final OS
Week of Feb 22
BC /DC /P
Circulate closing documents for review
Week of Feb 29
Pre - Closing
ALL
Closing and delivery of the Bonds
ALL
Role
Participant
Abbreviation
Issuer
City of Ukiah
City
Financial Advisor
Public Financial Management, Inc.
FA
Bond Counsel
Stradling Yocca Carlson & Rauth, P.C.
BC
Disclosure Counsel
Stradling Yocca Carlson & Rauth, P.C.
DC
Underwriter
Raymond James & Associates, Inc.
UW
Underwriter's Counsel
Nixon Peabody LLP
UC
Trustee /Escrow Agent
TBD
T
Printer
TBD
P
Page 2 of 2