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Home My WebLink AboutRDA Agenda Packet 2006/02/07 ,.J....ldf\3 UnLdl ;Je:nd:ty v~ ~eiJU, 'y" ~. employed by the City of Chula Vista In t~1d Office of the City Clerk and that I posted this ~ ~, /.. ment on the bulletin board according ~ Act req irements. _ _ -...:-...: J ~_ _ ~ ~- - Signed Stephen C. Padilla, Mayor/Chair Patricia E. Chavez, Council/Agency Member David D. Rowlands, Jr., City Manager/Executive Director John McCann, Council/Agency Member Ann Moore, City Attorney/Agency Counsel Jerry R. Rindone, Council/Agency Member Susan Bigelow, City Clerk Steve Castaneda, Council/Agen.cy Member SPECIAL JOINT MEETING OF THE CITY COUNCIL, REDEVELOPMENT AGENCY, AND PUBLIC FINANCING AUTHORITY February 7, 2006 4:00 P.M. (Immediately following the City Council Meeting) Council Chambers City Hall 276 Fourth Avenue CALL TO ORDER ROLL CALL: Councilmembers Castaneda, Chavez, McCann, Rindone, and Mayor Padilla PUBLIC COMMENTS Persons speaking during Public Comments may address the Council/Redevelopment Agency on any subject matter within the Council/Redevelopment Agency's jurisdiction that is not listed as an item on the agenda. State law generally prohibits the Council/Agency from taking action on any issue not included on the agenda, but, if appropriate, the Council/Agency may schedule the topic for future discussion or refer the matter to staff. Comments are limited to three minutes. PUBLIC HEARING OF THE CITY COUNCIL/PUBLIC FINANCING AUTHORITY The following item has been advertised as a public hearing as required by law. If you wish to speak on this item, please fill out a "Request to Speak" form (available in the lobby) and submit it to the City Clerk prior to the meeting. 1. CONSIDERATION BY THE CITY COUNCIL OF THE CITY OF CHULA VISTA AND THE CHULA VISTA PUBLIC FINANCING AUTHORITY OF THE EXECUTION, SALE AND DELIVERY OF CERTIFICATES OF PARTICIPATION IN ORDER TO FINANCE CERTAIN PUBLIC CAPITAL IMPROVEMENTS Pursuant to the City Charter Section 1017, an annual audit is performed of the City's financial records. Presented for acceptance are the Audited Financial Statements for the fiscal year ended June 30, 2005, as prepared by the independent audit firm of Caporicci & Larson. Both the City's and the Agency's Annual Financial Reports received unqualified (clean) opinions from the independent audit firm. (Finance Director) (Director of Finance) Staff recommendation: Council/Authority adopt the following resolutions: A. RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CHULA VISTA MAKING REQUIRED FINDINGS AUTHORIZING THE EXECUTION AND DELIVERY OF DOCUMENTS RELATING TO THE SALE AND DELIVERY OF NOT TO EXCEED $20,000,000 2006 CERTIFICATES OF PARTICIPATION, (CIVIC CENTER COMPLEX PROJECT - PHASE 2), APPROPRIATING THE NET PROCEEDS THEREOF TO THE CIVIC CENTER COMPLEX PROJECT (GG-200), AND AUTHORIZING REIMBURSEMENT OF UP TO $4,296,950 TO THE PFDIF FUND FROM PROCEEDS OF THE SALE OF THE CERTIFICATES OF PARTICIPATION, AND AUTHORIZING AND DIRECTING CERTAIN ACTIONS IN CONNECTION THEREWITH B. RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CHULA VISTA MAKING REQUIRED FINDINGS AUTHORIZING THE EXECUTION AND DELIVERY OF DOCUMENTS RELATING TO THE SALE AND DELIVERY OF NOT TO EXCEED $2,500,000 2006 CERTIFICATES OF PARTICIPATION (NATURE CENTER PROJECT), APPROPRIATING THE NET PROCEEDS THEREOF TO THE NATURE CENTER PROJECT (GG-175) AND AUTHORIZING REIMBURSEMENT OF UP TO $1,536,949 TO THE GENERAL FUND FOR MONIES PREVIOUSLY SPENT ON THE PROJECT FROM THE SALE OF THE CERTIFICATES OF PARTICIPATION, AND AUTHORIZING AND DIRECTING CERTAIN ACTIONS IN CONNECTION THEREWITH C. RESOLUTION OF THE CHULA VISTA PUBLIC FINANCING AUTHORITY APPROVING THE EXECUTION AND DELIVERY OF DOCUMENTS IN CONNECTION WITH THE SALE AND DELIVERY OF THE 2006 CERTIFICATES OF PARTICIPATION (CIVIC CENTER PROJECT - PHASE 2) IN A PRINCIPAL AMOUNT NOT TO EXCEED $20,000,000, AND AUTHORIZING AND DIRECTING CERTAIN ACTIONS IN CONNECTION THEREWITH D. RESOLUTION OF THE CHULA VISTA PUBLIC FINANCING AUTHORITY APPROVING THE EXECUTION AND DELIVERY OF DOCUMENTS IN CONNECTION WITH THE SALE AND DELIVERY OF THE 2006 CERTIFICATES OF PARTICIPATION (NATURE CENTER PROJECT) IN A PRINCIPAL AMOUNT NOT TO EXCEED $2,500,000 AND AUTHORIZING AND DIRECTING CERTAIN ACTIONS IN CONNECTION THEREWITH ACTION ITEM The Item listed in this section of the agenda will be considered individually by the Council/Agency, and is expected to elicit discussion and deliberation. If you wish to speak on any item, please jill out a "Request to Speak" form (available in the lobby) and submit it to the City Clerk prior to the meeting. 2. CONSIDERATION BY THE CITY COUNCILIREDEVELOPMENT AGENCY OF WITHHOLDING ALL FUTURE STIPENDS FOR MEMBERS OF THE CHULA VISTA REDEVELOPMENT CORPORATION (CVRe) FOR A PERIOD EQUAL TO At the Council meeting of January 24, 2006, Councilmember Rindone requested that a resolution be prepared authorizing all future stipends to current members serving on the Chula Vista Redevelopment Corporation (CVRe) board be withheld, effective February I, 2006, for a period equal to the number of months that stipends were paid to current members prior to the first CVRC meeting. (Assistant City Manager/Director of Community Development, Director of Finance) Staff recommendation: Council/Agency consider the following resolution: JOINT RESOLUTION OF THE CITY COUNCIL AND REDEVELOPMENT AGENCY OF THE CITY OF CHULA VISTA TO WITHHOLD ALL FUTURE STIPENDS FOR MEMBERS OF THE CHULA VISTA REDEVELOPMENT CORPORATION (CYRe) FOR A PERIOD EQUAL TO THE PERIOD THE STIPEND WAS PAID TO CURRENT MEMBERS PRIOR TO THE FIRST CVRC MEETING BEING HELD CITY COUNCIL/REDEVELOPMENT AGENCY WORKSHOP 3. WESTERN CHULA VISTA REVITALIZATION: POPULATION, MARKET AND HOUSING TRENDS The City Council/Redevelopment Agency workshop will focus on the competing priorities between the need for economic revitalization in western Chula Vista and the potential effects urban revitalization may have on population and housing. The potential loss of rental housing will be addressed. Staff will provide policy alternatives for the Council/Agency to consider in addressing the balance of revitalization efforts with the needs of our lower income residents. OTHER BUSINESS 4. CITY MANAGER REPORTS 5. MAYOR'S REPORTS 6. COUNCIL COMM;ENTS ADJOURNMENT Council: to February 14, 2006 at 6:00 p.m. in the Council Chambers; Redevelopment Agency: to February 21, 2006 at 6:00 p.m. in the Council Chambers, following the City Council Meeting; Public Financing Authority: Until further notice. In compliance with the AMERICANS WITH DISABILITIES ACT The City of Chula Vista requests individuals who require special accommodations to access, attend, and/or participate in a City meeting, activity, or service request such accommodation at least forty-eight hours in advance for meetings and five days for scheduled services and activities. Please contact the City Clerk for specific information at (619) 691-5041 or Telecommunications Devicesfor the Deaf(TDD} at (619) 585-5655. California Relay Service is also available for the hearing impaired. Page 3 - CouncillPublic Financing Authority Agenda htto:/ /www.chutavistaca.gov February 7, 2006 ITEM TITLE: JOINT CITY COUNCIL/PUBLIC FINANCING AUTHORITY AGENDA STATEMENT I Item Meeting Date 2/7/2006 Public Hearing of the City Council of the City of Chula Vista and the Chula Vista Public Financing Authority to consider the execution, sale and delivery of certificates of participation in order to finance certain public capital improvements. Resolution of the City of Chula Vista making required findings authorizing the execution and delivery of documents relating to the sale and delivery of not to exceed $20,000,000 2006 Certificates of Participation, (Civic Center Complex Project - Phase 2), appropriating the net proceeds thereof to the Civic Center Complex project (GG-200), and authorizing reimbursement of up to $4,296,950 to the PFDIF Fund from proceeds of the sale of the Certificates of Participation, and authorizing and directing certain actions in connection therewith. Resolution of the City of Chula Vista making required findings authorizing the execution and delivery of documents relating to the sale and delivery of not to exceed $2,500,000 2006 Certificates of Participation, (Nature Center Project), appropriating the net proceeds thereof to the Nature Center Project (GG-175) and authorizing reimbursement of up to $1,536,949 to the General Fund for monies previously spent on the project from the sale of the Certificates of Participation, and authorizing and directing certain actions in connection therewith. Resolution of the Chula Vista Public Financing Authority approving the execution and delivery of documents in connection with the sale and delivery of the 2006 Certificates of Participation, (Civic Center Project - Phase 2) in a principal amount not to exceed $20,000,000 and authorizing and directing certain actions in connection therewith Resolution of the Chula Vista Public Financing Authority approving the execution and delivery of documents in connection with the sale and delivery of the 2006 Certificates of Participation, (Nature Center Project) in a principal amount not to exceed -I Item Page 2, Date 2/7/2006 ! $2,500,000 and authorizing and directing certain actions in connection therewith. SUBMITTED BY: Director of Financ;fTreasurer ;u1 f"--H/L REVIEWED BY: City Manager) I jtc pi!.. (4/5ths Vote: SUMMARY: Yes LNo_) The City of Chula Vista has experienced significant growth in population over the past several years and is projected to reach a build out population of over 326,000. Recognizing that the existing Civic Center Complex no longer accommodated the staff required to service the current population nor that of the future and that modernization and retrofitting of all of the Civic Center Complex buildings were going to be required in order to meet current code requirements and to accommodate current and emerging technology, on 7/10/2001, the City Council approved the Civic Center Master Plan for the expansion of the existing Civic Center Complex and directed staff to return with recommended long-term-financing. On August 3, 2004, the City Council approved the financing for the first phase of the Civic Center Complex project, which included the reconstruction of the City Hall building. The first phase was substantially completed in November 2005. The renovation of the second phase of the Civic Center Complex is underway which involves the renovation of the Public Services Building. This report discusses the second phase of the Civic Center Complex financing plan and includes funding for the second component of the Civic Center Complex renovation (Renovation of the Public Services Building) and interior exhibit improvements in the Nature Center. The improvements within the Nature Center, which are unrelated to the City Hall expansion, are included in this financing plan in order to save on issuance costs. Staff is recommending approval of a long-term borrowing by issuing Certificates of Participation in a combined amount not to exceed $22,500,000. The funding for the final phase of the Civic Center Complex project will be brought back for Council consideration as Phase 3 of the financing plan in order to coincide with the construction timeline. RECOMMENDATION: Council: Conduct public hearing required by Government Code 6586.5. Adopt Resolution of the City of Chula Vista making required findings authorizing the execution and delivery of documents relating to the sale and delivery of not to exceed $20,000,000 2006 Certificates of Participation, (Civic Center Complex Project - Phase ! - ) Item Page 3, Date 2nJ2006 2), appropriating the net proceeds thereof to the Civic Center Complex project (GG-200), and authorizing reimbursement of up to $4,296,950 to the PFDIF Fund from proceeds of the sale of the Certificates of Participation, and authorizing and directing certain actions in connection therewith. Adopt Resolution of the City of Chula Vista making required findings authorizing the execution and delivery of documents relating to the sale and delivery of not to exceed $2,500,0002006 Certificates of Participation, (Nature Center Project), appropriating the net proceeds thereof to the Nature Center Project (GG-175) and authorizing reimbursement of up to $1,536,949 to the General Fund for monies previously spent on the project from the sale of the Certificates of Participation, and authorizing and directing certain actions in connection therewith. Financing Authority: Adopt Resolution of the Chula Vista Public Financing Authority approving the execution and delivery of documents in connection with the sale and delivery of the 2006 Certificates of Participation, (Civic Center Project - Phase 2) in a principal amount not to exceed $20,000,000 and authorizing and directing certain actions in connection therewith Adopt Resolution of the Chula Vista Public Financing Authority approving the execution and delivery of documents in connection with the sale and delivery of the 2006 Certificates of Participation, (Nature Center Project) in a principal amount not to exceed $2,500,000 and authorizing and directing certain actions in connection therewith. BOARDS/COMMISSIONS RECOMMENDATION: Not applicable DISCUSSION: The Civic Center project has three construction phases, which includes the demolition and reconstruction of the City Hall building, the renovation of the Public Services building and finally the renovation of the former Police Facility. The Guaranteed Maximum Price set by the City Council on August 3, 2004 was $50,148,000. The City has previously entered into a contract with Highland Partnership, Inc. for design/build services for the entire project. The first phase of the Civic Center Project was substantially completed in November 2005. This phase included the demolition of the former 18,300 square foot City Hall j,3 Item Page 4, Date 21712006 I Building and construction of the new facility. The new City Hall building is approximately 42,230 square feet and is occupied by the Mayor and Council, Council Chambers, City Manager, City Attorney, City Clerk, Finance Department, Office of Budget and Analysis and Office of Communications. Now that the City Hall phase is completed, the temporary remodel of the former Police Facility has begun in preparation to house staff during the second phase of the Civic Center project, which involves the renovation of the Public Services Building. The Planning & Building Department and Engineering Department are scheduled to move into the former Police Facility on February 13, 2006. The Public Services Building is currently 29,700 square feet in size and houses the former Council Chambers, Planning & Building Department, Engineering Department and the Finance Department until their recent move into the new City Hall. The renovated building will total 30,562 square feet, which is a small increase of 862 square feet due to the demolition of the Council Chambers and the "squaring off" of that corner of the building to make it more conducive for reuse as an office area. The Public Services building remodel should be substantially completed by December 13, 2006 and ready for move-in at that time. The renovated Public Services Building will be occupied by the Planning & Building Department and the Engineering Department. The former Police Facility, which will be the final phase of the Civic Center Project, will be renovated but the square footage will not be altered (52,160 sq. ft.). The work is scheduled to begin on February 19, 2007 and should be completed by May 7, 2008. The building is currently occupied by the Management and Information Systems Department and Human Resources Department. Upon completion of the renovations, the building will be occupied by the Management and Information Systems Department, Human Resources Department, Community Development Department, Recreation Department, portions of the Planning and Building Department and the Chula Vista Credit Union When this final renovation is complete, two other buildings, the Community Development Building and the Legislative Building will be demolished and parking will be added in that space. Also, throughout all of the components, various site work will be occurring as parking areas are constructed and relocated and a central landscaped plaza in what is now Memorial Way will be developed. The financing plan discussed in this report includes funding for the renovation of the Public Services Building (second phase of the Civic Center Complex project) and the Nature Center Interior Exhibits project. The attached Council informational memo was presented to Council on November 17, 2005 and discusses the additional appropriations being requested for reimbursements to the General Fund and PDIF fund. Staff will develop and return to Council with the third phase of financing for the final construction component (renovating the former Police Facility) in order to coincide with the construction timeframe. I~ '-I Item Page 5, Date 2/7/2006 f The approved Civic Center Master Plan also contemplated the future relocation of existing Fire Station NO.1 to the site of the current Ken Lee Building. Staff is currently developing preliminary feasibility options for Fire Station NO.1. Staff will return to Council at a future date when it appears that both funding and operational functionality require that the relocation of Fire Station No. 1 be considered for implementation and the Civic Center Master Plan to be amended. PFDIF Update The majority of the Civic Center Complex Project (estimated at 81.7%-with all three phases combined) will be funded by the Civic Center component of the Public Facilities Development Impact Fee (PFDIF). The PFDIF - Civic Center Component fee was approved by the City Council in August 1989. The purpose of the fee was to mitiaate the impacts of arowth on the Civic Center Complex by providina a fundina source for the construction and expansion of the Complex. In accordance with the Municipal Code 3.50.080. these funds are restricted for use on the construction of the Civic Center Complex Proiect and administrative costs associated with the administration of the fee. During the most recent update of the Public Facility Development Impact Fee (November 2002), the cost of the renovation of the Civic Center (excluding Fire Station 1 and financing cost) was $34,798,333. As discussed in the staff report provided to Council on 8/3/2004, the total estimated project cost for the Civic Center Complex project (all Components excludina Fire Station 1 and financing cost) is $50,148,000. The increase in cost is attributed to insurance costs which were not included in the initial estimate ($3.4 million), increased construction costs ($13.2 million) related to the increased cost of steel, updated design costs and the relocation of the Council Chambers which has been included in the City Hall building itself and a net reduction in costs for permits, staff services and contingencies (-$1.3 million). With the recent approval of the General Plan Update, it is staff's intention to present to Council an update of the PFDIF, not exclusively limited to the Civic Center component. The next PFDIF update, will take into account the increased costs, which are considered extraordinary because the cost increases could not have been reasonably forseen at the time the current fee was established. Beginning in fiscal year 2007, the total debt obligations being paid by the PFDIF fund will be approximately $5.0 million per year (excluding the Phase 2 financing). With the second and third phases yet to be financed, the anticipated debt obligations are projected to increase to $6.4 million per year not including the financing of the Rancho Del Rey Library. Civic Center Complex Renovation - Phase 2 - Public Services Buildina I , /-~ Item I Page 6, Date 2/7/2006 Phase 2 of the project involves the reconstruction of the Public Services Building. The total cost of the second phase, excluding financing, is anticipated to be approximately $12.4 million, broken down as follows: Design of PSB Renovations Design of Temporary Renovations to Current PD Development Staff Costs Design/Builders Fee (Design) Design/Builders Fee (Construction) Design Builders Reimbursables Construction Allowance Budgets General Conditions Renovations of PSB On-Site Improvements Construction Contingency Total Design Builder Costs City Budgeted Allowances (Permits, Staff Time Furniture and Equipment, Project Management Services, Contingencies, Other Equipment Project Insurance Total Phase 2 - Public Services Building Nature Center -Interior Exhibits $ 690,000 $ 10,000 $ 75,000 $ 151,000 $ 352,000 $ 131,000 $ 700,000 $ 668,000 $ 5,150,000 $ 1,298,000 .$ 357.000 $ 9,582,000 $ 1,964,000 $ 811,000 $12,357,000 The City Council previously approved the Design Build agreement with Rudolph and Sletten, Inc. for the provision of services necessary to design and construct upgrades and replacements to the Nature Center Interior Exhibits. The Guaranteed Maximum Price for the project was set at $3,174,736. Included in this financing plan is $1,824,736 in project costs, which will be dedicated to the Nature Center Project. General Fund revenues will be used to fund the debt service commitment. This project is independent of the Civic Center Project but included in this financing plan both for convenience and savings on cost of issuance. Nature Center Interior Exhibits General Fund - to be financed Grant - State Coastal Conservancy Donations and other Grant Funds Total Funding Sources /-(;: $1,824,736 $350,000 $1,200,000 $3,374,736 Item Page 7, Date 2/7/2006 I Lona Term Financina The total project cost included in Phase 2, excludina financina costs, is anticipated to be approximately $15,359,228. This financing includes costs associated with Phase III such as insurance costs which were initially budgeted over all three phases, but due to the volatility of the insurance market, it was to the benefit of the City to lock in a guaranteed rate and pay the costs in full during Phase I. In addition, in order to obtain the best value and price for ceramic and stone tiles, doors and frames, which will be utilized over the remaining two phases, these materials were prepaid during Phase 1 of the construction project. Design and Construction City Budgeted Allowances Insurance Total GMP Phase II Phase II Financing $ 9,582,000 $ 1,964,000 $ 811,000 $ 12,357,000 Phase III Insurance Costs Phase III Design and Materials Phase III pre-financing construction costs $ 898,726 $ 1,582,569 $ 520,933 Total Civic Center Complex Phase II Financing $ 15,359,228 The portion of the borrowing attributable to the development funding commitment is 75.9% or $11.7 million, with the remainder 24.1 % or $3.7 million attributable to the City funding commitment. The project costs for the Nature Center Interior Exhibits to be financed within this plan is $1,824,736, excludinq financina costs. Debt service commitments will be funded 100% from the General Fund. Staff is recommending that long-term financing be obtained to provide approximately $17,183,964 for project costs, which is derived as follows: Funding Ratios Proiect Description Civic Center Renovation - Phase 2 Nature Center - Exhibits Total Project Cost $ Proiect Cost Fundinq 15,359,228PFDIF 75.9%/General Fund 24.1% 1,824,736 General Fund 100% 17,183,964 /-1 Item I Page 8, Date 2/7/2006 In December, 2000, the Council approved an agreement with Harrell & Co. Advisors, LLC to provide financial advisory services for determining the most appropriate borrowing structure and for executing long-term financing transactions to provide funding for both the Police Headquarters and Civic Center Remodeling projects. Harrell & Co. is recommending that the required funds for the Civic Center project be obtained through a standard competitively bid certificate of participation issue, which is a vehicle that the City/Agency has used in the past for financing such projects as the police facility, corporation yard, shopping center remodel, the downtown parking structure, etc. The typical structure is such that certain assets are leased to a separate legal entity, in this case the City's Financing Authority, which then leases the assets back to the City. The Financing Authority then borrows money through the municipal market by causing the trustee bank to sell certificates of participation, which entitle the holder to a proportionate share of the City's lease payments (i.e. principal & interest). The lease payments from the City are established at a level sufficient to pay the debt service payments due to the certificate holders. In order to generate the $17,183,964 required to complete the funding of these projects, it is estimated under current market conditions (assumed interest rate of 4.7%) that a borrowing of approximately $22.5 million will be necessary. It is estimated that for a Certificate issue of this size, with a 30-year final maturity for the Civic Center portion and 20 years for the Nature Center Project, the total debt service will amount to approximately $35.3 million, which includes net financing cost of $14.4 million. This figure includes an estimated net interest cost of $13.8 million, an underwriter's discount of $200,000, an insurance premium of $188,000, miscellaneous costs of issuance including financial advisory services, legal services, etc. of approximately $250,000. The semi-annual debt service (lease) payments that will begin in March 2008, will vary slightly year to year, but the average annual amount due is estimated at approximately $1.3 million ($1.15 million Civic Center Project - Phase 2 and $169,320 Nature Center Interior Exhibits Project). Est. Average Annual Debt Service Assumed Interest Rate of 4.7% Civic Center Proiect - Phase II: PFDIF Fund (75.9%) General Fund (24.1 %) Subtotal 875,181 277,890 $ 1,153,071 Nature Center Interior Exhibits General Fund (100%) $ 169,320 Total Avg. Annual Debt Svc. $ 1,322,391 / - ,/ I Item Page 9, Date 2/712006 It is felt that these figures are somewhat conservative and that the actual costs should be less if market conditions remain fairly stable until the date of sale for the Certificates. As indicated previously, this amount is a shared commitment, funded by development fees and the General Fund. However, it must be noted that if at any time over the next 30 years, there are insufficient development fee revenues on hand to meet the debt service obligation related to the Civic Center Project the unmet obligation would fall to the General Fund. Outstandina Debt In fiscal year 2007-08, the first year of lease payments for this issue, the General Fund's actual debt service payments total $7.0 million. This $7.0 million represents approximately 4% of the projected General Fund operating budget, which would be considered an average debt burden for a local governmental entity. It should also be noted that the single largest annual debt service commitment of the General Fund is the $2.3 million payment on the Pension Obligation Bonds, which could easily be viewed as an operational expense categorized as personnel retirement, rather than debt service, thereby further reducing the "real" debt burden on the General Fund for comparison purposes to 2.7%. The final debt service payment for the Pension Obligation Bonds are scheduled to end in fiscal year 2012. $8.00 $7.00 $6.00 $5.00 $4.00 $3.00 $2.00 $1.00 $- Annual Debt Service Payments of the General Fund FY04 FY06 FY08 FY10 FY12 FY14 FY16 FY18 FY20 FY22 . Pension Obligation Bonds o Shopping Mall COP2003 (Ref COP) .2000 COP Corporation Yard . Calease #2 800 MHZ 2003 (Ref COP) . Police Facility- 2002 COP OCivic Center Expansion-Phase II (estimated) . Nature Center (estimated) . Shopping Mall Parking CV Ctr. 2003 (Ref. COP) o Palomar Trolley Commercial-Notes Payable .800 Mhz- County Buy-in []I Calease #2 Fiscal System 2003 (Ref COP) . Civic Center Expansion- 2004 COP Phase I IJ Civic Center Phase III (estimated) "Final payment of the Pension Obligations Bonds occurs in fiscal year 2012 ;-1 Item / Page 10, Date 2/7/2006 The annual lease payments for this borrowing will increase the total annual debt service commitment of the City's General Fund by almost 10% when the first full year payment is due in fiscal year 2007-08. At that time, it is projected that the General Fund annual debt service commitment will total approximately $13.8 million, or approximately 8% of the projected General Fund operating budget. Viewed in isolation, this percentage would be considered moderately high for a local governmental entity. However, it must be noted that although this amount is truly a General Fund commitment, only $7.0 million is to be actuallv paid from General Fund resources. The remaining $6.8 million of debt is scheduled to be paid from development fees, residential construction taxes etc. The financing-related resolutions approve the competitive sale of Certificates of Participation in a total amount not to exceed $22,500,000, and also, approve the amendments to the Site Lease, the Lease/Purchase Agreement, the trust agreement and the assignment agreement along with the Preliminary Official Statement and other necessary documents on file with the City Clerk, and authorize them to be executed and distributed in connection with the sale of the Certificates. In addition, the resolutions authorize the Director of Finance to solicit and obtain insurance on the transaction if it is found to be economically advantageous. Finally, the resolutions authorize staff to take all actions as may be necessary to close the transaction, including execution of all required closing documents. FISCAL IMPACT: Adoption of these resolutions will amend the Civic Center CIP budget by the net bond proceeds and the reimbursement of up to $4,296,950 to the Public Facilities Development Impact Fund and $1,536,949 to the General Fund for monies previously spent on the projects, and recognize net long-term financing costs over a thirty year period of approximately $14.4 million. The ongoing fiscal impact based on debt service obligations will on average be approximately, $477,210 ($277,890 Civic Center and $169,320 Nature Center Exhibits) to the General Fund and $875,181 to the PFDIF fund. As previously mentioned, the General Fund guarantees that the debt service will be paid. If at any time insufficient funds are available in the PFDIF funds, the General Fund would be committed to fund the debt service obligation which will be approximately $1.3 million annually. As previously stated, beginning in fiscal year 2007, the total debt obligations being paid by the PFDIF fund will be approximately $5.0 million per year (excluding the Phase 2 COPs). With the second and third phases yet to be financed, the anticipated debt obligations are projected to increase to $6.4 million per year by 2010. Currently, there are an estimated $6.2 million in available reserves within the PFDIF fund. Financinq Summarv I-j:) Item J Page 11, Date 2/7/2006 The funding sources for Phase 2 - PSB renovation, the Nature Center Interior Exhibits and the related financing costs are estimated as follows: Financing Summary Civic Center - Phase 2 Nature Center Total PFDIF 75.9% General Fund 24.1% Total Civic Ctr. 100% GF All Projects Gross Interest 11,866,412 3,767,860 15,634,272 1,853,728 17,488,000 Cost of Issuance 422,734 134,228 556,962 66,038 623,000 Project Fund 11,660,110 3,702,354 15,362,464 1,821,500 17,183,964 Total Financing Costs 23,949,257 7,604,441 31,553,698 $ 3,741,266 $ 35,294,964 Net Financing Costs $ 9,771,062 3,102,538 $ 12,873,600 $ 1,526,400 $ 14,400,000 Net Debt Service $ 14,178,194 4,501,904 $ 18,680,098 $ 2,214,866 $ 20,894,964 Total Cost $ 23,949,257 $ 7,604,441 $ 31,553,698 $ 3,741,266 $ 35,294,964 ATTACHMENTS: 1. Council Information Item Dated November 17, 2005 with attached Draft Staff Report 2. Amended and Restated Trust Agreement for CV 2006 Civic Center COPS 3. Agency Agreement for CV 2006 Civic Center COPS 4. Continuing Disclosure Agreement for CV 2006 Civic Center COPS 5. First Amendment to Lease/Purchase Agreement 6. First Amendment to Assignment Agreement 7. First Amendment to Site Lease 8. Preliminary Official Statement 9. Official Notice of Sale )- ;I ATTACHMENT 1 ~If? --- -- "1::.~ General Services Department Memorandum CllYOF CHUlA VISTA DATE: November 17, 2005 TO: The Honorable Mayor and City Council VIA: David D. Rowlands, Jr., City Manager FROM: Jack Griffin, Director of General Services SUBJECT: Civic Center Interim Appropriation Attached is a draft staff report that describes the need for the Council to authorize an interim appropriation to the Civic Center Renovation capital improvement project (GG 139). As the draft report indicates, the project is proceeding within the budget that the Council approved in August of 2004 when it approved the Guaranteed Maximum Price of the project. The interim appropriation is necessary due to certain expenditures that were made during the first phase of the project for work associated with later phases. In particular, the design of all three phases occurred in the first phase and the project insurance costs were paid almost in full during the first phase. These payments leave the project budget "short" from a cash perspective. The draft staff report indicates that the funds to be approproriated would be reimbursed when the second phase of the project, the renovations the Public Services Building, is financed in early 2006. This interim appropriation, like all other appropriations requires the approval offour-fifths of the Council. In the case of the Civic Center, Councilmember Rindone, whose residence is within 500 feet of the Civic Center Complex, would have to abstain from voting. This creates a problem with the uncertainty regarding when Councilmember Davis will be able to return to Council meetings. Given the uniqueness ofthis situation, the City Attorney is attempting to obtain an opinion from the California Fair Political Practices Commission (FPPC) as to whether Councilmember Rindone could vote on the matter. In the meantime, the City is contractually obligated to remit payment to Highland Partnership, Office Pavilion, Corporate Express, Allegis Development Company and other vendors who have or are currently providing services/materials for the project. In order to meet these contractual obligations, the City will continue to makes its required payments. Pending the answer the City Attorney receives from the FPPC or the return to C:\Documents and Settings\phillipdlLocal Settings\Temporary Internet Files\OLK20\civic center interim appropriation info iteml.doc I-I,:;+- ATTACHMENT 1 Council meetings of Council member Davis, we will promptly bring the draft staff report forward for your consideration. We would like to reiterate that the project costs are well within the project budget that the Council has previously approved and only the combination of a three-phased project with three distinct financing series, the conflict of interest issues and Councilmember Davis' illness have created this somewhat unwieldy situation. Cc: Ann Moore, City Attorney Maria Kachadoorian, Finance Director C:\Documents and Settings\phillipd\Local Settings\Temporary Internet Files\OLKlO\civic center interim appropriation info iteml.doc /-- /:3 ATTACHMENT 1 COUNCIL AGENDA STATEMENT Item: Meeting Date: 11122/05 ITEM TITLE: Resolution authorizing the appropriation of $3,721,194 from the available balance of the Public Facilities Development Impact (PFDIF) fund to complete the first phase activities regarding the Civic Center Complex project (GG 139). SUBMITTED BY: Director of General Services REVIEWED BY: City Manager (4/5ths Vote: Yes...x No--> The City Council previously approved CIP project GG-139 which involved the renovation of the Civic Center Complex. On August 3, 2004 City Council approved by Resolution 2004-266 a financing plan for Component A of the project appropriating $15,955,550 from bond proceeds and $3,000,000 from the Public Facility Development Impact Fund (PFDIF). In addition to existing funds when the first phase of the proj ect began, the total available funds amounted to $23,461,166. Phase I, City Hall is nearing final completion, however, due to expenditures incurred in the first phase of construction rather than in the budgeted future phases, staff is recommending an additional appropriation to complete all components of the first phase whereby the funds appropriated by the approval of tonight's resolution will be reimbursed when the bond proceeds or sale of the certificates of participation for the second phase occurs. RECOMMENDATION: That the City Council authorize the appropriation of $3,721,194 ITom the available balance of the Public Facilities Development Impact (PFDIF) fund to complete first phase activities regarding the Civic Center Complex project (GG 139). BOARDS/COMMISSIONS RECOMMENDATION: N/ A DISCUSSION: The construction/renovation of the Civic Center Complex is progressing well. Staff has moved into the new City Hall and it is operational. Only the new Council Chambers is not yet complete. It is expected that the Chambers will be ready to host its first City Council meeting on Tuesday, December 6, 2005. A temporary Occupancy Permit has been issued for City Hall. Also, as required by the contract, a Substantial Completion Certificate has also been issued. The interim modifications to the former Police Department and current move coordination activities from Public Services Building (PSB) to the former Police Department in an effort to prepare for the renovation of the PSB are proceeding. The financing for the project is broken down into the three phases consistent with the three phases of the Civic Center Complex renovation/construction and budgeted accordingly. The existing appropriation to the Civic Center Complex project was intended to cover budgeted costs of the first phase of the project. However, due to future phase expenditures incurred in the first phase, it has become necessary to appropriate additional funds to complete all components of the first phase. These additional funds will be reimbursed to the PFDIF with the financing of the second phase. / -I /- ATTACHMENT 1 Page 2, Item: Meeting Date: 11/22/05 Given the complexity of the project in that three separate and distinct existing buildings will be reconstructed and/or renovated, along with their related site improvements such as parking, landscaping, etc., expenditures have occurred relating to budgeted items in future phases of the project during the first phase. It should be noted that although there are overlapping phase expenditures, the project as a whole is within budget. The first occurrence is the payment of design services for all three components; City Hall, PSB and former Police Department including interim temporary renovations to the former Police Department to accommodate staff during construction, initially budgeted over three phases but incurred in the first phase, The total amount for the costs incurred in excess of budgeted Phase I design services is $1,970,000 (see Table I). The City realized significant savings in design costs by undertaking the full design of the project prior to the construction of the first phase. By completing the design of all phases up front, the Design Builder was also able to set prices for materials and labor in phases 2 and 3 by having biddable documents on those buildings. The second occurrence is the payment of the entire insurance program, initially budgeted over three phases. Due to the volatility of the insurance market it was to the benefit of the City to lock in a guaranteed price for the Civic Center insurance program at a cost of $3,027,326 for all three phases (less $150,000 in broker's fees to be paid at a rate of $75,000 at the construction onset of each phase) and $455,400 for Builder's Risk for a total expenditure of $3,332,726 in insurance costs. The budgeted amount for insurance in Phase I was $1,623,000. Thus, an unanticipated expense of $1,709,726 was incurred in the first phase (see Table I). The third and final occurrence is the payment of materials such as ceramic and stone tiles, doors and frames purchased and expense incurred in the first phase in an effort to obtain the best value and price for the City, however, they are not scheduled for installation nor budgeted for until the second and/or third phases. An amount of $297,468 accounts for those overlapping phase activity costs (see Table I), The total funds required to complete all Phase I activities is $3,292,028 and is outlined in Table I below: Table 1. Description Component A Amt Incurred in Budgeted Obligation Phase 1 for Com onent 2 Total Excess Amt Incurred in Phase t Com onents 2 + 3 Design Builder Costs: Design of Building Design of Temp ReDov - o]d PO Development Staff Costs IB Fixed Fee (Design) IB Fee (Construction) DIB Reimburseables Construction Allowance Budgets General Conditions Demolition and Construction* On-Site Improvements onstruction Contingency Design Builder Costs Sub-Total $1,299,00 $65,00 $120,00 $240,00 $680,00 $199,00 $855,00 $1,075,00 $10,838,00 $2,117,00 $691,00 $18,179,000 $690,00 $10,00 $75,00 $151,00 $785,00 $10,00 $83,00 $166,00 $142,26 $155,201 $1,068,26 $1,199,201 $2,267,46 /-/5 ATTACHMENT 1 Page 3, Item: Meeting Date: 11/22/05 Description Component A Amt Incurred in Amt Incurred in Total Excess Amt Budgeted Obligation Phase 1 for Phase 1 for Incurred in Phase 1 Comnonent 2 Comnonent 3 IComnonents 2 + 3) Insurance: $1,623,OOC $811 ,DOC $898,726 $1,709,726 fcity Budgeted Allowance: $2,974,00C $C $C $C [Total $22,776,000 $1,879,26 $2,097,927 $3,977.194 Less Adjusted Avail Balance** -$685,16€ [Appropriation Req - Ph I $3,292,028 Materia1s . Component 2/B - PSB Materials - Component 3/C - Old PD *Total Materials Purchased $142,26 $155,201 $297,468 mount Avail at onset of Phase 1 mount Budget ** Adj Avail $23,461,16 $22,776,00 $685,16 With the expenditure of Component 2 and 3 costs III Phase 1, the total amount of those Components will be reduced as shown on Table 2: Table 2. Description ComponeDt 2 Original Budget Component Z Component 3 Component 3 Adjusted Budget Origiual Budget Adjusted Budget Design Builder Costs City Budgeted Allowances Project Insurance Total Component Costs $8,513,73 $1,964,00 $ $10,477,733 $9,857,79 $3,012,00 $47,27 $12,917,073 Financing It is anticipated that the sale of certificates of participation will occur in February of 2006. In advance of that, staff will return to Council in December of 2005 recommending approval of a reimbursement resolution that will enable the City to have these DIF funds reimbursed with the Phase 2 financing. Also included in the recommended appropriation are funds that will enable the project to continue to move forward. These funds will be utilized to complete the interim improvements to the former Police Department as well as anticipated construction progress payments for the PSB in the amount of$429,166. Move coordination efforts for the Engineering Department and Planning and Building Department continue with their expected move into the former Police Department in late January/early February of 2006. Renovations to the PSB will start immediately upon those moves and it is anticipated that the renovations will take eleven to twelve months to complete. After analysis of current and anticipated obligations/expenditures, staff is recommending a total appropriation in the amount of$3,721,194 (see Table 3). /-/v;~ ATTACHMENT 1 Page 4, Item: Meeting Date: 11/22/05 Table 3. Appropriation Req - Phase 1 Anticipated Phase 2 Expenditure Total Appropriation Requested $3,292,028 $429,16E $3.721,19' FISCAL IMPACT: At this time staff is recommending that Council approve the appropriation of $3.721,194 from the available balance of the Public Facilities Development Impact (PFDIF) fund as necessary to complete Phase I activities and in anticipation of Phase 2 expenditures prior to receipt of bond proceeds. Of the $3,721,194 appropriated by approval of tonight's resolution, the entire amount will be reimbursed from the bond proceeds or sale of the certificates of participation when the financing plan for the second phase occurs, thus there is no impact to the General Fund. As indicated in earlier staffreports, the project costs are split between the PFDIF (approximately 84%) and the General Fund (approximately 16%). While this action does not have any direct impact on the General Fund the issuance of bonds or the sale of certificates of participation will require debt service payments &om the General Fund. Those costs will be detailed when staff brings forth recommendations on the financing of Phase 2. As previously stated, it is anticipated that the sale of certificates of participation will occur in February of 2006. M:\General Services\GS Administration\Council Agenda\Civic Center\2005 Civic Center Addtl Appropriation,doc /_/r'! ATTACHMENT 2 Stradling Yocca Carlson & Rauth Draft of 1/16/06 AMENDED AND RESTATED TRUST AGREEMENT Dated as of March 1,2006 by and among THE BANK OF NEW YORK TRUST COMPANY, N.A., as successor trustee to BNY WESTERN TRUST COMPANY, as Trustee and the CHULA VISTA PUBLIC FINANCING AUTHORITY and the CITY OF CHULA VISTA relating to the $37,240,000 CITY OF CHULA VISTA 2004 CERTIFICATES OF PARTICIPATION (Civic Center Project - Phase 1) and $ CITY OF CHULA VISTA 2006 CERTIFICATES OF PARTICIPATION (Civic Center Project - Phase 2) DOC50C/l148399v3/024036-0033 ,-) / ~ I i) TABLE OF CONTENTS Page ARTICLE] DEF]NITIONS Section l.0l. Definitions and Rules of Construction .............................................................2 Section 1.02. Authorization .................................................................................................. II Section 1.03. Equal Security.................................................................................................]] ARTICLE 11 TERMS OF THE CERTIFICATES AND ADDITIONAL CERT]FICA TES Section 2.0]. Authorization ..................................................................................................] ] Section 2.02. Description of Certificates. ............................................................................. ] ] Section 2.03. Form of Certificates.................................................................................... ....14 Section 2.04. Execution........................................................................................................ 14 Section 2.05. Application of Proceeds and Other Amounts. ................................................ 14 Section 2.06. Transfer and Exchange. .................................................................................. ] 5 Section 2.07. Certificates Mutilated, Lost, Destroyed or Stolen .......................................... ] 5 Section 2.08. Execution of Documents and Proof of Ownership ......................................... ] 6 Section 2.09. Certificate Register .........................................................................................16 Section 2.] O. Book-Entry System......................................................................................... I 7 Section 2.] ]. Destruction of Cancelled Certificates ............................................................. ] 9 Secti on 2.12. Add itional Certificates.................................................................................... 20 ARTICLE ]]] PROJECT FUND Section 3.0]. Establishment of Project Fund........................................................................22 Section 3.02. Purpose ...........................................................................................................22 Section 3.03. Deposit of Moneys; Payment of Project Costs and Delivery Costs. ..............22 Section 3.04. Transfers of Unexpended Proceeds ................................................................22 ARTICLE IV PREPAYMENT FUND Section 4.01. Establishment of Prepayment Fund................................................................23 Section 4.02. Extraordinary Prepayment ......................................................................... .....23 Section 4.03. Prepayment..................................................................................................... 23 Section 4.04. Selection of Certificates for Prepayment........................................................27 Section 4.05. Notice of Prepayment. ....................................................................................27 Section 4.06. Partial Prepayment of Certificates .................................................................. 28 DOCSOCIl148399v3/024036-0033 j- /-1 TABLE OF CONTENTS (continued) Page Section 4.07. Effect of Notice of Prepayment ...................................................................... 28 Section 4.08. S urpl us ............................................................................................................ 29 ARTICLE V LEASE PAYMENTS; LEASE PAYMENT FUND Section 5.01. Security Provisions. ........................................................................................29 Section 5.02. Establishment of Lease Payment Fund...........................................................30 Section 5.03. Deposits.......................................................................................................... 30 Section 5.04. Application of Moneys ...................................................................................30 Secti on 5.05. Surplus............................................................................................................ 31 ARTICLE VI RESERVE FUND Section 6.01. Establishment of Reserve Fund ......................................................................31 Section 6.02. Funding. .......................................................................................................... 31 Section 6.03. Transfers of Excess. ........................................................................................ 32 Section 6.04. Application of Reserve Fund in Event of Deficiency in Lease Payment Fund32 Section 6.05. Transfer to Make All Lease Payments............................................................ 33 ARTICLE VII NET PROCEEDS FUND Section 7.01. Establishment of Net Proceeds Fund: Deposits..............................................33 Section 7.02. Cooperation .................................................................................................... 34 ARTICLE VlIl MONEYS IN FUNDS; INVESTMENT Section 8.0 I. Held in Trust................................................................................................... 34 Section 8.02. Investments Authorized. .................................................................................34 Section 8.03. Disposition of Investments .............................................................................35 Section 8.04. Accounting...................................................................................................... 35 Section 8.05. Valuation and Disposition ofInvestments......................................................35 Section 8.06. Commingling of Moneys in Funds ................................................................. 36 Section 8.07. Tax Covenants. ............................................................................................... 36 Section 8.08. Rebate Fund. ................................................................................................... 37 ii / -,~:)() DOCSOC/1148399v3/024036-0033 TABLE OF CONTENTS (continued) Page ARTICLE IX THE TRUSTEE Section 9.0 I. Appointment of Trustee. ................................................................................. 39 Section 9.02. Merger or Consolidation.................................................................................40 Section 9.03. Protection of the Trustee.................................................................................40 Section 9.04. Rights of the Trustee....................................................................................... 4 ] Section 9.05. Standard of Care .............................................................................................4] Section 9.06. Compensation of the Trustee ..........................................................................4] Section 9.07. Indemnification of Trustee .............................................................................4] Section 9.08. Trustee's Disclaimer ofWarranties................................................................43 ARTICLE X MODlF]CA TlON OR AMENDMENT OF AGREEMENTS Section] 0.0]. Amendments Permitted. .................................................................................43 Section 10.02. Procedure for Amendment with Written Consent of the Owners...................44 Section ] 0.03. Disqualified Certificates ...................... .... ....................................................... 45 Section] 0.04. Effect of Supplemental Agreement ................................................................45 Section 10.05. Endorsement or Replacement of Certificates Delivered After Amendments.45 Section] 0.06. Amendatory Endorsement of Certificates ......................................................46 Section 10.07. Copies of Amendments Delivered to Rating Agencies ..................................46 ARTICLE XI COVENANTS; NOTICES Section 11.01. Compliance With and Enforcement of the Lease...........................................46 Section 11.02. Payment of Taxes ...........................................................................................46 Section 11.03. Observance of Laws and Regulations.............................................................46 Section] 1.04. Prosecution and Defense of Suits ...................................................................46 Section] ] .05. City Budgets ...................................................................................................47 Section] ] .06. Further Assurances .........................................................................................47 Section]] .07. Continuing Disclosure ....................................................................................47 ARTICLE XlI LIMITATION OF LIABILITY Section 12.01. Limited Liability of the City........................................................................... 47 Section ]2.02. No Liability of the City or Authority for Trustee Performance......................47 Section 12.03. Limitation of Rights to Parties and Certificate Owners..................................48 iii /" ,J { DOCSOCIl148399v3/024036-0033 TABLE OF CONTENTS (continued) Page Section 12.04. No Liability of Authority to the Owners .4.......................................................8 ARTICLE XIII EVENTS OF DEFAULT AND REMEDIES OF CERTIFICATE OWNERS Section 13.01. Assignment of Rights .....................................................................................48 Section 13.02. Events of Default. ............................... ............................................................ 48 Section 13.03. Application of Funds ...................................... ......... .... ..... ............. ................. 49 Section 13.04. Institution of Legal Proceedings.....................................................................49 Section 13.05 . Non-Waiver ....................................................................................................50 Section 13.06. Remedies Not Exclusive .................................................................................50 Section 13.07. Power of Trustee to Control Proceedings.......................................................50 Section 13.08. Limitation on Certificate Owners' Right to Sue............................................. 50 Section 13.09. Agreement to Pay Attorneys' Fees and Expenses..........................................51 Section 13.1 O. Insurers' Rights......................................................... ....... ...... ......................... 51 ARTICLE XIV MISCELLANEOUS Section 14.0 I. Defeasance. .................................................................... ................ ................. 51 Section 14.02. Non-Presentment of Certificates.....................................................................53 Section 14.03. Acquisition of Certificates by City ................................................................. 53 Section 14.04. Records ........ ... .... .... ........................................................................................53 Section 14.05. Notices ......................................... ... ................................................................53 Section 14.06. Governing Law.................................................. .......... ....................... ............ 54 Section 14.07. Binding Effect: Successors .............................................................................54 Section 14.08. Execution in Counterparts ..............................................................................54 Section 14.09. Headings.... .....................................................................................................54 Section 14.10. W ai ver of Notice .... ... ...... ...............................................................................54 Section 14.11. Separability of Invalid Provisions ..................................................................54 Section 14.12. Insurers to be Deemed Owners; Rights of the Insurers ..................................55 Section 14.13. Claims Under 2004 Insurance Policy: Payments by and to 2004 Insurer ......55 Section 14.14. Information to be Provided to the 2004 Insurer..............................................57 EXHIBIT A EXHIBIT B-1 EXHIBIT B-2 FORM OF CERTlF!CA TE ................................................................................A-I FORM OF WRITTEN DELIVERY COST REQUISITION...........................B-I-I FORM OF WRITTEN PROJECT COST REQUISITION ..............................B-2-1 iv ;- .....+ ) .' DOCSOC1l148399v31024036-0033 AMENDED AND REST A TED TRUST AGREEMENT THIS AMENDED AND RESTATED TRUST AGREEMENT, dated as of March 1,2006 (the 'Trust Agreemenf'), by and among THE BANK OF NEW YORK TRUST COMPANY, N.A., a national banking association, as successor-in-interest to BNY Western Trust Company, a state banking corporation organized under the laws of the State of California, as trustee (the 'Trustee"), the CHULA VISTA PUBLIC FINANCING AUTHORITY, ajoint exercise of powers authority duly organized and existing under the laws of the State of California, as lessor under the Lease hereinafter referred to (the "Authority"), and the CITY OF CHULA VISTA, a municipal corporation and a charter city duly organized and existing under the Constitution and laws of the State of California, as lessee under the Lease (the "City"), amends and restates in its entirety that certain Trust Agreement dated as of September 1,2004 by and among the City, the Authority and the Trustee, and constitutes a supplemental agreement executed pursuant to Section 2.12 thereof for the purpose of facilitating the execution and delivery of the 2006 Certificates (as defined below); WnN!;~~.!nH: WHEREAS, the City and the Authority have entered into a Lease/Purchase Agreement, dated as of September I, 2004, as amended by that First Amendment to Lease Agreement dated as of March 1,2006 (collectively, the "Lease"), whereby the City, as agent of the Authority. has agreed to cause the modernization. reconstruction and equipping of improvements for the City's Civic Center and other City facilities. as described therein (collectively, the "Project"), and the City has leased the Leased Premises (defined below) from the Authority; and WHEREAS, in order to finance the Project, the City and the Authority have authorized the sale of the $37,240.000 City ofChula Vista 2004 Certificates of Participation (Civic Center Project- Phase 1) (the "2004 Certificates") and the $ City of Chula Vista 2006 Certificates of Participation (Civic Center Project - Phase 2) (the "2006 Certificates"), each evidencing fractional interests in the Lease Payments and Prepayments made by the City under the Lease; and WHEREAS, as security for the 2004 Certificates, the 2006 Certificates and any Additional Certificates executed and delivered in accordance with this Trust Agreement, the Authority has assigned the rights to receive all Lease Payments described in the Lease. and the Authority and the City have granted a security interest in all moneys held by the Trustee hereunder (other than the Rebate Fund as described herein) to the Trustee for the benefit of the Owners of the 2004 Certificates. the 2006 Certificates and any Additional Certificates executed and delivered hereunder; and WHEREAS. Section 5420 et seq. of the California Government Code (the "Government Code") provides statutory authority for pledging collateral for the payment of principal or prepayment price of, and interest on, any agreement, including certificates of participation, and the Government Code creates a continuing perfected security interest which shall attach immediately to such collateral irrespective of whether the parties to the pledge document have notice of the pledge and without the need for any physical delivery. recordation, filing or further act, and, therefore, the City and the Authority hereby warrant and represent that pursuant to the Lease, this Trust Agreement and the Government Code, the Trustee has a first priority perfected security interest in the Lease Payments described in the Lease pursuant to the Government Code. DOCSOC/l148399v3/024036-0033 / ~ ) :~. WHEREAS, the Trustee has agreed to apply the proceeds of the 2004 Certificates, the 2006 Certificates and any Additional Certificates deposited in the Project Fund to pay certain Project Costs and Delivery Costs (as such terms are defined herein). NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein, the parties hereto hereby agree as follows: ARTICLE I DEFINITIONS Section 1.0 I. Definitions and Rules of Construction. Unless the context otherwise requires, the terms defined in this Section shall, for all purposes of this Trust Agreement, have the meanings herein specified. Unless the context otherwise indicates, words importing the singular number shall include the plural number and vice versa. The terms "hereby," "hereof," "hereto," "herein," "hereunder" and any similar terms, as used in this Trust Agreement, refer to this Trust Agreement as a whole. "Additional Certificates" means certificates of participation authorized by a supplemental Trust Agreement that are executed and delivered by the Trustee under and pursuant to Section 2.12. "Additional Pavments" means all amounts payable by the City as Additional Payments as defined in Section 4.11 of the Lease. "Assignment Agreement" means the Assignment Agreement, dated as of September I, 2004, as amended by that certain First Amendment to Assignment Agreement dated as of March I, 2006, by and between the Trustee and the Authority, and any duly authorized and executed amendments thereto. "Authority" means the Chula Vista Public Financing Authority, a joint exercise of powers authority organized under the laws of the State, its successors and assigns. "Authoritv Representative" means the President, Vice President, Secretary, Treasurer, Executive Director, Assistant Executive Director or Assistant Treasurer of the Authority, or any other person authorized to act on behalf of the Authority under or with respect to the Lease. "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 Certificates (including persons holding Certificates through nominees, depositories or other intermediaries), or (b) is treated as the owner of any Certificates for federal income tax purposes. "Business Dav" means any day other than (i) a Saturday or Sunday, or (ii) a day on which banking institutions in the State of New York or the State of Cali fomi a are authorized or required by law or executive order to remain closed. "Certificates" means the 2004 Certificates, the 2006 Certificates and each series of Additional Certificates executed and delivered pursuant to Section 2.12. 2 / -,II ....r:-7 I DOCSOC/1148399v3/024036-0033 "Certificate of Completion" means a certificate of the City Representative delivered pursuant to Section 3.4 of the Lease stating that all components of the Project being financed by a series of Certificates have been completed or concluded in conformity with the requirements of the Lease. "Certificate Year" means the period extending from September 2 each year to September I of the subsequent calendar year, provided that the first Certificate Year for each series of Certificates shall commence on the Delivery Date and end on the following September I. "Citv" means the City of Chula Vista, a municipal corporation and a charter city organized and existing under the laws and Constitution of the State, and its successors and assigns. "Citv Representative" means the City Manager and Director of Finance of the City or any other person authorized by the City Manager of the City to act on behalf of the City with respect to the Lease or this Trust Agreement. "Code" means the Internal Revenue Code of 1986, and the regulations issued thereunder, as the same may be amended from time to time, and any successor provisions of law. Reference to a particular section of the Code shall be deemed to be a reference to any successor to any such section. "Continuing Disclosure Agreement" means (i) that certain Continuing Disclosure Agreement dated as of September I, 2004, by and between the City and The Bank of New York Trust Company, N.A., as successor-in-interest to BNY Western Trust Company, as Dissemination Agent, as it may be amended from time to time in accordance with the terms thereof; (ii) that certain Continuing Disclosure Agreement dated as of March I, 2006 by and between The Bank of New York Trust Company, N.A., as Dissemination Agent, as it may be amended from time to time in accordance with the terms thereof; and (iii) any agreement entered into by the City and a dissemination agent with respect to any Additional Certificates relating to compliance with Rule I5c2-l2 adopted under the Securities Exchange Act of 1934. "Deliverv Cost Requisition" means a written requisition substantially in the form attached hereto as Exhibit B-1. "Delivery Costs" means and includes all items of expense directly or indirectly payable by or reimbursable to the City or the Authority relating to the financing of the Project from the proceeds of the Certificates, including but not limited to costs provided in the contract of purchase with the Original Purchaser, the premium for the 2004 Insurance Policy, the 2006 Insurance Policy or any insurance policies purchased to insure any Additional Certificates or to satisfy the Reserve Requirement, filing and recording costs, settlement costs, printing costs, word processing costs, reproduction and binding costs, initial fees and charges of the Trustee, including its first annual administration fee and the fees of its counsel, legal fees and charges, financing and other professional consultant fees, fees of auctioning any Certificates, costs of rating agencies and costs of providing information to such rating agencies, any computer and other expenses incurred in connection with the Certificates, fees for execution, transportation and safekeeping of the Certificates and charges and fees in connection with the foregoing. "Deliverv Date" means the date on which a series of Certificates, duly executed by the Trustee, is delivered to the Original Purchaser thereof. 3 / /" /",..) J '--.,..' I DOCSOC/1148399v3/024036-0033 "Depository" means the securities depository acting as depository pursuant to Section 2.\ 0 hereof. "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 Certificates. "Event of Default" means an event of default under the Lease, as defined in Section 9.\ thereof. "Fiscal Year" means the fiscal year of the City commencing July \ and ending June 30 of the next year. "Government Obligations" means Permitted Investments of the type described in paragraph (A) of the definition thereof. "Independent Counsel" means an attorney duly admitted to the practice of law before the highest court of the state in which such attorney maintains an office and who is not an employee of the Authority, the Trustee or the City. "Insurance Business Dav" means any day other than (i) a Saturday or Sunday, or (ii) a day on which the 2004 Insurance Trustee or lending institutions in the State of New York are authorized or required by law or executive order to remain closed. "Insurance Policies" means the municipal bond insurance policies issued by the Insurers insuring the payment when due of the principal and interest with respect to one or more series of the Certificates as provided therein. "Insurers" means, collectively, the municipal bond insurance companies insuring any of the Outstanding Certificates. "Interest Pavment Date" means March \ and September I of each year commencing March \, 2005 for the 2004 Certificates, September I, 2006 for the 2006 Certificates and for each series of Additional Certificates the March \ or September \ specified in the supplemental agreement executed in accordance with Section 2.\2 hereof with respect to such Additional Certificates. "Lease" means the Lease/Purchase Agreement related to the Certificates, dated as of September I, 2004, as amended by that certain First Amendment to LeaselPurchase Agreement dated as of March \, 2006, by and between the City and the Authority, and any additional duly authorized and executed amendments thereto. "Lease Pavment"' means any payment required to be paid by the City to the Authority pursuant to Section 4.4 of the Lease. "Lease Pavment Date" means the Lease Payment Date defined in Section 4.4(a) of the Lease, which shall be each February \5 and August 15 commencing February 15,2005. "Lease Pavment Fund" means the fund by that name established and held by the Trustee pursuant to Article V hereof. 4 00C50C/1148399v3/024036-0033 J- \ ," ). It) "Leased Premises" has the meaning set forth in the Lease. "Letter of Representations" means the letter of the City delivered to and accepted by the Depository on or prior to delivery of the Certificates as book-entry certificates making reference to the DTC Operational Arrangements memorandum, as it may be amended from time to time, setting forth the basis on which the Depository serves as depository for such book-entry certificates, as such letters were originally executed or as they may be supplemented or revised or replaced by letters from the City and the Trustee delivered to and accepted by the Depository. "Moodv's" means Moody's Investors Service or any successors or assigns thereto. "Net Proceeds" means any proceeds of any insurance, performance bonds or taking by eminent domain or condemnation paid with respect to the Leased Premises remaining after payment therefrom of any expenses (including attorneys' fees) incurred in the collection thereof. "Net Proceeds Fund" means the fund by that name established and held by the Trustee pursuant to Article VII hereof. "Nominee" means the nominee of the Depository, which may be the Depository, as determined from time to time pursuant to Section 2.10 hereof. "Original Purchaser" means the original purchaser of a senes of the Certificates on the Delivery Date for such series. "Outstanding" when used as of any particular time with respect to Certificates, means (subject to the provisions of Section 10.03 hereof) all Certificates theretofore executed and delivered by the Trustee under this Trust Agreement except: (1) Certificates theretofore cancelled by the Trustee or surrendered to the Trustee for cancellation; (2) Certificates for the payment or prepayment of which funds or Government Obligations, together with interest earned thereon, in the necessary amount shall have theretofore been deposited with the Trustee (whether upon or prior to the maturity or prepayment date of such Certificates), provided that, if such Certificates are to be prepaid prior to maturity, notice of such prepayment shall have been given as provided in Section 4.05 hereof or provision satisfactory to the Trustee shall have been made for the giving of such notice; and (3) Certificates in lieu of or in exchange for which other Certificates shall have been executed and delivered by the Trustee pursuant to Sections 2.06 and 2.07 hereof. Notwithstanding anything herein to the contrary, in the event that the principal and/or interest with respect to a Certificate shall be paid by an Insurer, pursuant to an Insurance Policy, such Certificate shall remain Outstanding for all purposes, not be defeased or otherwise satisfied and not be considered paid by the City. "Owner" or "Certificate Owner" or "Owner of a Certificate", or any similar term, when used with respect to a Certificate means the person in whose name such Certificate is registered on the registration books maintained by the Trustee. 5 DOC50C/1148399v3/024036-0033 l _ I / "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. "Permitted Investments" means, if and to the extent permitted by law and by any policy guidelines promulgated by the City: A. 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) or obligations the principal of and interest on which are unconditionally guaranteed by the United States of America. B. Bonds, debentures, notes or other evidence of indebtedness issued or guaranteed by any of the following federal agencies and provided such obligations are backed by the full faith and credit of the United States of America (stripped securities are only permitted if they have been stripped by the agency itself): ]. Farmers Home Administration (FmHA) Certificates of beneficial ownership 2. Federal Housing Administration Debentures (FHA) 3. General Services Administration Participation certificates 4. Government National Mortgage Association (GNMA or "Ginnie Mae") GNMA-guaranteed mortgage-backed bonds GNMA-guaranteed pass-through obligations 5. U.S. Maritime Administration Guaranteed Title XI financing (qualified under the Ship Financing Act of 1972) 6. U.S. Department of Housing and Urban Development (HUD) Project Notes Local Authority Bonds C. Bonds, debentures, notes or other evidence of indebtedness issued or guaranteed by any of the following non-full faith and credit U.S. government agencies (stripped securities are only permitted if they have been stripped by the agency itself): 6 DOCSOC/l148399v3/024036-0033 / ./ . ,) ~ \ I. Federal Home Loan Bank Svstem Senior debt obligations 2. Federal Home Loan Mortgage Corporation (FHLMC or '"Freddie Mac") Participation certificates Senior debt obligations 3. Federal National Mortgage Association (FNMA or '"Fannie Mae") Mortgage-backed securities and senior debt obligations (excluding stripped mortgage securities which are valued greater than par on the portion of unpaid principal) 4. Student Loan Marketing Association (SLMA or "Sallie Mae") Senior debt obligations 5. Resolution Funding Corp (REFCORP) The interest only component of REFCORP strips which have been stripped by request to the Federal Reserve Bank of New York 6. Farm Credit Svstem Corp. - Consolidated system-wide bonds and notes D. Money market funds registered under the Investment Company Act of 1940, whose shares are registered under the Securities Act of 1933, and having a rating by Standard & Poor's of AAAm-G, AAAm, or AAm and by Moody's of Aaa, including funds for which the Trustee, its parent holding company, if any, or any affiliates or subsidiaries of the Trustee provide investment advisory or other management services. E. Certificates of deposit secured at all times by collateral described in (A) and/or (B) above and having a maturity of one year or less. Such certificates must be issued by commercial banks, savings and loan associations or mutual savings banks whose short- term obligations are rated "A-]+" by Standard & Poor's, which may include the Trustee and its affiliates. The collateral must be held by a third party and the Bondholders must have a perfected first security interest in the collateral. F. Certificates of deposit, savings accounts, deposit accounts or money market deposits which are fully insured by FDIC (including those of the Trustee and its affiliates). G. Commercial paper rated at the time of investment '"Prime - j" by Moody's and "A-]+" or better by Standard & Poor's. H. Investment agreements, including guaranteed investment agreements, acceptable to the Insurers. 7 / ..j' J DOCSOC/1148399v3/024036-0033 I. Bonds or notes issued by any state or municipality which are rated by Moody's and Standard & Poor's in one ofthe two highest rating categories assigned by such agencIes. J. Federal funds or bankers acceptances with a maximum term of one year of any bank which has an unsecured, uninsured or unguaranteed obligation rating of "Prime - I" or "Ar or better by Moody's and "A-I +" or better by Standard & Poor's, including those of the Trustee and its affiliates. K. Repurchase agreements satisfying criteria acceptable to the Insurers that provide for the transfer of securities from a dealer bank or securities firm (seller/borrower) to the Trustee (buyer/lender), and the transfer of cash from the Trustee to the dealer bank or securities firm with an agreement that the dealer bank or securities firm will repay the cash plus a yield to the Trustee, in exchange for the securities at a specified date or dates. L. Pre-refunded municipal bonds rated "Aaa" by Moody's and "AAA" by Standard & Poor's. If, however, the issue is only rated by Standard & Poor's (i.e., there is no Moody's rating), then the pre-refunded bonds must have been pre-refunded with cash, direct U.S. or U.S. guaranteed obligations, or AAA rated pre-refunded municipals to satisfy this condition. M. The Local Agency Investment Fund of the State, provided that the Trustee may deposit and withdraw monies in its own name. N. Any other investment which the City is permitted by law to make (including investment agreements and forward delivery or forward purchase agreements), but only with prior written consent of the Insurers. "Value" of the above investments shall be determined as of the end of each month, and the value of any investments shall be calculated as follows: (a) as to investments the bid and asked prices of which are published on a regular basis in The Wall Street Journal (or, if not there, then in The New York Times): the average of the bid and asked prices for such investments so published on or most recently prior to such time of determination; (b) as to investments the bid and asked prices of which are not published on a regular basis in The Wall Street Journal or The New York Times: the average bid price at such time of determination for such investments by any two nationally recognized government securities dealers (selected by the Trustee in its absolute discretion) at the time making a market in such investments or the bid price published by a nationally recognized pricing service; (c) as to certificates of deposit and bankers acceptances: the face amount thereof, plus accrued interest; (d) as to any investment not specified above: the value thereof established by a methodology selected by the City and specified in writing to the Trustee; and 8 DOCSOC!l148399v3/024036-0033 /~30 (e) alternatively, the value of the above investments shall be detennined as of the end of each month by the manner currently employed by the Trustee or any other manner consistent with industry standard. "Prepavment" means any payment made by the City pursuant to Article X of the Lease as a prepayment of Lease Payments. "Prepavment Fund" means the fund by that name established and held by the Trustee pursuant to Article IV hereof. "Principal Office or Corporate Trust Office" means the corporate trust office of the Trustee at 700 South Flower Street, Suite 500, Los Angeles, California 90017, Attention: Corporate Trust Services, or such other or additional offices as may be designated by the Trustee; provided, however, that for the purposes of payment, transfer or exchange of Certificates such tenn means the office or agency of the Trustee at which, at any particular time its corporate trust agency business shall be conducted. "Proiect" has the meaning set forth in the Lease. "Proiect Cost Requisition" means a written requisition substantially in the fonn attached hereto as Exhibit B-2. "Proiect Costs" means, with respect to any item or portion of the Project, the contract price paid or to be paid therefor upon acquisition, construction, procurement or improvement thereof, in accordance with a purchase order or contract therefor. Project Costs include, but are not limited to, the administrative, engineering, legal, financial and other costs incurred by the City and the Authority in connection with the acquisition, construction, procurement, remodeling or improvement of the Project, all applicable sales taxes and other charges resulting from such construction, procurement, remodeling or improvement of the Project and the costs associated with making rebate calculations required by the Code. Project Costs shall not include any costs of the City or the Authority to enforce remedies hereunder or under the Lease. "Proiect Fund" means the fund by that name established and held by the Trustee pursuant to Article III hereof. "Propertv" has the meaning set forth in the Lease. "Record Date" means the close of business on the fifteenth day of the month preceding each Interest Payment Date, whether or not such fifteenth day is a Business Day. "Reserve Fund" means the fund by that name established and held by the Trustee pursuant to Article VI hereof. "Reserve Requirement" means, as of any calculation date, the least of (I) the maximum aggregate annual Lease Payments (in any Certificate Year) then payable under the Lease (exclusive of Lease Payments attributable to Certificates that have been defeased), (2) ] 25% of the average annual aggregate Lease Payments (in any Certificate Year) then payable under the Lease (exclusive of Lease Payments attributable to Certificates that have been defeased), or (3) 10% of the face amount of the Certificates (less original issue discount if in excess of two percent of the stated prepayment amount at maturity). 9 / - ~ I DOCSOC/l148399v3/024036-0033 "S&P" or "Standard & Poor's" means Standard & Poor's Ratings Services or any successors or assigns thereto. "Site Lease" means the Site Lease, dated as of September I, 2004, as amended by that certain First Amendment to Site Lease dated as of March I, 2006, by and between the Authority and the City, and any additional duly authorized and executed amendments thereto. "Special Counsel" means Stradling Y occa Carlson & Rauth, a Professional Corporation, or any other attorney or firm of attorneys of nationally recognized standing in matters pertaining to the tax-exempt status of interest on obligations issued by states and their political subdivisions and acceptable to the City. "State" means the State of California. "Tax Certificate" means the Tax Certificate, dated as of the Delivery Date for a series of Certificates, concerning matters pertaining to the use and investment of proceeds of such Certificates executed and delivered to the City on the date of execution and delivery of such Certificates, including any and all exhibits attached thereto. "Term" means the time during which the Lease is in effect, as provided in Section 4.2 of the Lease. "Trustee" means The Bank of New York Trust Company, N.A., a national banking association, as successor-in-interest to BNY Western Trust Company, a banking corporation duly organized and existing under the laws of the State of California, and any successor trustee. "Trust Agreement" or "Agreement" means this Amended and Restated Trust Agreement, together with any amendments hereof or supplements hereto permitted to be made hereunder. "2004 Certificates" means the $37,240,000 aggregate principal amount of City of Chula Vista 2004 Certificates of Participation (Civic Center Project - Phase I) executed and delivered by the Trustee pursuant to this Trust Agreement. "2004 Insurance Policv" means the municipal bond insurance policy issued by the 2004 Insurer insuring the payment when due of the principal and interest with respect to the 2004 Certificates as provided therein. "2004 Insurance Trustee" means U.S. Bank Trust National Association. or its successors. "2004 Insurer" means MBIA Insurance Corporation, a stock insurance company domiciled in the State of New York, or any successor thereto or assignee thereof. "2006 Certificates" means the $ aggregate principal amount of City of Chula Vista 2006 Certificates of Participation (Civic Center Project - Phase 2) executed and delivered by the Trustee pursuant to this Trust Agreement. "2006 Insurance Policv" means [TO COME] "2006 Insurer" means [TO COME] 10 DOCSOC1l148399v3!024036-0033 /~ ;;/' .:;.;.-- .,...' .- Section 1.02. Authorization. Each of the parties hereby represents and warrants that it has full legal authority and is duly empowered to enter into this Trust Agreement, and has taken all actions necessary to authorize the execution of this Trust Agreement by the officers and persons signing it. Section 1.03. Equal Securitv. In consideration of the acceptance of the Certificates by the Owners, this Trust Agreement shall be deemed to be and shall constitute a contract between the Trustee and the Owners to secure the full and final payment of the interest, if any, and principal represented by the Certificates which may be executed and delivered hereunder, subject to each of the agreements, conditions, covenants and terms contained herein; and all agreements, conditions, covenants and terms contained herein required to be observed or performed by or on behalf of the Trustee shall be for the equal and proportionate benefit, protection and security of all Owners without distinction, preference or priority as to security or otherwise of any Certificates over any other Certificates by reason of the number or date thereof or the time of execution or delivery thereof or for any cause whatsoever, except as expressly provided herein or therein. All of the Certificates are equally secured as provided in this Section 1.3, except as may be otherwise expressly provided in this Trust Agreement. ARTICLE II TERMS OF THE CERTIFICATES AND ADDITIONAL CERTIFICATES Section 2.01. Authorization. Upon written request of the City Representative, the Trustee will execute and deliver to the Original Purchaser of each series of Certificates an aggregate principal amount of Certificates of the applicable series purchased by such Original Purchaser representing proportionate ownership interests in the Lease Payments and the Prepayments. Section 2.02. Description of Certificates. (a) Each Certificate of a series shall be dated the Delivery Date for such series and shall mature on March I in each year, and shall bear interest (calculated on the basis of a 360- day year of twelve 30-day months) payable on each Interest Payment Date for such series. II //33 DOCSOCII148399v3/024036-0033 The 2004 Certificates shall mature on March 1 in each year of the years specified below and shall bear interest at the rates specified below: Maturity Principal Interest (March 1) Amount Rate 2007 $ 775,000 2.00% 2008 790,000 2.375 2009 810,000 2.75 2010 830,000 3.00 2011 855,000 3.375 2012 885,000 3.50 2013 915,000 3.75 2014 950,000 3.75 2015 985,000 3.75 2016 1,025,000 4.00 2017 1,065,000 4.00 2018 1,110,000 4.125 2019 1,155,000 4.20 2020 1,200,000 4.25 2021 1,255,000 4.375 2022 1,305,000 4.40 2023 1,365,000 4.50 2024 1,425,000 4.50 2026 3,050,000 4.625 2029 5,130,000 4.75 2034 10,360,000 5.00 12 / - 3'1- DOCSOC/I ] 48399v31024036-0033 The 2006 Certificates shall mature on March I in each year of the years specified below and shall bear interest at the rates specified below: Maturity (March I) Principal Amount Interest Rate The Certificates of a series shall be delivered in fully registered form, numbered from one upwards in consecutive numerical order (with such alphabetical prefix as the Trustee shall determine). The Certificates shall be executed and delivered in the denominations of $5,000 and any integral multiple thereof. Each Certificate shall bear interest from the Interest Payment Date next preceding the date of execution thereof, unless (i) it is executed during the period from the day after the Record Date for an Interest Payment Date to and including such Interest Payment Date, in which event it shall bear interest from such Interest Payment Date, or (ii) it is executed on or prior to the Record Date for the first Interest Payment Date, in which event interest shall be payable from the Delivery Date; provided, however, that if, at the time of execution of any Certificate interest with respect to such Certificate is in default, such Certificate shall bear interest from the Interest Payment Date to which interest has been paid or made available for payment with respect to such Certificate. (b) Pavment Provisions. Interest with respect to any Certificate shall be payable in lawful money of the United States of America by check or draft of the Trustee, mailed no later than the Interest Payment Date to the Owner at his address as it appears, on the Record Date, on the registration books maintained by the Trustee or at such other address as has been furnished to the Trustee in writing by the Owner on or prior to such Record Date; provided, however, that at the written request of the Owner of at least $1,000,000 in aggregate principal amount of Outstanding 13 /.- >.: j -.,..' ~-- 00C50C/l148399v3/024036-0033 Certificates filed with the Trustee prior to any Record Date, interest with respect to such Certificates shall be paid to such Owner on each succeeding Interest Payment Date (unless such request has been revoked in writing) by wire transfer of immediately available funds to an account in the continental United States designated in such written request. Payments of defaulted interest with respect to the Certificates shall be paid by check or draft to the registered Owners of the Certificates as of a special record date to be fixed by the Trustee, notice of which special record date shall be given to the registered Owners of the Certificates no less than ten days prior thereto. The principal of and premium, if any, on the Certificates is payable when due upon surrender thereof at the Principal Office in lawful money of the United States of America. Section 2.03. Form of Certificates. The 2004 Certificates and the 2006 Certificates and the assignment to appear thereon shall be substantially in the forms set forth in Exhibit A attached hereto and by this reference incorporated herein with such appropriate additions, modifications, and insertions as are permitted or required by this Trust Agreement or the 2004 Insurer in the case of the 2004 Certificates and the 2006 Insurer in the case of the 2006 Certificates. Each series of Additional Certificates shall be in the form set forth in the supplemental agreement executed with respect to such Additional Certificates in accordance with Section 2.12 hereof. Pending the preparation of definitive Certificates the Certificates may be executed and delivered in temporary form exchangeable for definitive Certificates when ready for delivery. If the Trustee delivers temporary Certificates for a series, it shall execute and deliver definitive Certificates of such series in an equal aggregate principal amount of authorized denominations, when available, without additional charge, and thereupon the temporary Certificates shall be surrendered to the Trustee at its Principal Office. Until so exchanged, the temporary Certificates shall be entitled to the same benefits under this Trust Agreement as definitive Certificates. Section 2.04. Execution. The Certificates shall be executed by and in the name of the Trustee by the manual signature of any authorized signatory of the Trustee. The Trustee shall insert the date of execution of each Certificate in the place provided thereon. Section 2.05. Application of Proceeds and Other Amounts. (a) 2004 Certificates. The proceeds from the sale ofthe 2004 Certificates in the amount of$36,570,711.36 (representing the par amount of the 2004 Certificates of $37,240,000, less the 2004 Insurance Policy premium of $332,000.00, plus the net original issue premium of $35,253.70, less Original Purchaser's discount of $372,542.34) shall be deposited with the Trustee as follows: $31,997,962.42 to the 2004 Certificates Account of the Project Fund (of which $221,962.42 shall be deposited to the Delivery Costs Account therein) for the payment of Project Costs and Delivery Costs, $2,176,837.68 to the Interest Account of the Lease Payment Fund and $2,395,911.26 to the 2004 Certificates Account of the Reserve Fund, which amount equals the initial Reserve Requirement. (b) 2006 Certificates. The proceeds rrom the sale of the 2006 Certificates in the amount of$ (representing the par amount of the 2006 Certificates of$ , less the 2006 Insurance Policy premium of $ , plus the net original issue premium of $ , less Original Purchaser's discount of$ ) shall be deposited with the Trustee as follows: $ to the 2006 Certificates Account of the Project Fund (of which $ shall be deposited to the Delivery Costs Account therein) for the payment of Project Costs and Delivery Costs, $ to the Interest Account of the Lease Payment Fund and 14 I"~ /_ /"'5tP DOCSOCIl148399v3/024036-0033 $ to the 2006 Certificates Account of the Reserve Fund, which amount equals the initial Reserve Requirement. The Trustee may, in its discretion, establish a temporary fund or account in its books or records to facilitate such deposits and transfers. Section 2.06. Transfer and Exchange. (a) Transfer of Certificates. Any Certificate may, in accordance with its terms, be transferred upon the books required to be kept pursuant to the provisions of Section 2.09 by the person in whose name it is registered, in person or by his duly authorized attorney, upon surrender of such Certificate for cancellation at the Principal Office accompanied by delivery of a written instrument of transfer in a form acceptable to the Trustee, duly executed. Whenever any Certificate or Certificates shall be surrendered for transfer, the Trustee shall execute and deliver a new Certificate or Certificates of the same series, tenor and maturity, for like aggregate principal amount in authorized denominations. The cost of printing Certificates and any services rendered or expenses incurred by the Trustee in connection with any transfer shall be paid by the City. The Trustee shall require the payment by the Owner requesting such transfer of any tax or other governmental charge required to be paid with respect to such transfer, and there shall be no other charge to any Owner for any such transfer. (b) Exchange of Certificates. Certificates may be exchanged at the Principal Office for a like aggregate principal amount of Certificates of other authorized denominations of the same series, tenor and maturity. The Trustee may require the payment by the Certificate Owner requesting such exchange of any tax or other governmental charge required to be paid with respect to such exchange. The cost of printing Certificates and any services rendered or expenses incurred by the Trustee in connection with any exchange shall be paid by the City. All Certificates surrendered pursuant to the provisions of this Section shall be cancelled and destroyed by the Trustee and shall not be redelivered. (c) Time for Transfer or Exchange. The Trustee shall not be obligated to transfer or exchange any Certificate after a Record Date and before the following Interest Payment Date, or during the period in which it is selecting Certificates for prepayment, or after notice of prepayment has been given as provided in Section 4.05. Section 2.07. Certificates Mutilated, Lost. Destroved or Stolen. If any Certificate shall become mutilated, the Trustee, at the expense of the Owner of said Certificate, shall execute and deliver a new Certificate of like series, tenor, maturity and principal amount in exchange and substitution for the Certificate so mutilated, but only upon surrender to the Trustee of the Certificate so mutilated. Every mutilated Certificate so surrendered to the Trustee shall be cancelled by it. If any Certificate shall be lost, destroyed or stolen, evidence of such loss, destruction or theft may be submitted to the Trustee, and, if such evidence is satisfactory to the Trustee and, if an indemnity, satisfactory to the Trustee indemnifying the Trustee, the Authority and the City, shall be given, the Trustee, at the expense of the Certificate Owner, shall execute and deliver a new Certificate of like series, tenor, maturity and principal amount and numbered as the Trustee shall determine in lieu of and in substitution for the Certificate so lost, destroyed or stolen. The Trustee may require payment of an appropriate fee for each new Certificate delivered under this Section and of the expenses which may be incurred by the Trustee in carrying out the duties under this Section. Any Certificate executed under the provisions of this Section in lieu of any Certificate alleged to be lost, destroyed or 15 .:.:''/ 1- ..' , DOCSOCI1148399v3/024036-0033 stolen shall be equally and proportionately entitled to the benefits of this Trust Agreement with all other Certificates secured by this Trust Agreement. The Trustee shall not be required to treat both the original Certificate and any replacement Certificate as being Outstanding for the purpose of determining the principal amount of Certificates which may be executed and delivered hereunder or for the purpose of determining any percentage of Certificates Outstanding hereunder, but both the original and replacement Certificate shall be treated as one and the same. Notwithstanding any other provision of this Section, in lieu of delivering a new Certificate in place of one which has been mutilated, lost, destroyed or stolen, and which has matured, or has been called for prepayment, the Trustee may make payment with respect to such Certificate upon receipt of the above-mentioned indemnity. Section 2.08. Execution of Documents and Proof of Ownership. Any request, direction, consent, revocation of consent, or other instrument in writing required or permitted by this Trust Agreement to be signed or executed by Certificate Owners may be in any number of concurrent instruments of similar tenor, and may be signed or executed by such Owners in person or by their attorneys or agents appointed by an instrument in writing for that purpose, or by any bank, trust company or other depository for such Certificates. Proof of the execution of any such instrument, or of any instrument appointing any such attorney or agent, and of the ownership of Certificates shall be sufficient for any purpose of this Trust Agreement (except as otherwise herein provided), if made in the following manner: (a) The fact and date of the execution by any Owner or his attorney or agent of any such instrument and of any instrument appointing any such attorney or agent, may be proved by a certificate, which need not be acknowledged or verified, of an officer of any bank or trust company located within the United States of America, or of any notary public, or other officer authorized to take acknowledgments of deeds to be recorded in such jurisdictions, that the persons signing such instruments acknowledged before him the execution thereof. Where any such instrument is executed by an officer of a corporation or association or a member of a partnership on behalf of such corporation, association or partnership, such certificate shall also constitute sufficient proof of his authority. (b) The fact of the ownership of Certificates by any person, the amount and numbers of such Certificates and the date of execution shall be proved by the registration books maintained pursuant to Section 2.09 hereof. Nothing contained in this Article II shall be construed as limiting the Trustee to such proof, it being intended that the Trustee may accept any other evidence of the matters herein stated which the Trustee may deem sufficient. Any request or consent of the Owner of any Certificate shall bind every future Owner of the same Certificate in respect of anything done or to be done by the Trustee in pursuance of such request or consent. Section 2.09. Certificate Register. The Trustee will keep or cause to be kept at its Principal Office sufficient books for the registration and transfer of the Certificates which shall, during normal working hours and upon reasonable notice, be open to inspection by the City and the Authority; and, upon presentation for such purpose, the Trustee shall, under such reasonable regulations as it may prescribe, register or transfer or cause to be registered or transferred, on said books, Certificates as hereinbefore provided. The City, the Authority and the Trustee shall be entitled to treat the registered owner of a Certificate as the absolute owner thereof for all purposes, whether or not a 16 j- :;;;/ DOCSOCIl148399v3/024036-0033 Certificate shall be overdue and the City, the Authority and the Trustee shall not be affected by any notice to the contrary. Section 2.10. Book-Entry Svstem. (a) E]ection of Book-Entry Svstem. Prior to the execution and delivery of a series of the Certificates, the City may provide that such series of Certificates shall be initially executed and delivered as book-entry Certificates. ]f the City shall elect to deliver any series of Certificates in book-entry, then the City shall cause the delivery of a separate single fully registered Certificate for such series (which may be typewritten) for each maturity date of such Certificates in an authorized denomination corresponding to that total principal amount of the Certificates designated to mature on such date. Upon initial execution and delivery, the ownership of each such Certificate shall be registered in the Certificate register in the name of the Nominee, as nominee of the Depository, and ownership of the Certificates, or any portion thereof, may not thereafter be transferred except as provided in Section 2.IO(d). With respect to book-entry Certificates, the City and the Trustee shall 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 Certificates. Without limiting the immediately preceding sentence, the City and the Trustee shall have no responsibility or obligation with respect to (i) the accuracy ofthe records of the Depository, the Nominee, or any Participant with respect to any ownership interest in book-entry Certificates, (ii) the delivery to any Participant or any other person, other than an Owner as shown in the Certificate register, of any notice with respect to book-entry Certificates, including any notice of prepayment, (iii) the selection by the Depository and its Participants of the beneficial interests in book-entry Certificates to be prepaid in the event the City prepays the Certificates in part, or (iv) the payment by the Depository or any Participant or any other person, of any amount with respect to principal, premium, if any, or interest evidenced and represented by book-entry Certificates. The City and the Trustee may treat and consider the person in whose name each book- entry Certificate is registered in the Certificate register as the absolute Owner of such book-entry Certificate for the purpose of payment of principal, premium and interest with respect to such Certificate, for the purpose of giving notices of prepayment and other matters with respect to such Certificate, for the purpose of registering transfers with respect to such Certificate, and for all other purposes whatsoever. The Trustee shall pay all principal, premium, if any, and interest evidenced and represented by the Certificates only to or upon the order of the respective Owner, as shown in the Certificate register, or his respective attorney duly authorized in writing, and all such payments shall be valid and effective to fully satisfy and discharge the City's obligations with respect to payment of principal, premium, if any, and interest evidenced and represented by the Certificates to the extent of the sum or sums so paid. No person other than an Owner, as shown in the Certificate register, shall receive a Certificate evidencing the obligation to make payments of principal, premium, if any, and interest evidenced and represented by the Certificates. Upon delivery by the Depository to the Owner 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 herein with respect to Record Dates, the word "Nominee" in this Trust Agreement shall refer to such nominee of the Depository. (b) Delivery of Letter of Representations. In order to qualify the book-entry Certificates for the Depository's book-entry system, the City shall execute and deliver to the Depository a Letter of Representations. The execution and delivery of a Letter of Representations shall not in any way impose upon the City any obligation whatsoever with respect to persons having interests in such book-entry Certificates other than the Owners, as shown on the Certificate register. ]7 " ) /~ ~i ~....... DOCSOC/1148399v3/024036-0033 In addition to the execution and delivery of a Letter of Representations, the City shall take such other actions, not inconsistent with this Trust Agreement, as are reasonably necessary to qualify book-entry Certificates for the Depository's book-entry program. (c) Selection of Depositorv. In the event (i) the Depository determines not to continue to act as securities depository for book-entry Certificates, or (ii) the City determines that continuation of the book-entry system is not in the best interest of the beneficial owners of the Certificates 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 shall prepare or direct the preparation of a new single, separate, fully registered Certificate for each of the maturity dates of such book-entry Certificates, registered in the name of such successor or substitute qualified securities depository or its Nominee as provided in subsection (d) hereof. If the City fails to identify another qualified securities depository to replace the Depository, then the Certificates shall no longer be restricted to being registered in such Certificate register in the name of the Nominee, but shall be registered in whatever name or names the Owners transferring or exchanging such Certificates shall designate, in accordance with the provisions of Section 2.06 hereof. (d) Pavments to Depositorv. Notwithstanding any other provision of this Trust Agreement to the contrary, so long as all Outstanding Certificates of a series are held in book-entry and registered in the name of the Nominee, all payments with respect to principal, prepayment premium, if any, and interest evidenced and represented by such Certificate and all notices with respect to such Certificate shall be made and given, respectively to the Nominees, as provided in the Letter of Representations or as otherwise instructed by the Depository and agreed to by the Trustee notwithstanding any inconsistent provisions herein. (i) All book-entry Certificates shall be initially executed and delivered as provided in Section 2.01 hereof. If such Certificates are initially registered in the name of the Nominee, then registered ownership of such Certificates, 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 2.1 Oed) ("Substitute Depository"); provided that any successor of DTC or Substitute Depository shall be qualified under any applicable laws to provide the service proposed to be provided by it; (B) to any Substitute Depository, upon (I) 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 shall be qualified under any applicable laws to provide the services proposed to be provided by it; or (C) to any person as provided below, upon (I) 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 18 / -If,) DOCSOC/l148399v3/024036-0033 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 2.10(d). upon receipt of all Outstanding Certificates of a series by the Trustee. together with a written request of the City to the Trustee designating the Substitute Depository, a single new Certificate. which the City shall prepare or cause to be prepared, shall be executed and delivered for each maturity of Certificates of such series 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 2.10(d), upon receipt of all Outstanding Certificates of a series by the Trustee, together with a written request of the City to the Trustee, new Certificates of the applicable series, which the City shall prepare or cause to be prepared, shall be executed and delivered 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 2.0 I hereof, provided that the Trustee shall not be required to deliver such new Certificates 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 prepayment or an advance refunding of any Certificates evidencing a portion ofthe principal maturing in a particular year, DTC or its successor (or any Substitute Depository or its successor) shall make an appropriate notation on such Certificates 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 shall not be liable for such Depository's failure to make such notations or errors in making such notations. (iv) The City and the Trustee shall be entitled to treat the person in whose name any Certificate is registered as the Owner thereof for all purposes of this Trust Agreement and any applicable laws, notwithstanding any notice to the contrary received by the Trustee or the City; and the City and the Trustee shall not have responsibility for transmitting payments to, communicating with, notifying, or otherwise dealing with any beneficial owners of the Certificates. Neither the City nor the Trustee shall have any responsibility or obligation, legal or otherwise, to any such beneficial owners or to any other party, including DTC or its successor (or Substitute Depository or its successor), except to the Owner of any Certificates, and the Trustee may rely conclusively on its records as to the identity of the Owners of the Certificates. Section 2.11. Destruction of Cancelled Certificates. Whenever in this Trust Agreement provision is made for the surrender or cancellation by the Trustee and the delivery to the City of any Certificates, the Trustee will cancel and destroy such Certificates and deliver a certificate of such destruction to the City upon its request. 19 I_ill 00C50C1I148399v3/024036-0033 Section 2.12. Additional Certificates. Subsequent to the execution and delivery by the Trustee of the 2004 Certificates, the Trustee shall, upon written request or requests of the City Representative and of the Authority Representative, execute and deliver from time to time one or more series of Additional Certificates in such aggregate principal amount as may be set forth in such written request or requests, provided that there shall have been compliance with all of the following conditions. which are hereby made conditions precedent to the preparation, execution and delivery of such Additional Certificates: (a) The parties to this Trust Agreement shall have executed a supplemental agreement which (i) sets forth the terms and provisions of such Additional Certificates, including the establishment of such funds and accounts, which may be separate and apart from the funds and accounts established hereunder for the 2004 Certificates and the 2006 Certificates, as shall be necessary or appropriate, and (ii) requires that prior to the delivery of such Additional Certificates the Reserve Requirement with respect to such Additional Certificates shall be on deposit in the Reserve Fund established hereunder or in a reserve fund established under such supplemental agreement; (b) The scheduled principal and interest payable with respect to such Additional Certificates shall be payable only on Interest Payment Dates; (c) The Lease shall have been amended, if necessary, to (i) increase or adjust the Lease Payments due and payable on each Lease Payment Date to an amount sufficient to pay the principal, premium (if any) and interest payable with respect to all Outstanding Certificates, including the Additional Certificates to be executed and delivered as and when the same mature or become due and payable (except to the extent such principal, premium and interest may be payable out of moneys then in the Reserve Fund or otherwise on deposit with the Trustee in accordance with this Trust Agreement), (ii) if appropriate, amend the definition of "'Leased Premises" to include as part of the Leased Premises all or any portion of additions, betterments, extensions, improvements or replacements, or such other real or personal property (whether or not located upon the Leased Premises as such Leased Premises is constituted as of the Delivery Date for the 2004 Certificates), to be financed, acquired or constructed by the preparation, execution and delivery of such Additional Certificates, and (iii) make such other revisions to the Lease as are necessitated by the execution and delivery of such Additional Certificates (provided, however, that such other revisions shall not prejudice the rights of the Owners of Outstanding Certificates as granted them under the terms of this Trust Agreement); (d) There shall have been delivered to the Trustee a counterpart of the amendments required by subsection 2.12(c) hereof; (e) The Trustee shall have received a certificate of the Authority Representative that there exists on the part of the Authority no Event of Default (or any event which, once all notice or grace periods have passed, would constitute an Event of Default); (f) The Trustee shall have received a certificate of the City Representative that (i) there exists on the part of the City no Event of Default (or any event which, once all notice or grace periods have passed, would constitute an Event of Default) and (ii) the Lease Payments as increased or adjusted do not exceed in any year the fair rental value of the Leased Premises (as such term is defined in the amended Lease); 20 / '-/,<__J- DOCSOC/1148399v3/024036-0033 (g) The Trustee shall have received an opinion of Special Counsel substantially to the effect that (i) said supplemental agreement and said amendments to the Lease comply in all respects with the requirements of this Section 2.12, (ii) said supplemental agreement and said amendments to the Lease have been duly authorized, executed and delivered by each of the respective parties thereto (provided that said opinion of Special Counsel, in rendering the opinions set forth in this clause (ii), shall be entitled to rely upon one or more other opinions of counsel, including counsel to any of the respective parties to said supplemental agreement or said amendments to the Lease), (iii) assuming that no Event of Default has occurred and is continuing, this Trust Agreement, as amended by said supplemental agreement, and the Lease, as amended by the respective amendments thereto, constitute the legal, valid and binding obligations of the respective parties thereto, enforceable against said parties in accordance with their respective terms (except to the extent that enforcement thereof may be limited by bankruptcy, insolvency, moratorium, debt adjustment or other laws affecting creditors' rights generally, and except to the extent that enforcement thereof may be limited by general principles of equity, regardless of whether enforcement is sought in a legal or equitable proceeding) and (iv) the execution of such supplemental agreement and said amendments to the Lease, and performance by the parties thereunder, will not result in the inclusion of the interest portion of any Lease Payments payable with respect to any Certificates theretofore prepared, executed and delivered, in the gross income of the Owners of the Certificates or the owners of any Additional Certificates for purposes of federal income taxation; (h) The City shall have provided the Insurers written notice of the proposed execution and delivery of such Additional Certificates and shall have received prior written consent of the Insurers with respect to such Additional Certificates; provided that any Additional Certificates being delivered to refund any Outstanding Certificates shall not require the prior written consent of the Insurers if the aggregate maximum annual debt service with respect to the Certificates and the Additional Certificates during any remaining year that the Certificates will be Outstanding does not exceed maximum annual debt service with respect to the Certificates prior to such refunding, as evidenced by a Certificate of the City Representative. (i) There shall have been delivered to the Trustee an endorsement to or reissuance of the title insurance policy delivered under Section 5.5 of the Lease providing that the insured amount is at least equal to the aggregate principal amount of all of the Certificates including the Additional Certificates outstanding upon the execution and delivery of such Additional Certificates; (j) Upon the execution and delivery of such Additional Certificates, the amount on deposit in the Reserve Fund or in a reserve fund established under the supplemental agreement pursuant to which such Additional Certificates are executed and delivered shall be equal to the Reserve Requirement, taking into account the execution of the Additional Certificates; and (k) Such other conditions shall have been satisfied, and such other instruments shall have been duly executed and delivered to the Trustee (with a copy to the Insurers), as the City or the Authority shall have reasonably requested. Upon delivery to the Trustee of the foregoing instruments, the Trustee shall cause to be executed and delivered Additional Certificates representing the aggregate principal amount specified in such supplemental agreement, and such Additional Certificates shall be equally and ratably secured with all Outstanding Certificates theretofore prepared, executed and delivered, all without preference, priority or distinction (other than with respect to maturity, payment, prepayment or 21 / - i/3 DOC50CII148399v3/024036-0033 sinking fund payment (if any)) of anyone Certificate, including Additional Certificates, over any other; provided, however, that no provision of this Trust Agreement shall require the City to consent to or otherwise permit the preparation, execution and delivery of Additional Certificates, it being understood and agreed that any such consent or other action of the City to permit the preparation, execution and delivery of Additional Certificates, or lack thereof, shall be in the sole discretion of the City. ARTICLE III PROJECT FUND Section 3.01. Establishment of Proiect Fund. The Trustee shall establish a special fund designated as the "'City of Chula Vista (Civic Center Project) Project Fund," referred to herein as the "'Project Fund" and shall establish a 2004 Certificates Account, a 2006 Certificates Account and Delivery Costs Account therein; shall keep the Project Fund separate and apart from all other funds and moneys held by it; and shall administer such fund as herein provided. The Project Fund shall be held and applied by the Trustee in accordance herewith. Section 3.02. PurDose. Moneys in the Project Fund shall be expended for Project Costs and Delivery Costs. Section 3.03. DeDosit ofMonevs: Pavment ofProiect Costs and Delivery Costs. (a) DeDosits. There shall be credited to the Project Fund and each applicable Account therein the following amounts: (1) the proceeds of sale of the Certificates required to be deposited therein pursuant to Section 2.05 hereof: (2) all investment earnings on moneys held in each Account of the Project Fund, which shall be credited to each Account and remain in the Project Fund until expended for Project Costs or Delivery Costs or applied to the prepayment of Certificates, as described in Section 3.04 below; and (3) any other funds from time to time deposited with the Trustee to pay Project Costs. (b) Disbursements. The Trustee shall disburse moneys in the Project Fund from time to time to pay Project Costs directly or to reimburse the City for payment of Project Costs, upon receipt by the Trustee of a Project Cost Requisition signed by the City Representative. The Trustee shall have no duty or liability to monitor the application of any moneys disbursed hereunder. The Trustee shall disburse moneys from the Delivery Costs Account to pay Delivery Costs or to reimburse the City for payment of such Delivery Costs upon receipt by the Trustee of a Delivery Cost Requisition signed by the City Representative. The Trustee shall be absolutely protected in making any disbursement from the Project Fund in reliance upon a Project Cost Requisition or Delivery Cost Requisition signed by the City Representative. Each such Project Cost Requisition and Delivery Cost Requisition shall be sufficient evidence to the Trustee of the facts stated therein and the Trustee shall have no duty to confirm the accuracy of such facts. Any remaining balance in the Delivery Costs Account shall be transferred by the Trustee to the Project Fund as directed in writing by City Representative. Section 3.04. Transfers of UnexDended Proceeds. Upon the filing with the Trustee of the Certificate of Completion with respect to a series of Certificates pursuant to Section 3.4 of the Lease, the Trustee shall withdraw all remaining moneys in the Account of the Project Fund related to such series (other than any moneys retained therein to pay Project Costs not then due and payable and 22 /~";/i DOC50CII148399v3/024036-0033 certified by the City Representative) and shall transfer such moneys to the Lease Payment Fund to be applied to the payment of principal and interest with respect to the Certificates of such series as prescribed in Section 5.04 hereof or, at the written election of the City Representative delivered to the Trustee, together with an opinion of Special Counsel that such transfer will not cause interest due with respect to the Certificates to be included in gross income for federal income tax purposes, shall transfer such moneys to the City for the purpose of capital expenditures of the City, and following such transfer, such Account of the Project Fund shall be closed. ARTICLE IV PREPAYMENT FUND Section 4.01. Establishment of Preoavment Fund. The Trustee shall establish a special fund designated as the "City of Chula Vista (Civic Center Project - Phase I) Prepayment Fund," referred to herein as the "Prepayment Fund"; shall keep such fund separate and apart from all other funds and moneys held by it; and shall administer such fund as herein provided. Moneys to be used for prepayment of the Certificates shall be deposited into the Prepayment Fund and used solely for the purpose of prepaying the Certificates in advance of their maturity on the date designated for prepayment and upon presentation and surrender of such Certificates to the Trustee. Section 4.02. Extraordinary Preoavment. The Certificates are subject to prepayment prior to their respective maturity dates on any date, in whole or in part, from Net Proceeds which the Trustee shall deposit in the Prepayment Fund as provided in Section 6.I(c) of the Lease at least 45 days prior to the date fixed for prepayment and credited towards the prepayment made by the City pursuant to Section 1O.2(a) of the Lease, at a prepayment price equal to the principal amount thereof together with accrued interest to the date fixed for prepayment, without premium. Section 4.03. Preoavment (a) Ootional Preoavment of2004 Certificates. The 2004 Certificates maturing on or after March 1,2015 are subject to prepayment prior to maturity in whole or in part on any date on or after March I, 2014, at the option of the City, in the event the City exercises its option under Section 10.3 ofthe Lease to prepay all or a portion of the principal component ofthe Lease Payments (in integral multiples of $5,000 but not in a principal amount of less than $20,000), at the following prepayment prices expressed as a percentage of the principal component to be prepaid), plus accrued interest to the date fixed for prepayment: Preoavment Date Preoavment Price March 1,2014 through February 28, 2015 March 1,2015 through February 28, 2016 March 1. 2016 and thereafter 101.0% 100.5 100.0 In the event the City gives notice to the Trustee of its intention to exercise such option, but fails to deposit with the Trustee on or prior to the prepayment date an amount equal to the prepayment price, the City will continue to pay the Lease Payments as if no such notice had been given. 23 /- t~ DOCSOCII148399v3/024036-0033 (b) Mandatory Sinking Account Pavment of 2004 Certificates. (i) The 2004 Certificates maturing March ], 2026 (the "2026 Term Certificates") are subject to prepayment in part by lot, on March] in each of the following years from sinking account payments as set forth below at a prepayment price equal to the principal amount thereof to be prepaid, without premium; provided, however, that if some but not all of the 2026 Term Certificates have been prepaid pursuant to an optional or extraordinary prepayment, the total amount of all future sinking account payments will be reduced pro rata by the aggregate principal amount of the 2026 Term Certificates so prepaid. ]n addition, in lieu of prepayment thereof, the 2026 Term Certificates may be purchased by the City and tendered to the Trustee pursuant to the provisions hereof. Mandatory Prepayment Date (March ]) Sinking Account Pavment 2025 2026* $ 1,490,000 1,560,000 * Final Maturity (ii) The 2004 Certificates maturing March ], 2029 (the "2029 Term Certificates") are subject to prepayment in part by lot, on March ] in each of the following years from sinking account payments as set forth below at a prepayment price equal to the principal amount thereof to be prepaid, without premium; provided, however, that if some but not all of the 2029 Term Certificates have been prepaid pursuant to an optional or extraordinary prepayment, the total amount of all future sinking account payments will be reduced pro rata by the aggregate principal amount of the 2029 Term Certificates so prepaid. ]n addition, in lieu of prepayment thereof, the 2029 Term Certificates may be purchased by the City and tendered to the Trustee pursuant to the provisions hereof. Mandatory Prepayment Date (March ]) Sinking Account Pavment 2027 2028 2029* $ 1,630,000 ],7]0,000 ],790,000 * Final Maturity (iii) The 2004 Certificates maturing March I, 2034 (the "2034 Term Certificates") are subject to prepayment in part by lot, on March I in each of the following years from sinking account payments as set forth below 24 /..~ 1.1 f{) DOCSOCIl148399v3/024036-0033 at a prepayment price equal to the principal amount thereof to be prepaid, without premium; provided, however, that if some but not all of the 2034 Term Certificates have been prepaid pursuant to an optional or extraordinary prepayment, the total amount of all future sinking account payments will be reduced pro rata by the aggregate principal amount of the 2034 Term Certificates so prepaid. In addition, in lieu of prepayment thereof, the 2034 Term Certificates may be purchased by the City and tendered to the Trustee pursuant to the provisions hereof. Mandatory Prepayment Date (March 1) Sinking Account Pavment 2030 2031 2032 2033 2034* $ 1,875,000 1,970,000 2,065,000 2,170,000 2,280,000 * Final Maturity If prior to one of the mandatory prepayment dates specified above the City purchases any 2026 Term Certificates, 2029 Term Certificates or 2034 Term Certificates, then at least 45 days prior to the prepayment date the City shall notify the Trustee as to the principal amount purchased, and the amount of 2004 Certificates so purchased shall be credited at the time of purchase, to the extent of the full principal amount thereof, to reduce the upcoming sinking account payment for the applicable maturity of the 2004 Certificates so purchased. All 2004 Certificates purchased pursuant to this subsection shall be cancelled pursuant to Section 14.03 hereof. (c) Optional Prepayment of2006 Certificates. The 2006 Certificates maturing on or after March I, 20_ are subject to prepayment prior to maturity in whole or in part on any date on or after March I, 20_. at the option of the City, in the event the City exercises its option under Section 10.3 of the Lease to prepay all or a portion of the principal component of the Lease Payments (in integral multiples of $5,000 but not in a principal amount of less than $20,000), at the following prepayment prices expressed as a percentage of the principal component to be prepaid), plus accrued interest to the date fixed for prepayment; Prepayment Date Prepayment Price March 1,20_ through February 28, 20_ March 1,20_ through February 28, 20_ March I, 20_ and thereafter In the event the City gives notice to the Trustee of its intention to exercise such option, but fails to deposit with the Trustee on or prior to the prepayment date an amount equal to the prepayment price, any notice of prepayment mailed in accordance with Section 4.05 hereof shall be of no force and effect and the City will continue to pay the Lease Payments as if no such notice had been giyen. 25 /,9'! DOCSOCIl148399v3!024036-0033 (d) Mandatory Sinking Account Pavment of2006 Certificates. (i) The 2006 Certificates maturing March I, 20 (the "20 Tenn Certificates") are subject to prepayment in part by lot, on March I in each of the following years from sinking account payments as set forth below at a prepayment price equal to the principal amount thereof to be prepaid, without premium; provided, however, that if some but not all of the 20 Tenn Certificates have been prepaid pursuant to an optional or extraordinary prepayment, the total amount of all future sinking account payments will be reduced pro rata by the aggregate principal amount of the 20_ Tenn Certificates so prepaid, In addition, in lieu of prepayment thereof, the 20_ Tenn Certificates may be purchased by the City and tendered to the Trustee pursuant to the provisions hereof. Mandatory Prepayment Date (March I) Sinking Account Pavment 20 20 · $ · Final Maturity (ii) The 2006 Certificates maturing March I, 20_ (the "20_ Tenn Certificates") are subject to prepayment in part by lot, on March 1 in each of the following years from sinking account payments as set forth below at a prepayment price equal to the principal amount thereof to be prepaid, without premium; provided, however, that if some but not all of the 20_ Tenn Certificates have been prepaid pursuant to an optional or extraordinary prepayment, the total amount of all future sinking account payments will be reduced pro rata by the aggregate principal amount of the 20_ Tenn Certificates so prepaid. In addition, in lieu of prepayment thereof, the 20_ Tenn Certificates may be purchased by the City and tendered to the Trustee pursuant to the provisions hereof. Mandatory Prepayment Date (March I) Sinking Account Pavment 20 20 20 · $ · Final Maturity (iii) The 2006 Certificates maturing March I, 20 (the "20_ Tenn Certificates") are subject to prepayment in part by lot, on March 1 in each of the following years from sinking account payments as set forth below 26 , I t , iff, DOC50CII148399v3/024036-0033 at a prepayment price equal to the principal amount thereof to be prepaid, without premium; provided, however, that if some but not all of the 20_ Term Certificates have been prepaid pursuant to an optional or extraordinary prepayment, the total amount of all future sinking account payments will be reduced pro rata by the aggregate principal amount of the 20_ Term Certificates so prepaid. In addition, in lieu of prepayment thereof, the 20_ Term Certificates may be purchased by the City and tendered to the Trustee pursuant to the provisions hereof. Mandatory Prepayment Date (March I) Sinking Account Pavment 20 20 20 20 20 * $ * Final Maturity If prior to one of the mandatory prepayment dates specified above the City purchases any 20_ Term Certificates, 20_ Term Certificates or 20_ Term Certificates, then at least 45 days prior to the prepayment date the City shall notify the Trustee as to the principal amount purchased, and the amount of 2006 Certificates so purchased shall be credited at the time of purchase, to the extent of the full principal amount thereof, to reduce the upcoming sinking account payment for the applicable maturity of the 2006 Certificates so purchased. All 2006 Certificates purchased pursuant to this subsection shall be cancelled pursuant to Section 14.03 hereof. Section 4.04. Selection of Certificates for Prepavment. Whenever provision is made in this Trust Agreement for the optional prepayment of a series of Certificates and less than all Outstanding Certificates of such series are called for optional prepayment, the Trustee shall select Certificates for optional prepayment from among maturities selected by the City and by lot within any maturity. For extraordinary prepayment of Certificates pursuant to Section 4.02 hereof, the Trustee shall select Certificates for prepayment as nearly as practicable on a pro rata basis among series and among maturities within a series and by lot within any maturity. The Trustee shall promptly notify the City and the Authority in writing of the Certificates so selected for prepayment by mailing to the City and the Authority copies of the notice of prepayment provided for in Section 4.05. The City shall provide the Trustee with a revised sinking fund schedule for the applicable series of Certificates upon any prepayments. Section 4.05. Notice ofPrepavment. (a) Content. When prepayment is authorized or required pursuant to this Article IV, the Trustee shall give notice of the prepayment of the Certificates. Such notice shall specify: (a) the prepayment date, (b) the prepayment price, (c) ifless than all ofthe Outstanding Certificates of a maturity are to be prepaid, the Certificate numbers (and in the case of partial prepayment, the respective principal amounts), (d) the series and CUSIP numbers of the Certificates to be prepaid, (e) the place or places where the prepayment will be made, (f) the original date of execution and delivery 27 I ! - , , 1-1 ! I ! DOCSOC!l148399v31024036-0033 of the Certificates, and (g) any other descriptive information regarding the Certificates needed to identify accurately the Certificates being prepaid. Such notice shall further state that on the specified date there shall become due and payable upon each Certificate to be prepaid, the portion of the principal amount of such Certificate to be prepaid, together with interest accrued to said date, and that from and after such date, provided that moneys therefor have been deposited with the Trustee, interest with respect thereto shall cease to accrue and be payable. (b) Recipients: Timing. Notice of such prepayment shall be sent by first class mail or delivery service postage prepaid, or by telecopy, to the municipal Securities Depository (as defined below) on the date of mailing of notice to the Owners by first class mail and to the Information Services (as defined below) that disseminate securities redemption notices, on the date notice is mailed to the Owners and by first class mail, postage prepaid, to the Authority and the respective Owners of any Certificates designated for prepayment at their addresses appearing on the Certificate registration books, at least thirty (30) days, but not more than sixty (60) days, prior to the prepayment date: provided that neither failure to receive such notice nor any defect in any notice so mailed shall affect the sufficiency of the proceedings for the prepayment of such Certificates. Under no circumstances shall the Trustee have any liability to any party for any inaccurate CUS1P number. The Securities Depository is The Depository Trust Company, 55 Water Street, New York, New York ]0041, Fax (2]2) 855-7320; or, in accordance with the then current guidelines of the Securities and Exchange Commission to such other addresses and/or such other securities depositories or to no such depositories as the City may designate in writing to the Trustee. In addition, notice of such prepayment shall also be sent by certified mail, overnight delivery service, facsimile transmission or other secure means, postage prepaid, to all municipal registered securities depositories and to at least two of the national information services that disseminate securities prepayment notices, when possible, at least two (2) days prior to the mailing of notices required by the first paragraph above, and in any event no later than simultaneously with the mailing of notices required by the first paragraph above; provided, that neither failure to receive such notice nor any defect in any notice so mailed shall affect the sufficiency of the proceedings for the prepayment of such Certificates. Section 4.06. Partial Prepavment of Certificates. Upon surrender by the Owner of a Certificate for partial prepayment at the Principal Office, payment of such partial prepayment of the principal amount of a Certificate will be paid to such Owner. Upon surrender of any Certificate prepaid in part only, the Trustee shall execute and deliver to the registered Owner thereof, at the expense of the City, a new Certificate or Certificates which shall be of authorized denominations equal in principal amount to the unprepaid portion of the Certificate surrendered and of the same series, tenor and maturity. Such partial prepayment shall be valid upon payment of the amount thereby required to be paid to such Owner, and the City, the Authority and the Trustee shall be released and discharged from all liability to the extent of such payment. Section 4.07. Effect of Notice of Prepavment. Notice having been given to the Owners of the Certificates as set forth in Section 4.05 hereof, and the moneys for the prepayment (including, the interest to the applicable date of prepayment), having, been set aside in the Prepayment Fund, the Certificates for which notice was sent shall become due and payable on said date of prepayment, and, upon presentation and surrender thereof at the Principal Office, said Certificates shall be paid at the prepayment price with respect thereto, plus interest accrued and unpaid to said date of prepayment. 28 / - '")0 I ~ DOCSOCII148399v3!024036-0033 If, on the date of a prepayment, moneys for the prepayment of all the Certificates to be prepaid, together with interest to said date of prepayment, shall be held by the Trustee so as to be available therefor on such date of prepayment, and, if notice of prepayment thereof shall have been given as set forth in Section 4.05 hereof, then, from and after said date of prepayment, interest with respect to the Certificates to be prepaid shall cease to accrue and become payable. All moneys held by or on behalf of the Trustee for the prepayment of Certificates shall be held in trust for the account of the Owners of the Certificates so to be prepaid, without liability for interest thereon. All Certificates paid at maturity or prepaid prior to maturity pursuant to the provisions of this Article shall be cancelled upon surrender thereof and destroyed. Section 4.08. Surplus. Any funds remaining in the Prepayment Fund after prepayment and payment of all Certificates Outstanding, including accrued interest and payment of any applicable fees and expenses to the Trustee pursuant to Sections 9.06 and 9.07 hereof and any other Additional Payments payable under the Lease or provision made therefor satisfactory to the Trustee, and provision for any amounts required to be transferred to the Rebate Fund pursuant to Sections 8.07 and 8.08 hereof, shall be withdrawn by the Trustee and remitted to the City. ARTICLE V LEASE PAYMENTS; LEASE PAYMENT FUND Section 5.01. Securitv Provisions. (a) Assignment of Rights in Lease. The Authority has, pursuant to the Assignment Agreement, absolutely assigned and set over to the Trustee certain of its rights in the Lease, including but not limited to all of the Authority's rights to receive and collect all of the Lease Payments, the Prepayments and all other amounts required to be deposited in the Lease Payment Fund pursuant to the Lease or pursuant hereto. All Lease Payments, Prepayments and such other amounts to which the Authority may at any time be entitled (other than amounts due to the Authority under Section 4. I I of the Lease) shall be paid directly to the Trustee, and all of the Lease Payments and Prepayments collected or received by the Authority shall be deemed to be held and to have been collected or received by the Authority as the agent of the Trustee and if received by the Authority at any time shall be deposited by the Authority with the Trustee within five (5) Business Days after the receipt thereof, and all such Lease Payments shall be forthwith deposited by the Trustee upon the receipt thereof in the Lease Payment Fund, all such Prepayments shall be forthwith deposited by the Trustee upon the receipt thereof in the Prepayment Fund. If the City shall fail to deposit with the Trustee a Lease Payment on the applicable Lease Payment Date, the Trustee shall, within three Insurance Business Days after such Lease Payment Date, notify the 2004 Insurer of such failure. The 2004 Insurance Policy and the 2006 Insurance Policy shall be held by the Trustee and, shall be deemed to be held in the Lease Payment Fund. (b) Security Interest in Monevs and Funds. The Authority and the City, as their interests may appear, hereby grant to the Trustee for the benefit of the Owners a lien on and a security interest in all moneys in the funds held by the Trustee under this Trust Agreement (excepting only the Rebate Fund and any moneys to be deposited into the Rebate Fund), including without limitation, the Lease Payment Fund, the Reserve Fund, the Prepayment Fund, the Project Fund and the Net Proceeds Fund, and all such moneys shall be held by the Trustee in trust and applied to the respective purposes specified herein and in the Lease. 29 /-51 DOCSOC/1148399v3/024036-0033 (c) Pledge of Lease Pavments and Proceeds. The Lease Payments and any proceeds from the re-Ietting or any other disposition of the Leased Premises pursuant to Article IX of the Lease (the "Lease Proceeds") are hereby irrevocably pledged to and shall be used for the punctual payment of the interest and principal represented by the Certificates and, except as permitted under Section 2. I 2 hereof with respect to Additional Certificates, the Lease Payments and Lease Proceeds shall not be used for any other purpose while any of the Certificates remain Outstanding. This pledge shall constitute a first lien on the Lease Payments and Lease Proceeds in accordance with the terms hereof, subject to Section 13.03 hereof and subject to Section 2.12 hereof, which provides that all Certificates and Additional Certificates shall be equally and ratably secured. Section 5.02. Establishment of Lease Pavment Fund. The Trustee shall establish a special fund designated as the "City of Chula Vista (Civic Center Project) Lease Payment Fund and shall establish an Interest Account therein. All moneys at any time deposited by the Trustee in the Lease Payment Fund shall be held by the Trustee in trust for the benefit of the Owners of the Certificates. So long as any Certificates are Outstanding, neither the City nor the Authority shall have any beneficial right or interest in the Lease Payment Fund or the moneys deposited therein, except only as provided in this Trust Agreement, and such moneys shall be used and applied by the Trustee as hereinafter set forth. Section 5.03. Deposits. There shall be deposited in the Interest Account of the Lease Payment Fund the amount specified in Section 2.05 from proceeds of the 2004 Certificates which shall be applied as a credit on the Lease Payments due on February 15, 2005, August 15, 2005 and February IS, 2006 and shall pay a portion of the interest due with respect to the 2004 Certificates on the Interest Payment Dates to and including March I, 2006. There shall be deposited in the Interest Account of the Lease Payment Fund the amount specified in Section 2.05 from proceeds of the 2006 Certificates which shall be applied as a credit on the Lease Payments due on August 15, 2006, February IS, 2007 and August IS, 2007 and shall pay a portion of the interest due with respect to the 2006 Certificates on the Interest Payment Dates to and including September I, 2007. There shall be deposited in the Lease Payment Fund all Lease Payments and in the Prepayment Fund all Prepayments received by the Trustee, including any moneys received by the Trustee for deposit therein pursuant to Section 2.05 hereof and Section 4.4 of the Lease, and any other moneys required to be deposited therein pursuant to the Lease, including without limitation Section 5.4(c) of the Lease (regarding proceeds of rental interruption insurance) or pursuant to this Trust Agreement, which moneys shall be applied as a credit towards any Lease Payment then due. Section 5.04. Application of Monevs. Except as provided in this Section 5.04, in all amounts in the Lease Payment Fund shall be used and withdrawn by the Trustee solely for the purpose of paying the principal and interest with respect to the Certificates as the same shall become due and payable, in accordance with the provisions of Article II and Article IV hereof, subject to the requirement that certain investment earnings may be transferred to the Rebate Fund, as provided in Section 8.08 hereof. On or before each Interest Payment Date, the Trustee shall set aside an amount sufficient to pay the interest becoming due and payable on such Interest Payment Date on all Outstanding Certificates. Moneys so set aside shall be used and withdrawn by the Trustee solely for the purpose of paying the interest with respect to the Certificates as it shall become due and payable (including, accrued interest with respect to any Certificates prepaid prior to maturity). 30 / <:J ',;)- DOCSOCIl148399v3/024036-0033 On or before each Interest Payment Date on which the principal of the Certificates shall be payable, the Trustee shall set aside an amount equal to (i) the principal amount of the Certificates coming due and payable on such Interest Payment Date pursuant to Section 2.02, and (ii) the prepayment price of the Certificates (consisting of the principal amount thereof and any applicable premiums) required to be prepaid on such Interest Payment Date pursuant to any of the provisions of Article IV hereof. Moneys so set aside shall be used and withdrawn by the Trustee solely for the purpose of (i) paying the principal of the Certificates at the maturity thereof, or (ii) paying the principal of and premium (if any) on any Certificates upon the prepayment thereof pursuant to Section 4.03 hereof. Section 5.05. Surplus. Any funds remaining in the Lease Payment Fund after payment of all Certificates Outstanding, including accrued interest and payment of any applicable fees to the Trustee pursuant to Sections 9.06 and 9.07 hereof and any other Additional Payments due under the Lease, or provision made therefor satisfactory to the Trustee, and provision for any amounts required to be transferred to the Rebate Fund pursuant to Section 8.08 hereof, shall be withdrawn by the Trustee and remitted to the City. ARTICLE VI RESERVE FUND Section 6.0 I. Establishment of Reserve Fund. The Trustee shall establish a special fund designated as the "City of Chula Vista (Civic Center Project) Reserve Fund," referred to herein as the "Reserve Fund" and shall establish a 2004 Certificates Account and a 2006 Certificates Account therein. All moneys at any time on deposit in the Reserve Fund shall be held by the Trustee in trust for the benefit of the Owners of the Certificates, as a reserve for the payment when due of all the Lease Payments to be paid pursuant to the Lease and of all payments on the Certificates and applied solely as provided herein. Section 6.02. Funding. (a) Reserve Requirement. On the Delivery Date for the 2006 Certificates, there shall be transferred to the 2004 Certificates Account of the Reserve Fund $2,395,911.26, which equals the initial Reserve Requirement that was funded upon the execution and delivery ofthe 2004 . Certificates. On the Delivery Date for the 2006 Certificates, there shall be transferred to the 2006 Certificates Account of the Reserve Fund $ , which shall cause the balance in the Reserve Fund to be increased to the Reserve Requirement as of such date. The Reserve Requirement, or any portion thereof, may be satisfied by the City by crediting to the Reserve Fund moneys or, with the prior written consent ofthe Insurers and with notice to S&P, a letter of credit, a bond insurance policy, or any other comparable credit facility or any combination thereof which, in the aggregate, make funds available in the Reserve Fund in an amount equal to the Reserve Requirement; however, the long-term unsecured debt or claim-paying ability, as the case may be, of the provider of any such letter of credit, bond insurance policy or any other comparable credit facility, must have a rating of at least no less than the current rating on the Certificates and a maturity date equal to the final maturity date of the Certificates or provide for a drawing, in full, in the event of a nonrenewal of any such instrument with a shorter maturity date. 31 / ~ .' I.....' ..,-"'~...-" DOCSOC/1148399v3/024036-0033 (b) Delinquent Lease Pavments. The City hereby agrees that if at any time the balance in the Reserve Fund shall be reduced below the Reserve Requirement, the first payments of Lease Payments thereafter payable by the City and not needed to pay interest and principal components of Lease Payments payable to the Certificate Owners on the next Interest Payment Date shall be deposited into the Reserve Fund and credited to the Accounts therein such that each Account contains its proportionate share of the Reserve Requirement or, if the available amounts are insufficient to replenish the Reserve Fund in full, then to each Account so that each Account contains the same percentage of its proportionate share of the Reserve Requirement. Amounts in the Reserve Fund shall be used to first, reimburse the provider of a surety bond, or any insurance policy or letter of credit for any repayment obligation owing thereto for any draw on a surety bond, insurance policy or letter of credit credited to the Reserve Fund and second, to increase the balance in the Reserve Fund to the Reserve Requirement. (c) Certain Net Proceeds. Net Proceeds of rental interruption insurance described in Section 5.4 of the Lease shall be deposited first to the Reserve Fund to make up any deficiencies therein and second to the Lease Payment Fund to be credited to the payment of the Lease Payments in the order in which they become due. Section 6.03. Transfers of Excess. The Trustee shall, on or before February 15 and August 15 of each year, provide written notice to the City of any moneys which will be on hand in each Account of the Reserve Fund (including investment earnings) in excess of the Reserve Requirement on the next succeeding March I or September I, as the case may be, and one Business Day immediately preceding any Lease Payment Date, the Trustee shall transfer such excess moneys, to the Lease Payment Fund to be applied to the Lease Payment then due from the City. In the event ofthe partial Prepayment of Lease Payments, the City may instruct the Trustee to reduce the amounts on deposit in one or more Accounts of the Reserve Fund to the Reserve Requirement as of such date and may direct the Trustee to transfer excess amounts from one or more Accounts of the Reserve Fund for any lawful purpose. The transfers described above are in each case subject to the requirement that if the Certificate proceeds shall have become subject to the arbitrage rebate provisions of Section 148(1) of the Code as described in Section 8.08 hereof then certain investment earnings are to be transferred to the Rebate Fund at the direction of the City as provided in Section 8.08 hereof. Section 6.04. Application of Reserve Fund in Event of Deficiencv in Lease Pavment Fund. Whether or not Lease Payments are then in abatement, if one (1) day immediately preceding any Interest Payment Date, the moneys available in the Lease Payment Fund do not equal the amount of the principal and interest with respect to the Certificates then coming due and payable, the Trustee first shall apply the moneys available in the Reserve Fund to make the payments due with respect to the Certificates on such Interest Payment Date by transferring the amount necessary for such purpose to the Lease Payment Fund. In the event of a deficiency in the Lease Payment Fund, the Trustee shall allocate the available funds to the payment of the principal and interest due on each series of Certificates on a proportionate basis such that an equal percentage of the principal and interest due on a series is paid from the moneys available in the Lease Payment Fund and shall then transfer from the Account ofthe Reserve Fund for each series the amount required to pay the balance of the principal and interest payments then due on such series. The Trustee shall take whatever action is necessary to liquidate or draw upon investments of funds held in the Reserve Fund or draw upon any surety bond, 32 i ! J1 DOCSOC/1148399v3/024036-0033 insurance policy or letter of credit securing the Reserve Fund to make such funds available for application as provided hereunder on the Interest Payment Date. Section 6.05. Transfer to Make All Lease Pavments. If on any Interest Payment Date the moneys on deposit in an Account of the Reserve Fund and the monies in the Lease Payment Fund allocable to the series of Certificates related to such Account (excluding amounts required for payment of principal or interest with respect to Certificates not presented for payment) are sufficient to pay all Outstanding Certificates of such series, including all principal, interest and prepayment premiums (if any), the Trustee shall, upon the written direction of the City Representative, transfer all amounts in the applicable Account ofthe Reserve Fund to the Lease Payment Fund to be applied to the payment of the Lease Payments or to the Prepayment Fund to make Prepayments on behalf of the City and such moneys shall be distributed to the Owners of the applicable series of Certificates in accordance with Article 11 and Article IV of this Trust Agreement. Any amounts remaining in the Reserve Fund upon payment in full of all Outstanding Certificates and the Trustee's fees and expenses pursuant to Sections 9.06 and 9.07 hereof and any other Additional Payments due under the Lease, or upon provision for such payments as provided in Section 14.0 I hereof and provisions for any amounts required to be transferred to the Rebate Fund pursuant to Section 8.08 hereof, shall at the written direction of the City Representative be withdrawn by the Trustee and paid to the City. ARTICLE VII NET PROCEEDS FUND Section 7.01. Establishment of Net Proceeds Fund: Deposits. The Trustee shall establish when required a special fund designated as the "City of Chula Vista (Civic Center Project) Net Proceeds Fund," referred to herein as the "Net Proceeds Fund," to be maintained and held in trust for the benefit of the Owners, subject to disbursement therefrom as provided herein. The Trustee shall deposit Net Proceeds in the Net Proceeds Fund as provided in Section 6.I(a) of the Lease. (a) Casualtv Insurance. The Trustee shall disburse Net Proceeds for replacement or repair of the Leased Premises as provided in Section 6.1 (b) ofthe Lease, or transfer such proceeds to the Prepayment Fund to be applied to the prepayment of Certificates in the manner provided in Section 4.02 hereof, upon notification of the City Representative as provided in Section 6.I(c) ofthe Lease. Pending such application, such Net Proceeds may be invested by the Trustee as directed by the City Representative in Permitted Investments that mature not later than such times moneys are expected to be needed to pay such costs of repair or replacement. After all of the Certificates have been paid and the entire amount of principal and interest with respect to the Certificates has been paid in full, or provision made for payment satisfactory to the Trustee, including provision for all amounts required to be transferred to the Rebate Fund pursuant to Section 8.08 hereof, the Trustee shall pay any remaining moneys in the Net Proceeds Fund to the City after payment of any amounts due to the Trustee pursuant to Sections 9.06 and 9.07 hereof and any other Additional Payments due under the Lease. (b) Title Insurance. Proceeds of any policy of title insurance received by the Trustee with respect to the Leased Premises shall be applied and disbursed by the Trustee upon the Written Request of the City as follows: (i) If the City determines that the title defect giving rise to such proceeds has not substantially interfered with its use and occupancy of the 33 / , ""J ."...... 00C50C/1148399v3/024036-0033 Leased Premises and will not result in an abatement of Lease Payments and Additional Payments payable by the City under the Lease (such determination to be certified by the City in writing), such proceeds shall, with the written approval of the Insurers, be remitted to the City and used for any lawful purpose thereof; or (ii) If the City determines that the title defect giving rise to such proceeds has substantially interfered with its use and occupancy of the Leased Premises and will result in an abatement of Lease Payments and Additional Payments payable by the City under the Lease; then the Trustee shall, with the written approval of the Insurers, immediately deposit such proceeds in the Prepayment Fund and such proceeds shall be applied to the prepayment of Certificates in the manner provided in Section 4.02 hereof. Section 7.02. Cooperation. The Authority and the Trustee shall cooperate fully with the City at the expense of the City in filing any proof of loss with respect to any 2004 Insurance Policy maintained pursuant to Article V of the Lease and in the prosecution or defense of any prospective or pending condemnation proceeding with respect to the Leased Premises or any item or portion thereof; provided, however, the Trustee shall not be obligated to take any action hereunder if it is not indemnified to its satisfaction from and against any liability or expense arising therefrom. ARTICLE VIlI MONEYS IN FUNDS; INVESTMENT Section 8.01. Held in Trust. The moneys and investments held by the Trustee under this Trust Agreement, other than in the Rebate Fund, are irrevocably held in trust for the benefit of the Owners and, in the case of the Rebate Fund, for payment as required to the United States Treasury, and for the purposes herein specified, and such moneys, and any income or interest earned thereon, shall be expended only as provided in this Trust Agreement, and shall not be subject to levy or attachment or lien by or for the benefit of any creditor of the Authority, the Trustee or the City, or any of them. Section 8.02. Investments Authorized. (a) Bv Trustee. Subject to the further provisions of this Article V III , moneys held by the Trustee hereunder shall be invested and reinvested on maturity thereof by the Trustee pursuant to Section 8.02(b). The Trustee will report any such investments to the City on a monthly basis in its regular statements. (b) Upon Direction of the Citv. The City Representative shall direct by facsimile, to the designated trust officer responsible for the administration of this Trust Agreement, followed by oral notification and distribution by U.S. Mail or overnight courier service of such notice, such investment in specific Permitted Investments not less than two Business Days prior to the date that such Permitted Investment is to take effect. Such investments and reinvestments shall be made giving full consideration for the time at which funds are required to be available based among other things, scheduled completion of the various components ofthe Project. In the event that the City Representative does not so direct the Trustee, the Trustee shall invest in the Permitted Investments described in paragraph (D) of the definition thereof contained in Section 1.01. 34 / ' , ,. ~ ',0' DOCSOC/l148399v3/024036-0033 Investments purchased with funds on deposit in the Lease Payment Fund and Prepayment Fund shall mature not later than the Interest Payment Date or prepayment date, as appropriate, immediately succeeding the investment. Investments purchased with funds on deposit in the Project Fund shall mature not later than the dates upon which such funds shall be needed to be expended for the payment of Project Costs. Notwithstanding anything to the contrary contained herein, investments purchased with funds on deposit in the Reserve Fund shall have an average aggregate weighted term to maturity of not greater than five years; provided that such amounts in an Account of the Reserve Fund may be invested in an investment agreement described in paragraph H of the definition of Permitted Investments to the date of the final maturity of the series of Certificates for which such Account was established so long as such amounts may be withdrawn at any time, without penalty, for application in accordance with Article VI hereof. (c) Registration. Such investments, if registrable, shall be registered in the name of the Trustee for the benefit of the Owners and held by the Trustee or its nominee. (d) Trustee as Purchaser or Agent. The Trustee may purchase or sell to itself or any affiliate, as principal or agent, investments authorized by this Section. The Trustee may act as purchaser or agent in the making or disposing of any investment. The Trustee or any of its affiliates may act as a sponsor of, or as an advisor to any provider of, Permitted Investments hereunder. The City acknowledges that to the extent regulations of the Comptroller of the Currency or other applicable regulatory entity grant the City the right to receive brokerage confirmations of security transactions as they occur, the City specifically waives receipt of such confirmations to the extent permitted by law. The Trustee will furnish the City periodic cash transaction statements which include detail for all investment transactions made by the Trustee hereunder. (e) Trustee Standard of Care. Except as otherwise provided in Section 9.05, the Trustee shall not be responsible or liable for any loss suffered in connection with any investment of funds or sale of such investment made by it in accordance with this Section or disposition made by it in accordance with Section 8.05(b). Section 8.03. Disposition of Investments. Any income, profit or loss on the investment of moneys held by the Trustee hereunder shall be credited to the respective fund for which it is held, except as otherwise provided herein. Section 8.04. Accounting. The Trustee shall furnish to the City, not less than monthly, an accounting (which may be in the form of its regular statements) of all investments made by the Trustee and all funds and amounts held by the Trustee; provided, that the Trustee shall not be obligated to deliver an accounting for any fund or account that (i) has a balance of zero and (ii) has not had any activity since the last reporting date. The Trustee shall keep accurate records of all funds administered by it and of all Certificates paid and discharged. Section 8.05. Valuation and Disposition of Investments. (a) Valuation. Subject to the provisions of Section 8.08 hereof, for the purpose of determining the amount in any fund, all Permitted Investments (except investment agreements) credited to such fund shall be valued at the lower of the cost or the market price, exclusive of accrued interest. With respect to all funds and accounts, investments shall be valued by the Trustee (i) as frequently as deemed necessary by the Insurers but not less often than annually nor more often than monthly, and (ii) upon any draw upon the Reserve Fund. In making any such valuations, the Trustee 35 /-':./1 DOC50C/l148399v3/024036-0033 may utilize, and conclusively rely upon such valuation services as may be available to the Trustee, including those within its regular accounting system. (b) Disposition. Subject to the provisions of Section 8.08 hereof, the Trustee shall sell, or present for prepayment, any Permitted Investment so purchased by the Trustee whenever it shall be necessary in order to provide moneys to meet any required payment, transfer, withdrawal or disbursement from the fund to which such Permitted Investment is credited. Section 8.06. Commingling of Monevs in Funds. The Trustee may, and upon the written request of the City Representative shall, commingle any of the funds held by it pursuant to this Trust Agreement into a separate fund or funds for investment purposes only; provided, however, that all funds or accounts held by the Trustee hereunder shall be accounted for separately notwithstanding such commingling by the Trustee. The City shall ensure that any such commingling complies with Section 1.148.4 of the Treasury Regulations, and shall provide direction to the Trustee accordingly. Section 8.07. Tax Covenants. (a) General. The City and the Authority hereby covenant with the holders of the Certificates that, notwithstanding any other provisions of this Trust Agreement, they shall not take any action, or fail to take any action, if any such action or failure to take action would adversely affect the exclusion from gross income of interest with respect to the Certificates under Section 103 of the Code. The Authority hereby covenants with the holders of the of the Certificates that, notwithstanding any other provision of this Trust Agreement, to the extent that the Authority may have control over the Project or the proceeds of the Certificates, it shall not take any action that would adversely affect the exclusion from gross income of interest with respect to the Certificates under Section 103 of the Code. The City and the Authority (to the extent that the Authority may have control over the Project or the proceeds of the Certificates) shall not, directly or indirectly, use or permit the use of proceeds ofthe Certificates or the Project, or any portion thereof, by any person other than a governmental unit (as such term is used in Section 141 ofthe Code), in such manner or to such extent as would result in the loss of exclusion from gross income for federal income tax purposes of interest due with respect to the Certificates. (b) Use of Proceeds. The City and the Authority (to the extent that the Authority may have control over the Project or the proceeds ofthe Certificates) shall not take any action, or fail to take any action, if any such action or failure to take action would cause the Certificates to be "private activity bonds" within the meaning of Section 141 of the Code, and in furtherance thereof, shall not make any use of the proceeds of the Certificates or the Project, or any portion thereof, or any other funds of the City, that would cause the Certificates to be "private activity bonds" within the meaning of Section 141 of the Code. To that end, so long as any Certificates are outstanding, the City and the Authority, with respect to such proceeds and the Project and such other funds, will comply with applicable requirements of the Code and all regulations of the United States Department of the Treasury issued thereunder and under Section 103 of the Code, to the extent such requirements are, at the time, applicable and in effect. The City shall establish reasonable procedures necessary to ensure continued compliance with Section 141 of the Code and the continued qualification of the Certificates as "governmental bonds."' (c) Arbitrage. The City and the Authority (to the extent that the Authority may have control over the Project or the proceeds of the Certificates) shall not, directly or indirectly, use or permit the use of any proceeds of any Certificates, or of the Project, or other funds of the City, or 36 ..... ...-~ / - .~.J () DOCSOC/1148399v31024036-0033 take or omit to take any action, that would cause the Certificates to be "arbitrage bonds" within the meaning of Section 148 of the Code. To that end, the City and the Authority shall comply with all requirements of Section 148 of the Code and all regulations of the United States Department of the Treasury issued thereunder to the extent such requirements are, at the time, in effect and applicable to the Certificates. (d) Federal Guarantee. The City and the Authority (to the extent that the Authority may have control over the proceeds of the Certificates) shall not make any use of the proceeds of the Certificates or any other funds of the City, or take or omit to take any other action, that would cause the Certificates to be "federally guaranteed" within the meaning of Section 149(b) of the Code. (e) Comoliance with Tax Certificates. In furtherance of the foregoing tax covenants of this Section, the City covenants that it will comply with the provisions of each Tax Certificate, which is incorporated herein as if fully set forth herein. These covenants shall survive payment in full or defeasance of the Certificates. Section 8.08. Rebate Fund. (a) General. The Trustee shall establish a special fund designated the "City of Chula Vista (Civic Center Project) Rebate Fund" (the "Rebate Fund") and shall establish a separate account therein for each series of Certificates. All amounts at any time on deposit in the Rebate Fund shall be held by the Trustee in trust, to the extent required to satisfy the requirement to make rebate payments to the United States (the "Rebate Requirement") pursuant to Section 148 of the Code and the Treasury Regulations promulgated thereunder (the "Treasury Regulations"). Such amounts shall be free and clear of any lien under this Trust Agreement and shall be governed by this Section and Section 8.07 of this Trust Agreement and by the Tax Certificate executed by the City. The Trustee shall be deemed conclusively to have complied with the Rebate Requirement if it follows the directions of the City, and shall have no independent responsibility to, or liability resulting from its failure to, enforce compliance by the City with the Rebate Requirement. (i) Within 45 days of the end of the fifth Certificate Year for a series of Certificates and each fifth Certificate Year thereafter, (1) the City shall calculate or cause to be calculated with respect to the Certificates of such series the amount that would be considered the "rebate amount" within the meaning of Section 1.148-3 ofthe Treasury Regulations, and (2) the City shall make an Additional Payment under Section 4.11 of the Lease and transfer to the Trustee for deposit in the Account of the Rebate Fund established for such series, if and to the extent required, amounts sufficient to cause the balance in the Rebate Fund to be equal to the "rebate amount" so calculated. The City may direct the Trustee to transfer excess amounts on deposit in the Reserve Fund, as set forth in Section 6.03 hereof, to pay all or a portion of any "rebate amount" due hereunder. (ii) The City shall not be required to deposit any amount to the Rebate Fund in accordance with preceding sentence if the amount on deposit in the Rebate Fund prior to the deposit required to be made under this subsection (a) equals or exceeds the "rebate amount" calculated in accordance 37 ..;i/' /' "- ~ DOCSOC/l148399v3/024036-0033 with the preceding sentence. Such excess may be withdrawn from the Rebate Fund to the extent permitted under subsection (1) of this Section. (iii) The City shall not be required to calculate the "rebate amount," and shall not be required to deposit any amount to the Rebate Fund in accordance with this subsection (a), with respect to all or a portion of the proceeds of a series of the Certificates (including amounts treated as proceeds of the Certificates) (1) to the extent such proceeds satisfY the expenditure requirements of Section 148(1)(4)(B) or Section 148(1)(4)(C) of the Code or Section 1.148-7(d) of the Treasury Regulations, whichever is applicable, and otherwise qualifY for the exception to the Rebate Requirement pursuant to whichever of said sections is applicable, (2) to the extent such proceeds are subject to an election by the City under Section 148(f)(4)(C)(vii) ofthe Code to pay a 1-1/2% penalty in lieu of arbitrage rebate in the event any of the percentage expenditure requirements of Section 148(f)(4)(C) are not satisfied, or (3) to the extent such proceeds qualify for the exception to arbitrage rebate under Section 148(f)(4)(A)(ii) of the Code for amounts in a "bona fide debt service fund:' (b) Withdrawal Following Pavment of Certificates. Any funds remaining in an Account of the Rebate Fund for a series of Certificates after prepayment of all the Certificates and any amounts described in paragraph (ii) of subsection (c) of this Section, or provision made therefor satisfactory to the Trustee, including accrued interest and payment of any applicable fees to the Trustee, shall be withdrawn by the Trustee and remitted to the City. (c) Withdrawal for Pavment of Rebate. Upon the City's written direction, but subject to the exceptions contained in subsection (a) of this Section to the requirement to calculate the "rebate amount" and make deposits to the Rebate Fund, the Trustee shall pay to the United States with respect to the applicable series of Certificates, from amounts on deposit in the Rebate Fund, (i) not later than 60 days after the end of (I) the fifth Certificate Year, and (2) each fifth Certificate Year thereafter for such series, an amount that, together with all previous rebate payments, is equal to at least 90% of the "rebate amount" for such series calculated as of the end of such Certificate Year in accordance with Section 1.148-3 of the Treasury Regulations; and (ii) not later than 60 days after the payment of all Certificates, an amount equal to 100% of the "rebate amount" calculated as of the date of such payment (and any income attributable to the "rebate amount" determined to be due and payable) in accordance with Section 1.148-3 ofthe Treasury Regulations. (d) Rebate Pavments. Each payment required to be made pursuant to subsection (c) of this Section shall be made to the Internal Revenue Service Center, Ogden, Utah 84201 on or before the date on which such payment is due, and shall be accompanied by Internal Revenue Service Form 8038- T, which shall be completed by the arbitrage rebate consultant for execution by the City and provided to the Trustee. 38 /~{~:-u DOCSOCIl148399v3/024036-0033 (e) Deficiencies in the Rebate Fund. In the event that, prior to the time any payment is 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 shall calculate the amount of such deficiency and direct the Trustee to deposit an amount received from the City equal to such deficiency into the applicable Account of the Rebate Fund prior to the time such payment is due. (f) Withdrawals of Excess Amounts. In the event that immediately following the calculation required by subsection (a) of this Section, but prior to any deposit made under said subsection, the amount on deposit in the applicable Account of the Rebate Fund exceeds the "rebate amount" calculated in accordance with said subsection, upon written instructions from the City, the Trustee shall withdraw the excess from the Rebate Fund and credit such excess to the Lease Payment Fund. (g) Record Keeping. The City shall retain records of all determinations made hereunder until six years after the complete retirement of the Certificates. (h) Survival of Defeasance. Notwithstanding anything in this Trust Agreement to the contrary, the Rebate Requirement for a series of the Certificates shall survive the payment in full or defeasance of the Certificates of such series. ARTICLE IX THE TRUSTEE Section 9.01. Appointment of Trustee. (a) Appointment. The Bank of New York Trust Company, N.A., a national banking association organized under the laws of the United States of America, is hereby appointed Trustee by the Authority and the City. (b) Oualifications. The Authority and the City agree that they will maintain a Trustee having a corporate trust office in New York, New York, San Francisco, California, Seattle, Washington, or Los Angeles, California capable of exercising trust powers in the State of California, with a combined capital (exclusive of borrowed capital) and a surplus of at least Fifty Million Dollars ($50,000,000), or be a member of a bank holding company system, which shall have a combined capital and surplus of at least Fifty Million Dollars ($50,000,000), and subject to supervision or examination by federal or state authority, so long as any Certificates are Outstanding. If such bank, corporation 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 Section the combined capital and surplus of such bank, corporation or trust company shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. (c) Removal. Each Insurer and, so long as there is no Event of Default, the City, may remove the Trustee initially appointed, and any successor thereto, and may appoint a successor or successors thereto. (d) Resignation. The Trustee may, upon prior written notice to the City, the Insurers and the Authority, resign; provided that such resignation shall not take effect until the 39 j. .- . / ; 1.( DOCSOC/l148399v3/024036-0033 successor Trustee is appointed as provided in this Section 9.01. Upon receiving such notice of resignation, the City shall promptly appoint a successor Trustee subject to written approval of the Insurers. In the event the City does not name a successor Trustee within thirty (30) days of receipt of notice of the Trustee's resignation, then the Trustee may petition a federal or state court to seek the immediate appointment of a successor Trustee. (e) Successor. Any successor Trustee shall be a bank, corporation, national association or trust company meeting the qualifications as set forth in Subsection (b) above. Any resignation or removal of the Trustee and appointment of a successor Trustee shall become effective upon acceptance of appointment by the successor Trustee and upon receipt of written approval of the Insurers. Upon such acceptance, the successor Trustee shall mail notice thereof to the Owners at their respective addresses set forth on the Certificate registration books maintained pursuant to Section 2.12. Section 9.02. Merger or Consolidation. Any company or banking association into which the Trustee 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 Trustee may sell or transfer all or substantially all of its corporate trust business, provided that such company shall be eligible under Section 9.01, shall be the successor to the Trustee without the execution or filing of any paper or further act, anything herein to the contrary notwithstanding. Section 9.03. Protection of the Trustee. (a) Reliance Upon Papers or Documents. The Trustee shall be protected and shall incur no liability in acting or proceeding in good faith upon any resolution, notice, telegram, facsimile, request, consent, direction, waiver, certificate, statement, affidavit, voucher, bond, requisition or other paper or document which it shall in good faith believe to be genuine and to have been passed or signed by the proper board or person or to have been prepared and furnished pursuant to any of the provisions of this Trust Agreement, and the Trustee shall be under no duty to make any investigation or inquiry as to any statements contained or matters referred to in any such instrument, but may, in the absence of bad faith on its part, accept and rely upon the same as conclusive evidence of the truth and accuracy of such statements. In the event the Trustee shall make any investigation into the content of any such certifications, the Trustee shall not thereby be deemed to have expanded the scope of its duties. (b) Reliance Upon Opinions of Counsel. The Trustee may consult with its counselor counsel to the City, with regard to legal questions and the opinion of such counsel shall be full and complete authorization and protection in respect of any action taken or suffered by it hereunder in good faith in accordance therewith. Before being required to take any action, the Trustee may require an opinion of Independent Counsel acceptable to the Trustee which opinion shall be made available to the other parties hereto upon request, which counsel may be counsel to any of the parties hereto, or a verified certificate of any party hereto, or both, concerning the proposed action and the opinion of such counsel shall be full and complete authorization and protection in respect of any action taken by the Trustee in reliance thereon. (c) Reliance Upon Requested Certificates. Whenever in the administration of its duties under this Trust Agreement, the Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking or suffering any action hereunder, such matter (unless other evidence in respect thereof be herein specifically prescribed), in the absence of bad faith on its part, 40 J /._l.. ! l.,;'. /'--:r- DOCSOC/l148399v31024036-0033 shall be deemed to be conclusively proved and established by the certificate of the City Representative or the Authority Representative and such certificate shall be full warranty to the Trustee for any action taken or suffered under the provisions of this Trust Agreement in reliance thereon, but in its discretion the Trustee may, in lieu thereof, accept other evidence of such matter or may require such additional evidence as to it may seem reasonable, provided however that the duties and obligations of the Trustee shall not be deemed expanded thereby. Section 9.04. Rights of the Trustee. (a) Ownership of Certificates. The Trustee may become an Owner with the same rights it would have if it were not Trustee; may acquire and dispose of other bonds or evidence of indebtedness of the City with the same rights it would have if it were not the Trustee; and may act as a 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 Owners, whether or not such committee shall represent the Owners of the majority in principal amount of the Certificates then Outstanding. (b) Attornevs. Agents. Receivers. The Trustee may execute any of the trusts or powers hereof and perform the duties required of it hereunder by or through attorneys, agents, or receivers, shall not be responsible for the actions or omissions of such attorneys, agents or receivers if appointed by it with reasonable care, and shall be entitled to advice of counsel concerning all matters of trust and its duty hereunder. (c) Funds and Accounts. In addition to the funds and accounts established or required to be established pursuant to this Trust Agreement, the Trustee may establish such additional funds and accounts as it deems necessary or appropriate to perform its duties hereunder, and shall have the right to close such accounts in its discretion. Section 9.05. Standard of Care. The Trustee shall not be liable in connection with the performance of its duties hereunder, except for its own negligence or willful misconduct. The Trustee shall only perform those duties specifically set forth herein and no implied duties, covenants or obligations whatsoever shall be read into this Trust Agreement. In the event of and during the continuance of an Event of Default, the Trustee shall exercise such care in performing its duties hereunder as a prudent man would exercise in such event. Section 9.06. Compensation of the Trustee. As an Additional Payment under Section 4.]] of the Lease, the City -shall, rrom time to time, pay such amounts as are specified in any written agreement with the City and, on demand, pay to the Trustee to the extent not covered by such agreement reasonable compensation for its services and the services of any accountants, consultants, attorneys and other experts as may be engaged by the Trustee to provide services under this Trust Agreement pursuant to a written agreement between the City and the Trustee. The City's obligation hereunder shall remain valid and binding notwithstanding maturity and payment of the Certificates or resignation and removal of the Trustee. Section 9.07. Indemnification of Trustee. The City shall, to the extent permitted by law, indemnify and save the Trustee and its officers, directors, agents, and employees harmless from and against (whether or not litigated) all claims, losses, costs, expenses, liability and damages, including legal fees and expenses, arising out of (i) the use, maintenance, condition or management of, or from any work or thing done on, the Leased Premises by the City, (ii) any breach or default on the part of 4] DOCSOCIl148399v3/024036-0033 -' .." the City in the perfonnance of any of its obligations under this Trust Agreement and any other agreement made and entered into for purposes of the Leased Premises, (iii) any act of negligence of the City or of any of its agents, contractors, servants, employees or licensees with respect to the Leased Premises, (iv) any act of negligence of any assignee of, or purchaser from, the City or of any of its or their agents, contractors, servants, employees or licensees with respect to the Leased Premises, (v) the construction or acquisition of the Project or the expenditure of Project Costs, or (vi) the exercise and perfonnance by the Trustee of its powers and duties hereunder or any related document, (vii) the sale of the Certificates and the carrying out of any of the transactions contemplated by the Certificates or this Trust Agreement, or (viii) any untrue statement or alleged untrue statement of any material fact or omission or alleged omission to state a material fact necessary to make the statements made in light of the circumstances in which they were made, not misleading in any official statement or other disclosure document utilized in connection with the sale of the Certificates. The indemnification set forth in this Section 9.07 shall extend to the Trustee's officers, agents, employees, successors and assigns. No indemnification will be made under this Section or elsewhere in this Trust Agreement or other agreements for willful misconduct or negligence by the Trustee, its officers, agents, employees, successors or assigns. The City's obligations hereunder shall remain valid and binding notwithstanding maturity and payment of the Certificates, or the resignation or removal of the Trustee. In accepting the trust hereby created, the Trustee acts solely as Trustee for the Owners and not in its individual capacity, and all persons, including, without limitation, the Owners, Authority and the City, having any claim against the Trustee arising from the Trust Agreement shall look only to the funds and accounts held by the Trustee hereunder for payment, except as otherwise provided herein or where the Trustee has breached its standard of care as described in Section 9.05 hereof. Under no circumstances shall the Trustee be liable in its individual capacity for the obligations evidenced by the Certificates. No provision of this Trust Agreement shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the perfonnance of its duties hereunder or in the exercise of any of its rights or powers. The Trustee shall not be 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 in aggregate principal amount of the Certificates at the time Outstanding relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee or in the exercise of any right hereunder. The Trustee is authorized and directed to execute, in its capacity as Trustee, the Assignment Agreement. Every provision of this Trust Agreement, the Lease, the Site Lease and the Assignment Agreement relating to the conduct or liability of the Trustee shall be subject to the provisions of this Trust Agreement, including without limitation, this Article IX. The Trustee shall have no responsibility with respect to any infonnation, statement or recital in any official statement, offering memorandum or any other disclosure material prepared or distributed with respect to the Certificates. 42 00C50CII148399v3/024036-0033 , ~ , .~ / The Trustee shall not to be deemed to have knowledge of any Event of Default hereunder or under the Lease unless it has actual knowledge thereof at its Principal Office. Before taking any action under Article XIII or this Article at the request of the Owners or Insurer, the Trustee may require that a satisfactory indemnity bond be furnished by the Owners or such Insurer for the reimbursement of all expenses to which it may be put and to protect it against all liability, except liability which is adjudicated to have resulted from its negligence or willful misconduct in connection with any action so taken. Section 9.08. Trustee's Disclaimer of Warranties. THE TRUSTEE MAKES NO WARRANTY OR REPRESENTATION, EITHER EXPRESS OR IMPLIED, AS TO THE VALUE, DESIGN, CONDITION, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OR FITNESS FOR THE USE CONTEMPLATED BY THE CITY OF THE LEASED PREMISES, OR ANY PORTION THEREOF. THE CITY ACKNOWLEDGES THAT THE CITY IS LEASING THE LEASED PREMISES AS IS. In no event shall the Trustee be liable for incidental, indirect, special or consequential damages, in connection with or arising out of the Lease, the Site Lease, the Assignment Agreement or this Trust Agreement for the existence, furnishing, functioning or the City's use and possession of the Leased Premises. ARTICLE X MODIFICATION OR AMENDMENT OF AGREEMENTS Section 10.0 I. Amendments Permitted. (a) With Consent. This Trust Agreement and the rights and obligations of the Owners, and the Lease and the rights and obligations of the parties thereto, may be modified or amended at any time, with notice to any rating agency then rating the Certificates by a supplemental agreement or amendment thereto which shall become effective when the written consents of each Insurer (exclusive of any Insurer which is in default in its payment obligations under its Insurance Policy) and Owners of a majority in aggregate principal amount of the Certificates then Outstanding, exclusive of Certificates disqualified as provided in Section 10.03 hereof, shall have been filed with the Trustee. No such modification or amendment shall: (i) extend or have the effect of extending the fixed maturity of any Certificate or reducing the interest rate with respect thereto or extending the time of payment of interest, or reducing the amount of principal thereof or reducing any premium payable upon the prepayment thereof, or diminish the security afforded by an Insurance Policy without the express consent of the Owner of such Certificate and the Insurer issuing such Insurance Policy (exclusive of any Insurer which is in default in its payment obligations under its Insurance Policy), or (ii) reduce or have the effect of reducing the percentage of Certificates required for the affirmative vote or written consent to an amendment or modification of the Lease, or (iii) modify any of the rights or obligations of the Trustee without its written assent thereto, or 43 / - (;~ ~) DOCSOCIl148399v3/024036-0033 (iv) amend this Section 10.01 without the prior written consent of the Owners of all Certificates then outstanding and each Insurer (exclusive of any Insurer which is in default in its payment obligations under its Insurance Policy). The Trustee shall have the right to require such opinions of counsel as it deems necessary concerning (i) the lack of material adverse effect of the amendment on Owners and (ii) the fact that the amendment will not affect the tax status of interest with respect to the Certificates. Any such supplemental agreement or amendments thereto shall become effective as provided in Section 10.02 hereof. (b) Without Consent. This Trust Agreement and the rights and obligations of the Owners, and the Lease and the rights and obligations of the parties thereto, may be modified or amended at any time by a supplemental agreement or amendments thereto, with the prior written consent of each Insurer (exclusive of any Insurer which is in default in its payment obligations under its Insurance Policy) without the consent of any such Owners, but only to the extent permitted by law and only: (i) to add to the covenants and agreements of the City hereunder, (ii) to cure, correct or supplement any ambiguous or defective provision contained herein or therein, (iii) in regard to matters arising hereunder or thereunder, as the parties hereto or thereto may deem necessary or desirable (which may be based upon opinions as provided in Section 9.03(b)), shall not adversely affect the interest ofthe Owners or the Insurers, (iv) to substitute the Leased Premises, or a portion thereof, in accordance with Sections 3.5 and 7.12 of the Lease, (v) to make such additions, deletions or modifications as may be necessary or appropriate to assure the exclusion from gross income for federal income tax purposes of the interest component of Lease Payments and the interest payable with respect to the Certificates, (vi) to add to the rights of the Trustee, (vii) to provide for the execution and delivery of Additional Certificates in accordance with the provisions of Section 2.12 hereof. No such modification or amendment, however, shall modify any of the rights or obligations of the Trustee without its written assent thereto. Any such supplemental agreement shall become effective upon execution and delivery by the parties hereto or thereto as the case may be. Section 10.02. Procedure for Amendment with Written Consent of the Owners. This Trust Agreement or the Lease may be amended by supplemental agreement as provided in this Section 10.02 in the event the consent of the Owners is required pursuant to Section 10.01(a) hereof. A copy of such supplemental agreement, together with a request to the Owners for their consent thereto, shall be mailed by the Trustee to each Owner of a Certificate at his address as set forth in the Certificate registration books maintained pursuant to Section 2.09 hereof, but failure to receive copies of such 44 / v DOCSOC/l148399v3/024036-0033 supplemental agreement and request so mailed shall not affect the validity of the supplemental agreement when assented to as in this Section provided. Such supplemental agreement shall not become effective unless there shall be filed with the Trustee the written consent of the Owners of at least a majority in aggregate principal amount of the Certificates then Outstanding (exclusive of Certificates disqualified as provided in Section 10.03 hereof) and notices shall have been mailed as hereinafter in this Section provided. Any such consent shall be binding upon the Owner of the Certificate giving such consent and on any subsequent Owner (whether or not such subsequent Owner has notice thereof) unless such consent is revoked in writing by the Owner giving such consent or a subsequent Owner by filing such revocation with the Trustee prior to the date when the notice hereinafter in this Section provided for has been mailed. After the Owners of the required percentage of Certificates shall have filed their consent to such supplemental agreement, the Trustee shall mail a notice to the Owners of the Certificates in the manner hereinbefore provided in this Section for the mailing of such supplemental agreement, stating in substance that such supplemental agreement has been consented to by the Owners of the required percentage of Certificates and will be effective as provided in this Section (but failure to mail copies of said notice shall not affect the validity of such supplemental agreement or consents thereto). A record, consisting ofthe papers required by this Section to be filed with the Trustee, shall be proof of the matters therein stated until the contrary is proved. The Trustee may obtain and conclusively rely on an opinion of counsel with regard to such matters. Section 10.03. Disqualified Certificates. Certificates owned or held by or for the account of the City or the Authority or by any person directly or indirectly controlled or controlled by, or under direct or indirect common control with the City or the Authority (except any Certificates held in any pension or retirement fund) shall not be deemed Outstanding for the purpose of any vote, consent, waiver or other action or any calculation of Outstanding Certificates provided for in this Trust Agreement, and shall not be entitled to vote upon, consent to, or take any other action provided for in this Trust Agreement. The City or the Trustee may adopt appropriate regulations to require each Owner, before his consent provided for in this Article X shall be deemed effective, to reveal if the Certificates as to which such consent is given are disqualified as provided in this Section 10.03 hereof. Upon request of the Trustee, the City and Authority shall specify to the Trustee those Certificates disqualified pursuant to this Section and the Trustee may conclusively rely on such certificate. Section 10.04. Effect of Supplemental Agreement. From and after the time any supplemental agreement becomes effective pursuant to this Article X, this Trust Agreement or the Lease, as the case may be, shall be deemed to be modified and amended in accordance therewith, the respective rights, duties and obligations of the parties hereto or thereto and all Owners of Certificates Outstanding, as the case may be, shall thereafter be detennined, exercised and enforced hereunder subject in all respects to such modification and amendment, and all the tenns and conditions of any supplemental agreement shall be deemed to be part of the tenns and conditions of this Trust Agreement or the Lease, as the case may be, for any and all purposes. Section 10.05. Endorsement or Replacement of Certificates Delivered After Amendments. The Trustee may detennine that Certificates delivered after the effective date of any action taken as provided in this Article X shall bear a notation, by endorsement, in fonn approved by the Trustee, as to such action. In that case, upon demand of the Owner of any Outstanding Certificate at such 45 /-/-'/ DOCSOCII148399v3/024036-0033 effective date and presentation of his Certificate for such purpose at the Principal Office, a suitable notation shall be made on such Certificate. The Trustee may determine that new Certificates, so modified as in the opinion of the Trustee is necessary to conform to such Owner's action, shall be prepared, executed and delivered. In that case, upon demand of the Owner of any Certificate then Outstanding, such new Certificate shall be exchanged in the Principal Office without cost to such Owner, for a Certificate of the same character then Outstanding, upon surrender of such Certificate. Section 10.06. Amendatory Endorsement of Certificates. Subject to Section 10.0 I hereof, the provisions ofthis Article X shall not prevent an Owner from accepting any amendment as to the particular Certificates held by him, provided that due notification thereof is made on such Certificates. Section 10.07. Copies of Amendments Delivered to Rating Agencies. Copies of any modifications or amendments to this Agreement, the Lease, the Site Lease or the Assignment Agreement shall be delivered by the City to any rating agency then rating the Certificates at least 10 days prior to the effective date thereof. ARTICLE XI COVENANTS; NOTICES Section 11.01. Compliance With and Enforcement of the Lease. The City covenants and agrees with the Owners to perform all obligations and duties imposed on it under the Lease. The Authority covenants and agrees with the Owners to perform all obligations and duties imposed on it under the Lease. The City will not do or permit anything to be done, or omit or refrain from doing anything, in any case where any such act done or permitted to be done, or any such omission of or refraining from action, would or might be a ground for cancellation or termination of the Lease by the Authority thereunder. The Authority and the City, immediately upon receiving or giving any notice, communication or other document in any way relating to or affecting their respective estates, or either of them, in the Leased Premises, which mayor can in any manner affect such estate of the City, will deliver the same, or a copy thereof, to the Trustee. Section 11.02. Pavment of Taxes. The City shall pay all taxes as provided in Section 7.7(b) of the Lease. Section 11.03. Observance of Laws and Regulations. The City will well and truly keep, observe and perform all valid and lawful obligations or regulations now or hereafter imposed on it by contract, or prescribed by any law of the United States, 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 hereafter acquired by the City, including its right to exist and carry on business as a municipal corporation, to the end that such rights, privileges and franchises shall be maintained and preserved, and shall not become abandoned, forfeited or in any manner impaired. Section 11.04. Prosecution and Defense of Suits. The City shall promptly, and also upon request of the Trustee, an Insurer or any 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 Leased Premises, 46 DOCSOC/l148399v3/024036-0033 /~/ ., whether now existing or hereafter developing and shall prosecute all such suits, actions and other proceedings as may be appropriate for such purpose. Section 11.05. Citv Budgets. In accordance with Section 4.7 of the Lease, the City Representative shall certify to the Trustee on or before August I of each year that the City has included all Lease Payments (other than Lease Payments of advance rental), Additional Payments due under the Lease in the Fiscal Year covered by its annual budget and the amount so included. If the City fails to certify that it has included all such Lease Payments and Additional Payments in such annual budget, the Trustee shall promptly provide the City written notice specifying that the City has failed to observe and perform its covenant and agreement in such Section 4.7 and requesting that such failure be remedied within 30 days, or such failure shall constitute an Event of Default under Section 9.1 (b) of the Lease. The Trustee shall forward a copy of such notice to the Authority and to the Insurers. Upon receipt of such notice, the City shall notify the Trustee of the proceedings proposed to be taken by the City, and shall keep the Trustee advised of all proceedings thereafter taken by the City. Section 11.06. Further Assurances. The Authority and the City will make, execute and deliver any and all such further resolutions, instruments and assurances as may be reasonably necessary or proper to carry out the intention or to facilitate the performance of this Agreement, and for the better assuring and confirming unto the Owners the rights and benefits provided herein. Section 11.07. Continuing Disclosure. The City hereby covenants and agrees that it will comply with and carry out all of the provisions of the Continuing Disclosure Agreement. Notwithstanding any other provision of this Trust Agreement, failure of the City to comply with the Continuing Disclosure Agreement shall not be considered an Event of Default hereunder; 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 its obligations under this Section and the Continuing Disclosure Agreement. ARTICLE Xli LIMITATION OF LIABILITY Section 12.01. Limited Liabilitv of the Citv. Except for the payment of Lease Payments, Additional Payments and Prepayments when due in accordance with the Lease and the performance of the other covenants and agreements of the City contained herein and in the Lease, the City shall have no obligation or liability to any of the other parties hereto or to the Owners with respect to this Trust Agreement or the terms, execution, delivery or transfer of the Certificates, or the distribution of Lease Payments to the Owners by the Trustee. Section 12.02. No Liabilitv of the Citv or Authoritv for Trustee Performance. Except as expressly provided herein, neither the City nor the Authority shall have any obligation or liability to any other parties hereto or to the Owners with respect to the performance by the Trustee of any duty imposed upon it under this Trust Agreement. (a) No Investment Advice. The Trustee shall have no obligation or responsibility for providing information to the Owners concerning the investment character of the Certificates. 47 DOCSOC/l148399v 3/024036-003 3 / - (,/'7 (b) Sufficiencv of this Trust Agreement or Lease Pavments. The Trustee makes no representations as to the validity or sufficiency of the Certificates, shall incur no responsibility in respect thereof, other than in connection with the duties or obligations herein or in the Certificates assigned to or imposed upon it. The Trustee shall not be responsible or liable for the sufficiency or enforceability of the Lease, the Site Lease or the Assignment Agreement. The Trustee shall not be liable for the sufficiency or collection of any Lease Payments or other moneys required to be paid to it under the Lease (except as provided in this Trust Agreement), its right to receive moneys pursuant to said Lease, or the value of or title to the Leased Premises. (c) Actions of Authoritv and Citv. The Trustee shall have no obligation or liability to any of the other parties or the Owners with respect to this Trust Agreement or failure or refusal of any other party to perform any covenant or agreement made by any of them under this Trust Agreement or the Lease, but shall be responsible solely for the performance of the duties and obligations expressly imposed upon it hereunder as provided in Section 9.05. (d) Recitals and Agreements of Authoritv and Citv. The recitals of facts, covenants and agreements herein and in the Certificates contained shall be taken as statements, covenants and agreements of the City or the Authority (as the case may be), and the Trustee assumes no responsibility for the correctness ofthe same. Section 12.03. Limitation of Rights to Parties and Certificate Owners. Nothing in this Trust Agreement or in the Certificates expressed or implied is intended or shall be construed to give any person other than the City, the Authority, the Trustee, the Insurers and the Owners, any legal or equitable right, remedy or claim under or in respect of this Trust Agreement or any covenant, condition or provision hereof; and all such covenants, conditions and provisions are and shall be for the sole and exclusive benefit of the City, the Authority, the Trustee, the Insurers and the Owners. Section 12.04. No Liabilitv of Authoritv to the Owners. Except as expressly provided herein, the Authority shall not have any obligation or liability to the Owners with respect to the payment when due of the Lease Payments by the City or with respect to the observance or performance by the City of the other agreements, conditions, and covenant imposed upon the City by the Lease or by this Trust Agreement. ARTICLE XIII EVENTS OF DEF AUL T AND REMEDIES OF CERTIFICATE OWNERS Section 13.01. Assignment of Rights. The parties hereto acknowledge that pursuant to the Assignment Agreement the Authority has transferred, assigned and set over to the Trustee for the benefit of the Owners, certain of the Authority's rights under the Lease. Section 13.02. Events of Default. (a) Remedies. If an Event of Default shall happen, then, and in each and every such case during the continuance of such Event of Default, subject to the provisions of Section 13.04 hereof, the Trustee may exercise any and all remedies available pursuant to law or granted pursuant to the Lease; provided, however, that notwithstanding anything herein or in the Lease to the contrary, THERE SHALL BE NO RIGHT UNDER ANY CIRCUMSTANCES TO ACCELERATE THE MATURlTlES OF THE CERTIFICATES OR OTHERWISE TO DECLARE ANY LEASE 48 DOCSOCIl148399v3/024036-0033 / -I.~'; , (/ PAYMENTS NOT THEN IN DEFAULT TO BE IMMEDIATELY DUE AND PAYABLE. Section 9.2 of the Lease is hereby incorporated by reference. (b) Actual Knowledge. The Trustee shall not be deemed to have knowledge of any Event of Default unless and until the trust officer responsible for the administration of this Trust Agreement shall have actual knowledge thereof, or shall have received written notice thereof at the Principal Office. Section 13.03. Aoolication of Funds. All moneys received by the Trustee pursuant to any right given or action taken under the provisions of this Article XIII or of Article IX of the Lease, shall be deposited into the Lease Payment Fund and be applied by the Trustee after payment of all amounts due and payable under Sections 9.06 and 9.07 hereof and Section 4. I I of the Lease in the following order upon presentation of the Certificates, and the stamping thereon of the payment if only partially paid, or upon the surrender thereof if fully paid - First, Costs and Expenses: to the payment of the costs, fees and expenses of the Trustee in declaring such Event of Default and in performing its duties hereunder, including reasonable compensation to its agents, attorneys and counsel and then to any such amounts incurred by the Owners; Second, Interest: to the payment to the persons entitled thereto of all installments of interest then due in the order of the maturity of such installment, and, if the amount available shall not be sufficient to pay in full any installment or installments maturing on the same date, then to the payment thereof ratably according to the amounts due thereon, to the persons entitled thereto, without any discrimination or preference; Third, Principal: to the payment to the persons entitled thereto of the unpaid principal with respect to any Certificates which shall have become due, whether at maturity or by call for prepayment, in the order of their due dates, with interest on the overdue principal and interest at a rate equal to the rate paid with respect to the Certificates and, if the amount available shall not be sufficient to pay in full all the amounts due with respect to the Certificates on any date, 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 Fourth, Insurers: to the extent not included in clauses First, Second or Third above, to the payment of all amounts then due to the Insurers, as certified in writing to the Trustee, and, to the extent that the amount available is not sufficient to pay in full all the amounts due to the Insurers, then to the payment thereof to each Insurer ratably. Section 13.04. Institution of Legal Proceedings. If one or more Events of Default shall happen and be continuing, with the prior written consent of the Insurers not then in default under their Insurance Policies, the Trustee may, and upon the written request of the Owners of a majority in principal amount ofthe Certificates then Outstanding, and upon being indemnified to its satisfaction therefor, shall, proceed to protect or enforce its rights or the rights of the Owners by a suit in equity or action at law, either for the specific performance of any covenant or agreement contained herein or in the Lease, or in aid of the execution of any power herein granted, or by mandamus or other appropriate proceeding for the enforcement of any other legal or equitable remedy as the Trustee shall deem most effectual in support of any of its rights or duties hereunder; provided that such written request shall not be otherwise than in accordance with provisions of law and this Trust 49 DOCSOCII148399v3/024036-0033 ~/ I Agreement and that the Trustee shall have the right to decline to follow any such written request if the Trustee shall be advised by counsel that the action or proceeding so requested may not be taken lawfully or if the Trustee in good faith shall determine that the action or proceeding so requested would be unjustly prejudicial to the Certificate Owners not a party to such written request or expose the Trustee to liability. In no event shall counsel to the Trustee be deemed counsel to the Owners, and any communications between the Trustee and its counsel shall be deemed confidential and privileged. Section 13.05. Non-Waiver. Nothing in this Article XlII or in any other provision of this Trust Agreement or in the Certificates shall affect or impair the obligation of the City to payor prepay the Lease Payments as provided in the Lease. So long as an Insurer is not in default in its payment obligations under its 2004 Insurance Policy, the Trustee shall not waive any default or breach of duty or contract hereunder without the prior written consent of such Insurer. No delay or omission of the Trustee or of any Owner of any of the Certificates to exercise any right or power arising upon the happening of any Event of Default shall impair any such right or power or shall be construed to be a waiver of any such Event of Default or an acquiescence therein, and every power and remedy given by this Article XIII to the Trustee or to the Owners may be exercised from time to time and as often as shall be deemed expedient by the Trustee or the Owners. Section 13.06. Remedies Not Exclusive. No remedy herein conferred upon or reserved to the Trustee or to the Owners is intended to be exclusive of any other remedy, and every such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing, at law or in equity or by statute or otherwise. Section 13.07. Power of Trustee to Control Proceedings. In the event that the Trustee, upon the happening of an Event of Default, shall have taken any action, by judicial proceedings or otherwise, pursuant to its duties hereunder, whether upon its own discretion, upon the request of an Insurer, or upon the request of the Owners of a majority in principal amount of the Certificates then Outstanding, it shall have full power, in the exercise of its discretion for the best interest of the Owners ofthe Certificates, with respect to the continuance, discontinuance, withdrawal, compromise, settlement or other disposal of such action; provided, however, that the Trustee shall not, unless there no longer continues an Event of Default, discontinue, withdraw, compromise or settle, or otherwise dispose of any litigation pending at law or in equity, if at the time there has been filed with it a written request signed by the Owners of at least a majority in principal amount of the Outstanding Certificates hereunder opposing such discontinuance, withdrawal, compromise, settlement or other disposal of such litigation. Section 13.08. Limitation on Certificate Owners' Right to Sue. No Owner of any Certificate executed hereunder shall have the right to institute any suit, action or proceeding at law or in equity, for any remedy under or upon this Trust Agreement, unless (a) such Owner shall have previously given to the Trustee written notice of the occurrence of an Event of Default under the Lease; (b) so long as the Insurer of such Certificate is not in default in its payment obligations under its Insurance Policy, such Owner shall have obtained such Insurer's consent to such institution; (c) the Owners ofa majority in aggregate principal amount of all the Certificates then Outstanding shall have made written request upon the Trustee to exercise the powers hereinbefore granted or to institute such action, suit or proceeding in its own name; (d) said Owners shall have tendered to the Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request; (e) the Trustee shall have refused or omitted to comply with such request for a period of 60 days after such written request shall have been received by, and said tender of indemnity shall 50 DOC50C/1148399v3/024036-0033 ~ , /'("..,,1- have been made to, the Trustee; and (f) there shall have been a default in the payment of such Owner's proportionate interest in the Lease Payments as the same become due. Such notification, request, tender of indemnity, refusal or omission, and default are hereby declared, in every case, to be conditions precedent to the exercise by any Owner of any remedy hereunder; it being understood and intended that no one or more Owners shall have any right in any manner whatever by his or their action to enforce any right under this Trust Agreement, except in the manner herein provided and for the equal benefit of all Owners of the Outstanding Certificates. The right of any Owner of any Certificate to receive payment of said Owner's proportionate interest in the Lease Payments as the same become due, or to institute suit for the enforcement of such payment, shall not be impaired or affected without the consent of such Owner, notwithstanding the foregoing provisions of this Section or any other provision of this Trust Agreement. Section 13.09. Agreement to Pav Attornevs' Fees and Expenses. In the event any party to this Trust Agreement should default under any of the provisions hereof and the nondefaulting party should employ attorneys or incur other expenses for the collection of moneys or the enforcement or observance of any obligation or agreement on the part of the defaulting party contained herein, the defaulting party agrees that it will on demand therefor pay to the nondefaulting party the reasonable fees of such attorneys and such other expenses so incurred by the nondefaulting party. Section 13.10. Insurers' Rights. Anything in this Trust Agreement to the contrary notwithstanding, upon the occurrence and continuance of an Event of Default, each Insurer may exercise its rights as the deemed Owner of the Certificates insured by it as set forth in Section 14.12 hereof for purposes of directing the Trustee in the exercise of all rights and remedies granted to the Owners or to the Trustee for the benefit of the Owners under this Trust Agreement. ARTICLE XIV MISCELLANEOUS Section 14.0 I. Defeasance. (a) Methods. If and when any Outstanding Certificates shall be paid and discharged in anyone or more of the following ways: (i) Pavment or Prepavment: by well and truly paying or causing to be paid the principal, interest and prepayment premiums (if any) with respect to such Certificates Outstanding, as and when the same become due and payable: (ii) Cash: if prior to maturity and having given at least thirty (30) days prior written notice of prepayment by depositing with the Trustee, in trust, concurrent with the giving of such notice, an amount of cash which (together with cash then on deposit in the Lease Payment Fund and the Reserve Fund together with the interest to accrue thereon, in the event of payment or provision for payment of all Outstanding Certificates) is sufficient to pay such Certificates Outstanding, including all principal and interest and premium, if any; or 51 DOCSOCII148399v3/024036-0033 / "7. I..... (iii) Government Obligations: by irrevocably depositing with the Trustee, in trust, Government Obligations together with cash, if required, in such amount as will, in the opinion of an independent certified public accountant, together with interest to accrue thereon (and, in the event of payment or provision for payment of all Outstanding Certificates, moneys then on deposit in the Lease Payment Fund and the Reserve Fund together with the interest to accrue thereon), be fully sufficient to pay and discharge such Certificates (including all principal and interest represented thereby and prepayment premiums if any) at or before their maturity or prepayment date; and all other amounts due hereunder have been paid in full, then, notwithstanding that any Certificates shall not have been surrendered for payment, all obligations of the Authority, the Trustee and the City with respect to such Certificates shall cease and terminate, except only the obligation of the City and the Authority to comply with the provisions of Sections 8.07 and 8.08 hereof and the obligation of the Trustee to payor cause to be paid, from Lease Payments paid by or on behalf of the City from funds deposited pursuant to paragraphs (ii) and (iii) of this Section, to the Owners of the Certificates not so surrendered and paid all sums due with respect thereto, and in the event of deposits pursuant to paragraphs (ii) and (iii) of this Section, the Certificates shall continue to represent direct and proportionate interests of the Owners thereof in Lease Payments under the Lease. Notwithstanding anything herein to the contrary, in the event that the principal and/or interest with respect to any Certificates shall be paid by an Insurer pursuant to an Insurance Policy, the Certificates shall remain Outstanding for all purposes, not be defeased or otherwise satisfied and not be considered paid by the City, and the assignment and pledge of the Lease Payments and all covenants, agreements and other obligations of the City to the Owners shall continue to exist and shall run to the benefit of such Insurer, and such Insurer shall be subrogated to the rights of such Owners. (b) Surplus Monevs. Any funds held by the Trustee, at the time of payment or provision for payment of all Outstanding Certificates pursuant to the one of the procedures described in paragraphs (a)(i) through (a)(iii) of this Section, which are not required for the payment to be made to the Owners, shall be paid over to the City, after the payment of any amounts due to the Trustee pursuant to Sections 9.06 and 9.07 hereof, any amounts due and owing to the Insurers, and any other Additional Payments due under the Lease. (c) Surviving Provisions. Notwithstanding the satisfaction and discharge hereof, the Trustee shall retain such rights, powers and privileges hereunder as may be necessary or convenient for the payment of the principal, interest and prepayment premium, if any, on the Certificates and for the registration, transfer and exchange of the Certificates. (d) Opinions and Reports. Prior to any defeasance becoming effective under this Section, the City shall cause to be delivered (i) an executed copy of a report, addressed to the Trustee, the City and the Insurer of the Certificates being defeased, in form and substance acceptable to the City and such Insurer of a nationally recognized firm of certified public accountants, verifYing that the Government Obligations and cash, if any, satisfy the requirements of Section I4.01(a) above, (ii) a copy of the escrow deposit agreement entered into in connection with such defeasance, which escrow deposit agreement shall be in form and substance acceptable to such Insurer, and (iii) a copy of an opinion of Special Counsel, dated the date of such defeasance and addressed to the Trustee, the 52 DOCSOCIl148399v3/024036-0033 I '/,/ City and such Insurer, in form and substance acceptable to the City and such Insurer, to the effect that such Certificates are no longer Outstanding under the Trust Agreement. Section 14.02. Non-Presentment of Certificates. In the event any Certificate shall not be presented for payment when the principal with respect thereto becomes due, either at maturity, or at the date fixed for prepayment thereof, if moneys sufficient to pay such Certificate shall have been deposited in the Prepayment Fund or Lease Payment Fund, as applicable, all liability of the City and the Trustee to the Owner thereof for payment of such Certificate shall forthwith cease, terminate and be completely discharged, and thereupon it shall be the duty of the Trustee to hold such moneys, without liability for interest thereon, for the benefit of the Owner of such Certificate who shall thereafter be restricted exclusively to such moneys, for any claim of whatever nature on his or her part under this Trust Agreement or on, or with respect to, said Certificate. Any moneys so deposited with and held by the Trustee not so applied to the payment of Certificates within two (2) years after the date on which the same shall have become due shall be paid by the Trustee to the City, free /Tom the trusts created by this Trust Agreement. Prior to forwarding any such moneys to the City, the Trustee may publish notice of its intention to transfer such funds in The Bond Buyer or another financial newspaper of general circulation in New York, New York. In addition, Trustee shall be indemnified from and against any and all liabilities to third parties resulting from its actions under this Section. Thereafter, Owners shall be entitled to look only to the City for payment, and then only to the extent of the amount so repaid by the Trustee. The City shall not be liable for any interest on the sums paid to it pursuant to this section and shall not be regarded as a trustee or trustees of such money. Section 14.03. Acquisition of Certificates bv Citv. All Certificates acquired by the City, whether by purchase, gift or otherwise, shall be surrendered by the City to the Trustee for cancellation. Section 14.04. Records. The Trustee shall keep complete and accurate records of all moneys received and disbursed by it under this Trust Agreement, which shall be available for inspection by the City, the Authority and any Owner, or the agent of any of them, at any time during regular business hours upon reasonable prior notice. Section 14.05. Notices. Except as specifically provided otherwise in this Trust Agreement, all written notices to be given under this Trust Agreement shall be given by mail or personal delivery to the party entitled thereto at its address set forth below, or at such address as the party may provide to the other party in writing from time to time. Notice shall be deemed to have been received upon the earlier of actual receipt or five Business Days after deposit in the United States mail, in certified form, postage prepaid or, in the case of personal delivery, upon delivery to the address set forth below: If to the City: City ofChula Vista 276 Fourth A venue Chula Vista, California 91910 Attention: Director of Finance If to the Authority: Chula Vista Public Financing Authority 276 Fourth Avenue Chula Vista, California 91910 53 /-15 DOC50C/1148399v3/024036-0033 Attention: Executive Director If to the Trustee: The Bank of New York Trust Company, N,A, 700 South Flower Street, Suite 500 Los Angeles, California 90017 Attention: Corporate Trust Services If to S&P: Standard & Poor's Ratings Services 55 Water Street New York, New York 10004 Attention: Public Finance Department If to the 2004 Insurer: MBIA Insurance Corporation I 13 King Street Armonk, New York 10504 Attention: Surveillance [fto the 2004 Insurer: [TO COME] Section 14.06. Governing Law. This Trust Agreement shall be construed and governed in accordance with the laws of the State. Section 14.07. Binding Effect: Successors. This Trust Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and assigns. Whenever in this Trust Agreement either the Authority, the City or the Trustee is named or referred to, such reference shall be deemed to include the successors or assigns thereof and all the covenants and agreements in this Trust Agreement contained by or on behalf of the Authority, the City or the Trustee shall bind and inure to the benefit of the respective successors and assigns thereof whether so expressed or not. Section 14.08. Execution in Counterparts. This Trust 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 agreement. Section 14.09. Headings. The headings or titles of the several Articles and Sections hereof, and any table of contents appended to copies hereof, shall be solely for convenience of reference and shall not affect the meaning, construction or effect of this Trust Agreement. All references herein to "Articles", "Sections" and other subdivisions are to the corresponding Articles, Sections or subdivisions of this Trust Agreement; and the words "'herein," "hereof," "hereunder" and other words of similar import refer to this Trust Agreement as a whole and not to any particular Article, Section or subdivision hereof. Section 14.10. Waiver of Notice. Whenever in this Trust Agreement 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 case the giving or receipt of such notice shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. Section 14.1 I. Separabilitv of Invalid Provisions. In case anyone or more of the provisions contained in this Trust Agreement or in the Certificates shall for any reason be held to be invalid, illegal or unenforceable in any respect, then such invalidity, illegality or unenforceability shall not 54 / -7C. DOCSOC/1148399v3/024036-0033 affect any other provision of this Trust Agreement, and this Trust Agreement shall be construed as if such invalid or illegal or unenforceable provision had never been contained herein. The parties hereto hereby declare that they would have entered into this Trust Agreement and each and every other section, paragraph, sentence, clause or phrase hereof and authorized the delivery of the Certificates pursuant thereto irrespective of the fact that anyone or more sections, paragraphs, sentences, clauses or phrases of this Trust Agreement may be held illegal, invalid or unenforceable. Section 14.12. Insurers to be Deemed Owners: Rights of the Insurers. Each Insurer shall be recognized as the Owner of each Certificate insured by it for the purposes of exercising all rights and privileges available to Certificate Owners. An Insurer shall have the right to institute any suit, action or proceeding at law or in equity under the same terms as the Owners of the Certificates insured by it in accordance with applicable provisions hereof. The rights granted to an Insurer shall be deemed terminated and shall not be exercisable during any period during which such Insurer shall be in default under the its Insurance Policy. Section 14.13. Claims Under 2004 Insurance Policv: Pavments bv and to 2004 Insurer. As long as the 2004 Insurance Policy shall be in full force and effect, the City and the Trustee agree to comply with the following provisions: (a) In the event that, on the second Business Day, and again on the Business Day, prior to any payment date on the 2004 Certificates, the Trustee has not received sufficient moneys to pay all principal of and interest on the 2004 Certificates due on the second following or following, as the case may be, Business Day, the Trustee shall immediately notify the 2004 Insurer or its designee on the same Business Day by telephone or telegraph, confirmed in writing by registered or certified mail, of the amount of the deficiency. (b) If the deficiency is made up in whole or in part prior to or on the payment date, the Trustee shall so notify the 2004 Insurer or its designee on the same Business Day by telephone or telegraph, confirmed in writing by registered or certified mail. (c) In addition, if a responsible officer of the Trustee has written notice that any Owner has been required to disgorge payments of principal or interest on a 2004 Certificate to a trustee in bankruptcy or creditors or others pursuant to a final judgment by a court of competent jurisdiction that such payment constitutes avoidable preference to such Owner within the meaning of any applicable bankruptcy laws, then the Trustee shall notify the 2004 Insurer or its designee of such fact by telephone or telegraphic notice, confirmed in writing by registered or certified mail. (d) The Trustee is hereby irrevocably designated, appointed, directed and authorized to act as attorney-in-fact for Owners of the 2004 Certificates as follows: (i) If and to the extent there is a deficiency in amounts required to pay interest due with respect to the 2004 Certificates, the Trustee shall (a) execute and deliver to 2004 Insurance Trustee, or its successors under the 2004 Insurance Policy, in form satisfactory to the 2004 Insurance Trustee, an instrument appointing the 2004 Insurer as agent for such Owners in any legal proceeding related to the payment of such interest and an assignment to the 2004 Insurer of the claims for interest to which such deficiency relates and which are paid by the 2004 Insurer, (b) receive as designee of the respective Owners of the 2004 Certificates (and not as Trustee) in accordance with the 55 (- 7/ DOCSOCl1148399v3/024036,0033 terms of the 2004 Insurance Policy payment from the 2004 Insurance Trustee with respect to the claims for interest so assigned, and (c) disburse the same to such respective Owners; and (ii) If and to the extent of a deficiency in amounts required to pay principal of the 2004 Certificates the Trustee shall (a) execute and deliver to the 2004 Insurance Trustee in fonn satisfactory to the 2004 Insurance Trustee an instrument appointing the 2004 Insurer as agent for such Owner in any legal proceeding relating to the payment of such principal and an assignment to the 2004 Insurer of any of the 2004 Certificates surrendered to the 2004 Insurance Trustee of so much of the principal amount thereof as has not previously been paid or for which moneys are not held by the Trustee and available for such payment (but such assignment shall be delivered only if payment from the 2004 Insurance Trustee is received), (b) receive as designee of the respective Owners of the 2004 Certificates (and not as Trustee) in accordance with the tenor of the 2004 Insurance Policy payment therefor from the 2004 Insurance Trustee, and (c) disburse the same to such Owners. (e) Payments with respect to claims for interest and principal due with respect to the 2004 Certificates disbursed by the Trustee from proceeds of the 2004 Insurance Policy shall not be considered to discharge the obligation of the City to make the Lease Payments evidenced by such 2004 Certificates, and the 2004 Insurer shall become the owner of such unpaid 2004 Certificates and claims for the interest in accordance with the tenor of the assignment made to it under the provisions of this subsection or otherwise. (I) Irrespective of whether any such assignment is executed and delivered, the City and the Trustee hereby agree for the benefit of the 2004 Insurer that: (i) They recognize that to the extent the 2004 Insurer makes payments, directly or indirectly (as by paying through the Trustee), on account of principal of or interest due with respect to the 2004 Certificates, the 2004 Insurer will be subrogated to the rights of such Owners to receive the amount of such principal and interest, with interest thereon as provided and solely from the sources stated in this Trust Agreement and the 2004 Certificates; and (ii) They will accordingly pay to the 2004 Insurer the amount of such principal and interest (including principal and interest recovered under subparagraph (ii) of the first paragraph of the 2004 Insurance Policy, which principal and interest shall be deemed past due and not to have been paid), with interest thereon as provided in this Trust Agreement and the 2004 Certificates, but only from the sources and in the manner provided herein for the payment of principal of and interest due with respect to the 2004 Certificates to Owners, and will otherwise treat the 2004 Insurer as the owner of such rights to the amount of such principal and interest. 56 / ! , I . DOCSOC/I 1 48399v3/024036-0033 Section 14.14. Infonnation to be Provided to the 2004 Insurer. (a) The City shall deliver copies of any amendments made to the documents executed in connection with the execution and delivery of the 2004 Certificates which are consented to by the 2004 Insurer to S&P. (b) The City shall deliver to the 2004 Insurer notice of the resignation or removal of the Trustee and the appointment of a successor thereto. (c) The Trustee shall deliver to the 2004 Insurer copies of all notices required to be delivered to 2004 Certificate Owners from the Trustee and, on an annual basis, the City shall deliver to the 2004 Insurer copies of the City's audited financial statements and annual budget. (d) Any notice that is required to be given to an Owner of a 2004 Certificate by the Trustee or to the Trustee by the City pursuant to this Trust Agreement shall also be provided to the 2004 Insurer. (e) In connection with the issuance of Additional Certificates, the City shall deliver to the 2004 Insurer a copy of the disclosure document circulated with respect to such Additional Certificates. 57 !- 7'/ DOC50C/l148399v3/024036-0033 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date and year first above written. THE BANK OF NEW YORK TRUST COMPANY, N.A., as Trustee By: Its: Authorized Officer CHULA VISTA PUBLIC FINANCING AUTHORITY By: Its: Executive Director ATTEST: Secretary CITY OF CHULA VISTA By: Its: Director of Finance ATTEST: City Clerk S-1 DOCSOCIl148399v3/024036-0033 I .' C EXHIBIT A FORM OF 2004 CERTIFICATE UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY (AS DEFINED IN THE TRUST AGREEMENT) TO THE REGISTRAR FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE 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. UNITED STATES OF AMERICA STATE OF CALIFORNIA COUNTY OF SAN DIEGO CITY OF CHULA VISTA 2004 CERTIFICATE OF PARTICIPATION (Civic Center Project - Phase 1) Evidencing the Fractional Interest of the Owner Hereof In Lease Payments to be Made by CITY OF CHULA VISTA As Rental for Certain Project Pnrsuant to a Lease/Purchase Agreement With CHULA VISTA PUBLIC FINANCING AUTHORITY INTEREST RATE % MATURITY DATE March 1,20_ DELIVERY DATE September 16, 2004 CUSIP REGISTERED OWNER: CEDE & CO. PRINCIPAL AMOUNT: AND NOlI 00 DOLLARS THIS IS TO CERTIFY THAT the registered owner named above, or registered assigns, as the Registered Owner of this Certificate of Participation (the "Certificate") is the owner of a fractional and undivided interest in the right to receive certain Lease Payments and Prepayments thereof under and as defined in that certain LeaseIPurchase Agreement, dated as of September I, 2004, as amended (the "Lease"), by and between the Chula Vista Public Financing Authority. a joint exercise of powers authority duly organized and existing under the laws of the State of California A-I /.~ ('/ DOCSOC/1148399v3/024036-0033 (the "Authority') and the City of Chula Vista, a municipal corporation and a chartered city organized and existing under and by virtue of the laws and Constitution of the State of California (the "City"), which Lease Payments and Prepayments and certain other rights and interests under the Lease have been assigned to The Bank of New York Trust Company, N.A., as trustee (the "'Trustee"). The Registered Owner of this Certificate is entitled to receive, subject to the terms of the Lease, on the maturity date specified above, the principal amount specified above, representing a portion of the Lease Payments designated as principal coming due during the preceding twelve months, and to receive on March I, 2005, and semiannually thereafter on March I and September I of each year (the "Payment Dates") until payment in full of said portion of principal, the Registered Owner's portion of the Lease Payments designated as interest coming due during the six months immediately preceding each of the Payment Dates provided that interest with respect hereto shall be payable from the Payment Date next preceding the date of execution of this Certificate unless (i) this Certificate is executed during the period from the day after the fifteenth day of the month proceeding a Payment Date (the "Record Date") to and including such Payment Date, in which event interest shall be payable from such Payment Date, or (ii) unless this Certificate is executed on or prior to February 15, 2005. in which event interest shall be payable from the Dated Date hereof. The portion of the Lease Payments designated as interest is computed on the basis of a 360-day year of twelve 30-day months and is the result of the multiplication of the aforesaid portion of the Lease Payments designated as principal by the rate per annum identified above. Said amounts are payable in lawful money of the United States of America. The amount representing principal payable at maturity or upon prepayment in whole or in part is payable to the Registered Owner upon presentation and surrender of this Certificate at the Principal Office. The amounts representing interest are payable by check mailed by the Trustee by first class mail to the Registered Owner hereof as of the Record Date preceding the Payment Date at his address as it appears on the registration books of the Trustee. Interest with respect to any Certificates may. at the option of any Owner of Certificates in an aggregate principal amount of $1 ,000.000 or more evidenced by the written request of such Owner to the Trustee, be paid to such Owner by wire transfer to the bank and account number on file with the Trustee as of the Record Date. This Certificate is one of the $37,240.000 aggregate principal amount of2004 Certificates of Participation (Civic Center Project - Phase I) (the "Certificates") which were initially executed and delivered by the Trustee pursuant to the terms of a Trust Agreement, dated as of September I. 2004, as amended and restated by that Amended and Restated Trust Agreement dated as of March 1, 2006 (the "Trust Agreemenf'), by and among the Trustee, the Authority and the City. The City is authorized to enter into the Lease and the Trust Agreement under the Constitution and laws of the State of California. Reference is hereby made to the Lease and the Trust Agreement (copies of which are on file at the Principal Office) for a description of the terms on which the Certificates are delivered, the rights thereunder of the Registered Owners of the Certificates, the rights, duties and immunities of the Trustee and the rights and obligations of the City under the Lease. to all of the provisions of which Lease and Trust Agreement the Registered Owner of this Certificate, by acceptance hereof, assents and agrees. The City is obligated to pay Lease Payments from any source of legally available funds, and the City has covenanted in the Lease to make the necessary annual appropriations therefor. The obligation of the City to pay the Lease Payments does not constitute an obligation of the City 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 Lease Payments does not constitute a debt of the City. the State of California or any of its political subdivisions within the meaning of any A-2 ')...., I --- ~) c).- DOCSOC/I 148399v3/024036-0033 Constitutional or statutory debt limitation or restriction. The City's obligation to pay Lease Payments may be completely or partially abated during any period in which, by reason of noncompletion of the Project by the date specified in the Lease or material damage, destruction, title defect, or taking by eminent domain or condemnation there is substantial interference with the use and right of possession by the City of the Leased Premises. Failure of the City to pay Lease Payments during any such period shall not constitute a default under the Lease, the Trust Agreement or this Certificate. To the extent and in the manner permitted by the terms of the Trust Agreement, the provisions of the Trust Agreement may be amended by the parties thereto with the written consent of the 2004 Insurer so long as the 2004 Insurer is not in default in its payment obligations under that 2004 Insurance Policy and the Registered Owners of at least a majority in aggregate principal amount of the Certificates and Additional Certificates then Outstanding, and may be amended, with the consent of the 2004 Insurer and without such consent of the Registered Owners under certain circumstances, but in no event such that the interests of the Registered Owners of the Certificates are adversely affected. No such modification or amendment shall (i) extend or have the effect of extending the fixed maturity of any Certificate or reducing the interest rate with respect thereto or extending the time of payment of interest, or reducing the amount of principal thereof or reducing any premium payable upon the prepayment thereof, without the express consent of the Registered Owner of such Certificate, or (ii) reduce or have the effect of reducing the percentage of Certificates required for the affirmative vote or written consent to an amendment or modification of the Lease, (iii) modif'y any of the rights or obligations of the Trustee without its written assent thereto or (iv) amend the section of the Trust Agreement dealing with permitted amendments thereof without the prior written consent of the owners of all Certificates and the 2004 Insurer so long as the 2004 Insurer is not in default in its payment obligations under that 2004 Insurance Policy, This Certificate is transferable by the Registered Owner hereof, in person or by his duly authorized attorney, at the Principal Office, but only in the manner, subject to the limitations and upon payment of the charges provided in the Trust Agreement and upon surrender and cancellation of this Certificate. Upon such transfer a new Certificate or Certificates, of an authorized denomination or denominations, for the same aggregate principal amount, maturity and interest rate, will be delivered to the transferee. This Certificate also may be exchanged for a like aggregate principal amount of Certificates of other authorized denominations as prescribed in the Trust Agreement. The City, the Authority, and the Trustee may treat the Registered Owner hereof as the absolute owner hereof for all purposes whether or not this Certificate shall be overdue, and the City, the Authority and the Trustee shall not be affected by any notice to the contrary. The Trustee shall not be required to transfer any Certificate selected for prepayment or be required to transfer any Certificate during the period in which the Trustee is selecting Certificates for prepayment. The Certificates are subject to prepayment, on any date, in whole or in part, from Net Proceeds deposited by the Trustee in the Prepayment Fund established under the Trust Agreement at least forty-five (45) days prior to the date fixed for prepayment, at a prepayment price equal to the principal amount thereof together with accrued interest to the dated fixed for prepayment, without premium. The Certificates maturing on or after March I, 2015 are subject to prepayment prior to maturity in whole or in part on any date on or after March I, 2014, at the option of the City, in the A-3 DOCSOC/l148399v3/024036-0033 /~ :,/"-;-' ''::/ event the City exercises its option under the Lease to prepay all or a portion of the principal component of the Lease Payments (in integral multiples of $5,000 but not in a principal amount of less than $20,000), at the following prepayment prices, expressed as a percentage of the principal component to be prepaid), plus accrued interest to the date fixed for prepayment: Prepayment Date Prepayment Price March 1,2014 through February 28, 2015 March ],2015 through February 28,20]6 March ], 20] 6 and thereafter ] 01.0% 100.5 100.0 The Certificates maturing March ], 2026 (the "2026 Term Certificates") are subject to prepayment in part by lot, on March] in each of the following years from sinking account payments as set forth below at a prepayment price equal to the principal amount thereofto be prepaid, without premium; provided, however, that if some but not all of the 2026 Term Certificates have been prepaid pursuant to an optional or extraordinary prepayment, the total amount of all future sinking account payments will be reduced pro rata by the aggregate principal amount of the 2026 Term Certificates so prepaid. ]n addition, in lieu of prepayment thereof, the 2026 Term Certificates may be purchased by the City and tendered to the Trustee pursuant to the provisions hereof. Mandatory Prepayment Date (March I ) Sinking Account Pavment 2025 2026* $ ] ,490,000 ] ,560,000 * Final Maturity The Certificates maturing March 1, 2029 (the "2029 Term Certificates") are subject to prepayment in part by lot, on March I in each of the following years from sinking account payments as set forth below at a prepayment price equal to the principal amount thereof to be prepaid, without premium; provided, however, that if some but not all of the 2029 Term Certificates have been prepaid pursuant to an optional or extraordinary prepayment, the total amount of all future sinking account payments will be reduced pro rata by the aggregate principal amount of the 2029 Term Certificates so prepaid. In addition, in lieu of prepayment thereof, the 2029 Term Certificates may be purchased by the City and tendered to the Trustee pursuant to the provisions hereof. Mandatory Prepayment Date (March I) Sinking Account Pavment 2027 2028 2029* $ 1,630,000 ],7] 0,000 1,790,000 A-4 /~S)' DOCSOC/l148399v3!024036-0033 * Final Maturity The Certificates maturing March I, 2034 (the "2034 Term Certificates") are subject to prepayment in part by lot, on March I in each of the following years from sinking account payments as set forth below at a prepayment price equal to the principal amount thereofto be prepaid, without premium; provided, however, that if some but not all of the 2034 Term Certificates have been prepaid pursuant to an optional or extraordinary prepayment, the total amount of all future sinking account payments will be reduced pro rata by the aggregate principal amount of the 2034 Term Certificates so prepaid. In addition, in lieu of prepayment thereof, the 2034 Term Certificates may be purchased by the City and tendered to the Trustee pursuant to the provisions hereof. Mandatory Prepayment Date (March ]) Sinking Account Payment 2030 2031 2032 2033 2034* $ 1,875,000 ] ,970,000 2,065,000 2,170,000 2,280,000 * Final Maturity As provided in the Trust Agreement, notice of prepayment shall be mailed, not less than 30 nor more than 60 days before the prepayment date, to the Registered Owner of this Certificate, but neither failure to receive such notice nor any defect in the notice so mailed shall affect the sufficiency of the proceedings for prepayment. If this Certificate is called for prepayment and payment is duly provided therefor as specified in the Trust Agreement, interest shall cease to accrue with respect hereto from and after the date fixed for prepayment. The City has certified that all acts, conditions and things required by the statutes ofthe State of California and the Trust Agreement to exist, to have happened and to have been performed precedent to and in connection with the execution and delivery of this Certificate do exist, have happened and have been performed in regular and due time, form and manner as required by law, and that the Trustee is duly authorized to execute and deliver this Certificate, and that the amount ofthis Certificate, together with all other Certificates executed and delivered under the Trust Agreement, is not in excess of the amount of Certificates authorized to be executed and delivered thereunder. Terms used herein which are not otherwise defined shall have the respective meanings assigned thereto in the Trust Agreement. The Trustee has no obligation or liability to the Registered Owners to make payments of principal or interest with respect to this Certificate except from Lease Payments paid to the Trustee and from the various funds and accounts established under the Trust Agreement. The Trust Agreement provides that the recitals of facts, covenants and agreements in this Certificate shall be taken as statements, covenants and agreements of the City, and the Trustee assumes no responsibility for the correctness of the same. The Trustee has executed this Certificate solely in its capacity as Trustee under the Trust Agreement and not in its individual or personal capacity, A-5 DOCSOC/1148399v3/024036-0033 /- , ~' .. .. ...;.., IN WITNESS WHEREOF, this Certificate has been executed and delivered by The Bank of New York Trust Company, N.A., as Trustee, acting pursuant to the Trust Agreement. Date of Execution: September 16,2004 THE BANK OF NEW YORK TRUST COMPANY, N.A., as Trustee By: Its: Authorized Officer A-6 DOCSOC/l148399v3!024036-0033 , /, / .. ,.."". ~ FORM OF STATEMENT OF INSURANCE MBIA Insurance Corporation (the "2004 Insurer'") has issued a policy contammg the following provisions, such policy being on file at The Bank of New York Trust Company, N.A,", Los Angeles, California. The 2004 Insurer, in consideration of the payment of the premium and subject to the terms of this policy, hereby unconditionally and irrevocably guarantees to any owner, as hereinafter defined, of the following described obligations, the full and complete payment required to be made by or on behalf of the City to The Bank of New York Trust Company, N.A., or its successor (the "Trustee'") of an amount equal to (i) the principal of (either at the stated maturity or by any advancement of maturity pursuant to a mandatory sinking fund payment) and interest on, the Obligations (as that term is defined below) as such payments shall become due but shall not be so paid (except that in the event of any acceleration of the due date of such principal by reason of mandatory or optional redemption or acceleration resulting from default or otherwise, other than any advancement of maturity pursuant to a mandatory sinking fund payment, the payments guaranteed hereby shall be made in such amounts and at such times as such payments of principal would have been due had there not been any such acceleration); and (ii) the reimbursement of any such payment which is subsequently recovered from any owner pursuant to a final judgment by a court of competent jurisdiction that such payment constitutes an avoidable preference to such owner within the meaning of any applicable bankruptcy law. The amounts referred to in clauses (i) and (ii) of the preceding sentence shall be referred to herein collectively as the "Insured Amounts.'" "Obligations" shall mean: $37,240,000 CITY OF CHULA VISTA 2004 CERTIFICATES OF PARTICIPATION (CIVIC CENTER PROJECT - PHASE I) Upon receipt of telephonic or telegraphic notice, such notice subsequently confirmed in writing by registered or certified mail, or upon receipt of written notice by registered or certified mail, by the 2004 Insurer from the Trustee or any owner of an Obligation the payment of an Insured Amount for which is then due, that such required payment has not been made, the 2004 Insurer on the due date of such payment or within one business day after receipt of notice of such nonpayment, whichever is later, will make a deposit of funds, in an account with State Street Bank and Trust Company, N.A., in New York, New York, or its successor, sufficient for the payment of any such Insured Amounts which are then due. Upon presentment and surrender of such Obligations or presentment of such other proof of ownership of the Obligations, together with any appropriate instruments of assignment to evidence the assignment of the Insured Amounts due on the Obligations as are paid by the 2004 Insurer, and appropriate instruments to effect the appointment of the 2004 Insurer as agent for such owners of the Obligations in any legal proceeding related to payment of Insured Amounts on the Obligations, such instruments being in a form satisfactory to State Street Bank and Trust Company, N.A., State Street Bank and Trust Company, N.A. shall disburse to such owners or the Trustee payment of the Insured Amounts due on such Obligations, less any amount held by the Trustee for the payment of such Insured Amounts and legally available therefor. This policy does not insure against loss of any prepayment premium which may at any time be payable with respect to any Obligation. A-7 / / " 1 DOCSOC/1148399v3!024036-0033 As used herein, the term "'owner" shall mean the registered owner of any Obligation as indicated in the books maintained by the Trustee, the Issuer, or any designee of the Issuer for such purpose. The term owner shall not include the Issuer or any party whose agreement with the Issuer constitutes the underlying security for the Obligations. Any service of process on the 2004 Insurer may be made to the 2004 Insurer at its offices located at ] ] 3 King Street, Armonk, New York 10504, and such service of process shall be valid and binding. This policy is non-cancelable for any reason. The premium on this policy is not refundable for any reason including the payment prior to maturity of the Obligations. In the event the 2004 Insurer were to become insolvent, any claims arising under a policy of financial guaranty insurance are excluded rrom coverage by the California Insurance Guaranty Association, established pursuant to Article 14.2 (commencing with Section ]063) of Chapter] of Part 2 of Division 1 of the California Insurance Code. MBIA INSURANCE CORPORATION A-8 /~. /. / ;, ,/ I DOCSOC/1148399v31024036-0033 FORM OF ASSIGNMENT FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto (print or typewrite name, address, including postal zip code, and social security or other identifying number of Transferee) the within Certificate and all rights thereunder, and hereby irrevocably constitutes and appoints to transfer the within Certificate on the books kept for registration thereof, with full power of substitution in the premises. Dated: Signature Guaranteed NOTICE: Signature(s) guarantee should be made by a guarantor institution participating in the Securities Transfer agents Medallion Program or such other guarantee program acceptable to the Trustee. NOTICE: The signature to this assignment must correspond with the name as it appears upon the face of the within Certificate in every particular, without alteration or enlargement or any change whatever. A-9 / /1 DOCSOC/l148399v3/024036-0033 FORM OF 2006 CERTIFICATE UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY (AS DEFINED IN THE TRUST AGREEMENT) TO THE REGISTRAR FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE 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. UNITED STATES OF AMERICA STATE OF CALIFORNIA COUNTY OF SAN DIEGO CITY OF CHULA VISTA 2006 CERTIFICATE OF PARTICIPATION (Civic Center Project - Phase 2) Evidencing the Fractional Interest of the Owner Hereof In Lease Payments to be Made by CITY OF CHULA VISTA As Rental for Certain Project Pursuant to a LeaselPurchase Agreement With CHULA VISTA PUBLIC FINANCING AUTHORITY INTEREST RATE % MATURITY DATE March 1,20_ DELIVERY DATE ,2006 CUSIP REGISTERED OWNER: CEDE & CO. PRINCIPAL AMOUNT: AND Non 00 DOLLARS THIS IS TO CERTIFY THAT the registered owner named above, or registered assigns, as the Registered Owner of this Certificate of Participation (the "Certificate") is the owner of a fractional and undivided interest in the right to receive certain Lease Payments and Prepayments thereof under and as defined in that certain Lease/Purchase Agreement, dated as of September I, 2004, as amended (the "Lease"), by and between the Chula Vista Public Financing Authority, a joint exercise of powers authority duly organized and existing under the laws of the State of California (the "Authority') and the City of Chula Vista, a municipal corporation and a chartered city organized A-IO J_l)(.) DOCSOC/l148399v31024036-0033 and existing under and by virtue of the laws and Constitution of the State of California (the "City"), which Lease Payments and Prepayments and certain other rights and interests under the Lease have been assigned to The Bank of New York Trust Company, N,A, as trustee (the "Trustee"). The Registered Owner of this Certificate is entitled to receive, subject to the terms of the Lease, on the maturity date specified above, the principal amount specified above, representing a portion of the Lease Payments designated as principal coming due during the preceding twelve months, and to receive on September ], 2006, and semiannually thereafter on March ] and September] of each year (the "Payment Dates") until payment in full of said portion of principal, the Registered Owner's portion of the Lease Payments designated as interest coming due during the six months immediately preceding each of the Payment Dates provided that interest with respect hereto shall be payable from the Payment Date next preceding the date of execution of this Certificate unless (i) this Certificate is executed during the period from the day after the fifteenth day of the month proceeding a Payment Date (the "Record Date") to and including such Payment Date, in which event interest shall be payable from such Payment Date, or (ii) unless this Certificate is executed on or prior to August ] 5, 2006, in which event interest shall be payable from the Dated Date hereof. The portion of the Lease Payments designated as interest is computed on the basis of a 360-day year of twelve 30-day months and is the result of the multiplication of the aforesaid portion of the Lease Payments designated as principal by the rate per annum identified above. Said amounts are payable in lawful money of the United States of America. The amount representing principal payable at maturity or upon prepayment in whole or in part is payable to the Registered Owner upon presentation and surrender of this Certificate at the Principal Office. The amounts representing interest are payable by check mailed by the Trustee by first class mail to the Registered Owner hereof as of the Record Date preceding the Payment Date at his address as it appears on the registration books of the Trustee. Interest with respect to any Certificates may, at the option of any Owner of Certificates in an aggregate principal amount of $] ,000,000 or more evidenced by the written request of such Owner to the Trustee, be paid to such Owner by wire transfer to the bank and account number on file with the Trustee as of the Record Date. This Certificate is one of the $ aggregate principal amount of 2006 Certificates of Participation (Civic Center Project - Phase 2) (the "Certificates") which have been executed and delivered by the Trustee pursuant to the terms of an Amended and Restated Trust Agreement, dated as of March I, 2006 (the "Trust Agreement"), by and among the Trustee, the Authority and the City. The City is authorized to enter into the Lease and the Trust Agreement under the Constitution and laws of the State of California. Reference is hereby made to the Lease and the Trust Agreement (copies of which are on file at the Principal Office) for a description of the terms on which the Certificates are delivered, the rights thereunder of the Registered Owners of the Certificates, the rights, duties and immunities of the Trustee and the rights and obligations of the City under the Lease, to all of the provisions of which Lease and Trust Agreement the Registered Owner of this Certificate, by acceptance hereof, assents and agrees. The City is obligated to pay Lease Payments from any source of legally available funds, and the City has covenanted in the Lease to make the necessary annual appropriations therefor. The obligation of the City to pay the Lease Payments does not constitute an obligation of the City 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 Lease Payments does not constitute a debt of the City, the State of California or any of its political subdivisions within the meaning of any Constitutional or statutory debt limitation or restriction. The City's obligation to pay Lease Payments may be completely or partially abated during any period in which, by reason of A-II J-- )/ DOCSOC/l148399v3/024036-0033 noncompletion of the Project by the date specified in the Lease or material damage, destruction, title defect, or taking by eminent domain or condemnation there is substantial interference with the use and right of possession by the City of the Leased Premises. Failure of the City to pay Lease Payments during any such period shall not constitute a default under the Lease, the Trust Agreement or this Certificate. To the extent and in the manner permitted by the terms of the Trust Agreement, the provisions of the Trust Agreement may be amended by the parties thereto with the written consent of the 2006 Insurer so long as the 2006 Insurer is not in default in its payment obligations under the 2006 Insurance Policy and the Registered Owners of at least a majority in aggregate principal amount of the Certificates, 2004 Certificates and Additional Certificates then Outstanding, and may be amended, with the consent of the 2006 Insurer and without such consent of the Registered Owners under certain circumstances, but in no event such that the interests of the Registered Owners of the Certificates are adversely affected. No such modification or amendment shall (i) extend or have the effect of extending the fixed maturity of any Certificate or reducing the interest rate with respect thereto or extending the time of payment of interest, or reducing the amount of principal thereof or reducing any premium payable upon the prepayment thereof, without the express consent of the Registered Owner of such Certificate, or (ii) reduce or have the effect of reducing the percentage of Certificates required for the affirmative vote or written consent to an amendment or modification of the Lease, (iii) modify any of the rights or obligations of the Trustee without its written assent thereto or (iv) amend the section ofthe Trust Agreement dealing with permitted amendments thereof without the prior written consent of the owners of all Certificates and the 2006 Insurer so long as the 2006 Insurer is not in default in its payment obligations under the 2006 Insurance Policy. This Certificate is transferable by the Registered Owner hereof, in person or by his duly authorized attorney, at the Principal Office, but only in the manner, subject to the limitations and upon payment of the charges provided in the Trust Agreement and upon surrender and cancellation of this Certificate. Upon such transfer a new Certificate or Certificates, of an authorized denomination or denominations, for the same aggregate principal amount, maturity and interest rate, will be delivered to the transferee. This Certificate also may be exchanged for a like aggregate principal amount of Certificates of other authorized denominations as prescribed in the Trust Agreement. The City, the Authority, and the Trustee may treat the Registered Owner hereof as the absolute owner hereof for all purposes whether or not this Certificate shall be overdue, and the City, the Authority and the Trustee shall not be affected by any notice to the contrary. The Trustee shall not be required to transfer any Certificate selected for prepayment or be required to transfer any Certificate during the period in which the Trustee is selecting Certificates for prepayment. The Certificates are subject to prepayment, on any date, in whole or in part, from Net Proceeds deposited by the Trustee in the Prepayment Fund established under the Trust Agreement at least forty-five (45) days prior to the date fixed for prepayment, at a prepayment price equal to the principal amount thereof together with accrued interest to the dated fixed for prepayment, without premium. The Certificates maturing on or after March I, 20_ are subject to prepayment prior to maturity in whole or in part on any date on or after March I, 20_, at the option of the City, in the event the City exercises its option under the Lease to prepay all or a portion of the principal component of the Lease Payments (in integral multiples of $5,000 but not in a principal amount of A-12 /. /,.;.. DOCSOC/l148399v31024036-0033 less than $20,000), at the following prepayment prices, expressed as a percentage of the principal component to be prepaid), plus accrued interest to the date fixed for prepayment: Prepayment Date Prepayment Price The Certificates maturing March I, 20 (the "20 Term Certificates") are subject to prepayment in part by lot, on March] in each of the following years from sinking account payments as set forth below at a prepayment price equal to the principal amount thereofto be prepaid, without premium; provided, however, that if some but not all of the 20_ Term Certificates have been prepaid pursuant to an optional or extraordinary prepayment, the total amount of all future sinking account payments will be reduced pro rata by the aggregate principal amount of the 20_ Term Certificates so prepaid. ]n addition, in lieu of prepayment thereof, the 20_ Term Certificates may be purchased by the City and tendered to the Trustee pursuant to the provisions hereof. Mandatory Prepayment Date (March I) Sinking Account Pavment * Final Maturity The Certificates maturing March ], 20_ (the "20_ Term Certificates") are subject to prepayment in part by lot, on March I in each of the following years from sinking account payments as set forth below at a prepayment price equal to the principal amount thereof to be prepaid, without premium; provided, however, that if some but not all of the 20_ Term Certificates have been prepaid pursuant to an optional or extraordinary prepayment, the total amount of all future sinking account payments will be reduced pro rata by the aggregate principal amount of the 20_ Term Certificates so prepaid. ]n addition, in lieu of prepayment thereof, the 20_ Term Certificates may be purchased by the City and tendered to the Trustee pursuant to the provisions hereof. Mandatory Prepayment Date (March 1) Sinking Account Pavment * Final Maturity A-13 /- ..l:~ DOCSOCflI48399v3/024036-0033 The Certificates maturing March I, 20_ (the "20_ Term Certificates") are subject to prepayment in part by lot, on March I in each of the following years ITom sinking account payments as set forth below at a prepayment price equal to the principal amount thereof to be prepaid, without premium; provided, however, that if some but not all of the 20_ Term Certificates have been prepaid pursuant to an optional or extraordinary prepayment, the total amount of all future sinking account payments will be reduced pro rata by the aggregate principal amount of the 20_ Term Certificates so prepaid. In addition, in lieu of prepayment thereof, the 20_ Term Certificates may be purchased by the City and tendered to the Trustee pursuant to the provisions hereof. Mandatory Prepayment Date (March I) Sinking Account Pavment * Final Maturity As provided in the Trust Agreement, notice of prepayment shall be mailed, not less than 30 nor more than 60 days before the prepayment date, to the Registered Owner of this Certificate, but neither failure to receive such notice nor any defect in the notice so mailed shall affect the sufficiency of the proceedings for prepayment. If this Certificate is called for prepayment and payment is duly provided therefor as specified in the Trust Agreement, interest shall cease to accrue with respect hereto from and after the date fixed for prepayment. The City has certified that all acts, conditions and things required by the statutes of the State of California and the Trust Agreement to exist, to have happened and to have been performed precedent to and in connection with the execution and delivery of this Certificate do exist, have happened and have been performed in regular and due time, form and manner as required by law, and that the Trustee is duly authorized to execute and deliver this Certificate, and that the amount of this Certificate, together with all other Certificates executed and delivered under the Trust Agreement, is not in excess of the amount of Certificates authorized to be executed and delivered thereunder. Terms used herein which are not otherwise defined shall have the respective meanings assigned thereto in the Trust Agreement. The Trustee has no obligation or liability to the Registered Owners to make payments of principal or interest with respect to this Certificate except ITom Lease Payments paid to the Trustee and from the various funds and accounts established under the Trust Agreement. The Trust Agreement provides that the recitals of facts, covenants and agreements in this Certificate shall be taken as statements, covenants and agreements of the City, and the Trustee assumes no responsibility for the correctness of the same. The Trustee has executed this Certificate solely in its capacity as Trustee under the Trust Agreement and not in its individual or personal capacity. A-14 /'-')"/ DOCSOC!l148399v3/024036-0033 IN WITNESS WHEREOF, this Certificate has been executed and delivered by The Bank of New York Trust Company, N.A., as Trustee, acting pursuant to the Trust Agreement. Date of Execution: ,2006 THE BANK OF NEW YORK TRUST COMPANY, N.A., as Trustee By: Its: Authorized Officer A-IS j o' II:..; I DOCSOCIl148399v3/024036-0033 DOCSOCIl148399v3/024036-0033 FORM OF STATEMENT OF INSURANCE [TO COME] A-16 /-- 10 FORM OF ASSIGNMENT FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto (print or typewrite name, address, including postal zip code, and social security or other identifying number of Transferee) the within Certificate and all rights thereunder, and hereby irrevocably constitutes and appoints to transfer the within Certificate on the books kept for registration thereof, with full power of substitution in the premises. Dated: Signature Guaranteed NOTICE: Signature(s) guarantee should be made by a guarantor institution participating in the Securities Transfer agents Medallion Program or such other guarantee program acceptable to the Trustee. NOTICE: The signature to this assignment must correspond with the name as it appears upon the face of the within Certificate in every particular, without alteration or enlargement or any change whatever. A-17 i_ ./-/ / DOCSOC/1148399v3/024036-0033 EXHIBIT B.I FORM OF WRITTEN DELIVERY COST REOUISITION The Bank of New York Trust Company, N.A., as Trustee RE: Disbursement from the Project Fund pursuant to Section 3.03 of the Amended and Restated Trust Agreement related to the City of Chula Vista 2006 Certificates of Participation (Civic Center Project. Phase 2), dated as of March I, 2006 (the "Agreement"), by and among you as trustee, the Chula Vista Public Financing Authority and the City of Chula Vista (the "City") REQUISITION NO. _ You are hereby instructed to pay to the City, or to at $ as a Delivery Cost from the Project Fund as provided in Section 3.03 of the Agreement. This Delivery Cost has been properly incurred, is a proper charge against the Project Fund and has not been the basis of any previous disbursements. The amount remaining in the Project Fund, together with interest earnings on the Project Fund plus investment earnings on other funds that will be transferred into the Project Fund, will, after payment of the amount set forth in this requisition, be sufficient to pay all remaining Delivery Costs and Project Costs as presently estimated. Very truly yours, City Representative B.I.I /~ /?! DOCSOCIl148399v3/024036-0033 EXHIBIT B-2 FORM OF WRITTEN PROJECT COST REOUISITION The Bank of New York Trust Company, N.A., as Trustee RE: Disbursement from the Project Fund pursuant to Section 3.03 of the Amended and Restated Trust Agreement related to the City of Chula Vista 2004 Certificates of Participation (Civic Center Project - Phase I), and the City of Chula Vista 2006 Certificates of Participation (Civic Center Project - Phase 2), dated as of March I, 2006 (the "'Agreement"), by and among you as trustee, the Chula Vista Public Financing Authority and the City of Chula Vista (the "City") REQUISITION NO._ You are hereby instructed to pay to the City, or to at $ as a Project Cost from the Account of the Project Fund as provided in Section 3.03 of the Agreement. This Project Cost has been properly incurred, is a proper charge against the Account of the Project Fund and has not been the basis of any previous disbursements. The amount remaining in the Project Fund, together with other moneys available to the City and together with interest earnings on the Project Fund plus investment earnings on other funds that will be transferred into the Project Fund, will, after payment of the amount set forth in this requisition, be sufficient to pay all remaining Delivery Costs and Project Costs as presently estimated. Very truly yours, City Representative B-2-1 J.. II DOCSOCIl148399v3/024036.0033 ATTACHMENT 3 Stradling Yocca Carlson & Rauth Draft 1/11/06 AGENCY AGREEMENT by and between CHULA VISTA PUBLIC FINANCING AUTHORITY and CITY OF CHULA VISTA Relating to $ City of Chula Vista 2006 Certificates of Participation (Civic Center Project - Phase 2) Dated as of March 1,2006 DOCSOC!l147593v4/024036-0033 I '~O -' / (1 AGENCY AGREEMENT THIS AGENCY AGREEMENT (the "Agency Agreement"), dated as of March I, 2006, is entered into by and between CHULA VISTA PUBLIC FINANCING AUTHORITY, a joint powers authority duly organized and existing under and by virtue of the Constitution and laws of the State of California (the "Authority"), and the CITY OF CHULA VISTA, a municipal corporation and a charter city duly organized and existing under and by virtue of the Constitution and laws of the State of California (the "City"); WITNESSETH: WHEREAS, the Authority and the City have entered into a Lease/Purchase Agreement, dated as of September I, 2004, and as amended by a First Amendment to Lease/Purchase Agreement, dated as of March I, 2006 (as amended, the "Lease"), whereby the Authority has leased to the City certain real property and the existing improvements thereon (the "Property"), together with the improvements to be constructed on the Property (such improvements, together with the Property, the "Leased Premises"), with a portion of the proceeds of the $ City of Chula Vista 2006 Certificates of Participation (Civic Center Project - Phase 2) (the "2006 Certificates"); and WHEREAS, the Authority desires to appoint the City as its agent for the purposes of the acquisition, construction, delivery and installation of the improvements to be constructed with the proceeds of the 2006 Certificates (collectively, the "2006 Project"); and WHEREAS, all acts, conditions and things required by law to exist, to have happened and to have been performed precedent to and in connection with the execution and entering into of this Agency Agreement do exist, have happened and have been performed in regular and due time, form and manner as required by law, and the parties hereto are now duly authorized to execute and enter into this Agency Agreement; NOW, THEREFORE, IN CONSIDERATION OF THE MUTUAL AGREEMENTS AND COVENANTS CONTAINED HEREIN AND FOR OTHER VALUABLE CONSIDERATION, THE PARTIES HERETO DO HEREBY AGREE AS FOLLOWS: Section I. Citv to Act as Agent for the Authoritv and the City. The Authority hereby appoints the City as its agent in connection with the acquisition, construction, delivery and installation of the 2006 Project. The City, as the agent of the Authority for the foregoing purpose, shall cause the acquisition, construction, delivery and installation of the 2006 Project to be completed on or before the dates set forth in Section 3 of this Agency Agreement and otherwise in accordance with the Lease and all other laws applicable to the 2006 Project. The appointment by the Authority of the City as its agent as provided in this Section and the acceptance by the City of such appointment results in the assumption by the City of duties, responsibilities and liabilities which are separate and apart from its duties, responsibilities and liabilities under the Lease, and such assignment does not include or transfer to the City any of the rights or obligations ofthe Authority under the Lease which have been assigned by the Authority to the Trustee pursuant to the Assignment Agreement. It is recognized by the parties that the Authority DOCSOC/l147593v4/024036-0033 / - /J I has appointed the City for the purposes specified in this Agency Agreement, rather than appoint another firm or entity for said purposes, based upon the Authority's and the City's determination that the City is suitable to perform the duties, responsibilities and liabilities delegated to and assumed by it pursuant to this Agreement due to the expertise, knowledge and ability of the City's personnel with respect to similar undertakings. Section 2. Acceptance. The City, for one dollar ($1.00) and other good and valuable consideration in hand received, does hereby accept the foregoing appointment as agent of the Authority for the purposes set forth in Section I hereof. Section 3. Time of Completion and Liquidated Damages. The construction and equipping of the 2006 Project shall be completed on or prior to August 1, 2007. It is agreed that, if the City does not cause the completion of the acquisition, construction, equipping and installation of the portion of the 2006 Project being constructed on the Property by its completion date specified above by construction contractors or a construction manager, whichever the City deems appropriate, liquidated damages will be assessed against the construction contractor for each day completion is delayed in the amount specified in such construction contractor's contract. The City shall cause to be paid to the Trustee all amounts received as liquidated damages for application toward the Lease Payments. Each construction contractor hired by the City shall be required to provide payment and performance bonds in amounts equal to the maximum price under its contract. Section 4. Construction and Acquisition of the 2006 Proiect. The City agrees to oversee the construction, acquisition, delivery and installation of the 2006 Project in accordance with the following terms: (a) Construction and Completion. The City agrees to proceed with all due diligence to complete the construction, acquisition, delivery and installation ofthe 2006 Project, all in accordance with the plans and specifications for the 2006 Project (the "Plans and Specifications") approved pursuant to the Design/Build Agreement and the other contracts to be entered into by the City with respect to the 2006 Project. The City shall comply with all statutes and laws applicable to the performance of its obligations hereunder, including all public laws applicable thereto and all laws regarding the approval, acquisition and construction of public projects by chartered cities in the State of California. The City shall make certain that each contract relating to the 2006 Project is awarded in accordance with applicable law and contains a scheduled completion date which requires completion on or before the scheduled completion date referred to in Section 3 above; (b) Change Orders. Subject to any other restrictions imposed upon the City, the City may approve any changes to the Plans and Specifications so long as any change does not, and all such changes as a whole do not, (i) substantially alter the nature of the 2006 Project, (ii) delay the completion of the 2006 Project beyond its scheduled completion date, (iii) reduce the fair rental value of the portion of the 2006 Project being constructed on the Property, or (iv) increase the total Costs of the 2006 Project to an amount in excess of the amount in the 2006 Project Fund unless there has been deposited with the City an amount equal to such excess or unless there has been deposited with the City a certificate of an Authorized Representative of the City, together with a revised construction budget demonstrating that the total amount on deposit to pay for the 2006 Project is adequate to allow the completion of the 2006 Project as planned; 2 /-/0:"')- DOCSOCII147593v41024036-0033 (c) Pavment of Costs of the 2006 Proiect. Payment of the portion of the Costs of the 2006 Project being financed by the City shall be made from moneys deposited in the 2006 Project Fund, and shall be disbursed for such purpose in accordance and upOn compliance with the Trust Agreement. Neither the Authority nor the City shall be liable for the payment of Costs of the 2006 Project other than from amounts on deposit in the 2006 Project Fund; and (d) Unexpended Monies. The City agrees that unexpended moneys remaining in the 2006 Project Fund shall, upon payment in full of all Costs of the 2006 Project, be applied solely in accordance with the provisions of the Trust Agreement. (e) Partial Invaliditv. If anyone or more of the terms, proVISiOnS, covenants or conditions ofthis Agency Agreement shall to any extent be declared invalid, unenforceable, void or voidable for any reason whatsoever by a court of competent jurisdiction, the finding or order or decree of which becomes final, nOne of the remaining terms, provisions, covenants and conditions of this Agency Agreement shall be affected thereby, and each provision of this Agency Agreement shall be valid and enforceable to the fullest extent permitted by law. Section 3. App]icable Law. This Agency Agreement shall be governed by and construed in accordance with the laws of the State. Section 4. Representatives. Whenever under the provisions of this Agency Agreement the approval of the Authority or the City is required, or the Authority or the City is required to take some action at the request of the other, such approval or such request shall be given for the Authority by an Authorized Representative of the Authority and for the City by an Authorized Representative of the City and any party hereto shall be authorized to rely upon any such approval or request. Section 5. Notices. All notices or other communications hereunder shall be sufficiently given and shall be deemed to have been received five days after deposit in the United States mail in registered or certified form, postage prepaid: If to the City: City ofChula Vista 276 Fourth Avenue Chula Vista, California 9]910 Attention: City Manager ]fto the Authority: Chula Vista Public Financing Authority c/o City of Chula Vista 276 Fourth Avenue Chula Vista, California 9]9]0 Attention: Executive Director ]fto the Trustee: The Bank of New York Trust Company, N.A. 700 South Flower Street, Suite 500 Los Angeles, California 9007] Attention: Corporate Trust Services The Authority, the City and the Trustee, by notice given hereunder, may designate different addresses to which subsequent notices or other communications will be sent. 3 j- /0:5 DOCSOClI147593v4/024036-0033 Section 6. Captions. The captions or headings in this Agency Agreement are for convenience only and in no way define, limit or describe the scope or intent of any provision or section of this Agency Agreement. Section 7. Execution in Counternarts. This Agency Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original but all together shall constitute but one and the same instrument. Section 8. Amendment. The terms of this Agency Agreement shall not be waived, altered, modified, supplemented or amended in any manner whatsoever, except by written instrument signed by the Authority and the City, with the prior written consent of the Trustee and the Insurer for the 2006 Certificates. The City hereby irrevocably appoints the Authorized Representative of the City to act as its attorney-in-fact for pUrposes of providing the foregoing consent. 4 /~/()7 DOCSOC1I147593v4!024036-0033 IN WITNESS WHEREOF, the parties hereto have executed this Agency Agreement as of the day and year first written above. CITY OF CHULA VISTA By: Director of Finance ATTEST: By: City Clerk CHULA VISTA PUBLIC FINANCING AUTHORITY By: Executive Director ATTEST: By: Secretary S-I DOCSOCIJ 147593v4/024036-0033 / / ,.., -~ Stradling Yocca Carlson & Rauth Draft 1/6/06 CONTINUING DISCLOSURE AGREEMENT This Continuing Disclosure Agreement, dated as of March 1, 2006 (the "Disclosure Agreement") is executed and delivered by the City ofChula Vista (the "City") and The Bank of New York Trust Company, N.A. (the "Dissemination Agent") in connection with the execution and delivery of $ City of Chula Vista 2006 Certificates of Participation (Civic Center Project - Phase 2) (the "Certificates"). The Certificates are being executed pursuant to an Amended and Restated Trust Agreement, dated as of March I, 2006, by and among the City, The Bank of New York Trust Company, N.A., as trustee (the "Trustee") and the Chula Vista Public Financing Authority (the "Authority"). The City covenants as follows: SECTION I. Purpose of the Disclosure Agreement. This Disclosure Agreement is being executed and delivered by the City for the benefit of the Holders and Beneficial Owners of the Certificates and in order to assist the Participating Underwriter in complying with the Rule. SECTION 2. Definitions. In addition to the definitions set forth in the Trust Agreement, which apply to any capitalized term used in this Disclosure Agreement unless otherwise defined in this Section, the following capitalized terms shall have the following meanings: "Annual Report" shall mean any Comprehensive Annual Financial Report provided by the City pursuant to, and as described in, Sections 3 and 4 of this Disclosure Agreement. "Beneficial Owner" shall mean any person which (a) has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Certificates (including persons holding Certificates through nominees, depositories or other intermediaries), or (b) is treated as the owner of any Certificates for federal income tax purposes. "Central Post Office" means the DisclosureUSA website maintained by the Municipal Advisory Council of Texas or any successor thereto, or any other organization or method approved by the staff or members of the Securities and Exchange Commission as an intermediary through which issuers may, in compliance with the Rule, make filings required by this Disclosure Agreement. "Disclosure Representative" shall mean the City Manager ofthe City, the Director of Finance ofthe City or their designee, or such other officer or employee as the City shall designate in writing from time to time. "Dissemination Agent" shall mean The Bank of New York Trust Company, N.A., or any successor Dissemination Agent designated in writing by the City and which has filed with the City a written acceptance of such designation. "Listed Events" shall mean any of the events listed in Section Sea) of this Disclosure Agreement. "National Repository" shall mean any Nationally Recognized Municipal Securities Information Repository for purposes of the Rule. "Official Statement" shall mean the Official Statement relating to the Certificates, dated ,2006. -- DOC50C/I14776Iv3/024036-0033 I-Ioe, "Participating Underwriter" shall mean the original purchaser of the Certificates required to comply with the Rule in connection with the offering of the Certificates. "Repository" shall mean each National Repository and each State Repository. "Rule" shall mean Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time. "State" shall mean the State of California. "State Repository" shall mean any public or private repository or entity designated by the State as a state repository for the purpose of the Rule and recognized as such by the Securities and Exchange Commission. As of the date of this Agreement, there is no State Repository. SECTION 3. Provision of Annual Reports. (a) The City shall, or, upon delivery of the Annual Report to the Dissemination Agent, shall cause the Dissemination Agent to, not later than each March I of each year commencing March I, 2007, provide to each Repository an Annual Report which is consistent with the requirements of Section 4 of this Disclosure Agreement. The 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 Agreement; provided that the audited financial statements of the City may be submitted separately from the balance of the Annual Report and later than the date required above for the filing of the Annual Report if they are not available by that date. Ifthe City's fiscal year changes, it shall give notice of such change in the same manner as for a Listed Event under Section 5( c). (b) Not later than fifteen (15) business days prior to said date, the City shall provide the Annual Report to the Dissemination Agent (if other than the City). If the City is unable to provide to the Repositories an Annual Report by the date required in subsection (a), the City shall send a notice to each Repository in substantially the form attached as Exhibit A. (c) The Dissemination Agent shall: (i) detennine each year prior to the date for providing the Annual Report the name and address of each National Repository and the State Repository, if any; and (ii) (if the Dissemination Agent is other than the City), file a report with the City certifying that the Annual Report has been provided pursuant to this Disclosure Agreement, stating the date it was provided and listing all the Repositories to which it was provided. (e) Notwithstanding any other provIsIon of this Disclosure Agreement, any of the required filings hereunder may be made through a Central Post Office. SECTION 4. Content of Annual Reports. The City's Annual Report shall contain or include by reference the following: (a) The City's audited financial statements, prepared in accordance with generally accepted auditing standards for municipalities in the State of California. If the City's audited 2 1-le)7 DOCSOCII14 7761 v3/024036-0033 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 become available. (b) To the extent not contained in the audited financial statements filed pursuant to the preceding subsection (a) by the date required by Section 3 hereof, updates of Tables _, _, _ and set forth in the Official Statement. 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 each of the Repositories or the Securities and Exchange Commission. If the document included by reference is a final official statement, it must be available from the Municipal Securities Rulemaking Board. The City shall clearly identify each such other document so included by reference. SECTION 5. Reporting of Significant Events. (a) Pursuant to the provisions of this Section 5, the City shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Certificates, if material: (i) Principal and interest payment delinquencies. (ii) Non-payment related defaults. (iii) Modifications to rights of Certificate holders. (iv) Optional, contingent or unscheduled Certificate calls. (v) Defeasances. (vi) Rating changes. (vii) Adverse tax opinions or events affecting the tax-exempt status of the Certificates. (viii) Unscheduled draws on the debt service reserves reflecting financial difficulties. (ix) Unscheduled draws on the credit enhancements reflecting financial difficulties. (x) Substitution of the credit or liquidity providers or their failure to perform. (xi) Release, substitution or sale of property securing repayment of the Certificates. (b) Whenever the City obtains knowledge of the occurrence of a Listed Event, the City shall as soon as possible determine if such event would be material under applicable federal securities laws. 3 , / ,./ /'... / , ,.,- ,! DOCSOCIJ 147761 v3/024036-0033 (c) If the City determines that knowledge of the occurrence of a Listed Event would be material under applicable federal securities laws, the City shall promptly file a notice of such occurrence with the Repositories, Notwithstanding the foregoing, notice of Listed Events described in subsections (a)(iv) and (v) need not be given under this subsection any earlier than the notice (if any) of the underlying event is given to Holders of affected Certificates pursuant to the Trust Agreement. SECTION 6. Termination of Reporting Obligation. The City's obligations under this Disclosure Agreement shall terminate upon the legal defeasance, prior redemption or payment in full of all of the Certificates. If such termination occurs prior to the final maturity of the Certificates, the City shall give notice of such termination in the same manner as for a Listed Event under Section 5(c). SECTION 7. Dissemination Agent. The City may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Agreement, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. The Dissemination Agent shall not be responsible in any manner for the content of any notice or report prepared by the City pursuant to this Disclosure Agreement. The Dissemination Agent may resign by providing thirty days written notice to the City and the Trustee. The Dissemination Agent shall not be responsible for the content of any report or notice prepared by the City and shall have no duty to review any information provided to it by the City. The Dissemination Agent shall have no duty to prepare any information report nor shall the Dissemination Agent be responsible for filing any report not provided to it by the City in a timely manner and in a form suitable for filing. SECTION 8. Amendment: Waiver. Notwithstanding any other provision of this Disclosure Agreement, the City may amend this Disclosure Agreement, and any provision of this Disclosure Agreement may be waived, provided that, in the opinion of nationally recognized bond counsel, such amendment or waiver is permitted by the Rule: provided, the Dissemination Agent shall have first consented to any amendment that modifies or increases its duties or obligations hereunder. In the event of any amendment or waiver of a provision of this Disclosure Agreement, the City shall describe such amendment in the next Annual Report, and shall include, as applicable, a narrative explanation of the reason for the amendment or waiver and its impact on the type (or in the case of a change of accounting principles, on the presentation) of financial information or operating data being presented by the City. In addition, if the amendment relates to the accounting principles to be followed in preparing financial statements, (i) notice of such change shall be given in the same manner as for a Listed Event under Section 5( c), and (ii) the Annual Report for the year in which the change is made shall present a comparison (in narrative form and also, if feasible, in quantitative form) between the financial statements as prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. SECTION 9. Additional Information. Nothing in this Disclosure Agreement shall be deemed to prevent the City from disseminating any other information, using the means of dissemination set forth in this Disclosure Agreement or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Agreement. If the City chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Agreement, the City shall have no obligation under this Certificate to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event. 4 / /,. I ' - / c.' / DOCSOCIl14776 J v3/024036-0033 SECTION 10. Default. In the event ofa failure of the City to comply with any provision of this Disclosure Agreement, any Holder or Beneficial Owner of the Certificates 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 Agreement. A default under this Disclosure Agreement shall not be deemed an Event of Default under the Trust Agreement, and the sole remedy under this Disclosure Agreement in the event of any failure of the City to comply with this Disclosure Agreement shall be an action to compel performance. No Certificate holder or Beneficial Owner 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. SECTION I I. Duties. Immunities and Liabilities of Dissemination Agent. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Agreement, and the City agrees, to the extent permitted by law, to indemnifY and save the Dissemination Agent, its officers, directors, employees and agents, harmless agaipst any loss, expense and liabilities which it may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the costs and expenses (including attorney's fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent's negligence or willful misconduct. The Dissemination Agent shall be paid compensation by the City for its services provided hereunder in accordance with its schedule of fees as amended from time to time and all expenses, legal fees and advances made or incurred by the Dissemination Agent in the performance of its duties hereunder. In performing its duties hereunder, the Dissemination Agent shall not be deemed to be acting in any fiduciary capacity for the City, the Certificate Holders, or any other party. The obligations of the City under this Section shall survive resignation or removal of the Dissemination Agent and payment ofthe Certificates. SECTION 12. Notices. Any notices or communications to or among any of the parties to this Disclosure Agreement may be given as follows: To the City: City ofChula Vista 276 Fourth Avenue Chula Vista. California 91910 Attention: Director of Finance To the Dissemination Agent: The Bank of New York Trust Company, N.A. 700 South Flower Street, Suite 500 Los Angeles, California 90017 SECTION 13. Beneficiaries. This Disclosure Agreement solely to the benefit of the City, the Dissemination Agent, the Participating Underwriter and Holders and Beneficial Owners from time to time of the Certificates, and shall create no rights in any other person or entity. 5 / //J DOCSOC/I 147761 v3/024036-0033 SECTION 14. Signature. This Disclosure Agreement has been executed by the undersigned on the date hereof. and such signature binds the City to the undertaking herein provided. CITY OF CHULA VISTA By: Its: Director of Finance THE BANK OF NEW YORK TRUST COMPANY. N.A.. as Dissemination Agent By: Its: Authorized Officer 6 j- / // DOCSOC/l147761 v3/024036-0033 EXHIBIT A NOTICE TO REPOSITORIES OF FAILURE TO FILE ANNUAL REPORT Name of Issuer: City of Chula Vista Name of Certificate Issue: $ City ofChula Vista 2006 Certificates of Participation (Civic Center Project - Phase 2) Date of Issuance: ,2006 NOTICE IS HEREBY GIVEN that the City has not provided an Annual Report with respect to the above-named Certificates as required by the Continuing Disclosure Agreement executed by the City on the date of issuance of the Certificates. The City anticipates that the Annual Report will be filed by Dated: THE BANK OF NEW YORK TRUST COMPANY, N.A., as Dissemination Agent By: A-I I-/Id- DOCSOCIl147761v3/024036-0033 ATTACHMENT 4 Stradling Yocca Car/son & Rauth Draft 1/6/06 CONTINUING DISCLOSURE AGREEMENT This Continuing Disclosure Agreement, dated as of March I, 2006 (the "Disclosure Agreement") is executed and delivered by the City of Chula Vista (the "City") and The Bank of New York Trust Company, N.A. (the "Dissemination Agent") in connection with the execution and delivery of $ City of Chula Vista 2006 Certificates of Participation (Civic Center Project - Phase 2) (the "Certificates"). The Certificates are being executed pursuant to an Amended and Restated Trust Agreement, dated as of March I, 2006, by and among the City, The Bank of New York Trust Company, N.A., as trustee (the "Trustee") and the Chula Vista Public Financing Authority (the "Authority"). The City covenants as follows: SECTION I. Purpose of the Disclosure Agreement. This Disclosure Agreement is being executed and delivered by the City for the benefit of the Holders and Beneficial Owners of the Certificates and in order to assist the Participating Underwriter in complying with the Rule. SECTION 2. Definitions. In addition to the definitions set forth in the Trust Agreement, which apply to any capitalized term used in this Disclosure Agreement unless otherwise defined in this Section, the following capitalized terms shall have the following meanings: "Annual Report" shall mean any Comprehensive Annual Financial Report provided by the City pursuant to, and as described in, Sections 3 and 4 of this Disclosure Agreement. "Beneficial Owner" shall mean any person which (a) has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Certificates (including persons holding Certificates through nominees, depositories or other intermediaries), or (b) is treated as the owner of any Certificates for federal income tax purposes. "Central Post Office" means the DisclosureUSA website maintained by the Municipal Advisory Council of Texas or any successor thereto, or any other organization or method approved by the staff or members of the Securities and Exchange Commission as an intermediary through which issuers may, in compliance with the Rule, make filings required by this Disclosure Agreement. "Disclosure Representative" shall mean the City Manager of the City, the Director of Finance of the City or their designee, or such other officer or employee as the City shall designate in writing from time to time. "Dissemination Agent"' shall mean The Bank of New York Trust Company, N.A., or any successor Dissemination Agent designated in writing by the City and which has filed with the City a written acceptance of such designation. "Listed Events" shall mean any of the events listed in Section 5(a) of this Disclosure Agreement. "National Repository" shall mean any Nationally Recognized Municipal Securities Information Repository for purposes of the Rule. "Official Statement"' shall mean the Official Statement relating to the Certificates, dated __,2006. DOCSOCIJ 147761v3/024036-0033 1-1/::.> "Participating Underwriter" shall mean the original purchaser of the Certificates required to comply with the Rule in connection with the offering of the Certificates. "Repository" shall mean each National Repository and each State Repository. "Rule" shall mean Rule l5c2-12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time. "State" shall mean the State of California. "State Repository" shall mean any public or private repository or entity designated by the State as a state repository for the purpose of the Rule and recognized as such by the Securities and Exchange Commission. As of the date of this Agreement, there is no State Repository. SECTION 3. Provision of Annual Reports. (a) The City shall, or, upon delivery of the Annual Report to the Dissemination Agent, shall cause the Dissemination Agent to, not later than each March I of each year commencing March I, 2007, provide to each Repository an Annual Report which is consistent with the requirements of Section 4 of this Disclosure Agreement. The 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 Agreement; provided that the audited financial statements of the City may be submitted separately from the balance ofthe Annual Report and later than the date required above for the filing of the Annual Report if they are not available by that date. If the City's fiscal year changes, it shall give notice of such change in the same manner as for a Listed Event under Section 5( c). (b) Not later than fifteen (15) business days prior to said date, the City shall provide the Annual Report to the Dissemination Agent (if other than the City). If the City is unable to provide to the Repositories an Annual Report by the date required in subsection (a), the City shall send a notice to each Repository in substantially the form attached as Exhibit A. (c) The Dissemination Agent shall: (i) determine each year prior to the date for providing the Annual Report the name and address of each National Repository and the State Repository, if any; and (ii) (if the Dissemination Agent is other than the City), file a report with the City certifying that the Annual Report has been provided pursuant to this Disclosure Agreement, stating the date it was provided and listing all the Repositories to which it was provided. (e) Notwithstanding any other provIsIon of this Disclosure Agreement, any of the required filings hereunder may be made through a Central Post Office. SECTION 4. Content of Annual Reports. The City's Annual Report shall contain or include by reference the following: (a) The City's audited financial statements, prepared in accordance with generally accepted auditing standards for municipalities in the State of California. If the City's audited 2 / - / /'1 DOCSOCI114 7761 v3/024036-0033 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 become available. (b) To the extent not contained in the audited financial statements filed pursuant to the preceding subsection (a) by the date required by Section 3 hereof, updates of Tables , , and --- set forth in the Official Statement 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 each ofthe Repositories or the Securities and Exchange Commission. If the document included by reference is a final official statement, it must be available from the Municipal Securities Rulemaking Board. The City shall clearly identify each such other document so included by reference. SECTION 5. Reporting of Significant Events. (a) Pursuant to the provisions ofthis 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 Certificates, if material: (i) Principal and interest payment delinquencies. (ii) Non-payment related defaults. (iii) Modifications to rights of Certificate holders. (iv) Optional, contingent or unscheduled Certificate calls. (v) Defeasances, (vi) Rating changes. (vii) Adverse tax opinions or events affecting the tax-exempt status of the Certificates. (viii) Unscheduled draws on the debt service reserves reflecting financial difficulties. (ix) Unscheduled draws on the credit enhancements reflecting financial difficulties. (x) Substitution of the credit or liquidity providers or their failure to perform. (xi) Release, substitution or sale of property securing repayment of the Certificates, (b) Whenever the City obtains knowledge of the occurrence of a Listed Event, the City shall as soon as possible determine if such event would be material under applicable federal securities laws. 3 / - / /.~ 00C50C1I147761 v31024036-0033 (c) (fthe City determines that knowledge of the occurrence ofa Listed Event would be material under applicable federal securities laws, the City shall promptly file a notice of such occurrence with the Repositories. Notwithstanding the foregoing, notice of Listed Events described in subsections (a)(iv) and (v) need not be given under this subsection any earlier than the notice (if any) of the underlying event is given to Holders of affected Certificates pursuant to the Trust Agreement. SECTION 6. Termination of Reporting Obligation. The City's obligations under this Disclosure Agreement shall terminate upon the legal defeasance, prior redemption or payment in full of all of the Certificates. If such termination occurs prior to the final maturity ofthe Certificates, the City shall give notice of such termination in the same manner as for a Listed Event under Section 5(c). SECTION 7. Dissemination Agent. The City may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Agreement, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. The Dissemination Agent shall not be responsible in any manner for the content of any notice or report prepared by the City pursuant to this Disclosure Agreement. The Dissemination Agent may resign by providing thirty days written notice to the City and the Trustee. The Dissemination Agent shall not be responsible for the content of any report or notice prepared by the City and shall have no duty to review any information provided to it by the City. The Dissemination Agent shall have no duty to prepare any information report nor shall the Dissemination Agent be responsible for filing any report not provided to it by the City in a timely manner and in a form suitable for filing. SECTION 8. Amendment: Waiver. Notwithstanding any other provision of this Disclosure Agreement, the City may amend this Disclosure Agreement, and any provision of this Disclosure Agreement may be waived, provided that, in the opinion of nationally recognized bond counsel, such amendment or waiver is permitted by the Rule; provided, the Dissemination Agent shall have first consented to any amendment that modifies or increases its duties or obligations hereunder. In the event of any amendment or waiver of a provision of this Disclosure Agreement, the City shall describe such amendment in the next Annual Report, and shall include, as applicable, a narrative explanation of the reason for the amendment or waiver and its impact on the type (or in the case of a change of accounting principles, on the presentation) of financial information or operating data being presented by the City. In addition, if the amendment relates to the accounting principles to be followed in preparing financial statements, (i) notice of such change shall be given in the same manner as for a Listed Event under Section 5( c), and (ii) the Annual Report for the year in which the change is made shall present a comparison (in narrative form and also, if feasible, in quantitative form) between the financial statements as prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. SECTION 9. Additional Information. Nothing in this Disclosure Agreement shall be deemed to prevent the City from disseminating any other information, using the means of dissemination set forth in this Disclosure Agreement or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Agreement. If the City chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Agreement, the City shall have no obligation under this Certificate to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event. 4 j. / /0 00CSOC/1147761 v31024036-0033 SECTION 10. Default. In the event ofa failure of the City to comply with any provision of this Disclosure Agreement, any Holder or Beneficial Owner of the Certificates 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 Agreement. A default under this Disclosure Agreement shall not be deemed an Event of Default under the Trust Agreement, and the sole remedy under this Disclosure Agreement in the event of any failure of the City to comply with this Disclosure Agreement shall be an action to compel performance. No Certificate holder or Beneficial Owner 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. SECTION II. Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Agreement, and the City agrees, to the extent permitted by law, to indemnify and save the Dissemination Agent, its officers, directors, employees and agents, harmless against any loss, expense and liabilities which it may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the costs and expenses (including attorney's fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent's negligence or willful misconduct. The Dissemination Agent shall be paid compensation by the City for its services provided hereunder in accordance with its schedule of fees as amended from time to time and all expenses, legal fees and advances made or incurred by the Dissemination Agent in the performance of its duties hereunder. In performing its duties hereunder, the Dissemination Agent shall not be deemed to be acting in any fiduciary capacity for the City, the Certificate Holders, or any other party. The obligations ofthe City under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Certificates. SECTION 12. Notices. Any notices or communications to or among any of the parties to this Disclosure Agreement may be given as follows: To the City: City ofChula Vista 276 Fourth Avenue Chula Vista, California 91910 Attention: Director of Finance To the Dissemination Agent: The Bank of New York Trust Company, N.A. 700 South Flower Street, Suite 500 Los Angeles, California 90017 SECTION 13. Beneficiaries. This Disclosure Agreement solely to the benefit of the City, the Dissemination Agent, the Participating Underwriter and Holders and Beneficial Owners from time to time of the Certificates, and shall create no rights in any other person or entity. 5 /.- /17 DOCSOCII14 7761 v3/024036-0033 SECTION 14. Signature. This Disclosure Agreement has been executed by the undersigned on the date hereof, and such signature binds the City to the undertaking herein provided. CITY OF CHULA VISTA By: Its: Director of Finance THE BANK OF NEW YORK TRUST COMPANY, N.A., as Dissemination Agent By: Its: Authorized Officer 6 /" II !.~' DOCSOCII147761 v3/024036-0033 EXHIBIT A NOTICE TO REPOSITORIES OF FAILURE TO FILE ANNUAL REPORT Name ofIssuer: City of Chula Vista Name of Certificate Issue: $ City ofChula Vista 2006 Certificates of Participation (Civic Center Project - Phase 2) Date ofIssuance: ,2006 NOTICE IS HEREBY GIVEN that the City has not provided an Annual Report with respect to the above-named Certificates as required by the Continuing Disclosure Agreement executed by the City on the date of issuance of the Certificates. The City anticipates that the Annual Report will be filed by Dated: THE BANK OF NEW YORK TRUST COMPANY, N.A., as Dissemination Agent By: DOCSOC/] 147761 v3/024036-0033 / Iii A-I RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: STRADLING, YOCCA, CARLSON & RAUTH 660 Newport Center Drive Suite 1600 Newport Beach, California 92660 Attn: Robert J, Whalen, Esq, ATTACHMENT 5 Stradling Yocca Carlson & Rauth Draft 1/23/06 ) ) ) ) ) ) ) ) ) [Space above for recorder,] This document is recorded for the benefit of the City of Chula Vista, and the recording is fee-exempt under Section 27383 of the Government Code, FIRST AMENDMENT TO LEASE/PURCHASE AGREEMENT between CITY OF CHULA VISTA, as Lessee and CHULA VISTA PUBLIC FINANCING AUTHORITY, as Lessor Dated as of March 1, 2006 Relating to the $ City ofChula Vista Certificates of Participation (Civic Center Project-Phase 2) DOCSOC/l147282v61024036-0033 /-- / ' -- \...... FIRST AMENDMENT TO LEASE/PURCHASE AGREEMENT THIS FIRST AMENDMENT TO LEASE/PURCHASE AGREEMENT, dated as of March I, 2006 ("First Amendment to Lease'"), is entered into by and between the CITY OF CHULA VISTA PUBLIC FINANCING AUTHORITY, a joint powers authority duly organized and existing under the laws ofthe State of California, as lessor (the "Authority"), and the CITY OF CHULA VISTA, a municipal corporation and a charter city duly organized and existing under and by virtue of the Constitution and laws of the State of California, as lessee (the "City'"), and amends, in part, that certain Lease/Purchase Agreement between the City, as lessee, and the Authority, as lessor, dated as of September 1,2004, and recorded in the official records of the County of San Diego (the "County") on September 15, 2004 as Document No. 2004-0877212 (the "Lease"); WITNESSETH: WHEREAS, pursuant to the Government Code of the State of California, the City may enter into leases and agreements relating to real property to be used by the City; and WHEREAS, the Authority is authorized pursuant to the laws of the State of California to provide financial assistance to the City by acquiring, constructing and financing various public facilities, land and equipment and the leasing of facilities, land and equipment for the use, benefit and enjoyment of the public; and WHEREAS, the Authority entered into the Lease with the City for the purpose of leasing the real property (including all existing and future improvements thereon) described in Exhibit B thereto to the City, as lessee thereunder; and WHEREAS, the City and the Authority desire to enter into this First Amendment to Lease/Purchase Agreement in order to facilitate the execution and delivery of those certain $ City of Chula Vista 2006 Certificates of Participation (Civic Center Project-Phase 2) (the "2006 Certificates"), which shall be treated as Additional Certificates under the terms of the Lease, to facilitate the construction, modernization and equipping of Phase 2 of the Civic Center and the renovation ofthe Nature Center owned by the City; and WHEREAS, the 2006 Certificates are being executed and delivered as Additional Certificates under that certain Amended and Restated Trust Agreement, dated as of March I, 2006 (the "Trust Agreement"), by and among the City, the Authority and The Bank of New York Trust Company, N.A., as Trustee, which amends and restates in its entirety the Trust Agreement, dated as of September I, 2004, by and among the City, the Authority and the Trustee, pursuant to which the Trustee executed $37,240,000 City of Chula Vista 2004 Certificates of Participation (Civic Center Project - Phase I) (the "Certificates"); and WHEREAS, pursuant to Section 8.3 of the Lease, the City and the Authority reserved the right to amend the Lease from time to time, including in connection with the execution and delivery of Additional Certificates; and WHEREAS, to facilitate the execution and delivery of the 2006 Certificates, the City and the Authority desire to amend the Lease to add certain real property and improvements consisting of DOCSOC/1147282v6/024036-0033 ! . ; I-I ,--:J I , , Montevalle Park and Salt Creek Park (the "Additional Property") described in Exhibit I hereto to the real property and improvements currently leased by the City from the Authority and to make the further amendments to the Lease described herein; and WHEREAS, the parties have determined that the amendments contained herein do not adversely affect the interests of the Owners of the Certificates, the 2006 Certificates or any Additional Certificates; and WHEREAS, pursuant to Section 8.3 of the Lease, the Trustee is required to consent to any amendment to the Lease; and WHEREAS, the Trustee has consented to this First Amendment to Lease; NOW, THEREFORE, in consideration of the above premises and of the mutual covenants hereinafter contained and for other good and valuable consideration, the parties hereto agree as follows: SECTION 1. Definitions. Unless the context otherwise requires, the capitalized terms used herein shall have the meanings specified in the Lease and the Trust Agreement. The term "Agency Agreement"' means the Agency Agreement dated as of September], 2004 by and between the City and the Authority, the Agency Agreement dated as of March], 2006 by and between the City and the Authority and any similar agreement entered into between the City and the Authority with respect to any Additional Certificates. The term "Insurer" means MB]A Insurance Corporation, a stock insurance company domiciled in the State of New York, or any successor thereto or assignee thereof. The term "Supplemental Agreement" or "Supplemental Trust Agreement" shall refer to any amendment to the Trust Agreement. SECTION 2. Lease of Additional PrODertv. The Authority hereby leases to the City and the City hereby leases from the Authority the Additional Property on the terms and conditions set forth in the Lease, as amended by this First Amendment to Lease, Exhibit B to the Lease is hereby deleted in its entirety and replaced by Exhibit 1 hereto. From and after the date hereof, the Property (as defined in the Lease) consists of the real property described in Exhibit 1 hereto and the improvements located thereon other than the Project, and the Leased Premises consists of the real property described in Exhibit] hereto, together with all existing and future improvements located thereon, including, but not limited to, the portions of the Project located thereon. Notwithstanding the provisions of Section 7.]2 of the Lease, upon the completion of the Phase 3 improvements to the City's Civic Center Complex, the Additional Property shall automatically be released upon the City's filing of a Completion Certificate for such improvements and its presentation to the Trustee of a supplement to the Lease substantially in the form attached as Exhibit D. The Trustee shall deliver a copy ofthe Completion Certificate and the supplement to the Lease to the Insurer and the insurer of any Additional Certificates. SECTION 3. Amendment of Section 3.4. Section of 3.4 of the Lease is hereby deleted in its entirety and amended to read as follows: 2 /-/1-1 ~--:I'( DOCSOC/l147282v61024036-0033 "Section 3.4. Completion Certification. The portion of the Project financed with the proceeds of the Certificates is substantially complete. The City and the Authority expect that portion of the Project being constructed with the proceeds of the 2006 Certificates will be substantially completed in accordance with plans and specifications described in the Agency Agreement related to the 2006 Certificates on or prior to August I, 2007. "Upon the completion of acquisition, construction, delivery and installation of the portion of the Project to be financed with the proceeds of the Certificates and, upon the completion of the improvements to be financed with each series of Additional Certificates, the City shall deliver to the Trustee, the Insurer and any insurer of Additional Certificates a Completion Certificate with respect thereto. A separate Completion Certificate will be filed with respect to the portion of the Project to be financed from the Certificates and the portion to be financed with each series of Additional Certificates. On the date of filing a Completion Certificate, all excess moneys remaining in the Project Fund for the Certificates or the series of Additional Certificates for which such Completion Certificate is delivered shall be applied in accordance with the provisions of Section 3.04 of the Trust Agreement. "If the Authority, for any reason whatsoever, cannot deliver possession of the portion of the Leased Premises being financed with the proceeds of the 2006 Certificates by August I, 2007, and as a result of which non-delivery the City is deprived of the use and occupancy of a substantial portion of the Leased Premises, this Lease shall not be void or voidable, nor shall the Authority be liable to the City for any loss or damage resulting therefrom. In such event, however, Lease Payments and Additional Payments, with respect to the period between August I, 2007 and the time when the portion of the Leased Premises comprising the Project is substantially completed, shall be payable solely to the extent and from the sources of payment identified in Section 4.IO(a) hereof:' SECTION 4, Amendment of Section 4,lO(a), Section 4.2 of the Lease is amended, in part, by adding the following sentence at the end of Section 4.1 O(a) hereof: "Notwithstanding the foregoing, there shall be no abatement hereunder as a result of the noncompletion of the portion of the Project being financed with proceeds of the 2006 Certificates. The City hereby finds and determines that the fair rental value of the Leased Premises existing as of the date ofthe execution and delivery of the 2006 Certificates is not less than the Lease Payments and Additional Payments due hereunder. SECTION 5, Amendment of Section 5.6(d). Section 5.6(d) of the Lease is hereby deleted in its entirety and amended to read as follows: "(d) Evidence of Insurance. The City shall cause to be delivered to the Trustee and the Insurer and any insurer of Additional Certificates annually on or before August I a certificate stating that the insurance policies required by this Lease are in full force and effect." 3 1- / )-3 . .- DOC50C/1147282v6/024036-0033 SECTION 6. Ootion to Purchase. Any appraiser selected pursuant to Section 7.3 shall also be acceptable to any insurer of Additional Certificates, and each insurer of Additional Certificates shall have provided its written consent pursuant to any reversion or transfer pursuant to such Section 7.3. SECTION 7. Notice of Reolacements. Redevelooment and Renovation. Any notice provided by the City pursuant to Section 7 .8( c )(ii) shall also be provided to any insurer of Additional Certificates and any rating agency then providing a rating on any Additional Certificates. SECTION 8. Schedule of Lease Pavments. Exhibit A to the Lease is hereby deleted in its entirety and replaced by Exhibit 2 hereto. SECTION 9. Descriotion of Proiect. Exhibit C to the Lease is hereby deleted in its entirety and replaced by Exhibit 3 hereto. SECTION 10. No Other Amendments. Except as expressly set forth in Sections 2 through 8 above, all other provisions of the Lease remain in full force and effect. SECTION 11. Counteroarts. This First Amendment to Lease/Purchase 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. 4 ; I j I '\ i "t DOCSOCIl147282v6/024036-0033 IN WITNESS WHEREOF, the Authority has caused this First Amendment to Lease/Purchase Agreement to be executed in its name by its duly authorized officers, and the City has caused this First Amendment to Lease/Purchase Agreement to be executed in its name by its duly authorized officers, as of the date first above written. CHULA VISTA PUBLIC FINANCING AUTHORITY, as Lessor By: Chair ATTEST: Secretary CITY OF CHULA VISTA, as Lessee By: City Manager ATTEST: City Clerk 5 /.- / ,) ~.:; 00C50C/1147282v6/024036.0033 CONSENTED TO BY: THE BANK OF NEW YORK TRUST COMPANY, N.A. as successor-in-interest to BNY Western Trust Company, as Trustee and Assignee By: Authorized Officer 6 /-- I' ' ,)lC DOCSOCIJ 147282v6/024036-0033 CERTIFICATE OF ACCEPTANCE This is to certify that the interest in real property conveyed under the foregoing to the City of Chula Vista, a municipal corporation and a charter city, is hereby accepted by the undersigned officer or agent on behalf of the City Council of the City of Chula Vista (the "City Council"), pursuant to authority conferred by resolution of the said City Council adopted on February 7, 2006, and the grantee consents to recordation thereof by its duly authorized officer, Dated: March~, 2006 CITY OF CHULA VISTA By: Its: City Manager DOCSOC/l147282v6!024036-0033 / "-1 / I / STATE OF CALIFORNIA COUNTY OF SAN DIEGO On March _' 2006 before me, the undersigned, personally appeared David D. Rowlands, Jr., personally known to me to be the person whose names is subscribed to the within instrument and acknowledged to me that he executed the same in his authorized capacity, and that by his signature on the instrument the person, or the entity upon behalf of which the person acted, executed the instrument. [SEAL] WITNESS my hand and official seal Donna Norris, Assistant City Clerk of the City of ChuIa Vista . X / - I.)., DOCSOCIl147282v6/024036-0033 STATE OF CALIFORNIA COUNTY OF SAN DIEGO On March~, 2006 before me, the undersigned, personally appeared Maria Kachadoorian, personally known to me to be the person whose names is subscribed to the within instrument and acknowledged to me that she executed the same in her authorized capacity, and that by her signature on the instrument the person, or the entity upon behalf of which the person acted, executed the instrument. [SEAL] WITNESS my hand and official seal Donna Norris, Assistant City Clerk of the City of Chula Vista /" / J I DOCSOC/1147282v6/024036,0033 EXHIBIT 1 DESCRIPTION OF THE LEASED PREMISES THA T REAL PROPERTY IN THE CITY OF CHULA V]ST A, COUNTY OF SAN DIEGO, STATE OF CALlFORN]A, DESCRIBED AS FOLLOWS: CIVIC CENTER PARCEL A: ALL THAT PORTION OF THE WESTERLY HALF OF LOT 13, IN QUARTER SECTION ]49, CHULA VISTA, IN THE CITY OF CHULA VISTA, COUNTY OF SAN DIEGO, STATE OF CALlFORN]A, ACCORDING TO MAP THEREOF NO. 505, F]LED ]N THE OFF]CE OF THE COUNTY RECORDER OF SAN DIEGO COUNTY, MARCH 13, 1888, DESCRIBED AS FOLLOWS: COMMENCING AT A POINT IN THE SOUTHERLY LINE OF SAID LOT WH]CH]S NORTH 71 DEGREES EAST 467 Yz FEET FROM THE SOUTHWESTERLY CORNER OF SAID LOT; THENCE NORTH 71 DEGREES EAST ALONG THE SOUTHERLY LINE OF SAID LOT 78 \12 FEET; THENCE NORTH 19 DEGREES WEST 290 FEET TO THE NORTHERLY LINE OF SAID LOT 13: THENCE SOUTH 71 DEGREES WEST ALONG SAID NORTHERLY LINE OF SAID LOT, 78 \12 FEET; THENCE SOUTH 19 DEGREES EAST, 290 FEET, TO POINT OF COMMENCEMENT. (APN: 568-110-17-00) PARCELB: ALL THAT PORTION OF THE WESTERLY HALF OF LOT 13, IN QUARTER SECTION 149, CHULA VISTA, IN THE CITY OF CHULA VISTA, COUNTY OF SAN DIEGO, STATE OF CALlFORN]A, ACCORDING TO MAP THEREOF NO. 505, FILED IN THE OFF]CE OF THE COUNTY RECORDER OF SAN DIEGO COUNTY, MARCH 13, 1888, DESCRIBED AS FOLLOWS: COMMENCING AT A POINT IN THE SOUTHERLY LINE OF SAID LOT WH]CH]S NORTH 71 DEGREES 00'00" EAST, 546.00 FEET FROM THE SOUTHWESTERLY CORNER OF SAID LOT, SAID POINT BE]NG ALSO THE SOUTHEASTERLY CORNER OF THE LANDS CONVEYED BY ELLA J. WHARTON AND REVERDY J. WHARTON TO ROBERT H. KING, BY DEED DATED MARCH 2,1914 AND RECORDER IN BOOK 643, PAGE 325 OF DEEDS, RECORDS OF SAN DIEGO COUNTY; THENCE NORTH 71 DEGREES 00'00" EAST ALONG SAID SOUTHERLY LINE OF SAID LOT 74.00 FEET TO THE SOUTHEASTERLY CORNER OF THE WESTERLY HALF OF SAID LOT; THENCE NORTH 19 DEGREES 00'00" WEST ALONG THE EASTERLY LINE OF SAID WESTERLY HALF OF SAID LOT, 290.00 FEET TO THE NORTHERLY LINE THEREOF; THENCE SOUTH 71 DEGREES 00'00" WEST ALONG THE NORTHERLY LINE THEREOF 74.00 FEET, MORE OR LESS, TO THE NORTHEASTERLY CORNER OF THE LAND SO CONVEYED TO K]NG; THENCE SOUTH 19 Exhibit 1-1 ; / ~~<) DOCSOClI ] 47282v61024036-0033 DEGREES 00'00" EAST ALONG THE EASTERLY LINE OF SAID KING'S LAND, 290.00 FEET TO THE POINT OF COMMENCEMENT. (APN: 568- I 10-16-00) PARCEL C: THE EAST HALF OF TEN-ACRE LOT FOURTEEN AND THE EAST HALF OF TEN-ACRE LOT THIRTEEN IN QUARTER SECTION ONE HUNDRED FORTY-NINE OF CHULA VISTA, IN THE CITY OF CHULA VISTA, COUNTY OF SAN DIEGO, STATE OF CALIFORNIA, BEING IN RANCHO DE LA NACION, ACCORDING TO MAP THEREOF NO. 505, FILED IN THE OFFICE OF THE COUNTY RECORDER OF SAN DIEGO COUNTY MARCH 13, 1888. EXCEPTING THOSE PORTIONS LYING WITHIN PARCELS I AND 2. PARCEL I: ALL THAT PORTION OF LOT 14 OF THE NORTHEAST QUARTER OF QUARTER SECTION 149 OF RANCHO DE LA NACION, IN THE CITY OF CHULA VISTA, COUNTY OF SAN DIEGO, STATE OF CALIFORNIA, ACCORDING TO MAP THEREOF NO. 505, FILED IN THE OFFICE OF THE COUNTY RECORDER OF SAN DIEGO COUNTY, MARCH 13, 1888, DESCRIBED AS FOLLOWS: BEGINNING AT THE INTERSECTION OF THE CENTERLINE OF FIG AVENUE WITH THE CENTERLINE OF DAVIDSON STREET, ACCORDING TO MAP NO. 2109, FILED IN THE OFFICE OF THE COUNTY RECORDER OF THE COUNTY OF SAN DIEGO, CALIFORNIA, BEING THE NORTHWEST CORNER OF THE EAST-HALF OF SAID LOT 14; THENCE NORTH 71 DEGREES 00'15" EAST, 135.39 FEET; THENCE SOUTH 18 DEGREES 40'22" EAST, 30.00 FEET TO THE TRUE POINT OF BEGINNING; THENCE CONTINUING SOUTH 18 DEGREES 40'22" EAST 100.00 FEET; THENCE NORTH 71 DEGREES 00'15" EAST, 135.00 FEET; THENCE NORTH 18 DEGREES 40'22" WEST, 77.13 FEET TO THE BEGINNING OF A TANGENT CURVE TO THE LEFT HALF HAVING A RADIUS OF 23.00 FEET AND A CENTRAL ANGLE OF 89 DEGREES 40'37"; THENCE ALONG SAID CURVE A DISTANCE OF 36.00 FEET; THENCE SOUTH 71 DEGREES 00'15" WEST, A DISTANCE OF 112.13 FEET TO THE TRUE POINT OF BEGINNING. PARCEL 2: ALL THAT PORTION OF LOT 14 OF THE NORTHEAST QUARTER OF QUARTER SECTION 149 OF RANCHO DE LA NACION, IN THE CITY OF CHULA VISTA, COUNTY OF SAN DIEGO, STATE OF CALIFORNIA, ACCORDINGTO MAP THEREOF NO. 505, FILED IN THE OFFICE OF THE COUNTY RECORDER OF SAN DIEGO COUNTY, MARCH 13, 1888, DESCRIBED AS FOLLOWS: BEGINNING AT THE INTERSECTION OF THE CENTERLINE OF FIG AVENUE WITH THE CENTERLINE OF DAVIDSON STREET, ACCORDING TO MAP NO. 2109, FILED IN THE OFFICE OF THE COUNTY RECORDER OF THE COUNTY OF SAN DIEGO, CALIFORNIA, Exhibit 1-2 j-r:</ DOCSOCIl147282v6/024036-0033 BEING THE NORTHWEST CORNER OF THE EAST-HALF OF SAID LOT 14; THENCE NORTH 71 DEGREES 00'15" EAST, 135.39 FEET; THENCE SOUTH 18 DEGREES 40'22" EAST, 30 FEET TO THE TRUE POINT OF BEGINNING; THENCE CONTINUING SOUTH 18 DEGREES 40'22" EAST 100 FEET; THENCE NORTH 71 DEGREES 00'15" EAST, 135.00 FEET; THENCE SOUTH 18 DEGREES 40'22" EAST, 40 FEET; THENCE SOUTH 71 DEGREES 00'15" WEST TO AN INTERSECTION WITH THE EASTERLY LlNE OF THE WESTERLY 60 FEET OF THE EAST HALF OF SAID LOT 14; THENCE NORTHERLY ALONG SAID EASTERLY LINE TO AN INTERSECTiON WITH A LINE WHICH BEARS SOUTH 71 DEGREES 00'15" WEST FROM THE TRUE POINT OF BEGINNING; THENCE ALONG SAID LINE NORTH 71 DEGREES 00'15" EAST TO THE TRUE POINT OF BEGINNING. (APN: 568-110-33-00) PARCEL D: ALL THAT PORTION OF LOT 14 OF THE NORTHEAST QUARTER OF QUARTER SECTION 149 OF RANCHO DE LA NACION, IN THE CITY OF CHULA VISTA, COUNTY OF SAN DIEGO, STATE OF CALlFORNIA, ACCORDING TO MAP THEREOF NO. 505, FILED IN THE OFFICE OF THE COUNTY RECORDER OF SAN DIEGO COUNTY, MARCH 13, 1888, DESCRIBED AS FOLLOWS: BEGINNING AT THE INTERSECTiON OF THE CENTERLINE OF FIG AVENUE WITH THE CENTERLINE OF DAVIDSON STREET, ACCORDING TO MAP NO. 2109, FILED IN THE OFFICE OF THE COUNTY RECORDER OF THE COUNTY OF SAN DIEGO, CALIFORNIA, BEING THE NORTHWEST CORNER OF THE EAST-HALF OF SAID LOT 14; THENCE NORTH 71 DEGREES 00'15" EAST, 135.39 FEET; THENCE SOUTH 18 DEGREES 40'22" EAST, 30.00 FEET TO THE TRUE POINT OF BEGINNING; THENCE CONTINUING SOUTH 18 DEGREES 40'22" EAST 100.00 FEET; THENCE NORTH 71 DEGREES 00'15" EAST, 135.00 FEET; THENCE NORTH 18 DEGREES 40'22" WEST, 77.13 FEET TO THE BEGINNING OF A TANGENT CURVE TO THE LEFT HALF HAVING A RADIUS OF 23.00 FEET AND A CENTRAL ANGLE OF 89 DEGREES 40'37"; THENCE ALONG SAID CURVE A DISTANCE OF 36.00 FEET; THENCE SOUTH 71 DEGREES 00'15" WEST, A DISTANCE OF 112.13 FEET TO THE TRUE POINT OF BEGINNING. PARCEL E: ALL THAT PORTiON OF LOT 14 OF THE NORTHEAST QUARTER OF QUARTER SECTiON 149 OF RANCHO DE LA NACION, IN THE CITY OF CHULA VISTA, COUNTY OF SAN DIEGO, STATE OF CALIFORNIA, ACCORDING TO MAP THEREOF NO. 505, FILED IN THE OFFICE OF THE COUNTY RECORDER OF SAN DIEGO COUNTY, MARCH 13, 1888, DESCRIBED AS FOLLOWS: BEGINNING AT THE INTERSECTiON OF THE CENTERLlNE OF FIG AVENUE WITH THE CENTERLINE OF DAVIDSON STREET, ACCORDING TO MAP NO. 2109, FILED IN THE OFFICE OF THE COUNTY RECORDER OF THE COUNTY OF SAN DIEGO, CALIFORNIA, BEING THE NORTHWEST CORNER OF THE EAST-HALF OF SAID LOT 14; THENCE NORTH 71 DEGREES 00'15" EAST, 135.39 FEET; THENCE SOUTH 18 DEGREES 40'22" Exhibit 1-3 DOCSOCI1147282v6/024036-0033 I I f ; , .....:>"'. EAST, 30 FEET TO THE TRUE POINT OF BEGINNING; THENCE CONTINUING SOUTH 18 DEGREES 40'22" EAST 100 FEET; THENCE NORTH 71 DEGREES 00'15" EAST, 135 FEET; THENCE SOUTH 18 DEGREES 40'22" EAST, 40 FEET; THENCE SOUTH 71 DEGREES 00'15" WEST TO AN INTERSECTION WITH THE EASTERLY LINE OF THE WESTERLY 60 FEET OF THE EAST HALF OF SAID LOT 14; THENCE NORTHERLY ALONG SAID EASTERLY LINE TO AN INTERSECTION WITH A LINE WHICH BEARS SOUTH 71 DEGREES 00'15" WEST FROM THE TRUE POINT OF BEGINNING; THENCE ALONG SAID LINE NORTH 71 DEGREES 00'15" EAST TO THE TRUE POINT OF BEGINNING, (APN: 568-1 10-32-00) FIRE STATION NO.7 PARCEL F: THAT PORTION OF PARCEL 4 OF PARCEL MAP NO. 18789, IN THE CITY OF CHULA VISTA, COUNTY OF SAN DIEGO, STATE OF CALIFORNIA, FILED IN THE OFFICE OF THE COUNTY RECORDER OF SAN DIEGO COUNTY ON SEPTEMBER 7. 2001, BEING MORE PARTICULARLY DESCRIBED AS FOLLOWS: COMMENCING AT AN ANGLE POINT ON THE EASTERLY BOUNDARY OF SAID PARCEL 4 BEING THE WESTERLY TERMINUS OF THAT COURSE ON THE BOUNDARY OF PARCEL I OF SAID PARCEL MAP NO. 18789 DEPICTED ON SHEET 3 OF SAID PARCEL MAP NO. 18789 AS NORTH 71 DEGREES 57'24" EAST, 1091.24', SAID POINT BEING THE NORTHERLY TERMINUS OF THE WESTERLY RIGHT OF WAY OF LA MEDIA ROAD AS DEDICA TED ON CHULA VISTA TRACT NO. 02-055 OT A Y RANCH VILLAGE 6 UNIT 2 "A" MAP NO. I ACCORDING TO MAP THEREOF NO. 14447 FILED IN THE SAID OFFICE OF THE COUNTY RECORDER ON SEPTEMBER 18,2002, SAID POINT ALSO BEING A POINT ON A 4336.00 FOOT RADIUS CURVE, CONCAVE WESTERLY. A RADIAL LINE OF SAID CURVE BEARS NORTH 77 DEGREES 19'04" EAST (RECORD NORTH 77 DEGREES 18'51" EAST PER SAID PARCEL MAP NO. 18789) TO SAID POINT; THENCE ALONG SAID WESTERLY RIGHT OF WAY SOUTHERLY ALONG THE ARC OF SAID 4336.00 FOOT RADIUS CURVE THROUGH A CENTRAL ANGLE OF 00 DEGREES 39'06". 49.32 FEET TO THE TRUE POINT OF BEGINNING; THENCE CONTINUING ALONG SAID WESTERLY RIGHT OF WAY SOUTHERLY ALONG THE ARC OF SAID 4336.00 FOOT RADIUS CURVE THROUGH A CENTRAL ANGLE OF 03 DEGREES 24'43", 258.21 FEET; THENCE LEAVING SAID WESTERLY RIGHT OF WAY NON-TANGENT TO SAID CURVE SOUTH 76 DEGREES 40'26" WEST. 266.27 FEET; THENCE NORTH 12 DEGREES 45'05" WEST, 271.84 FEET TO A POINT ON THE PROPOSED SOUTHERLY RIGHT OF WAY ("STREET A" WITHIN OTAY RANCH VILLAGE 2; THENCE ALONG SAID PROPOSED SOUTHERLY RIGHT OF WAY NORTH 77 DEGREES 14'55" EAST. 259.19 FEET; THENCE CONTINUING ALONG SAID PROPOSED SOUTHERLY RIGHT OF WAY SOUTH 70 DEGREES 47'53" EAST, 20.21 FEET TO THE TRUE POINT OF BEGINNING. (APN: 644-030-22-00) Exhibit 1-4 /- j " ~ _~ J l ~? ..--) DOCSOC/1 ] 47282v6/024036-0033 MONTEV ALLE PARK [TO COME] SALT CREEK PARK [TO COME] Exhibit 1-5 DOCSOC/1147282v6/024036-0033 / . / ~i Date 2004 Principal Component DOCSOC/1147282v6/024036-0033 EXHIBIT 2 SCHEDULE OF LEASE PAYMENTS 2004 Interest 2006 Principal Component Component Exhibit 2-1 2006 Interest Component , ..-"~" Total Lease Payments EXHIBIT 3 DESCRIPTION OF THE PROJECT I. The portion of the Project to be constructed on the Property consists of the reconstruction, modernization and equipping of the City's Civic Center Complex in three phases, including the construction of a new 42,455 square foot City Hall building in phase 1, the renovation of the existing Public Services building in phase 2 and the renovation of the former Police Department building in phase 3, along with related site improvements in each phase. 2. The portion of the Project not located on the Property financed with proceeds of the 2004 Certificates consists of infrastructure improvements made in the western portion of the City, including street, drainage and park improvements. 3. The portion of the Project not located on the Property financed with proceeds of the 2006 Certificates consists of improvements to be made to the City's Nature Center. Exhibit 3-1 ! / ../~ ,. DOCSOCIl147282v6/024036-0033 RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: STRADLING YOCCA CARLSON & RAUTH 660 Newport Center Drive Suite 1600 Newport Beach, California 92660 Attn: Robert J. Whalen, Esq. ATTACHMENT 6 Stradling Yocca Carlson & Rauth Draft 1/23/06 ) ) ) ) ) ) ) ) ) [Space above for recorder.] This document is recorded for the benefit of the City of Chula Vista, and the recording is fee-exempt under Section 27383 of the Government Code. FIRST AMENDMENT TO ASSIGNMENT AGREEMENT between CHULA VISTA PUBLIC FINANCING AUTHORITY and THE BANK OF NEW YORK TRUST COMPANY, N.A., as successor trustee to BNY WESTERN TRUST COMPANY, as Trustee Dated as of March I, 2005 Relating to the $ City ofChula Vista 2006 Certificates of Participation (Civic Center Project-Phase 2) DOCSOC/l147304v61024036-0033 - _7- / - / .:; FIRST AMENDMENT TO ASSIGNMENT AGREEMENT This First Amendment to Assignment Agreement, dated as of March 1, 2006 (the "First Amendment to Assignment AgreemenC), is made and entered into by and between the Chula Vista Public Financing Authority, a joint powers authority duly organized and existing under the laws of the State of California (the "Authority"), as assignor, and The Bank of New York Trust Company, a national banking association organized and existing under the laws of the United States, as successor-in-interest to BNY Western Trust Company, as trustee (the ''Trustee''), as assignee, and amends that certain Assignment Agreement between the Authority and the Trustee, dated as of September I, 2004 and recorded in the official records of the County of San Diego (the "County") on September 15, 2004 as Document No. 2004-0877213 (the "Assignment Agreement"); W !IN .E~~.EIH: WHEREAS, the Authority and the City of Chula Vista (the "City") have entered into a certain Site Lease, dated as of September 1, 2004, recorded on September 15, 2004 in the official records of the County as Document No. 2004-0877211, as amended by that certain First Amendment to Site Lease dated as of March I, 2006, as recorded concurrently herewith (collectively, the "Site Lease"), whereby the City has leased to the Authority certain real property, including the improvements thereon, described in Exhibit A to First Amendment to Site Lease and in Exhibit A hereto (the "Property"); and WHEREAS, the Authority and the City have entered into a certain Lease/Purchase Agreement, dated as of September I, 2004, recorded on September 15, 2004 in the official records of the County as Document No. 2004-0877212, as amended by that certain First Amendment to Lease/Purchase Agreement dated as of March 1, 2006 and recorded concurrently herewith (collectively, the "Lease"), whereby the Authority has leased to the City, and the City has leased from the Authority, the Leased Premises (as defined therein); and WHEREAS, the Authority has assigned absolutely, without recourse, all of its rights to receive the Lease Payments scheduled to be paid by the City under and pursuant to the Lease to the Trustee and certain of its other rights, title and interest under the Lease, pursuant to the Assignment Agreement; and WHEREAS, the Authority has assigned absolutely, without recourse, all of its rights to, under and pursuant to the Site Lease to the Trustee, pursuant to the Assignment Agreement; and WHEREAS, the Authority and the Trustee desire to enter into this First Amendment to Assignment Agreement in order to facilitate the execution and delivery of those certain $ City of Chula Vista 2006 Certificates of Participation (Civic Center Project-Phase 2) (the "2006 Certificates"); and WHEREAS, the 2006 Certificates are being executed and delivered as Additional Certificates under that certain Amended and Restated Trust Agreement, dated as of March 1, 2006 (the "Trust Agreement"), by and among the City, the Authority and the Trustee; and DOCSOC/1147304v6/024036-0033 / ,. - :) .- / .:.-' ~ NOW, THEREFORE, in consideration of the mutual covenants contained herein, and for other valuable consideration, it is hereby mutually agreed as follows: SECTION 1. Definitions, Unless the context otherwise requires, the capitalized terms used herein shall have the meanings specified in the Lease and the Trust Agreement. SECTION 2. Execution and Delivery of 2006 Certificates. From and after the date of the execution and delivery of the 2006 Certificates, the 2006 Certificates shall constitute Additional Certificates subject to the provisions of the Assignment Agreement, and all references in the Assignment Agreement to the "Trust Agreement" shall refer to the Amended and Restated Trust Agreement as further amended from time to time. SECTION 3. Revised Le!!al Description. Exhibit A to the Assignment Agreement is hereby deleted in its entirety and replaced by Exhibit A hereto. Upon the release of any portion of the Leased Premises in accordance with the terms of the Lease, without the need for any further consents or approvals, the parties hereto shall execute an amendment to revise Exhibit A hereto to reflect the removal of property from the Leased Premises. SECTION 4. No Other Amendments. Except as expressly set forth in Section 2 above, all other provisions of the Assignment Agreement remain in full force and effect. SECTION 5. Connterparts. This First Amendment to Assignment 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. 2 DOCSOCII147304v6/024036-0033 1-1:;,1 IN WITNESS WHEREOF, the parties have executed this First Amendment to Assignment Agreement by their officers thereunto duly authorized as of the day and year first written above, CHULA VISTA PUBLIC FINANCING AUTHORITY By: Chief Financial Officer ATTEST: Secretary THE BANK OF NEW YORK TRUST COMPANY, N.A., as successor-in-interest to BNY WESTERN TRUST COMPANY, as Trustee By: Authorized Officer 3 DOCSOCIl147304v6/024036-0033 j. / 't) CONSENT The City of Chula Vista hereby consents to the foregoing. CITY OF CHULA VISTA. as Lessee By: City Manager ATTEST: City Clerk DOCSOC/1147304v6/024036-0033 ,I 1'// STATE OF CALIFORNIA COUNTY OF SAN DIEGO On March _, 2006 before me, the undersigned, personally appeared Maria Kachadoorian, personally known to me to be the person whose names is subscribed to the within instrument and acknowledged to me that she executed the same in her authorized capacity, and that by her signature on the instrument the person, or the entity upon behalf of which the person acted, executed the instrument. [SEAL] WITNESS my hand and official seal Donna Norris, Assistant City Clerk of the City of Chula Vista DOCSOCIl147304v6/024036-0033 /-/'i~ STATE OF CALIFORNIA COUNTY OF LOS ANGELES On March _, 2006 before me, the undersigned, personally appeared personally known to me to be the person whose names is subscribed to the within instrument and acknowledged to me that she executed the same in her authorized capacity, and that by her signature on the instrument the person, or the entity upon behalf of which the person acted, executed the instrument. [SEAL] WITNESS my hand and official seal Notary Public DOCSOC/] 147304v6/024036-0033 I / '-I .:j EXHIBIT A LEGAL DESCRIPTION OF PROPERTY THAT REAL PROPERTY IN THE CITY OF CHULA VISTA, COUNTY OF SAN DIEGO, STATE OF CALIFORNIA, DESCRIBED AS FOLLOWS: CIVIC CENTER PARCEL A: ALL THAT PORTION OF THE WESTERLY HALF OF LOT 13, IN QUARTER SECTION 149, CHULA VISTA, IN THE CITY OF CHULA VISTA, COUNTY OF SAN DIEGO, STATE OF CALIFORNIA, ACCORDING TO MAP THEREOF NO. 505, FILED IN THE OFFICE OF THE COUNTY RECORDER OF SAN DIEGO COUNTY, MARCH 13, 1888, DESCRIBED AS FOLLOWS: COMMENCING AT A POINT IN THE SOUTHERLY LINE OF SAID LOT WHICH IS NORTH 71 DEGREES EAST 467 Y, FEET FROM THE SOUTHWESTERLY CORNER OF SAID LOT: THENCE NORTH 71 DEGREES EAST ALONG THE SOUTHERLY LINE OF SAID LOT 78 Y, FEET; THENCE NORTH 19 DEGREES WEST 290 FEET TO THE NORTHERLY LINE OF SAID LOT 13; THENCE SOUTH 71 DEGREES WEST ALONG SAID NORTHERLY LINE OF SAID LOT, 78 Y, FEET; THENCE SOUTH 19 DEGREES EAST, 290 FEET, TO POINT OF COMMENCEMENT. (APN: 568-110-17-00) PARCEL B: ALL THAT PORTION OF THE WESTERLY HALF OF LOT 13, IN QUARTER SECTION 149, CHULA VISTA, IN THE CITY OF CHULA VISTA, COUNTY OF SAN DIEGO, STATE OF CALIFORNIA, ACCORDING TO MAP THEREOF NO. 505, FILED IN THE OFFICE OF THE COUNTY RECORDER OF SAN DIEGO COUNTY, MARCH 13, 1888, DESCRIBED AS FOLLOWS: COMMENCING AT A POINT IN THE SOUTHERLY LINE OF SAID LOT WHICH IS NORTH 71 DEGREES 00'00" EAST, 546.00 FEET FROM THE SOUTHWESTERLY CORNER OF SAID LOT, SAID POINT BEING ALSO THE SOUTHEASTERLY CORNER OF THE LANDS CONVEYED BY ELLA J. WHARTON AND REVERDY J. WHARTON TO ROBERT H. KING, BY DEED DATED MARCH 2,1914 AND RECORDER IN BOOK 643, PAGE 325 OF DEEDS, RECORDS OF SAN DIEGO COUNTY; THENCE NORTH 71 DEGREES 00'00" EAST ALONG SAID SOUTHERLY LINE OF SAID LOT 74.00 FEET TO THE SOUTHEASTERLY CORNER OF THE WESTERLY HALF OF SAID LOT; THENCE NORTH 19 DEGREES 00'00" WEST ALONG THE EASTERLY LINE OF SAID WESTERLY HALF OF SAID LOT, 290.00 FEET TO THE NORTHERLY LINE THEREOF; THENCE SOUTH 71 DEGREES 00'00" WEST ALONG THE NORTHERLY LINE THEREOF 74.00 FEET, MORE OR LESS, TO THE NORTHEASTERLY CORNER OF THE LAND SO CONVEYED TO KING; THENCE SOUTH 19 DEGREES 00'00" EAST ALONG THE EASTERLY LINE OF SAID KING'S LAND, 290.00 FEET A-I DOCSOC/l147304v6/024036-0033 / I",~ -/'1'7 TO THE POINT OF COMMENCEMENT. (APN: 568-] ]0-]6-00) PARCEL C: THE EAST HALF OF TEN-ACRE LOT FOURTEEN AND THE EAST HALF OF TEN-ACRE LOT THIRTEEN IN QUARTER SECTION ONE HUNDRED FORTY-NINE OF CHULA VISTA, IN THE CITY OF CHULA VISTA, COUNTY OF SAN DIEGO, STATE OF CALIFORNIA, BEING IN RANCHO DE LA NAC]ON, ACCORDING TO MAP THEREOF NO. 505, FILED IN THE OFFICE OF THE COUNTY RECORDER OF SAN DIEGO COUNTY MARCH 13, ]888. EXCEPTING THOSE PORTIONS LYING WITH]N PARCELS] AND 2. PARCEL I: ALL THAT PORTION OF LOT 14 OF THE NORTHEAST QUARTER OF QUARTER SECTION 149 OF RANCHO DE LA NACION, IN THE CITY OF CHULA VISTA, COUNTY OF SAN DIEGO, STATE OF CALIFORNIA, ACCORD]NG TO MAP THEREOF NO. 505, FILED IN THE OFFICE OF THE COUNTY RECORDER OF SAN DIEGO COUNTY, MARCH 13, 1888, DESCRIBED AS FOLLOWS: BEGINNING AT THE INTERSECTION OF THE CENTERLINE OF FIG AVENUE WITH THE CENTERLINE OF DAVIDSON STREET, ACCORDING TO MAP NO. 2109, FILED IN THE OFFICE OF THE COUNTY RECORDER OF THE COUNTY OF SAN DIEGO, CALlFORN]A, BEING THE NORTHWEST CORNER OF THE EAST-HALF OF SAID LOT ]4; THENCE NORTH 71 DEGREES 00'15" EAST, 135.39 FEET; THENCE SOUTH 18 DEGREES 40'22" EAST, 30.00 FEET TO THE TRUE POINT OF BEGINNING; THENCE CONTINUING SOUTH 18 DEGREES 40'22" EAST 100.00 FEET; THENCE NORTH 7] DEGREES 00']5" EAST, 135.00 FEET; THENCE NORTH 18 DEGREES 40'22" WEST, 77.13 FEET TO THE BEGINNING OF A TANGENT CURVE TO THE LEFT HALF HAVING A RADIUS OF 23.00 FEET AND A CENTRAL ANGLE OF 89 DEGREES 40'37"; THENCE ALONG SAID CURVE A DISTANCE OF 36.00 FEET; THENCE SOUTH 71 DEGREES 00']5" WEST, A DISTANCE OF] ]2.13 FEET TO THE TRUE POINT OF BEGINNING. PARCEL 2: ALL THAT PORTION OF LOT 14 OF THE NORTHEAST QUARTER OF QUARTER SECTION 149 OF RANCHO DE LA NACION, IN THE CITY OF CHULA VISTA, COUNTY OF SAN DIEGO, STATE OF CALIFORNIA, ACCORDING TO MAP THEREOF NO. 505, FILED IN THE OFFICE OF THE COUNTY RECORDER OF SAN DIEGO COUNTY, MARCH 13, 1888, DESCRIBED AS FOLLOWS: BEGINNING AT THE INTERSECTION OF THE CENTERLINE OF FIG AVENUE WITH THE CENTERLINE OF DAVIDSON STREET, ACCORDING TO MAP NO.2] 09, FILED IN THE OFFICE OF THE COUNTY RECORDER OF THE COUNTY OF SAN DIEGO, CALIFORNIA, BEING THE NORTHWEST CORNER OF THE EAST-HALF OF SAID LOT ]4; THENCE A-2 1_ / i-l -' DOCSOCII147304v6/024036-0033 NORTH 71 DEGREES 00'15" EAST, 135.39 FEET; THENCE SOUTH 18 DEGREES 40'22" EAST, 30 FEET TO THE TRUE POINT OF BEGINNING; THENCE CONTINUING SOUTH 18 DEGREES 40'22" EAST 100 FEET; THENCE NORTH 71 DEGREES 00'15" EAST, 135.00 FEET; THENCE SOUTH 18 DEGREES 40'22" EAST, 40 FEET; THENCE SOUTH 71 DEGREES 00'15" WEST TO AN INTERSECTION WITH THE EASTERLY LINE OF THE WESTERLY 60 FEET OF THE EAST HALF OF SAID LOT 14; THENCE NORTHERLY ALONG SAID EASTERLY LINE TO AN INTERSECTION WITH A LINE WHICH BEARS SOUTH 71 DEGREES 00'15" WEST FROM THE TRUE POINT OF BEGINNING; THENCE ALONG SAID LINE NORTH 71 DEGREES 00'15" EAST TO THE TRUE POINT OF BEGINNING. (APN; 568-110-33-00) PARCEL D; ALL THAT PORTION OF LOT 14 OF THE NORTHEAST QUARTER OF QUARTER SECTION 149 OF RANCHO DE LA NACION, IN THE CITY OF CHULA VISTA, COUNTY OF SAN DIEGO, STATE OF CALIFORNIA, ACCORDING TO MAP THEREOF NO. 505, FILED IN THE OFFICE OF THE COUNTY RECORDER OF SAN DIEGO COUNTY, MARCH 13, 1888, DESCRIBED AS FOLLOWS: BEGINNING AT THE INTERSECTION OF THE CENTERLINE OF FIG AVENUE WITH THE CENTERLINE OF DAVIDSON STREET, ACCORDING TO MAP NO. 2109, FILED IN THE OFFICE OF THE COUNTY RECORDER OF THE COUNTY OF SAN DIEGO, CALIFORNIA, BEING THE NORTHWEST CORNER OF THE EAST-HALF OF SAID LOT 14; THENCE NORTH 71 DEGREES 00'15" EAST, 135.39 FEET; THENCE SOUTH 18 DEGREES 40'22" EAST, 30.00 FEET TO THE TRUE POINT OF BEGINNING; THENCE CONTINUING SOUTH 18 DEGREES 40'22" EAST 100.00 FEET; THENCE NORTH 71 DEGREES 00'15" EAST, 135.00 FEET; THENCE NORTH 18 DEGREES 40'22" WEST, 77.13 FEET TO THE BEGINNING OF A TANGENT CURVE TO THE LEFT HALF HAVING A RADIUS OF 23.00 FEET AND A CENTRAL ANGLE OF 89 DEGREES 40'37"; THENCE ALONG SAID CURVE A DISTANCE OF 36.00 FEET; THENCE SOUTH 7] DEGREES 00'15" WEST, A DISTANCE OF 112.13 FEET TO THE TRUE POINT OF BEGINNING. PARCEL E: ALL THAT PORTION OF LOT 14 OF THE NORTHEAST QUARTER OF QUARTER SECTION 149 OF RANCHO DE LA NACION, IN THE CITY OF CHULA VISTA, COUNTY OF SAN DIEGO, STATE OF CALIFORNIA, ACCORDING TO MAP THEREOF NO. 505, FILED IN THE OFFICE OF THE COUNTY RECORDER OF SAN DIEGO COUNTY, MARCH 13, 1888, DESCRIBED AS FOLLOWS: BEGINNING AT THE INTERSECTION OF THE CENTERLINE OF FIG A VENUE WITH THE CENTERLINE OF DAVIDSON STREET, ACCORDING TO MAP NO. 2109, FILED IN THE OFFICE OF THE COUNTY RECORDER OF THE COUNTY OF SAN DIEGO, CALIFORNIA, BEING THE NORTHWEST CORNER OF THE EAST-HALF OF SAID LOT 14; THENCE NORTH 71 DEGREES 00'15" EAST, 135.39 FEET; THENCE SOUTH 18 DEGREES 40'22" EAST, 30 FEET TO THE TRUE POINT OF BEGINNING; THENCE CONTINUING SOUTH 18 A-3 DOCSOCIl147304v6/024036-0033 , i - / -/. - ! I i.:) DEGREES 40'22" EAST 100 FEET; THENCE NORTH 71 DEGREES 00'15" EAST, 135 FEET; THENCE SOUTH 18 DEGREES 40'22" EAST, 40 FEET; THENCE SOUTH 71 DEGREES 00'15" WEST TO AN INTERSECTION WITH THE EASTERLY LINE OF THE WESTERLY 60 FEET OF THE EAST HALF OF SAID LOT 14; THENCE NORTHERLY ALONG SAID EASTERLY LINE TO AN INTERSECTION WITH A LINE WHICH BEARS SOUTH 71 DEGREES 00'15" WEST FROM THE TRUE POINT OF BEGINNING; THENCE ALONG SAID LINE NORTH 71 DEGREES 00'15" EAST TO THE TRUE POINT OF BEGINNING, (APN: 568-110-32-00) FIRE STATION NO.7 PARCEL F: THAT PORTION OF PARCEL 4 OF PARCEL MAP NO. 18789, IN THE CITY OF CHULA VISTA, COUNTY OF SAN DIEGO, STATE OF CALIFORNIA, FILED IN THE OFFICE OF THE COUNTY RECORDER OF SAN DIEGO COUNTY ON SEPTEMBER 7, 2001, BEING MORE PARTICULARLY DESCRIBED AS FOLLOWS: COMMENCING AT AN ANGLE POINT ON THE EASTERLY BOUNDARY OF SAID PARCEL 4 BEING THE WESTERLY TERMINUS OF THAT COURSE ON THE BOUNDARY OF PARCEL I OF SAID PARCEL MAP NO. 18789 DEPICTED ON SHEET 3 OF SAID PARCEL MAP NO. 18789 AS NORTH 71 DEGREES 57'24" EAST, 1091.24', SAID POINT BEING THE NORTHERLY TERMINUS OF THE WESTERLY RIGHT OF WAY OF LA MEDIA ROAD AS DEDICATED ON CHULA VISTA TRACT NO. 02-055 OT A Y RANCH VILLAGE 6 UNIT 2 "A" MAP NO. I ACCORDING TO MAP THEREOF NO. 14447 FILED IN THE SAID OFFICE OF THE COUNTY RECORDER ON SEPTEMBER 18,2002, SAID POINT ALSO BEING A POINT ON A 4336.00 FOOT RADIUS CURVE, CONCA VE WESTERLY, A RADIAL LINE OF SAID CURVE BEARS NORTH 77 DEGREES 19'04" EAST (RECORD NORTH 77 DEGREES 18'51" EAST PER SAID PARCEL MAP NO. 18789) TO SAID POINT; THENCE ALONG SAID WESTERLY RIGHT OF WAY SOUTHERLY ALONG THE ARC OF SAID 4336.00 FOOT RADIUS CURVE THROUGH A CENTRAL ANGLE OF 00 DEGREES 39'06", 49.32 FEET TO THE TRUE POINT OF BEGINNING; THENCE CONTINUING ALONG SAID WESTERLY RIGHT OF WAY SOUTHERLY ALONG THE ARC OF SAID 4336.00 FOOT RADIUS CURVE THROUGH A CENTRAL ANGLE OF 03 DEGREES 24'43", 258.21 FEET; THENCE LEAVING SAID WESTERLY RIGHT OF WAY NON-TANGENT TO SAID CURVE SOUTH 76 DEGREES 40'26" WEST, 266.27 FEET; THENCE NORTH 12 DEGREES 45'05" WEST, 271.84 FEET TO A POINT ON THE PROPOSED SOUTHERLY RIGHT OF WAY ("STREET A" WITHIN OTAY RANCH VILLAGE 2; THENCE ALONG SAID PROPOSED SOUTHERLY RIGHT OF WAY NORTH 77 DEGREES 14'55" EAST, 259.19 FEET; THENCE CONTINUING ALONG SAID PROPOSED SOUTHERLY RIGHT OF WAY SOUTH 70 DEGREES 47'53" EAST, 20.21 FEET TO THE TRUE POINT OF BEGINNING. (APN: 644-030-22-00) A-4 / - ,: it , DOCSOC1I147304v6!024036-0033 MONTEVALLE PARK [TO COME] SALT CREEK PARK [TO COME] A-5 DOCSOCIl147304v6/024036-0033 1_;1-1/ ! ATTACHMENT 7 Recording Requested By and When Recorded Mail To: Stradling Yocca Carlson & Rauth Draft 1/23/06 ) ) ) Stradling Y occa Carlson & Rauth ) 660 Newport Center Drive, Suite 1600) Newport Beach, California 92660 ) Attention: Robert J. Whalen, Esq. ) ) [Space above for recorder.] This document is recorded for the benefit ofthe City of Chula Vista, and the recording is fee-exempt under Section 27383 of the Government Code. FIRST AMENDMENT TO SITE LEASE between CITY OF CHULA VISTA and CHULA VISTA PUBLIC FINANCING AUTHORITY Dated as of March I, 2006 Relating to the $ City ofChula Vista Certificates of Participation (Civic Center Project-Phase 2) DOCSOC/l147272v6/024036-0033 I .. l.....f "/ " FIRST AMENDMENT TO SITE LEASE This First Amendment to Site Lease (the "First Amendment to Site Lease") is made and entered into as of March I, 2006, by and between the CITY OF CHULA VISTA, a municipal corporation and a charter city duly organized and existing under and by virtue of the laws of the State, as lessor (the "City"), and the CHULA VISTA PUBLIC FINANCING AUTHORITY, ajoint powers authority duly organized and existing under the laws of the State, as lessee (the "Authority"), and amends, in part, that certain Site Lease between the City, as lessor, and the Authority, as lessee, dated as of September I, 2004 and recorded in the official records of the County of San Diego (the "County") on September 15, 2004 as Document No. 2004-0877211 (the "Site Lease'"). W IIN .!;~~.!:;r H: WHEREAS, the City has entered into the Site Lease with the Authority for the purpose of leasing to the Authority, as lessee thereunder, the real property (including all existing improvements thereon) described in Exhibit A thereto; and WHEREAS, the City and the Authority desire to enter into this First Amendment to Site Lease in order to facilitate the execution and delivery of those certain $ City of Chula Vista 2006 Certificates of Participation (Civic Center Project-Phase 2) (the "2006 Certificates"); and WHEREAS, the 2006 Certificates are being executed and delivered as Additional Certificates under that certain Amended and Restated Trust Agreement, dated as of March I, 2006 (the 'Trust Agreement"), by and among the City, the Authority and The Bank of New York Trust Company, N.A., as Trustee (the "Trustee"), which amends and restates in its entirety the Trust Agreement, dated as of September I, 2004, by and among the City, the Authority and the Trustee, pursuant to which the Trustee executed and delivered the $37,240,000 City of Chula Vista 2004 Certificates of Participation (Civic Center Project - Phase I) (the "2004 Certificates"); and WHEREAS, pursuant to Section 18 of the Site Lease the City and the Authority reserved the right to amend the Site Lease; and WHEREAS, pursuant to Section 18 of the Site Lease and Section 8.3 of the Lease/Purchase Agreement, dated as of September I, 2004 (the "Lease"), by and between the City, as lessee, and the Authority, as lessor, and recorded in the official records of the County on September 15, 2004 as Document No. 2004-08772 I 2, the City and the Authority reserved the right to amend the Site Lease and the Lease in connection with the execution and delivery of Additional Certificates; and WHEREAS, to facilitate the execution and delivery of the 2006 Certificates, the City has determined to add certain real property and improvements consisting of Montevalle Park and Salt Creek Park (the "Additional Property") described in Exhibit A hereto to the property being leased to the Authority under the Site Lease; and WHEREAS, the parties hereto have agreed to amend the Site Lease as described herein, which amendments do not adversely affect the interests of the Owners of the 2004 Certificates, the 2006 Certificates or any Additional Certificates; 2 ! -- , U DOCSOClI ] 47272v61024036-0033 NOW, THEREFORE, in consideration of the mutual covenants contained herein, and for other valuable consideration, it is hereby mutually agreed as follows: SECTION L Definitions. Unless the context otherwise requires, the capitalized terms herein which are not defined herein shall have the meanings referenced in the Site Lease, SECTION 2. Amendment of Section 3. The first sentence of Section 3 of the Site Lease is amended by deleting the words "March], 2034" and inserting in their place the words "March I, 20_" SECTION 3. Lease of Additional ProDertv, The City hereby leases to the Authority and the Authority hereby leases from the City the Additional Property, on the terms and conditions set forth in the Site Lease, Exhibit A to the Site Lease is hereby deleted in its entirety and replaced by Exhibit A hereto, and, from and after the date hereof, the Property (as defined in the Site Lease) consists of the real property described in Exhibit A hereto and the existing improvements thereon, Upon the release of the Additional Property under the Lease, without the need for any further consents or approvals, the parties hereto shall execute an amendment to revise Exhibit A hereto to reflect the removal of the Additional Property from the Site, SECTION 4. Additional Rental. Section 4 of the Site Lease is amended, in part, by adding a sentence thereto stating as follows: "The Authority, and any assignee or successor in interest of the Authority under this Site Lease, shall pay to the City as an additional rental payment hereunder an amount equal to the net proceeds of the 2006 Certificates and any Additional Certificates deposited with the Trustee, SECTION 5. References to Trust Ae:reement, From and after the date of the execution and delivery of the 2006 Certificates, all references in the Site Lease to "Trust Agreement" shall refer to the Amended and Restated Trust Agreement as further amended from time to time, SECTION 6. No Other Amendments. Except as expressly set forth in Section 2 and 3 above, all other provisions of the Site Lease remain in full force and effect SECTION 7. CounterDarts. This First Amendment to Site Lease 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. 3 I" , /- /:~/ DOCSOCIl147272v6/024036-0033 IN WITNESS WHEREOF, the parties have caused this First Amendment to Site Lease to be executed by their duly authorized officers on the date and year first above written. CITY OF CHULA VISTA, as Lessor By: City Manager ATTEST: City Clerk CHULA VISTA PUBLIC FINANCING AUTHORITY, as Lessee By: Chief Financial Officer ATTEST: Secretary 4 .I ,/.../,~ DOC50C/1147272v6/024036-0033 CONSENTED TO BY: THE BANK OF NEW YORK TRUST COMPANY, N.A., as successor-in-interest to BNY Western Trust Company, as Trustee and Assignee By: Authorized Officer 5 DOCSOC/I147272v6/024036-0033 . ~h'l / - ;' .". ' -", j......-' CERTIFICATE OF ACCEPTANCE This is to certify that the interest in real property conveyed under the foregoing to the Chula Vista Public Financing Authority (the "Authority"), a body corporate and politic, is hereby accepted by the undersigned officer or agent on behalf of the Board of the Authority (the "Board"), pursuant to authority conferred by resolution of the said Board adopted on February 7, 2006, and the grantee consents to recordation thereof by its duly authorized officer. Dated: March _, 2006 CHULA VISTA PUBLIC FINANCING AUTHORITY By: Its: Chief Financial Officer 6 /-. /'-''1 DOCSOCIl147272v6/024036-0033 STATE OF CALIFORNIA COUNTY OF SAN DIEGO On March ~, 2006 before me, the undersigned, personally appeared David D. Rowlands, Jr., personally known to me to be the person whose names is subscribed to the within instrument and acknowledged to me that he executed the same in his authorized capacity, and that by his signature on the instrument the person, or the entity upon behalf of which the person acted, executed the instrument. [SEAL] WITNESS my hand and official seal Donna Norris, Assistant City Clerk of the City of Chula Vista DOCSOC/l147272v6/024036-0033 / 1'.:.; STATE OF CALIFORNIA COUNTY OF SAN DIEGO On March _, 2006 before me, the undersigned, personally appeared Maria Kachadoorian, personally known to me to be the person whose names is subscribed to the within instrument and acknowledged to me that she executed the same in her authorized capacity, and that by her signature on the instrument the person, or the entity upon behalf of which the person acted, executed the instrument. [SEAL] WITNESS my hand and official seal Donna Norris, Assistant City Clerk of the City of Chula Vista DOCSOCIl147272v6/024036-0033 1- r V EXHIBIT A DESCRIPTION OF THE LEASED PREMISES THAT REAL PROPERTY IN THE CITY OF CHULA VISTA, COUNTY OF SAN DIEGO, STATE OF CALIFORNIA, DESCRIBED AS FOLLOWS: CIVIC CENTER PARCEL A: ALL THAT PORTION OF THE WESTERLY HALF OF LOT 13, IN QUARTER SECTION 149, CHULA VISTA, IN THE CITY OF CHULA VISTA, COUNTY OF SAN DIEGO, STATE OF CALIFORNIA, ACCORDING TO MAP THEREOF NO. 505, FILED IN THE OFFICE OF THE COUNTY RECORDER OF SAN DIEGO COUNTY, MARCH 13, 1888, DESCRIBED AS FOLLOWS: COMMENCING AT A POINT IN THE SOUTHERLY LINE OF SAID LOT WHICH IS NORTH 71 DEGREES EAST 467 'I, FEET FROM THE SOUTHWESTERLY CORNER OF SAID LOT; THENCE NORTH 71 DEGREES EAST ALONG THE SOUTHERLY LINE OF SAID LOT 78 Y2 FEET; THENCE NORTH 19 DEGREES WEST 290 FEET TO THE NORTHERLY LINE OF SAID LOT 13; THENCE SOUTH 71 DEGREES WEST ALONG SAID NORTHERLY LINE OF SAID LOT, 78 Y2 FEET; THENCE SOUTH 19 DEGREES EAST, 290 FEET, TO POINT OF COMMENCEMENT. (APN: 568-110-17-00) PARCEL B: ALL THAT PORTION OF THE WESTERLY HALF OF LOT 13, IN QUARTER SECTION 149, CHULA VISTA, IN THE CITY OF CHULA VISTA, COUNTY OF SAN DIEGO, STATE OF CALIFORNIA, ACCORDING TO MAP THEREOF NO. 505, FILED IN THE OFFICE OF THE COUNTY RECORDER OF SAN DIEGO COUNTY, MARCH 13, 1888, DESCRIBED AS FOLLOWS: COMMENCING AT A POINT IN THE SOUTHERLY LINE OF SAID LOT WHICH IS NORTH 71 DEGREES 00'00" EAST, 546.00 FEET FROM THE SOUTHWESTERLY CORNER OF SAID LOT, SAID POINT BEING ALSO THE SOUTHEASTERLY CORNER OF THE LANDS CONVEYED BY ELLA J. WHARTON AND REVERDY J. WHARTON TO ROBERT H. KING, BY DEED DATED MARCH 2,1914 AND RECORDER IN BOOK 643, PAGE 325 OF DEEDS, RECORDS OF SAN DIEGO COUNTY: THENCE NORTH 71 DEGREES 00'00" EAST ALONG SAID SOUTHERLY LINE OF SAID LOT 74.00 FEET TO THE SOUTHEASTERLY CORNER OF THE WESTERLY HALF OF SAID LOT; THENCE NORTH 19 DEGREES 00'00" WEST ALONG THE EASTERLY LINE OF SAID WESTERLY HALF OF SAID LOT, 290.00 FEET TO THE NORTHERLY LINE THEREOF; THENCE SOUTH 71 DEGREES 00'00" WEST ALONG THE NORTHERLY LINE THEREOF 74.00 FEET, MORE OR LESS, TO THE A-I DOCSOCflI47272v6/024036-0033 / -- / ::) ""7 NORTHEASTERLY CORNER OF THE LAND SO CONVEYED TO KING; THENCE SOUTH 19 DEGREES 00'00" EAST ALONG THE EASTERLY LINE OF SAID KING'S LAND, 290.00 FEET TO THE POINT OF COMMENCEMENT. (APN: 568-110-16-00) PARCEL C: THE EAST HALF OF TEN-ACRE LOT FOURTEEN AND THE EAST HALF OF TEN-ACRE LOT THIRTEEN IN QUARTER SECTION ONE HUNDRED FORTY-NINE OF CHULA VISTA, IN THE CITY OF CHULA VISTA, COUNTY OF SAN DIEGO, STATE OF CALIFORNIA, BEING IN RANCHO DE LA NACION, ACCORDING TO MAP THEREOF NO. 505, FILED IN THE OFFICE OF THE COUNTY RECORDER OF SAN DIEGO COUNTY MARCH 13,1888. EXCEPTING THOSE PORTIONS LYING WITHIN PARCELS I AND 2. PARCEL I: ALL THAT PORTION OF LOT 14 OF THE NORTHEAST QUARTER OF QUARTER SECTION 149 OF RANCHO DE LA NACION, IN THE CITY OF CHULA VISTA, COUNTY OF SAN DIEGO, STATE OF CALIFORNIA, ACCORDING TO MAP THEREOF NO. 505, FILED IN THE OFFICE OF THE COUNTY RECORDER OF SAN DIEGO COUNTY, MARCH 13, 1888, DESCRIBED AS FOLLOWS: BEGINNING AT THE INTERSECTION OF THE CENTERLINE OF FIG A VENUE WITH THE CENTERLINE OF DAVIDSON STREET, ACCORDING TO MAP NO. 2109, FILED IN THE OFFICE OF THE COUNTY RECORDER OF THE COUNTY OF SAN DIEGO, CALIFORNIA, BEING THE NORTHWEST CORNER OF THE EAST-HALF OF SAID LOT 14; THENCE NORTH 71 DEGREES 00'15" EAST, 135.39 FEET; THENCE SOUTH 18 DEGREES 40'22" EAST, 30.00 FEET TO THE TRUE POINT OF BEGINNING; THENCE CONTINUING SOUTH 18 DEGREES 40'22" EAST 100.00 FEET; THENCE NORTH 71 DEGREES 00'15" EAST, 135.00 FEET; THENCE NORTH 18 DEGREES 40'22" WEST, 77.13 FEET TO THE BEGINNING OF A TANGENT CURVE TO THE LEFT HALF HAVING A RADIUS OF 23.00 FEET AND A CENTRAL ANGLE OF 89 DEGREES 40'37"; THENCE ALONG SAID CURVE A DISTANCE OF 36.00 FEET; THENCE SOUTH 71 DEGREES 00'15" WEST, A DISTANCE OF 112.13 FEET TO THE TRUE POINT OF BEGINNING. PARCEL 2: ALL THAT PORTION OF LOT 14 OF THE NORTHEAST QUARTER OF QUARTER SECTION 149 OF RANCHO DE LA NACION, IN THE CITY OF CHULA VISTA, COUNTY OF SAN DIEGO, STATE OF CALIFORNIA, ACCORDING TO MAP THEREOF NO. 505, FILED IN THE OFFICE OF THE COUNTY RECORDER OF SAN DIEGO COUNTY, MARCH 13, 1888, DESCRIBED AS FOLLOWS: A-2 DOCSOC/1147272v6/024036-0033 Ii ..- , I BEGINNING AT THE INTERSECTION OF THE CENTERLINE OF FIG AVENUE WITH THE CENTERLINE OF DAVIDSON STREET, ACCORDING TO MAP NO. 2109, FILED IN THE OFFICE OF THE COUNTY RECORDER OF THE COUNTY OF SAN DIEGO, CALIFORNIA, BEING THE NORTHWEST CORNER OF THE EAST-HALF OF SAID LOT 14; THENCE NORTH 71 DEGREES 00']5" EAST, 135.39 FEET; THENCE SOUTH 18 DEGREES 40'22" EAST, 30 FEET TO THE TRUE POINT OF BEGINNING; THENCE CONTINUING SOUTH 18 DEGREES 40'22" EAST 100 FEET; THENCE NORTH 71 DEGREES 00'15" EAST, 135.00 FEET; THENCE SOUTH 18 DEGREES 40'22" EAST, 40 FEET; THENCE SOUTH 71 DEGREES 00'15" WEST TO AN INTERSECTION WITH THE EASTERLY LINE OF THE WESTERLY 60 FEET OF THE EAST HALF OF SAID LOT 14; THENCE NORTHERLY ALONG SAID EASTERLY LINE TO AN INTERSECTION WITH A LINE WHICH BEARS SOUTH 71 DEGREES 00'15" WEST FROM THE TRUE POINT OF BEGINNING; THENCE ALONG SAID LINE NORTH 71 DEGREES 00'15" EAST TO THE TRUE POINT OF BEGINNING. (APN: 568-110-33-00) PARCEL D: ALL THAT PORTION OF LOT 14 OF THE NORTHEAST QUARTER OF QUARTER SECTION 149 OF RANCHO DE LA NACION, IN THE CITY OF CHULA VISTA, COUNTY OF SAN DIEGO, STATE OF CALIFORNIA, ACCORDING TO MAP THEREOF NO. 505, FILED IN THE OFFICE OF THE COUNTY RECORDER OF SAN DIEGO COUNTY, MARCH 13, 1888, DESCRIBED AS FOLLOWS: BEGINNING AT THE INTERSECTION OF THE CENTERLINE OF FIG A VENUE WITH THE CENTERLINE OF DAVIDSON STREET, ACCORDING TO MAP NO. 2109, FILED IN THE OFFICE OF THE COUNTY RECORDER OF THE COUNTY OF SAN DIEGO, CALIFORNIA, BEING THE NORTHWEST CORNER OF THE EAST-HALF OF SAID LOT 14; THENCE NORTH 71 DEGREES 00'15" EAST, 135.39 FEET; THENCE SOUTH 18 DEGREES 40'22" EAST, 30.00 FEET TO THE TRUE POINT OF BEGINNING; THENCE CONTINUING SOUTH 18 DEGREES 40'22" EAST 100.00 FEET; THENCE NORTH 71 DEGREES 00'15" EAST, 135.00 FEET; THENCE NORTH 18 DEGREES 40'22" WEST, 77.13 FEET TO THE BEGINNING OF A TANGENT CURVE TO THE LEFT HALF HAVING A RADIUS OF 23.00 FEET AND A CENTRAL ANGLE OF 89 DEGREES 40'37"; THENCE ALONG SAID CURVE A DISTANCE OF 36.00 FEET; THENCE SOUTH 71 DEGREES 00'15" WEST, A DISTANCE OF 112.13 FEET TO THE TRUE POINT OF BEGINNING. PARCEL E: ALL THAT PORTION OF LOT 14 OF THE NORTHEAST QUARTER OF QUARTER SECTION 149 OF RANCHO DE LA NACION, IN THE CITY OF CHULA VISTA, COUNTY OF SAN DIEGO, STATE OF CALIFORNIA, ACCORDING TO MAP THEREOF NO. 505, FILED IN THE OFFICE OF THE COUNTY RECORDER OF SAN DIEGO COUNTY, MARCH 13, 1888, DESCRIBED AS FOLLOWS: A-3 DOCSOC/1147272v6/024036-0033 ,- /. . j ! I BEGINNING AT THE INTERSECTION OF THE CENTERLINE OF FIG AVENUE WITH THE CENTERLINE OF DAVIDSON STREET, ACCORDING TO MAP NO. 2109, FILED IN THE OFFICE OF THE COUNTY RECORDER OF THE COUNTY OF SAN DIEGO, CALIFORNIA, BEING THE NORTHWEST CORNER OF THE EAST-HALF OF SAID LOT 14; THENCE NORTH 71 DEGREES 00'15" EAST, 135.39 FEET; THENCE SOUTH 18 DEGREES 40'22" EAST, 30 FEET TO THE TRUE POINT OF BEGINNING; THENCE CONTINUING SOUTH 18 DEGREES 40'22" EAST 100 FEET; THENCE NORTH 71 DEGREES 00'15" EAST, 135 FEET; THENCE SOUTH 18 DEGREES 40'22" EAST, 40 FEET; THENCE SOUTH 71 DEGREES 00'15" WEST TO AN INTERSECTION WITH THE EASTERLY LINE OF THE WESTERLY 60 FEET OF THE EAST HALF OF SAID LOT 14; THENCE NORTHERLY ALONG SAID EASTERLY LINE TO AN INTERSECTION WITH A LINE WHICH BEARS SOUTH 71 DEGREES 00'15" WEST FROM THE TRUE POINT OF BEGINNING; THENCE ALONG SAID LINE NORTH 71 DEGREES 00'15" EAST TO THE TRUE POINT OF BEGINNING. (APN: 568-110-32-00) FIRE STATION NO.7 PARCEL F: THAT PORTION OF PARCEL 4 OF PARCEL MAP NO. 18789, IN THE CITY OF CHULA VISTA, COUNTY OF SAN DIEGO, STATE OF CALIFORNIA, FILED IN THE OFFICE OF THE COUNTY RECORDER OF SAN DIEGO COUNTY ON SEPTEMBER 7, 2001, BEING MORE PARTICULARLY DESCRIBED AS FOLLOWS: COMMENCING AT AN ANGLE POINT ON THE EASTERLY BOUNDARY OF SAID PARCEL 4 BEING THE WESTERLY TERMINUS OF THAT COURSE ON THE BOUNDARY OF PARCEL I OF SAID PARCEL MAP NO. 18789 DEPICTED ON SHEET 3 OF SAID PARCEL MAP NO. 18789 AS NORTH 71 DEGREES 57'24" EAST, 1091.24', SAID POINT BEING THE NORTHERLY TERMINUS OF THE WESTERLY RIGHT OF WAY OF LA MEDIA ROAD AS DEDlCA TED ON CHULA VISTA TRACT NO. 02-055 OT A Y RANCH VILLAGE 6 UNIT 2 "A" MAP NO.1 ACCORDING TO MAP THEREOF NO. 14447 FILED IN THE SAID OFFICE OF THE COUNTY RECORDER ON SEPTEMBER 18,2002, SAID POINT ALSO BEING A POINT ON A 4336.00 FOOT RADIUS CURVE, CONCAVE WESTERLY, A RADIAL LINE OF SAID CURVE BEARS NORTH 77 DEGREES 19'04" EAST (RECORD NORTH 77 DEGREES 18'51" EAST PER SAID PARCEL MAP NO. 18789) TO SAID POINT; THENCE ALONG SAID WESTERLY RIGHT OF WAY SOUTHERLY ALONG THE ARC OF SAID 4336.00 FOOT RADIUS CURVE THROUGH A CENTRAL ANGLE OF 00 DEGREES 39'06", 49.32 FEET TO THE TRUE POINT OF BEGINNING; THENCE CONTINUING ALONG SAID WESTERLY RIGHT OF WAY SOUTHERLY ALONG THE ARC OF SAID 4336.00 FOOT RADIUS CURVE THROUGH A CENTRAL ANGLE OF 03 DEGREES 24'43", 258.21 FEET; THENCE LEAVING SAID WESTERLY RIGHT OF WAY NON-TANGENT TO SAID CURVE SOUTH 76 DEGREES 40'26" WEST, 266.27 FEET; THENCE NORTH 12 DEGREES 45'05" WEST, 271.84 FEET TO A POINT ON THE PROPOSED SOUTHERLY RIGHT OF WAY ("STREET A" WITHIN OTAY RANCH VILLAGE 2; THENCE ALONG SAID PROPOSED SOUTHERLY RIGHT OF WAY NORTH 77 DEGREES 14'55" EAST, 259.19 FEET; THENCE CONTINUING ALONG SAID A-4 DOCSOC/l ] 47272v6/024036-0033 , , ' - ! (,,0 1./ PROPOSED SOUTHERLY RIGHT OF WAY SOUTH 70 DEGREES 47'53" EAST, 20.21 FEET TO THE TRUE POINT OF BEGINNING. (APN: 644-030-22-00) MONTEV ALLE PARK [TO COME] SALT CREEK PARK [TO COME] A-5 I ;." DOCSOCIII47272v6/024036-0033 .~ = :. ~"; .S =.s't eo; -.- ..c:.~ ~ rn~'i: rJ'J._ = ~ ~ '- = .~ ~ ~'5 ~ = = e eo: rn B.5 r.- ... '" 0 .- " (j:: rn 0';: ;!: = = ~ I.,~- '" '" '" ] ~.~ ~ ~."= -= ; ..... " =: 0 ~ " '" IE -; '" "0"'-= = ...- ~=... = " 0 " '" .....0 = 0"'0 ... .- g~'"; .:;:~ ~ =.- c.. ~ -; ~ -= = g = Q'" " 0 0='" _ ~ 0 - = = ~..c 0 ~,S::: = "" E '" "'- ~ =.~ ... 0 OJ) :; = ~ = " '-.. 0 eo - ~ g :... .- 0 "'E ~'C =.-:= c.. .;;~- coa o '" > " " ... cl.,..:! 00= :::== " " - '" " E,S..c ~1.o"O .s~= ~ 0 !? -= = ~ - " "0",,,, =;"; :;: :IJ ern s.. " = 0 ~ 8 = ~ =.s -,,- 'JJ.... :; ~.~ .;: -.- y,S'O ~'JJVJ ....- o.:! s.: >. (j .CooI I.,e~ .500 E ,,'5 :.: :; = f:.5 rn ~IE-= m:': (j :=~:= E-t~~ ATTACHMENT 8 DRAFT AS OF JA:-il'ARY 30. 2006 ]\"EW ISSCE BOOK-E]\"TRY OI\LY RUI]\"GS Moody's: _ S&P: (See ''CONCLUDING INFORMATION - Ratings on the Certificates" herein). /n the opinion of Stradling }occa Carlson & Rauth, a Professional Corporation, ,Vewport Beach, California. Special Counsel. under existing statutes. regulations, rulings and judicial decisions. and assuming rhe accuracy of certain representations and compliance with certain covenants and requirements described herein. interest with respect to the Certificates is excludedfrom gross incomefor federal income tax purposes and is nut an item of tax preference for purposes of calculating the federal alternative minimum tax: imposed in individuals and corporations. /n the further opinion of Special Counsel. the interest due 11'ith respect to the Certificates is exemptfrom State afCalifornia personal income tax. See "LEGAL MATTERS - Tax Exemption.' herein. SA:-i DIEGO COll]\"TY STATE OF CALIFORNIA $20,100,000. CITY OF CHULA VISTA 2006 Certificates of Participation (Civic Center Project - Phase 2) Evidencing Undivided Proportionate Interests in Lease Payments to be Made by the CITY OF CHULA VISTA, CALIFORNIA Pursuant to a Lease with the CHULA VISTA PUBLIC FINANCING AUTHORITY Dated: Date of Delivery Due: March 1, as Shown on the Inside Front Cover. The cover page contains certain information for quick reference only. It is not a summary of the issue. Potential investors must read the entire Official Statement to obtain information essential to the making of an informed inYestment decision. See "CERTIFICATE OW;\ERS' RISKS" herein for a discussion of special risk factors that should be considered in evaluating the investment quality of the Certificates. The City ofChula Vista 2006 Certificates of Participation (Civic Center Project - Phase 2) (the "Certificates..) are being executed and delivered to (i) provide funds for the construction and equipping of certain improvements to the Civic Center complex of the City of Chula Vista (the .'City'.) and other existing City facilities as described herein (the "ProjecC), (ii) fund capitalized interest during construction, (iii) finance a reserve fund for the Certificates and (iv) pay the costs incurred in connection ,'vith the execution and delivery of the Certificates. The Certificates evidence direct. undivided proportionate interests in lease payments r;Lease Payments.') to be made by the City to the Chu]a Vista Public Financing Authority (the "Authority'.) as renta] for certain real property and the improvements thereon (referred to herein as the .'Leased Premises'.) consisting of the City.s Civic Center complex, the City's Fire Station No. 7 and two City parks pursuant to a Lease/Purchase Agreement, dated September J, 2004 as amended by a First Amendment to Lease/Purchase Agreement dated as of March 1. 2006. by and behveen the City and the Authority (as amended, the "Lease'.), as described herein. See 'THE LEASED PREMISES'. herein. The City is required under the Lease to make Lease Payments in each fiscal year in consideration of the use and possession of the Leased Premises from any source of available funds. including certain funds held under a trust agreement, as described herein, and insurance or condemnation av.,'ards, in an amount sufficient to pay the annual principal and interest due with respect to the Certificates, subject to abatement, as described herein (see "SOURCES OF PAYMENT FOR THE CERTIFICATES.. and "CERTIFICATE O'A-'NERS' RISKS.' herein). Interest represented by the Certificates is payable on September 1, 2006, and semiannually thereafter on March J and September 1 of each year until maturity or earlier prepayment (see "THE CERTIFICATES - General Provisions" and "THE CERTIFICATES - Prepayment'. herein). Payment of the principal at the stated maturity of and interest with respect to the Certificates will be guaranteed by a financial guaranty insurance policy to be issued by simultaneously with the execution and delivery ofthe Certfficates. See "SOURCES OF PAYMENT FOR THE CERTIFICATES - Certificate Insurance'. herein. [LOGO] The Certificates are offered, when. as and if executed and delivered, subject to the approval as to their lega]ity by Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach. California, Special Counsel. Certain legal matters will be passed on for the City by the City Attorney, and by Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California, as Disclosure Counsel. It is anticipated that the Certificates, in book-entry form, ,vill be available for delivery on or about March 15. 2006 through the facilities of The Depository Trust Company (see "APPENDIX F - BOOK-ENTRY ONLY SYSTEM" herein). The date afthe Official Statement is _,2006. * Preliminary, subject to change. , I - I " $20,100,000' CITY OF CHULA VISTA 2006 Certificates of Participation (Civic Center Project - Phase 2) Evidencing Undivided Proportionate Interests in Lease Payments to be Made by the CITY OF CHULA VISTA, CALIFORNIA Pursuant to a Lease with the CHULA VISTA PUBLIC FINANCING AUTHORITY ~IATURITY SCHEDl'LE (Base CUSIP@t Maturity Date March I 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 Principal Amount Interest Rate Reoffering Yield/Price CUSIP@t * Preliminary, subject to change. t CUS!P@ A registered trademark of the American Bankers Association. Copyright IQ 1999-2006 Standard & Poor's, a Division of The McGraw-Hill Companies, Inc. CUSIP@ data herein is provided by Standard & Poor's CUSIP@ Service Bureau. This data in not intended to create a database and does not serve in any way as a substitute for the CUSIP@ Service Bureau. CUSIP@ numbers are provided for convenience of reference only. Neither the City nOf the Underwriter takes any responsibility for the accuracy of such numbers. /~ i / .'.' ~ j ,~ _/ GENERAL INFORMATION ABOUT THIS OFFICIAL STATEMENT Use of Official Statement. This Official Statement is submitted in connection with the offer and sale of the Certificates referred to herein and may not be reproduced or used, in whole or in part, for any other purpose. This Official Statement is not to be construed as a contract with the purchasers of the Certificates. Estimates and Forecasts. When used in this Official Statement and in any continuing disclosure by the Authority or the City in any press release and in any oral statement made with the approval of an authorized officer of the City or any other entity described or referenced herein, the words or phrases "will likely result," "are expected to," "will continue," "is anticipated," "estimate," "project," "forecast," "expect," "intend" and similar expressions identify "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated in such forward- looking statements. Any forecast is subject to such uncertainties. Inevitably, some assumptions used to develop the forecasts will not be realized and unanticipated events and circumstances may occur. Therefore, there are likely to be differences between forecasts and actual results, and those differences may be material. Limit of Offering. No dealer, broker, salesperson or other person has been authorized by the Authority or the City to give any information or to make any representations in connection with the offer or sale of the Certificates other than those contained herein and if given or made, such other information or representation must not be relied upon as having been authorized by the Authority, the City, the Financial Advisor 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 Certificates by a person in any jurisdiction in which it is unlawful for such person to make such an offer, solicitation or sale. Involvement of Underwriter. The Underwriter has submitted 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. Information Subject to Change. The information and expressions 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 Authority or the City or any other entity described or referenced herein since the date hereof. All summaries of the documents referred to in this Official Statement are made subject to the provisions of such documents, respectively, and do not purport to be complete statements of any or all of such provisions. Stabilization of Prices. In connection with this offering, the Underwriter may overallot or effect transactions which stabilize or maintain the market price of the Certificates at a level above that which might otherwise prevail in the open market. Such stabilizing, if commenced, may be discontinued at any time. The Underwriter may offer and sell the Certificates to certain dealers and others at prices lower than the public offering prices set forth on the inside front cover page hereof and said public offering prices may be changed from time to time by the Underwriter. THE CERTIFICATES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, IN RELIANCE UPON AN EXCEPTION FROM THE REGISTRATION REQUIREMENTS CONTAINED IN SUCH ACT. THE CERTIFICATES HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE. "I " CITY OF CHULA VISTA, CALIFORNIA CITY COUNCIL Stephen C. Padilla, Alayor John McCann, Mayor Pro Tem Steve Castaneda, Councilmember Patricia E. Chavez, Councilmember Jerry Rindone, Councilmember CITY STAFF David D. Rowlands, Jr., City Manager Jim Thomson, Assistant City Manager Maria Kachadoorian, Director of Finance/Treasurer Ann Moore, City Attorney Susan Bigelow, Ci(v Clerk PROFESSIONAL SERVICES Special Counsel and Disclosure Counsel Stradling Yocca Carlson & Rauth, a Professional Corporation Newport Beach, California Financial Advisor Harrell & Company Advisors, LLC Orange, California Trustee The Bank of New York Trust Company, N.A. Los Angeles, California / ,/ TABLE OF CONTENTS INTRODUCTION ...................................................... I The City .....................................................................1 Security and Sources of Repayment ..........................1 Additional Certi ficates...............................................3 Tax Exemption.............................. .............................3 Professional Services........"."............................... '.... 3 Offering of the Certificates ........................................4 Infonmation Concerning this Official Statement........4 THE CERTIFICATES ...............................................5 General Provisions... ........................... ,_.................. ...5 Prepayment................................................................ 6 Scheduled Lease Payments ........................................8 THE FINANCING PLAN ..........................................9 Estimated Sources aud Uses of Funds .......................9 The Proj ect................................................................. 9 The Civic Center Complex ........................................9 Design/Build Agreement..........................................1 0 Nature Center Improvements...................."............. 11 Project Costs ............................................................11 THE LEASED PREMISES .....................................12 Description of the Leased Premises.........................12 SOURCES OF PAYMENT FOR THE CERTlFICATES....................................................13 GeneraL............."..".. ... .......... ....... .................. ... .... ._.. J 3 Lease Payments; Abatement ....................................13 Reserve Fund ...........................................................14 Capitalized Interest ..................................................14 Certificate Insurance ................................................15 Insurance Relating to the Leased Premises..............] 5 Reentering and Reletting .........................................15 THE AUTHORITY ..................................................16 CITY OF CHULA VISTA........................................16 Generallnfonmation.................................................16 General Organization ...............................................16 Governmental Services ............................................] 7 Community Facilities and Services .........................] 7 Transportation.. ............. ................................_.......... ] 8 Population ................................................................19 Personallncorne.......................................................19 Employment and Industry........................................20 Commercial Activity................................................21 Building Activity .....................................................23 FINANCIAL INFORMATION ...............................24 Budgetary Process and Administration ....................24 Appropriations Limit.............................................. .24 Revenues and Expenditures .....................................24 Local Taxes ............................................................. .26 Motor Vehicle License Fees.....................................29 Other Revenue Sources............................................30 Public Facilities Development Impact Fees.............30 Personnel........................... ..................................... ..31 Employee Relations and Collective Bargaining.......3] Retirement Programs ...............................................32 Insurance Program........................................... ....... .32 Outstauding Indebtedness of the City ......................33 Direct and Overlapping Debt ...................................35 Financial Statements ................................................36 City Investment Policy.............................................39 CERTIFICATE OWNERS' RISKS ........................42 The Lease Payments ................................................42 Limited Recourse on Default ...................................47 Release or Substitution of Property .........................48 Loss of Tax Exemption ............................................48 Secondary Market ....................................................48 LEGAL MATTERS ..................................................49 Enforceability of Remedies......................................49 Approval of Legal Proceedings................................49 Tax Exemption.........................................................49 Absence of Litigation................. ............................. .51 CONCLUDING INFORMATION ..........................51 Ratings on the Certificates .......................................51 Underwriting.......................................................... ..51 The Finaucial Advisor..............................................51 Continuing Disclosure .............................................51 Additionallnfonmation ............................................52 References.........................,......................................52 Execution................................................................ .52 APPENDIX A - SUMMARY OF PRINCIPAL LEGAL DOCUMENTS APPENDIX B - CITY AUDITED FINANCIAL STATEMENTS APPENDIX C - FORM OF CONTINUING DISCLOSURE AGREEMENT APPENDIX D - FORM OF SPECIAL COUNSEL OPINION APPENDIX E - SPECIMEN MUNICIPAL BOND INSURANCE POLICY APPENDIX F - BOOK-ENTRY ONLY SYSTEM / j'" . , '( --t OFFICIAL STATEMENT $20,100,000' CITY OF CHULA VISTA 2006 Certificates of Participation (Civic Center Project - Phase 2) Evidencing Undivided Proportionate Interests in Lease Payments to be Made by the CITY OF CHULA VISTA, CALIFORNIA Pnrsnant to a Lease with the CHULA VISTA PUBLIC FINANCING AUTHORITY This Official Statement which includes the cover page and appendices (the "Official Statement"), is provided to furnish certain information concerning the sale, execution and delivery of 2006 Certificates of Participation (the "Certificates"), in the aggregate principal amount of $20, I 00,000*, evidencing undivided proportionate interests in Lease Payments (defined below) to be made by the City of Chula Vista, California (the "City"), pursuant to a Lease as more fully described herein (the "Lease") with the Chula Vista Public Financing Authority (the "Authority"). INTRODUCTION This Introduction contains only a brief description of this issue and does not pUlport to be complete. The Introduction is subject in all respects to more complete iliformation in the entire Official Statement and the offering of the Certificates to potential investors is made only by means of the entire Official Statement and the documents summarized herein. Potential investors must read the entire Official Statement to obtain iliformation essential to the making of an informed investment decision (see "CERTIFICATE OWNERS' RISKS" herein). The City The City of Chula Vista (the "City") is located on San Diego Bay in Southern California, 8 miles south of San Diego and 7 miles north of the Mexico border in an area generally known as "South Bay" The City encompasses approximately 50 square miles. Based on population, Chula Vista is the second largest city in San Diego County (see '"CITY OF CHULA VISTA" herein), Security and Sources of Repayment In 2004, the City delivered $37,240,000 2004 Certificates of Participation (Civic Center Project Phase I) (the "2004 Certificates') for the purpose of financing the first phase of renovation of the City's Civic Center complex and other City public improvements. The 2004 Certificates are payable from lease payments (the "2004 Lease Payments") made pursuant to a Lease/Purchase Agreement dated as of September 1, 2004 (the "2004 Lease") between the City, as lessee, and the Authority, as lessor, entered into for the lease of certain real property and improvements comprising the City's Civic Center complex and Fire Station No.7. The City leased such real property and improvements to the Authority under a Site Lease dated as of September 1,2004 (the "2004 Site Lease"). * Preliminary, subject to change. / - /-..7 In order to provide for additional lease payments under the 2004 Lease (the "2006 Lease Payments;' and together with the 2004 Lease Payments, the "Lease Payments"), the City and the Authority will enter into a First Amendment to LeaselPurchase Agreement (the "First Amendment") dated as of March I, 2006, which amends the 2004 Lease (as amended, the "Lease"). The City and the Authority will also enter into a First Amendment to Site Lease, dated as of March I, 2006, to amend the 2004 Site Lease (as amended, the "Site Lease"). Under the First Amendment, the City and the Authority agree to add certain real property and improvements to the Lease comprising the City's Montevalle Park and Community Center and Salt Creek Park and Community Center (together with the Civic Center and Fire Station No.7, the "Leased Premises"). The Certificates are being executed and delivered pursuant to an Amended and Restated Trust Agreement dated as of March I, 2006 (the "Trust Agreement"), by and among the City, the Authority and The Bank of New York Trust Company, N.A., as trustee (the "Trustee"). The Certificates represent direct, undivided proportionate interests in the 2006 Lease Payments. The City will use a portion of the proceeds of the Certificates to provide funds for the construction and equipping of additional improvements to the Civic Center complex and for renovation of the City's Nature Center (the "ProjecC). See "THE FINANCING PLAN - The Project" herein. Pursuant to an Assignment Agreement, dated as of September I, 2004, as amended by a First Amendment to Assignment Agreement, dated as of March I, 2006 (as amended, the "Assignment AgreemenC), by and between the Authority and the Trustee, the Authority assigns to the Trustee, for the benefit of the owners of the Certificates and the 2004 Certificates, substantially all of its rights under the Lease, including its right to receive and collect Lease Payments and prepayments from the City under the Lease and rights as may be necessary to enforce payment of Lease Payments and prepayments. All rights assigned by the Authority pursuant to the Assignment Agreement will be administered by the Trustee in accordance with the provisions of the Trust Agreement for the equal and proportionate benefit of all owners of the Certificates and the 2004 Certificates. For a summary of the Trust Agreement, the Lease, the Site Lease and the Assignment Agreement, see "APPENDIX A - SUMMARY OF PRINCIPAL LEGAL DOCUMENTS" herein. Certain capitalized terms used in this Official Statement and not otherwise defined have the meanings given them in "APPENDIX A." In general, the City is required under the Lease to pay to the Trustee specified amounts for use and possession of the Leased Premises which amounts are calculated to be sufficient in both time and amount to pay, when due, the principal and interest payable with respect to the Certificates and the 2004 Certificates. The City is also required to pay any taxes and assessments levied on the Leased Premises and all costs of maintenance and repair of the Leased Premises. The City has covenanted in the Lease to take such actions as may be necessary to include all Lease Payments in its annual budgets and to make the necessary annual appropriations for all such Lease Payments subject to complete or partial abatement of such Lease Payments resulting from a taking of the Leased Premises (either in whole or in part) under the powers of eminent domain or resulting from damage or loss of all or any portion of the Leased Premises. Except for the Authority's right, title and interest in and to the Lease which have been assigned to the Trustee, no funds or properties of the Authority or the City are pledged to or otherwise liable for the obligations of the Authority (see "CERTIFICATE OWNERS' RISKS" herein). The Lease is, in the opinion of Special Counsel, a valid and binding obligation of the City enforceable against the City in accordance with its terms, except to the extent enforceability thereof may be limited by bankruptcy. insolvency, moratorium and other similar laws affecting creditors' rights heretofore or hereinafter enacted and may be subject to the exercise of judicial discretion in accordance with general principles of equity or otherwise in appropriate cases (see "CERTIFICATE OWNERS' RISKS - The Lease Payments - Limited Recourse on Default" herein). The form of Special Counsel's opinion is attached hereto as "APPENDIX D." 2 /. / / The obligation of the City to pay Lease Payments does not constitute au obligation for which the City is obligated to levy or pledge any form of taxation or for which the City has pledged any form of taxation. The obligation of the City to pay Lease Payments does not constitute a debt or liability of the State of California or of any political subdivision thereof within the meaning of any constitutional or statutory debt limitation or restriction. Additional Certificates The Certificates are being executed and delivered as "Additional Certificates" under the Trust Agreement and are secured by Lease Payments on a parity with the 2004 Certificates. Further, the City expects to cause approximately $18,000,000 of Additional Certificates to be executed and delivered in 2007 pursuant to the Trust Agreement to finance the third and final phase of the renovation to the Civic Center complex. In connection with the execution and delivery of such Additional Certificates, the Lease Payments due under the Lease would be increased, The Certificates, the 2004 Certificates and the Additional Certificates will be secured on a parity under the Trust Agreement by Lease Payments and other amounts held in the funds established thereunder other than the Project Fund and the Rebate Fund. See "APPENDIX A - SUMMARY OF PRINCIPAL LEGAL DOCUMENTS - THE CERTIFICATES - Additional Certificates. " Tax Exemption In the opinion of Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California ("Special Counsel"), under existing statutes, regulations, rulings and judicial decisions, and assuming certain representations and compliance with certain covenants and requirements described herein, the interest (and original issue discount) due with respect to the Certificates 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 Special Counsel, the interest (and original issue discount) due with respect to the Certificates is exempt from State of California personal income tax. See "LEGAL MATTERS - Ta.x Exemption" herein. Professional Services All legal proceedings in connection with the execution and delivery of the Certificates are subject to the approving opinion of Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California, Special Counsel. Certain legal matters will be passed on for the City by Ann Moore, City Attorney and by Stradling Yocca Carlson & Rauth, a Professional Corporation, as Disclosure Counsel. The Bank of New York Trust Company, N.A., serves as Trustee under the Trust Agreement. The Trustee will act on behalf of the Certificate Owners for the purpose of receiving all moneys required to be paid to the Trustee, to allocate, use and apply the same, to hold, receive and disburse the Lease Payments and other funds held under the Trust Agreement, and otherwise to hold all the offices and perform all the functions and duties provided in the Trust Agreement to be held and performed by the Trustee. Harrell & Company Advisors, LLC (the "Financial Advisor") advised the City as to the financial structure and certain other financial matters relating to the Certificates. The City's audited general purpose financial statements for the fiscal year ended June 30, 2005, attached hereto as "APPENDIX B" have been audited by Caporicci & Larson, Certified Public Accountants, Costa Mesa, California. The City's audited financial statements are public documents and are included within this Official Statement without the prior approval of the auditor. Accordingly, the auditor has not performed any post-audit of the financial condition of the City. 3 // I Offering of the Certificates Authority for Execution and Delivery. The Certificates are to be executed and delivered pursuant to the Trust Agreement, and have been authorized by a resolution adopted by the City Council of the City on February 7, 2006. The Site Lease and the Lease will be entered into in accordance with the laws of the State of California (the "State"), and particularly Section 37350 of the Government Code of the State. Offering and Delivery of the Certificates. The Certificates were sold to at competitive sale. The Certificates are offered. when. as and if executed and delivered, subject to the approval as to their legality by Stradling Yocca Carlson & Rauth. a Professional Corporation, Newport Beach, California, Special Counsel. It is anticipated that the Certificates, in book-entry fonn, will be available for delivery in New York, New York on March 15, 2006 through the facilities of The Depository Trust Company. See "APPENDIX F - BOOK-ENTRY ONLY SYSTEM." Information Concerning this Official Statement This Official Statement speaks only as of its date. The infonnation set forth herein has been obtained by the City with the assistance of the Financial Advisor from sources which are believed to be reliable and such infonnation is believed to be accurate and complete, but such infonnation is not guaranteed as to accuracy or completeness, nor has it been independently verified and is not to be construed as a representation by the Financial Advisor or the Disclosure Counsel. Statements contained in this Official Statement which involve estimates, forecasts or matters of opinion, whether or not expressly so described herein. are intended as such and are not to be construed as representations of fact. Preliminary Official Statement Deemed Final. The infonnation set forth herein is in a fonn deemed final, as of its date, by the City for the purpose of Rule I 5c2- I 2 under the Securities Exchange Act of 1934, as amended (except for the omission of certain infonnation pennitted to be omitted under the Rule). The infonnation herein is subject to revision, amendment and completion in a Final Official Statement. The infonnation and expressions of opinion herein are subject to change without notice and the delivery of this Official Statement shall not. under any circumstances, create any implication that there has been no change in the information or opinions set forth herein or in the affairs of the City since the date hereof. The infonnation and expressions of opinion herein are subject to change without notice and the delivery of this Official Statement shall not, under any circumstances, create any implication that there has been no change in the infonnation or opinions set forth herein or in the affairs of the City since the date hereof. Availability of Legal Documents. The summaries and references contained herein with respect to the Trust Agreement, the Lease, the Site Lease, the Assignment Agreement, the Certificates and other statutes or documents do not purport to be comprehensive or definitive and are qualified by reference to each such document or statute, and references to the Certificates are qualified in their entirety by reference to the form thereof included in the Trust Agreement. Copies of the documents described herein are available for inspection during the period of initial offering of the Certificates at the offices of the Financial Advisor. Copies of these documents may be obtained after delivery of the Certificates at the trust office of the Trustee, The Bank of New York Trust Company, N.A., Los Angeles, California or from the City at 276 Fourth Avenue, Chula Vista, California 91910. 4 , i / , ,. THE CERTIFICATES General Provisions Payment of the Certificates. The Certificates will be executed and delivered in the form of fully registered Certificates in the principal amount of $5,000 each or any integral multiple thereof. Interest represented by the Certificates is payable at the rates per annum set forth on the inside front cover page hereof, on September 1,2006 and each March I and September I thereafter (each, an "Interest Payment Date") until maturity. Said interest will represent the portion of Lease Payments designated as interest and coming due on each Interest Payment Date. The share of the portion of Lease Payments designated as interest with respect to any Certificate will be computed by multiplying the portion of Lease Payments designated as principal with respect to such Certificates by the rate of interest represented by such Certificates. Interest represented by the Certificates and the Lease Payments will be computed on the basis of a year consisting of 360 days and twelve 30-day months. Principal with respect to the Certificates is payable from the principal component of Lease Payments allocable to the Certificates on March I in each of the years and in the amounts set forth on the inside front cover page hereof. Each Certificate will be dated as of the date of original delivery of the Certificates, and interest with respect to the Certificates will be payable from the Interest Payment Date next preceding the date of execution thereof, unless (a) it is executed following the 15th day of the month preceding an Interest Payment Date (a "Record Date') and on or before such Interest Payment Date, in which event interest with respect thereto will be payable from such Interest Payment Date; or (b) it is executed on or before the first Record Date, in which event interest represented thereby will be payable from the Date of Delivery. Notwithstanding the foregoing, if, as of the date of any Certificate, interest represented by such Certificate is in default, interest represented by such Certificate will be payable from the Interest Payment Date to which interest has previously been paid or made available for payment with respect to such Certificate. Book-Entry Only System. The Depository Trust Company ("DTC"), New York, New York, will act as securities depository for the Certificates. The Certificates 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. Interest on and principal of the Certificates will be payable when due by wire of the Trustee to DTC which will in tum remit such interest and principal to DTC Participants (as defined herein), which will in turn remit such interest and principal to Beneficial Owners (as defined herein) of the Certificates (see "APPENDIX F - BOOK-ENTRY ONLY SYSTEM" herein). As long as DTC is the registered owner of the Certificates and DTC's book-entry method is used for the Certificates, the Trustee will send any notices to certificate owners only to DTC. Discontinuance of Book-Entry System. DTC may discontinue providing its services as secuntles depository with respect to the Certificates at any time by giving reasonable notice to the City or the Trustee. Under such circumstances, in the event that a successor securities depository is not obtained, Certificates are required to be printed and delivered as described in the Trust Agreement. 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 Certificates will be printed and delivered as described in the Trust Agreement. In addition, the following provisions shall apply: interest represented by each Certificate will be paid on each Interest Payment Date by check of the Trustee mailed on such Interest Payment Date by first class mail, to the person appearing on the registration books of the Trustee as the Owner thereof as of the close of business on the preceding Record Date, at such Owner's address as it appears on the registration books of the Trustee; provided however, that at the written request of the Owner of Certificates in an aggregate principal amount of at least $1,000,000, which request is on file with the Trustee as of any Record Date, interest with respect to such Certificates shall be paid on each succeeding Interest Payment Date by wire transfer in immediately available funds to such account within the United States of America as shall be specified in such request. The principal and prepayment price represented 5 ~'I by any Certificate at maturity or upon prepayment will be payable upon presentation and surrender of such Certificate at the Office of the Trustee in Los Angeles, California. or at such place as may be designated by the Trustee. Prepayment Optional Prepayment. The Certificates maturing on or before March 1, 20]6 are not subject to prepayment prior to maturity. The Certificates maturing on or after March I, 2017 are subject to prepayment prior to maturity at the option of the City, on any date on or after March I, 20 I 6. as a whole or in part among maturities designated by the City and by lot within a maturity, from any source of available funds at a prepayment price equal to 100% of the principal amount thereof to be prepaid, without a premium, together with accrued interest thereon to the date fixed for prepayment. Prepayment From Net Proceeds of Insurance or Condemnation. The Certificates and the 2004 Certificates are subject to mandatory prepayment, without premium as a whole, on any date, or in part on any Interest Payment Date, from net hazard or title insurance proceeds not used to repair or replace any portion of the Leased Premises damaged or destroyed, or from condemnation proceeds received with respect to any portion of the Leased Premises and elected by the City to be used for such purpose (collectively, "Net Proceeds"), pro-rata among maturities, at a prepayment price equal to the principal amount of the Certificates and the 2004 Certificates to be prepaid, plus accrued interest thereon to the date fixed for prepayment, without premium. There can be no assurance that such proceeds will be adequate to prepay all of the Certificates and the 2004 Certificates (see "SOURCES Of PAYMENT fOR THE CERTIfICATES - Certificate Insurance" and "CERTIfICATE OW1\'ERS' RISKS The Lease Payments - Insurance" herein). In the event that Net Proceeds are to be applied to the prepayment of Certificates or 2004 Certificates when Additional Certificates, in any, are outstanding, the Net Proceeds will be applied to prepay a proportionate amount of Certificates, 2004 Certificates and Additional Certificates based on the Outstanding principal amount. Mandatory Sinking Account Prepayment. The Certificates maturing March I, _ (the "_ Term Certificates") will be subject to prepayment in part by lot, on March I in each ofthe following years from sinking account payments as set forth below at a prepayment price equal to the principal amount thereof to be prepaid, without premium, provided, however, that if some but not all of the _ Term Certificates have been prepaid pursuant to an optional or extraordinary prepayment, the total amount of all future sinking account payments will be reduced pro rata by the aggregate principal amount of the _ Term Certificates so prepaid. In addition, in lieu of prepayment thereof, the _ Term Certificates may be purchased by the City and tendered to the Trustee pursuant to the provisions of the Trust Agreement. Mandatory Prepayment Date (March 1) Sinking Account Prepavment Notice of Prepayment. When prepayment is authorized or required, the Trustee is required to give written notice to the respective Certificate Owners of any Certificates designated for prepayment at their addresses appearing on the Certificate registration books, to the Securities Depositories and to one or more of the Information Services, all as provided in the Trust Agreement, by first class mail, postage prepaid, no less than 30, nor more than 60, days prior to the date fixed for prepayment. Neither failure to receive such notice nor any defect in the notice so mailed will affect the validity of the proceedings for prepayment of such Certificates or the cessation of accrual of interest from and after the prepayment date. 6 .'- So long as DTC is the registered Owner of the Certificates, all such notices will be provided to DTC as the Owner, without respect to the beneficial ownership of the Certificates. See "'APPENDIX F - BOOK- ENTRY ONLY SYSTEM:' Rescission of Notice, The City has the right to rescind any notice of the optional prepayment of Certificates by written notice to the Trustee on or prior to the dated fixed for prepayment. Any notice of optional prepayment will be cancelled and annulled iffor any reason funds will not be or are not available on the date fixed for prepayment for the payment in full of the Certificates then called for prepayment, and such cancellation will not constitute an Event of Default. The City and the Trustee have no liability to the Owners or any other party related to or arising from such rescission of prepayment. The Trustee shall mail notice of such rescission of prepayment in the same manner as the original notice of prepayment was sent. Effect of Prepayment. Interest represented by the Certificates (or portions thereof) called for prepayment will cease to accrue on the date fixed for prepayment and such Certificates (or portions thereof) will cease to be entitled to any benefit or security under the Trust Agreement and the Owners of such Certificates will have no rights in respect thereof except to receive payment of the prepayment price thereof. Partial Prepayment. In the event only a portion of any Certificate is called for prepayment, then upon surrender of such Certificate the Trustee will execute and deliver to the Certificate Owner thereof, at the expense of the City, a new Certificate or Certificates of authorized denominations equal in aggregate principal amount equal to the unprepaid portion of the Certificate surrendered and of the same tenor and the maturity. 7 I .) ,', . I / ,',,' Scheduled Lease Payments The following is a schedule of Lease Payments, and therefore the scheduled payments of principal and interest represented by the Certificates and the 2004 Certificates. Certificate Year Ending March] 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 Total Princioal 2006 Lease Payments 2004 Lease Payments Interest Annual Total 8 / I -7/ THE FINANCING PLAN Estimated Sources and Uses of Funds Under the provisions of the Trust Agreement, the Trustee will receive the proceeds from the sale of the Certificates, together with other available funds, and will apply them as follows: Sources of Funds Par Amount of Certificates Net Original Issue PremiumlDiscount Available Funds Uses of Funds Project Fund Reserve Fund Interest Account (II Underwriters' Discount Costs oflssuance Fund 12> Total Uses (l) Represents capitalized interest on the Certificates through September}, 2007. (~) Expenses include fees and expenses of Special Counsel, the Financial Advisor, Disclosure Counsel and Trustee, rating fees, bond insurance premium, costs of printing the Official Statement, and other costs of delivery of the Certificates. The Project The proceeds of the Certificates deposited in the Project Fund will finance (i) the renovation, reconstruction and equipping of the Public Service Building located in the City's Civic Center complex (the "PSB Improvements") and (ii) the renovation and replacement of exhibits at the City's Nature Center (the "Nature Center Improvements," and together with the PSB Improvements, the "ProjecC). Approximately $]5.4 million of Certificate proceeds are expected to be spent on the Civic Center renovations and $1.8 million of Certificate proceeds are expected to be spent on the Nature Center Improvements. The City expects to finance a final phase of its Civic Center complex renovation through the execution and delivery of approximately $] 8,000,000 of Additional Certificates which will also be secured under the Trust Agreement on a parity with the 2004 Certificates and the Certificates. Based on current plans, the City expects the Additional Certificates to be executed and delivered in 2007. See "INTRODUCTION -Additional Certificates." The Civic Center Complex The Civic Center complex consists of approximately 7.9 acres located in the City's downtown and currently includes City Hall, the Public Services Bui]ding, a former Police Department facility, the Community Development Building and the Legislative Building. The Civic Center Complex is being renovated in phases. Phase 1 consisted of the construction of a new City Hall, whereby the former City Hall was demolished and a new City Hall was constructed at the same location using a portion of the proceeds of the City's 2004 Certificates. The newly constructed 42,000 square foot City Hall building, includes City Council chambers with fixed seating for 156 people, an overflow conference room, a press 9 -., / - / ,/ -,' room and audio visual equipment area. The new City Hall also contains the offices for the City Council and Mayor, the City Manager. the City Attorney, the Finance Department, the Office of Budget and Analysis. the Office of Public Information and the City Clerk. In phase 2 of the Civic Center complex project, the Public Services Building will be renovated. The City will utilize the former Police Department facility as temporary offices while the Public Services Building is being renovated (the former Police Department facility also served as temporary offices for employees to be displaced while the new City Hall was being constructed). When completed, the Public Services Building will house the Engineering, Planning and Community Development departments. The PSB Improvements are expected to cost $12.4 million as shown below. The City is also prefunding $3 million in Phase 3 costs for materials and insurance. Design of Public Services Building Improvements Design of Temporary Renovations to police facility Development Staff Costs Design/Builders Fee (Design) Design/Bui]ders Fee (Construction) DesignlBui]ders Reimbursables Construction Allowance Budgets General Conditions Renovations of Public Services Building On-Site Improvements Construction Contingency Total DesignlBuild Costs City Budgeted Allowances Project Insurance Total PSB Improvements $690.000 10,000 75,000 151,000 352,000 ]3],000 700,000 668,000 5. I 50,000 ] ,298,000 357,000 9,582.000 1,964,000 81 1.000 $12,357,000 The total approximate cost of the Civic Center renovation and reconstruction is $49.6 million (a reduction of $500,000 from the original budget due to savings in Phase I), of which $22.8 was financed in the first phase and $15.4 million is being financed in the second phase. The first phase of construction was substantially complete in September 2005. The second phase of construction is expected to be complete in February 2007. The renovation and reconstruction of the former Police Department facility will be completed in a third and final phase of construction. When complete, it will house the Human Resources, Parks and Recreation and Building and Planning departments, as well as a conference center and a new gymnasium and training facility. The third and final phase is expected to cost $ I 5 million and be complete in August 2008. Design/Build Agreement The Civic Center Complex is being renovated pursuant to the terms of a Design/Build Agreement dated as of February 18, 2003, as amended on August 3, 2004 (the "Design/Build Agreement"), by and between the City and Highland Partnership, Inc. ("Highland'"). Highland specializes in providing turnkey development, project management and construction services for new and retrofit building projects for the public sector, corporate, medical and technology based industries. From its corporate office in Chula Vista, Highland has directed and implemented projects across the nation, concentrating the majority of its efforts in Southern California. In early 2004, Highland completed the construction of a new ]40,000 square foot police facility for the City at a cost of approximately $66 million. The facility was completed within budget and on-time. Highland completed phase I of the Civic Center complex renovation also on time and within budget. 10 / ./ Under the tenns of the Design/Build Agreement, Highland has contracted to complete the PSB Improvements for a guaranteed maximum price of $]2,357,000 ("GMP"), Under the tenns of the Design/Build Agreement, Highland is required to commence construction on the PSB Improvements immediately after it receives written notice to proceed from the City. The City expects to issue this notice in February 2006, as soon as temporary renovations to the fonner Police Department facility are complete and can be used as temporary offices. The Design/Build Agreement obligates Highland to provide a perfonnance bond in favor of the City in a principal amount equal to 100% of the GMP and a payment bond equal to 100% of hard construction costs of the PSB Improvements. The amounts payable under the perfonnance and payment bonds are not pledged to secure the payment of the Certificates. The PSB Improvements are scheduled to be substantially completed and occupied by February 2007. If Highland fails to complete the PSB Improvements within 30 days after the substantial completion date in the Design/Build Agreement (currently estimated to be February 2007 based on receiving notice to commence in February 2006), Highland and the City have agreed upon liquidated damages in the amount of $580 per day for the first 30 days, $1,740 for each calendar day in excess of 30 days and less than 60 days and $2,900 per day for each calendar day in excess of 60 days up to a maximum of $870,000. The liquidated damages amount is sufficient to cover interest due with respect to the Certificates for approximately one year; however, capitalized interest will be funded through September], 2007 with Certificate proceeds and interest earnings on amounts in the Interest Account of the Lease Payment Fund and the Reserve Fund. The PSB Improvements, when complete, will constitute a portion of the Leased Premises. See "THE LEASED PREMISES" Nature Center Improvements The portion of the Project constituting Nature Center Improvements includes certain improvements to the City's Nature Center building, a new orientation area and four new exhibits - a Green Sea Turtle exhibit, a Marsh exhibit, a Bay exhibit and an Upland exhibit. These four new exhibits will replace all of the existing displays at the facility, and will represent the geographic diversity of the City, from its coastal area to its mountain area. The Nature Center Improvements do not constitute a part of the Leased Premises. Project Costs There can be no assurance that the Project will be completed for the costs and within the time described in this Official Statement. A delay in the completion or damage to the Project during construction could have an adverse effect on the costs of the Project. Contractor and subcontractor perfonnance and integrity, availability and cost of labor, equipment and materials, and weather conditions, among other unexpected factors, could cause such a failure of timely on-budget construction. II i i i i / THE LEASED PREMISES Description of the Leased Premises Pursuant to the tenus of the Site Lease, the City leases the 7.9 acre Civic Center complex, Fire Station No.7, Montevalle Park and Salt Creek Park and the existing improvements thereon (collectively the "Property") to the Authority. Pursuant to the tenns of the Lease, the Authority leases the Property, the PSB Improvements and any other improvements constructed on the Property, which together comprise the Leased Premises, back to the City. The Leased Premises includes the improvements constructed on the Property in the first phase of the Civic Center complex renovation and will include the PSB Improvements when complete as well as any additional improvements constructed on the Property which are financed with the proceeds of any Additional Certificates. See "INTRODUCTION - Additional Certificates:' The Civic Center complex consists of approximately 7.9 acres located in the City's downtown and currently includes City Hall, the Public Services Building, a fonner Police Department facility, the Community Development Building and the Legislative Building. The newly constructed 42,000 square foot City Hall building includes the City Council chambers with fixed seating for 156 people, an overflow conference room, a press room and audio visual equipment area. The new City Hall also contains offices for the City Council and Mayor, the City Manager, the City Attorney, the Finance Department, the Office of Budget and Analysis, the office of Public Information and the City Clerk. The Public Services Building is 3 I ,494 square feet and the fonner Police Department facility is 50,976 square feet. The City Fire Station No.7 was constructed in 2003 at a total land and construction cost of $5.5 million. Montevalle Park is a 29-acre park located within the Rolling Hills Ranch community. A 2 I ,000 square foot community center is under construction and expected to be complete in April 2006. The community center will contain a gymnasium, annex/multi-purpose room, game room, dance room, craft room and court, offices, lobby and restrooms. Park amenities include three lighted multi-purpose fields, one lighted softball field, lighted tennis courts and basketball courts, skate area, off-leash dog area, tot lots and picnic shelters. Salt Creek Park is a 24-acre park located within the EastLake Trails subdivision. A 20,000 square foot community center is under construction and expected to be complete in April 2006. The community center will contain a gymnasium, annex, weight room and offices. Other park amenities include two lighted multi-purpose fields, a lighted arena soccer facility, lighted tennis courts and basketball courts, skate area, tot lots and picnic shelters. Pursuant to the Lease, the City and the Authority have agreed and detennined that the Lease Payments required to be made under the Lease represent fair rental value of the Leased Premises. Under the tenns of the Lease, upon completion of the Phase 3 Civic Center improvements (renovation of the fonner police department facility), Montevalle Park and Salt Creek Park will be released from the Leased Premises provided that certain conditions set forth in the Lease are met. Further, under the terms of the Lease, the City may substitute other property for the Leased Premises, or any portion thereof, and may release other portions of the Leased Premises provided that certain conditions set forth in the Lease are met. See "APPENDIX A - SUMMARY OF PRINCIPAL LEGAL DOCUMENTS - Covenants with Respect to the Property - Substitution or Release of the Leased Premises" and "CERTIFICATE OWNERS' RISKS - Release or Substitution of Property" herein. 12 i I i "') , ( SOURCES OF PAYMENT FOR THE CERTIFICATES General Each Certificate and each 2004 Certificate represents an undivided proportionate interest in the Lease Payments to be made by the City (except certain right to indemnification) to the Authority under the Lease. Under the Assignment Agreement, the Authority has assigned all of its rights under the Lease, including its rights to receive Lease Payments from the City and its remedies under the Lease to the Trustee for the benefit of the Owners of the Certificates and the 2004 Certificates. The Lease Payments are calculated to be sufficient to pay, when due, the annual principal of and interest due with respect to the Certificates and the 2004 Certificates. Principal and interest with respect to the Certificates will be paid from the 2006 Lease Payments payable by the City for the use and possession of the Leased Premises, insurance or condemnation Net Proceeds received in respect to the Leased Premises to the extent that such Net Proceeds are not used for repair or replacement, interest or other income derived from the investment of the funds held by the Trustee under the Trust Agreement, or, in certain instances, ITom the Reserve Fund established by the Trust Agreement. Lease Payments; Abatement The City is required to pay to the Authority specified amounts for use of the Leased Premises, which are equal to the principal of and interest due with respect to the Certificates and the 2004 Certificates. The 2006 Lease Payments payable under the Lease are in addition to the 2004 Lease Payments which the City has agreed to pay under the 2004 Lease for the use and possession of the Leased Premises. The Lease requires the City to make Lease Payments to the Authority fifteen days preceding each Interest Payment Date. Under the Assignment Agreement, the Authority has assigned its rights to receive Lease Payments to the Trustee for the benefit of the owners of the Certificates and the 2004 Certificates, as a result of which all Lease Payments will be made by the City directly to the Trustee. The Trust Agreement requires that the Lease Payments as are necessary to pay the principal and interest with respect to the Certificates and the 2004 Certificates then coming due and payable will be deposited in the Lease Payment Fund maintained by the Trustee under the Trust Agreement. The City covenants in the Lease to take such action as may be necessary to include all Lease Payments in its annual budgets and to make annual appropriations for all such Lease Payments. The Lease provides that the several actions required by such covenants are deemed to be and shall be construed to be duties imposed by law and that it is the duty of each and every public official of the City to take such action and do such things as are required by law in the performance of the official duty of such official to enable the City to carry out and perform the covenants in the Lease agreed to be carried out and performed by the City. The Lease provides that Lease Payments for any portion of the Leased Premises will be abated during any period in which there is substantial interference with the City's use of such portions of the Leased Premises because of damage, destruction or condemnation of such portions. The amount of such abatement will be an amount such that the resulting Lease Payments represent fair consideration for the use and occupancy of the portions of the Leased Premises not taken, damaged or destroyed. Such abatement will continue for the period commencing with such taking, damage or destruction and ending with the substantial completion of the work of replacement, repair or reconstruction. In the event of any such damage or destruction, the Lease will continue in full force and effect and the City waives any right to terminate the Lease by virtue of such damages, destruction and taking. Notwithstanding the foregoing, there shall be no abatement of Lease Payments under the Lease to the extent that the proceeds of rental interruption insurance or amounts in the Lease Payment Fund or the Reserve Fund are available to pay Lease Payments which would otherwise be abated under the Lease. 13 , ; , . / I I I , During any period of abatement of Lease Payments, the Trustee may pay principal and interest with respect to the Certificates and the 2004 Certificates (and Additional Certificates, if any) allocable to such portions of the Leased Premises from moneys on deposit in the Reserve Fund, and, if available, proceeds of insurance or condemnation award. The City's reduced rental payments will constitute the total Lease Payments. The reduced Lease Payments may not be sufficient to pay principal and interest with respect to the Certificates and the 2004 Certificates (and Additional Certificates, if any) in the amounts and at the rates set forth therein. In the event and to the extent the Lease Payments are subject to abatement, there could be insufficient amounts to pay principal of and interest on the 2004 Certificates and the Certificates (and Additional Certificates, if any) in full, and such insufficiency would not constitute a default by the City under the Trust Agreement, the Lease or otherwise. The obligation of the City to make Lease Payments does not constitute an indebtedness of the City 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. Neither the Certificates nor the obligation of the City to make Lease Payments constitutes an indebtedness of the City, the State of California, or any of its political subdivisions withiu the meaning of any constitutional or statutory debt limitation or restrictiou. Reserve Fund A Reserve Fund is established by the Trust Agreement which is to be maintained in an amount equal to the least of (i) maximum aggregate annual Lease Payments payable under the Lease in any Certificate Year (exclusive of Lease Payments attributable to Certificates and Additional Certificates that have been defeased), (ii) 125% of the average annual aggregate Lease Payments (in any Certificate Year) then payable under the Lease (exclusive of Lease Payments attributable to Certificates and Additional Certificates, if any, that have been defeased), or (iii) 10% of the face amount of the Certificates and any Additional Certificates, if any, (less original issue discount if in excess of two percent of the stated payment amount at maturity) (the "Reserve Requirement"). The full amount available in the Reserve Fund may be used by the Trustee to make payments due with respect to the Certificates, the 2004 Certificates and Additional Certificates, if any, in the event of abatement or a failure by the City to make Lease Payments when due. Currently, there is $ on deposit in the Reserve Fund from proceeds of the 2004 Certificates. The City will deposit an additional $ in the Reserve Fund from proceeds of the Certificates. Interest or income received by the Trustee on investment of moneys in the Reserve Fund will be retained in the Reserve Fund so long as amounts on deposit in the Reserve Fund are less than the Reserve Requirement. In the event that amounts on deposit in the Reserve Fund exceed the Reserve Requirement, subject to the requirement of transfers to the Rebate Fund, such excess shall be transferred to the Lease Payment Fund on or before February] 5 and August 15 of each year. The Reserve Requirement, or any portion thereof, may also be satisfied by the City by crediting to the Reserve Fund a letter of credit, a surety bond insurance policy, or any other comparable credit facility or any combination thereof which in the aggregate make funds available in the Reserve Fund in an amount equal to the Reserve Requirement. See "APPENDIX A - SUMMARY OF PRINCIPAL LEGAL DOCUMENTS - Definitions." Capitalized Interest There will an initial deposit by the Trustee to the Interest Account of the Lease Payment Fund from proceeds of the Certificates. The amount deposited has been calculated, together with earnings thereon and on the Reserve Fund, to be sufficient to make interest payments on the Certificates through and including September I, 2007. Such amounts represent advance Lease Payments. 14 i , . Certificate Insurance [to be completed] Insurance Relating to the Leased Premises Pursuant to the Lease, the City is required to obtain an ALTA leasehold title insurance policy (with Western Regional Exceptions) on the Leased Premises in an amount equal to the aggregate principal component of unpaid Lease Payments. The Lease also requires that the City maintain casualty insurance on the Leased Premises in amount equal to replacement value and rental interruption insurance to insure against loss of Lease Payments caused by loss or damage to the Leased Premises covered under the City's casualty insurance. The rental interruption insurance is to be in an amount not less than the maximum remaining scheduled Lease Payments in any future two-year period. The City also is obligated under the Lease to obtain a standard comprehensive general public liability and property damage insurance policy or policies and workers' compensation insurance. See "FINANCIAL INFORMATION - Insurance Program" and "APPENDIX A - SUMMARY OF PRINCIPAL LEGAL DOCUMENTS -INSURANCE" herein. The proceeds of any rental interruption insurance will be deposited to (i) the Reserve Fund to make up any deficiency therein and (ii) in the Lease Payment Fund to be credited towards the payment of the Lease Payments in the order in which such Lease Payments become due and payable. The Lease requires the City to apply the Net Proceeds of any insurance award either to replace or repair the Leased Premises or to prepay Certificates, the 2004 Certificates and Additional Certificates, if any, if certain certifications with respect to the adequacy of the Net Proceeds to make repairs, and the timing thereof, cannot be made. See "APPENDIX A - SUMMARY OF PRINCIPAL LEGAL DOCUMENTS - DAMAGE, DESTRUCTION AND EMINENT DOMAIN; USE OF NET PROCEEDS," and "THE CERTIFICATES - Prepayment - Prepayment from Net Proceeds of Insurance or Condemnation" The amount of Lease Payments will be abated and Lease Payments due under the Lease may be reduced during any period in which by reason of damage, destruction, title defect or taking by eminent domain or condemnation there is substantial interference with the City's use and possession of all or part of the Leased Premises. See "CERTIFICATE OWNERS' RISKS - The Lease Payments - Abatement" herein. If there are not sufficient insurance proceeds to complete repair of the Leased Premises, the Lease Payment schedule will be proportionally reduced in accordance with the Lease. Such reduced Lease Payments may not be sufficient to pay principal and interest with respect to the 2004 Certificates and the Certificates. Such reduction would not constitute a default under either the Trust Agreement or the Lease. Reentering and Reletting If the City defaults in performance of its obligations under the Lease, the Trustee, as assignee of the Authority, may re-enter and relet the Leased Premises and may enforce the Lease and hold the City liable for all Lease Payments on an annual basis while re-entering and reletting the Leased Premises. Such re- entry and reletting shall not effect a surrender of the Lease. The City, in the event of default, waives all rights to any rentals received by the Trustee through reletting of the Leased Premises. The City agrees to pay all costs, loss or damage howsoever occurring. 15 ! ,. , ) . / / THE AUTHORITY The Chula Vista Public Financing Authority was established pursuant to a Joint Exercise of Powers Agreement, dated as of April 4, 1995, by and between the City and the Redevelopment Agency of the City of Chula Vista. The City Council of the City is appointed as the Governing Board of the Authority. The Authority has acted as a conduit issuer for the City for a variety of financings. The Authority is governed by a five-member Board which consists of all members of the City Council. The Mayor serves as the Chairman of the Authority. The City Manager acts as the Executive Director, the City Clerk acts as the Secretary and the Finance Director acts as the Treasurer of the Authority. CITY OF CHULA VISTA General Information Chula Vista is located on San Diego Bay in Southern California, 8 miles south of the City of San Diego and 7 miles north of the Mexico border, in an area generally know as "South Bay:' Chula Vista's city limits cover approximately 50 square miles. Neighboring communities include the City of San Diego and National City to the north and the City of Imperial Beach and the communities of San Ysidro and Otay Mesa to the south. With a January 2005 estimated population of 2 I 7,543, Chula Vista is the second largest city in the County. General Organization The City of Chula Vista was incorporated as a general law city on March 17, 191 I, and operates under the council/manager form of government. It became a charter city in 1949. The City is governed by a five- member council consisting of four members and a Mayor, each elected at large for four-year alternating term. Positions of City Manager and City Attorney are filled by appointments of the Council. The City of Chula Vista currently employs approximately 1,547 statT members including sworn officers and fire personnel. The members of the City Council, the expiration dates of their terms and key administrative personnel are set forth in the charts below. CITY COUNCIL Council Member Stephen C. Padilla, Mayor John McCann Steve Castaneda Patricia E. Chavez Jerry Rindone Term Expires December 2006 December 2006 December 2008 December 2006 Decem ber 2008 CHIEF ADMINISTRATIVE PERSONNEL David D. Rowlands, Jr., City Manager Laurie A Madigan, Assistant City Manager Special Projects David Palmer, Assistant City Manager Community Services Dana Smith, Assistant City Manager Development Services Jim Thomson, Assistant City Manager Administrative Services Maria Kachadoorian, Director of Finance/Treasurer Ann Moore, City Attorney Susan Bigelow, City Clerk 16 / / ) ~ --J / (:' L Governmental Services Public Safety and Welfare The City of Chula Vista Police Department consists of 340 sworn officers and non-sworn personnel providing patrol, traffic, animal control and investigations. There are eight fire stations located in and operated by the City, staffed by 141 fire personnel. Community Services Services provided by the City include building permit and inspection, planning and zoning, landscape and public infrastructure maintenance, street cleaning, traffic signal maintenance and municipal code compliance. Public Services Water is supplied to Chula Vista by the Otay Water District and the Sweetwater Water District. Sewer service is provided by the City. Electric power and natural gas are provided by San Diego Gas and Electric. Parks and Recreation The Chula Vista Public Library is comprised of three individual libraries with over 432,000 volumes available and connected by a wide-area network. The Library delivers books in English and Spanish, videos and CDs, and community programming to the City's residents nearly every day of the year. The Library contains an Office of Cultural Arts dedicated to advancing the arts and culture in a manner designed to preserve the diverse cultures of the area. In addition, Chula Vista provides a variety of cultural and educational facilities such as the Chula Vista Heritage Museum, Onstage Playhouse, and the San Diego Junior Theater. The Chula Vista Recreation department provides citizens with a variety of park and recreational services on a year round basis. Facilities include nine community and recreation centers, including a youth community center and a senior center. The City also has two community pools open year round, 46 community and neighborhood parks, and a Memorial Bowl with seating for 700 at which the City's Summer Concert Series is hosted. The City also has after-school programs throughout the community. The City will open three new parks and community centers this year. Community Facilities and Services Public educational instruction for kindergarten through high school is provided by the Chula Vista Elementary School District and Sweetwater Union High School District. These districts administer 42 elementary schools, one junior high school, ten middle schools, II senior high schools, one continuation high school, one alternative program school and one charter school. Southwestern College, a two year Community College, has enrollment of approximately 19,000. There are also four adult education schools and 16 private schools. There are seven universities or colleges within 30 minutes commuting distance from Chula Vista in the San Diego metropolitan area. Chula Vista has proposed a University of California campus in Chula Vista, to be located on a 400 acre property adjoining the Olympic Training Center. There are two acute-care hospitals, two psychiatric hospitals and three convalescent hospitals, and more than 400 medical doctors and allied professionals in Chula Vista. 17 ~. / ,,'" ---'" There are two daily, one weekly and one semi-weekly newspapers published and circulated in Chula Vista. Chula Vista has one main public library and two branch libraries. Chula Vista has more than 60 churches and nearly 100 service, fraternal and civic organizations. The City's Mediterranean climate lends itself to many outdoor recreational activities. Chula Vista is home to the 20,000 seat Coors Amphitheatre, the Chula Vista Nature Center, Knotts Soak City USA, four golf courses, numerous parks and open spaces, and a harbor which includes two marinas, an RV park, and several restaurants. In addition, Chula Vista is the location of the United States Olympic Training Center. This is the third such training center in the nation and the only year round training facility. The center is located on a 150- acre property donated by EastLake Development Company adjacent to the Otay Lake reservoir. Transportation U.S, Highways 5 (along the coast) and 805 (inland) provide full freeway access from Chula Vista north to San Diego and south to the Mexican border. Commuter rail service is provided by the San Diego Trolley, a light rail system started in 1981 and II bus routes serve Chula Vista. The City has recently introduced Chula Vista Express, a three-part pilot commuting program to promote public transportation, carpooling, vanpooling, biking and walking to work as alternatives to driving alone. If offers free bus service from eastern Chula Vista to downtown San Diego, a free shuttle from eastern Chula Vista to the H Street Trolley Station to a cash incentive for riding or joining a vanpool or carpool. San Diego's Lindbergh International Airport is IS minutes to the north ofChula Vista. Air cargo and passenger flight services are provided at San Diego's Lindbergh International Airport, 12 miles west, which is served by all major airlines. Cargo shipping is available at the Unified Port of San Diego, which serves as a transshipment facility for the region, which includes San Diego, Orange, Riverside, San Bernardino and Imperial counties, plus northern Baja California, Arizona and points east. 18 )f' ,t-' Population The following table provides a comparison of population growth for Chula Vista, surrounding cities and San Diego County between 2001 and 2005. TABLE NO. I CHANGE IN POPULATION CHULA VISTA, SURROUNDING CITIES AND SAN DIEGO COUNTY 2001 - 2005 CHULA VISTA SURROUNDING CITIES SAN DIEGO COUNTY Percentage Percentage Percentage Year Population Change Population Change Population Change 2001 181,453 176,052 2,863,657 2002 191,033 5.3% 180,662 2.6% 2.920.010 2.0% 2003 200,378 4.9% 183,379 1.5% 2,971,805 1.8% 2004 208.510 4.1% 183,791 0.2% 3,013,014 1.4% 2005 217.543 4.3% 188,449 2.5% 3,051,280 1.3% % Increase Between 200 I - 2005 19.9% 7.0% 6.6% Surrounding cities include EI Cajon, Coronado and National City. Source: State of California Department of Finance, Population Research Unit, "Population Estimates/or California Cities and Counties. " Personal Income Personal income information for the City of Chula Vista, San Diego County, the State of California and the United States are summarized in the following table. TABLE NO.2 EFFECTIVE BUYING INCOME CITY OF CHULA VISTA, SAN DIEGO COUNTY, CALIFORNIA AND UNITED STATES 2000 - 2004 Year Chula Vista San Diego County State of California United States 2000 2001 2002 2003 2004 $42.550 42,229 40,578 42.389 45,145 $44.292 44,146 42,315 43,346 44,506 $44,464 43,532 42,484 42,924 43.915 $39.129 38,365 38.035 38,201 39,324 Source: Sales and Marketing Management. "Survey of Buying Power." 19 / ~"I / { ~ Employment and Industry The City is located in the San Diego-Carlsbad-San Marcos MSA labor market. Six major job categories constitute 76.6% of the work force. They are government (16.8%). professional and business services (15.9%), service producing (14.7%), leisure and hospitality (11.6%), educational and health services (9.7%) and manufacturing (7.9%). The November 2005 unemployment rate in the San Diego-Carlsbad- San Marcos area was 4.2%. The State of California November 2005 unemployment rate (unadjusted) was 5.1%. TABLE NO.3 SAN DIEGO-CARLSBAD-SAN MARCOS MSA WAGE AND SALARY WORKERS BY INDUSTRY (1) (in Thousands) Industry 2001 2002 2003 2004 2005 Government 221.1 222.8 216.7 218.8 218.9 Other Services 44.8 45.9 46.4 48.1 49.9 Leisure and Hospitality 128.6 135.8 142.1 144.0 150.2 Educational and Health Services 119.1 121.1 123.1 121.4 125.5 Professional and Business Services 200.3 204.0 203.0 207.2 207.1 Financial Activities 72.9 77.3 80.6 81.6 82.9 Infonnation 38.3 38.3 36.6 36.5 36.8 Transportation, Warehousing and Utilities 31.9 27.4 28.0 28.4 28.6 Service Producing Retail Trade 139.7 143.6 ]47.2 149.6 149.4 Wholesale Trade 41.5 41.6 41.9 42.1 42.1 Manufacturing Nondurable Goods 28.9 27.0 26.2 25.9 25.3 Durable Goods 87.3 82.6 78.0 77.8 77.9 Goods Producing Construction 76.3 77.8 82.3 89.5 94.6 Natural Resources and Mining -1U -1U -----M -----M -----M Total Nonfarm 1.231.0 1,245.5 1,252.5 1,271.3 1,289.6 Farm -1.Q1 ----1l.J. -----1U -----1M ---1.Q& Total (all industries) Uill l.lliJ\ ~ UW ~ (1) Annually, as of November. Source: State of Cali fomi a Employment Development Department. "Labor Alarket information. '.' 20 /.//?{ The major employers operating within the City and their respective number of employees as of June 30, 2005 are as follows: Name of Company Rohr DBA Goodrich Aerospace Sharp Chula Vista Medical Center Scripps Memorial Hospital United Parcel Service Walmart 2291 Sears Roebuck & Co. Costco Wholesale Corp. #781 ATC Vancom Inc. Costco Wholesale Corp. #460 Walmart Store #3516 Employment Tvpe of Business/Product 1,903 Aerospace Manufacturing 1,410 Hospital 890 Hospital 637 Parcel Delivery Service 400 General Merchandise 340 General Merchandise 285 General Merchandise 284 General Merchandise 275 General Merchandise 250 General Merchandise Source: City of Chula Vista. Commercial Activity The following table summarizes the volume of retail sales and taxable transactions for the City of Chula Vista for 1999 through 2003. The City's reported sales tax has increased 20% since 2003. This increase is primarily due to continued growth in the eastern section of the City, which lead to the opening of significant new developments. TABLE NO.4 CITY OF CHULA VISTA TOTAL TAXABLE TRANSACTIONS (in Thousands) 1999 - 2003 Total Taxable Retail Sales Retail Sales Transactions Issued Sales Year ($OOO's) 0/0 Change Permits ($OOO's) 0/0 Change Permits 1999 $1,240,992 1,738 $1,456,388 3,619 2000 1,401,401 12.9% 1.780 1,608,290 10.4% 3,609 2001 1,463,409 4.4% 1,823 1,688,665 5,0% 3,690 2002 1,513,809 3.4% 1,883 1,729,158 2.4% 3,737 2003 1,642,889 8.5% 2,092 1,857,233 7.4% 3,921 Source: State Board of Equalization, "Ta-.;able Sales in California. .. 21 , 7 /' / ,\ I The following table compares taxable transactions for the City of Chula Vista and surrounding cities. TABLE NO.5 CHANGE IN TOTAL TAXABLE TRANSACTIONS CHULA VISTA AND SURROUNDING CITIES (in Thousands) 1999 - 2003 Chula Vista EI Cajon Coronado National City 0/0 Change - 1999 2000 2001 2002 2003 1999 - 2003 $] .456.388 $] ,608,290 $] ,688,865 $],729,]58 $1.857.233 27.5% ].474,055 1.597,168 1,725,00] ] ,817,568 1.939.482 31.6% 163,488 172,63] 168.147 ] 75,648 ]79,4]8 9.7% 1,082,] 13 1,179.111 1,231,562 ] ,30 1,407 ] .389,042 28.4% City Source: State Board of Equalization, "Taxable Sales in California. Taxable transactions by type of business for the City of Chula Vista for ] 999 through 2003 are summarized in Table No.6. TABLE NO.6 CITY OF CHULA VISTA TAXABLE TRANSACTIONS BY TYPE OF BUSINESS (in Thousands) 1999 - 2003 1999 2000 2001 2002 2003 Retail Stores Apparel Stores $ 6],758 $ 66,598 $ 61.937 $ 67,035 $ 67,114 General Merchandise Stores 439,73] 495,679 524,942 525.423 553,979 Food Stores 85,662 90.487 92,224 99,897 ]03,]55 Eating/Drinking Places ]42,329 155,583 ]64.4]7 169,892 ] 88,675 Home Furnishings and Appliances 61.923 66,365 67,827 74.255 78,56] Building Materials and Fann Implements 87,902 ]02,370 97,897 91.235 100,504 Auto Dealers/Suppliers 126,304 145,923 15],812 ] 56,872 178,733 Service Stations 95.546 121.244 119,050 123,636 148,318 Other Retail Stores 139.837 ]57.]52 ] 83.303 205.564 223,850 Total Retail Stores 1,240,992 1,401,401 1,463,409 1,513,809 1,642,889 All Other Outlets 215.396 206.889 225.256 2]5.349 2]4.344 Total All Outlets $1 456.388 $1.608290 $1.688.665 $1.729158 $1.857.233 Source: State Board of Equalization, ''Taxable Sales in California. " 22 )/ I /~ : Building Activity The following table summarizes building activity valuations for the City of Chula Vista for the five-year period from 2001 through 2005. TABLE NO.7 CITV OF CHULA VISTA BUILDING ACTIVITY AND VALUATION (in Thousands) 2001 - 2005 2001 2002 2003 2004 2005 Residential $482,131,012 $467.349,014 $569.435.026 $703,847,604 $440,321,520 Non-Residential 91.667.827 81.298.075 92.855.876 123.793.323 111.908.460 Total Valuation ~573. 79R.R39 $S48 647 089 $662.290902 $R27640.927 $"2 229 980 Total Permits ~ ~ ~ ~ ~ Source: City ofChu1. Vista 23 / ; / /j I FINANCIAL INFORMATION Budgetary Process and Administration In accordance with the provisions of Chapter 1, Division 3, Title 3, of the Government Code of the State of California, the City prepares and adopts a budget for each fiscal year. Prior to July I, the City Manager is required to submit to the City Council a proposed budget for the fiscal year commencing the following July I. The budget includes proposed expenditures and the means of financing them. On or before June 30, public hearings are conducted to obtain public comments. On or before June 30, the budget is required to be enacted through the passage of a resolution by the City Council. From the effective date of the budget, the amounts stated as proposed expenditures become appropriated to the several departments, offices and agencies for the objects and purposes named, provided that the City Manager may transfer appropriations of a fund from one object or purpose to another within the same department in any amount up to $ I 5,000. All other transfers or amendments require City Council approval. All appropriations lapse at the end of the Fiscal Year to the extent that they have not been expended or lawfully encumbered. At a public meeting after the adoption of the budget the City Council may amend or supplement the budget by motion adopted by four votes of the City Council. Appropriations Limit Section 7910 of the Government Code of the State of California requires the City to adopt a formal appropriations limit for each fiscal year. The City's appropriations limit for fiscal year 2005/06 is $406,875,338. The City's appropriations subject to the limit for 2005/06 are $67,463,884. Based on this, the appropriations limit is not expected to have any impact on the ability of the City to budget and appropriate the Lease Payments as required by the Lease. Revenues and Expenditures The General City Budget includes programs which are provided on a largely city-wide basis. The programs and services are financed primarily by the City's share of property taxes, sales taxes, utility taxes, transient occupancy ta.xes, revenues from the State and/or federal government, and charges for services provided. See "CERTIFICATE OWNERS' RJSKS - The Lease Payments - State Budget" herein. Table No.8 compares the adopted General Fund 2005/06 Budget with actual revenue and expenditures for 2004105. Sales and use taxes and property taxes provide the major source of revenues to the General Fund, comprising approximately 17% and 13% respectively, of the City's 2005/06 General Fund Budget. Other significant 2005/06 General Fund budgeted revenue sources are motor vehicle fees, 12%, franchise fees, 6% and the utility users tax, 5%. Public safety represents the major use of General Fund moneys, accounting for approximately 40% of total expenditures of the 2005/06 General Fund Budget. 24 I I'~/(I - I:.J TABLE NO.8 CITY OF CHULA VISTA GENERAL FUND REYENUES AND EXPENDITURES Item 2004/05 Actual 2005/06 Budget Beginning Undesignated Fund Balance $ 18,393,361 $ 14,607,968 Revenues Taxes Intergovernmental Revenues Licenses and Penn its Charges for Services Fines and Forfeitures Use of Money and Property Other Revenues Transfers In Total Revenues 64,045,568 19,560,288 3,649,710 14,482,914 824,901 2,055,387 21,440,097 15.706199 $141,765,064 Expenditures General Government Public Safety Public Works Parks and Recreation Library Capital Outlay Transfers Out Total Expenditures Ending Undesignated Fund Balance (i) 34,048,658 60,470,397 31.864,754 5,303,741 8,929,751 1,249,582 3.683.574 $145,550,457 $ 14607968 $ 14607968 (1) The City also maintains a fund balance reserve for contingencies of$2,982,950. Source: City of Chula Vista. 25 /- / !/ 70,555,056 24.903,834 4,282,338 18,942,595 1,265,393 2,285,146 16,384,602 17.362.017 $155,980,981 40.831,003 61,973,167 30,705,676 5,830,725 9,646,674 659,389 6,334347 $155,980,981 Local Taxes The City receives the following local taxes: TABLE NO.9 CITY OF CHULA VISTA TA.X REVENUES BY SOURCE (in Thousands) Budget 2002/03 2003/04 2004/05 2005/06 Sales and Use Taxes $19.612.779 $21.421,090 $23,600,000 $26,788,000 Property Taxes 14,649,804 16,356,953 18,134,869 20,033,563 Franchise Fees 4.301.710 7,820,569 9,837,800 10,249,651 Utility Users Taxes 4,770,817 5,622,545 6,579,578 7.435,816 Business License Tax 1,085,986 1.063,847 1,185,187 1.229,948 Transient Occupancy Tax 2,024,366 2,159,478 2,268,944 2,410,301 Real Property Transfer Tax 1.359,756 1.989,898 2.439.190 2.407,777 Total Tax Revenues $47,805218 $56.434 380 $64 045 568 ~70 ""5.056 Source: City of Chula Vista. Sales and Use Taxes. Sales tax is collected and distributed by the State Board of Equalization. Each local jurisdiction received an amount equal to one percent of taxable sales within their jurisdiction. In addition, the City receives a portion of a y, cent sales tax increase approved by voters in ] 993. Sales tax generated by this increase is used to offset certain expenses for public safety. On March 2, 2004, voters approved a bond initiative fonnally known as the "California Economic Recovery Act." This act authorized the issuance of $15 billion in bonds to finance the 2002/03 and 2003/04 State budget deficits, which would be payable from a fund to be established by the redirection of tax revenues through the Triple Flip. Under the "Triple Flip," one-quarter of local governments' one percent share of the sales tax imposed on taxable transactions within their jurisdiction are redirected to the State. In an effort to eliminate the adverse impact of the sales tax revenue redirection on local government, the legislation provides for property ta.xes in the ERAF to be redirected to local government. Because the ERAF moneys were previously earmarked for schools, the legislation provides for schools to receive other state general fund revenues. It is expected that the swap of sales taxes for property taxes would tenninate once the deficit financing bonds were repaid, which is currently expected to occur in approximately 9 to 13 years. See "CERTIFICATE OWNERS' RJSKS - The Lease Payments - 2005/06 State Budget - Triple Flip" herein. Ad Valorem Property Taxes. Taxes are levied for each fiscal year on ta.xable real and personal property which is situated in the City as of the preceding January 1. For assessment and collection purposes. property is classified either as "secured" or "unsecured," and is listed accordingly on separate parts of the assessment roll. The "secured roll" is that part of the assessment roll containing State assessed property and real property having a ta.x lien which is sufficient, in the opinion of the assessor, to secure payment of the taxes. Other property is assessed on the "unsecured roll." 26 / -- / f 7 /L,.. Property taxes on the secured roll are due in two installments, on November I and February 1 of the fiscal year. If unpaid, such taxes become delinquent on December 10 and April 10, respectively, and a 10% penalty attaches to any delinquent payment. In addition, property on the secured roll with respect to which taxes are delinquent is sold to the State on or about June 30 of the fiscal year. Such property may thereafter be redeemed by payment of the delinquent taxes and the delinquency penalty, plus a redemption penalty of IY2% per month to the time of redemption. If taxes are unpaid for a period of five years or more, the property is subject to sale by the County Tax Collector. Property taxes on the unsecured roll become delinquent, if unpaid on August 31. A 10% penalty attaches to delinquent taxes on property on the unsecured roll, and an additional penalty of I WYO per month begins to accrue on November I of the fiscal year. The City has four ways of collecting delinquent unsecured personal property taxes: (1) a civil action against the taxpayer; (2) filing a certificate in the office of the County Clerk specil);Jng certain facts in order to obtain a judgment lien on certain property of the ta.xpayer; (3) filing a certificate of delinquency for record in the County Recorder's Office, in order to obtain a lien on certain property of the taxpayer; and (4) seizure and sale of personal property, improvements or possessory interests belonging or assessed to the assessee. Taxable ProperlY and Assessed Valuation Set forth in Table Nos. 10 and ] 1 below are assessed valuation for secured and unsecured property within the City of Chula Vista and tax levies and collections. TABLE NO. 10 CITY OF CHlILA VISTA GROSS ASSESSED VALliE OF ALL TAXABLE PROPERTY Fiscal Year Secured Unsecured Total 2001/02 2002/03 2003/04 2004/05 2005/06 $ 9.732,749,187 ] ],204,758,]44 12,877,493,259 15,010,238,27] 18,254,397,000 $396,]47,70] 340,623,666 346,627,990 356,016,779 403,067,000 $10,]28,896,888 11,545,381,810 13,224,12] ,249 15,366,255,050 ] 8,657,464,000 Source: City of Chula Vista. TABLE NO. 11 CITY OF CHlILA VISTA GENERAL FlIND PROPERTY TAX LEVIES AND COLLECTIONS Delinquent Fiscal Total Tax Current Tax Percent Tax Total Tax Year Levy Collections Collected Collections Collections 2000/0] $11 ,254,079 $11,073,584 98.40% $165,738 $11,239,322 200]/02 12,806,109 12,602,185 98.41 ] 60,066 12,762,25 ] 2002/03 ]4,293,880 14,066,050 98.41 ]69,521 14,235,57] 2003/04 16,200,005 ]5,959,738 98.52 ]85,237 16,144,975 2004/05 18,652,193 18,324,641 98.24 ] 87,292 ]8,51 ],933 Source: City of Chula Vista. 27 l 0 I 00 f . i 1:/' I Largest Taxpavers The principal taxpayers in the City as of June 30, 2005 are as shown in Table No. 12. TABLE NO. 12 CITY OF CHULA VISTA LARGEST TAXPAYERS ProperlY Owner I. Rohr Inc. 2. Camden USA Inc. 3. Bre Properties 4. KB Home Coastal Inc. 5. Brookfield Shea Otay 6. CV Center Inc. 7. Eagle Lomas Verdes 8. SSR Realty Advisors CaIstrs 9. Duke Energy South Bay LLP 10. Cornerstone Summit at EastIake II. Shea Homes LP 12. Missions at Sunbow 13. Horton DR San Diego Holding Co. 14. Eastlake Company LLC 15. Otay MFI LLC 16. Otay Ranch R7B LLC 17. Lyon Otay Ranch LLC 18. Gateway Chula Vista LLC 19. San Miguel Village 20. Cornerstone GOCI Chula Vista Total Tax Assessed Valuation $ 1.766,594 1,403,863 1,238,213 I, I 02,045 1,019,342 1,012,423 979.219 876.740 766,265 732,178 668,607 645,075 600,018 517,904 46 I ,853 443,]] 9 440,753 378,441 367,100 354.674 $15,734,427 $ ]65,712,468 110,037,078 75.912,505 73,450,098 24,57],819 95,000,000 53,889,142 69,039,237 71.934,269 57,058,104 22,309,729 51.713,205 14,881,178 5,616,765 20,468,507 6,660,522 18,500,902 26,258,961 39,505,810 24.750.000 $1,027.270.299 Source: City of Chula Vista. (1) Percentage of assessed valuation to total assessed valuation. Redevelopment Agencies Total (1) 1.25% 0.83 0.57 0.56 0.19 0.72 0.41 0.52 0.54 0.43 0.17 0.39 0.1] 0.04 0.15 0.05 0.14 0.20 0.30 0.]9 7.77% The California Redevelopment Law authorizes the redevelopment agency of any city or county to receive an a!Iocation of tax revenues resulting from increases in assessed values of properties within designated redevelopment project areas (the "incremental value") occurring after the year the project area is fornled. In effect. local taxing authorities, such as the City, realize tax revenues only on the assessed value of such property at the time the redevelopment project is created for the duration of such redevelopment project. There have been six redevelopment projects formed in the City. The fo!Iowing table sets forth total assessed valuations and redevelopment agency incremental values. 28 lit' ./ TABLE NO. 13 CITY OF CHULA VISTA TOTAL AND NET PROPERTY TAX VALUATIONS Fiscal Year Total Redevelopment Assessed Agency Net Valuation Incremental Value Value $10,128,896,888 $589,344,184 $ 9,539,552,704 11,545,381,810 674,814,888 10,870,566,922 13,224,121,249 637,124,442 12,586,996,807 15,366,255,050 688,121,299 14,678,133,751 18,657,464,000 821,078,172 17,836,385,828 2001/02 2002/03 2003/04 2004/05 2005/06 Source: County of San Diego Auditor-Controller. State Legislative Shift of ProDertv Tax Allocation Beginning in 1992/93, the State has required that local agencies remit a portion of property taxes received to augment schoo] funding. The Genera] Fund's share of this property tax reduction was approximately $1,835,000 for 2004/05. This reduction is expected to continue in future fiscal years. However, certain provisions in the State budget have resulted in a realignment of property tax revenues in future years. See "CERTIFICATE OWNERS' RISKS - The Lease Payments - State Budget" herein and "Local Taxes - Sales and Use Taxes" above. Franchise Taxes. The City levies a franchise tax on its cable television, trash collection and utility franchises. Utility Users Taxes. A utility users tax is levied on gas and electric based on usage and telephone services based on gross receipts. The utility tax was first levied in ] 970 and the last increase in tax rates was in ]979. See "CERTIFICATE OWNERS' RJSKS - The Lease Payments - Proposition 62 and Proposition 2] 8" herein. Business License Taxes. The City levies a business license tax based on number of employees. Transient Occupancy Taxes. The City levies a ] 0% transient occupancy tax on hotel and motels bills. Property Transfer Taxes. A documentary stamp tax is assessed for recordation of real property transfers. Motor Vehicle License Fees A significant revenue source of the City is State of California payments in-lieu of taxes. The City receives a portion of Department of Motor Vehicles license fees ("VLF") collected statewide. Payments of VLF to the City were budgeted to be $18,424,278 or ]2% of the total General Fund Budget for 2005/06. Payment of State assistance depends on the adoption by the State of its budget, including the appropriations therein providing for local assistance. These revenues are shown in the accompanying financial statements as "intergovernmental revenues from other agencies." 29 i-I /"J Several years ago, the state-wide VLF was reduced by approximately two-thirds, However, the State continued to remit to cities and counties the same amount that those local agencies would have received if the VLF had not been reduced, known as the "VLF backfill." On June 19, 2003, the State triggered an increase in VLF to be effective beginning October I, 2003. However, the State Legislature adopted AB 1768 which would defer payment to local agencies of the amount of the VLF backfill that relates to the period from June 20, 2003 to September 30, 2003 when the higher VLF went into effect, until August 2006. This VLF "gap" or "loan" is approximately $825 million statewide. The City's share of the "loan" was $3,500,000. The Governor signed and executive order on November 17, 2003 to reduce the VLF, revising the triggered increase. On December 17, 2003 the Governor issued another executive order, this time appropriating $2.625 billion to provide backfill funding for the city and county VLF funding in 2003/04 which covered the backfill except for the VLF loan. The City's budgeted VLF amount of $18.4 million for Fiscal Year 2005/06 is based on projected amounts at the reduced VLF rates and no assumed State VLF backfill, however, it does include repayment of the VLF loan of approximately $3,500,000. The State's 2005/06 Budget realigns certain property tax revenues so that cities and counties are kept whole with respect to the amount of the VLF backfill in future years. See "CERTIFICATE OWNERS' RJSKS - The Lease Payments - State Budget" herein. Other Revenue Sources Licenses and Permits. These revenues consist primarily of building construction and engineering permits. Fines, Forfeitnres and Penalties. These revenues include parking citations and traffic fines. Use of Money and Property. These revenues consist primarily of investment earnings and rental income received for the City's community buildings. Cbarges for Services. The City charges fees for zoning, plan check and inspection, as well as for various City-sponsored recreational programs and other services. Public Facilities Development Impact Fees The City assesses certain fees on new development. One such fee is the Public Facilities Development Impact Fee, or "PFDlF." These revenues are recorded in a Development Impact Fund. See "APPENDIX B CITY AUDITED FINANCIAL STATEMENTS." The City utilizes the PFDlF to offset the cost of constructing or financing certain public facilities, such as the renovation of the Civic Center complex. The City expects to utilize PFDlF revenues to pay approximately 75.9 of Lease Payments allocable to the PSB Improvements and 88% of Lease Payments allocable to the recently completed City Hall improvement. The other major improvements funded with the PFDIF revenues are the City's public works center financing and the City's police headquarters financing. In addition, the City expects to utilize PFDlF to fund a portion of the cost of financing the final phase of the Civic Center complex renovation. The receipt of the PFDlF is dependent upon building activity in the City. While the City has projected future development based on available information and expects that the PFDIF revenues will be available in sufficient amounts to pay a portion of Lease Payments as well as other obligations described above, there can be no guarantee that building activity will occur as anticipated, and as a result, the City General Fund may be required to pay a greater share of Lease Payments than currently anticipated by the City. 30 I . ~ II I (,. ,/ I ' v' The following table summarizes historical and projected PFDIF Revenues: TABLE NO. 14 CITY OF CHULA VISTA HISTORICAL AND PROJECTED PFDIF REVENUES [to be completed] Personnel Employee salaries and benefits account for over 78% of the City's General Fund expenditures, Table No. 15 sets forth historical employee infonnation for the City as of June 30. TABLE NO. 15 CITY OF CHULA VISTA CITY PERSONNEL Year Number of Emolovees Percent of Increase (Decrease) Over Previous Year Number of Employees per Thousands PODulation 2000 2001 2002 2003 2004 2005 1.211 1,279 1.398 1,403 1,475 1,547 11.8% 5.6% 9.3% 0.4% 5.1% 4.9% 6.95 6.98 7.32 7.02 6.78 7.11 Source: City of Chula Vista. Employee Relations and Collective Bargaining City employees are represented by four labor unions and associations - the Chula Vista Employees' Association (CVEA), the Chula Vista Police Officers' Association, the International Association of Fire Fighters and the Western Council of Engineers. CVEA is the largest association, representing approximately 40% of all City employees. Currently 64% of all City employees covered by negotiated agreements. Current negotiated agreements expire June 30, 20 I O. 31 '-' ... , I Retirement Programs California Public Employee's Retirement System. The City contributes to the California Public Employee's Retirement System (PERS). an agent multiple-employer public employee retirement system that acts as a common investment and. administrative agent for participating public entities within the State of California. All full-time employees are eligible to participate in the PERS. City emp]oyee's contribution rates are 8% (9% for safety employees) of their annual covered salary. The City makes the contributions required of City employees on their behalf and for their account. which amounted to $6,412.264 for the year ended June 30, 2005. The City is required to contribute at an actuarial determined rate of ] 5.975% for the period from July]. 2004 through October 14.2004 and ]6.003% for the period from October ]5,2004 to June 30, 2005 of annual covered payroll for miscellaneous employees and 22.054% of annual covered payroll for safety employees from July 1,2004 to October ]4.2004 and 22.048% for the period from October] 5, 2004 to June 30. 2005. City contribution rates in 2006 are approximately 40.3% for safety employees and 28.7% for miscellaneous employees. The City's share of PERS payments for 2002/03 through 2004/05 are shown in the table below. Fiscal Year End Annual Pension Cost 6/30/03 6/30/04 6/30/05 $ 6,947.159 8,340,066 13.614,272 PERS unfunded actuarial accrued liability (or surplus) for both miscellaneous and safety employees are being amortized as a level percentage of projected payrolls over a closed 20-year period for prior and current service unfunded liability. The current unfunded actuarial accrued liability is approximately $52.8 million. Defined Contribution Pension Plan. The City provides pension plan benefits for all of its part-time employees through a defined contribution pension plan. All part-time employees are eligible to participate from the date of employment. Federal legislation requires contributions of at least 7.5% to a retirement plan, and City Council resolved to match the employees' contributions of 3.75%. The City's contributions for each employee (and interest earned by the accounts) are fully vested immediately. For the year ended June 30. 2004, the City's total payroll and covered payroll was $3.] 04,0 19. The City made employer contributions of $] 16,40 I (3.75% of current covered payroll), and employees contributed $1] 6,40] (3.75% of current covered payroll). Insurance Program The City is self-insured for the first $250,000 per occurrence for its general liability losses including persona] injury, property damage, errors and omissions. automobile liability and employment practices liability. For those losses between $250,000 and $2,000.000 per occurrence the City pools its liabilities through its membership in the San Diego Pooled Insurance Program Authority (SANDPIPA). Insurance for losses in excess of the $2,000,000 up to $34,000,000 is purchased on a group basis by the member cities. SANDPIPA is a joint powers authority comprised of twelve San Diego County cities. The Board of Directors consists of one staff representative (and an alternate) from each of the member cities as designated by the city's governing body. Each member city has equal representation on the Board of Directors. The Board of Directors is liable for all actions of SANDPIPA. 32 1- / /2 I Annual pool premiums and assessments are approved by the Board of Directors and are adjusted annually based on the member city's incurred losses~ the member's share of such losses and other expenses as a proportion of all member's losses; historical contributions to reserves (including reserves for IBNR losses); the cost to purchase excess liability insurance and other coverage and a proportionate share of administrative expenses. The City is self-insured for the first $500,000 per occurrence for workers' compensation liabilities. Excess workers' compensation coverage is obtained through participation in the CSAC Excess Insurance Authority's Excess Workers' Compensation Program. As of June 30, 2005, there are 147 member entities participating in the program that offers per occurrence coverage up to $5,000,000 through pooled resources and from $5,000,000 to $150,000,000 via a group purchased excess insurance policy. Only the probable amounts of loss as estimated by the City's Risk Manager and Attorney, including an estimate of incurred-but-not-reported losses, have been recorded as liabilities in the City's financial statements. As of June 30, 2005, there were no reductions in insurance from the prior year and there were no insurance settlements that exceeded coverage in each of the past three years. The aggregate balance of claims payable as of June 30, 2004 and June 30, 2005 were $8,164,554 and $8,948,014, respectively. Outstanding Indebtedness of the City The City had the following outstanding indebtedness as of June 30, 2005, exclusive of obligations to be paid from specifically pledged revenues, such as revenue bonds, tax allocation bonds and assessment district or special tax bonds. The City has never defaulted in the payment of any of its obligations. Original Amount Final Category of Indebtedness Obligation Outstanding Maturity (I) Pension Obligation Bonds, Series 1994 $16,786,532 $12,991,962 2012 (2) 2000 Certificates of Participation, Series A 25,255,000 21.280,000 2021 (3) 2002 Certificates of Participation Police Facility 60,145,000 60,145,000 2033 (4) 2003 Refunding Certificates of Participation 11,320,000 8,900,000 2014 (5) 2004 Certificates of Participation, Civic Center I 37,240,000 37,240,000 2034 (6) Notes Payable 406,385 291,460 2014 (7) Capital Leases 2,809,405 2,042,487 2014 (8) Compensated Absences 5,094,534 N/A (1) The Pension Obligation Bonds, Series 1994 were issued by the City to pay the obligations from the City to the California Public Employees Retirement System for the City's unfunded pension liability. The bonds are not limited as to payment to any special source offunds of the City. The total issue is comprised of current interest bonds and capital appreciation bonds. Annual debt service is approximately $2.2 million. (2) In October 2000, the Authority issued its 2000 Certificates of Participation, Series A to provide funds to improve the City's 800 Megahertz emergency communications system and improve the City's Corporation Yard. The Certificates are to be repaid from lease payments to be made by the City to the Authority. Annual lease payments are approximately $2.1 million. Currently, 61 % of these lease payments are funded from PFDlF. 33 / ~ I '/ / (3) In June 2002, the Authority issued its 2002 Certificates of Participation to provide funds to construct the City's Police Headquarters. The Certificates are to be repaid from lease payments to be made by the City to the Authority. Annual lease payments are approximately $3.9 million. Currently, 48.2% of these lease payments are funded from PFDIF. (4) In May 2003, the City issued its 2003 Refunding Certificates of Participation to defease its outstanding 1993 Certificates of Participation and reimburse the City for amounts it advanced to prepay an equipment lease. The Certificates are to be repaid from lease payments made by the City to the Authority. Annua] lease payments are approximately $1.6 million. (5) In September 2004, the City issued its 2004 Certificates of Participation to provide funding for the first phase of the reconstruction, renovation, and equipping of the City's Civic Center Complex as well as approximately $9 million in infrastructure improvements throughout the City. The Certificates are to be repaid from lease payments to be made by the City to the Authority. Annual lease payments are approximately $2.4 million and advance lease payments (capitalized interest) has been funded through March I, 2006. When due, approximately $1,540,000 will be funded from PFDIF and an additional $680,000 will be funded from residential construction taxes. (6) ]n January 1994, the City entered into a note payable with a private party in order to purchase certain land and improvements for the ultimate purpose of constructing a three-level parking structure. (7) The City has capitalized a certain lease for its share of the San Diego County Regional Communications System. (8) Represents that portion of compensated absences not expected to be paid during the current year. The City expects to execute and deliver $15,000,000 of Additional Certificates in addition to the 2004 Certificates and the Certificates to complete the renovation of the Civic Center. As with the financing for the first two phases of the project, the City expects to use PFDIF funds to pay approximately 88% of lease payments attributable to the project. 34 ./) Direct and Overlapping Debt Set forth below is a direct and overlapping debt report (the "Debt Report") prepared by Muni Financial as of June 30, 2005. The Debt Report is included for general infortnation purposes only. The City has not independently verified this information and makes no representations as to its accuracy or completeness. The Debt Report generally includes long-term obligations sold in the public credit markets by public agencies whose boundaries overlap the boundaries of the City in whole or in part. Such long-tertn obligations are not payable from City's General Fund nor are they necessarily obligations secured by property within the City. In many cases, long-tertn obligations issued by a public agency are payable only from the general fund or other revenues of such public agency. TABLE NO. 16 CITY OF CHULA VISTA DIRECT AND OVERLAPPING DEBT 2004/05 Assessed Valuation: $15.366,255,050 Redevelopment Incremental Valuation: 699.939.207 Adjusted Assessed Valuation: $14.666.315.843 OVERLAPPING TAX AND ASSESSMENT DEBT: Percentage Outstanding Aoolicable Debt 6/30/05 1.104% $ 4.616,818 99.997% 9.954.701 53.83 1 % 48.409.666 63.722% 53.551,969 85.353% 76.711,009 100.000% 178,410.000 3.978.100% 121.571.181 100.000% 7.945.000 100.000% 49.455.000 $550,625.344 5.808% $ 26,941.954 5.808% 72.730,269 5.808% 744.731 53.831 % 1.442.671 63.722% 11.642.009 85.353% 95.608.163 100.000% 127.565.000 100.000% 12,275.036 61.279% 15.730.319 $364.680.152 15 730,319 $348.949.833 Metropolitan Water District 013y Municipal Water District, LD. No. 27 Southwestern Community College District Sweetv..'ater Union High School District Chula Vista City School District City ofChula Vista Community Facilities Districts Sweet\l..'ater Union High School District Community Facilities Districts Chula Vista City School District Community Facilities Districts City ofChula Vista 1915 Act Bonds TOTAL OVERLAPPING TAX AND ASSESSMENT DEBT DIRECT AND UVERLAPPING GENERAL FUND OBLIGATION DEBT: San Diego County General Fund Obligations San Diego County Pension Obligations San Diego County Superintendent of Schools Obligations Southwestern Community ColJege District Certificates of Participation Sweetwater Union High School District Certificates of Participation Chula Vista City School District Certificates of Participation City ofChula Vista Certificates of Participation City ofChula Vista Pension Obligations Otay Municipal Water District Certificates of Participation TOTAL GROSS DIRECT AND OVERLAPPING GENERAL FUND DEBT Less: Otay Municipal Water District Certificates of Participation TOTAL NET DIRECT AND OVERLAPPING GENERAL FUND DEBT (Continued on next page.) 35 / j/ I (Continued from vrevious vaile.) GROSS COMBINED TOTAL DEBT $915.305.496 (I) $899.575.177 NET COMBINED TOTAL DEBT (1) Excludes ta.x and revenue anticipation notes. enterprise revenue. mortgage revenue and tax a1l0cation bonds and non-bonded capital lease obligations. Ratios to 2004105 Assessed Valuation: Total Overlapping Tax and Assessment Deb!............... ................. ................ ..................3.580/0 Ratios to Adiusted Assessed Valuation: Combined Direct Debt ($139.840.036) .............. ........................................................ .....0.95% Gross Combined Total Debt .............. .................... ........................................................ .6.240/0 Net Combined Total Debt ............... ......................................... .................. ...................6.130/0 Source: Muni Financial Financial Statements The City's accounting policies confonn to generally accepted accounting principles and reporting standards set forth by the State Controller. The audited financial statements also confonn to the principles and standards for public financial reporting established by the National Council of Government Accounting and the Governmental Accounting Standards Board. GASB No. 34. The Governmental Accounting Standards Board (GASB) published its Statement No. 34 "Basic Financial Statements - and Management's Discussion and Analysis - for State and Local Governments" on June 30, 1999. Statement No. 34 provides guidelines to auditors, comptrollers. and financial officers on requirements for financial reporting for all governmental agencies in the United States. Retroactive reporting is required four years after the effective date on the basic provisions for all major general infrastructure assets that were acquired or significantly reconstructed, or that received significant improvements, in fiscal years ending after June 30, 1980. The City was required to implement the provision of GASB 34 for the fiscal year ending June 30, 2002. Basis of Accounting and Financial Statement Presentation. The government-wide financial statements are reported using the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. Governmental fund financial statements are reported using the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures are recorded only when payment is due. The City retained the firm of Caporicci & Larson, Certified Public Accountants, Costa Mesa, California, to examine the general purpose financial statements of the City as of and for the year ended June 30, 2005. The following tables summarize the Balance Sheet and Statement of Revenues, Expenditures and Changes in Fund Balance of the City's General Fund for the last four fiscal years. 36 , ./ /.. TABLE NO. 17 CITY OF CHULA VISTA GENERAL FUND BALANCE SHEET As of June 30 2002 2003 2004 2005 ASSETS Cash and investments $27.341.472 $27.866,446 $19.125.509 $11.357.783 Receivables: Accounts 5.959.672 725281 1.000.307 200.620 Taxes 4.746.955 5.713,547 7.356.217 10.161,465 Interest 480,647 315.828 146.936 107,022 Loans 506.250 293.750 181.250 168,750 Due from other funds 1.400,461 1,676,641 3.035.728 1,736,486 Due from other governments 1,977,046 2,303,240 3,492.030 3,072.073 Advances to component unit 3,911,561 Advances to other funds 20,105,078 22,457.868 23,871.280 26.070.864 Inventories and prepaid items 164.324 17080 17.126 32 642 T ota] assets $66.593.466 $61.369.681 $58.226,383 $52,907,705 LIABILITIES AND FUND BALANCES Liabilities: Accounts payable and accrued liabilities $ 4,481.923 $ 6.035.288 $ 6.740.614 $ 4,900,211 Refundable deposits 14.710 14,710 Unearned revenue 5777.281 5.266457 6.198.198 6.505.316 Total liabilities $10.273.914 $11.316.455 $12,938,812 $11.405.527 Fund Balances: Reserved: Encumbrances $ 3,068,795 $ 3.856.092 $ 2,224,781 $ 2.448.025 Long-term receivables and advances 18.745.607 17,485,160 17,854,331 19,734.298 Prepaid items 164 324 17080 17126 32 642 Total reserved $21,978,726 $21,358.332 $20.096.238 $22,214,965 Unreserved: Designated for: Contingency 2,982,950 2,982,950 Capital projects 2.843,983 1,696.295 Designated 4,523.190 5.196.422 Undesignated: 29817 636 23,498,4 72 19.364.400 14.607968 Total unreserved 34,340,826 28,694.894 25.191.333 19.287.213 Total fund balances $56.319 552 $50053 226 $45.287.571 $41502178 Total1iabilities. fund balances $66 593 466 $61169681 $'R n6 3R3 $52 907 705 Source: Cily ofChula Vista Comprehensive Annual Financial Report. 37 / \ ',. TABLE NO. 18 CITY OF CHULA VISTA GENERAL FUND STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE For the year ended June 30 REVENI'ES: 2002 2003 2004 2005 $ 51.457,7]9 $ 47,805,218 $ 56,434,380 $ 64.045,568 (I) 15,882,300 16,556260 15,603,934 19.560288 3,458,645 4,569294 5,067,768 3,649,710 11,47],285 13,403,746 14,395,804 ]4,482,914 920531 922937 968,513 824,90] 3,595,682 2,741.528 837,064 2,055,387 13.359798 16.023,619 ] 9070.433 2] 440097 PI $100,]45,960 $102.022,602 $112.377,896 $126,058,865 Taxes Intergovernmental Licenses and pennits Charges for services Fines and forfeitures Use of money and property Other Total reyenues EXPENDITl'RES: Current: General government Public safety Public \vorks Parks and recreation $ 24,45],019 $ 27.530,693 $ 30,764,992 $ 34,048,658 39.409,867 44,369,505 51,459,649 60.4 70397 ] 9,379,018 25,645,] 52 29,968,968 3],864,754 7,978,726 4,712,527 4,759282 5303,741 6,900,253 7,630,160 7,513,643 8,929,75] 5,520,797 4,633,345 3,474,411 L249,582 69,645 $103,709,325 $] ]4,52L382 $]27,940,945 $141.866,883 1$ 3,563365) ($ 12.498,780) ($ ] 5,563,049) ($ 15,808,018) $ 15,010,230 $ 13,496,337 $ 13,732,582 $ 15,706,199 II 880,274) 14937,736) 12,935,1881 13683,5741 $ 13,129,956 $ 8,558,601 $ 10,797.394 $ 12,022,625 (2.4861411 (2,486,141 ) $ 9.566,591 1$ 6,426,320) ($ 4,765,655) ($ 3,785,393) $ 46,422,947 $ 56.319,552 $ 50,053,226 $ 45287,57] 330,014 ] 59 994 $ \6119552 $ 50053226 $ 45287571 $ 41 50? 17R Library Capital outlay Debt service: Interest and fiscal charges Total expenditures REVENI:ES OVER (I'NDER) OTHER FINANCING SOVRCES (t:SES): Transfers in Transfers out Total other financing sources EXTR-\ORDlNARY ITEM: Forgiveness of debt Total extraordinary item NET CHANGE IN FlIND BALAi'iCES Flfl'iD BALANCE Beginning of Year Prior year adjustment End of year (]) As restated. Source: City ofChula Vista Comprehensive Annual Financial Report 38 / ) 't' , t.). City Investment Policy General. Pursuant to the City's Investment Policy (the "Investment Policy") the City's Finance Director is responsible for investing the cash balances in all City Funds in accordance with the California Government Code, Sections 53600 et seq. and 53635 et seq. The Investment Policy does not include long term debt reserve funds and deferred compensation funds, which are exceptions covered by other more specific Government Code sections and the legal documents unique to each debt transaction. The Investment Policy provides that investment practices shall conform to California's prudent man rule which states, in essence, that "in investing... property for the benefit of another, a trustee shall exercise the judgment and care, under the circumstances then prevailing, which men of prudence, discretion and intelligence exercise in the management of their own affairs..." Under the Investment Policy, the Finance Director and other individuals assigned to manage the investment portfolio, acting within the intent and scope of the investment policy and other written procedures, and exercising due diligence. shall be relieved of personal responsibility and liability for an individual investment's credit risk or market price changes, provided material deviations from expectations are reported in a timely manner and appropriate action is taken to control any adverse developments. The Investment Policy states that it is the City's full intent, at the time of purchase, to hold all investments until maturity in order to ensure the return of all invested principal. However, it is anticipated that market prices of securities purchased as investments will vary depending on economic conditions, interest rate fluctuations. or individual security credit factors. In a diversified investment portfolio. such temporary variations in market value will inevitably result in measurable losses at any specific point in time. From time to time, changes in economic or market conditions may dictate that it is in the City's best interest to sell a security prior to maturity. The three principal factors of safety, liquidity and yield are to be taken into consideration, in that order, when making investment decisions. Authorized Investment Instruments. The City may invest in the following instruments under the guidelines as provided in the Investment Policy: Certificates of DeDosit. Time Certificates of Deposit will be made only in FDIC or FSLIC insured accounts. For deposits in excess of the insured maximum of $100.000. approved collateral shall be required in accordance with California Government Code section(s) 53652 and/or 53651(m)(l). No more than 25% of the investment portfolio may be invested in this investment type. Securities of the U.S. Government or its Agencies. This category includes obligations issued by Federal Home Loan Banks, Government National Mortgage Association, the Farm Credit System, the Federal Home Loan Bank, the Federal Home Loan Mortgage Association, the Federal National Mortgage Association, the Student Loan Marketing Association, or obligations or other instruments of or issued by a federal agency or a United States Government sponsored enterprise. Treasurv Bills and Notes. U.S. Treasury Bills, Notes, Bonds or Certificates of Indebtedness, or those for which the full faith and credit of the United States are pledged for the payment of principal and interest. Local Agencv Investment Fund ILAIF). Investment of funds in the California LAIF which allows the State Treasurer to invest through the Pooled Money Investment Account. Maximum investment is subject to state regulation. County of San Diego Treasurv Pool. Investment of funds in the County of San Diego Treasury which allows the County Treasurer-Tax Collector to invest local funds through a pooled concept. 39 / -' Bankers Acceotance. Bills of Exchange or time Drafts drawn on and accepted by a commercial bank, otherwise known as Bankers Acceptances, both foreign and domestic, which are eligible for purchase by the Federal Reserve System. Purchases of Bankers Acceptances may not exceed 270 days maturity or total more then 40% of the cost value of the City's investment portfolio. Commercial Paper. Paper of the highest rating as provided by Moody's Investors Service, Inc. (PI), or Standard and Poor's Ratings Service (AI+). Eligible commercial paper is further limited to issuing corporations that are organized and operating within the United States and having total assets in excess of $500,000,000. Purchases of eligible commercial paper may not exceed 180 days maturity, represent more than 10% of the outstanding paper of the issuer, or total more than 15% of the cost value of the City's investment portfolio. Negotiable Certificates of Deoosit. Issued by a nationally or state-chartered bank of a state or federal savings and loan association or by a state-licensed branch of a foreign bank. Purchases of Negotiable Certificates of Deposit may not total more than 30% of the cost value of the City's investment portfolio. Reourchase Agreements. A purchase of securities by the City pursuant to a Master Repurchase Agreement by which the seller will repurchase such securities on or before a specified date, or on demand of either party, and for a specified amount. Investments in repurchase agreements will be used solely as short term investments not to exceed 90 days and be collateralized by securities having a market value of at least 102% of the value of the repurchase agreement at all times during the term of the investment. Medium Term Coroorate Notes. Corporate obligations rated A or better by Moody's and or Standard and Poor's rating agencies. Purchases of corporate medium term notes shall not total more than 30% of the cost value of the City's investment portfolio, nor for anyone corporation, when combined with any commercial paper issued by the same corporation, total more than 15% of the cost value of the City's investment portfolio. Dailv Cash Funds. Various daily cash funds administered for or by Trustees, Paying Agents, or Custodian Banks contracted by the City may be purchased as allowed under California Government Code. Only those funds holding U.S. Treasury or Government Agency obligations shall be purchased. Diversification. Investments shall be diversified among institutions, types of securities and maturities to maximize safety and yield with changing market conditions. Local financial institutions will be given preferential consideration for investment of City funds consistent with the City's objective of attaining market rates of return, and consistent with constraints imposed by its safety objectives, cash flow considerations and State laws. 40 / 'I ~ (t' The par value. market value, adjusted cost basis and percent of total investments for each category of the City's investments, as of December 3]. 2005. are set forth in Table No. 19 below. TABLE NO. 19 CITY OF CHULA VISTA SCHEDULE OF INVESTMENTS (As of December31, 2005) Investment Tvee Cash/Time Deposits Pooled Investment Federal Securities Local Authority Investment Fund Corporate Bonds Par Value (1) Market Value (2) Adjusted Cost Basis (1) % of Total Investments Subtotal Cash/Investments with Fiscal Agent U.S. Government Investment Agreements Mutual Funds Cash with Fiscal Agents Restricted Cash Subtotal Totals (II Par value is the principal amount of the investment at maturity. All market values contained herein are received from sources the City believes are reliable; however, the City does not guarantee their accuracy. Adjusted Cost Basis is the par value of the security plus or minus any premium or discount and accrued interest that was included in the purchase price. Source: City of Chula Vista (2) (J} 41 / (." ? CERTIFICATE OWNERS' RISKS The purchase of the Certificates involves investment risk. If a risk factor materializes to a sufficient degree, it could delay or prevent payment of principal andJor interest represented by the Certificates. Such risk factors include, but are not limited to, the following matters and should be considered, along with other information in this O./Jicial Statement, by potential investors. The Lease Payments City's Lease Payments and Other Payments, The City's Lease Payments and other payments due under the Lease (including the costs of improvement, repair and maintenance of the Leased Premises and taxes, other governmental charges and assessments levied against the Leased Premises) are not secured by any pledge of taxes or other revenues of the City but are payable ITom yearly appropriations of any funds lawfully available to the City. If the City's revenue sources are less than its total obligations, the City could choose to fund other services before making Lease Payments and other payments due under the Lease. The same result could occur if, because of State Constitutional limits on expenditures, the City is not permitted to appropriate and spend all of its available revenues (see "Constitutional Limitation on Taxes and Expenditures" herein). To the extent these types of events or other events adversely affecting the funds available to the City occur in any year, the funds available to make Lease Payments may be decreased. The City has the capacity to enter into other obligations which may constitute additional charges against its revenues. To the extent that additional obligations are incurred by the City, the funds available to the City to make Lease Payments may be decreased. Abatement. The amount of Lease Payments due under the Lease will be adjusted or abated during any period in which by reason of damage or destruction to the Leased Premises or eminent domain proceedings there is substantial interference with the use and possession of the Leased Premises. Notwithstanding the provisions of the Lease and the Trust Agreement specifying the extent of abatement in the event of the City's failure to have use and possession of the Leased Premises, such provisions may be superseded by operation of law, and, in such event, the resulting Lease Payments of the City may not be sufficient to pay all of that portion of the remaining principal and interest represented by the Certificates. Insurance, The Lease obligates the City to obtain and keep in force various forms of insurance, to assure repair or replacement of the Leased Premises in the event of damage or destruction to the Leased Premises (see "APPENDIX A - SUMMARY OF PRINCIPAL LEGAL DOCUMENTS - LEASE AGREEMENT _ Insurance" herein). The City makes no representation as to the ability of any insurer to fulfill its obligations under any insurance policy provided for in the Lease. In addition, certain risks, such as damage from earthquakes, may not be covered by such property insurance (see "SOURCES OF PAYMENT FOR THE CERTIFICATES - Insurance Relating to the Leased Premises" herein). If the Leased Premises is partially or completely damaged or destroyed due to any uninsured or underinsured event, it is likely that Lease Payments will be partially or completely abated. Apart from the Net Proceeds of insurance, the City and the Authority will have no obligation to expend any funds to repair or replace such damaged or destroyed property. If any Leased Premises so damaged or destroyed is not repaired or replaced within the period during which the proceeds of rental interruption insurance or amounts in the Reserve Fund are available, any such abatement could prevent the City from making timely Lease Payments. 42 i I ! x Discovery of a Hazardous Substance That Would Limit the Beneficial Use of the Leased Premises. In general. the owners and lessees of a parcel may be required by law to remedy conditions of the property relating to the releases or threatened releases of hazardous substances. The federal Comprehensive Environmental Response, Compensation and Liability Act of 1980 sometimes referred to as CERCLA or the Superfund Act, is the most well known and widely applicable of these laws but California laws with regard to hazardous substances are also stringent and similar. Under many of these laws, the owner (or lessee) is obligated to remedy a hazardous substance condition of property whether or not the owner (or lessee) had any involvement in creating or handling the hazardous substance. The effect, therefore, should the Leased Premises be affected by a hazardous substance, might be to limit the beneficial use of the Leased Premises upon discovery and during remediation. State Budget The following il1formation concerning the State s budgets for the current and most recent preceding years has been compiled jivm publicZv-available information provided by the State. Neither the City nor the Financial Advisor is responsible for the information relating to the State s budgets provided in this sectioll. Further il1formation is available from the Public Finance Division of the State Treasurer s Office. The Budget Process. The State's fiscal year begins on July I and ends on June 30. The annual budget is proposed by the Governor by January 10 of each year for the next fiscal year (the "Governor's Budget"). Under State law, the annual proposed Governor's Budget cannot provide for projected expenditures in excess of projected revenues and balances available from prior fiscal years. Following the submission of the Governor's Budget, the Legislature takes up the proposal. Under the State Constitution, money may be drawn from the Treasury only through an appropriation made by law. The primary source of the annual expenditure authorizations is the Budget Act as approved by the Legislature and signed by the Governor. The Budget Act must be approved by a two-thirds majority vote of each House of the Legislature. The Governor may reduce or eliminate specific line items in the Budget Act or any other appropriations bill without vetoing the entire bill. Such individual line- item vetoes are subject to override by a two-thirds majority vote of each House of the Legislature. Appropriations also may be included in legislation other than the Budget Act. Bills containing appropriations (except for K-14 education) must be approved by a two-thirds majority vote in each House of the Legislature and be signed by the Governor. Bills containing K-14 education appropriations only require a simple majority vote. Continuing appropriations, available without regard to fiscal year, may also be provided by statute or the State Constitution. Funds necessary to meet an appropriation need not be in the State Treasury at the time such appropriation is enacted; revenues may be appropriated in anticipation of their receipt. Recent State Budgets. Certain information about the State budgeting process and the State Budget is available through several State of California sources. A convenient source of information is the State's website, where recent official statements for State bonds are posted. The references to internet websites shown below are shown for reference and convenience only; the information contained within the websites has not been reviewed by the City and is not incorporated herein by reference. The California State Treasurer's Internet home page at www.treasurer.ca.gov. under the heading "Bond Information," posts various State of California Official Statements, many of which contain a summary of the current State Budget, past State Budgets, and the impact of those budgets on school districts in the State. 43 I I / The California State Treasurer's Internet home page at www.treasurer.ca.gov. under the heading '''Financial Infonnation," posts the State's audited financial statements. In addition, the ""Financial Information" section includes the State's Rule 15c2-12 filings for State bond issues. The "Financial Information" section also includes the "Overview of the State Economy and Government, State Finances, State Indebtedness, Litigation" from the State's most current Official Statement, which discusses the State budget and its impact on school districts. The California Department of Finance's Internet home page at www.dof.ca.gov. under the heading "California Budget," includes the text of proposed and adopted State Budgets. The State Legislative Analyst's Office prepares analyses of the proposed and adopted State budgets. The analyses are accessible on the Legislative Analyst's Internet home page at www.lao.ca.gov under the heading "Products." 2005/06 State Budget Among the measures in the 2005/06 State budget affecting local governments are the following: Vehicle License Fee Backfill. The State has enacted Vehicle License Fee reductions for the current and prior fiscal years, but under the law authorizing these reductions, the State is required to "backfill" local governments for their revenue losses resulting from the lowered rates, and the Vehicle License Fee rate must be increased whenever there are insufficient moneys in the State general fund to pay for the backfill. The 2004/05 and 2005/06 State budgets deleted the requirement for backfill payments and, instead, provided that the amount of the backfill requirement will be met by an increase in the property tax allocation to cities and counties. See "FINANCIAL INFORMATION - Local Ta.xes," Property Tax Shift to the ERAF, The budget included a $1.3 billion shift of local government property taxes to the ERAF, The budget apportioned the $1.3 billion among cities ($350 million), counties ($350 million), special districts ($350 million) and redevelopment agencies ($250 million) and limited the $1.3 billion ERAF transfer to the two fiscal years 2004/05 and 2005/06. The City's share of this additional shift of property taxes is estimated to be $1,835,000 in each of the two years, Deferral of Mandate Reimbursement. The budget defers reimbursement to counties, cities and special districts for State mandates (i.e., State-mandated requirements that local agencies must carry out without regard to the timing of State reimbursement of the costs of those mandates), Other Measures, In addition to the ERAF shift, the budget contained numerous other changes that reduce local government funds or increase local costs, including the elimination of booking fee subventions. Triple Flip. The City anticipates that property tax revenue could be an increasingly significant portion of City revenues, and that sales tax revenues could be an increasingly smaller portion of City revenues, at least over the next few fiscal years, because of legislation, commonly referred to as the "Triple Flip," which was submitted to the voters on March 2, 2004, as part of a bond initiative formally known as the "California Economic Recovery Act." This act authorized the issuance of $ I 5 billion in bonds to finance the 2002/03 and 2003/04 State budget deficits, which are payable from a fund established by the redirection of tax revenues through the Triple Flip, Currently, $11.3 billion of the $15 billion authorization has been sold, with the remaining authorization being held in reserve to assist in defraying any future State budget deficits. Under the "Triple Flip" one-quarter of local governments' one percent share of the sales ta.x imposed on taxable transactions within their jurisdiction is redirected to the State. In an effort to eliminate the adverse impact of the sales tax revenue redirection on local government, the legislation provides for property taxes in the ERAF to be redirected to local government. Because the ERAF moneys were previously earmarked for schools, the legislation provides for schools to receive other state general fund revenues. It 44 ! ) / V is expected that the swap of sales taxes for property taxes would terminate once the deficit financing bonds were repaid. The "Triple Flip" legislation was approved by voters at the election on March 2, 2004 and the bonds were sold in May 2004. The City cannot predict what actions will be taken in future years by the State Legislature and the Governor to address the State's current or future budget deficits. Future State budgets will be affected by national and state economic conditions and other factors over which the City has no control. To the extent that the State budget process results in reduced revenues to the City, the City will be required to make adjustments to its budget. Decrease in such revenues may have an adverse impact on the City's ability to pay Lease Payments. Constitutional Limitation on Taxes and Expenditures State Initiative Measures Generally, Under the California Constitution, the power of initiative is reserved to the voters for the purpose of enacting statutes and constitutional amendments. Over the past 18 years, the voters have exercised this power through the adoption of Proposition 13 ('"Article XlllA") and similar measures, the most recent of which was approved as Proposition 218 in the general election held on November 5, 1996. Any such initiative may affect the collection of fees, taxes and other types of revenue by local agencies such as the City. Subject to overriding federal constitutional principles, such collection may be materially and adversely affected by voter-approved initiatives, possibly to the extent of creating cash-flow problems in the payment of outstanding obligations such as the Lease Agreement. Article XIIIA. Article XlllA of the California Constitution limits the taxing powers of California public agencies. Article XlllA provides that the maximum ad valorem tax on real property cannot exceed one percent of the "full cash value" of the property, and effectively prohibits the levying of any other ad valorem property tax except for taxes above that level required to pay debt service on voter-approved general obligation bonds. "Full cash value" is defined as "the County assessor's valuation of real property as shown on the 1975/76 tax bill under "full cash value' or, thereafter, the appraised value of real property when purchased, newly constructed, or a change in ownership has occurred after the 1975 assessment." The "full cash value" is subject to annual adjustment to reflect inflation at a rate not to exceed two percent or a reduction in the consumer price index or comparable local data. Article XlllA has subsequently been amended to permit reduction of the 'full cash value' base in the event of declining property values caused by substantial damage, destruction or other factors, and to provide that there would be no increase in the 'full cash value' base in the event of reconstruction of property damaged or destroyed in a disaster and in other special circumstances. The foregoing limitation does not apply to ad valorem taxes or special assessments to pay the interest and redemption charges on any indebtedness approved by the voters before July 1, 1978 or any bonded indebtedness for the acquisition or improvement of real property approved by two-thirds of votes cast by the voters voting on the proposition. In the general election held November 4, 1986, voters of the State of California approved two measures, Propositions 58 and 60, which further amend the terms "purchase" and "change of ownership", for purposes of determining full cash value of property under Article XlllA, to not include the purchase or transfer of (1) real property between spouses and (2) the principal residence and the first $1,000,000 of other property between parents and children. Proposition 60 amends Article XlllA to permit the Legislature to allow persons over age 55 who sell their residence and buy or build another of equal or lesser value within two years in the same city, to transfer the old residence's assessed value to the new residence. In the March 26, 1996 general election, voters approved Proposition 193, which extends the parents-children exception to the reappraisal of assessed value. Proposition 193 amended Article XlllA so that grandparents may transfer to their grandchildren whose parents are deceased, their principal residences, and the first $1 ,000,000 of other property without a re-appraisal of assessed value. 45 I " II Article XIIIB. On October 6, 1979, California voters approved Proposition 4, or the Gann Initiative, which added Article XlllB to the California Constitution. The principal thrust of Article XlllB is to limit the annual appropriations of the State and any city, county, city and county, school district, authority or other political subdivision of the State. The "base year" for establishing such appropriations limit is the 1978/79 fiscal year, and the limit is to be adjusted annually to reflect changes in population, consumer prices and certain increases in the cost of services provided by public agencies. Proposition 62 and Proposition 218, Under the California Constitution, the power of initiative is reserved to the voters for the purpose of enacting statutes and constitutional amendments. Over the past 18 years, the voters have exercised this power through the adoption of Proposition 13 ("Article XIIIA ") and similar measures, the most recent of which was approved as Proposition 218 in the general election held on November 5, 1996. Proposition 62, also discussed below, was adopted in the November 1986 general election. Any such initiative may affect the collection of fees, taxes and other types of revenue by local agencies such as the City. Subject to overriding federal constitutional principles, such collection may be materially and adversely affected by voter-approved initiatives, possibly to the extent of creating cash flow problems in the payment of outstanding obligations such as the Lease Payments. Proposition 62 was a statutory initiative adding Sections 53720 to 53730, inclusive, to the California Government Code. It confirmed the distinction between a general tax and special tax, established by the State Supreme Court in 1982 in City and County of San Francisco v. Farrell, by defining a general tax as one imposed for general governmental purposes and a special tax as one imposed for specific purposes, Proposition 62 further provided that no local government or district may impose (i) a general tax without prior approval of the electorate by majority vote or (ii) a special tax without such prior approval by two- thirds vote. It further provided that if any such tax is imposed without such prior written approval, the amount thereof must be withheld from the levying entity's allocation of annual property taxes for each year that the tax is collected. By its terms, Proposition 62 applies only to general and special taxes imposed on or after August I, 1985. Proposition 62 was generally upheld in Santa Clara County Local Transportation Authority v. Guardino, a California Supreme Court decision filed September 28, 1995. The City levies a utility tax, which was first levied in 1970 and increased the tax (prior to the adoption of Proposition 62) in 1979, without voter approval. The total utility tax revenues are estimated at $7,435,000 for the 2005/06 fiscal year, which is approximately 4.7% of the City's total General Fund Budget. On November <; 1996, California voters approved Proposition 218 - Voter Approval for Local Government Ta.xes - Limitation on Fees, Assessments, and Charges - Initiative Constitutional Amendment. Proposition 218 added Articles XIIIC and XIIID to the California Constitution, imposing certain vote requirements and other limitations on the imposition of new or increased taxes. assessments and property-related fees and charges, Proposition 218 states that all taxes imposed by local governments shall be deemed to be either general taxes or special ta.xes. Special purpose districts, including school districts, have no power to levy general taxes. No local government may impose, extend or increase any general ta.x unless and until such tax is submitted to the electorate and approved by a majority vote, No local government may impose, extend or increase any special tax unless and until such tax is submitted to the electorate and approved by a two-thirds vote. Proposition 218 also provides that no tax, assessment, fee or charge shall be assessed by any agency upon any parcel of property or upon any person as an incident of property ownership except: (i) the ad valorem property tax imposed pursuant to Article XIII and Article XIIIA of the California Constitution, (il) any special tax receiving a two-thirds vote pursuant to the California Constitution, and (iii) assessments, fees, and charges for property related services as provided in Proposition 218, Proposition 218 then goes on to add voter requirements for assessments and fees and charges imposed as an incident of property ownership, other than fees and charges for sewer, water, and refuse collection services. In addition, all 46 / ! / _ L assessments and fees and charges imposed as an incident of property ownership, including sewer, water, and refuse col1ection services. are subjected to various additional procedures, such as hearings and stricter and more individualized benefit requirements and findings. The effect of such new provisions will presumably be to increase the difficulty a local agency will have in imposing, increasing or extending such assessments. fees and charges. Proposition 218 also extended the initiative power to reducing or repealing any local ta.xes, assessments, fees and charges. This extension of the initiative power is not limited to taxes imposed on or after November 6, 1996, the effective date of Proposition 218, and could result in retroactive repeal or reduction in any existing taxes, assessments, fees and charges, subject to overriding federal constitutional principles relating to the impairments of contracts. Proposition 218 provides that, effective July 1, 1997, fees that are charged "as an incident of property ownership" may not "exceed the funds required to provide the property related services" and may only be charged for services that are "immediately available to the owner of the property." The foregoing discussion of Proposition 62 and Proposition 218 should not be considered an exhaustive or authoritative treatment of the issues. The City does not expect to be in a position to control the consideration or disposition of these issues and cannot predict the timing or outcome of any judicial or legislative activity in this regard. Interim rulings, final decisions, legislative proposals and legislative enactments may all affect the impact of Proposition 218 on the Lease Payments as well as the market for the Certificates. Legislative and court calendar delays and other factors may prolong any uncertainty regarding the effects of Proposition 218. Like its antecedents, Proposition 218 is likely to undergo both judicial and legislative scrutiny before its impact on the City and its obligations can be determined. Certain provisions of Proposition 218 may be examined by the courts for their constitutionality under both State and federal constitutional law. The City is not able to predict the outcome of any such examination. Future Initiatives. Articles XlllA, XII1B, XlllC and XlllD were adopted as measures that qualified for the ballot pursuant to California's Constitutional initiative process. From time to time other initiative measures could be adopted, affecting the ability of the City to increase revenues and to increase appropriations. Limited Recourse on Default If an event of default occurs and is continuing under the Lease, there is no remedy of acceleration of any Lease Payments which have not come due and payable in accordance with the Lease. The City will continue to be liable for Lease Payments as they become due and payable in accordance with the Lease if the Trustee does not tenninate the Lease, and the Trustee would be required to seek a separate judgment each year for that year's defaulted Lease Payments. Any such suit for money damages would be subject to limitations on legal remedies against counties in California, including a limitation on enforcement of judgments against funds or property needed to serve the public welfare and interest. In addition, the enforcement of any remedies provided in the Lease and the Trust Agreement could prove both expensive and time-consuming. The Lease permits the Trustee to take possession of and re-lease the Leased Premises in the event of a default by the City under the Lease. However, due to the fact that the Leased Premises serves essential governmental purposes, it is unlikely that a court would permit such remedy to be exercised. Even if such remedy may be exercised, due to the specialized nature of the Leased Premises it is unlikely that the Trustee could readily re-lease it for rents which are sufficient to enable it to pay principal and interest represented by the Certificates in full when due. In the event of a default, there is no remedy of acceleration of the total Lease Payments due over the term ofthe Lease. 47 / ) /:" Release or Substitution of Property The City has the right from time to time, with the consent of the Insurer, to add other real property and improvements (subject only to Permitted Encumbrances) or to substitute other real property or improvements (subject only to Permitted Encumbrances) for all or a portion of the Leased Premises or to release a portion of the real property or improvements constituting the Leased Premises, subject to the conditions precedent to such addition, substitution or release as set forth in the Lease. No addition, substitution or release under the Lease will be, by itself. the basis for any reduction in or abatement of the Lease Payments due from the City thereunder. A release could, however. result in a reduction in the fair rental value of the Leased Premises which would result in less security for the Owners should it be necessary to relet the Leased Premises to cure a default in Lease Payments. See "APPENDIX A _ SUMMARY OF PRINCIPAL LEGAL DOCUMENTS - COVENANTS WITH RESPECT TO THE PROPERTY - Substitution or Release of the Leased Premises" herein. Loss of Tax Exemption As discussed under the caption "LEGAL MATTERS - Tax Exemption" herein. the portion of the Lease Payments designated as and comprising interest and received by the Owners of the Certificates could become includable in gross income for purposes of federal income taxation retroactive to the date the Certificates were executed and delivered as a result of future acts or omissions of the City or the Authority in violation of their covenants contained in the Trust Agreement and the Lease. Should such an event of taxability occur, the Certificates are not subject to special prepayment or any increase in interest rate and will remain outstanding until maturity or until prepaid under one of the prepayment provisions contained in the Trust Agreement. Secondary Market There can be no guarantee that there will be a secondary market for the Certificates or, if a secondary market exists, that such Certificates can be sold for any particular price. Occasionally, because of general market conditions or because of adverse history or economic prospects connected with a particular issue, secondary marketing practices in connection with a particular issue 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. 48 r ,j/'I LEGAL MATTERS Enforceability of Remedies The remedies available to the Trustee and the Owners of the Certificates upon an event of default under the Trust Agreement, the Lease, the Site Lease, the Assignment Agreement or any other document described herein are in many respects dependent upon regulatory and judicia] actions which are often subject to discretion and delay. Under existing law and judicial decisions, the remedies provided for under such documents may not be readily avai]able or may be limited. The various legal opinions to be delivered concurrently with the delivery of the Certificates will be qualified to the extent that the enforceability of certain legal rights related to the Trust Agreement, the Lease, the Site Lease, the Assignment Agreement and other pertinent documents is subject to limitations imposed by bankruptcy, reorganization, insolvency or other similar laws affecting the rights of creditors generally and by equitable remedies and proceedings generally. Approval of Legal Proceedings Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California, as Special Counsel, will render an opinion which states that the Lease represents a valid and binding obligation of the City and is enforceable against the City in accordance with its terms. The legal opinion of Special Counsel will be subject to the effect of bankruptcy, insolvency, moratorium and other similar laws affecting creditors' rights and to the exercise of judicial discretion in accordance with genera] principles of equity. See "APPENDIX 0" hereto for the proposed form of Special Counsel's opinion. The City has no knowledge of any fact or other information which would indicate that the Trust Agreement. the Lease or the Certificates are not so enforceable against the City. except to the extent such enforcement is limited by principles of equity and by state and federal laws relating to bankruptcy, reorganization, moratorium or creditors' rights generally. Certain legal matters will be passed on by Stradling Yocca Carlson & Rauth, a Professional Corporation. Newport Beach, California, as Disc]osure Counsel and for the City by the City Attorney. Fees payable to Special Counsel and Disclosure Counsel are contingent upon the sale and delivery of the Certificates. Tax Exemption In the opinion of Stradling Yocca Carlson & Rauth, a Professional Corporation. Newport Beach, California, Special Counsel, under existing statutes, regulations, rulings and judicial decisions, interest due with respect to the Certificates 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. ]n the further opinion of Special Counsel. interest due with respect to the Certificates is exempt from State of California personal income tax. Special Counsel notes that, with respect to corporations, interest due with respect to the Certificates may be included as an adjustment in the calculation of altemative minimum taxable income which may affect the altemative minimum tax liability of such corporations. The difference between the issue price of a Certificate (the first price at which a substantial amount of the Certificates of the same series and maturity is to be sold to the public) and the stated redemption price at maturity with respect to such Certificate constitutes original issue discount. Original issue discount accrues under a constant yield method, and original issue discount will accrue to the owner of the Certificate before receipt of cash attributable to such excludable income. The amount of original issue discount deemed received by the owner of a Certificate will increase the owner's basis in the Certificate. ]n the opinion of Special Counsel original issue discount that accrues to the owner of a Certificate is excluded from the gross income of such owner for federal income tax purposes, is not an item of ta.x 49 /:..~/ preference for purposes of the federal alternative minimum ta.x imposed on individuals and corporations, and is exempt from State of California personal income tax. Special Counsel's opinion as to the exclusion from gross income of constituting interest (and original issue discount) due with respect to the Certificates is based upon certain representations of fact and certifications made by the City and others and is subject to the condition that the City and the Authority comply with all requirements of the Internal Revenue Code of 1986, as amended (the "Code"), that must be satisfied subsequent to the execution and delivery of the Certificates to assure that the portion of each Lease Payment constituting interest (and original issue discount) 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) due with respect to the Certificates to be included in gross income for federal income tax purposes retroactive to the date of execution and delivery of the Certificates. The City and the Authority have covenanted to comply with all such requirements applicable to each, respectively. The amount by which a Certificate Owner's original basis for determining loss on sale or exchange in the applicable Certificate (generally, the purchase price) exceeds the amount payable on maturity (or on an earlier call date) constitutes amortizable Certificate premium, which must be amortized under Section 171 of the Code; such amortizable Certificate premium reduces the Certificate Owner's basis in the applicable Certificate (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 Certificate premium may result in a Certificate Owner realizing a taxable gain when a Certificate is sold by the Owner for an amount equal to or less (under certain circumstances) than the original cost of the Certificate to the Owner. Purchasers of the Certificates should consult their own tax advisors as to the treatment, computation and collateral consequences of amortizable Certificate premium. Special Counsel's opinions may be affected by actions taken (or not taken) or events occurring (or not occurring) after the date hereof. Special Counsel has not undertaken to determine, or to inform any person, whether any such actions or events are taken or do occur. The Trust Agreement, the Lease, and the Tax Certificate permit certain actions to be taken or to be omitted if a favorable opinion of Special Counsel is provided with respect thereto. Special Counsel expresses no opinion as to the exclusion from gross income for federal income tax purposes of interest (and original issue discount) due with respect to any Certificate if any such action is taken or omitted based upon the advice of counsel other than Stradling Yocca Carlson & Rauth, a Professional Corporation. 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 Certificates will be selected for audit by the IRS. It is also possible that the market value of the Certificates might be affected as a result of such an audit of the Certificates (or by an audit of similar securities). Although Special Counsel has rendered an opinion that the interest (and original issue discount) due with respect to the Certificates is excluded from gross income for federal income tax purposes provided that the City and the Authority continue to comply with certain requirements of the Code, the ownership of the Certificates and the accrual or receipt of interest (and original issue discount) with respect to the Certificates may otherwise affect the ta.x liability of certain persons. Special Counsel expresses no opinion regarding any such ta.x consequences. Accordingly, before purchasing any of the Certificates, all potential purchasers should consult their tax advisors with respect to collateral tax consequences with respect to the Certificates. The form of Special Counsel's Opinion with respect to the Certificates is attached hereto as "APPENDIX D:' 50 I. ~'/,0 Absence of Litigation The City will furnish a certificate dated as of the date of delivery of the Certificates that there is not now known to be pending or threatened any litigation restraining or enjoining the execution or delivery of the Trust Agreement, the Lease or the sale or delivery of the Certificates or in any manner questioning the proceedings and authority under which the Trust Agreement and the Site Lease and the Lease are to be executed or delivered or the Certificates are to be delivered or affecting the validity thereof. CONCLUDING INFORMATION Ratings on the Certificates Moody's and Standard and Poor's have assigned their ratings of "_" and "_," respectively, to the Certificates with the understanding that a municipal bond insurance policy insuring payment when due of the principal of and interest on the Certificates will be issued on the closing date by . In addition. Standard & Poor's has assigned their municipal bond rating of " " to the Certificates, notwithstanding the delivery of the municipal bond insurance policy. Such ratings reflect only the views of the rating agencies and any desired explanation of the significance of such rating should be obtained from the rating agencies. Generally, a rating agency bases its rating on the information and materials furnished to it and on investigations, studies and assumptions of its own. There is no assurance such rating will continue for any given period of time or that such rating will not be revised downward or withdrawn entirely by the rating agency, if in the judgment of such rating agency, circumstances so warrant. Any such downward revision or withdrawal of such rating may have an adverse effect on the market price of the Certificates. Underwriting The Certificates were sold to (the "Underwriter") at competitive sale. The Underwriter is offering the Certificates at the prices set forth on the inside front cover page hereof. The initial offering prices may be changed from time to time and concessions from the offering prices may be allowed to dealers, banks and others. The Underwriter has purchased the Certificates at a price equal to $ , which amount represents the principal amount of the Certificates, plus an original issue premium of $ , and less an Underwriter's discount of $ . The Underwriter will pay certain of its expenses relating to the offering. The Financial Advisor The material contained in this Official Statement was prepared by the City with the assistance of the Financial Advisor who advised the City as to the financial structure and certain other financial matters relating to the Certificates. The information set forth herein has been obtained by the City from sources which are believed to be reliable, but such information is not guaranteed by the Financial Advisor as to accuracy or completeness, nor has it been independently verified. Fees paid to the Financial Advisor are contingent upon the sale and delivery of the Certificates. Continuing Disclosure The City will covenant to provide annually certain financial information and operating data by not later than March 1 each year commencing March I, 2007 and to provide the audited General Purpose Financial Statements of the City for the fiscal year ending June 30, 2006 and for each subsequent fiscal year when they are available (together, the "Annual Report"), and to provide notices of the occurrence of certain other enumerated events if deemed by the City to be material. The Annual Report will be filed by the Trustee on behalf of the City with each Nationally Recognized Municipal Securities Information Repository certified by the Securities and Exchange Commission (the "Repositories") and a State 51 /- )/7 repository, if any, and may also be obtained from the Trustee. The notices of material events will be timely filed by the City with the Municipal Securities Rulemaking Board and the State repository, if any. The specific nature of the information to be contained in the Annua] Report or the notices of material events and certain other terms of the continuing disclosure obligation are set forth in "APPENDIX C _ FORM OF CONTINUING DISCLOSURE AGREEMENT." These covenants have been made in order to assist the underwriters in complying with Securities and Exchange Commission Rule 15c2-12(b)(5). Other than as described in the next paragraph, the City has never failed to comply in all material respects with any previous undertakings with regard to said Rule to provide annual reports or notices of material events. The City had delivered to U.S. Bank National Association in February 2004 its continuing disclosure filings for fiscal year ending June 30, 2003 required under Rule ]5c2-I2 in connection with its Certificates of Participation, Series A of 2000 (2000 Financing Project), its 2002 Certificates of Participation (Police Faci]ity Project), and its 2003 Refunding Certificates of Participation (Town Centre II Parking Project) with the intention that U.S. Bank National Association would disseminate the City's continuing disclosure filings for fiscal year ending June 30, 2003 on or before March 1, 2004. On May ]9,2004, U.S. Bank National Association had disseminated all of the City's continuing disclosure filings for fiscal year ending June 30, 2003, and the City is now current on all filings required pursuant to its previous continuing disclosure undertakings. Additional Information The summaries and references contained herein with respect to the Trust Agreement, the Site Lease, the Lease, the Assignment Agreement, the Certificates, statutes and other documents, do not purport to be comprehensive or definitive and are qualified by reference to each such document or statute and references to the Certificates are qualified in their entirety by reference to the form hereof included in the Trust Agreement. Copies of the Trust Agreement, the Site Lease and the Lease are available for inspection during the period of initial offering on the Certificates at the offices of the Financial Advisor. Copies of these documents may be obtained after delivery of the Certificates from the City at 276 Fourth Avenue, Chu]a Vista, California 91910, References Any statements in this Official Statement involving matters of opinion, whether or not expressly so stated, are intended as such and not as representations of fact. This Official Statement is not to be construed as a contract or agreement between the City and the purchasers or Owners of any of the Certificates. Execution The execution of this Official Statement by the Finance Director has been duly authorized by the City of Chula Vista, CITY OF CHULA VISTA By: Finance Director 52 / _.J I APPENDIX A SUMMARY OF PRINCIPAL LEGAL DOCUMENTS [to be provided by Special Counsel] A-I /-)/(/ APPENDIX B CITY AUDITED FINANCIAL STATEMENTS B-1 ! " , "" ( ). (.) I...,j APPENDIX C FORM OF CONTINUING DISCLOSURE AGREEMENT [to be provided by Disclosure Counsel] C-I j' ) I , APPENDIX D FORM OF SPECIAL COUNSEL OPINION [to be provided by Special Counsel] D-1 / ")) ,1. -' ,.' (,.., (../ APPENDIX E SPECIMEN MUNICIPAL BOND INSURANCE POLICY [to be provided by Bond Insurer] E-I . ../ /.. ) r) ..-' APPENDIX F BOOK-ENTRY ONLY SYSTEM The informatiun in this section concerning DTC and DTC's book-entry system has been obtained frum sources that the City helieves to be reliable, but the City takes no responsibility for the accuracy or completeness thereof The City cannot and does not give any assurances that DTC DTC Participants or Indirect Participants will distribute to the Beneficial Owners (a) payments of interest. principal or premium, if any, with respect to the Certificates, (b) Certificates representing ownership interest in or other c01?firmation or o1''I'nership interest in the Certificates, or (c) prepayment or other notices sent fa DTC or Cede & Co.. its nominee. as the registered owner of the Certificates. or that they will so do on a time(v basis or that DTC. DTC Participants or DTC Indirect Participants will act in the manner described in this Official Statement. The current "Rules" applicable to DTC are on file with the Securities and Exchange Commission and the current "Procedure" of DTC to befollowed in dealing with DTC Participants are onfile with DTC. The Depository Trust Company (hDTC,") New York, NY, will act as secuntles depository for the Certificates. The Certificates 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 Certificate will be issued for each maturity of the Certificates, each in the aggregate principal amount of such maturity, and will be deposited with DTC. DTC, the world's largest 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 hclearing corporation" within the meaning of the New York Uniform Commercial Code, and a hclearing agency" registered pursuant to the provisions of Section 17 A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 2,2 million issues of U.S, and non-U,S. equity, corporate and municipal debt issues, and money market instruments from over 100 countries that DTC's participants (hDirect 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 wholly-owned subsidiary of The Depository Trust & Clearing Corporation (hDTCC"). DTCC, in turn, is owned by a number of Direct Participants of DTC and Members of the National Securities Clearing Corporation, Fixed Income Clearing Corporation and Emerging Markets Clearing Corporation (NSCC, FICC, and EMCC, also subsidiaries of DTCC), as well as by the New York Stock Exchange, Inc., the American Stock Exchange LLC, and the National Association of Securities Dealers, Inc. 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 (hlndirect Participants"), DTC has Standard & Poor's highest rating: AAA. 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 and www.dtc.org, Purchases of Certificates under the DTC system must be made by or through Direct Participants, which will receive a credit for the Certificates on DTC's records. The ownership interest of each actual purchaser of each Certificate (hBeneficial 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 Certificates are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners, Beneficial Owners will not receive certificates representing their F-I ; .)1 ownership interests in Certificates, except in the event that use of the book-entry system for the Certificates is discontinued. To facilitate subsequent transfers, all Certificates deposited by Direct Participants with DTC are registered in the name of DTe's partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTe. The deposit of Certificates 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 Certificates; DTe's records reflect only the identity of the Direct Participants to whose accounts such Certificates are credited, which mayor 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. 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. Prepayment notices shall be sent to DTe. If less than all of the Certificates within an issue are being prepaid, DTe's practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be prepaid. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Certificates unless authorized by a Direct Participant in accordance with DTC's Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the City (or the Trustee on behalf thereof) 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 Certificates are credited on the record date (identified in a listing attached to the Omnibus Proxy). Principal, prepayment price, and interest payments with respect to the Certificates will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTe. DTe's practice is to credit Direct Participants' accounts upon DTe's receipt of funds and corresponding detail information from the City or Trustee, on the payable date in accordance with their respective holdings shown on DTe'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 nor its nominee, Trustee, or the City, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal, prepayment price, and interest payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of OTC) is the responsibility of the City or Trustee, disbursement of such payments to Direct Participants will be the responsibility of OTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. A Beneficial Owner shall give notice to elect to have its Certificates purchased or tendered, through its Participant, to the Trustee, and shall effect delivery of such Certificates by causing the Direct Participant to transfer the Participant's interest in the Certificates, on DTe's records, to the Trustee. The requirement for physical delivery of Certificates in connection with an optional tender or a mandatory purchase will be deemed satisfied when the ownership rights in the Certificates are transferred by Direct Participants on OTe's records and followed by a book-entry credit of tendered Certificates to the Trustee's OTC account. F-2 c.--- /--.J)2> DTC may discontinue providing its services as depository with respect to the Certificates at any time by giving reasonable notice to the City or Trustee. Under such circumstances. iF! the event that a successor depository is not obtained, 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, Certificates will be printed and delivered to DTC. The information in this section concerning DTC and DTCs book-entry system has been obtained from sources that the City believes to be reliable, but the City takes no responsibility for the accuracy thereof. F-3 r ) .j \c:} c..."". ATTACHMENT 9 OFFICIAL NOTICE OF SALE $20,100,000. CITY OF CHULA VISTA 2006 CERTIFICATES OF PARTICIPATION (CIVIC CENTER PROJECT - PHASE 2) NOTICE Is HEREBY GIVEN that electronic bids for the purchase of $20,100,000* aggregate principal amount of the City ofChula Vista 2006 Certificates of Participation (Civic Center Project - Phase 2) (the "Certificates" herein) will be received by a representative of the City of Chula Vista. California (herein the "City") in the manner and up to the time specified below. All bids must be submitted electronically via PARlTY@on Wednesday, March 1,2006, up until 9:30 a.m. (Pacific Standard Time) (see "'BIDDING DETAILS" herein). No bid will be received after such time. To the extent any instructions or directions set forth in P ARITY@ conflict with this Official Notice of Sale, the tenns of this Official Notice of Sale shall control. For further information about PARlTY@,potential bidders may contact i-Deal at, 1359 Broadway, 2nd Floor, New York, NY 100]8, telephone (212) 849-5021. No bid check is required. Neither the City, the financial Advisor nor Special Counsel (defined below) is responsible for, and each bidder expressly assumes risk of, any incomplete, inaccurate or untimely bid submitted by Internet transmission by such bidder. including, without limitation, by reason of garbled transmissions, mechanical failure, engaged teIephone or telecommunications lines, or any other cause arising from delivery by Internet transmission. Any change in the terms of the sale or the date and time for the receipt of bids will be communicated through TM3. Failure by the City to announce any such change on any particular information or news service, or the failure of any such information or news service to publish such change, does not affect the validity of such change and therefore bidders are responsible for and should check all sources. OFFICIAL STATEMENT: The City has caused a preliminary official statement to be prepared relating to the Certificates (the "Preliminary Official Statement"), copies of which may be obtained at the office of the City's Financial Advisor, Harrell & Company Advisors, LLC, 333 City Boulevard West, Suite ]430, Orange, California 92868. telephone (7]4) 939-]464. The Preliminary Official Statement may also be viewed on the i-Deal Prospectus website at ..www.i-DeaIProspectus.com... The Preliminary Official Statement is in a form deemed final by the City for the purposes of SEC Rule 15c2-l2(b)(]), but is subject to revision, amendment and completion in a final official statement (the "Official Statement"). The City will furnish the successful bidder with a reasonable number of copies ofthe final Official Statement within seven (7) business days of award of the Certificates, without charge. AME:'oIDMENT AND MODIFICATION: The City reserves the right to amend this Official Notice of Sale at least 24 hours prior to the bid submittal time for the Certificates on Wednesday, March ],2006, and communicating such amendment through TM3. POSTPO:'olEMENT: The City reserves the right to postpone, from time to time, the date established for the receipt of bids. Any such postponement will be communicated through TM3 prior to any announced date for receipt of bids. I f any date fixed for the receipt of bids and the sale of the Certificates is postponed, any alternative sale date will be announced via TM3 at least 20 hours prior to such alternative sale date. On any such alternative sale date, any bidder may submit a bid for the purchase of the Certificates in conformity in all respects with the provisions of this Official Notice of Sale except for the date of sale and except for the changes announced via TM3. * Subject to change, see "MATURITIES" herein. !.-c) ) 7 BOOK-ENTRY ONLY: The Certificates will be issued in book-entry fonn only, initially registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York ("DTC"). Individual purchases will be made in the maturities described hereinafter under the caption "THE CERTIFICATES." Payments of principal and interest to DTC will be made by The Bank of New York Trust Company, N.A., Los Angeles, California (the "Trustee") and disbursement of such payments to the beneficial owners is the responsibility of DTC's direct participants or indirect participants. As of the date of award of the Certificates. the successful bidder must either participate in DTC or must clear through or maintain a custodial relationship with an entity that participates in DTe. The fees and charges of DTC shall be borne by the successful bidder. THE CERTIFICATES DATE; DENOMINATIO]\': The Certificates are to be delivered on or about March 15, 2006 (the "Date of Delivery"), in fully registered fonm in denominations of $5,000 or any integral multiple thereof, all dated as of the Date of Delivery, in the aggregate principal amount of $20,100,000*, designated "City of Chula Vista 2006 Certificates of Participation (Civic Center Project - Phase 2)" and comprising all of the authorized Certificates. Bidders are referred to the Preliminary Official Statement for particulars related to the Certificates. MATURITIES: The final aggregate principal amount of the Certificates and the maturity schedule will be detennined following award to the winning bidder. For the purpose of calculating the winning bid for the Certificates, the following maturity schedule shall be used. Each bidder may specify in its bid whetber, for any particular year, the Certificates will be Term Certificates subject to mandatory prepayment in the applicable principal amount set forth below. The Financial Advisor will promptly recalculate the aggregate principal amount of the Certificates following award to the winning bidder, for the purpose of maintaining certain debt service levels, and the Financial Advisor will promptly infonn the successful bidder of any changes. Any increase or decrease in the principal amount of the Certificates will cause a proportionate increase or decrease, as the case may be, in the discount or premium at which the Certificates are sold. By offering a bid for the Certificates, a bidder will be obligated, ifit is the successful bidder, to purchase the Certificates with any such changes. MATURITY SCHEDULE Maturity Date March 1 2008 2009 2010 2011 2012 2013 2014 2015 2016 '017 2018 2019 2020 2021 2022 Principal Amount* Maturity Date March 1 2023 2024 2025 2026 2027 2028 ,029 2030 2031 2032 2033 2034 2035 2036 Principal Amount* '" Subject to change, see '''MATrRITlES'' herein. 2 j ;/ I~TEREST: The Certificates will bear interest (computed on the basis of a 360-day year of twelve 30-day months) from their date at the rate or rates to be fixed upon the sale thereof, but not to exceed 6% per annum. Interest with respect to a Certificate will be paid March I and September I commencing September 1,2006 (each, an "Interest Payment Date"). PAYMENT: Interest and principal with respect to the Certificates will be payable when due by wire of the Trustee to DTC which will in turn remit such interest and principal to DTC Participants (see "BOOK-ENTRV ONL v" herein). If the book-entry only system is discontinued, interest and principal will be paid as described in the Preliminary Official Statement. PURPOSE: The Certificates are being delivered to provide funds for the construction and equipping of certain improvements to th~ Civic Center complex of the City and other existing City facilities, to fund capitalized interest during construction, to make a deposit to the reserve fund and to pay the expenses incurred in connection with the delivery of the Certificates, all as more fully described in the Preliminary Official Statement. SEClIRJTY: The Certificates are being executed and delivered under an Amended and Restated Trust Agreement dated as of March ], 2006 (the "Trust Agreement") by and among the City, the Chula Vista Public Financing Authority (the "Authority") and the Trustee, and a resolution adopted by the City Council of the City authorizing the execution, sale and delivery thereof. The Certificates represent direct, undivided proportionate interests in the lease payments (the "'Lease Payments") to be made by the City to the Authority as rental for the Leased Premises, as more fully described in the Preliminary Official Statement, pursuant to a LeaselPurchase Agreement dated as of September I, 2004 as amended by a First Amendment to LeaselPurchase Agreement dated as of March I, 2006, between the Authority, as Lessor, and the City, as Lessee (the "Lease"), certain funds held under the Trust Agreement and investment earnings thereon, and from net proceeds of insurance or condemnation awards, all as more fully described in the Preliminary Official Statement. In general. the City is required under the Lease to pay to the Trustee specified amounts for use and possession of the Leased Premises which amounts sufficient in both time and amount to pay, when due, the principal and interest payable with respect to the Certificates all as more fully described in the Preliminary Official Statement. The City is also required to pay all taxes and assessments and the cost of maintenance and repair of the Leased Premises. Except for the Authority's right, title and interest in and to the Lease, no funds or properties of the City or the Authority are pledged to or otherwise liable for the obligations of the City. The obligation of the City to pay Lease Payments 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 pledged any form of taxation. The obligation of the City to pay Lease Payments does not constitute a debt or liability of the State of California or of any political subdivision thereof within the meaning of any constitutional or statutory debt limitation or restriction. Bidders are referred to the Preliminary Official Statement for further particulars. Ml'NICIPAL BOND I:'iSIIRA"ICE: The City received a commitment /Tom bond insurance with respect to the Certificates. The City will directly purchase such insurance. for municipal OPTIONAL PREPAYMENT: The Certificates maturing on or before March 1,2016 are not subject to prepayment prior to maturity. The Certificates maturing on or after March 1, 2017 are subject to prepayment prior to maturity at the option of the City, on any date on or after March 1, 2016, as a whole or in part among maturities designated by the City and by lot within a maturity, from any source of available funds at a prepayment price equal to 100% of the principal amount thereof to be prepaid. without a premium, together with accrued interest thereon to the date fixed for prepayment. MANDATORY SINKING ACCOlTNT PREPAYMENT: Any Certificates designated by the successful bidder as Tenn Certificates will also be subject to prepayment in part by lot, on March 1 in each year from sinking account payments, at a prepayment price equal to the principal amount thereof to be prepaid, without premium; provided, however, that if some but not aU of the Term Certificates have been prepaid pursuant to an optional or extraordinary prepayment, the total amount of all future payments will be reduced by the aggregate principal amount of Term Certificates so prepaid. In addition, in lieu of prepayment thereof, the Term Certificates may be purchased by the 3 /j,/ ') City and tendered to the Trustee pursuant to the provisions of the Trust Agreement. See caption "MATURITIES" above for bidders' option with respect to Tenn Certificates and mandatory prepayment. TERMS OF SALE STATED II\TEREST R-\.TE: The stated interest rate bid for any maturity of Certificates may not exceed six percent (6%) per annum. Bidders must specify the rate of interest which is payable with respect to the Certificates strictly in accordance with the following conditions: (i) Each interest rate specified in any bid must be in a multiple of one-twentieth of one percent (1/20%) or one-eighth of one percent (1/8%) per annum; (ii) No Certificate is payable at more than one rate of interest; (iii) Interest with respect to each Certificate is computed from its date to its stated maturity date at the interest rate specified in the bid; (iv) All Certificates maturing at anyone time are payable at the same rate of interest; (v) Any premium must be paid as part of the purchase price, and no bid will be accepted which contemplates the cancellation or the waiver of any interest or other concession by the bidder as a substitute for payment in full of the purchase price; and (vi) The interest rate bid with respect to any maturity of the Certificates shall be equal to or greater than the interest rate with respect to each preceding maturity of the Certificates. DISCODIT: Bidders may specifY a discount, but the discount shall not exceed one and one-half percent (1-1/2%) of the principal amount of the Certificates. AWARD: The Certificates will be sold for cash or Federal Reserve Bank Funds only. All bids must be for not less than all of the Certificates hereby offered for sale and each bid shall state the total price offered for the Certificates, the premium, or the discount, if any, and the interest rate or rates (which shall not exceed those specified herein) at which the bidder offers to buy the Certificates. WIl'i:>lIl'iG BIDDER; TRl'E INTEREST COST: The Certificates will be awarded to the responsible bidder whose bid produces the lowest true interest cost on the Certificates, subject to the right to reject certain bids as described below under "RIGHT OF REJECTION." The true interest cost specified in any bid will be that cost, which, when used in computing the present value of all payments of principal and interest on all Certificates from the Date of Delivery, to their respective maturity dates or mandatory sinking fund dates, produces an amount equal to the purchase price specified in such bid. For purposes of computing the true interest cost represented by any bid, the purchase price specified in such proposal shall be equal to the par amount of the Certificates less any discount specified in such bid or plus any premium specified in such bid, and the true interest cost shall be calculated by the use of a semiannual interval of compounding interest based on the Interest Payment Dates of the Certificates. If two or more bidders have bid the same lowest true interest cost to the City, the award shall be made to the first bid received. RIGHT OF REJECTlOl'i: The City reserves the right, in its discretion, to reject any and all bids and, to the extent not prohibited by law, to waive any irregularity or informality in any bid. PRO:\lPT AWARD: The City will take action awarding the Certificates or rejecting all bids not later than twenty- four (24) hours after the expiration of the time herein prescribed for the receipt of bids; provided that the award may be made after the expiration of the specified time if the bidder has not given the City notice in writing of the withdrawal of its bid. DELIVERY OF OFFICIAL STATEMENT: The City will furnish the successful bidder with a reasonable number of copies of the final Official Statement within seven (7) business days after award of the Certificates, without charge. 4 1'- ,; "':.) r.,j PLACE OF DELIVERY: Delivery of the Certificates will be made to the successful bidder through DTC in New York, New York. or at any other place agreeable to both the City and the successful bidder. Payment for the Certificates shall be made in cash or Federal Reserve Bank funds which are immediately available to the City. PROMPT DELIVERY; CA:>ICELLATlO:-O FOR LATE DELIVERY: It is expected that the Certificates will be delivered to the successful bidder on or about March 15.2006. The successful bidder has the right, at its option, to cancel the contract of purchase if the City fails to execute the Certificates and tender them for delivery within sixty (60) days ITom the date of sale thereof. LIST A<TOl::>IT ME\IBERS: Bidders are requested to list the members of the bidding group on whose behalf the bid is made. BIDDING DETAILS: All bids must be unconditional and submitted via P ARlTY'!). No facsimile, personal delivery bids or bids delivered by any other method will be accepted. All costs and expenses incurred by prospective bidders in connection with their submission for bids through P ARITY@ are the sole responsibility of the bidder and the City is not responsible for such costs or expenses. Further information about PARlTy~l. including any fee charged may be obtained from PARITY". 1359 Broadway. 2nd Floor, New York, NY 10018 (212) 849-5021. VERIFICA TlO:-O: All bids are subject to verification and approval by the City. The City has the right to deem each final bid reported by PARJTY@ immediately after the deadline for receipt of bids to be accurate and binding on the bidder. Information or calculations provided by P ARITY@ other than the information required to be provided by the bidder in accordance with this Official Notice of Sale is for information purposes only and is not binding on either the bidder or the City. If two or more bidders offer bids for the Certificates at the same lowest true interest cost. the winning bid shall be the first bid received in the determination of the City whose determination is final. COI\'FIR\IATlO:>i OF BIDS: The successful bidder for the Certificates must deliver a certificate confirming the terms of its bid to the City within one hour after the bidding deadline. The certificate may be sent by facsimile transmission to Harrell & Company Advisors, LLC, facsimile number (714) 939-1462. CHA:>iGE II\' TAX-EXEMPT STAn:S: At any time before the Certificates are tendered for delivery, the successful bidder may disaffirm and withdraw the proposal if interest on the Certificates received by private owners ITom securities of the same type and character is declared to be includable in gross income under present federal income tax laws in a manner not described in the section "LEGAL MATTERS - Tax Exemption" in the Preliminary Official Statement, either by a ruling of the Internal Revenue Service or by a decision of any federal court. or is declared includable in gross income or is required to be taken into account in computing personal federal income taxes by the terms of any federal income tax law enacted subsequent to the date of this notice. CLOSING PAPERS: Each proposal will be understood to be conditioned upon the City furnishing to the successful bidder, without charge, concurrently with payment for and delivery of the Certificates, the following closing papers, each dated the date of delivery: (a) Legal Opinion, The legal opinion of Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California, ("Special Counsel,") approving the validity of the Certificates and the Trust Agreement and stating that interest on the Certificates is excluded from gross income for federal income ta.x purposes of the United States of America under existing law (see Preliminary Official Statement for a description of certain qualifications with respect to taxes on corporations and others), and that such interest is also exempt from personal income taxes of the State of California under existing law, will be furnished the successful bidder at the time of delivery of the Certificates. at the expense of the City. (b) No Arbitrage Certificate, A Certificate of the City certifying that on the basis of the facts, estimates and circumstances in existence on the Date of Delivery, it is not expected that the proceeds of the Certificates will be used in a manner that would cause the Certificates to be arbitrage bonds. 5 i I (c) No Litigation Certificate. At the time of payment for and delivery of the Certificates, the City will furnish the successful bidder a Certificate that there is no litigation pending affecting the validity of the Trust Agreement or the Certificates. (d) Certificate Concerning Official Statement. A Certificate of the City, signed by an appropriate officer. acting in his or her official capacity. to the effect that to the best of such officer's knowledge and belief, and after reasonable investigation: (1) neither the Official Statement nor any amendment or supplement thereto contains any untrue statement of a material fact or omits to state any material fact necessary to make the statements therein. in light of the circumstances in which they were made, not misleading; (2) since the date of the Official Statement no event has occurred which should have been set forth in an amendment or supplement to the Official Statement which has not been set forth in such an amendment or supplement which would make the statements therein. in light of the circumstances in which they were made misleading; nor (3) has there been any material adverse change in the operation or financial affairs of the City since the date of such Official Statement. DISCLOSl1RE LETTER: A disclosure letter with respect to the Official Statement will be provided to the successful bidder by Stradling Y occa Carlson & Rauth, a Professional Corporation, Newport Beach, California, Disclosure Counsel. CO:'olTIl'il'ING DISCLOSl'RE: In order to assist bidders in complying with S.E.C. Rule I5c2-12(b)(5) (the "Rule"), the City has committed to undertake, pursuant to the Trust Agreement and a Continuing Disclosure Agreement, to provide certain annual financial infonnation and notices of the occurrence of certain events, if material. A description of this undertaking is set forth in the Preliminary Official Statement and will also be set forth in the final Official Statement. Such Continuing Disclosure Agreement is a document required to be delivered at closing by the City, and the failure by the City to deliver such document in fonn and substance acceptable to Disclosure Counsel and the successful bidder will relieve the successful bidder of its obligation to purchase the Certificates. Except as described in the Preliminary Official Statement, the City has never failed to comply with its filing obligations under the Rule. CUSIP NIIMBERS: CUSIP identification numbers will be requested by the City and will be printed on the Certificates. All expenses in relation to the printing of CUSIP numbers on the Certificates shall be paid for by the City~ provided, however, that the CUSIP Service Bureau charge for the assignment of said numbers are the responsibility of and shall be paid for by the purchaser. The Trustee and the City are not liable for any defect or inaccuracy in the CUSIP number that appears on any Certificate or in any redemption notice. CALIFORl'iIA DEBT AND INVESTME:>IT ADVISORY COM:\1ISSION FEE: Attention of bidders is directed to California Government Code Section 8856, which provides that the purchaser of the Certificates will be charged for the California Debt and Investment Advisory Commission fee relating to the Certificates. PlIRCHASER'S CERTIFICATE: On the date of delivery of the Certificates. the successful bidder will be required to furnish a certificate certifying the price or prices at which the Certificates were reoffered to the public and the price or prices at which a substantial amount of the Certificates were sold. GIVE:'oI by order of the City ofChula Vista made on ,2006. By: Isl Maria Kachadoorian Director ofFinance/Treasurer i _./ -.~/;' <;;~L. C - 6 RESOLUTION NO. RESOLUTION OF THE CITY OF CHULA VISTA MAKING REQUIRED FINDINGS AUTHORIZING THE EXECUTION AND DELIVERY OF DOCUMENTS RELATING TO THE SALE AND DELIVERY OF NOT TO EXCEED $20,000,000 2006 CERTIFICATES OF PARTICIPATION, (CIVIC CENTER COMPLEX PROJECT - PHASE 2), APPROPRIATING THE NET PROCEEDS THEREOF TO THE CIVIC CENTER COMPLEX PROJECT (GG-200), AND AUTHORIZING REIMBURSEMENT OF UP TO $4,296,950 TO THE PFDIF FUND FROM PROCEEDS OF THE SALE OF THE CERTIFICATES OF PARTICIPATION, AND AUTHORIZING AND DIRECTING CERTAIN ACTIONS IN CONNECTION THEREWITH. WHEREAS, the City ofChula Vista (the "City") is a municipal corporation and a charter city duly organized and existing under and pursuant to the Constitution and laws of the State of California (the "State"); and WHEREAS, the Chula Vista Public Financing Authority (the "Authority") has assisted the City to finance the first phase of the construction, reconstruction, modernization and equipping of the Civic Center (the "Civic Center Project - Phase I") and the installation and renovation of certain infrastructure improvements in the western portion of the City including street, drainage and park improvements through the execution and delivery of the $37,240,000 City of Chula Vista 2004 Certificates of Participation (Civic Center Project - Phase I) (the "2004 Certificates") pursuant to that certain Trust Agreement, dated as of September 1,2004 (the "Original Trust Agreement"), by and among the City, the Authority and The Bank of New York Trust Company, N.A., as successor-in-interest to BNY Western Trust Company; and WHEREAS, in order to facilitate the execution and delivery of the 2004 Certificates, the City leased to the Authority the real property (the "Site") set forth in Exhibit A to that certain Site Lease, dated as of September I, 2004 (the "Original Site Lease"), by and between the City and the Authority, and the Authority simultaneously leased back the Site and the improvements located thereon to be constructed with the proceeds of the 2004 Certificates (together, the "Leased Premises") to the City pursuant to that certain Lease/Purchase Agreement, dated as of September 1,2004 (the "Original Lease"), by and between the City and the Authority; and WHEREAS, the Original Trust Agreement and the Assignment Agreement, dated as of September I, 2004 (the "Original Assignment Agreement"), by and between the Authority and the Trustee, allow for the execution and delivery of Additional Certificates (as that tenn is defined in the Original Trust Agreement) to finance additional improvements for the City; and i I ! . -- ...":.' J J:\Altomey\EHull\RESOS\FINANCEIRESULlJTION OF CITY COUNCIL FOR CHULA VISTA 2()()6 COPS (CIVIC CENTER PROJECT-PHASE 2).DOC Resolution No. Page 2 WHEREAS, the City desires to cause the Trustee to execute and deliver the 2006 Certificates of Participation (Civic Center Project - Phase 2), in the aggregate principal amount not to exceed $20,000,000 (the "2006 Civic Center Phase 2 Certificates"), in order to provide additional financing for the acquisition, construction, reconstruction, modernization and equipping of the Civic Center (the "Civic Center Project - Phase 2"); and WHEREAS, to accomplish the sale, preparation, execution and delivery of the 2006 Civic Center Phase 2 Certificates, the City desires to enter into that certain First Amendment to Site Lease, dated as of March I, 2006 (the "First Amendment to Site Lease"), by and between the City and the Authority and that certain First Amendment to Lease/Purchase Agreement, dated as of March 1, 2006 (the "First Amendment to Lease/Purchase Agreement"), by and between the City and the Authority, in order to add certain real property and improvements to the Site and the Leased Premises, consisting of Montevalle Park and Salt Creek Park (the "Additional Property"), and to make certain amendments thereto; and WHEREAS, to facilitate the execution and delivery of the 2006 Civic Center Phase 2 Certificates the City desires to enter into that certain Amended and Restated Trust Agreement, dated as of March I, 2006 (the "Amended and Restated Trust Agreement"), by and among the Authority, the City and the Trustee and that certain First Amendment to Assignment Agreement, dated as of March I, 2006 (the "First Amendment to Assignment Agreement"), by and between the Authority and the Trustee; and WHEREAS, to facilitate the acquisition, construction, reconstruction, modernization and equipping of the Civic Center Project - Phase 2, the City will act agent of the Authority for the purposes of the acquisition, construction, delivery and installation of the Civic Center Project - Phase 2 pursuant to an Agency Agreement (2006 Certificates of Participation), dated as of March 1, 2006 (the "Agency Agreement"), by and between the Authority and the City, the form of which has been presented to this City Council at the meeting at which this Resolution is being adopted; and WHEREAS, the City has held a public hearing on the date hereof pursuant to Government Code Section 6586.5 following publication of notice not less than five days prior to the hearing, concerning the financing of the Civic Center Project - Phase 2 and the execution and delivery of the 2006 Civic Center Phase 2 Certificates; and WHEREAS, the forms of the documents necessary to finance the Civic Center Project - Phase 2 and provide for the execution and delivery of the 2006 Civic Center Phase 2 Certificates are on file with the City Clerk as described herein; and WHEREAS, all acts, conditions and things required by the Constitution and laws of the State to exist, to have happened and to have been performed precedent to and in connection with the execution and delivery of the 2006 Civic Center Phase 2 Certificates do exist, have happened and have been performed in regular and due time, form and manner as required by law, and the J:\AtlomcyIEHuIlIRESOSIFINANCE\RESOLUTION OF CITY COUNCIL FOR CHULA VISTA 2006 COPS (CIVIC CENTER PROJECT.PHASE 2).DOC I -' ,.. -r Resolution No. Page 3 City is now duly authorized and empowered, pursuant to each and every requirement of law, to consummate such financing for the purpose, in the manner and upon the terms herein provided; and WHEREAS, prior to the issuance of the 2006 Civic Center Phase 2 Certificates the City desires to incur certain expenditures with respect to the Civic Center Project - Phase 2 from available monies of the City which expenditures are desired to be reimbursed by the City from a portion of the proceeds of the sale ofthe 2006 Civic Center Phase 2 Certificates. NOW, THEREFORE, the City Council of the City ofChula Vista does hereby resolve as follows: SECTION I. Findings. The City Council hereby specifically finds and declares that each of the statements, findings and determinations of the City set forth in the recitals set forth above and in the preambles of the documents approved herein are true and correct and that the financing of the Civic Center Project - Phase 2 will result in significant public benefits for the residents of the City of the type described in Government Code Section 6586(a), (c) and (d). SECTION 2. Authorization of 2006 Civic Center Phase 2 Certificates and Appropriations. The City Council hereby authorizes the financing all or a portion of the acquisition, construction, reconstruction, modernization and equipping of the Civic Center Project - Phase 2 through the preparation, sale and delivery of the 2006 Civic Center Phase 2 Certificates in an amount not to exceed $20,000,000. In the event that the City Council approves the execution and delivery of the 2006 Certificates of Participation (Nature Center Project) (the "2006 Nature Center Certificates"), then the 2006 Nature Center Certificates and the 2006 Civic Center Phase 2 Certificates may be combined into a single series of certificates of participation and be sold together as directed by the City Manager, the Director of Finance or their designees, and a single set of the financing documents described herein shall be used for the combined series. In the event that the 2006 Nature Center Certificates are not approved by the City Council, then the 2006 Civic Center Phase 2 Certificates may be sold separately in accordance with this Resolution. The City Council hereby appropriates $4,296,950 from the Public Facilities Development Impact Fund (the "PFDIF Fund") to the construction and installation of the Civic Center Project - Phase I. This amount shall be reimbursed from proceeds of the 2006 Civic Center Phase 2 Certificates to the PFDIF Fund following the execution and delivery of the 2006 Civic Center Phase 2 Certificates. The City Council hereby appropriates the balance of the proceeds of the 2006 Civic Center Phase 2 Certificates deposited to the Project Fund established under the Amended and Restated Trust Agreement to the acquisition, construction, reconstruction, modernization and equipping of the Civic Center Project ~ Phase 2. SECTION 3. First Amendment to Lease/Purchase Agreement. The form of the First Amendment to Lease/Purchase Agreement presented to this meeting and on file with the City Clerk (the "Clerk"), is hereby approved. Each of the Mayor of the City (the "Mayor"), the City Manager of the City (the "City Manager") and the Director of Finance of the City (the "Director J:\AlIomcy\EHullIRESOS\F1NANCEIRESOLUTJON OF CITY COUNCIL FOR CHULA VISTA 2006 COPS (CIVIC CENTER PROJECT-PHASE 2).DOC /_. -, Resolution No. Page 4 of Finance") or their designees (collectively, the "Authorized Officers"), is hereby authorized and directed, for and in the name and on behalf of the City, to execute and deliver to the Authority the First Amendment to Lease/Purchase Agreement in substantially said form, with such changes therein as the Authorized Officer or Officers executing the same may require or approve, such approval to be conclusively evidenced by the execution and delivery thereof by one or more of the Authorized Officers. The property to be leased pursuant to the First Amendment to Lease/Purchase Agreement to finance the Civic Center Project - Phase 2 shall consist of the Leased Premises and the Additional Property, and the City Council hereby finds and determines that the annual lease payments and additional payments due under the Original Lease as amended by the First Amendment to Lease/Purchase Agreement in each fiscal year will not exceed the fair rental value of the Leased Premises and the Additional Property during such fiscal year, and further determines that, if the 2006 Civic Center Phase 2 Certificates of Participation and the 2006 Nature Center Certificates are sold in a single series of certificates of participation, the annual lease payments and additional payments due under the Original Lease as amended by the First Amendment to Lease/Purchase Agreement in each fiscal year will not exceed the fair rental value of the Leased Premises and the Additional Property in such fiscal year. SECTION 4. First Amendment to Site Lease. The form of the First Amendment to Site Lease presented to this meeting and on file with the Clerk, is hereby approved. Each of the Authorized Officers is hereby authorized and directed, for and in the name and on behalf of the City, to execute and deliver to the Authority the First Amendment to Site Lease in substantially said form, with such changes therein as the Authorized Officer or Officers executing the same may require or approve, such approval to be conclusively evidenced by the execution and delivery thereof by one or more of the Authorized Officers. SECTION 5. Amended and Restated Trust Agreement. The form of the Amended and Restated Trust Agreement presented to this meeting and on file with the Clerk, is hereby approved. Each ofthe Authorized Officers is hereby authorized and directed, for and in the name and on behalf of the City, to execute and deliver to the Authority and the Trustee the Amended and Restated Trust Agreement in substantially said form, with such changes therein as the Authorized Officer or Officers executing the Amended and Restated Trust Agreement may require or approve, such approval to be conclusively evidenced by the execution and delivery thereof by one or more of the Authorized Officers. SECTION 6. Appointment of Trustee. The Bank of New York Trust Company, N.A. shall continue to act as trustee (the "Trustee") under the Amended and Restated Trust Agreement unless and until replaced in accordance with the provisions of the Amended and Restated Trust Agreement. SECTION 7. First Amendment to Assignment Agreement. The First Amendment to Assignment Agreement substantially in the form on file with the Clerk is hereby approved for execution and delivery by the Authority. J:v\llomcyIEHuI1IRESOSIFlNANCEIRESOLlJTlON OF CITY COUNCIL FOR CHIILA VISTA 2006 COPS (CIVIC CENTER PROJECT-PHASE 2).DOC /,'j-;;rt' Resolution No. Page 5 SECTION 8. Official Notice of Sale. The form of the Official Notice of Sale on file with the Clerk is approved and the City's Financial Advisor is authorized to solicit bids for the sale of the 2006 Civic Center Phase 2 Certificates by publishing once in The Bond Buyer, not less than five days prior to receipt of bids, a short form of the Official Notice of Sale and to distribute or make available to prospective purchasers of the 2006 Civic Center Phase 2 Certificates the Official Notice of Sale substantially in the form on file with the Clerk together with such changes thereto as the Director of Finance or her designee, approve. The Director of Finance and her designee are authorized, on behalf of the City, to accept the bid of the lowest responsible bidder for the 2006 Civic Center Phase 2 Certificates provided that: ( a) the principal amount of the 2006 Civic Center Phase 2 Certificates does not exceed $20,000,000; and (b) the true interest cost of the 2006 Civic Center Phase 2 Certificates as calculated by the City's Financial Advisor does not exceed 7.0%. In the event that the 2006 Civic Center Phase 2 Certificates are sold together with the 2006 Nature Center Certificates as a single series of certificates of participation, the portion of the combined series allocable to the Civic Center Project - Phase 2 as calculated by the City's Financial Advisor shall not exceed $20,000,000. The sale may be conducted through electronic means if the Director of Finance of the City, or her designee, determines that such process will assist the City in obtaining the lowest interest cost for the Civic Center Project - Phase 2. SECTION 9. Bond Insurance and Suretv Policy. The Director of Finance and her designee are hereby authorized to: (i) solicit bids on a municipal bond insurance policy and/or a debt service surety policy; (ii) to negotiate the terms of such policies; (iii) to finalize the form of such policies with a municipal bond insurer; and, (iv) if it is determined that one or both of the policies will result in interest rate savings for the City, to pay the insurance premium for the applicable policy or policies from the proceeds of the sale of the 2006 Civic Center Phase 2 Certificates. SECTION 10. Preliminarv Official Statement. The form of the Preliminary Official Statement, presented to this meeting and on file with the Clerk, is hereby approved. The Director of Finance and her designee are hereby authorized to make such changes to the Preliminary Official Statement as are necessary to make it final as of its date and are authorized and directed to execute and deliver a certificate deeming the Preliminary Official Statement final as of its date in accordance with Rule 15c2-12 promulgated under the Securities Exchange Act of 1934. Each of the Authorized Officers is hereby authorized and directed to execute, approve and deliver the final Official Statement in the form of the Preliminary Official Statement with such changes, insertions and omissions as the Authorized Officer or Officers executing said document may require or approve, such approval to be conclusively evidenced by the execution and delivery thereof by one or more of such Authorized Officers. SECTION 11. Continuing Disclosure Agreement. The form of the Continuing Disclosure Agreement, dated as of March I, 2006 (the "Continuing Disclosure Agreement"), by and between the City and the Trustee, as dissemination agent, presented to this meeting and on file with the Clerk, is hereby approved. Each of the Authorized Officers is hereby authorized and directed, for and in the name and on behalf of the City, to execute and deliver to the Trustee the J:\AllomeyIEHullIRESOS\FINANCE\RESOLUTJON OF CITY COUNCIL FOR CHULA VISTA 2006 COPS (CIVIC CENTER PROJECT-PHASE l).DOC /.~ ):'7 Resolution No. Page 6 Continuing Disclosure Agreement in substantially said form, with such changes therein as the Authorized Officer or Officers executing such document may require or approve, such approval to be conclusively evidenced by the execution and delivery thereof by one or more if such Authorized Officers. SECTION 12. Agencv Agreement. The form of the Agency Agreement presented to this meeting and on file with the Clerk, is hereby approved. Each of the Authorized Officers is hereby authorized and directed, for and in the name and on behalf of the City, to execute and deliver to the Authority the Agency Agreement in substantially said form, with such changes therein as the Authorized Officer or Officers executing the same may require or approve, such approval to be conclusively evidenced by the execution and delivery thereof by one or more of such Authorized Officers. SECTION 13. Attestations. The Clerk and such person or persons as may have been designated by the Clerk to act on her behalf, are hereby authorized and directed to attest the signature of the Authorized Officers designated herein to execute any documents described herein, and to affix and attest the seal of the City, as may be required or appropriate in connection with the execution and delivery of the First Amendment to Lease/Purchase Agreement, the Amended and Restated Trust Agreement, the Continuing Disclosure Agreement, the First Amendment to Site Lease, the Agency Agreement and the Official Statement. SECTION 14. Other Actions. The Authorized Officers are each hereby authorized and directed, jointly and severally, to do any and all things and to execute and deliver any and all documents which each may deem necessary or advisable (including the payment of a premium for a municipal bond insurance policy, a debt service surety policy, or other form of credit enhancement, and the payment of other costs of issuance approved by the Director of Finance or her designee) in order to consummate the sale, execution and delivery of the 2006 Civic Center Phase 2 Certificates and otherwise to carry out, give effect to and comply with the terms and intent of this Resolution, the 2006 Civic Center Phase 2 Certificates, the First Amendment to Lease/Purchase Agreement, the Amended and Restated Trust Agreement, the Continuing Disclosure Agreement, the First Amendment to Site Lease, the Agency Agreement, the Official Notice of Sale, the Preliminary Official Statement, and the Official Statement. Such actions heretofore taken by such officers or designees are hereby ratified, confirmed and approved. If necessary to obtain a rating or municipal bond insurance for the 2006 Civic Center Phase 2 Certificates, there may be added to the Site and the Leased Premises, in addition to the Additional Property, one or more other real property assets of the City if needed to provide fair rental value for the combined series of certificates of participation. Each of the Authorized Officers is hereby authorized and directed to determine which of the other real property assets of the City, if any, shall be included as a part of the Site and the Leased Premises, in addition to the Additional Property. J:\Anomcy\EHuHlRESOSIFINANCEIRESOLUTION OF CITY COUNCIL FOR CHUlA ViSTA 2006 COPS (CIVIC CENTER PROJECT-PHASE 2).DOC /. / ,...." Resolution No. Page 7 SECTION IS. Expected Reimbursement. The City hereby states its intention and reasonably expects to reimburse Civic Center Project - Phase 2 costs incurred prior to the issuance of the 2006 Civic Center Phase 2 Certificates with proceeds of the 2006 Civic Center Phase 2 Certificates. The reasonably expected maximum principal amount of the 2006 Civic Center Phase 2 Certificates is $20,000,000. This resolution is being adopted not later than 60 days after the payment of the original expenditures (the "Expenditures Date or Dates"). Except as described below, the expected date of issue of the 2006 Civic Center Phase 2 Certificates will be within eighteen months of the later of the Expenditure Date or Dates and the date the Civic Center Project Phase 2 is placed in service; provided, the reimbursement may not be made more than three years after the Expenditure Date. Proceeds of the 2006 Civic Center Phase 2 Certificates to be used to reimburse for Civic Center Project - Phase 2 costs are not expected to be used within one year of reimbursement, directly or indirectly, to pay debt service with respect to any obligation (other than to pay current debt service coming due within the next succeeding one year period on any tax-exempt obligation of the City (other than the 2006 Civic Center Phase 2 Certificates)) or to be held as a reasonably required reserve or replacement fund with respect to an obligation of the City or any entity related in any manner to the City, or to reimburse any expenditure that was originally paid with the proceeds of any obligation, or to replace funds that are or will be used in such manner. This Resolution is consistent with the budgetary and financial circumstances of the City, as of the date hereof. No monies from sources other than the proceeds of the 2006 Civic Center Phase 2 Certificates are, or are reasonably expected to be, reserved, allocated on a long-term basis, or otherwise set aside by the City (or any related party) pursuant to their budget or financial policies with respect to the Civic Center Project - Phase 2 costs. To the best of its knowledge, this City Council is not aware of the previous adoption of official intents by the City that have been made as a matter of course for the purpose of reimbursing expenditures and for which tax-exempt obligations have not been issued. The limitations described above regarding the Expenditures Dates do not apply to: (a) costs of issuance of the 2006 Civic Center Phase 2 Certificates; (b) an amount not in excess of the lesser of $1 00,000 or five percent (5%) of the proceeds of the 2006 Civic Center Phase 2 Certificates; or (c) any preliminary expenditures, such as architectural, engineering, surveying, soil testing, and similar costs other than land acquisition, site preparation, and similar costs incident to commencement of construction, not in excess of twenty percent (20%) of the aggregate issue price of the 2006 Civic Center Phase 2 Certificates that finances the Civic Center Project - Phase 2 for which the preliminary expenditures were incurred. This Resolution is adopted as official action ofthe City in order to comply with Treasury Regulation 91.150-2 and any other regulations of the Internal Revenue Service relating to the qualification for reimbursement of City expenditures incurred prior to the date of issue of the 2006 Civic Center Phase 2 Certificates, is part of the City's official proceedings, and will be available for inspection by the general public at the main administrative office of the City. J:\Auomey\EHuIl\RESOS\FINANCEIRESOLUTION OF CITY COUNCIL FOR CHULA VISTA 2006 COPS (CIVIC CENTER PROJECT-PHASE 2).DOC I Resolution No. Page 8 SECTION 16. Effect. This Resolution shall take effect immediately upon its passage. Presented by Approved as to fonn by Ann Moore City Attorney ~df~4 dP Attorney J:\Anomcy\EHuIllRESOS\FINANCEIRESOLUTlON OF CITY COUNCil FOR (HULA VISTA 1006 COPS {CIVIC CENTER PROJECT-PHASE 2).DOC .", , ..., RESOLUTION NO. RESOLUTION OF THE CITY OF CHULA VISTA MAKING REQUIRED FINDINGS AUTHORIZING THE EXECUTION AND DELIVERY OF DOCUMENTS RELATING TO THE SALE AND DELIVERY OF NOT TO EXCEED $2,500,000 2006 CERTIFICATES OF PARTICIPATION, (NATURE CENTER PROJECT), APPROPRIATING THE NET PROCEEDS THEREOF TO THE NATURE CENTER PROJECT (GG-175) AND AUTHORIZING REIMBURSEMENT OF UP TO $1,536,949 TO THE GENERAL FUND FOR MONIES PREVIOUSLY SPENT ON THE PROJECT FROM THE SALE OF THE CERTIFICATES OF PARTICIPATION, AND AUTHORIZING AND DIRECTING CERTAIN ACTIONS IN CONNECTION THEREWITH. WHEREAS, the City ofChu1a Vista (the "City") is a municipal corporation and a charter city duly organized and existing under and pursuant to the Constitution and laws of the State of California (the "State"); and WHEREAS, the Chula Vista Public Financing Authority (the "Authority") has assisted the City to finance the construction, reconstruction, modernization and equipping of the Civic Center and the installation and renovation of certain infrastructure improvements in the western portion of the City including street, drainage and park improvements through the execution and delivery of the $37,240,000 City ofChula Vista 2004 Certificates of Participation (Civic Center Project - Phase 1) (the "2004 Certificates") pursuant to that certain Trust Agreement, dated as of September 1,2004 (the "Original Trust Agreement"), by and among the City, the Authority and The Bank of New York Trust Company, N.A., as successor-in-interest to BNY Western Trust Company; and WHEREAS, in order to facilitate the execution and delivery of the 2004 Certificates, the City leased to the Authority the real property (the "Site") set forth in Exhibit A to that certain Site Lease, dated as of September 1,2004 (the "Original Site Lease"), by and between the City and the Authority, and the Authority simultaneously leased back the Site and the improvements located thereon to be constructed with the proceeds of the 2004 Certificates (together, the "Leased Premises") to the City pursuant to that certain Lease/Purchase Agreement, dated as of September 1,2004 (the "Original Lease"), by and between the City and the Authority; and WHEREAS, the Original Trust Agreement and the Assignment Agreement, dated as of September 1,2004 (the "Original Assignment Agreement"), by and between the Authority and the Trustee, allow for the execution and delivery of Additional Certificates (as that tenn is defined in the Original Trust Agreement) to finance additional improvements for the City; and .~ / " / Resolution No. Page 2 WHEREAS, the City desires to cause the Trustee to execute and deliver the 2006 Certificates of Participation (Nature Center Project), in the aggregate principal amount not to exceed $2,500,000 (the "2006 Nature Center Certificates"), in order to provide financing for the acquisition, construction, reconstruction, modernization and equipping of the Nature Center (the "Nature Center Project"); and WHEREAS, to accomplish the sale, preparation, execution and delivery of the 2006 Certificates, the City desires to enter into that certain First Amendment to Site Lease, dated as of March I, 2006 (the "First Amendment to Site Lease"), by and between the City and the Authority and that certain First Amendment to LeaselPurchase Agreement, dated as of March I, 2006 (the "First Amendment to Lease/Purchase Agreement"), by and between the City and the Authority in order to add certain real property and improvements to the Site and the Leased Premises, consisting of Montevalle Park and Salt Creek Park (the "Additional Property"), and to make certain other amendments thereto; and WHEREAS, to facilitate the execution and delivery of the 2006 Nature Center Certificates, the City desires to enter into that certain Amended and Restated Trust Agreement, dated as of March I, 2006 (the "Amended and Restated Trust Agreement"), by and among the Authority, the City and the Trustee and that certain First Amendment to Assignment Agreement, dated as of March 1,2006 (the "First Amendment to Assignment Agreement"), by and between the Authority and the Trustee; and WHEREAS, to facilitate the acquisition and construction of the Nature Center Project, the City will act as agent for the purposes of the acquisition, construction, reconstruction, modernization and equipping of the Nature Center Project pursuant to an Agency Agreement (2006 Certificates of Participation), dated as of March I, 2006 (the "Agency Agreement"), by and between the Authority and the City, the form of which has been presented to this City Council at the meeting at which this Resolution is being adopted; and WHEREAS, the City has held a public hearing on the date hereof pursuant to Government Code Section 6586.5 following publication of notice not less than five days prior to the hearing, concerning the financing of the Nature Center Project and the execution and delivery of the 2006 Nature Center Certificates; and WHEREAS, the forms of the documents necessary to finance the Nature Center Project and provide for the execution and delivery of the 2006 Nature Center Certificates are on file with the City Clerk as described herein; and J:\Altomcy\EHull\RESOS\FINANCEIRESOLUTION OF CJTY OF CHULA VISTA 1006 COPS (NATURE CENTER PROJECT).DOC l.cji )- Resolution No. Page 3 WHEREAS, all acts, conditions and things required by the Constitution and laws of the State to exist, to have happened and to have been perfonned precedent to and in connection with the execution and delivery of the 2006 Nature Center Certificates do exist, have happened and have been perfonned in regular and due time, fonn and manner as required by law, and the City is now duly authorized and empowered, pursuant to each and every requirement of law, to consummate such financing for the purpose, in the manner and upon the tenns herein provided; and WHEREAS, prior to the issuance of the 2006 Nature Center Certificates the City desires to incur certain expenditures with respect to the Nature Center Project from available monies of the City which expenditures are desired to be reimbursed by the City from a portion of the proceeds of the sale ofthe 2006 Nature Center Certificates. NOW, THEREFORE, the City Council of the City of Chula Vista does hereby resolve as follows: SECTION I. Findings. The City Council hereby specifically finds and declares that each of the statements, findings and detenninations of the City set forth in the recitals set forth above and in the preambles of the documents approved herein are true and correct and that the financing of the Nature Center Project will result in significant public benefits for the residents of the City of the type described in Government Code Section 6586(a), (c) and (d). SECTION 2. Authorization of 2006 Nature Center Certificates. The City Council hereby authorizes the financing all or a portion of the acquisition, construction, reconstruction, modernization and equipping of the Nature Center Project through the preparation, sale and delivery of the 2006 Nature Center Certificates in an amount not to exceed $2,500,000. In the event that the City Council approves the execution and delivery of the 2006 Certificates of Participation (Civic Center Project - Phase 2) (the "2006 Civic Center Phase 2 Certificates"), then the 2006 Nature Center Certificates and the 2006 Civic Center Phase 2 Certificates may be combined into a single series of certificates of participation and be sold together as directed by the City Manager, the Director of Finance or their designees, and a single set of the financing documents described herein shall be used for the combined series. In the event that the 2006 Civic Center Phase 2 Certificates are not approved by the City Council, then the 2006 Nature Center Certificates may be sold separately in accordance with this Resolution. The City Council hereby appropriates the proceeds of 2006 Nature Center Certificates deposited to the Project Fund established under the Amended and Restated Trust Agreement to the acquisition, construction, reconstruction, modernization and equipping of the Nature Center Project. SECTION 3. First Amendment to Lease/Purchase Agreement. The fonn of the First Amendment to Lease/Purchase Agreement presented to this meeting and on file with the City Clerk (the "Clerk"), is hereby approved. Each of the Mayor of the City (the "Mayor"), the City Manager of the City (the "City Manager") and the Director of Finance of the City (the "Director of Finance") or their designees (collectively, the "Authorized Officers"), is hereby authorized and directed, for and in the name and on behalf of the City, to execute and deliver to the J:\Attorllcy\EHu1l\RESOS\FINANCEIRESOLUTION OF CITY OF CHULA VISTA 2006 COPS (NATURE CENTER PROJECT),DOC ,-I - . , ..-' Resolution No. Page 4 Authority the First Amendment to Lease/Purchase Agreement in substantially said form, with such changes therein as the Authorized Officer or Officers executing the same may require or approve, such approval to be conclusively evidenced by the execution and delivery thereof by one or more of the Authorized Officers. The property to be leased pursuant to the First Amendment to Lease/Purchase Agreement to finance the Nature Center Project shall consist of the Leased Premises and the Additional Property, and the City Council hereby finds and determines that the annual lease payments and additional payments due under the Original Lease as amended by the First Amendment to Lease/Purchase Agreement in each fiscal year will not exceed the fair rental value of the Leased Premises and the Additional Property during such fiscal year, and further determines that, if the 2006 Nature Center Certificates of Participation and the 2006 Civic Center Phase 2 Certificates are sold in a single series of certificates of participation, the annual lease payments and additional payments due under the Original Lease as amended by the First Amendment to LeaseIPurchase Agreement in each fiscal year will not exceed the fair rental value of the Leased Premises and the Additional Property in such fiscal year. SECTION 4. First Amendment to Site Lease. The form of the First Amendment to Site Lease presented to this meeting and on file with the Clerk, is hereby approved. Each of the Authorized Officers is hereby authorized and directed, for and in the name and on behalf of the City, to execute and deliver to the Authority the First Amendment to Site Lease in substantially said form, with such changes therein as the Authorized Officer or Officers executing the same may require or approve, such approval to be conclusively evidenced by the execution and delivery thereof by one or more of the Authorized Officers. SECTION 5. Amended and Restated Trust Agreement. The form of the Amended and Restated Trust Agreement presented to this meeting and on file with the Clerk, is hereby approved. Each of the Authorized Officers is hereby authorized and directed, for and in the name and on behalf of the City, to execute and deliver to the Authority and the Trustee the Amended and Restated Trust Agreement in substantially said form, with such changes therein as the Authorized Officer or Officers executing the Amended and Restated Trust Agreement may require or approve, such approval to be conclusively evidenced by the execution and delivery thereof by one or more ofthe Authorized Officers. SECTION 6. Appointment of Trustee. The Bank of New York Trust Company, N.A. shall continue to act as trustee (the "Trustee") under the Amended and Restated Trust Agreement unless and until replaced in accordance with the provisions of the Amended and Restated Trust Agreement. SECTION 7. First Amendment to Assignment Agreement. The First Amendment to Assignment Agreement substantially in the form on file with the Clerk is hereby approved for execution and delivery by the Authority. J :\AUomeyIEHull\RESaSIFlNANCE\RESOLUTlON OF CITY OF CHULA VISTA 2006 COPS (NATURE CENTER PROJECT).OOC ,. . ;' ; i-";'i!. ,. l Resolution No. Page 5 SECTION 8. Official Notice of Sale. The fonn of the Official Notice of Sale on file with the Clerk is approved and the City's Financial Advisor is authorized to solicit bids for the sale of 2006 Nature Center Certificates by publishing once in The Bond Buyer, not less than 5 days prior to receipt of bids, a short fonn of the Official Notice of Sale and to distribute or make available to prospective purchasers of 2006 Nature Center Certificates the Official Notice of Sale substantially in the fonn on file with the Clerk together with such changes thereto as the Director of Finance or her designee, approve. The Director of Finance and her designee are authorized, on behalf of the City, to accept the bid of the lowest responsible bidder for 2006 Nature Center Certificates provided that: (a) the principal amount of 2006 Nature Center Certificates does not exceed $2,500,000; and, (b) the true interest cost of 2006 Nature Center Certificates as calculated by the City's Financial Advisor does not exceed 7.0%. In the event that 2006 Nature Center Certificates are sold together with the 2006 Civic Center Phase 2 Certificates as a single series of certificates of participation, the portion of the combined series allocable to the Nature Center Project as calculated by the City's Financial Advisor shall not exceed $2,500,000. The sale may be conducted through electronic means if the Director of Finance of the City, or her designee, detennines that such process will assist the City in obtaining the lowest interest cost for the Nature Center Project. SECTION 9. Bond Insurance and Surety Policy. The Director of Finance and her designee are hereby authorized to: (i) solicit bids on a municipal bond insurance policy and/or a debt service surety policy; (ii) to negotiate the tenns of such policies; (iii) to finalize the fonn of such policies with a municipal bond insurer; and (iv) if it is detennined that one or both of the policies will result in interest rate savings for the City, to pay the insurance premium for the applicable policy or policies from the proceeds of the sale of 2006 Nature Center Certificates. SECTION 10. Preliminarv Official Statement. The fonn of the Preliminary Official Statement, presented to this meeting and on file with the Clerk, is hereby approved. The Director of Finance and her designee are hereby authorized to make such changes to the Preliminary Official Statement as are necessary to make it final as of its date and are authorized and directed to execute and deliver a certificate deeming the Preliminary Official Statement final as of its date in accordance with Rule 15c2-12 promulgated under the Securities Exchange Act of 1934. Each of the Authorized Officers is hereby authorized and directed to execute, approve and deliver the final Official Statement in the fonn of the Preliminary Official Statement with such changes, insertions and omissions as the Authorized Officer or Officers executing said document may require or approve, such approval to be conclusively evidenced by the execution and delivery thereof by one or more of such Authorized Officers. SECTION I 1. Continuing Disclosure Agreement. The fonn of the Continuing Disclosure Agreement, dated as of March I, 2006 (the "Continuing Disclosure Agreement"), by and between the City and the Trustee, as dissemination agent, presented to this meeting and on file with the Clerk, is hereby approved. Each of the Authorized Officers is hereby authorized and directed, for and in the name and on behalf of the City, to execute and deliver to the Trustee the Continuing Disclosure Agreement in substantially said fonn, with such changes therein as the J:\AltomcyIEHu1l\RESOSIFINANCEIRESOLUTION OF CITY OF CHULA VISTA 2006 cors (NATURE CENTER PROJECT).DOC " vi 1-.. ,,,.,,.1fI" I ._""" Resolution No. Page 6 Authorized Officer or Officers executing such document may require or approve, such approval to be conclusively evidenced by the execution and delivery thereof by one or more if such Authorized Officers. SECTION 12. Agencv Agreement. The form of the Agency Agreement presented to this meeting and on file with the Clerk, is hereby approved. Each of the Authorized Officers is hereby authorized and directed, for and in the name and on behalf of the City, to execute and deliver to the Authority the Agency Agreement in substantially said form, with such changes therein as the Authorized Officer or Officers executing the same may require or approve, such approval to be conclusively evidenced by the execution and delivery thereof by one or more of such Authorized Officers. SECTION 13. Attestations. The Clerk and such person or persons as may have been designated by the Clerk to act on her behalf, are hereby authorized and directed to attest the signature of the Authorized Officers designated herein to execute any documents described herein, and to affix and attest the seal of the City, as may be required or appropriate in connection with the execution and delivery of the First Amendment to Lease/Purchase Agreement, the Amended and Restated Trust Agreement, the Continuing Disclosure Agreement, the First Amendment to Site Lease, the Agency Agreement and the Official Statement. SECTION 14. Other Actions. The Authorized Officers are each hereby authorized and directed, jointly and severally, to do any and all things and to execute and deliver any and all documents which each may deem necessary or advisable (including the payment of a premium for a municipal bond insurance policy, a debt service surety policy, or other form of credit enhancement, and the payment of other costs of issuance approved by the Director of Finance or her designee) in order to consummate the sale, execution and delivery of the 2006 Nature Center Certificates and otherwise to carry out, give effect to and comply with the terms and intent of this Resolution, the 2006 Nature Center Certificates, the First Amendment to Lease/Purchase Agreement, the Amended and Restated Trust Agreement, the Continuing Disclosure Agreement, the First Amendment to Site Lease, the Agency Agreement, the Official Notice of Sale, the Preliminary Official Statement, and the Official Statement. Such actions heretofore taken by such officers or designees are hereby ratified, confirmed and approved. If necessary to obtain a rating or municipal bond insurance for the 2006 Nature Center Certificates, there may be added to the Site and the Leased Premises, in addition to the Additional Property, one or more other real property assets of the City if needed to provide fair rental value for the combined series of certificates of participation. Each of the Authorized Officers is hereby authorized and directed to determine which of the other real property assets of the City, if any, shall be included as a part of the Site and the Leased Premises. J:\AttomcyIEHuI1\RBSDSIFlNANCEIRESOLUTlON OF CITY OF CHULA VISTA 200(, COPS (NATURE CENTER PROJECT).DOC /... ..) L./C;- ..- Resolution No. Page 7 SECTION 15. Expected Reimbursement. The City hereby states its intention and reasonably expects to reimburse Nature Center Project costs incurred prior to the issuance of the 2006 Nature Center Certificates with proceeds of the 2006 Nature Center Certificates. The reasonably expected maximum principal amount of the 2006 Nature Center Certificates is $2,500,000. This resolution is being adopted not later than 60 days after the payment of the original expenditures (the "Expenditures Date or Dates"). Except as described below, the expected date of issue of the 2006 Nature Center Certificates will be within eighteen months of the later of the Expenditure Date or Dates and the date the Nature Center Project is placed in service; provided, the reimbursement may not be made more than three years after the Expenditure Date. Proceeds of the 2006 Nature Center Certificates to be used to reimburse for Nature Center Project costs are not expected to be used within one year of reimbursement, directly or indirectly, to pay debt service with respect to any obligation (other than to pay current debt service coming due within the next succeeding one year period on any tax-exempt obligation of the City (other than the 2006 Nature Center Certificates)) or to be held as a reasonably required reserve or replacement fund with respect to an obligation of the City or any entity related in any manner to the City, or to reimburse any expenditure that was originally paid with the proceeds of any obligation, or to replace funds that are or will be used in such manner. This Resolution is consistent with the budgetary and financial circumstances of the City, as of the date hereof. No monies from sources other than the proceeds of the 2006 Nature Center Certificates are, or are reasonably expected to be, reserved, allocated on a long-term basis, or otherwise set aside by the City (or any related party) pursuant to their budget or financial policies with respect to the Nature Center Project costs. To the best of its knowledge, this City Council is not aware of the previous adoption of official intents by the City that have been made as a matter of course for the purpose of reimbursing expenditures and for which tax-exempt obligations have not been issued. The limitations described above regarding the Expenditures Dates do not apply to: (a) costs of issuance of the 2006 Nature Center Certificates; (b) an amount not in excess of the lesser of$IOO,OOO or five percent (5%) of the proceeds of the 2006 Nature Center Certificates; or (c) any preliminary expenditures, such as architectural, engineering, surveying, soil testing, and similar costs other than land acquisition, site preparation, and similar costs incident to commencement of construction, not in excess of twenty percent (20%) of the aggregate issue price of the 2006 Nature Center Certificates that finances the Nature Center Project for which the preliminary expenditures were incurred. This Resolution is adopted as official action of the City in order to comply with Treasury Regulation 91.150-2 and any other regulations of the Internal Revenue Service relating to the qualification for reimbursement of City expenditures incurred prior to the date of issue of the 2006 Nature Center Certificates, is part of the City's official proceedings, and will be available for inspection by the general public at the main administrative office of the City. J:\A.UomcyIEHull\RESQS\F!NANCE\RESOLUTION OF CITY OF CHl!LA VISTA 2006 COPS (NATURE CENTER PROJECT).DOC ; I ; , . .'j / Resolution No. Page 8 SECTION 16. Effect. This Resolution shall take effect immediately upon its passage. Presented by Approved as to fonn by Ann Moore City Attorney ~~~~ /),u Attorney J:\Altomcy\EHull\RESOS\FINANCE\RESOLUTlON OF CITY OF ('HULA VISTA 2()06 COPS (NATURE CENTER PROJECT).DOC A""'" ..I- I' . RESOLUTION NO. CHULA VISTA PUBLIC FINANCING AUTHORITY RESOLUTION OF THE CHULA VISTA PUBLIC FINANCING AUTHORITY APPROVING THE EXECUTION AND DELIVERY OF DOCUMENTS IN CONNECTION WITH THE SALE AND DELIVERY OF THE 2006 CERTIFICATES OF PARTICIPATION, (CIVIC CENTER PROJECT - PHASE 2) IN A PRINCIPAL AMOUNT NOT TO EXCEED $20,000,000. AND AUTHORIZING AND DIRECTING CERTAIN ACTIONS IN CONNECTION THEREWITH. WHEREAS, the Chula Vista Public Financing Authority (the "Authority") is a joint exercise of powers authority organized and existing under Article 4 of Chapter 5 of Division 7 of Title I of the Government Code of the State of California (the "JP A Act") with the authority to assist in the financing of the construction, reconstruction, modernization and equipping of certain capital improvements on behalf of the City ofChula Vista (the "City"); and WHEREAS, the Authority has assisted the City to finance the acquisition, construction, reconstruction, modernization and equipping of the Civic Center and the installation and renovation of certain infrastructure improvements in the western portion of the City including street, drainage and park improvements through the execution and delivery of the $37,240,000 City of Chula Vista 2004 Certificates of Participation (Civic Center Project - Phase I) (the "2004 Certificates") pursuant to that certain Trust Agreement, dated as of September 1,2004 (the "Original Trust Agreement"), by and among the City, the Authority and The Bank of New York Trust Company, N.A., as successor-in-interest to BNY Western Trust Company; and WHEREAS, in order to facilitate the execution and delivery of the 2004 Certificates, the City leased to the Authority the real property (the "Site") set forth in Exhibit A to that certain Site Lease, dated as of September I, 2004 (the "Original Site Lease"), by and between the City and the Authority, and the Authority simultaneously leased back the Site and the improvements located thereon to be constructed with the proceeds of the 2004 Certificates (the "Leased Premises") to the City pursuant to that certain LeaselPurchase Agreement, dated as of September 1,2004 (the "Original Lease"), by and between the City and the Authority; and WHEREAS, the Original Trust Agreement and the Assignment Agreement, dated as of September I, 2004 (the "Original Assignment Agreement"), by and between the Authority and the Trustee, allow for the execution and delivery of Additional Certificates (as that term is defined in the Original Trust Agreement) to finance additional improvements for the City; and J:\AtlomcyIEHull\RESOS\FINANCEIRESOLUTION OF (,HULA VISTA PFA FUR CIVIC CENTER COPS {PHASE 2),DOC Resolution No. Page 2 WHEREAS, the City desires to cause the Trustee to execute and deliver the 2006 Certificates of Participation (Civic Center Project - Phase 2), in the aggregate principal amount not to exceed $20,000,000 (the "2006 Civic Center Phase 2 Certificates"), in order to provide additional financing for the acquisition, construction, reconstruction, modernization and equipping of the Civic Center (the "Civic Center Project - Phase 2"); and WHEREAS, to accomplish the sale, preparation, execution and delivery of the 2006 Civic Center Phase 2 Certificates, the City desires to enter into that certain First Amendment to Site Lease, dated as of March I, 2006 (the "First Amendment to Site Lease"), by and between the City and the Authority and that certain First Amendment to Lease/Purchase Agreement, dated as of March I, 2006 (the "First Amendment to Lease/Purchase Agreement"), by and between the City and the Authority, in order to add certain real property and improvements to the Site and the Leased Premises, consisting of Montevalle Park and Salt Creek Park (the "Additional Property"), and to make certain other amendments thereto; and WHEREAS, to facilitate the execution and delivery of the 2006 Civic Center Phase 2 Certificates, the City desires to enter into that certain Amended and Restated Trust Agreement, dated as of March I, 2006 (the "Amended and Restated Trust Agreement"), by and among the Authority, the City and the Trustee and that certain First Amendment to Assignment Agreement, dated as of March I, 2006 (the "First Amendment to Assignment Agreement"), by and between the Authority and the Trustee; and WHEREAS, to facilitate the acquisition and construction of the Civic Center Project - Phase 2, the City will act as agent for the purposes of the acquisition, construction, reconstruction, modernization and equipping of the Civic Center Project - Phase 2 pursuant to an Agency Agreement (2006 Certificates of Participation), dated as of March I, 2006 (the "Agency Agreement"), by and between the Authority and the City, the form of which has been presented to this Board of Directors at the meeting at which this Resolution is being adopted; and WHEREAS, the City Council of the City has held a public hearing on the date hereof pursuant to Section 6586.5 of the IPA Act, and the City Council has found that the financing of the Civic Center Project - Phase 2, including the execution and delivery of the 2006 Civic Center Phase 2 Certificates by the Authority, will result in significant public benefits for the residents of the City; and WHEREAS, the Authority has determined and hereby finds that the Authority's assistance in financing the Civic Center Project - Phase 2 by the execution and delivery of the 2006 Civic Center Phase 2 Certificates by the Authority will result in significant public benefits of the type described in Section 6586(a), (c) and (d), inclusive, of the IPA Act; and WHEREAS, there has been presented to this Board of Directors at the meeting at which this Resolution is being adopted the form of an Official Notice of Sale pursuant to which the 2006 Civic Center Phase 2 Certificates will be sold; and J:\A!lomeyIEHuIIIRESOSIFINANCEIRESOLUTION OF CHULA VISTA PFA FOR CIVIC CENTER COPS ~PHASE 2),DOC i , , :C'..! Resolution No. Page 3 NOW, THEREFORE, the Board of Directors of the Authority does hereby resolve as follows: SECTION I. 2006 Civic Center Phase 2 Certificates. This Board of Directors hereby authorizes the preparation, sale and delivery of the 2006 Civic Center Phase 2 Certificates in an aggregate principal amount not to exceed $20,000,000 in accordance with the terms and provisions of the Amended and Restated Trust Agreement. The purposes for which the proceeds of the sale of the 2006 Civic Center Phase 2 Certificates shall be expended are to pay all or a portion of the costs the Civic Center Project - Phase 2 Project, to fund capitalized interest due with respect to the 2006 Civic Center Phase 2 Certificates, to purchase a reserve fund surety bond or to fund a reserve fund, and to pay the costs of the sale and delivery of the 2006 Civic Center Phase 2 Certificates. If the City requests that the 2006 Civic Center Phase 2 Certificates be sold as a single series together with certificates of participation to renovate the City's Nature Center (the "2006 Nature Center Certificates"), then the authorized officers of the Authority are authorized and directed to take such actions as are necessary to implement a single financing plan utilizing a single set of the Agreements (as defined below) for such purpose. SECTION 2. 2006 Certificate Documents. The First Amendment to Site Lease, the First Amendment to Lease/Purchase Agreement, the Amended and Restated Trust Agreement, the First Amendment to Assignment Agreement and the Agency Agreement (collectively, the "Agreements") presented at this meeting are approved. Each of the Chair, Executive Director, Treasurer and Secretary of the Authority, or the Chair's designee, are authorized and directed to execute and deliver the Agreements. The Agreements shall be executed in substantially the forms hereby approved, with such additions thereto and changes therein as are recommended or approved by counsel to the Authority and approved by the officer or officers of the Authority executing the Agreements, such approval to be conclusively evidenced by the execution and delivery thereof by one or more of the officers listed above. SECTION 3. Official Notice of Sale. The form of the Official Notice of Sale is approved and the City's Financial Advisor is authorized to solicit bids for the sale of the 2006 Civic Center Phase 2 Certificates by publishing once in The Bond Buyer, not less than five days prior to receipt of bids, a short form of the Official Notice of Sale and to distribute or make available to prospective purchasers of the 2006 Civic Center Phase 2 Certificates the Official Notice of Sale substantially in the form on file with the Secretary, together with such changes thereto as the Executive Director, the Treasurer or their designees approve. The Authority consents to the City's acceptance of the bid of the lowest responsible bidder for the 2006 Civic Center Phase 2 Certificates providing that: (a) the principal amount of the 2006 Civic Center Phase 2 Certificates does not exceed $20,000,000; and, (b) the true interest cost of the 2006 Civic Center Phase 2 Certificates as calculated by the City's Financial Advisor does not exceed 7.0%. In the event that the 2006 Civic Center Phase 2 Certificates are sold together with the 2006 Nature Center Certificates as a single series of certificates of participation, the portion of the combined series allocable to the Civic Center Project - Phase 2 as calculated by the City's Financial Advisor shall not exceed $20,000,000. J:\AnomcyIEHuIl\RESOSIFlNANCEIRESOLUTlON OF CHULA VISTA PFA FOR CIVIC CENTER CUPS (PHASE 2).DOC /. . ,.../ Resolution No. Page 4 SECTION 4. Other Actions. The Chair, Executive Director, Treasurer, Secretary and other officers of the Authority are authorized and directed, jointly and severally, to do any and all things and to execute and deliver any and all documents which they may deem necessary or advisable in order to consummate the sale and delivery of the 2006 Civic Center Phase 2 Certificates, and the execution of the Agreements and otherwise effectuate the purposes of this Resolution, and such actions previously taken by such officers are hereby ratified and confirmed. SECTION 5. Effect. This Resolution shall take effect from and after its date of adoption. Presented by Approved as to form by ~hd eVe) 11<0' Ann oore y Attorney Ann Moore City Attorney -' . J:\AUomeyIEHuIIIRESOS\FINANCEIRESOLUTION OF CHUI,A VISTA PFA fOR CIVIC CENTER COPS ~PHASE 2),DOC RESOLUTION NO. CHULA VISTA PUBLIC FINANCING AUTHORITY RESOLUTION OF THE CHULA VISTA PUBLIC FINANCING AUTHORITY APPROVING THE EXECUTION AND DELIVERY OF DOCUMENTS IN CONNECTION WITH THE SALE AND DELIVERY OF THE 2006 CERTIFICATES OF PARTICIPATION, (NATURE CENTER PROJECT) IN A PRINCIPAL AMOUNT NOT TO EXCEED $2,500,000 AND AUTHORIZING AND DIRECTING CERTAIN ACTIONS IN CONNECTION THEREWITH. WHEREAS, the Chula Vista Public Financing Authority (the "Authority") is a joint exercise of powers authority organized and existing under Article 4 of Chapter 5 of Division 7 of Title I of the Government Code of the State of California (the "JPA Act") with the authority to assist in the financing of the construction, reconstruction, modernization and equipping of certain capital improvements on behalf of the City ofChula Vista (the "City"); and WHEREAS, the Authority has assisted the City to finance the acquisition, construction, reconstruction, modernization and equipping of the Civic Center and the installation and renovation of certain infrastructure improvements in the western portion of the City including street, drainage and park improvements through the execution and delivery of the $37,240,000 City of Chula Vista 2004 Certificates of Participation (Civic Center Project ~ Phase 1) (the "2004 Certificates") pursuant to that certain Trust Agreement, dated as of September 1,2004 (the "Original Trust Agreement"), by and among the City, the Authority and The Bank of New York Trust Company, N.A., as successor-in-interest to BNY Western Trust Company; and WHEREAS, in order to facilitate the execution and delivery of the 2004 Certificates, the City leased to the Authority the real property (the "Site") set forth in Exhibit A to that certain Site Lease, dated as of September 1,2004 (the "Original Site Lease"), by and between the City and the Authority, and the Authority simultaneously leased back the Site and the improvements located thereon to be constructed with the proceeds of the 2004 Certificates (the "Leased Premises") to the City pursuant to that certain Lease/Purchase Agreement, dated as of September 1,2004 (the "Original Lease"), by and between the City and the Authority; and WHEREAS, the Original Trust Agreement and the Assignment Agreement, dated as of September I, 2004 (the "Original Assignment Agreement"), by and between the Authority and the Trustee, allow for the execution and delivery of Additional Certificates (as that term is defined in the Original Trust Agreement) to finance additional improvements for the City; and WHEREAS, the City desires to cause the Trustee to execute and deliver the 2006 Certificates of Participation (Nature Center Project), in the aggregate principal amount not to exceed $2,500,000 (the "2006 Nature Center Certificates"), in order to finance the renovation of certain infrastructure improvements for the City's Nature Center (the "Nature Center Project"); and J:\AUom<:yIEHull\RESOSIFlNANCEIRESOLUTlON OF (HULA VISTA PFA FOR NATURE CENTER COPS.DOC . / _' ':' J -,.; Resolution No. Page 2 WHEREAS, to accomplish the sale, preparation, execution and delivery of the 2006 Nature Center Certificates, the City desires to enter into that certain First Amendment to Site Lease, dated as of March 1,2006 (the "First Amendment to Site Lease"), by and between the City and the Authority and that certain First Amendment to Lease/Purchase Agreement, dated as of March I, 2006 (the "First Amendment to Lease/Purchase Agreement"), by and between the City and the Authority, in order to add certain real property and improvements to the Site and the Leased Premises, consisting of Montevalle Park and Salt Creek Park (the "Additional Property"), and to make certain other amendments thereto; and WHEREAS, to facilitate the execution and delivery of the 2006 Nature Center Certificates, the City desires to enter into that certain Amended and Restated Trust Agreement, dated as of March I, 2006 (the "Amended and Restated Trust Agreement"), by and among the Authority, the City and the Trustee and that certain First Amendment to Assignment Agreement, dated as of March 1,2006 (the "First Amendment to Assignment Agreement"), by and between the Authority and the Trustee; and WHEREAS, to facilitate the acquisition and construction of the Nature Center Project, the City will act as agent for the purposes of the acquisition, construction, reconstruction, modernization and equipping of the Nature Center Project pursuant to an Agency Agreement (2006 Certificates of Participation), dated as of March I, 2006 (the "Agency Agreement"), by and between the Authority and the City, the form of which has been presented to this Board of Directors at the meeting at which this Resolution is being adopted; and WHEREAS, the City Council of the City has held a public hearing on the date hereof pursuant to Section 6586.5 of the JP A Act, and the City Council has found that the financing of the Nature Center Project, including the execution and delivery of the 2006 Nature Center Certificates by the Authority, will result in significant public benefits for the residents of the City; and WHEREAS, the Authority has determined and hereby finds that the Authority's assistance in financing the Nature Center Project by the execution and delivery of the 2006 Nature Center Certificates by the Authority will result in significant public benefits of the type described in Section 6586(a), (c) and (d), inclusive, of the JPA Act; and WHEREAS, there has been presented to this Board of Directors at the meeting at which this Resolution is being adopted the form of an Official Notice of Sale pursuant to which the 2006 Nature Center Certificates will be sold. NOW, THEREFORE, the Board of Directors of the Authority does hereby resolve as follows: SECTION 1. 2006 Nature Center Certificates. This Board of Directors hereby authorizes the preparation, sale and delivery of the 2006 Nature Center Certificates in an aggregate principal amount not to exceed $2,500,000 in accordance with the terms and provisions of the J:\.AtlomeyIEHull\RESOSIFlNANCEIRESOLUT!ON OF CHULA VISTA PFA FOR NATURE CENTER COPS.DOC /. .) t Resolution No. Page 3 Amended and Restated Trust Agreement. The purposes for which the proceeds of the sale of the 2006 Nature Center Certificates shall be expended are to pay all or a portion of the costs the Nature Center Project, to fund capitalized interest due with respect to the 2006 Nature Center Certificates, to purchase a reserve fund surety bond or to fund a reserve fund, and to pay the costs of the sale and delivery of the 2006 Nature Center Certificates. If the City requests that the 2006 Nature Center Certificates be sold as a single series together with certificates of participation to renovate the Civic Center (the "2006 Civic Center Phase 2 Certificates"), then the authorized officers of the Authority are authorized and directed to take such actions as are necessary to implement a single financing plan utilizing a single set of the Agreements (as defined below) for such purpose. SECTION 2. 2006 Nature Center Certificate Documents. The First Amendment to Site Lease, the First Amendment to Lease/Purchase Agreement, the Amended and Restated Trust Agreement, the First Amendment to Assignment Agreement and the Agency Agreement (collectively, the "Agreements") presented at this meeting are approved. Each of the Chair, Executive Director, Treasurer and Secretary of the Authority, or the Chair's designee, are authorized and directed to execute and deliver the Agreements. The Agreements shall be executed in substantially the forms hereby approved, with such additions thereto and changes therein as are recommended or approved by counsel to the Authority and approved by the officer or officers of the Authority executing the Agreements, such approval to be conclusively evidenced by the execution and delivery thereof by one or more of the officers listed above. SECTION 3. Official Notice of Sale. The form of the Official Notice of Sale is approved and the City's Financial Advisor is authorized to solicit bids for the sale of the 2006 Nature Center Certificates by publishing once in The Bond Buyer, not less than five days prior to receipt of bids, a short form of the Official Notice of Sale and to distribute or make available to prospective purchasers of the 2006 Nature Center Certificates the Official Notice of Sale substantially in the form on file with the Secretary, together with such changes thereto as the Executive Director, the Treasurer or their designees approve. The Authority consents to the City's acceptance of the bid of the lowest responsible bidder for the 2006 Nature Center Certificates providing that: (a) the principal amount of the 2006 Nature Center Certificates does not exceed $2,500,000; and, (b) the true interest cost of the 2006 Nature Center Certificates as calculated by the City's Financial Advisor does not exceed 7.0%. In the event that the 2006 Nature Center Certificates are sold together with the 2006 Civic Center Phase 2 Certificates as a single series of 2006 Nature Center Certificates of participation, the portion of the combined series allocable to the Nature Center Project as calculated by the City's Financial Advisor shall not exceed $2,500,000. J:\Attorney\EHulllRESaS\FJNANCEIRESOLUTION OF CHULA VISTA PFA FOR NATURE CENTER COPS,DOC / -) -> .-' Resolution No. Page 4 SECTION 4. Other Actions. The Chair, Executive Director, Treasurer, Secretary and other officers of the Authority are authorized and directed, jointly and severally, to do any and all things and to execute and deliver any and all documents which they may deem necessary or advisable in order to consummate the sale and delivery of the 2006 Nature Center Certificates, and the execution of the Agreements and otherwise effectuate the purposes of this Resolution, and such actions previously taken by such officers are hereby ratified and confirmed. SECTION 5. Effect. This Resolution shall take effect from and after its date of adoption. Presented by Approved as to form by Ann Moore City Attorney ~~ -%~ /IuLJ Attorney J:\Attorncy\EHull\RESOSIFJNANCE\RESOLUTlON OF CHULA VISTA PFA FOR NATURE CENTER COPS,DOC / _~, 5:= ~~) / PAGE 1, ITEM NO.: MEETING DATE: ;6 02/7/06 JOINT REDEVELOPMENT AGENCY / CITY COUNCIL AGENDA STATEMENT ITEM TITLE: CONSIDERATION OF A RESOLUTION TO WITHHOLD ALL FUTURE STIPENDS FOR MEMBERS OF THE CHULA VISTA REDEVELOPMENT CORPORATION (CVRC) FOR A PERIOD EQUAL TO THE PERIOD THE STIPEND WAS PAID TO CURRENT MEMBERS PRIOR TO THE FIRST CVRC MEETING BEING HELD ASSISTANT CITY MANAGERlDIR. OF COMMUNITY DEVELOPMENT DIRECTOR OF FINANCE 11. ,III'- EXECUTIVE DIRECTOR V SUBMlnED BY: REVIEWED BY: 4/5THS VOTE: YES D NO 0 BACKGROUND At the City Council meeting of January 24, 2006, Couneilmember Rindone requested that a resolution be prepared authorizing all future stipends to current members serving on the Chula Vista Redevelopment Corporation (CVRC) board be withheld, effective February 1, 2006, for a period equal to the number of months that stipends were paid to current members prior to the first CVRC meeting. RECOMMENDATION That Council! Agency consider whether to approve the resolution to withhold all future stipends for members of the Chula Vista Redevelopment Corporation (CVRC) for a period starting February 1, 2006, and equal to the period the stipend was paid to current members prior to the first CVRC meeting being held. BOARDS/COMMISSIONS RECOMMENDATION Not applicable. DISCUSSION On May 24, 2005, through Resolution No. 2005-176 the City Council and Redevelopment Agency approved the formation of the Chula Vista Redevelopment Corporation (CVRC), a 501 c3 non-profit corporation, and accompanying Articles of Incorporation, Bylaws and Operating Agreement. , The CVRC became a legal entity on June 15, 2005 upon the filing of formation documents with the State of California. The CVRC was formed to support the planning and redevelopment activities of the City and the Agency within designated areas of the City. c?l PAGE 2, ITEM NO.: MEETING DATE: L 02/7/06 The CVRC Board of Directors is camprised of 9 members, including all five City Council members and four independent directors appointed by the City Council. On November 23, 2004, through Resolution No. 2004-383, the City Council and Redevelopment Agency approved monthly stipends in the amount of $750 for board members and $1500 for the Baard Chair. After the legal approval and formation of the CVRC, monthly stipends as provided for in the resolution were disbursed to the CVRC Board members each month following the formation. Following the legal formation, board members and redevelopment staff worked towards the numerous activities required to bring the "start-up" company into fruition. This work included the development of an application process for the four independent directar board positions, finalization of operating documents, and selection of a search firm to recruit the Corporation's CEO. The formation meeting of the CVRC was unfortunately delayed in September of 2005, due to the illness of Council member Davis. The By-laws stipulated that a quorum of the Board (five members) is required for the conduct of any CVRC business. With the absence of one Council member, it was impossible for a meeting to be called. While board members and staff have continued efforts ta move the CVRC forward, concerns regarding the stipends have been raised. To address these concerns staff has been requested to prepare the attached resolution for Council! Agency consideration which would, effective February 1, 2006, withhold all future stipends for members of the Chula Vista Redevelopment Corporation (CVRC) for a period equal to the initial period the stipend was paid to current members prior to the first CVRC meeting being held. As of February 2006, this would require withholding of stipends for eight months for the original members and one month for Councilmember Chavez. FISCAL IMPACT Currently, the stipend is paid from City funds and reimbursed with Redevelopment Agency funds. The withholding of future stipend payments for the time period, as earlier described, will equal $30,750. This amount will remain within the CVRC budget. J :\COMMDEV\STAFF.REp\2006 \02 -7 .06\Rindone Referrol.doc )<? RESOLUTION NO. 2006- JOINT RESOLUTION OF THE CITY COUNCIL AND THE REDEVELOPMENT AGENCY OF THE CITY OF CHULA VISTA TO WITHHOLD ALL FUTURE STIPENDS FOR MEMBERS OF THE CHULA VISTA REDEVELOPMENT CORPORATION (CVRC) FOR A PERIOD EQUAL TO THE PERIOD THE STIPEND WAS PAID TO CURRENT MEMBERS PRIOR TO THE FIRST CVRC MEETING BEING HELD WHEREAS, the formation of the Chula Vista Redevelopment Corporation (CVRC) was approved on May 24, 2005, through Resolution No. 2005-176. The CVRC became a legal entity on June 15,2005 upon the filing of formation documents with the State; and WHEREAS, at the May 24, 2005 meeting the legal and operating documents, including the Articles of Incorporation, Bylaws and the Operating Agreement, were presented and approved by the City and Redevelopment Agency; and WHEREAS, the CVRC Board of Directors is comprised of 9 members, including all five City Councilmembers and four independent directors appointed by the City Council. On November 23, 2004, through Resolution No. 2004-383, the City Council and Redevelopment Agency approved monthly stipends in the amount of$750 for board members and $1500 for the Board Chair; and WHEREAS, after the legal approval and formation of the CVRC, monthly stipends were disbursed to the City Council board members; and WHEREAS, the CVRC has not been legally able to conduct meetings due to lack of quorum caused by Councilmember Davis' illness. However, board members and redevelopment staff have continued to work towards the completion of those actions necessary to further the Corporation; and WHEREAS, the Council directed staff to prepare this resolution suspending a stipend payment for the period of time equal to the payments received prior to the CVRe's first meeting. NOW, THEREFORE, BE IT RESOLVED that the City Council and the Redevelopment Agency of the City of Chula Vista hereby suspend payment of all future stipends for members of the Chula Vista Redevelopment Corporation (CVRC) equal to the period the stipend was paid to current members prior to the first CVRC meeting being held. Presented by Approved as to form by Dana M. Smith Assistant City Manager/ Director of Community Development aMJi!~ IIdI Ann Moore City Attorney/Agency ounsel J:attomey/Reso/Policy/Council Reso - eYRC ;)3 ~ {ft.. :- ---- ~ ~- -- -- ........""€:~~ --- ~~ CIlY OF CHULA VISTA Report to the City Council and Redevelopment Agency West.er. n Ch.ula. Vista .. ... - -.- ..- .-. .. . Revitalization: Population, Market, and Housing Trends Prepared: February 2, 2006 Submitted by: Dana M. Smith, Assistant City Manager /Community Development Director Prepared by: Amanda Mills, Housing Manager Ken Lee, Principal Community Development Specialist Stacey Kurz, Senior Community Development Specialist Via: David D. Rowlands, Jr., City Manager TABLE OF CONTENTS I. INTRODUCTION............................................................................................................................ 1 II. THE LIFE CYCLE OF A COMMUNITY .............................................................................................. 3 A BRIEF REVIEW OF CHUlA VISTA'S LIFE CYCLE ..............................................................................................3 III. CHULA VISTA'S POPULATION AND HOUSING STATiSTiCS............................................................. 5 POPUlATION CHARACTERiSTiCS.......... ............. ......... ................................. ...... ..... ...... ........... ............. .... ....5 HOUSING CHARACTERISTICS .......................... .......... ................ ......... ................... .......................... ............7 IV. PRIVATE MARKET FORCES AND THE ROLE OF REDEVELOPMENT .................................................. 11 LONG-RANGE PlANNING DOCUMENTS .....................................................................................................11 MARKET INFLUENCES AND VARIABLES ....................................................... .................................................. 1 3 REDEVELOPMENT AS A CATALYST FOR PRIVATE INVESTMENT .............................................................................14 REDEVELOPMENT & AFFORDABLE HOUSING ................................................................................................15 RELOCATION ASSISTANCE & REPlACEMENT HOUSiNG...................................................................................15 V. REVITALIZATION AND HOUSING ................................................................................................ 18 PROVIDING AND MAINTAINING AFFORDABLE HOUSING ................................................................................18 PRIVATE MARKET REVITALIZATION............. ..................... .............. ............................................ ...................1 8 VI. CONCLUSIONS AND HOUSING POLICY ALTERNATIVES ............................................................. 22 CONCLUSiONS................................................................................................................... ..................22 HOUSING POLICY ALTERNATiVES............... ................... ....... ..................................................... ................ .22 APPENDIX A: TERMINOLOGY ...........................................................................................:.............. 26 -,- I. INTRODUCTION This white paper is the outgrowth of concerns expressed by the Chula Vista community, City palicymakers, and staff abaut the speed of land use changes in westem Chula Vista and the effect on our existing citizens. This paper raises policy concerns and highlights the challenges of wrestling with competing priorities in urban revitalization efforts. It confronts the tension between private market forces and property owner rights to buy, sell, and develop their property, and government intervention into the market to protect citizens against any potential adverse impacts. As discussed in numerous city planning documents, Chula Vista's older areas - located primarily in western Chula Vista - continue to age and experience declining commercial activity, some deteriorating housing stock (primarily multi-family), and a limited market for attracting new investment. At the same time, California and the San Diego County region continue to experience unmet demand for housing, high housing prices, and shrinking availability of "raw" land for new housing. In recent years, a broad cross section of community leaders have joined with City leaders in renewed calls to update infrastructure, attract higher value businesses, and pravide commensurate amenities such as parks and open space on the west side. In response, the City Council has directed the City and its Redevelopment Agency to step up strategic planning efforts to revitalize and reenergize the older developed areas of the west. Fundamental to revitalization is increased housing density around commercial core areas, better utilization of existing vacant or underutilized lands, enhanced infrastructure to support the needs of businesses and residents, and attention to the physical form and urban design that create places of interest. The City's current planning efforts, including the recent update of the General Plan and the preparation of the Urban Core Specific Plan (UCSP), take the necessary planning steps to implement this vision by providing the blueprint for future development over the next 25 years. These planning efforts, coupled with a healthy real estate market and renewed developer interest in the urbanized City center, will be the catalyst for western Chula Vista revitalization. This report discusses the role of both the public and private sector in shaping the revitalization of western Chula Vista and provides a braad discussion of potential effects on existing populations as change occurs. It also provides a discussion of housing policy alternatives available to the City Council to assist in tracking and addressing unintended effects on our most vulnerable citizens, those of limited financial means. This report: q Reviews the cycle of growth and renewal of urban areas q Provides statistics on population and the types and age of housing in western Chula Vista q Discusses the City's new General Plan and upcoming Urban Core Specific Plan and Housing Element as they may affect redevelopment, affordable housing, and the encouragement of new development q Addresses the Redevelopment Agency's rale in encouraging revitalization and providing new public infrastructure, parks and open space, and affordable housing. It also addresses the legal requirements to relocate existing uses and residents when the Redevelopment Agency is a partner in development (as distinguished from private revitalization) -1 - q Discusses housing issues that may result from public and private development activity: ~ Creation of adequate supply of affordable units for lower income households within Western Chula Vista. ~ Generation of additional tax increment through redevelopment to fund necessary public improvements in western Chula Vista, including the creation of new rental and for-sale affordable housing. ~ Provision of proactive services and programs in the community to assist lower income residents. ~ Ensuring a balanced community with a mix of housing options for all income levels. ~ Addressing the potential negative impacts of revitalization activities on the supply of rental housing and on lower income households that may be required to move. q Provides a discussion of possible policy alternatives available to the Council to address these housing issues Various key terms and phrases used in this report to describe aspects of the City's planning and redevelopment activities are defined in Appendix A. - 2 - II. THE LIFE CYCLE OF A COMMUNITY A little more than one year ago, the Chula Vista City Council and Planning Commission held a joint workshop on the various planning efforts for the revitalization and redevelopment of Chula Vista's Urban Core. The workshop included a comprehensive presentation from Planning & Building Department and Community Development Department staff on the General Plan Update, Urban Core Specific Plan, and the role of redevelopment in the revitalization efforts for western Chula Vista. Lucetta Dunn, Director of the California Department of Housing and Community Development, also appeared as a special guest speaker to share the state's views on current housing trends and the future necessity for cities to promote urban infill and redevelopment to house future residents as California's population expands and land resources shrink. The Life. Cycle or a Community MATURING Risk-aversion Contraction ~ Instability The central theme of the November 17, 2004 workshop was the concept of "The Life Cycle of a Community," as depicted in the illustrative model on the right, which takes a city through four distinct stages of evolution Emerging, Thriving, Maturing, Declining before the cycle leads back to the re-emergence of the city through careful reflection, reevaluation, repurposing, and re-planning. Below is a brief revisit of Chula Vista's own life cycle to date, which pravides the context for the issues framed in this paper. .. De-investment Investment CITY OF CHULA VISTA ~e.1: ~~!H!~,. ~ip' at ;,;-"-",, ",",",.:t!,. .,;''';'''''' A Brief Review of Chula Vista's Life Cycle Once the largest lemon growing center in the world, Chula Vista has rapidly grown, developed, and expanded to become one of the nation's fastest growing cities. Initially incorporated in 1911, much of the City's historical growth and development traces back to World War II and the relocation of Rohr Aircraft Corporation to Chula Vista in early 1941. The presence of Rohr and the post-WWII boom brought extraordinary population growth to Chula Vista, along with the demand for housing, roads, schools, public services, and retail services (e.g., shops, restaurants, markets, banks, etc.). - 3- With an established but growing population and employment base, Chula Vista's urban core and business economy thrived with commercial activity and spawned additional housing opportunities for newcomers. As the size and needs of the community continued to grow, local downtown businesses flourished and odditional community amenities were created in response to the increasing service and governance demands of local citizens. Over the next several decades, California's continued rate of population growth and housing production, coupled with Chula Vista's regional and waterfront location between the Mexican border and downtown San Diego, spurred the City's outward expansion and development to the east (east of Interstate-80S). Now home to nearly a quarter-million residents, Chula Vista is the second largest city in San Diego County. As the City has continued to expand outward, and eastern Chula Vista has begun to thrive and mature during the past 1S years, western Chula Vista has experienced a decline in commercial activity and community reinvestment as residents have sought business and retail services elsewhere, including eastern Chula Vista, downtown San Diega, and Mission Valley. The decline in private investment in the urban core has led toward decreased small business retention and attraction, reduced private investment, and a loss of external confidence in the area's housing market. It has also led to the ongoing physical deterioration of some of the City's housing stock, shrinking tax revenues to the City, and a greater need for infrastructure improvements. To evolve past western Chula Vista's cycle of decline, and create a path toward the reemergence of a thriving economy and housing market, the City Council has cast a vision for the revitalization of the City's downtown urban core through the update of the City's General Plan and the preparation of the Urban Core Specific Plan. - 4- III. CHULA VISTA'S POPULATION AND HOUSING STATISTICS As communities age, their population and housing characteristics change. Cities con use several key indicators to understand the effect of age on communities. One important measure is the overall age of housing and commercial stock. Property that is greater than 50 years in age will typically require substantial financial reinvestment, repair, and maintenance by owners. Rental properties, because they ore frequently owned by absentee owners for investment purposes, are often not as well-cared far as owner occupied residences and businesses. Chula Vista's west side has many stable and great single family neighborhoods which reveal tremendous care and investment by owners. The stability and overall reinvestment into single family homes and commercial areas is often reflected in the ratio of owner occupied homes to rental units. To provide context to the discussion, several data sources were reviewed, including: q City of Chula Vista General Plan, adopted December 13, 2005. Provides detailed population for 2004 and 2030 proiections for the western and eastern portions of the City. q City of Chula Vista Urban Core Specific Plan Market Analysis, June 2, 2005. Provides demographic statistics for population age and household income for the western portion of the City and the urban core planning area. q United States Census, 2000. Provides detailed housing statistics by census tract. Conducted every ten (10) years, the U.S. Census provides the most comprehensive data source available. Census tracts are generally divided by City boundaries, but not always. This presents a slight inconsistency when trying to combine census tracts to determine statistics for a portion of the City os done in this section of the report. While small portions of census tracts fall outside or within the City, overall it was determined to be the best way to form detailed housing statistics for the western portion of the City. q SANDAG Population and Housing Estimates, January 1, 2005. Provides current (2004) population and housing occupancy for the San Diego County region and its jurisdictions. Population Characteristics Expected Population (2000-2030) The entire Son Diego County region is expected to experience 0 tremendous amount of growth over the next 25 years with an estimated 20.9% (803,805) increase in population. This growth is primarily due to natural births from within the region. Chula Vista is expected to absorb over 11 % of these new residents. Between 2004 (209,200) and 2030 (299,900), the City's population is expected to increase by 30.2%. Eastern Chula Vista is r Chula Vista Prajected Population in 2030 l Urban Core .. , 74,900 1 Western CV , ,., 136,700 Eastern CV 160,700 Chula Vista .. II 299,900 C> "C> Cj ,:>C>' "C> Cj ,,\;)C)' "C> Cj ",:>C>. "C> Cj c>C>. ')) c>c>C> ,:>C>. 'j; c>c>C> "C>. '0 .2004 Estimate Iii! Projected Increase by 2030 - 5- expected to increase its population by 38.6% (98,710 I 160,700) while western Chula Vista is expected to increase its population by 19.2% (110,490 /136,700), including a 24% (56,930/ 74,900) increase in the Urban Core. Age The SANDAG chart to the right shows the anticipated changes in population age groups over the next 25 years. The average age of the population in the San Diego County region was 33.2 in 2000 and this average age is proiected to increase over the next 25 years. All age groups below 55 years are expected to decreose, os a percentage of the total population, during the period, while there is an expected average increase of nearly 4% of residents age 55 and above. In Chula Vista this phenomenon is expected to be more profound with an approximate 5.4% increase in the 55-64 age group. The population increase of 65-74 year olds in western Chula Vista and in the urban core is expected to be higher than the entire City (4.6%) and the San Diego County region (5%). This shift may lead to on increased need for facilities and housing projects that can accommodate and include amenities for this older population. Expected Change (2000-2030) in Age Distribution 0-9 10- 20- 35- 55- 65- 19 34 54 64 74 II Urban Core 75+ 6.0% 4.0% 2.0% 0.0% -2.0% -4.0% -6.0% . Western CV tl IOICV iiII San Diego Region Special Needs Groups In addition to the age of the population, another important issue is the provision of housing for special needs groups, including individuals with physical, emotional, or psychological disabilities. With a large portion of census tracts in the western portion of the City reporting a quarter of their population with disabilities, accommodations for this population may need to be considered with future housing options. Citywide Disability Status Western CV Disability Status 19% 81% IiiI Disability . No disability IiiI Disability . No disability - 6 - Housing Characteristics Housing Types In 2000 the housing stock in western Chula Vista (west of 1-805) consisted of 0 fairly even mix of single fomily residences (18,864 units / 47%) and multifamily residences (17,345 /43%). The remoining 10% of the housing stock of western Chulo Vista were mobilehome and trailer parks. Citywide Housing Mix 6% Western CV Housing Mix 60% 10% 47% ~r7?\~'"~",,, , 34 Yo ~<;~~~%'" 43% "Sing.. family" MJltiple family.. Mobile Horre " Single family " Mu~iple family.. Mobile Ho Citywide in 2000, Chula Vista hod 60% single family residences (35,707), 34% multifomily (19,990), and 6% mabilehome and trailer parks. The Citywide overage nearly matches the Son Diego County regional overage of 60% single family, 35% multifamily, and 4% mobile homes. The eo stern portion of the City far exceeds the countywide rotio of single family to multifamily residences. The miX of renter occupied to owner occupied units in the Son Diego County region was 45% renter to 55% owner in 2000. The City of Chula Vista os 0 whole almost mirrored the regional ratio with renter occupied units totaling 43% of the City's housing stock. However, of the approximately 40,366 housing units in western Chula Vista, 55% were renter occupied and 45% were owner occupied. This means that eastern Chula Vista has 0 higher percentage of owner occupied housing than the regional overage. The ratio of renter to owner in the east is likely higher now due to the number of condominium conversions that is underway there. In addition, with the continued building of single family housing units in the east, it is proiected that the current citywide ownership rates ore approximately 63%. These statistics also suggest that for the east to achieve a renter to owner ratio commensurate with the region, the City would need to protect the existing rental properties and encourage new rental development in that port of the City. Conversely, fo achieve 0 similar balance on the west, the City may wont to encourage more entry-level opportunities for homeownership there. Housing Ownership Potterns Citywide Ownership Patte rns Western CV Ownership Patterns ~ Renter Occupied. Ow ner Occupied Iii! Renter Occupied . Ow ner Occupied - 7- Vacancy Rates' The industry standard for a healthy vacancy rate is approximately 5%. The estimated vacancy rate for all housing units in the San Diego County region as of January 1, 2005 was 4.3%. The City of Chula Vista averaged 3%. The low vacancy rote suggests on unmet demand for housing and means that renters who may be displaced by private market forces may have difficulty relocating within Chula Vista. The vacancy rate is an important statistic for the City to monitor os revitalization tokes hold. Household Income & Poverly Level In 2000, the City of Chula Vista's mix of household income was fairly consistent with the San Diego County region. According to the 2000 census, 42.1 % of households in the San Diego County region were considered low income (less than $40,000 per year). Approximately 31 .6% of households in eastern Chula Vista were low income. In western Chula Vista, including the Urban Core, 57.2% of households were low income. These statistics show a growing disparity between household income in the east and west of the City, os well as a high number of low income households in the west compared to the region In addition to household income data, the Census provides poverty status of the population. The San Diego County region averages 13% of the population living below poverty level'. In 2000, the City of Chula Vista overall averaged 11 % of the population living below poverty level while the western portion overage. Household Income (2000) 40.0% 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% ,,<::> <::>~ ..J); ~<:- >1S' ~c, y'" RJO:> "'~ .."5 ,-0 ,,<::> <::>~ ..J); RJO:> 05 ~O:>. os,; ,-0 ,,<::> ~ ~. <sI ,,<::> ~ <::><::>. .." ,-0 ,,<::> ~ 'jo<::>' .. &0 (:-0 0' ,,<::> ,,~ ,,~ .. II Urban Core IIWestern CV IiiICV II San Diego Region Citywide Pove rty Status 11% Western CV Poverty Status 15% 89% 85% '" Aba,", Po,",rty . Below Po,",rty IiiiiI Abo'loe Poverty . Below Poverty 1 SANDAG - San Diego County region City/County Papulation and Housing Estimates 1/1/2005 2 Poverty thresholds are set by the U.s. Department of Health & Human Services and are determined by family unit size and income level. 2000 Poverty Thresholds were: one person = $8,794; f\.vo persons = $11,239; three persons = $13,738; etc. - 8- of the City averaged 15%. While not much higher than the regional average, when examined at the census tract level, some revealing statistics arise. Out of the twenty-six (26) census tracts used in this analysis for the western portion of the City of Chula Vista, eight (8) tracts reported 20% or more of their population below poverty level. These census tracts were in the extreme northwest and southwest of the City, suggesting a need to assist families and those of special needs who are below the poverty level in attaining safe and decent housing, as well as to increase overall densities to attract a broader array of income levels. I '. Structural Age As described earlier, the structural age of housing units is an important determinant of reinvestment requirements. Property that is 50 years or more in age typically requires substantial financial reinvestment, repair, and maintenance. In 2000, 83% of the housing units in the western portion of Chula Vista were reported as being built prior to 1980, including 33% before 1959. In other words, one-third of western Chula Vista's housing stock is approaching 50 years in age, as shown below. This is a critical statistic because, over the next 25 years, a substantial amount of property and City infrastructure in the west (83%) will require either complete replacement or substantial reinvestment and repair. Citywide - Year Housing Structure Built Census Tracts with 20% or Higher Below Poverty level Western CV - Year Housing Structure Built Western CV. 2030 Housing Age Projection 17% 22% ~...... f/ffI~M",~ 37% 41% . 1980 - 2000 II 1960 - 1980 g Before 195 83% .1980 - 2000 .1960 - 1980 Iii! Before 195 g Ulder 50 years old . Over 50 years old Summary These statistics provide a snapshot of Chula Vista's current (2000) and future population and housing trends. The data shows that western Chula Vista is currently providing a higher amount of multifamily rentol stock than the regional average, and significantly higher than that of eastern Chula Vista. It further suggests that a substantial amount of reinvestment will be required to avoid dilapidation and an increase in unsafe housing conditions. The City should encourage rehabilitation or removal of unsafe and low value properties, development of new affordable units and new multifamily units, as well as new entry level home ownership opportunities. Finally, - 9- the demographic make-up of western Chula Vista suggests that there is a significant need to serve the City's lower income residents, including elderly and special needs groups. HOUSING POLICY ISSUE #1: Creation of adequate supply of affordable units for lower income households within Western Chula Vista. See Chapter VI of this report for a more detailed description of this policy issue, including policy alternatives to address the issue. - 10- IV. PRIVATE MARKET FORCES AND THE ROLE OF REDEVELOPMENT Long-Range Planning Documents The timing of development patterns is generally driven by private market forces and entities (e.g., developers, lenders, investors, brokers, builders, etc.) and not by government - except possibly in redevelopment project areas (see Page 14). The purpose of a general plan is to serve as a long- range (25-year) blueprint or roadmap far the future physical form, operation, and mobility of a city's built environment by: q Casting a vision for the city by establishing long-range land use goals and policy objectives for future development q Strategically directing the physical location of prescribed land uses and building types q Governing the physical and functional form of development by establishing design guidelines and development standards' To be effective blueprints, these planning tools are crafted to accommodate changing population, housing, and market trends. In essence, they provide a platform for future development. They do not, however, directly govern, dictate, or influence when development will occur. General Plan Chula Vista's recently adopted General Plan Update ("GPU) changes land use designations in key commercial and residential areas of the City. The GPU's land use designations were strategically focused on three key planning areas of the City encompassing 5,268 acres: Northwest, Southwest, and East. Designations in the remaining 90 percent of the General Plan (53,154 acres) were left unaffected. Within the three planning areas, the GPU made a number of important changes critical to future redevelopment activities, including the addition of new land use designations: Mixed Use Residential, Mixed Use Commercial, Mixed Use Transit Focus Area, Urban Core Residential (28-60 dwelling units/acre). Specifically, the GPU: q Northwest. Increases mixed use development in the Urban Core, allowing more residential and transit-oriented uses and densities in the vicinity of major transit corridars. q Southwest. Focuses redevelopment within the Montgomery Subarea to facilitate economic development opportunities through appropriate designation of transit-oriented, industrial, commercial and higher-density residential. Promotes mixed use or other appropriate densities to facilitate smart growth planning, and to establish an identifiable town center area. q East. Increases overall densities in the Otay Ranch Subarea for residential use, and increases lands designated for commercial and industrial uses. 3 Design guidelines and development standards include common zoning tools, such as density standards, height limitations, setbacks, parking requirements, and required public amenities. -11- Urban Core Specific Plan The upcoming Urban Core Specific Plan ("UCSP") is an implementation tool for the goals and land uses established in the General Plan. As a zoning document, the UCSP will, upon its adoption, set forth land use and development regulations for the Urban Core that establish the appropriate distribution, mix, intensity, physical form, and functional relationships of land uses in the area. These regulations will encourage and facilitate infill development, mixed uses, pedestrian scale, urban amenities, transit use, creative design, and the overall revitalization of the Urban Core. Similar to the General Plan Update, the UCSP strategically focuses new zoning tools in three key planning districts: the Village, the Urban Core, and the Corridors. The UCSP focus areas are primarily located along existing commercial corridors and would allow mixed use (as opposed to iust commercial), thereby increasing the vitality of those areas. In addition, areas west of Broadway are proposed for higher density residential, providing opportunities for older housing stock in need of reinvestment to be rehabilitated or replaced. Each of the three UCSP planning areas are further broken down into sub-districts where the UCSP will establish a number of zoning regulations, including floor area ratio, lot coverage, building height, building step back, street walJ frontage, setback, open space requirement, permitted land uses, and parking regulations. ...-.,-:....,.- ",;,;..;...;,.........-..e-- _...............~ .. ..~~..;:...;.;.:.;..;...:!E:.,;E:--1i#"=-= ~ ~:::I~::..~ ..:._=""' ~;=""" ;.i """ Vo,l" Housing Element The City's Housing Element Update is expected to come before the Council in March 2006 to address Chula Vista's housing needs through 2010. The Housing Element is a required element of the General Plan overseen by the California Department of Housing and Community Development (HCD) and is typically updated in five-year cycles. The purpose of the Housing Element is to establish goals, policies, and a five-year work program for how Chula Vista will house local citizens as the City's population size and demographic makeup changes. The Housing Element examines existing housing needs, demonstrates sites with adequate density levels to accommodate new housing, and outlines which programs and/or policies will be utilized to serve lower income housing needs. The Housing Element is required to plan for a spectrum of housing types and prices that will accommodate residents of all incomes, as determined by the City's share of the Regional Housing Needs Assessment ("RHNA"). RHNA establishes housing numbers by income levels that need to be built to accommodate future population growth. These numbers are generated by HCD and distributed among cities in San Diego County by the San Diego Association of Governments (SANDAG). Chula Vista's RHNA allocation for the current Housing Element period is 17,223 housing units. Of these, 3,875 units are for very low income housing, and 2,945 are for low income housing. - 12- CHULA VISTA RHNA ALLOCATIONS Income Category I % of County I Income Range ($) I RHNA I Median Allocatian Very-Low Income < 50% MFI4 < $31,700 3,875 Low Income 51 % - 80% MFI $31,701-$50,720 2,945 Moderate Income 81 % - 120% MFI $50,721-$76,080 3,255 Above-Moderate Income > 120% MFI > $76,080 7,148 TOTAL 17,223 *Mfl = Median Family Income Market Influences and Variables The establishment of a planning and regulatory framework for the City is not the only vital ingredient that will allow a new vision for Chula Vista to unfold. Changes to the General Plan and Zoning Code do not mandate that the area must change but instead means it can change in a well thought out, logical manner. For example, over the last 25 years, the downtown Third Avenue area was fairly liberally zoned and permitted to develop to a much greater intensification of its commercial corridor. That change, however, never occurred. The key missing ingredient was the positive market forces that attract new investments and see the change through. The critical and unpredictable influence of market forces is the key to understanding the pace of change and whether the change will have an impact on low income residents. There are a myriad of "risk variables" that can influence market forces and market confidence (or inversely, market risk) in a particular region or city, including: c:> Local demographics c:> Existing housing types and prices c:> Ability of the market to absorb new units (Will they sell?) c:> Development costs (e.g., construction costs, fees) c:> I nterest rates c:> Whether the existing housing market has been tested to support similar product types and pricing. These variables impact the rate at which a local housing market can absorb new units, and therefore also impact the rate of change and revitalization that occurs in a region, regardless of city general plans and zoning codes. Since market variables fluctuate over time, the timing and rate of development will also fluctuate with the unknown cycles of the market. The long-range, 25-year blueprint of a General Plan or an Urban Core Specific Plan, therefore, does not become fulfilled overnight. Depending on market forces, only some elements of the vision may be realized, if any at all. In the Urban Care, the UCSP would allow for a total capacity of more than 7,000 new housing units (net increase in units) over 25 years. Of that amount, the City's market studies estimate that only half is likely to be absorbed in the market over the 25-year period, if market trends remain -4 Median Family Income (MFI) is used as a Federal standard to determine eligibility for affordable housing. - 13 - constant. Spread evenly over 25 years, the Urban Core would average about 150 new units each yeor. If market conditions were to facilitate rapid growth and change within 0 short period of time (1-5 years), it could impact the ability of existing residents to relocate to comparable housing units. It is important to consider, however, that a proportion of the new units built within the Urban Core will be made affordable to moderate and lower income households. The exact proportion will be known as projects are proposed and the number of units is disclosed. Redevelopment as a Catalyst for Private Investment Redevelopment plays an important role in the revitalization goals and efforts of a city through the tools it can employ to directly influence the private market, reduce risk, and create market confidence. Redevelopment can facilitate new development that might not normally occur under existing market conditions by helping address the risk variables described above. The tools and requirements of a redevelopment agency include (see Appendix A for definitions of terminology): q Tax increment financing to fund public improvements and provide financial assistance to qualifying developers for qualifying proiects in the form of gap financing q Required 20 percent monetary set-aside of all tax increment revenues for low- and moderate income housing q 15 percent affordable housing production requirement q Land acquisition and parcel assemblage q Relocation assistance and replacement housing With these tools, redevelopment can act as a catalyst to "jumpstart" the revitalization process in conformance with a city's land use plans. Once redevelopment efforts create market confidence, the private market can run its own course and lead the city toward a state of thriving through further risk-taking, renovation, and redevelopment. By law, however, redevelopment is limited to areas of a city that are in a state of decline and are physically and economically blighted. Its direct influence on the private housing market is therefore limited to "project areas" adopted by the redevelopment agency. The following map depicts Chula Vista's redevelopment project areas in colored zones. ::.~&;~~f . .. a REDEVELOPMENT ~~ PIIOJECT AREAS ... 'lp - 14- Redevelopment & Affordable Housing Redevelopment agencies play an important role in the funding and production of affordable housing. Within adopted project areas, redevelopment agencies receive a higher level of properly tax revenues that would normally be allocated to the state and other taxing entities. In exchange, the state requires that 20 percent of all of these "tax increment" revenues be set aside for the development of affordable housing. To ensure that these monies are in fact used for the production of affordable housing, the state requires that 15 percent of all new residential units built in an adopted project area be restricted to households of very low-, low-, and moderate incomes. Next to the federal government, redevelopment is the largest provider of affordable housing for California's low- and moderate income families. All tax increment monies generated in adopted redevelopment praject areas are allocated among four basic public uses: schools, neighborhood improvements, affordable housing, and other public agencies. The following exhibit provides an example of how $40 million of tax increment revenues is allocated among those four public uses. EXAMPLE: Allocation of $40 Million of Tax Increment Affordable Housing (20% Set Aside) $8,000,000 Schools $20,000,000 Neighborhood Improvements - $6,000,000 $6,000,000 Other Public Agencies Relocation Assistance & Replacement Housing Redevelopment Agency participation in a development project occurs when an Agency enters into an agreement with the developer or owner that provides financial assistance for the construction of the project, or facilitates the acquisition and/or disposition of land for the proiect. When Agency participation in a project results in the displacement of residents or businesses, lawmakers recognized the direct role of the government in causing those impacts and established strict rules - 15 - and regulations to mitigate them. In cases of residential displacement, both Federal5 and state' relocation rules and regulations require the Redevelopment Agency to find alternative housing for displaced residents, and pay for their relocation costs, including moving expenses and any differences in rent (for two years). To ensure that residents are fully informed about their eligibility to receive relocation assistance and benefits, agencies typically hire experienced relocation consultants to prepare comprehensive relocation plans! meet with residents, and walk them through the relocation process, step-by-step, to find them new residences that are safe and sanitary. Relocation assistance by an Agency provides important benefits and protections to residents, especially those of low- and moderate income. When Agency participation in a proiect results in the demolition and loss of existing housing stock, the California Community Redevelopment Law' requires that the Agency replace all units demolished or removed from the project site that previously housed any low- or moderate income persons or families8. State law requires replacement of these lost units on a one-for-one basis, and within four years. Summary The realization of the City's vision and land use plans for revitalization and redevelopment of western Chula Vista will mostly be determined by private market forces. While plans provide a blueprint and the capacity for future development over 25 years, it will be the market that will determine just how much of that capacity will actually be absorbed and built over time. The Redevelopment Agency can playa strategic, albeit limited, role in influencing private market forces. The state recognizes the importance of this role, but also recognizes that the direct participation of government in private market transactions can sometimes lead to unintended impacts on residents and businesses, and that those residents and businesses should be protected through prescribed laws and procedures. The state also recognizes that redevelopment is a critical vehicle for generating much needed local revenues to enhance municipal services and public improvements, including the creation of affordable housing, in the areas of greatest need. To generate these critical revenues, however, new development must occur to increase property values and create tax increment. Currently, the City annually generates approximately $1.5 million in 20 percent set-aside funds. The City should prioritize and support redevelopment activities that will significantly increase these revenue streams and provide greater resources and tools to purchase land, partner with non-profits, and facilitate the creation of new rental and for- sale affordable housing in western Chula Vista. ~: Generation of additional tax increment through redevelopment to fund necessary public improvements in western Chula Vista, including the creation of new rental and for-sale affordable housing. 5 Uniform Relocotion Assistonce and Real Property Acquisition Policies Act of 1970, as amended (P.L. 91-646; 42 U.S.c. 4601 et seq.) 'Government Code ~~7260 et seq. 7 Health ond Safety Code ~~33000 et seq. 8 Health and Safety Code ~33413 - 16- HOUSING POLICY ISSUE #3: Provision of proactive services and programs in the communi1y to assist lower income residents. See Chapter VI of this report for a more detailed description of these policy issues, including policy alternotives to address the issues. - 17- V. REVITALIZATION AND HOUSING Providing and Maintaining Affordable Housing Local governments are tasked by the State of California to ensure that a variety of housing options (rental and for-sale) for households of all income levels are made available. Generally, the private market builds adequate housing for above moderate income households, whil.e government and the non-profit sector try to facilitate development of housing for moderate- and lower income families. New AHordable Housing Currently, the City's Affordable Housing Program (inclusionary housing policy) requires residential proiects of 50 or more units to provide 10% of their units at affordable levels. Of the 10%, half must meet the requirements for lower income household (80% of the Median Family Income) and the other half for moderate income households (120% MFI). This 50-unit threshold was intended primarily for large greenfield development in the east and many infill projects in the west may not meet the 50-unit threshold to trigger the affordable requirement. In addition, infill development is often more difficult and expensive to produce than greenfield development. When projects are borderline feasible, developers may choose to build fewer units to avoid the cost of offering affordable housing required by the 50-unit threshold. The City's inclusionary policy applies citywide and provides the following direction on how to provide affordable units. q First, proiects should try to meet the obligation an-site. q If this is not financially feasible, the developer must demonstrate why and propose an off- site option. q If this is not financially feasible, the developer must show staff why and propose a land dedication for another developer to build the units. q If this is not financially feasible, the developer must pay an in-lieu fee. However, currently there is no fee structure in place for this option. The Council may want to consider amending the existing policy described above to be more flexible and effective for creating affordable units in western Chula Vista. Private Market Revitalization When a public agency is not a participant in the acquisition, rehabilitation, or development of land, there is no requirement for the public agency, or developer, to relocate renters asked to move by the owner due to development of the property. The existing land uses on these sites are often underutilized and undervalued and are often older, sometimes dilapidated, buildings, mobilehome parks, or trailer parks. Often, the rents in these types of units are lower than market. - 18- The Council will want to consider and balance the long-term value of revitalizing these uses with protections for the City's most vulnerable citizens. Determining whether or not an adverse effect is occurring will be based on two key factors: the availability of comparable units in the vicinity (possibly vacancy rates or development of new affordable units) and the income levels of those affected (fixed income and low income families). Below is a detailed discussion about each of these situations. Apartment Demolition and Rebuild Many concerns have been expressed about the potential acquisition and reconstruction of larger apartment complex properties. Although no formal applications are currently on file for the redevelopment of rental property in western Chula Vista, staff has met with several developers about their interests in redeveloping certain parcels. Most likely proiects of this nature would demolish existing rental units in older multi-family buildings and create new homeownership opportunities. The replacement of the building and the creation of new homeownership opportunities on the west side can be a benefit to the neighborhood and residents, but if the loss of rental units citywide becomes significant, it may have an effect on lower income tenants. The City may want to ensure that adequate rental housing is being built citywide, particularly for lower income households. Condominium Conversions The market for attached for-sale residential units has significantly increased over the last few years. In the 1990s, the condominium market was halted for over a decade by litigation over construction liability issues; but with resolution of these issues in the early 2000s, pent up demand for more reasonably valued housing was realized. This coupled with the fact that the cost of detached single family units was slipping further out of reach of the entry-level homebuyer, has resul.ted in a positive market shift for condominium products. This phenomenon has been more prevalent in the eastern portions of the City which were largely developed following the 1970s, coinciding with the onset of the condominium product type. With the rapid increase of condominium conversions in San Diego County, many jurisdictions are grappling with appropriate policies to address the balance of rental/ownership housing. While condominium conversions offer additional homeownership opportunities at an entry-level price, the loss of inexpensive rental units and the impact on lower income renters could be problematic and should be considered. Based on current development trends, mostly for-sale products are being developed. Continued loss of existing rentals without new rental developments being built in Chula Vista will reduce options for those who cannot or do not want to purchase. To date, Chula Vista has approved four applications to convert 432 rental units to condominiums. Eight applications remain in the pipeline to convert an additional 727 rental units. The applications for conversion have primarily been in eastern Chula Vista. Currently, the City allows conversion to condominiums after consideration that the proiect meets the following general requirements: q Fire protection standards - 19- e:> Storage space e:> Uniform Housing Code e:> Protective-lighting standards e:> Off-street parking requirements e:> Design guidelines e:> Adequate noticing to tenants of their intent to terminate tenancies for the purpose of converting their developments to condominium ownership e:> First right of refusal for renters to purchase their dwelling units os condominiums What is not included in the current review process is 0 determination of the impact on the rental stock or the lower income population. Additionally, stoff recommends 0 mechanism to ensure that the existing building is structurally sound. Mobilehome and Trailer Park Closure There are 13 mobilehome/trailer parks within the Urban Core, providing space for 1,175 units. Nine of these parks (651 spaces) are legal non-conforming, meaning new mobilehome/trailer parks could not be placed on those parcels if the site was redeveloped because it is not a permitted use under the existing zoning. e:> Mobilehome Parks. The mobilehome parks within a designated Mobilehome Park (MHP) zone are fairly stable and have seen infrastructure reinvestment. It is not likely that these parks will change use. e:> Trailer Parks. Many of the trailer parks along the Broadway corridor are smaller, run- down parks. Most of the parks were built in the 1940's and 1950's and require infrastructure improvements. Similarly, many of the trailers within these parks are aged as well. Most of the trailers are in such an aged state that they could not be relocated to another park. Turnover and redevelopment is both appropriate and expected for some of the run-down trailer parks, or parks where the land could yield a much higher use. Although no applications are on file with the City, there are several park owners that have discussed potential closure with City staff. While trailer park conversions will revitalize the Broadway corridor, the loss of inexpensive rental units and the impact on individual lower income renters may demonstrate a need for some City intervention. Summary The City of Chula Vista ensures a balanced wmmunity by offering a variety of housing options (rental and for-sale) for households of all income levels. As the private market is currently building adequate for-sale housing for the above moderate income categories, planning for the development of for-sale and rental housing for moderate and lower income families remains a City priority. The availability of affordable rental housing is of particular importance because of the potential loss of rental units in the next 25 years, and the impact that might have on existing renters trying to find new housing. HOUSING POLICY ISSUE #4: Ensuring a balanced community with a mix of housing options for all income levels. - 20- HOUSING POLICY ISSUE #5: Addressing the potential negative impacts of revitalization activities on the supply of rental housing and on lower income households that may be required to move. See Chapter VI of this report for a more detailed description of these policy issues, including policy alternatives to address the issues. - 21 - VI. CONCLUSIONS AND HOUSING POLICY ALTERNATIVES Conclusions Th'is white paper addresses the role of both the public and private sector in shaping the revitalization of western Chula Vista and provides a broad discussion of potential effects on existing populations as change occurs. As noted in this paper, urban revitalization efforts may present challenges of competing social and economic priorities. This report is intended to set the stage for a dialogue on housing policy alternatives available to the City Council in addressing the balance of revitalization efforts and the needs of our lower income residents. The statistics and market trends identified in this report provide valuable information as the City embarks on the revitalization of western Chula Vista. The western and eastern portions of the City are significantly different in terms of age of housing, income level, need for reinvestment, price of housing and type of housing. Below are a few key findings: q Western Chula Vista is currently providing a significantly higher amount of multifamily rental stock than eastern Chula Vista. Over 85% of the multi-family housing is in western Chula Vista. q Western Chula Vista is currently home to a much lower income population than that of eastern Chula Vista. q Based on the age of the housing, a substantial amount of reinvestment will be required in the west to avoid dilapidation and an increase in unsafe housing conditions. q The City should encourage rehabilitation or removal of unsafe and low value properties, development of new affordable units and new multifamily units. q Based on the type of private development that is expected to occur, there is a significant need for the City to ensure housing for the next 25 years: :J Special needs and elderly residents :J Low income renters :J Entry level homebuyers Housing Policy Alternatives As change occurs in the west, the Council may want to consider the use of the City's regulatory powers to afford some level of protection for the most vulnerable residents: those on fixed incomes, the working poor, and those with disabilities. Although the City already offers priority to displaced residents for affordable rental and for-sale units, some additional options to consider include changes to the City's Condominium Conversion Ordinance, Mobilehome Park Closure Ordinance, and Affordable Housing strategy. These policy alternatives, as described below, must be weighed to protect existing lower income residents without impeding the rate of revitalization due to inordinate increases in risk and/or the cost of private development. - 22 - The following alternatives are concepts for workshop discussion and are intended to elicit Council/Agency direction to stoff. Staff is recommending that the Council/Agency review the belaw housing policy issues and refer back to stoff the items for which they would like further analysis and policy/program development. HOUSING POLICY ISSUE #1: Creation of adequate supply of affordable units for lower income households within Western Chula Vista. Given population forecasts for western Chula Vista, additional affordable housing will be needed in the next five years. The lack of financial and land resources is a barrier to affordable housing production. The following options are offered for Council/Agency consideration to increase the supply of affordable housing in western Chula Vista. 1.1 Facilitate affordable housing proiects within the Urban Core early in the revitalization efforts (e.g., subsidies, site acquisition, etc.). 1.2 Expand the redevelopment project area boundaries to include more residential areas. This would generate additional tax increment revenues, thereby increasing the ability to subsidize more affordable housing. 1.3 Amend the City's Affordable Housing Program (inclusionary housing policy) with any combination of the following: ~ Lower the threshold from 50 units ~ Adopt a fee structure for fees to be paid in lieu of building units ~ Increase the requirement from 10% ~ Lower the low and moderate income target to serve lower income households ~ Apply the program to condominium conversions HOUSING POLICY ISSUE #2: Generation of additional tax increment through redevelopment to fund necessary public improvements in western Chula Vista, including the creation of new rental and for-sale affordable housing. Public improvements are a critical component of successful revitalization. Redevelopment is an important tool for the generation of tax revenues to fund these improvements. The following options are offered for Council/Agency consideration to increase the City's financial capacity. 2.1 Expand the redevelopment proiect area boundaries to include more residential areas. This would bring in more tax increment revenues to fund important public improvements in western Chula Vista, including affordable housing. 2.2 Develop financial strategies to maximize redevelopment income streams, such as bond financing. HOUSING POLICY ISSUE #3: Provision of proactive services and programs in the community to assist lower income residents. Informational services and programs are important resources that should be available to lower income residents, particularly for those that need assistance relocating to new residences. The following options are offered for Council consideration to ensure that lower income residents are fully informed and provided adequate assistance. 3.1 Develop a "Housing Assistance Resource Program" which could offer informational relocation services to displaced lower income renters, including rental listings and moving assistance referrals. 3.2 Increase bilingual noticing requirements of developers. 3.3 Launch a bilingual educational campaign to provide proactive outreach to lower income renters in western Chula Vista about housing resources and programs. 3.4 Develop and fund a shart-term rental assistance program to provide rent subsidies for 24 months to displaced lower income tenants. HOUSING POLICY ISSUE #4: Ensuring a balanced community with a mix of housing options for all income levels. The state charges localities with the responsibility of planning for a variety of housing types for all income levels, including special needs populations. Based on population and housing data, the City will need to monitor the rental/for-sale housing balance, particularly between the east and west. The following options are offered for Council consideration to increase the supply of affordable housing to ensure a balanced community. 4.1 Limit condominium conversions in the east to ensure the availability of rental housing. 4.2 Require all or some future affordable housing units built in the east through the City's Affordable Housing Program (inclusionary housing policy) to be rental housing. 4.3 Develop incentives for new rental housing to be built by private developers (e.g., fee deferral program, reduction of development standards). 4.4 Amend the City's Affordable Housing Program (inclusionary housing policy) with any combination of the following: ~ Lower the threshold from 50 units ~ Adopt a fee structure for fees to be paid in lieu of building units ~ Increase the requirement from 10% ~ Lower the low and moderate income target to serve lower income households ~ Apply the program to condominium conversions - 24- HOUSING POLICY ISSUE #5: Addressing the potentiol negative impocts of revitalization activities on the supply of rental housing and on lower income households that may be required to move. The Council should consider and balance the long-term value of revitalizing western Chula Vista with protecting the City's most vulnerable citizens. The following options ore offered for Council consideration to address the impacts some revitalization efforts may have on the community: 5.1 Require a Community Impact Report (ClR) on a project-by-project basis to determine if development will impact the supply of rental housing and displace lower income persons. The CIR could include a survey of rental, vacancy and ownership rates, as well as income levels of occupants. 5.2 Require relocation assistance by private developers for the most vulnerable population when necessary and appropriate. 5.3 Reassess relocation requirements in the current Mobilehome Park and Trailer Park Conversions Code (Municipal Code Chapter 9.40.010) for mobilehome residents. 5.4 Amend the Condominium Conversion Code (Municipal Code Chapter 15.56) to require the assessment of the balance of rental stock. 5.5 Require a contribution to a "mitigation bank" for rental unit development from projects negatively impacting the rental housing stock. The City would facilitate an affordable housing rental project and a portion of the subsidies required are advanced by the City in anticipation that future developments will reimburse the City through these fees. - 25- APPENDIX A: TERMINOLOGY The following are definitions of terms and phrases used throughout this report. This list has been prepared to reduce confusion and avoid their common misuse to describe the City's various planning and redevelopment activities in western Chula Vista. 20 Percent Set-Aside: The California Community Redevelopment Law requires that at least 20 percent of all tax increment revenues generated from a redevelopment project area must be used by the Redevelopment Agency to increase, improve, and preserve the community's supply of affordable housing for persons and families of low and moderate income (Health and Safety Code 933334.2). Health and Safety Code Section 33334.3 further requires that all set-aside funds are required to be held in a separate Low and Moderate Income Housing Fund until used, including any interest earned and repayments to the Fund. The Agency may spend monies from the Housing Fund either within or outside of the redevelopment proiect areas, if the Agency finds that the use of the monies outside will benefit the project areas (933334.2(g)). Absorption Rates: The rate at which real estate properties are able to be sold or leased within a designated market region or focus area. Absorption rates are often used to forecast market conditions and analyze the feosibility of a project based on a variety of market factors. Absorption rates are also used to describe the rate of change, turnover of property, and creation of new housing units over an identified period of time. Affordable Housina: Housing that has a deed restriction regulating the maximum income level of occupants and the maximum rent or sales price. ADencv Participation: The direct participation of a redevelopment agency in a project through the execution of an agreement with the developer (e.g., Disposition and Development Agreement, Owner Participation Agreement). Such an agreement for a redevelopment project triggers the requirement for an Agency to: (1) provide relocation assistance and benefits to residents and business owners; and (2) replace housing units on a one-for-one basis if the project will destroy housing for low- or moderate income residents. Bliaht: A primary legislative charge of a redevelopment agency is to eliminate blight. All territory included within a redevelopment proiect area, subject to the powers and authorities of an agency, must possess blighting conditions as defined by state law. Health and Safety Code Section 33030 defines "blighted area" as one that is: (1) predominately urbanized; (2) underutilized to the extent that is constitutes a serious physical and economic burden on the community; and (3) characterized by one or more physical or economic conditions as described and set forth in Section 33031 : 33031. (0) This subdivision describes physical conditions that cause blight: (1) Buildings in which it is unsafe or unhealthy for persons to live or work. These conditions can be caused by serious building code violations, dilapidation and deterioration, defective design or physical construction, faulty or inadequate utilities, or other similar factors. {2} Factors that prevent or substantially hinder the economically viable use or capacity of buildings or lots. This condition can be caused by a substandard design, inadequate size given present standards and market conditions, lack of parking, or other similar factors. (3) Adjacent or nearby uses that are incompatible with each other and which prevent the economic development of those parcels or other portions of the project area. - 26- (4) The existence of subdivided lots of irregular form and shape and inadequate size for proper usefulness and development that are in multiple ownership. (b) This subdivision describes economic conditions that couse blight: (1) Depreciated or stagnant property values or impaired investments, including, but not necessarily limited to, those properties contoining hazardous wastes that require the use of agency authority as specified in Article 12.5 (commencing with Section 33459). (2) Abnormally high business vacancies, abnormally low lease rates, high turnover rates, abandoned buildings, or excessive vacant lots within an area developed for urban use and served by utilities. (3) A lack of necessary commercial facilities that are normally found in neighborhoods, including grocery stores, drug stores, and banks and other lending institutions. (4) Residential overcrowding or an excess of bars, liquor stores, or other businesses that cater exclusively to adults, that has led to problems of public sofety and welfare. (5) A high crime rate that constitutes a serious threat to the public safety and welfare. California Community RedeveloDment Law: The authority to establish a redevelopment agency, and the authorities granted to an agency, including the adoption and implementation of a redevelopment plan, is granted and governed by the California Community Redevelopment Law. The Law is contained in California Health and Safety Code Sections 33000 et seq. Eminent Domain: Eminent domain is considered by the U.S. and California Constitutions as the sovereign right of government to take private properly for public use. The U.S. Constitution limits the use of eminent domain by providing that "private properly shall not be taken for a public use, without just compensation." Some state legislatures further limit, or establish procedures for, the use of eminent domain. In California, the legislature has enacted a comprehensive statute known as the Eminent Domain Law, contained in Sections 1230.010 et seq. of the California Code of Civil Procedure. The California Community Redevelopment Law provides for the use of eminent domain to eliminate blight. The Chula Vista Redevelopment Agency has adopted local policies within the City's Redevelopment Plans that prohibit the use of eminent domain on any properly that is both zoned and used for residential purposes. Hausina Element: The State of California requires cities and counties to prepare a Housing Element as part of their comprehensive General Plans. The Housing Element must address the housing need for all income levels through adequate zoning, policies, and programs. The City of Chula Vista's existing Housing Element (originally created for the 1999-2004 planning cycle) was approved by the State of California in 1999. The City is in the process of updating the Housing Element to address similar housing needs and policy issues for the 2005-2010 planning cycle. Inclusianarv Hausina Reauirement: City policy sets forth inclusionary housing regulations that ensure a balance between affordable and market rate housing opportunities in Chula Vista. The City's Affordable Housing Program requires the provision of 10 percent affordable units (half low income and half moderate income) for new residential developments of 50 units or more. Mabilehame Park (MHP) Zone: Chapter 19.27 of the Chula Vista Municipal Code establishes an exclusive Mobilehome Park Zone. "The purpose of the MHP zone is to provide appropriate locations where mobilehome parks may be established, maintained, and protected. The regulations of this zone are designed to promote and encourage an orderly residential environment with appropriate physical amenities, such as open areas, landscaping, and parking. To this end, the regulation permit, through the conditional use permit process, provides for the establishment of mobilehome parks. (Ord. 1845 9 1, 1978)." - 27- Redevelopment Inclusionarv Housina Reauirement: Redevelopment law requires at least 15 percent of all new ond substantially rehabilitated dwelling units developed within a redevelopment project area be available at affordable housing costs to, and occupied by, persons and families of low and moderate income. Nine percent must be available to low- and moderate income persons or families. Six percent must be available to very low income persons or families. Redevelopment Proiect Area: Territories adopted by and placed under the jurisdiction and outhority of a redevelopment ogency. Within project area boundaries, the Agency may use its general powers to collect tax increment revenues, create a Low and Moderate Income Housing Fund, and conduct other redevelopment activities in accordance with the California Community Redevelopment Law. A project area is a "predominantly urbanized area of a community which is a blighted area, the redevelopment of which is necessary to effectuate the public purposes" of a Redevelopment Agency as set forth under state law (Health and Safety Code 933320.1). Relocation Assistance: When applicable, Federal and state laws establish extensive relocation rules and regulations for cities and redevelopment agencies. q The Federal Uniform Relocation Assistance and Real Property Acquisition Policies Act (URA) dictates relocation regulations in relation to the public acquisition of real estate for a Federal project or a project in which Federal funds are used. q California Government Code (beginning at Section 7260) prescribes the process and procedures for relocation assistance by public agencies when applicable. Replacement Housina: Subdivision (aJ of Section 33413 the California Health and Safety Code sets forth the Redevelopment Agency's statutory requirements for replacement housing: 33413. (o) Whenever dwelling units housing persons and families of low or moderate income are destroyed or removed from the low~ and moderate income housing market as part of a redevelopment project that is subject to a written agreement with the agency or where financial assistance has been provided by the agency, the agency shall, within four years of the destruction or removal, rehabilitate, develop, or construct, or cause to be rehabilitated, developed, or constructed, for rental or sale to persons and families of low or moderate income, an equal number of replacement dwelling units that have an equal or greater number of bedrooms as those destroyed or removed units at affordable housing costs within the territorial jurisdiction of the agency_ When dwelling units are destroyed or removed after September 1, 1989, 75 percent of the replacement dwelling units shall replace dwelling units available at affordable housing cost in the or a lower income level of very low income households, lower income households, and persons and families of low and moderate income, as the persons displaced from those destroyed or removed units. When dwelling units are destroyed or removed on or after January " 2002, , 00 percent of the replacement dwelling units shall be available at affordable housing cost to persons in the same or a lower income category (low, very low, or moderate), as the persons displaced from those destroyed or removed units. Tax Increment: Tax increment is the primary source of revenue that redevelopment agencies have to fund and undertake public improvement and affordable housing projects. It is based on the assumption that a revitalized proiect area will generate more property taxes than were being produced before redevelopment. When a redevelopment project area is adopted, the current assessed values of the property within the project area are designated as the base year value. Tax increment comes from the increased assessed value of property, not from an increase in tax rate. Any increases in property value, as assessed because of change of ownership or new construction, will increase tax revenue generated by the property. This increase in tax revenue is the tax increment that goes to the Agency. - 28-