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HomeMy WebLinkAboutUkiah Valley Sanitation District 2020-02-24Coi,c- No, 14020 --a70 CITY - DISTRICT 2020 REFINANCING AGREEMENT Dated as of February 24, 2020 By and Between CITY OF UKIAH And UKIAH VALLEY SANITATION DISTRICT Relating to the $25,010,000 CITY OF UKIAH SERIES 2020 WASTEWATER REVENUE REFUNDING OBLIGATIONS (2020 WASTEWATER REFUNDING PROJECT) and the $25,005,000 UKIAH VALLEY SANITATION DISTRICT WASTEWATER REVENUE REFUNDING BONDS, SERIES 2020 CITY - DISTRICT 2020 REFINANCING AGREEMENT This CITY — DISTRICT 2020 REFINANCING AGREEMENT ("Agreement"), dated for convenience as of February 24, 2020, is by and between the CITY OF UKIAH, a municipal corporation and general law city, duly organized and validly existing under the laws of the State of California (the "City"), and the UKIAH VALLEY SANITATION DISTRICT, a county sanitation district organized and existing under and by virtue of the laws of the State of California (the "District"); WITNESSETH: WHEREAS, the City owns a wastewater treatment plant (the "City WWTP") and a system for the collection and disposal of wastewater within the City, including sewer mains, laterals and related facilities (collectively with the City WWTP, the "City Wastewater System"). The City provides wastewater collection, treatment, and effluent disposal services to customers within the City; and WHEREAS, the District owns a system for the collection and transmission of wastewater within the District, including sewer mains, laterals, the Trunk Line and related facilities (collectively, the "District Wastewater System"), which wastewater is treated at the WWTP; and WHEREAS, in order to finance certain capital improvements to, and to upgrade and rehabilitate, the WWTP, the City previously entered into an Installment Sale Agreement, dated as of March 1, 2006 (the "2006 Installment Sale Agreement") with the Association of Bay Area Governments (the "Authority"), pursuant to which the City agreed to make certain installment payments (the "2006 Installment Payments"), and in connection therewith the Authority issued its $75,060,000 original aggregate principal amount of 2006 Water and Wastewater Revenue Bonds, Series A (the "2006 Bonds"), pursuant to a Trust Agreement dated as of March 1, 2006 (the "2006 Trust Agreement," and together with the 2006 Installment Sale Agreement, the "Prior Obligation Documents"), between the Authority and Wells Fargo Bank, National Association, as trustee (the "Prior Trustee"); and WHEREAS, the City and the District entered into a Financing Agreement dated March 2, 2006 (the "2006 Financing Agreement"), whereby the District agreed to apportionment to it of an allocable share of the 2006 Installment Payments (the "District's Allocable Share"); and WHEREAS, the District has determined that it is in the best interests of the District and its customers that the District issue its Ukiah Valley Sanitation District Wastewater Revenue Refunding Bonds, Series 2020 (the "District's 2020 Obligations") secured by and pursuant to an Indenture dated as of February 1, 2020 by and between U.S. Bank National Association, as trustee (the "Trustee") and the District (the "Indenture"), the proceeds of which, combined with a $2.5 million cash contribution from the District's unrestricted fund balance, will be used to fully prepay the District's Allocable Share; and WHEREAS, the City has determined that it is in the interests of the City at this time to provide for the execution and delivery of its "City of Ukiah, Series 2020 Wastewater Revenue 1 Refunding Obligations (2020 Wastewater Refunding Project)" (the "City's 2020 Obligations") pursuant to a 2020 Financing Agreement by and between BBVA Mortgage Corporation (the "Corporation") and the City (the "Financing Agreement"), as evidenced by a Promissory Note, dated February 24, 2020 (the "Note,"), the proceeds of which will be combined with the proceeds of the District's 2020 Obligations and cash contribution and used to prepay and defease all outstanding 2006 Bonds in accordance with certain Irrevocable Deposit and Refunding Instructions given by the City to the Prior Trustee, dated as of February 24, 2020 (the "Refunding Instructions") in the form attached hereto and incorporated herein by reference as Exhibit A; and WHEREAS, the City and the District have previously entered into an Operating Agreement dated October 3, 2018, as may be amended from time to time (the "Operating Agreement"), which sets forth, among other things, the responsibilities and the terms under which the City and the District provide wastewater collection and treatment services to their respective ratepayers and residents; and WHEREAS, the 2006 Bonds were issued to finance (i) a project designed to expand the capacity of the City WWTP (the "Capacity Project") by 2,400 ESSU's (as defined in the Operating Agreement), and (ii) a project designed to upgrade and rehabilitate the City WWTP (the "Rehab Project"); and WHEREAS, as set forth in Section II.D.2 of the Operating Agreement, 25.8414% of the debt service on the 2006 Bonds is apportioned to the Capacity Project (the "25.84% Capacity Component") and 74.1586% of the debt service on the 2006 Bonds is apportioned to the Rehab Project (the "74.16% Rehabilitation Component"); and WHEREAS, as set forth in Section II.D.2 of the Operating Agreement, the District's and City's respective obligations to pay the 25.84% Capacity Component is shared as follows: 65% to the District (the "District's Share of Capacity Component") and 35% to the City (the "City's Share of Capacity Component"), subject to adjustment as provided in the Operating Agreement; and WHEREAS, as set forth in Section II.D.2 of the Operating Agreement, the District's and City's respective obligation to pay the 74.16% Rehabilitation Component is allocated between the City and District based on the "Allocation Methodology," which is particularly described in the Operating Agreement; and WHEREAS, as part of this Agreement, the City and the District have agreed to an Allocation Methodology to be used commencing March 2, 2020, subject to annual adjustment each fiscal year thereafter commencing July 1, 2020; and WHEREAS, based on the proposed implementation of the Allocation Methodology by Hildebrand Consulting ("Hildebrand Implementation") jointly hired by the City and the District on January 16, 2019, to conduct a Joint Rate Study for the City and the District, the City and District agree that the District will refinance 54% of the principal amount of the 2006 Bonds outstanding after March 1, 2020 as part of the District's 2020 Obligations, and the City will refinance 46% of the principal amount of the 2006 Bonds outstanding after March 1, 2020 as part of the City's 2020 Obligations; and 2 WHEREAS, there has been a dispute between the City and the District concerning the characterization of a Connection as one that is a District or City connection, including the Mendocino County Jail (the "Jail"), and, in order to avoid potential litigation, the City and District agree to resolve the dispute as provided in Section 7; and WHEREAS, the City and the District have each authorized the execution, delivery and performance of this Agreement; and NOW, THEREFORE, THIS AGREEMENT WITNESSETH, in consideration of the premises and of the mutual covenants herein contained and the Recitals above, which are incorporated into the terms hereof by reference, and for other valuable considerations, the receipt whereof is hereby acknowledged, the City and District do hereby covenant and agree, as follows: Section 1. Definitions. Unless otherwise specified or defined herein, capitalized terms used in this Agreement shall have the same meaning given to those terms in the Operating Agreement. Section 2. Agreed Upon Allocable Shares. The City and the District hereby agree that the District will refinance 54% of the principal amount of the 2006 Bonds outstanding after March 1, 2020 as part of the District's 2020 Obligations, and the City will refinance 46% of the principal amount of the 2006 Bonds outstanding after March 1, 2020 as part of the City's 2020 Obligations (the District's 2020 Obligations and the City's 2020 Obligations are collectively referred to herein as the "Total 2020 Obligations"). Section 3. Agreement to Transfer Proceeds to 2006 Trustee. The City and the District hereby agree that (i) the 46% of the principal amount of the 2006 Bonds outstanding after March 1, 2020 the City will refinance as part of the City's 2020 Obligations equates to $22,845,000, which the City agrees to transfer to the 2006 Trustee in accordance with the Refunding Instructions, and (ii) the 54% of the principal amount of the 2006 Bonds outstanding after March 1, 2020 the District will refinance as part of the District's 2020 Obligations equates to $26,825,000, which the District agrees to transfer to the 2006 Trustee on or prior to February 24, 2020 for irrevocable deposit into the Redemption Fund in accordance with the Refunding Instructions. a. Payment of March 1, 2020, Installment. The City shall transfer to the 2006 Trustee, from District revenues on hand with the City, 52% of the March 1, 2020 installment payment due on the 2006 Bonds net of the District's 52% allocable share of the balance in the 2006 Revenue Fund. The remaining 48% of the March 1, 2020 installment payment, net of the City's 48% allocable share of the balance in the 2006 Revenue Fund, will be paid with a portion of the proceeds of the City's 2020 Obligations. Section 4. No Transfer of District Accounts to District WWTP. The District hereby agrees that it shall not transfer customers from the City's WWTP to a District WWTP or the fees paid by those customers for sewer service and used to pay the District's share of expenses for the City's WWTP under the Operating Agreement, until such time as both the City and the District 3 have fully repaid and defeased their respective Total 2020 Obligations, but not later than March 1, 2035. Section 5. Allocation of Revenue, Expenses and Debt Service Upon Detachment. Except as otherwise provided in the City's Financing Agreement and the District's Indenture regarding the Overlap Area, in the event any change of organization by either party results in detachment of sewer services from all or any portion of one party ("Transferring Party") to the other party ("Receiving Party") (the "Detached Area"), including in connection with any future annexations, effective when the detachment becomes effective: (1) Customers and Connections in the Detached Area, including the revenue from them, shall be transferred to the Receiving Party and become the Receiving Party's customer accounts (the "Transferred Accounts"); (2) the allocation of Combined CITY/DISTRICT Sewer System costs shared by the City and the District attributable to the Transferred Accounts shall be paid by the Receiving Party in accordance with the Operating Agreement; and (3) the portion of the Transferring Party's (District's or City's) 2020 Obligations attributable to the Transferred Accounts shall, in accordance with the Operating Agreement, be either (i) transferred from the Transferring Party to and assumed by the Receiving Party in accordance with the Transferring Party's Indenture or Financing Agreement with the Trustee or Corporation that underlie that party's 2020 Obligations, (ii) legally defeased in accordance with the Transferring Party's Indenture or Financing Agreement with the Corporation or Trustee that underlie that party's 2020 Obligations with a sufficient deposit by the Receiving Party which shall be accepted by the Transferring Party into an irrevocable escrow fund held by the escrow agent for the Transferring Party's 2020 Obligations; or (iii) realigned in a manner allowable by the Corporation and LAFCO. Nothing herein shall alter the parties' rights and obligations concerning reorganizations as provided in the Operating Agreement. Section 6. True Up Process. The District is obligated to make its payments under the District's 2020 Obligations and the City is obligated to make its payments under the City's 2020 Obligations. Prepaying and defeasing the 2006 Bonds with two separate refinancings does not allow for debt service to be annually adjusted between the District and the City. Notwithstanding, the District and the City agree to a true up process whereby true up payments are computed and paid annually according to the Operating Agreement. Commencing in Fiscal Year 2020-21, a third party selected by both the City and the District will annually calculate the applicable fiscal year's debt service allocation according to the Operating Agreement. If the resulting allocation varies from a 54% District and 46% City debt service allocation, the party with the increased allocation will make a true up payment to the party with the decreased allocation at the end of the fiscal year. By no later than March 31, 2020, the Parties shall retain a third -party consultant to assist the Parties in developing and administrating the protocols for implementing the requirements of this Section 6 annually and in the event of detachment. Section 7. Accounts. Development of Rules for Designating Accounts as City or District (a) Developing Rules. No later than April 30, 2020, the District Board of Directors and the City Council shall meet in joint session to discuss the definitions of such terms as "point of connection," "sewer main," "sewer lateral," and "sewer service connection" and to identify other 4 criteria for determining when a customer receiving sewer service within the City and the District is a District or City customer. The governing bodies may determine any further procedures and timelines for completing this process, including the formation of ad hoc committees or directing the submission of reports by City or District staff or consultants to one or more further joint sessions of the District Board and City Council. (b) Dispute Resolution. (1) Matters subject to dispute resolution. If within 120 days from their first joint meeting the City Council and the District Board have not agreed on the rules for determining whether an account/customer is a District or City account/customer, either party may initiate binding dispute resolution as set forth below. If rules are adopted by the City Council and the District Board but the City and the District do not agree on how the rules apply to a particular account/customer, within 30 days after either party gives written notice that it claims the account/customer based on the adopted rules, the dispute shall be resolved exclusively by binding dispute resolution as provided below. If any agreements reached by the District Board and City Council or a decision of the Hearing Officer under subsection (b)(2) below warrant treating any account/customer as an account/customer of the other party, that account/customer shall be transferred accordingly and any connection fees, revenues and expenses associated with that account/customer shall be treated thereafter as revenue and expenses of the party to whom the account(s)/customer(s) are transferred as otherwise provided in the Operating Agreement. Additionally, any connection fee, whether resulting from a new connection or one from a change in use, etc., associated with an existing connection, accruing on or paid by said account(s)/customer(s) during the time from the date of this Agreement through the date of any agreement by the governing bodies or decision of the Hearing Officer, shall be transferred to the party to whom the account(s)/customer(s) is transferred, unless the District Board and City Council agree otherwise. Accordingly, the District withdraws its claim for damages filed with the City on October 16, 2019, but said withdrawal shall not be deemed a waiver of any further claim that the Mendocino County Sheriffs Office rehabilitation and jail facility(ies) located on Low Gap Road in Ukiah, California ("Jail Accounts"), is a District account/customer, if brought in accordance with the provisions in this section, including the provision transferring revenue and expenses associated with that account only for the period of time after the account has been transferred. In consideration of that waiver, in the event a further claim is brought by the District pursuant to this section: the District shall not be required to, and City waives any requirement that the District, file a government or other formal claim concerning the Jail Accounts, as the matter shall proceed as provided herein; and, the City waives any defense in that proceeding that the District's claim is subject to any timing based defense, including the statute of limitations. (2) Dispute resolution procedure. Unresolved disputes under subsection (b)(1) above shall be resolved using the following procedures which are similar to those used in law and motion matters without the opportunity for discovery, including depositions. Notwithstanding that, the parties shall promptly comply with informal information requests made by the other party. This process shall be deemed to have commenced on the date that the governing body of either party 5 gives written notice to the other party that it requests dispute resolution. A mutually agreed upon attorney or sitting or retired judge in Mendocino or Sonoma Counties ("Hearing Officer") shall hear and decide the dispute. If the parties have failed to agree on the selection of the Hearing Officer within 15 days of initiating these procedures, they shall each designate one candidate. The designees shall then select, among themselves, the Hearing Officer who shall hear and decide the matter. The Hearing Officer shall base his/her decision on submissions from the parties, including declarations under penalty of perjury, documents and/or stipulated facts and written and oral arguments, unless the Hearing Officer on his or her own initiative requests additional information. All written submissions by the City and the District shall be submitted to the Hearing Officer and each other simultaneously within 30 days of selecting the Hearing Officer. The Hearing Officer shall conduct one hearing within 30 days after the written submissions by the parties have been served on each other to hear oral argument and shall make a written decision within 30 days after the hearing concludes. The parties shall be bound by the Hearing Officer's written decision which shall not be subject to further appeal. Section 8. Settlement Payment Subordinate to Debt Service. The City and District entered into a Settlement Agreement and Release (the "Settlement Agreement") whereby the City agreed to pay the District $4,000,000 in equal annual payments of $1,000,000 each, commencing November 1, 2019 (the "Settlement Payments"). The City and the District hereby agree that the Settlement Payments are subordinate to the debt service payments made on the City's 2020 Obligations. Section 9. City Agrees to Receive District's Allocable Share. Upon the District's signature hereto, and so long as the District can prepay the District's 54% of the principal amount of the 2006 Bonds outstanding after March 1, 2020 in accordance with Section 3 hereof by not later than February 24, 2020, the City hereby agrees to accept the District's payment in full satisfaction of the District's obligations under the 2006 Financing Agreement, whereupon said agreement shall automatically terminate. Section 10. Tax Certification. a. Current Refunding. The City hereby acknowledges receipt of $26,825,000 (the "District Contribution") from the District on February 24, 2020, for the specific purpose of causing the redemption of the 54% of the principal amount of the 2006 Bonds outstanding after March 1, 2020 as referenced herein (the "District's Portion of Refunded 2006 Bonds"). The District Contribution, including earnings thereon, will be used to redeem the District's Portion of Refunded 2006 Bonds within 90 days of the date hereof, in accordance with the Refunding Instructions. b. Ownership and Use of Project; Continuing Compliance. The City has made certain covenants relating to the Project and the 2006 Bonds, as set forth in the Certificate Regarding Use of Proceeds, dated as of March 2, 2006 (the "2006 Use Certificate"), which is attached hereto as Exhibit B. The City acknowledges that the 2006 Use Certificate has not been amended since its original execution, and that the City has, since the issuance of the 2006 Bonds, been in compliance with the covenants set forth therein. The City further acknowledges that the City shall not take any action or permit to be taken any action within its control which would cause or which, with the 6 passage of time if not cured could cause, interest on the District's 2020 Obligations to become includable in gross income for federal income tax purposes. Section 11. Binding Effect. This Agreement shall inure to the benefit of and shall be binding upon the City and the District and their respective successors and assigns. Section 12. Severability. In the event any provision of this 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. Section 13. Further Assurances and Corrective Instruments. The City and the District agree that they will, from time to time, execute, acknowledge and deliver, or cause to be executed, acknowledged and delivered, such supplements hereto and such further instruments as may reasonably be required for carrying out the expressed intention of this Agreement. Section 14. Applicable Law. This Agreement shall be governed by and construed in accordance with the laws of the State of California. Section 15. Execution in Counterparts. This Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. Section 16. Operating Agreement Controls. Any provisions of the Operating Agreement not expressly changed by this Agreement are unchanged by this Agreement and remain in full force and effect. [Signature Page to Follow on Next Page] 7 IN WITNESS WHEREOF, the City has caused this Agreement to be executed in its name by its duly authorized officer; and the District has caused this Agreement to be executed in its name by its duly authorized officer, as of the date first above written. Approved as to form: o ald McMullen, District Attorney ATTEST: 'stine Lawler, City Clerk Approved as to form: Davi apport, ity At`orney 8 UKIAH VALLEY SANITATION DISTRICT By: vid Redding, Ge ger CITY OF UKIAH, CALIFORNIA By: DouglaCrane, Mayor Exhibit A Form of Refunding Instructions 9 $25,010,000 CITY OF UKIAH SERIES 2020 WASTEWATER REVENUE REFUNDING OBLIGATIONS (2020 WASTEWATER REFUNDING PROJECT) and the $25,005,000 UKIAH VALLEY SANITATION DISTRICT WASTEWATER REVENUE REFUNDING BONDS, SERIES 2020 IRREVOCABLE DEPOSIT AND REFUNDING INSTRUCTIONS These IRREVOCABLE DEPOSIT AND REFUNDING INSTRUCTIONS (these "Instructions") are dated as of February 24, 2020, and are given by the CITY OF UKIAH, a public body and political subdivision, organized and existing under and by virtue of the laws of the State of California (the "City"), to WELLS FARGO BANK, NATIONAL ASSOCIATION, acting as trustee for the 2006 Bonds described below (the "2006 Trustee"); BACKGROUND: 1. In order to provide funds for the acquisition and construction of certain public improvements within the City, the City previously worked with the Association of Bay Area Governments (the "Authority") to provide for the issuance of $75,060,000 original principal amount of Association of Bay Area Governments, 2006 Water and Wastewater Revenue Bonds, Series A (the "2006 Bonds"), pursuant to an Indenture of Trust dated as of March 1, 2006, by and between the City, the 2006 Trustee and the Authority (the "2006 Indenture"). 2. The 2006 Bonds are secured primarily by "Installment Payments" made pursuant to an Installment Sale Agreement dated as of March 1, 2006, by and between the City, the Authority and the Trustee (the "2006 ISA," and together with the 2006 Indenture, the "2006 Bond Documents"). 3. Pursuant to the 2006 Indenture, the Authority assigned its rights to the Installment Payments to the 2006 Trustee, which the 2006 Trustee uses to pay commensurate debt service on the 2006 Bonds. 4. In order to provide revenue support to the City for the Installment Payments, the City and the Ukiah Valley Sanitation District (the "District") entered into a Financing Agreement dated March 2, 2006 (the "2006 Financing Agreement"), whereby the District agreed to assume responsibility for an allocable share of the Installment Payments (the "District's Allocable Share"). 5. The District has determined that it is in the public interests of the District to issue its Ukiah Valley Sanitation District Wastewater Revenue Refunding Bonds, Series 2020 (the "District's 2020 Obligations") secured by and pursuant to an Indenture dated as of February 1, 2020 by and between U.S. Bank National Association, as trustee thereunder (the "2020 Trustee"), and the District (the "Indenture"), the proceeds of which, combined with a $2.5 million cash contribution from the District's unrestricted fund balance, will be used to fully prepay the District's Allocable Share. IRREVOCABLE REFUNDING INSTRUCTIONS - 1 - 6. The City has determined that it is in the public interests of the City to provide for the prepayment of all outstanding principal components of the Installment Payments (and accrued interest thereon) thereby causing the refunding of the outstanding principal balance of the 2006 Bonds (the "Refunding"), and to that end, in order to obtain funds necessary to implement such Refunding, the City has provided for the execution and delivery of its "City of Ukiah, Series 2020 Wastewater Revenue Refunding Obligations (2020 Wastewater Refunding Project)," in the aggregate principal amount of $25,010,000 (the "2020 Obligations"), all pursuant to and secured by a 2020 Financing Agreement (the "Financing Agreement"), dated as of February 1, 2020, by and between the City and BBVA Mortgage Corporation (the "Corporation"). 7. The 2006 Bonds are subject to optional prepayment in full on March 1, 2020 (the "Redemption Date") upon the prepayment of all outstanding principal components of the Installment Payments and accrued interest thereon. 8. The City wishes to give these Instructions to the 2006 Trustee for the purpose of providing for the prepayment in full of the principal components of the Installment Payments together with the interest component of the Installment Payment required to be paid on or accrued to the Redemption Date. 9. Pursuant to the 2006 Indenture, the 2006 Trustee shall receive all amounts transferred and/or deposited by the City and/or the District in connection with these Instructions and shall immediately deposit all such funds into the redemption fund established pursuant to Section 4.03 of the 2006 Indenture (the "2006 Redemption Fund"), which shall represent an irrevocable security deposit for the prepayment and redemption of all remaining outstanding 2006 Bonds in accordance with the 2006 Bond Documents. 10. As a result of the irrevocable deposit of funds in accordance with these Instructions, the City's obligations under the 2006 ISA and the pledge of Net Revenues (as defined in the 2006 ISA) and all other security provided by the 2006 ISA, will cease and terminate in accordance with the provisions of Article IX of the 2006 ISA, and the 2006 Bonds will correspondingly be discharged pursuant to Section 9.03 of the 2006 Indenture. INSTRUCTIONS: In order to provide for the prepayment in full of the principal components of the Installment Payments in accordance with Article VII of the 2006 ISA, and the corresponding optional prepayment and discharge of the 2006 Bonds in accordance with Sections 2.03(a) and 9.03 of the 2006 Indenture, the City hereby irrevocably directs the 2006 Trustee as follows: Section 1. Irrevocable Deposit into the 2006 Redemption Fund. The 2006 Trustee is hereby directed to receive all amounts transferred and/or deposited to or with the 2006 Trustee by the City and/or the District in connection with these Instructions and to immediately deposit all such funds into the 2006 Redemption Fund to be held by the 2006 Trustee as an irrevocable security deposit for the corresponding optional prepayment and discharge of the 2006 Bonds in accordance with Sections 2.03(a) and 9.03 of the 2006 Indenture. All cash and securities in the 2006 Redemption Fund are hereby irrevocably pledged for the payment of the principal and interest represented by the 2006 Bonds in accordance with the 2006 Bond Documents. If at any time the 2006 Trustee receives actual knowledge that the cash and securities in the 2006 Redemption Fund will not be sufficient to make any payment required by IRREVOCABLE REFUNDING INSTRUCTIONS -2- Section 2 in respect of the 2006 Bonds, the 2006 Trustee shall notify the City of such fact and the City shall immediately cure such deficiency from any source of legally available funds. The 2006 Trustee has no liability for any such insufficiency. On or before February 24, 2020 (the "Closing Date"), the following actions shall occur: a. The City shall cause the Corporation to transfer to the 2006 Trustee the amount of $24,404,503.74 for deposit in the 2006 Redemption Fund. b. The 2020 Trustee shall transfer to the 2006 Trustee the amount of $26,702,481.43 for deposit in the 2006 Redemption Fund. c. The City shall transfer to the 2006 Trustee the amount of $1,802,527.36 from moneys on hand with the City for deposit in the 2006 Redemption Fund. d. The 2006 Trustee shall transfer the amount of $900.92 from the 2006 Revenue Fund and the amount of $0.31 from the installment payment balance for deposit in the 2006 Redemption Fund, together with the amount of $104,367.67 presently on deposit in the 2006 Redemption Fund (credited to the City) and the amount of $122,518.57 presently on deposit in the 2006 Redemption Fund (credited to the District). Section 2. Application of the 2006 Redemption Fund. The 2006 Trustee is hereby irrevocably instructed, to which instructions the 2006 Trustee agrees, to apply the amounts on deposit in the 2006 Redemption Fund to pay and redeem the 2006 Bonds through and including the Redemption Date, in accordance with the following schedule: Redemption Maturing Redeemed Redemption Total Date Principal Principal Interest Premium Payment 03/01/2020 $2,280,000.00 $49,670,000.00 $1,187,300.00 $0.00 $53,137,300.00 Following the prepayment and redemption of the 2006 Bonds in full on the Redemption Date, the 2006 Trustee shall transfer any amounts remaining on deposit in the 2006 Redemption Fund to the City. Section 3. Required Notices. The 2006 Trustee acknowledges that the prepayment of all outstanding principal components of the Installment Payments (and accrued interest thereon) will cause a corresponding prepayment and redemption of all outstanding 2006 (the "Called Bonds"). The 2006 Trustee further acknowledges that it has provided the owners of the Called Bonds with notice of redemption, in the manner provided by, and meeting the requirements of the 2006 Bond Documents, a form sample of which is attached hereto as Exhibit A. Section 4. Application of Certain Terms of 2006 Bond Documents. All of the terms of the 2006 Bond Documents relating to the payment and prepayment of principal and interest represented by the 2006 Bonds, as well as the protections, immunities and limitations from liability afforded the 2006 Trustee, are incorporated in these Instructions as if set forth in full herein. These Instructions set forth all matters pertinent to the escrow contemplated hereunder, and no additional obligations of the 2006 Trustee shall be inferred from the terms of these Instructions or any other agreement. IRREVOCABLE REFUNDING INSTRUCTIONS -3- Section 5. Compensation to Trustee. The City shall pay the 2006 Trustee full compensation for its services under these Instructions, including out-of-pocket costs such as publication costs, prepayment expenses, legal fees and other costs and expenses relating hereto and, in addition, all fees, costs and expenses relating to the purchase, substitution or withdrawal of any securities after the date hereof. Section 6. No Right of Set Off Under no circumstances shall amounts deposited in or credited to the 2006 Redemption Fund be deemed to be available for any purpose other than as set forth herein. The 2006 Trustee has no lien upon or right of set off against the cash and securities at any time on deposit in the 2006 Redemption Fund. Section 7. Applicable Law. These Instructions shall be governed by and construed in accordance with the laws of the State of California. Section S. Execution in Counterparts. These Instructions may be executed in several counterparts, each of which shall be regarded as an original and all of which shall constitute but one and the same document. [Signature Page to Follow on Next Page] IRREVOCABLE REFUNDING INSTRUCTIONS -4- IN WITNESS WHEREOF, the City and the 2006 Trustee have each caused these Instructions to be executed by their duly authorized officers all as of the date first above written. Attest: By: CITY OF UKIAH, CALIFORNIA By: Daniel Buffalo, Finance Director ACCEPTED AND AGREED: WELLS FARGO BANK, NATIONAL ASSOCIATION, as 2006 Trustee By: IRREVOCABLE REFUNDING INSTRUCTIONS -5- EXHIBIT A FORM OF CONDITIONAL NOTICE OF FULL OPTIONAL REDEMPTION to the Holders of ASSOCIATION OF BAY AREA GOVERNMENTS 2006 WATER AND WASTEWATER REVENUE BONDS SERIES A CONDITIONAL NOTICE IS HEREBY GIVEN to the owners of the above -captioned bonds (the "2006 Bonds") pursuant to the Indenture of Trust, dated as of March 1, 2006 (the "Indenture"), by and between the Association of Bay Area Governments (the "Authority") and Wells Fargo Bank, National Association, as trustee (the "2006 Trustee"), that all outstanding 2006 Bonds in the aggregate principal amount of $ have been called for redemption on March 1, 2020 (the "Redemption Date"). Redemption of the 2006 Bonds on the Redemption Date as described in this notice shall be conditioned upon the receipt by the 2006 Trustee of the funds sufficient for the proposed redemption on or before the Redemption Date. The 2006 Bonds to be called, which were originally issued on March 2, 2006, are as follows: Original Maturity Principal Redemption CUSIP* (March 1) Amount Price The 2006 Bonds will be payable on the Redemption Date at a Redemption Price of 100% of the principal amount plus accrued interest with respect thereto to such date (the "Redemption Price"). The Redemption Price of the 2006 Bonds will become due and payable on the Redemption Date. From and after the Redemption Date, interest on the 2006 Bonds to be redeemed will cease to accrue, and such 2006 Bonds will be surrendered to the Trustee. This Conditional Notice will be withdrawn if the 2006 Trustee does not receive funds sufficient to pay the Redemption Price on or before the Redemption Date. If this Conditional Notice is withdrawn, this Conditional Notice shall be null and void and of no force or effect, and any 2006 Bonds delivered for redemption shall be returned to the respective owners thereof, and the 2006 Bonds shall remain outstanding as though this Conditional Notice of Redemption had not been given. Notice of a failure to receive funds, and cancellation of this redemption, will be given by Wells Fargo Bank, National Association, as 2006 Trustee, to the registered owners of the 2006 Bonds. ESCROW AGREEMENT A-1 To receive payment on the Redemption Date, owners of the 2006 Bonds should present and surrender said 2006 Bonds on the Redemption Date at the address of the Trustee set forth below: Registered/Certified Mail: Air Courier: Wells Fargo Bank, N.A. Wells Fargo Bank, N.A. Corporate Trust Operations 600 Fourth Street, 7th Floor P.O. Box 1517 Minneapolis, MN 55479 Minneapolis, MN 55480-1517 MAC N9300-070 If the Owner of any 2006 Bond fails to deliver such 2006 Bond to the Trustee on the Redemption Date, such 2006 Bond shall nevertheless be deemed redeemed on the Redemption Date and the Owner of such 2006 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. A signed W-9 is required to accompany the 2006 Bonds or 28% of the 2006 Bond redemption proceeds will be withheld. By: WELLS FARGO BANK, NATIONAL ASSOCIATION, as 2006 Trustee Dated this _ day of , 2020. * Note: The Authority and Trustee shall not be responsible for the selection or use of the CUSIP numbers selected, nor is any representation made as to their correctness indicated in the notice or as printed on any 2006 Bonds. They are included solely for the convenience of the holders. IRREVOCABLE REFUNDING INSTRUCTIONS A-2 Exhibit B 2006 Use Certificate 10 11017-85 JH:CFA:PCH 2/27/06 $75,060,000 ASSOCIATION OF BAY AREA GOVERNMENTS 2006 WATER AND WASTEWATER REVENUE BONDS SERIES A CERTIFICATE REGARDING USE OF PROCEEDS The undersigned hereby states and certifies as follows: (i) that I am the Finance Director of the City of Ukiah (the "City"), and, as such, I am authorized to execute this certificate on behalf of the City and am knowledgeable with respect to the matters set forth herein; (ii) that the City has entered into an Installment Sale Agreement dated as of March 1, 2006 (the "Installment Sale Agreement"), between the Association of Bay Area Govemments, the City and Wells Fargo Bank, National Association, as trustee (the "Trustee"), for the purpose of providing funds for improvements to the Project defined below; (iii) that on the date hereof, the Trustee has transferred a portion of the proceeds of the above -captioned Bonds to the City for deposit into the Project Fund which is established under Section 3.6 of the Installment Sale Agreement (the "Project Fund"); (iv) that the proceeds of the Bonds deposited in the Project Fund will be used to finance projects of the City relating to the Water System (the "Project"), as more particularly described in Part I of Exhibit A hereto attached and by this reference herein incorporated; (v) that Part II of Exhibit A hereto attached describes (A) each use to be made by any person of the Project, other than use by the City and other non-federal governmental units and other than use by members of the public generally, and (B) payments (if any) directly or indirectly in respect of such use which are to be made after the date hereof; (vi) that no portion of the proceeds of the Bonds will be, used, directly or indirectly, to make or finance a loan to any person (other than a State or local govemment unit) or to acquire property which will be sold to any person (other than a State or local govemment unit) on an installment sale basis except as referenced in Part II of Exhibit A; and (vii) that the City expects to use the Project for the purposes referenced in Exhibit A or for other governmental purposes of the City during the entire term of the Bonds. Dated: March 2, 2006 CITY OF UKIAH By Mike McCann, Finance Director EXHIBIT A I. Description of Project The Project consists of the construction of the new treatment plant and the rehabilitation, upgrade and expansion of the existing treatment plant. The Project has been designed to produce a wastewater treatment plant that can reliably meet effluent requirements for the design year 2025 and produce Class A biosolids. A new influent pump station will be built to address deficiencies of the existing one. Two climber -type bar screens and a bypass channel will be used to remove coarse solids. Four aerated grit tanks will be added and the existing secondary clarifiers will be converted to primary clarifiers. A new trickling filter will provide plant redundancy and a pre -aeration tank will be converted to an equipment gallery to house the snail separation and dewatering facilities. The existing primary clarifiers will be converted to solids contact tanks to meet current and future discharge requirements. Following completion of the Project, the plant will have a capacity of 3.01 MGD ADWF. II. Description of Use of Project A. Expected use by any Person Other than Governmental Units or Members of Public Generally None B. Expected payments to be Made after Date Hereof in Respect of Above Use None Exhibit A-1