HomeMy WebLinkAboutRDA Packet 2003/05/20Notice is hereby given that the Chairman of the Public Financing Authority has called and will convene a
special joint meeting of the Public Financing Authority/City Council/Redevelopment Agency, Tuesday, May
20, 2003 at 6:00 p.m., immediately following the City Council meeting in the Council Chambers, located in
the Public Services Building, 276 Fourth Avenue, Chula Vista, California to consider, deliberate and act
upon the following:
CIIY OF
CHULA VISTA
TUESDAY, MAY 20, 2003 COUNCIL CHAMBERS
6:00 P.M. PUBLIC SERVICES BUILDING
(immediately following the City Council meeting)
JOINT SPECIAL MEETING Of THE
CITY COUNCIL/REDEVELOPMENT AGENCY/AND PUBLIC
FINANCING AUTHORITY
AND REGULAR MEETING OF THE REDEVELOPMENT AGENCY
OF THE CITY OF CHULA VISTA
CALL TO ORDER
ROLL CALL
Agency/Council/Authority Members Davis, McCann, Rindone, Salas; Chair/Mayor Padilla
ACTION ITEMS
The items listed in this section of the agenda are expected to elicit substantial discussions and deliberations by the
Council/Agency/Financing Authority, staff, or members of the general public. The items will be considered individually
by the Council/Agency/ Financing Authority and staff recommendation may in certain cases be presented in the
alternative. Those who wish to speak, please fill out a Request to Speak form available in the lobby and submit it to
the Secretary to the Redevelopment Agency or City Clerk prior to the meeting.
1. a. RESOLUTION OF THE PUBLIC FINANCING AUTHORITY OF THE CITY OF CHULA
VISTA APPROVING (1) THE SALE AND DELIVERY OF THE 2003 REFUNDING
CERTIFICATES OF PARTICIPATION (TOWN CENTRE II PARKING PROJECT) IN A
PRINCIPAL AMOUNT NOT-TO-EXCEED $13,000,000 FOR PURPOSES OF
REFUNDING THE 1993 TCII PARKING STRUCTURE REFUNDING CERTIFICATES OF
PARTICIPATION, 1993 CERTIFICATE OF PARTICIPATION TC II - PARKING
STRUCTURE PHASE II, AND THE 1998 CAPITAL LEASE WITH CALEASE PUBLIC
FUNDING CORPORATION; AND (2) A LEASE/PURCHASE AGREEMENT WITH THE
CITY OF CHULA VISTA, AND CERTAIN OTHER DOCUMENTS, IN CONNECTION
THEREWITH - On 2/18, 2003, staff was directed to determine the feasibility of
refunding the 1993 TCII Parking Structure Refunding Certificates of Participation,
1993 Certificate of Participation TC II - Parking Structure Phase II, and the 1998
Capital Lease with CaLease Public Funding Corporation. Based on current market
rates, the refinancing of these obligations will result in an estimated savings of
$938,000 to the City and redevelopment Agency for the 1993 COP's. An
additional savings of approximately $462,000 will be realized by various funding
sources, such as the Residential Construction Fund, DIF Funds and Sewer Funds,
due to the refunding of the CaLease capital lease agreement. [Director of
Finance/Treasurer]
1. b. RESOLUTION OF THE REDEVELOPMENT AGENCY OF THE CITY OF CHULA VISTA
APPROVING (1) THE SALE AND DELIVERY BY THE CHULA VISTA FINANCING
AUTHORITY OF THE 2003 REFUNDING CERTIFICATES OF PARTICIPATION (TOWN
CENTRE II PARKING PROJECT) IN A PRINCIPAL AMOUNT NOT-TO-EXCEED
$13,000,000; (2) THE REFUNDING OF THE CITY'S 1993 CERTIFICATES OF
PARTICIPATION; AND (3) CERTAIN AGENCY ACTIONS AND DOCUMENTS
REQUIRED IN CONNECTION THEREWITH
1. c. RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CHULA VISTA APPROVING
(1) THE SALE AND DELIVERY BY THE CHULA VISTA FINANCING AUTHORITY OF
THE 2003 REFUNDING CERTIFICATES OF PARTICIPATION (TOWN CENTRE II
PARKING PROJECT) IN A PRINCIPAL AMOUNT NOT-TO-EXCEED $13,000,000; (2)
THE REFUNDING OF THE CITY'S 1993 CERTIFICATES OF PARTICIPATION; (3)
CERTAIN CITY ACTIONS AND DOCUMENTS REQUIRED IN CONNECTION
THEREWITH; AND (4) APPROPRIATING $2,250,000 FROM THE GENERAL FUND TO
PREPAY THE CALEASE CAPITAL LEASE OBLIGATION WITH REIMBURSEMENT TO
FOLLOW OUT OF 2003 CERTIFICATE PROCEEDS
STAFF RECOMMENDATION: That: (a) Public Financing Authority adopt the
resolution; (b); Agency adopt resolution; and (c) Council adopt the resolution.
4/5ths VOTE REQUIRED ON (C) ONLY
ORAL COMMUNICATIONS
This is an opportunity for the general public to address the Public Financing Authority on any subject matter within the
Authority's jurisdiction that is no~t an item on this agenda. (State law, however, generally prohibits the Public Financing
Authority from taking action on any issues not included on the posted agenda.) If you wish to address the
Agency/Authority on such a subject, please complete the "Request to Speak Under Oral Communications Form"
available in the lobby and submit it to the City Clerk prior to the meeting. Those who wish to speak, please give your
name and address for record purposes and follow up action.
2. DIRECTOR'S REPORT(S)
3. CHAIR/MAYOR REPORT(S)
4. AGENCY/COUNCIL COMMENTS
ADJOURNMENT
The meeting will adjourn to a closed session and thence to an adjourned meeting of the
Redevelopment Agency on May 27, 2003, at 6:00 p.m., immediately following the City
Council meeting in the City Council Chambers.
Redevelopment Agency, May 20, 2003 Page 2
CLOSED SESSION
Unless Agency Counsel, the Executive Director, or the Redevelopment Agency states otherwise at this time, the
Agency will discuss and deliberate on the following item(s) of business which are permitted by law to be the subject of
a closed session discussion, and which the Agency is advised should be discussed in closed session to best protect the
interests of the City. The Agency is required by law to return to open session, issue any reports of final action taken in
closed session, and the votes taken. However, due to the typical length of time taken up by closed sessions, the
videotaping will be terminated at this point in order to save costs so that the Agency's return from closed session,
reports of final action taken, and adjournment will not be videotaped. Nevertheless, announcements of actions taken in
Closed Session shall be made by Noon on Wednesday following the meeting at the City Clerk's office in accordance
with the Ralph Brown Act (Govt. Code ~ 54957.7)
5. CONFERENCE WITH LEGAL COUNSEL REGARDING EXISTING LITIGATION --
Pursuant to Government Code Section 54956.9(a)
City/Agency vs. IT Group, Inc., et. al. [Case No. 02-10118 (MFW)]
AMERICANS WITH DISABILITIES ACT
The City of Chula Vista, in complying with the Americans with Disabilities Act (ADA), request individuals who require
special accommodates to access, attend, and/or participate in a City meeting, activity, or service request such
accommodation at least 48 hours in advance for meetings and five days for scheduled services and activities. Please
contact the Secretary to the Redevelopment Agency for specific information at (619) 691-5047 or Telecommunications
Devices for the Deaf (TDD) at (619) 585-5647. California Relay Service is also available for the hearing impaired.
Redevelopment Agency, May 20, 2003 Page 3
JOINT
CITY COUNCIL/REDEVELOPMENT AGENCY/PUBLIC FINANCING AUTHORITY/
AGENDA STATEMENT
Item
Meeting Date 5/20/2003
ITEM TITLE: a. RESOLUTION OF THE PUBLIC FINANCING AUTHORITY OF THE
CITY OF CHULA VISTA APPROVING (1) THE SALE AND
DELIVERY OF THE 2003 REFUNDING CERTIFICATES OF
PARTICIPATION (TOWN CENTRE II PARKING PROJECT) IN A
PRINCIPAL AMOUNT NOT-TO-EXCEED $13,000,000 FOR
PURPOSES OF REFUNDING THE 1993 TCII PARKING
STRUCTURE REFUNDING CERTIFICATES OF PARTICIPATION,
1993 CERTIFICATE OF PARTICIPATION TC II - PARKING
STRUCTURE PHASE II, AND THE 1998 CAPITAL LEASE WITH
CALEASE PUBLIC FUNDING CORPORATION; AND (2) A
LEASE/PURCHASE AGREEMENT WITH THE CITY OF CHULA
VISTA, AND CERTAIN OTHER DOCUMENTS, IN CONNECTION
THEREWITH
b. RESOLUTION OF THE REDEVELOPMENT AGENCY OF THE CITY
OF CHULA VISTA APPROVING (1) THE SALE AND DELIVERY BY
THE CHULA VISTA FINANCING AUTHORITY OF THE 2003
REFUNDING CERTIFICATES OF PARTICIPATION (TOWN CENTRE II
PARKING PROJECT) IN A PRINCIPAL AMOUNT NOT-TO-EXCEED
$13,000,000; (2) THE REFUNDING OF THE CITY'S 1993
CERTIFICATES OF PARTICIPATION; AND (3) CERTAIN AGENCY
ACTIONS AND DOCUMENTS REQUIRED IN CONNECTION
THEREWITH
c. RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CHULA
VISTA APPROVING (1) THE SALE AND DELIVERY BY THE CHULA
VISTA FINANCING AUTHORITY OF THE 2003 REFUNDING
CERTIFICATES OF PARTICIPATION (TOWN CENTRE II PARKING
PROJECT) IN A PRINCIPAL AMOUNT NOT-TO-EXCEED
$13,000,000; (2) THE REFUNDING OF THE CITY'S 1993
CERTIFICATES OF PARTICIPATION; (3) CERTAIN CITY ACTIONS
AND DOCUMENTS REQUIRED IN CONNECTION THEREWITH; AND
(4) APPROPRIATING $2,250,000 FROM THE GENERAL FUND TO
PREPAY THE CALEASE CAPITAL LEASE OBLIGATION WITH
REIMBURSEMENT TO FOLLOW OUT OF 2003 CERTIFICATE
PROCEEDS
SUBMITTED BY: Director of Finance/Treasurer~f~
City Manager~'D'~ (4/5ths Vote: Yes X No )
REVIEWED
BY:
~ 0'~ (Item c. only)
Page 2, Item
Meeting Date 5/20~2003
SUMMARY:
On February 18, 2003, staff was directed to determine the feasibility of refunding the
1993 TCII Parking Structure Refunding Certificates of Participation, 1993 Certificate of
Participation TC II - Parking Structure Phase II, and the 1998 Capital Lease with
CaLease Public Funding Corporation. Based on current market rates (2.875%), the
refinancing of these obligations will result in an estimated savings of $1.3 million to the
City of which $1.1 million relates to the 1993 COP's and $200,000 to the CaLease
agreement.
RECOMMENDATION: That the:
a. Authority: Approve: (1) the sale and delivery of the 2003 Refunding
Certificates of Participation (Town Centre II Parking Project) in a principal amount
not-to-exceed $13,000,000 for purposes of refunding the 1993 TCII Parking
Structure Refunding Certificates of Participation, 1993 Cedificate of Participation
TC II - Parking Structure Phase II, and the 1998 Capital Lease with CaLease
Public Funding Corporation; and (2) a lease/purchase agreement with the City of
Chula vista, and certain other documents, in connection therewith.
b. Agency: Approve: (1) the sale and delivery by the Chula Vista Financing
Authority of the 2003 Refunding Certificates of Participation (Town Centre II Parking
Project) in a principal amount not-to-exceed $13,000,000; (2) the refunding of the
City's 1993 Certificates of Participation; and (3) certain Agency actions and
documents required in connection therewith
c. Council: Approve: (1) the sale and delivery by the Chula Vista Financing
Authority of the 2003 Refunding Certificates of Padicipation (Town Centre II Parking
Project) in a principal amount not-to-exceed $13,000,000; (2) the refunding of the
City's 1993 Certificates of Participation; (3) certain City actions and documents
required in connection therewith; and (4) appropriating $2,250,000 from the General
Fund to prepay the CaLease capital lease obligation with reimbursement to follow out
of 2003 Certificate proceeds
BOARDS/COMMISSIONS RECOMMENDATION: Not applicable.
DISCUSSION:
In March 1993, the City and Redevelopment Agency issued the 1993 Refunding
Certificates of Participation for $11,285,000 to advance refund the 1987 Series of
Certificates of Participation. The original borrowing was to provide funds for the first
phase of a new parking structure at the Chula Vista Shopping Center. There is
currently $7,215,000 in outstanding 1993 Certificates with an average interest coupon of
5.2% and a final maturity date of 2012. The debt service on these 1993 Certificates is
funded by capital lease payments from the City's General Fund to be repaid from future
Agency revenues.
Page 3, Item
Meeting Date 5/20/2003
In December 1993, the City and Redevelopment agency issued Certificates of
Participation to finance the second phase of the public parking garage in the Chula
Vista Shopping Center for $3,115,000. The debt service on the Certificates is funded by
capital lease payments from the City's General Fund to the Agency to be repaid from
future Agency revenues. There is currently $2,140,000 in outstanding 1993 Certificates
with an average interest coupon of 5.07% and a final maturity date of 2013.
In 1998, the City refunded the lease-purchase financing agreement with CaLease Public
Funding Corporation (CaLease) for the funding of a public safety computer aided
dispatch (CAD) and mobile data terminal (MDT) system from Unisys Corp., an 800 MHZ
communication system from Motorola, Inc., and miscellaneous heating and air
conditioning equipment. At the same time, the refunding was combined with a current
financing for the Mainframe/Fiscal Accounting System. There is currently $2,232,645
outstanding on the lease with an average interest coupon of 5.46% and a final maturity
date of 2008. Under the terms of the CaLease Agreement, that lease can only be
prepaid on June 1 or December 1 (with a 2% prepayment premium). However, the City
must wait to close the refunding of the 2003 Certificates until after June 1. In order to
deal with this timing issue, the City will prepay the CaLease obligation on June 1, 2003
from the General Fund, which will be reimbursed from the proceeds of the 2003
Certificates once the refunding closes on June 10th, 2003.
The municipal banking firm of U.S. Bancorp Piper Jaffray Inc. unilaterally brought the
refunding proposal to the City for consideration. As a result, the refunding will be
marketed on a "negotiated" basis, which includes the pre-selection of an underwriter
and a negotiated interest cost, based on market conditions at the time of the sale. U.S.
Bancorp Piper Jaffray Inc. has agreed to an underwriting fee of 1% of the par value of
the transaction, which is at the Iow end of the range in today's environment. Stradling,
Yocca, Carlson & Rauth, a Professional Corporation, bond counsel analyzed the
feasibility of the refunding, determined the optimum structure and market timing of this
refunding.
The Finance Director of the City of Chula Vista will enter into the Certificate Purchase
Agreement with US Bancorp Piper Jaffray finalizing the pricing of the 2003 Certificates.
The financing-related resolutions approve the negotiated sale of 2003 Refunding
Certificates of Participation in a total amount not to exceed $13,000,000, approve the
Site Lease, Lease/Purchase Agreement, Assigned Agreements, Preliminary Official
Statement, Trust Agreement, Certificate Purchase Agreement, and other necessary
documents in the form on file, and authorize them to be executed and distributed in
connection with the sale of the 2003 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
financing, including the execution of all required closing documents.
Page 4, Item
Meeting Date, 5/20/2003
Included with the staff report is the Preliminary Official Statement. All other refunding
documents are available for review with the City Clerk.
FISCAL IMPACT Based on current market rates (2.875%), the refinancing of these
obligations will result in estimated savings of $1.3 million to the City of which $1.1
million relates to the 1993 COP's, resulting in savings to the General Fund and
subsequently the Redevelopment Agency, and $200,000 related to the CaLease
agreement, resulting in savings to various funding sources including the Residential
Construction Fund, DIF Funds and Sewer Funds. The debt service on the 2003
Certificates that relates to the refunding of the 1993 COP's shall be repaid to the
General Fund from future Redevelopment Agency revenues.
All costs of issuance, including the cost of the underwriter, bond counsel, disclosure
documents etc. will be paid from the 2003 Certificate proceeds.
Stradling Yocca Carlson & Rauth
Draft of 05/07/03
RESOLUTION NO.
CHULA VISTA PUBLIC FINANCING AUTHORITY
RESOLUTION OF THE PUBLIC FINANCING AUTHORITY OF THE CITY
OF CHULA VISTA APPROVING (1) THE SALE AND DELIVERY OF THE
2003 REFUNDING CERTIFICATES OF PARTICIPATION (TOWN CENTRE
II PARKING PROJECT) IN A PRINCIPAL AMOUNT NOT-TO-EXCEED
$13,000,000 FOR PURPOSES OF REFUNDING THE 1993 TCII PARKING
STRUCTURE REFUNDING CERTIFICATES OF PARTICIPATION, 1993
CERTIFICATE OF PARTICIPATION TC II - PARKING STRUCTURE
PHASE II, AND THE 1998 CAPITAL LEASE WITH CALEASE PUBLIC
FUNDING CORPORATION; AND (2) A LEASE/PURCHASE AGREEMENT
WITH THE CITY OF CHULA VISTA, AND CERTAIN OTHER
DOCUMENTS, IN CONNECTION THEREWITH
WHEREAS, the Chula Vista Public Financing Authority is a joint exercise of powers
authority organized and existing under the laws of the State of California (the "Authority") with the
authority to assist in the financing of the acquisition, construction, installation and equipping of
certain capital improvements on behalf of the City of Chula Vista (the "City"); and
WHEREAS, the City has heretofore entered into a Master Lease Agreement, dated April 1,
1997, by and between the City and Cai Lease Public Funding Corporation, as supplemented by the
Master Lease Agreement Supplement No. 1, dated as of May 30, 1997 and the Master Lease
Agreement Supplement No. 2, dated as of April 24, 1998 (collectively, the "Equipment Lease"), all
pursuant to which Cai Lease Public Funding Corporation agreed to lease to the City retain equipment
(the "Equipment Lease Assets"); and
WHEREAS, the City has previously caused to be executed and delivered the $11,285,000
1993 Refunding Certificates of Participation (Town Centre ll Parking Project) (the "1993A
Certificates"); and
WHEREAS, the City has previously caused to be executed and delivered the $3,115,000
1993 Certificates of Participation (Town Centre Il Parking Project--Phase Two) (the "1993B
Certificates") (together, with the 1993A Certificates, the "1993 Certificates"); and
WHEREAS, in order to refinance and defease the 1993 Certificates and prepay the
Equipment lease, the Authority and the City have determined that it would be in the best interests of
the Authority, the City and residents of the City to authorize the preparation, sale and delivery of the
2003 Certificates of Participation (Town Centre Il Parking Project) in an aggregate principal amount
not to exceed $13,000,000 (the "Certificates"), which Certificates evidence fractional interests in
certain lease payments to be made pursuant to the Lease (as defined below); and
WHEREAS, in order to facilitate the issuance of the Certificates, the City and the Authority
desire to enter into a Site Lease between the City and the Authority (the "Site Lease") and a
Lease/Purchase Agreement between the City and the Authority (the "Lease"), the forms of which
have been presented to this Board of Directors at the meeting at which this Resolution is being
adopted and pursuant to which the City will under the Site Lease lease certain Property (as defined
DOCSOC\967401 v2L24036.002S
therein) to the Authority and under the Lease the Authority will lease the Property to the City and the
City will pay certain Lease Payments (as defined in the Lease), which will be pledged to the owners
of the Certificates pursuant to a Trust Agreement among U.S. Bank, National Association (the
"Trustee"), the City and the Authority (the "Trust Agreement"), 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 Authority desires to assign its right to receive such Lease Payments from the
City to the Trustee pursuant to an Assignment Agreement between the Authority and the Trustee (the
"Assignment Agreement"), the form of which has been presented to this Board of Directors at the
meeting at which this Resolution is being adopted;
WHEREAS, in order to facilitate the execution and delivery of the Certificates, the Authority
and the City desire to enter into a Certificate Purchase Agreement by and among the City, the
Authority and US Bancorp Piper Jaffray (the "Purchase Agreement"); and
NOW, THEREFORE, the Board of Directors of the Authority does hereby resolve as
follows:
SECTION 1. Certificates. This Board of Directors hereby authorizes the preparation, sale
and delivery of the Certificates in an aggregate principal amount not to exceed $13,000,000 in
accordance with the terms and provisions of the Trust Agreement. The purposes for which the
proceeds of the sale of the Certificates shall be expended are to refinance the 1993 Certificates and
prepay the Equipment Lease, to fund a reserve fund, and to pay the costs of the sale and delivery of
the Certificates. The refinancing of the 1993 Certificates and the prepayment of the Equipment
Lease will result in lower financing costs for the City and will result in significant public benefits for
the residents of the City.
SECTION 2. Certificate Documents. The Site Lease, the Lease, the Trust Agreement, the
Purchase Agreement and the Assignment Agreement (the "Agreements") presented at this meeting
are approved. Each of the Chair, Vice Chair, Executive Director, Chief Financial Officer and
Secretary of the Authority, or the Chair's designee, are authorized and directed to execute and deliver
the Agreements. The Agreements ~hall 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 documents, such
approval to be conclusively evidenced by the execution and delivery thereof by one or more of the
officers listed above.
SECTION 3. Other Actions. The Chair, Vice Chair, Executive Director, Chief Financial
Officer, 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 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 4. Effect. This Resolution shall take effect from and after its date of adoption.
DOCSOC\967401 v2X24036.0028
ADOPTED AND APPROVED this 20th day of May, 2003, by the following vote:
AYES:
NOES:
ABSTENTIONS:
ABSENT:
Chair
Board of Directors
Chula Vista Public Financing Authority
I hereby certify that the foregoing resolution was duly introduced, passed and adopted at the
time and place and by the vote as noted above.
Secretary
Chula Vista Public Financing Authority
APPROVED AS TO FORM
~ Public~dl~Aut~ty Atto'f~'o-o-o-o-o-o-~
3 /--'7
DOCSOC\967401 v2124036.002g
Stradling Yocca Carlson & Rauth
Draft of 05/07/03
RESOLUTION NO.
REDEVELOPMENT AGENCY OF THE CITY OF CHULA VISTA
RESOLUTION OF THE REDEVELOPMENT AGENCY OF
THE CITY OF CHULA VISTA APPROVING (1) THE SALE
AND DELIVERY BY THE CHULA VISTA FINANCING
AUTHORITY OF THE 2003 REFUNDING CERTIFICATES OF
PARTICIPATION (TOWN CENTRE II PARKING PROJECT)
IN A PRINCIPAL AMOUNT NOT-TO-EXCEED $13,000,000; (2)
THE REFUNDING OF THE CITY'S 1993 CERTIFICATES OF
PARTICIPATION; AND (3) CERTAIN AGENCY ACTIONS
AND DOCUMENTS REQUIRED IN CONNECTION
THEREWITH
WHEREAS, the Redevelopment Agency of the City of Chula Vista (herein referred to as the
"Agency") is a redevelopment agency duly created, established and authorized to transact business
and exercise its powers, all under and pursuant to the California Community Redevelopment Law,
Health and Safety Code Sections 33000, et seq. ("CRL') and has been authorized to transact business
and exercise powers of a redevelopment agency pursuant to action of the City Council of the City of
Chula Vista (the "City"); and
WHEREAS, the Agency and the City have caused to be executed and delivered the City's
Certificates of Participation (Capital Improvements Project) 1987 Series A in the aggregate principal
amount of $9,835,000 (the "1987 Certificates") for the purpose of acquiring a leasehold interest in
land for use for public parking (the "Leased Parcel"), each certificate representing a direct,
undivided fractional interest in lease payments made by the City to the Agency under a Lease
Agreement, dated as of September 1, 1987, as amended by that First Amendment to Lease dated as
of June 30, 1992 and that Second Amendment to Lease Agreement, dated as of February 1, 1993, by
and between the City and the Agency, whereby the Agency subleased the Leased Parcel to the City
(the "1987 Lease Agreement"); and
WHEREAS, in connection with the execution and delivery of the 1987 Certificates, the
Leased Parcel was leased to the Agency by Homart Development Co, a Delaware corporation (the
"Developer") pursuant to a Site Lease, dated as of September 1, 1987, as amended by that certain
First Amendment. to Site Lease dated as of June 30, 1992 and that Second Amendment to Site Lease,
dated as of February 1, 1993 (the "1987 Site Lease"); and
WHEREAS, in connection with the execution and delivery of the 1987 Certificates, the City
sub-subleased the Leased Parcel back to the Developer and the Developer agreed to maintain and
repair the Leased Parcel pursuant to an Operating Lease, dated as of September 1, 1987, as amended
by that certain First Amendment to Operating Lease dated as of June 30, 1992 and that Second
Amendment to Operating Lease, dated as of February 1, 1993, by and between the City and the
Developer (the "1987 Operating Lease"); and
WHEREAS, in connection with the execution and delivery of the 1987 Certificates, the City
and the Agency entered into a Cooperation and Reimbursement Agreement, dated as of September 1,
1987, which was amended by that certain First Amendment to Cooperation and Reimbursement
Agreement dated as of February 1, 1993 (the "1987 Reimbursement Agreement"), whereby the
DOCSOC\955801 v9L24036.0028
Agency agreed to reimburse the City for payments made under the 1987 Lease, as amended, from tax
increment revenues available to the Agency from the Town Centre Il Redevelopment Area (the
"Project Area"); and
WHEREAS, the City has previously caused to be executed and delivered the $11,285,000
1993 Refunding Certificates of Participation (Town Centre lI Parking Project) (the "1993A
Certificates"), the proceeds of which were used to prepay the 1987 Certificates and which were
secured by lease payments to be made under and pursuant to the terms the 1987 Lease Agreement as
amended; and
WHEREAS, in connection with the execution and delivery of the 1993A Certificates, the
Developer agreed to continue to perform its obligations under the 1987 Operating Lease in the event
of a default by the City under the 1987 Lease Agreement pursuant to a Recognition and Attornment
Agreement, by and among the Agency, the City; and
WHEREAS, the City has previously caused to be executed and delivered the $3,115,000
1993 Certificates of Participation (Town Centre ll Parking Project--Phase Two) (the "1993B
Certificates") (together, with the 1993A Certificates, the "1993 Certificates"), the proceeds of which
were used to finance the construction of a parking structure located in the Project Area and which
were secured by lease payments under and pursuant to the terms the 1993 Lease Agreement; and
WHEREAS, in connection with the execution and delivery of the 1993B Certificates, the
City and the Agency have heretofore entered into a Lease Agreement, dated as of December 1, 1993
(the "1993 Lease Agreement") pursuant to which the Agency agreed to lease to the City (i) Fire
Station No. 1, (ii) certain land and improvements constituting the Community Development Office
and Legislative Office and (iii) certain land constituting Marina View Park; and
WHEREAS, in order to refinance and defease the 1993 Certificates, the Agency and the City
have determined that it would be in the best interests of the Agency, the City and residents of the
City to authorize the preparation, sale and delivery by the Chula Vista Public Financing Authority
("Finance Authority") of the 2003 Refunding Certificates of Participation (Town Centre Il Parking
Project) in an aggregate principal amount not to exceed $13,000,000 (the "Certificates"), which
Certificates evidence fractional interests in certain lease payments to be made pursuant to a Lease
Agreement between the City and the Financing Authority dated as of June l, 2003.
WHEREAS, in order to refinance the 1993 Lease Agreements and refinance and defease the
1993 Certificates, the Agency desires to enter into two Escrow Agreements, each between the City,
the Agency and BNY Western Trust Company, as Escrow Bank (collectively, the "Escrow
Agreements"); and
WHEREAS, in order to facilitate the execution and delivery of the Certificates, and the
refunding of the 1993 certificates, the Agency desires to do any and all things to execute and deliver
any and all documents which it deems necessary in order to consummate the sale and delivery of the
Certificates and the refunding of the 1993 Certificates.
NOW, THEREFORE, the Agency Board does hereby resolve as follows:
SECTION 1. Recitals. The foregoing Recitals are true and correct and are a substantive
part of this Resolution.
SECTION 2. Certificates. This Board hereby approves the sale and delivery of the
Certificates by the Finance Authority in an aggregate principal amount not to exceed $13,000,000 in
2
DOCSOC\955801 v9~24036.0028
accordance with the terms and provisions of the Trust Agreement. One of the purposes for which the
proceeds of the sale of the Certificates shall be expended is to prepay the 1993 Lease Agreements
and refinance and defease the 1993 Certificates, and the Agency consents to the refinancing.
SECTION 3. Escrow Agreements. The forms of the Escrow Agreements, each dated as of
June 1, 2003 (collectively, the "Escrow Agreements"), each between the City, the Agency and BNY
Western Trust Company, as Escrow Bank, presented to this meeting and on file with the Clerk, are
hereby approved. The Chair, Vice Chair, Executive Director, Treasurer, Secretary and other officers
of the Agency (the "Authorized Officers") are hereby authorized and directed, for and in the name
and on behalf of the Agency, to execute and deliver to the Escrow Bank the Escrow Agreements in
substantially said form, with such changes therein as such Authorized Officer or Authorized Officers
executing such document may require or approve, such approval to be conclusively evidenced by the
execution and delivery thereof.
SECTION 4. Other Actions. The Authorized Officers of the Agency 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 (including documents terminating or
amending the 1987 Reimbursement Agreement and any of the other agreements executed in
connection with the 1987 Certificates and 1993 Certificates and any agreements with General
Growth Properties, as successor to Homart Development Co., or its successors and assigns) in order
to (a) consummate the sale and delivery of the Certificates, and the execution of the Agreements; (b)
cause the continued effectiveness of operating covenants for the benefit of the Agency contained in
the 1987 Operating Lease; and (c) 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.
3
o soc 95 801v0 4036.0028 f /
ADOPTED AND APPROVED this 20th day of May, 2003, by the following vote:
AYES:
NOES:
ABSTENTIONS:
ABSENT:
Chair
Board of Directors
Redevelopment Agency of the City of Chula
Vista
I hereby certify that the foregoing resolution was duly introduced, passed and adopted at the
time and place and by the vote as noted above.
Secretary
Redevelopment Agency of the City of Chula
Vista
APPROVED AS TO FORM
~orney (~ ~
4/
DOC SOC\955801 v9L24036.0028
Stradling Yocca Carlson & Rauth
Draft of 05/07/03
CITY COUNCIL
CITY OF CHULA VISTA
RESOLUTION NO.
RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
CHULA VISTA APPROVING (1) THE SALE AND DELIVERY
BY THE CHULA VISTA FINANCING AUTHORITY OF THE
2003 REFUNDING CERTIFICATES OF PARTICIPATION
(TOW2N CENTRE II PARKING PROJECT) IN A PRINCIPAL
AMOUNT NOT-TO-EXCEED $13,000,000; (2) THE
REFUNDING OF THE CITY'S 1993 CERTIFICATES OF
PARTICIPATION; (3) CERTAIN CITY ACTIONS AND
DOCUMENTS REQUIRED IN CONNECTION THEREWITH;
AND (4) APPROPRIATING $2,250,000 FROM THE GENERAL
FUND TO PREPAY THE CALEASE CAPITAL LEASE
OBLIGATION WITH REIMBURSEMENT TO FOLLOW OUT
OF 2003 CERTIFICATE PROCEEDS
WHEREAS, the City of Chula Vista (the "City") is a municipal corporation and a chartered
city duly organized and existing under and pursuant to the Constitution and laws of the State of
California (the "State"); and
WHEREAS, the City and the Redevelopment Agency of the City of Chula Vista (the
"Agency") have heretofore entered into a Lease Agreement, dated as of March 1, 1993 (the "1993A
Lease Agreement") pursuant to which the Agency agreed to lease to the City certain land; and
WHEREAS, the City and the Agency have heretofore entered into a Lease Agreement, dated
as of December 1, 1993 (the "1993B Lease Agreement") (together, with the 1993A Lease
Agreement, the "1993 Lease Agreements") pursuant to which the Agency agreed to lease to the City
(i) Fire Station No. l, (ii) certain land and improvements constituting the Community Development
Office and Legislative Office and (iii) certain land constituting Marina View Park; and
WHEREAS, the City has heretofore entered into a Master Lease Agreement, dated April 1,
1997, by and between the City and Cal Lease Public Funding Corporation, as supplemented by the
Master Lease Agreement Supplement No. 1, dated as of May 30, 1997 and the Master Lease
Agreement Supplement No. 2, dated as of April 24, 1998 (collectively, the "Equipment Lease"), all
pursuant to which Cai Lease Public Funding Corporation agreed to lease to the City retain equipment
(the "Equipment Lease Assets"); and
WHEREAS, the City has previously caused to be executed and delivered the $11,285,000
1993 Refunding Certificates of Participation (Town Centre Il Parking Project) (the "1993A
Certificates"), which 1993A Certificates were secured by lease payments to be made under and
pursuant to the terms the 1993A Lease Agreement; and
WHEREAS, the City has previously caused to be executed and delivered the $3,115,000
1993 Certificates of Participation (Town Centre II Parking Project--Phase Two) (the "1993B
Certificates") (together, with the 1993A Certificates, the "1993 Certificates"), which 1993B
Certificates were secured by lease payments under and pursuant to the terms the 1993B Lease
Agreement; and
WHEREAS, the City desires to defease and prepay the 1993 Certificates in order to reduce
the City's lease payments; and
WHEREAS, the City desires to prepay the Equipment Lease in order to reduce the City's
lease payments; and
WHEREAS, in order to refinance the 1993 Lease Agreements and defease the 1993
Certificates and prepay the Equipment Lease, the Chula Vista Public Financing Authority, a joint
exercise of powers authority (the "Authority"), and the City have determined that it would be in the
best interests of the Authority, the City and residents of the City to authorize the preparation, sale and
delivery of the 2003 Refunding Certificates of Participation (Town Centre I1 Parking Project) in an
aggregate principal amount not to exceed $13,000,000 (the "Certificates"), which Certificates
evidence fractional interests in certain lease payments to be made pursuant to the Lease (as defined
below); and
WHEREAS, the City expects to prepay the Equipment Lease in the approximate amount of
$2,250,000 from available monies of the City prior to the sale and delivery of the Certificates;
WHEREAS, the City desires to reimburse itself for the cost of any such expenditures made
with respect to prepaying the Equipment Lease from a portion of the proceeds from the sale of the
Certificates;
WHEREAS, in order to facilitate the execution and delivery of the Certificates, the Authority
and the City desire to enter into a Site Lease between the City and the Authority (the "Site Lease")
and a Lease/Purchase Agreement between the City and the Authority (the "Lease"), the forms of
which have been presented to this City Council at the meeting at which this Resolution is being
adopted and pursuant to which the City will under the Site Lease lease certain Property (as defined
therein) to the Authority and under the Lease the Authority will lease the Property to the City;
WHEREAS, the City will pay certain Lease Payments (as defined in the Lease) which will be
pledged to the owners of the Certificates pursuant to a Trust Agreement by and among U.S. Bank
National Association (the "Trustee"), the City and the Authority (the "Trust Agreement"), the form
of which has been presented to this City Council at the meeting at which this Resolution is being
adopted; and
WHEREAS, in order to facilitate the execution and delivery of the Certificates, the City and
Authority desire to enter into a Certificate Purchase Agreement by and among the City, the Authority
and US Bancorp Piper Jaffray (the "Purchase Agreement"); and
WHEREAS, in order to facilitate the execution and delivery of the Certificates, the City
desires to approve and deliver a final Official Statement in the form of the Preliminary Official
Statement which has been presented to this City Council at the meeting at which this Resolution is
being adopted (the "Preliminary Official Statement"); and
WHEREAS, in order to refinance the 1993 Lease Agreements and refinance and defease the
1993 Certificates, the City desires to enter into two Escrow Agreements, each between the City, the
Agency and BNY Western Trust Company, as Escrow Bank (collectively, the "Escrow
Agreements"); and
2
DOCSOC\955796v7X24036.0028 / ~ /~
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
consummation of the financing authorized hereby do exist, have happened and have been performed
in regular and due time, form and manner as required by law, and the City is now duly authorized
and empowered, pursuant to each and every requirement of law, to consummate such financing for
the purpose, in the manner and upon the terms herein provided;
NOW, THEREFORE, it is resolved by the City Council of the City of Chula Vista as
follows:
SECTION 1. Findings. The City Council hereby specifically finds and declares that each of
the statements, findings and determinations of the City set fo?th in the recitals set forth above and in
the preambles of the documents approved herein are true and correct and that the refinancing of the
1993 Certificates and the prepayment and refinancing of the Equipment Lease will result in
significant public benefits for the residents of the City.
SECTION 2. Authorization of Certificates. The City Council hereby expresses its intention
of refinancing the 1993 Lease Agreements and 1993 Certificates and prepaying and refinancing the
Equipment Lease through the preparation, sale and delivery of Certificates in an amount not to
exceed $13,000,000 in accordance with the provisions of the Trust Agreement.
SECTION 3. Reimbursement; Appropriation. The City Council hereby expresses the
intention of the City to reimburse itself with proceeds of the Certificates for the costs of the City of
prepaying the Equipment Lease on or about June l, 2003 in the approximate amount of $2,250,000;
and hereby appropriates $2,250,000 from the General Fund for such purpose.
SECTION 4. Site Lease and Lease. The forms of the Site Lease and Lease presented to this
meeting and on file with the City Clerk (the "Clerk") are 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 Authority the Site Lease and the Lease in substantially the forms on file with the Clerk, with
such changes therein as the Authorized Officer or Authorized Officers executing such documents
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 5. Appointment. U.S. Bank National Association is appointed trustee (the
"Trustee") under the Trust Agreement (defined below).
SECTION 6. Trust Agreement. The form of the 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 Trust Agreement in substantially said form, with such changes therein as the
Authorized Officer or Authorized Officers executing the Trust Agreement may require or approve,
such approval to be conclusively evidenced by the execution and delivery thereof by one or more
such Authorized Officers.
SECTION 7. Assignment Agreement. The Assignment Agreement dated June 1, 2003
between the Trustee and the Authority in the form on file with the Clerk is hereby approved for
execution and delivery by the Authority.
3
DOCSOC\955796v7~24036.0028
SECTION 8. Bond Insurance. The Director of Finance and her designee are hereby
authorized to (i) solicit bids on a municipal bond insurance policy, (ii) to negotiate the terms of such
policy, (iii) to finalize the form of such policy with a municipal bond insurer and (iv) if it is
determined that the policy will result in interest rate savings for the City, to pay the insurance
premium of such policy from the proceeds of the Certificates.
SECTION 9. Preliminary 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. The Authorized
Officers are 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 executing said document may require or approve, such approval
to be conclusively evidenced by the execution and delivery thereof.
SECTION 10. Purchase Agreement. The form of the Certificate Purchase Agreement (the
"Purchase Agreement"), by and among the City, the Authority and US Bancorp Piper Jaffray (the
"Underwriter") presented to this meeting and on file with the Clerk and the sale of the Certificates to
the Underwriter pursuant thereto upon the terms and conditions set forth therein is hereby approved,
and subject to such approval and subject to the provisions hereof, the Authorized Officers are each
hereby authorized and directed to evidence the City's acceptance of the offers made by the Purchase
Agreement by executing and delivering the Purchase Agreement in said form with such changes
therein as the Authorized Officer or Authorized Officers executing the same may approve and such
matters as are authorized by this Resolution, such approval to be conclusively evidenced by the
execution and delivery thereof by any one of the Authorized Officers; provided, however, that the
Certificate Purchase Agreement shall be executed only if th~/ principal amount of the Certificates
does not exceed $13,000,000 and the Underwriter's discount (exclusive of original issue discount)
does not exceed 1% of the principal amount of the Certificates and the execution and delivery of the
Certificates results in interest savings to the City.
SECTION 11. Continuing Disclosure Agreement. The form of the Continuing Disclosure
Agreement between the City and the Trustee (the "Continuing Disclosure 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 Trustee the Continuing Disclosure Agreement in substantially said form, with such changes
therein as the Authorized Officer or Authorized Officers executing such document may require or
approve, such approval to be conclusively evidenced by the execution and delivery thereof.
SECT1ON 12. Escrow Agreements. The forms of the Escrow Agreements, each dated as of
June I, 2003 (collectively, the "Escrow Agreements"), each between the City, the Agency and BNY
Western Trust Company, as Escrow Bank, presented to this meeting and on file with the Clerk, are
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 Escrow Bank the Escrow Agreements in
substantially said form, with such changes therein as such Authorized Officer or Authorized Officers
executing such document may require or approve, such approval to be conclusively evidenced by the
execution and delivery thereof.
SECTION 13. Attestations. The Clerk, or such other persons as may have been designated
by the City Manager, 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
4
DOCSOC\955796v7X24036.0028 /_ [ ~
of the City, as may be required or appropriate in connection with the execution and delivery of the
Lease, the Trust Agreement, the Continuing Disclosure Agreement, the Site Lease, the Certificate
Purchase Agreement, the Escrow 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 documents terminating or
amending any of the agreements executed in connection with the 1993 Certificates, documents
relating to a municipal bond insurance policy, a debt service surety bond, or other form of credit
enhancement) in order to consummate the sale, execution and delivery of the Certificates and
otherwise to carry out, give effect to and comply ~vith the terms and intent of this Resolution, the
Certificates, the Lease, the Trust Agreement, the Continuing Disclosure Agreement, the Site Lease,
the Escrow Agreements, the Preliminary Official Statement, and the Official Statement. Such
actions heretofore taken by such officers or designees are hereby ratified, confirmed and approved.
In the event that it is determined by the Director of Finance, or her designee, that there are limitations
or restrictions on the ability of the City to lease any portion of the Property as contemplated by the
Site Lease and the Lease or that only a portion of the Property is required to effect the execution and
delivery of the Certificates, the Director of Finance, or her designee, may designate the portion of the
Property to be leased and the other real property of the City to be leased pursuant to the Site Lease
and the Lease with such designation to be conclusively evidenced by the execution and delivery of
the Site Lease and the Lease by one or more of the Authorized Officers.
SECTION 15. Effect. This Resolution shall take effect immediately upon its passage.
PASSED AND ADOPTED this 20th day of May, 2003, by the following vote:
AYES:
NOES:
ABSTENTIONS:
ABSENT:
Mayor
City of Chula Vista
I hereby certify that the foregoing resolution was duly introduced, passed and adopted at the
time and place and by the vote as noted above.
Clerk of the City Council
City of Chula Vista
APPROVED AS TO FORM
DO1~24036.0028 ~ (J
Stradling Yocca Carlson & Rauth
Draft 5/7/03
PRELIMINARY OFFICIAL STATEMENT DATED AS OF
,2003
NEW ISSUE - BOOK-ENTRY-ONLY RATINGS: Moody's:
S&P:
(See "RATINGS" herein)
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 the accuracy of certain representations and compliance with certain
Certificates is exempt/rom State of California personal income tax. See 'TAX EXEMPTION" herein.
$~3,000,o00'
CITY OF CHULA VISTA
2003 Refunding Certificates of Participation
(Town Centre II Parking Project)
Evidencing Undivided Proportionate Interests in Lease Payments to be Made by the
CITY OF CHULA VISTA, CALIFORNIA
Pursuant to a Lease Agreement with the
Chula Vista Public Financing Authority
Dated: Date of Delivery Due: September l, as shown on the inside cover
The City of Chula Vista (the "City") 2003 Certificates of Participation (Town Centre 11 Parking Project) (the "Certificates") are being
interests of the Owners in the lease payments (the "Lease Payments") to be made by the City to the Chula Vista Public Financing Authority (the
"Authority"), under the Lease/Purchase Agreement, dated as of June I, 2003 by and between the City and the Authority (the "Lease Agreement")
CERTIFICATES -- General" herein.
The Certificates will be executed and delivered in book-entry form only and, when delivered, will be registered in the name of Cede & Co.,
as nominee of The Depository Trast Company, New York, New York ("DTC'), which will act as securities depository for the Certificates. Individual
distribute such payments to the beneficial owners of the Certificates. See Append x H--"DTC Book-Entry System" herein.
[LOGO]
The purchase of the Certificates involves certain risks which should be considered by investors. See "RISK FACTORS" for a discussion of
legality by Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California, Special Counsel, and certain other conditions.
Certain legal matters will be passed upon for the City and the Authority by the City Attorney and by Stradling Yocca Carlson & Rauth, a Professional
Dated: ,2003
* Preliminary, subject to change
/
Stradling Yocca Carlson & Rauth
Draft 5/7/03
US BANCORP PIPER JAFFRAY
DOCSOC\954737v7~24036.0028
Maturity Schedule
$ Serial Certificates
Maturity Principal Maturi~ Principal
(September l) Amount Interest Rate Yield/Price (September 1) Amount Interest Rate Yield/Price
DOCSOC\954737v7~24036.0028 f~ ~
CITY OF CHULA VISTA
COUNTY OF SAN DIEGO, CALIFORNIA
CITY COUNCIL
Stephen C. Padilla, Mayor
Patty Davis
John McCam~
Jerry Rindone
Mary Salas
CITY OFFICIALS
David D. Rowlands Jr., City Manager
Sid Morris, Assistant City Manager
George Krempl, Assistant City Manager
Cheryl Fruchter, Assistant City Manager
Maria Kachadoorian, Director of Finance
£aurie Madigan, Director of Community Development
~Inn Moore, City Attorney
Susan Bigelow, City Clerk
CHULA VISTA PUBLIC FINANCING AUTHORITY
GOVERNING BOARD
Stephen C. Padilla - Chair
Patty Davis
John McCann
Jerry Rindone
Mary Salas
David D. Rowlands Jr., Executive Director
Susan Bigelow, Secretary
SPECIAL COUNSEL AND DISCLOSURE COUNSEL
Stmdling Yocca Carlson & Rauth,
a Professional Corporation
Newport Beach, California
TRUSTEE
U.S. Bank National Association
Los Angeles, California
VERIFICATION AGENT
Grant Thorton
Minneapolis, Minnesota
/- 2__0
DOCSOC\954737v7~24036.0028
No dealer, broker, salesperson o r other person has been authorized b y t he City o r t he Authority t o give a ny
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 representations must not be relied upon as having been
authorized by the City or the Authority. 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.
This Official Statement is not to be construed as a contract with the purchasers or o~vners of the Certificates.
Statements contained in this Official Statement which involve estimates, forecasts or matters of opinion, whether or not
expressly so described herein, are intended solely as such and are not to be construed as representations of fact.
This Official Statement and the information contained herein are subject to completion or amendment without
notice and neither delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create
any implication that them has been no change in the affairs of the City or any other parties described herein since the date
hereof. These securities may not be sold nor may an offer to buy be accepted prior to the time the Official Statement is
delivered in final form. This Official Statement is being submitted in connection with the sale of the Certificates referred
to herein and may not be reproduced or used, in whole or in part, for any other purpose, unless authorized in writing by the
City. All summaries of documents and laws are made subject to the provisions thereof and do not purport to be complete
statements of any or all such provisions.
The Underwriter has provided the following sentence for inclusion in this Official Statement:
The Underwriter has reviewed the information in this Official Statement in accordance with, and as 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.
Certain statements included or incorporated by reference in this Official Statement constitute "forward-looking
statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995, Section 21E of the
United States Securities Exchange Act of 1934, as amended, and Section 27A of the United States Securities Act of 1933,
as amended. Such statements are generally identifiable by the terminology used such as a "plan," "expect," "estimate,"
"project," "budget" or similar words. Such forward-looking statements include, but are not limited to certain statements
contained in the information under the captions "CITY FINANCIAL INFORMATION."
THE ACHIEVEMENT OF CERTAIN RESULTS OR OTHER EXPECTATIONS CONTAINED IN
SUCH FORWARD-LOOKING STATEMENTS 1NVOLVE KNOWN AND UNKNOWN RISKS,
UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE ACTUAL RESULTS, PERFORMANCE OR
ACHIEVEMENTS DESCRIBED TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS,
PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING
STATEMENTS. THE CITY DOES NOT PLAN TO ISSUE ANY UPDATES OR REVISIONS TO THE
FORWARD-LOOKING STATEMENTS SET FORTH IN THIS OFFICIAL STATEMENT. IN EVALUATING
SUCH STATEMENTS, POTENTIAL INVESTORS SHOULD SPECIFICALLY CONSIDER THE VARIOUS
FACTORS WHICH COULD CAUSE ACTUAL EVENTS OR RESULTS TO DIFFER MATERIALLY FROM
THOSE INDICATED BY SUCH FORWARD-LOOKING STATEMENTS.
1N CONNECTION WITH THE OFFERING OF THE CERTIFICATES, THE UNDERWRITER MAY
OVERALLOT OR EFFECT TRANSACTIONS THAT 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 DEALER
BANKS AND BANKS ACTING AS AGENT AND OTHERS AT PRICES LOWER THAN THE PUBLIC
OFFERING PRICE STATED ON THE COVER PAGE HEREOF AND SAID PUBLIC OFFERING PRICE 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 EXEMPTION CONTAINED IN SUCH ACT AND HAVE NOT BEEN
REGISTERED OR QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE.
DOCSOC\954737v7~24036.0028
SECURITIES PRODUCTS AND SERVICES ARE OFFERED THROUGH U.S. BANCORP
PIPER JAFFRAY INC., MEMBER SIPC AND NYSE, INC. AND A SUBSIDIARY OF U.S.
BANCORP.
NOT FDIC INSURED NO BANK GUARANTEE MAY LOSE VALUE
f--
DOCSOC\954737v7~24036.0028
TABLE OF CONTENTS
PAGE
INTRODUCTION ......................................................................................................................................................... 1
General ............................................................................................................................................................. 1
Security and Sources of Payment for the Certificates ...................................................................................... 1
Certificate Insumnce ........................................................................................................................................ 2
The Certificates ................................................................................................................................................ 2
Prepayment ....................................................................................................................................................... 2
Tax Exemption ................................................................................................................................................. 2
Continuing Disclosure ...................................................................................................................................... 3
Professionals Involved in the Offering ............................................................................................................. 3
Certificate Owners' Risks ................................................................................................................................ 3
Miscellaneous ................................................................................................................................................... 3
ESTIMATED SOURCES AND USES OF FUNDS ..................................................................................................... 4
THE REFUNDING PLAN ............................................................................................................................................ 4
THE LEASED PROPERTIES ....................................................................................................................................... 5
Release/Substitution of Leased Properties ....................................................................................................... 5
THE CERTIFICATES ................................................................................................................................................... 5
General ............................................................................................................................................................. 5
Prepayment ....................................................................................................................................................... 6
Prepayment Procedures .................................................................................................................................... 6
Partial Prepayment ........................................................................................................................................... 7
SECURITY AND SOURCES OF PAYMENT FOR THE CERTIFICATES ............................................................... 7
General ............................................................................................................................................................. 7
Covenant to Appropriate Funds for Lease Payments ....................................................................................... 8
Abatement ........................................................................................................................................................ 8
Lease Payments ................................................................................................................................................ 8
Action on Default ............................................................................................................................................. 9
Reserve Fund .................................................................................................................................................... 9
Additional Payments ........................................................................................................................................ 9
Insurance ........................................................................................................................................................ 10
CERTIFICATE PAYMENT SCHEDULE .................................................................................................................. 10
CERTIFICATE INSURANCE ................................................................................. . .................................................. 11
The Insurance Policy ................................................................................................................. 11
Insurer ............................................................................................................................................................ 12
Insurer Information ........................................................................................................................................ 12
CITY FINANCIAL INFORMATION ......................................................................................................................... 12
Accounting and Financial Reporting .............................................................................................................. 12
Budget Procedure, Current Budget and Historical Budget Information ......................................................... 12
Comparative Change in Fund Balance of the City General Fund .................................................................. 15
Comparative General Fund Balance Sheets of the City ................................................................................. 16
Major Revenues .............................................................................................................................................. 17
Property Taxes ................................................................................................................................................ 17
Principal Taxpayers ........................................................................................................................................ 20
Indebtedness ................................................................................................................................................... 21
City Investment Policy ................................................................................................................................... 23
, I -2_8
DOCSOC\954737v%24036.0028
TABLE OF CONTENTS
PAGE
Insurance ........................................................................................................................................................ 25
LIMITATIONS ON TAX REVENUES ...................................................................................................................... 25
Article XIII A of the California Constitution ................................................................................................. 25
Article XIII B of the California Constitution ................................................................................................. 27
Article XIIIC and Article XIIID of thc State Constitution ............................................................................. 27
Proposition 62 ................................................................................................................................................ 27
Unitary Property ............................................................................................................................................. 28
Future Initiatives ............................................................................................................................................ 28
RISK FACTORS ......................................................................................................................................................... 28
Not a Pledge of Taxes .................................................................................................................................... 28
Additional Obligations o£thc City ................................................................................................................. 29
Default ............................................................................................................................................................ 29
Release or Substitution of Property ................................................................................................................ 30
Abatement ...................................................................................................................................................... 30
Earthquakes .................................................................................................................................................... 31
Limitations on Remedies; Bankruptcy ........................................................................................................... 31
Economic Conditions in California ................................................................................................................ 31
Impact of State Budget on City ...................................................................................................................... 34
THE AUTHORITY ..................................................................................................................................................... 34
TAX EXEMPTION ..................................................................................................................................................... 34
CERTAIN LEGAL MATTERS .................................................................................................................................. 36
LITIGATION .............................................................................................................................................................. 36
RATINGS .................................................................................................................................................................... 36
UNDERWRITING ...................................................................................................................................................... 37
CONTINUING DISCLOSURE ................................................................................................................................... 37
VERIFICATION OF MATHEMATICAL COMPUTATIONS .................................................................................. 37
FINANCIAL STATEMENTS OF THE CITY ............................................................................................................ 37
MISCELLANEOUS .................................................................................................................................................... 38
APPENDIX A ECONOMIC AND DEMOGRAPHIC INFORMATION REGARDING THE
CITY OF CHULA VISTA ............................................................................................. A-1
APPENDIX B THE CITY OF CHULA VISTA AUDITED FINANCIAL STATEMENTS FOR
THE FISCAL YEAR ENDED JUNE 30, 2001 .............................................................. B-1
APPENDIX C SUMMARY OF PRINCIPAL LEGAL DOCUMENTS ................................................ C-1
APPENDIX D FORM OF LEGAL OPINION ....................................................................................... D-I
APPENDIX E SPECIMEN MUNICIPAL BOND INSURANCE POLICY ........................................... E-1
APPENDIX F CITY INVESTMENT POLICY ...................................................................................... F-1
APPENDIX G FORM OF CONTINUING DISCLOSURE AGREEMENT .......................................... G-1
APPENDIX H DTC BOOK-ENTRY SYSTEM .................................................................................... H-1
DOC SOC\954737v7X24036.0028 ii [ ~
$13,000,000'
CITY OF CHULA VISTA
2003 Refunding Certificates of Participation
(Town Centre II Parking Project)
Evidencing Proportionate Interests in Lease Payments to be Made by the
CITY OF CHULA VISTA, CALIFORNIA
Pursuant to a Lease Agreement with the
CHULA VISTA PUBLIC FINANCING AUTHORITY
INTRODUCTION
This introduction contains only a brief summary of certain of the terms of the Certificates being
offered, and a brief description of the Official Statement. All statements contained in this introduction are
qualified in their entirety by reference to the entire Official Statement. References to, and summaries of,
provisions of the Constitution and laws of the State of California and any documents referred to herein do not
purport to be complete and such references are qualified in their entirety by reference to the complete
provisions. Capitalized terms used in this OJficial Statement and not defined elsewhere herein have the
meanings given such terms in Appendix C -- "SUMMARY OF PRINCIPAL LEGAL DOCUMENTS" herein.
This Official Statement speaks only as o fits date, and the information contained herein is subject to change.
General
This Official Statement, including the cover page and the Appendices attached hereto (the "Official
Statement"), provides certain information concerning the execution and delivery of the City of Chula Vista
2003 Certificates of Participation (the "Certificates") in an aggregate principal amount of $13,000,000.* The
Certificates will be executed and delivered pursuant to a Trust Agreement, dated as of June 1, 2003 (the "Trust
Agreement"), by and among the City of Chula Vista (the "City"), the Chula Vista Public Financing Authority
(the "Authority") and U.S. Bank National Association, as trustee (the "Trustee"). The Certificates represent
proportionate undivided interests of the registered owners thereof (the "Owners") in the Lease Payments to be
made by the City to the Authority under that certain Lease/Purchase Agreement, dated as of June 1, 2003 (the
"Lease Agreement"), by and between the Agency, as lessor, and the City, as lessee. See "SECURITY AND
SOURCES O F PAYMENT FOR T HE CERTIFICATES --- Lease Payments." T he Certificates a re being
delivered to (i) refinance the City's lease obligations entered into in connection with the execution and delivery
of the 1993 Certificates, (ii) prepay the Equipment Lease; (iii) finance a reserve account for the Certificates,
and (iv) pay the costs of delivery incurred in connection with the execution and delivery of the Certificates.
See "THE REFUNDING PLAN" herein. The City and the Leased Properties are located in the Cotmty of San
Diego (the "County").
Security and Sources of Payment for the Certificates
The Certificates are being executed and delivered pursuant to the Trust Agreement. The City will
lease certain real property (referred to herein as the "Leased Properties") to the Authority pursuant to a Site
Lease between the City as lessor, and the Authority, as lessee, dated as of June 1, 2003 (the "Site Lease").
Under the Lease Agreement, the Agency will lease back to the City the Leased Properties. The City is
required under the Lease Agreement to pay Lease Payments for the use and possession of the Leased
Properties, as further described under the caption "THE LEASED PROPERTIES" herein. The City is also
required to pay any taxes and assessments and the cost of maintenance and repair of the Leased Properties.
Pursuant to an Assignment Agreement, dated as of June 1, 2003 (the "Assignment Agreement"), by
and between t he Authority and t he Trustee, t he Authohty w ill assign t o t he Trustee, f or t he benefit o f t he
* Preliminary, subject to change
DOC SOC\954737v7~24036.0028
Owners, substantially all of its rights under the Lease Agreement, including its rights to receive and collect
Lease Payments and prepayments from the City under the Lease Agreement and rtghts 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.
The Certificates evidence proportionate undivided interests in the right to receive Lease Payments and
prepayments thereof to be made by the City to the Authority under the Lease Agreement. The Lease Payments
are designed t o pay, w hen due, t he principal of a nd interest represented b y t he Certificates. T he City h as
covenanted in the Lease Agreement that it will take such action as may be necessary to include the Lease
Payments and other payments due under the Lease Agreement in its annual budgets anti to make the necessary
annual appropriations therefor. The City's obligation to make Lease Payments is subject to complete or partial
abatement in the event of the taking of, damage to or loss of use and possession of all or a portion of the
Leased Properties. See "RISK FACTORS -- Abatement" herein.
The obligation of the City to make 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. Neither the Certificates nor the obligation of the City to make Lease
Payments constitutes an indebtedness of the Authority, the City, the State of California or any of its
political subdivisions within the meaning of any constitutional or statutory debt limitation or restriction.
Certificate Insurance
Payment of the principal of and interest represented by the Certificates when due will be insured by a
financial guaranty insurance policy (the "Policy") to be issued by (the "Insurer")
simultaneously with the delivery of the Certificates. See "CERTIFICATE INSURANCE" herein.
The Certificates
Interest represented by the Certificates is payable semiannually on March 1 and September 1 of each
year, commencing on September 1, 2003 (each an "Interest Payment Date"). See "THE CERTIFICATES --
General" herein. The Certificates will be executed and delivered in book-entry form only and, when delivered,
will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New
York ("DTC"), which will act as securities depository for the Certificates. Individual purchases of the
Certificates will be made in book-entry form only. Purchasers of the Certificates will not receive certificates
representing their ownership interests in the Certificates purchased. The Certificates will be executed and
delivered in the principal amount of $5,000 and integral multiples thereof. Principal, premium, if any, and
interest payments due with respect to the Certificates are payable directly to DTC by the Trustee. Upon receipt
of payments of principal, premium, if any, and interest, DTC is to distribute such payments to the participants
in the DTC system who, in turn, are to disburse such payments to the beneficial owners of the Certificates, all
in accordance with DTC's procedures. Neither the City nor the Trustee is responsible for DTC's distribution
of payments to its participants or by its participants to the beneficial owners. See "THE CERTIFICATES --
General" and Appendix H -- "DTC BOOK-ENTRY SYSTEM" heroin.
Prepayment
The Certificates are subject to extraordinary and optional prepayment prior to maturity, as described
herein. See "THE CERTIFICATES -- Prepayment" herein.
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
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DOCSOC\954737v7~24036.0028
assuming certain representations and compliance with certain covenants and requirements described herein, the
interest (and original issue discount) due ~vith 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 "TAX EXEMPTION" herein.
Continuing Disclosure
The City has covenanted for the benefit of the holders and beneficial owners of the Certificates to
provide, or cause to be provided, to each nationally recognized municipal securities information repository and
any public or private repository or entity designated by the State as a state repository for purposes of
Rule 15c2-12(b)(5) (the "Rule") adopted by the Securities and Exchange Commission (each, a "Repository")
certain annual financial information and operating data and, in a timely manner, notice of certain material
events. These covenants have been made in order to assist the Underwriter in complying with the Rule. See
"CONTINUING DISCLOSURE" herein for a descriphon of the specific nature of the annual report and
notices of material events and a summary description of the terms of the disclosure agreement pursuant to
which such reports are to be made. The City has never failed to comply in all material respects with any
previous undertakings with regard to the Rule.
Professionals Involved in the Offering
U.S. Bank National Association, Los Angeles, California, will act as Trustee with respect to the
Certificates. The Certificates will be delivered subject to the approval as to their legality by Stradling Yocca
Carlson & Rauth, a Professional Corporation, Newport Beach, California, Special Counsel. Certain legal
matters will be passed upon for the Underwriter by Harper & Burns, L.L.P., Orange, California, Underwriter's
Counsel, and for the City and the Authority by the City Attorney and by Stradling Yocca Carlson & Rauth, a
Professional Corporation, Newport Beach, California, Disclosure Counsel. The City's financial statements for
the fiscal year ended June 30, 2002 included as Appendix B hereto have been audited by Caporicci & Larson,
Certified Public Accountants, Costa Mesa, Califomia (the "Auditor"). See Appendix B -- "THE CITY OF
CHULA VISTA AUDITED FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30,
2002" herein. The Auditor has not performed any audit of the financial condition of the City subsequent to the
date of its audit. See "FINANCIAL STATEMENTS OF THE CITY."
Certificate Owners' Risks
Certain events could affect thc ability of thc City to make the Lease Payments when due. See "RISK
FACTORS" for a discussion of certain factors that should be considered, in addition to other matters set forth
herein, in evaluating an investment in the Certificates.
Miscellaneous
It is anticipated that the Certificates in book-entry form will be available for delivery to DTC on or
about ,2003 (the "Delivery Date").
Thc description herein of the Trust Agreement, the Lease Agreement, the Site Lease, the Assignment
Agreement and any other agreements relating to the Certificates arc qualified in their entirety by reference to
such documents, and the descriptions herein of the Certificates are qualified in their entirety by the form
thereof and the information with respect thereto included in thc aforementioned documents. See Appendix C
--"SUMMARY OF PRINCIPAL LEGAL DOCUMENTS" herein. Copies o£the documents are on file and
available for inspection at the offices of the Trustee at 550 South Hope Street, Suite 500, Los Angeles,
California 90071, Attention: Corporate Trust Services.
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DOCSOC5954737v7~24036.0028 /r -- ~ ~7
All capitalized terms used in this Official Statement and not otherwise defined herein have the
meanings given such terms in Appendix C -- "SUMMARY OF PRINCIPAL LEGAL DOCUMENTS" herein.
The information and expressions of opinion herein speak only as of their date and are subject to
change without notice. Neither the delivery of this Official Statement nor any sale made hereunder nor any
future use of this Official Statement shall, under any circumstances, create any implication that there has been
no change in the affairs of the City since the date hereof.
The presentation of information, including tables of receipt of revenues, is intended to show recent
historical information and is not intended to indicate future or continuing trends in the financial position or
other affairs of the City. No representation is made that past experience, as it might be shown by such
financial and other information, will necessarily continue or be repeated in the future.
ESTIMATED SOURCES AND USES OF FUNDS
The following table summarizes the estimated sources and uses of Certificate proceeds:
Sources of Funds
Par Amount of Certificates $
Net Original Issue Premium/[Discount]
Transferred Moneys°)
Total Sources $
Uses of Funds
Prepayment Fund $
Escrow Fund
Reserve Fund
Costs of Delivery(2)
City Reimbursement(3)
Total Uses $
o) From funds and accounts created with respect to the 1993 Certificates.
(2) Includes underwriting discount, Special Counsel fees, printing costs, rating agency fees, Certificate insurance premium and
other issuance costs.
(3) The City will prepay the Equipment Lease on June 1, 2003 with other funds and will be reimbursed with proceeds of the
Certificates for the amount prepaid in the Equipment Lease.
THE REFUNDING PLAN
A portion of the proceeds from the sale of the Certificates, together with interest to be earned thereon,
will be used to refund the outstanding $11,285,000 principal balance of the City's 1993 Refunding Certificates
of Participation (Town Centre II Parking Project) (the "1993A Certificates"), and the outstanding $3,115,000
principal balance of the City's 1993 Certificates of Participation (Town Centre II Parking Project -
Phase Two) (the "1993B Certificates") (collectively, the "I993 Certificates"). A portion of the proceeds of the
Certificates will also be used to reimburse the City for amounts that it advanced to prepay the City's obligation
under that certain Master Equipment Lease Agreement, dated as of May 30, 1997, by and between the City and
CalLease Public Funding Corporation, as supplemented, (thc "Equipment Lease") (together, with the 1993
Certificates, the "Refunded Obligations").
Under the refunding plan, the City will enter into two Escrow Agreements, each dated as of June 1,
2003, and each by and between the City, the Redevelopment Agency of the City of Chula Vista (the
"Agency") and BNY Western Trast Company (the "Escrow Bank"). One Escrow Agreement will relate to the
1993A Certificates and the second to the 1993B Certificates. An irrevocable escrow fund will be established
under each Escrow Agreement (together the "Escrow Funds"). The moneys held by the Escrow Bank will be
sufficient to prepay and defease the 1993 Certificates. Moneys in the Escrow Funds will be invested pursuant
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DOCSOC\954737v7~24036.0028 f ~ ~ ~
to instructions of the City. Moneys on deposit in the Escrow Funds will be held as cash or invested solely in
non-callable, direct general obligations of the United States of America (including obligations issued or held in
book entry form on the books of the Department of the Treasury of the United States of America) (the
"Escrowed Federal Securities"). T he c ash a nd Escrowed Federal Securities i n e ach Escrow Fund, a nd t he
interest accrued with respect thereto, will be held by the Escrow Bank on behalf of the City and for the benefit
of the owners of the series of the 1993 Certificates for which such Escrow Fund was established and will be
applied to prepay the applicable outstanding series of the 1993 Certificates, in whole, on
2003. Upon the establishment of the Escrow Funds as described above, the lien of the trust agreements
pursuant to which the 1993 Certificates were executed and delivered and the proceedings pursuant to which the
1993 Certificates were authorized, executed and delivered wilI cease, terminate and become void with respect
to the 1993 Certificates, except for the rights of the owners of the 1993 Certificates to payments from the
applicable Escrow Fund. Upon the delivery of the Certificates, Grant Thorton (the "Verification Agent"), will
deliver a report verifying the sufficiency of the moneys deposited in the Escrow Funds to defease the 1993
Certificates. See "VERIFICATION OF MATHEMATICAL COMPUTATIONS" herein.
TIlE LEASED PROPERTIES
At the time of the delivery of the Certificates, the Leased Properties will consist of the following
facilities located within the City (the "Leased Properties").
Main Library. The main library is located at 365 F Street in the City. Built in 1976, the main library
consists of a bi-level building of approximately 55,000 square feet. In addition to housing over 260,000
volumes, the library contains a 150-seat auditorium and a computer lab.
South Chula Vista Branch Library. The South Chula Vista Branch is located at 389 Orange Avenue
in the City. Built in 1988, the library building consists of approximately 37,000 square feet, housing over
180,000 volumes. The library also houses a caf6, bookstore, art gallery and courtyard gardens.
Otay Recreation Center. The Otay Recreation Center, built in 1999, is a 15,000 square foot recreation
center located at 3554 Main Street in the City.
Release/Substitution of Leased Properties
The Leased Properties are subject to change in whole or in part from time to time under the
circumstances permitted in the Lease Agreement. See "SECURITY AND SOURCES OF PAYMENT FOR
THE CERTIFICATES Substitution of Leased Properties" herein.
THE CERTIFICATES
General
The Certificates will be executed and delivered in the form of fully registered Certificates in principal
amounts of $5,000 each or any integral multiple thereofi The Certificates will be dated their date of delivery
and mature on September 1 in the years set forth on the inside cover page hereof. The Certificates will be
payable with respect to interest on March 1 and September 1 of each year, commencing on September 1, 2003
at the rates of interest for each maturity set forth on the inside front cover page hereof.
The Certificates will be executed and delivered in book-entry form only and, when delivered, will be
registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York
("DTC"), which will act as securities depository for the Certificates. Individual purchases of the Certificates
will be made in book-entry form only. Purchasers of the Certificates will not receive certificates representing
their ownership interests in the Certificates purchased. Principal, premium, if any, and interest payments due
with respect to the Certificates are payable directly to DTC by the Trostee. Upon receipt of payments of
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DOCSOC\954737v7X24036.0028 /~
principal, premium, if any, and interest, DTC is to distribute such payments to its participants who, in turn, are
to distribute such payments to the beneficial owners of the Certificates. See Appendix H -- "DTC BOOK-
ENTRY SYSTEM" herein.
Prepayment
Extraordinary Prepayment The Certificates a re subject t o p repayment, without premium, p riot t o
their respective maturity dates on any date, in whole or in part, from Net Proceeds which the Trustee transfers
to the Prepayment Fund as provided in the Lease Agreement at least 45 days prior to the date fixed for
prepayment, at a prepayment price equal to the principal amount thereof together with the accmed interest to
the date fixed for prepayment.
Optional Prepayment. The Certificates maturing on or after September 1, __ are subject to
prepayment prior to maturity in whole or in part on any date on or after September 1, __ at the option of the
City, in the event the City exercises its option under the Lease Agreement to prepay all or a portion of the
principal component of the Lease Payments, at the prepayment price (expressed as a percentage of the
principal component to be prepaid), plus accrued interest to the date fixed for prepayment, as follows:
Prepayment Periods Prepayment Price
September 1, __ through August 31, __ %
September 1, __ through August 31, __ __%
September 1, __ and thereafter %
Prepayment Procedures
Whenever provision is made for the optional prepayment of Certificates and less than all Outstanding
Certificates are called for 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, the Trustee will select Certificates for prepayment pro rata among mattmties and by lot within any
mattmty and for mandatory sinking account prepayment by lot. Certificates may only be redeemed in $5,000
principal amounts, or any integral multiple thereof.
Notice of prepayment will be mailed by first-class mail, postage prepaid, not less than 30 nor more
than 60 days prior to the prepayment date to the respective Owners of any Certificates designated for
prepayment at their addresses appearing on the Certificate registration books, and will be sent by first class
mail o r delivery service, postage p repaid, t o t he Municipal Securities D epositories (as defined i n t he T rust
Agreement) and to the Information Services (as defined in the Trust Agreement) which the City will designate
to the Trustee. Neither failure to receive such notice nor any defect in any notice so mailed will affect the
sufficiency of the proceedings for the prepayment of such Certificates. Such notice will specify: (a) the
prepayment date, (b) the prepayment price, (c) if less than all of the Outstanding Certificates are to be prepaid,
the Certificate numbers (and in the case of partial prepayment, the respective principal amounts), (d)the
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 of the Certificates, (g) any other descriptive information
regarding the Certificates needed to identify accurately the Certificates being prepaid. Such notice will further
state that on the specified date there will 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 will cease to accrue and be payable.
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 H -- "DTC
BOOK-ENTRY SYSTEM" herein.
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DOCSOC\954737v7~24036.0028
Notice having been given to the Owners of any Certificates being prepaid, 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 will become due and payable on the date of prepayment, and upon
presentation and surrender thereof at the Principal Office of the Trustee such Certificates will be paid at the
prepayment price with respect thereto, plus interest accrued and unpaid to the date of prepayment.
If, on the date of prepayment moneys for the prepayment of all the Certificates to be prepaid, together
with interest to the date of prepayment, are held by the Trustee so as to be available therefor on such date of
prepayment, and, if notice of prepayment thereof has been given as described above, then, from and after the
date of prepayment, interest with respect to the Certificates to be prepaid will cease to accrue and become
payable. All moneys held by or on behalf of the Trustee for the prepayment of Certificates will be held in trust
for the account of the Owners of the Certificates so to be prepaid, without liability for interest thereon.
Partial Prepayment
Upon surrender by the Owner of a Certificate for partial prepayment at the Principal Office of the
Trustee, 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 will 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 to the unprepaid portion of the Certificate surrendered and of the same tenor
and maturity. Such partial prepayment will be valid upon payment of the amount thereby required to be paid
to such Owner, and the City, the Authority and the Trustee will be released and discharged from all liability to
the extent of such payment.
SECURITY AND SOURCES OF PAYMENT FOR THE CERTIFICATES
Neither the Certificates nor the obligation of the City to make Lease Payments constitutes an
obligation of the City for which the City is obligated to levy or pledge, 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 Authority, the City, the State of Califomia or any of its political subdivisions
within the meaning of any constitutional limitation or violates any statutory debt limitation or restriction.
General
Each Certificate represents a proportionate undivided interest in the Lease Payments and prepayments
to be made by the City to the Trustee under the Lease Agreement. The City is obligated to pay Lease
Payments from any source of legally available funds, and has covenanted in the Lease Agreement to include
all Lease Payments coming due in its annual budgets and to make the necessary annual appropriations therefor.
The Authority, pursuant to the Assignment Agreement, has assigned all of its rights under the Lease
Agreement (excepting certain rights as specified therein), including the right to receive Lease Payments and
prepayments, to the Trustee for the benefit of the Owners. By the fifteenth day of each February and August
(if such day is not a Business Day, the next succeeding Business Day), the City must pay to the Trustee a
Lease Payment (to the extent required under the Lease Agreement) which is expected to equal the amount
necessary to pay the principal and interest with respect to the Certificates on the next succeeding Interest
Payment Date.
The City's obligation to make Lease Payments will be abated in whole or in part, to the extent of
substantial interference with use and possession of the Leased Properties arising from damage, destruction,
title defect or taking by eminent domain of the Leased Properties. Abatement will not constitute a default
under the Lease Agreement and the Trustee will not be entitled in such event to pursue remedies against the
City. See "RISK FACTORS -- Abatement" herein.
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Under the Lease Agreement, the City agrees to pay certain taxes, assessments, utility charges, and
insurance premiums charged with respect to the Leased Properties and the Certificates and fees and expenses
of the Tmstee. The City is responsible for repair and maintenance of the Leased Properties during the term of
the Lease Agreement. The City may, at its own expense, in good faith contest such taxes, assessments and
utility and other charges if certain requirements set forth in the Lease Agreement are satisfied, including
obtaining an opinion of counsel that the Leased Properties will not be subjected to loss or forfeiture.
Should the City default under the Lease Agreement, the Trustee, as assignee of the Authority, may
terminate the Lease Agreement and re-lease the Leased Properties or may retain the Lease Agreement and hold
the City liable for all Lease Payments thereunder on an annual basis. Under no circumstances will the Trustee
have the fight to accelerate Lease Payments. The exercise of the remedies provided to the Trustee is subject to
various limitations on the enforcement of remedies against public agencies. See "RISK FACTORS --
Default" herein.
The following sections summarize various provisions of the Lease Agreement and the Trust
Agreement. A more complete description of these provisions and other provisions of the Lease Agreement and
the Trust Agreement are set forth in Appendix C -- "SUMMARY OF PRINCIPAL DOCUMENTS."
Covenant to Appropriate Funds for Lease Payments
The City has covenanted in the Lease Agreement to take such action as may be necessary to include
all Lease Payments in each of its annual budgets and to make the necessary annual appropriations for all such
Lease Payments and Additional Payments (as defined in the Lease Agreement).
Abatement
Lease Payments are to be paid by the City in each rental period for and in consideration of the right to
use and occupy the Leased Properties during each such period. ~ne amount of Lease Payments shall be abated
during any period in which by reason of damage, destruction, title defect or taking by eminent domain there is
substantial interference with the use and occupancy by the City of the Leased Properties or any portion thereof.
See "RISK FACTORS - Eminent Domain" herein. The amount of such abatement shall be determined by the
City, [which determination shall be acceptable to the Insurer,] such that the resulting Lease Payments represent
fair consideration for the use and occupancy of the portions of the Leased Properties not damaged, destroyed,
taken or subject to title defect. Such abatement shall continue for the period commencing with the event
causing the substantial interference with the use and ending with the substantial completion of the work of
repair or reconstruction or restoration of use. In the event of any event of abatement, the Lease Agreement
shall continue in full force and effect and the City waives any right to terminate the Lease Agreement by virtue
of any such abatement. Notwithstanding the foregoing, there shall be no abatement of Lease Payments under
the Lease Agreement to the extent that the proceeds of casualty insurance and rental interruption insurance or
amounts in the Reserve Fund are available to pay Lease Payments which would otherwise be abated.
Lease Payments
Subject to thc provisions of the Lease Agreement regarding loss of use and possession of any portion
of the Leased Properties (see "RISK FACTORS -- Abatement" herein) and prepayment of Lease Payments
(see the provisions relating to prepayment under thc caption "THE CERTIFICATES" above), the City agrees
to pay to the Authority, its successors and assigns, the Lease Payments as annual rental for the use and
possession of the Leased Properties. The Lease Payments are due and payable on February 15 and August 15
of each year (each, a "Lease Payment Date").
Any monies held in the Lease Payment Fund on any Lease Payment Date (other than amounts
resulting from the prepayment of the Lease Payments in part but not in ~vhole pursuant to the Lease Agreement
and other amounts required for payment of past due principal or interest with respect to any Certificates not
8
DOC SOC\954737v7~24036.0028
presented for payment) shall be credited to the payment of Lease Payments due and payable on such Lease
Payment Date.
The Trust Agreement requires that Lease Payments be deposited in the Lease Payment Fund
maintained by the Trustee. Pursuant to the Trust Agreement, on March 1 and September 1 of each year,
commencing September 1, 2003, the Trustee will apply such amounts in the Lease Payment Fund as are
necessary to make interest and principal payments, respectively, represented by the Certificates as the same
become due and payable.
Action on Default
Should the City default under the Lease Agreement, the Trustee, as assignee of the Authority under
the Lease Agreement, may exercise any and all remedies available pursuant to law or granted pursuant to the
Lease Agreement; provided, however, that notwithstanding anything in the Lease Agreement or in the Trust
Agreement to the contrary, there is no right under any circumstances to accelerate the Lease Payments or
otherwise declare any Lease Payments not then in default to be immediately due and payable. The Authority
and the Trustee (as assignee of the Authority) have the right to re-enter or re-let the Leased Properties and the
right to temnnate the Lease Agreement. See "RISK FACTORS--Limited Recourse on Default; No
Acceleration" herein.
For a description of the events of default and permitted remedies of the Trustee (as assignee of the
Authority) contained in the Lease Agreement and the Trust Agreement, see Appendix C "SUMMARY OF
PRINCIPAL LEGAL DOCUMENTS" herein.
Reserve Fund
A Reserve Fund will be established by the Trust Agreement which is to bc maintained in an amount
equal to the least of (i) maximum aggregate annual Lease Payments payable under the Lease Agreement in any
Certificate Year (exclusive of Lease Payments attributable to Certificates that have been dcfeased), (ii) 125%
of the average annual aggregate Lease Payments (in any Certificate Year) then payable under thc Lease
Agreement (exclusive of Lease Payments attributable to Certificates that have been dcfeased), or (iii) 10% of
the face amount of thc Certificates and/or the AdditionaI Certificates, as applicable (less original issue discount
if in excess of two percent of thc stated payment amount at maturity) (thc "Reserve Requirement"). The full
amount available in the Reserve Fund may be used by the Trustee in the event of abatement or a failure by the
City to make Lease Payments when due. In the event that thc Reserve Fund is depleted duc to an abatement,
the City is not obligated under that circumstance to replenish the Reserve Fund.
Interest or income received by thc Trustee on investment of monies 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 thc Reserve Requirement,
subject to the requirement of transfers to the Rebate Fund, such excess shall be transfen'ed to the Lease
Payment Fund on or before February 15 and August 15 of each year.
Additional Payments
Under the Lease Agreement, the City is to pay such amounts ("Additional Payments") as are required
for the payment of all a&ninistrative costs of the Authority relating to the Leased Properties or the Certificates,
including, without limitation, all expenses, compensation and indemnification of the Trustee payable by the
City under the Trust Agreement, taxes of any sort whatsoever payable by the Authority as a result of its
leasehold interest in the Leased Properties or undertaking of the transactions contemplated in the Lease
Agreement or in the Trust Agreement, fees of auditors, accountants, attomeys or engineers, any and all
amounts due to the Insurer and all other necessary administrative costs of the Authority or charges required to
be paid by it in order to comply with the terms of the Certificates or of the Trust Agreement, including
DOCSOC\954737v7&2.4036.0028
premiums on insurance required to be maintained by the Lease Agreement or to indemnify the Authority and
its officers and directors.
Pursuant to the Lease Agreement, the City will obtain an ALTA leasehold title insurance policy (with
Western Regional Exceptions) on the Leased Properties in an amount equal to the aggregate principal
component of unpaid Lease Payments. The Lease Agreement also requires that the City maintain casualty
insurance on the Leased Properties in amount equal to replacement value, less certain deductibles, and, rental
interruption insurance to insure against loss of Lease Payments caused by loss or damage to the Leased
Properties 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 Agreement to obtain a standard comprehensive general public liability and
property damage insurance policy or policies and workers' compensation insurance. See "CITY FINANCIAL
INFORMATION - Insurance" and Appendix C -- "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 Agreement requires
the City to apply the Net Proceeds of any insurance award either to replace or repair the Leased Properties or
to prepay Certificates if certain certifications with respect to the adequacy of the Net Proceeds to make repairs,
and the timing thereof, cannot be made. See Appendix C -- "SUMMARY OF PRINCIPAL LEGAL
DOCUMENTS -- DAMAGE, DESTRUCTION AND EMINENT DOMAIN; USE OF NET PROCEEDS."
The amount of Lease Payments will be abated and Lease Payments due under the Lease Agreement may be
reduced during any period in which by reason of damage, destruction, title defect or taking by eminent domain
there is substantial interference with the City's use and possession of all or part of the Leased Properties. See
"RISK FACTORS -- Abatement" herein.
CERTIFICATE PAYMENT SCHEDULE
Lease Payments are required to be made by the City under the Lease Agreement on or before
February 15 and August 15 of each year for the use and possession of the Leased Properties for the period
commencing as of the date of delivery of the Certificates and terminating on September 1, 2013, or a later date
if such date is extended as provided in the Lease Agreement. The Interest Payment Dates with respect to the
Certificates are March 1 and September 1, commencing September 1, 2003. The aggregate annual amounts of
Certificate payments, comprising interest and principal payable to the Owners on each Interest Payment Date,
are set forth below.
DOC SOC\954737v7L24036.0028
Annual Period
(Ending September 1) Principal Interest Total
Totals
CERTIFICATE INSURANCE
The following information has been furnished by the Insurer for use in this Official Statement. Such
information has not been independently confirmed or verified by the City. No representation is made herein by
the City as to the accuracy or adequacy of such information subsequent to the dale hereof, or that the
information contained and incorporated herein by reference is correct. Reference is made to Appendix E for a
specimen of the Insurer's Financial Guaranty Insurance Policy.
[TO COME]
The Insurance Policy
The following information has been furnished by ("Insurer") for use in this Official
Statement. Reference is made to Appendix E for a specimen of Insurer's policy.
DOCSOC\954737v7X24036.0028
Insurer Information
CITY FINANCIAL INFORMATION
The following is a description of the City's budget process, current budget, historical budget
information, changes in ftmd balance, balance sheets, its major revenues and expenditures, indebtedness,
investments and certain other financial information relating to the City.
The City's Financial Statements along with accompanying notes and opinions from thc Independent
Auditor for the Fiscal Year cndad June 30, 2002, arc set forth in Appendix B -- "THE CITY OF CHULA
VISTA AUDITED FINANCIAL STATEMENTS FOR. THE FISCAL YEAR ENDED JUNE 30, 2002"
herein. The Auditor has not perfonmcd any post-audit of the financial condition of the City subsequent to the
date of its audit. See "FINANCIAL STATEMENTS OF THE CITY."
Accounting and Financial Reporting
The City maintains its accounting records in accordance with Generally Accepted Accounting
Principles (GAAP) and the standards established by thc Governmental Accounting Standards Board (GASB).
On a quarterly basis, a report is prepared for the City Council which reviews fiscal performance for thc Fiscal
Year to date against the budget and recommends any necessary changes. Combined financial statements are
produced following the close of each Fiscal Year.
Thc City Council employs an indapendcnt certified public accountant, who, at such time or times as
specified by the City Council, at least ammally, and at such other times as they determine, examines the
financial statements of thc City in accordance with generally accepted auditing standards, including tests of thc
accounting records and other auditing procedures as such accountant considers necessary. As soon as
practicable, after the end of the Fiscal Year, a final audit and report is submitted by thc indapendent accountant
to the City Council.
Thc accounts of thc City are organized on the basis of funds and accotmt groups, each of which is
considered a separate accounting entity. Thc operations of each fund are accounted for with a separate set of
self-balancing accounts that comprise its assets, liabilities, fund equity, revenues and cxpanditures, or
expenses, as appropriate. Government resources are allocated to and accounted for in individual funds based
upon thc purposes for which they are to be spent and the means by which spending activities are controlled.
The various govcnnmcntal funds are grouped, in the City's annual financial statements, into generic fund types,
which include thc General Funds, Special Revenue Funds, Debt Service Funds and Capital Project Funds.
Thc General Fund is thc general operating fund of the City. It is used to account for all financial
resources except those required to be accounted for in another fund. It is expected that thc Lease Payments
will be paid for from amounts in the General Fund. Tables 1 through 4 below set forth certain historical and
curccnt fiscal year budget information for thc General Fund. Information on the remaining governmantal funds
of thc City as of June 30, 2002 is set forth in Appendix B.
Budget Procedure, Current Budget and Historical Budget Information
Thc Fiscal Year of thc City begins on thc first day of July of each year and ends on the 30th day of
June of thc following year.
12 / - ~
DOCSOC\95,4737vT~24036.0028
At such time as the City Manager determines, each department head must furnish to the City Manager
an estimate of revenues and expenditures for the department for the ensuing Fiscal Year, detailed in such
manner as may be prescribed by the City Manager. In preparing the proposed budget, the City Manager
reviews the estimates, holds conferences thereon with the respective department heads, and revises the
estimates as he/she deems advisable.
Prior to the beginning of each Fiscal Year, the City Manager submits to the City Council the proposed
budget. The City Council determines the time for the holding of a public heating and causes a notice of public
hearing to be published. Not less than ten days prior to the date of the public hearing, copies of the proposed
budget are available for inspection by the public in the office of the City Clerk and at the City Library. During
the public hearing and after its conclusion, the City Council further considers the proposed budget and makes
any revisions thereto that it deems advisable. On or before June 30, of each year, the City Council adopts the
budget with revisions, if any, by the affirmative vote of at least a majority of the total members.
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 $15,000. 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.
13 [ -- ..~ '~
DOCSOC\954737vT~24036.0028
Set forth in Table 1 below are the General Fund budgets as initially adopted for fiscal years 2001-02
and 2002-03. During the course of each fiscal year, the budgets are amended and revised as necessary by the
City Council.
TABLE 1
CITY OF CHULA VISTA
GENERAL FUND BUDGETS
(in 000's)
Adopted Adopted
2001-02 Budget 2002-03 Budget
Revenue:
Taxes $ 47,299 $ 49,808
Intergovernmental 15,023 16,651
Licenses and Permits 3,336 3,678
Charges £or Services 13,187 14,186
Fines and Forfeitures 977 986
Interest and Rent 1,945 2,449
Other 9, 132 11,068
Total Revenue $ 90,899 $ 98,826
Expenditures:
General Government $ 21,273 $ 29,180
Public Safety 40,134 42,851
Public Works 23,391 24,763
Parks and Recreation 4,715 3,785
Library 7,258 8,386
Capital Outlay 37 543
TotalExpenditures $ 96,808 $ 109,507
Excess (deficiency) of revenue over expenditures (5,909) ( 10,681)
Other Financing Sources (Uses):
Operating transfers in 9,970 10,681
Operating transfers out (4,060) --
TotaIOther Financing Sources (Uses) $ 5,910 $ 10,681
Excess of Revenue and Other Financing Sources over
Expenditures and Other Financing Uses $ I $ 0
Source: Adopted Budgets of the City for fiscal years 2001-02 and 2002-03.
According to the City's Quarterly Fiscal Status Report for the Quarter Ended December 31, 2002, the
projected actual results for the General Fund for fiscal year 2002-03 are total revenues, including transfers in to
the General Fund of approximately $11,091,802 million, of $112,697,788 million and total expenditures,
including transfers out of the General Fund, of $115,990,896 million, producing a shortfall of revenues over
expenditures o f approximately $2,934,098 million. With these projections, the City's available unreserved
fund balance at June 30, 2003 would decrease by approximately $3,300,000 million or 2.8% of the total
General Fund operating budget.
14 / Bg
DOCSOC\954737v7~24036.0028
Comparative Change in Fund Balance of the City General Fund
Table 2 below presents the City's audited General Fund Statement of Revenues, Expenditurcs and
Change in Fund Balance for the past five fiscal years.
TABLE 2
CITY OF CHULA VISTA GENERAL FUND STATEMENT OF
REVENUES, EXPENDITURES AND CHANGE IN FUND BALANCE
FIVE YEAR COMPARISON
(in 000's)
Fiscal Year Ending June 30,
1998 1999 2000 2001 2002
Taxes $ 31,328 $ 33,465 $ 39,198 $ 45,711 $ 51,458
Intergovernmental 17,671 18,906 12,976 14,816 15,882
Licenses and Permits 2,108 3,479 3.557 4,395 3,459
Charges for Services 5,071 7,172 9,331 12,148 11,471
Fines and Forfeitures 604 782 931 897 921
Interest and Rent 1,850 2,267 2,091 2,663 3,596
Other 2,22~ 3,543 10,191 11,293 13,360
Total Revenue $ 60,860 $ 69,614 $ 78,275 $ 91,922 $100,146
Expenditures:
General Govemment $ 11,980 $ 15,627 $ 15,783 $ 19,273 $ 24,451
Public Safety 28,361 29,877 32,560 35,449 39,410
Public Works 11,051 1 1,914 13,470 16,051 19,379
Parks and Recreation 5,190 5,255 7,129 7,084 7,979
Library 3,912 3,984 4,333 6,356 6,900
Capital Outlay -- 571 2,162 5,521
TotalExpenditures $ 60.493 $ 66,657 $ 73,846 $ 86,375 $103,640
Excess (deficiency) of revenue over
expenditures $ 366 $ 2,957 $ 4,430 $ 5,547 ($ 3,494)
Other Financing Sources (Uses):
Operating transfers in $ 5,379 $ 5,244 $ 7,883 $ 8,310 $ 15,010°~
Operating transfers out (2,3~1) (2,544) (2,1~) (3,170) (1,880)
Total Other Finaucing Sources (Uses) $ 3,028 $ 2,700 $ 5,730 $ 5,140 $ 13,130
Excess of Revenue and other Sources over
Expenditures and other Uses $ 3,211 $ 5,656 $ 10,159 $ 10,687 $ 9,636
Fund Balance, Beginning of Year $ 16,334 $ 19,653 $ 25,309 $ 35,736 $ 46,423
Adjustment to Beginning Fund Balance $ $ 108 $ 268 $ -- $ 330
Fund Balance, End of Year $ 19,545 $ 25,309 $ 35,736 $ 46,423 $ 56,319
0) Includes a one-time $5,000,000 reimbursement to the City from proceeds of a certificate of participation funding for the
Police Station.
Source: Audited Financial Statements for fiscal years 1997-98, 1998-99, 1999-00, 2000-01 and 2001-02,
DOCSOC\954737v7~24036.0028
Comparative General Fund Balance Sheets of the City
Table 3 below presents the City's audited General Fund Balance Sheets for the past five fiscal years.
TABLE 3
CITY OF CHULA VISTA
GENERAL FUND BALANCE SHEETS
FIVE YEAR COMPARISON
Fiscal Year Ending June 30,
1998 1999 2000 2001 2002
ASSETS
Pooled cash and investments $ 3,558,295 $ 9,002,899 $16,086,148 $24,624,929 $27,341,472
Accounts receivable 3,276,408 1,513,337 2,619,799 3,186,745 5,959,672
Taxes receivable 2,767,923 2,971,033 3,290,303 4,565,022 4,746,955
Grant receivable 50,666 155,865 645,510 --
Interest and other receivables 747,387 402,670 16,158 61,357 480,647
Due from other funds 69,811 31,176 575,039 697,827 1,400,461
Due from other governments .... 1,002,329 873,879 1,977,046
Loans receivable 250,000 243,750 231,250 518,750 506,250
Advances to component unit 2,633,718 2,892,922 3,167,855 3,493,015 3,911,561
Advances to other funds 11,310,201 13,342,468 15,912,534 17,982,540 20,105,078
Restricted Cash and Investments 239,810 265,329 257,603 ....
Prepaid Expenses -- 234,946 18,727 164,324
Total assets $24,933,654 $31,580,534 $44,039,474 $56,022,791 $66,593,466
LIABILITIES, EQUI~
AND OTHER CREDITS
Liabilities
Accounts Payable and Accrued Liabilities $ 2,455,600 $ 2,796,164 $ 4,054,951 $ 4,692,353 $ 4,481,923
Due to other funds 1,695 26,743 ......
Deposits 4,350 ......
Refundable Deposits -- 14,190 14,190 25,210 14,710
Deferred revenues 2,927,082 3,434,249 4,234,137 4,882,281 5~777,281
Totalliabilities $ 5,388,727 $ 6,271,346 $ 8,303,278 $ 9,599,844 $10,273,914
EQUITY AND OTHER CREDITS
Fund balances:
Reserved:
Encumbrances $ 829,853 $ 1,333,750 $ 2,674,041 $ 2,319,300 $ 3,068,795
Long-Term Receivables 11,266,838 13,044,890 15,885,196 17,703,449 18,745,607
Assessment District Debt 572,749 572,749 ....
Unreserved:
Undesignated 3,748,112 6,803,214 13,187,979 22,219,251 29,817,636
Designated 3,127,375 3,554,585 3,988,980 4,180,897 4,523,190
Total equity and other credits $19,544,927 $25,309,188 $35,736,196 $46,422,947 $56,319,552
Total liabilities, equity and credits $24,933,654 $31,580,534 $44,039,474 $56,022,791 $66,593,466
Source: Audited Financial Statements of the City for fiscal years 1997-98, 1998-99, 1999-00, 2000-01 and 2001-02.
16 f__ t~
DOCSOC\954737v7X24036.0028
Major Revenues
The City derives its General Fund revenues from a variety of sources including ad valorem property
taxes, sales and use taxes, licenses, permits, aid from other governmental agencies, charges for services
provided by the City and other miscellaneous revenues. For fiscaI year 2001-02, approximately 51% of
General Fund revenues were proceeds of taxes, 16% intergovernmental transfers, 11.5% charges imposed by
the City for services, 3.$% license and permit fees and 18% miscellaneous revenues, interest and rent. The
City's total General Fund revenues for selected major revenue sources for the past four fiscal years and the
estimated actuai amounts for the current fiscal year, are set forth in Table 4 below:
TABLE 4
CITY OF CHULA VISTA
SELECTED MAJOR REVENUE SOURCES
(in 000's)
2003 Estimated
Revenue Category 1999 Actual 2000 Actual 2001 Actual 2002 Actual Actual(il
Sales & Use Taxes $ 15,360 $ 16,952 $ 18,820 $ 18,812 $ 20,354
Property Taxes 9,378 10,262 11,526 13,069 14,634
Motor Vehicle License Fees 7,245 8,079 9,214 10,253 10,800
Franchise Fees 2,507 4,771 7,316 I 1,195 6,935
Charges for Services -
Development 1,790 6,287 8,215 7,262 10,119
Utility Users Taxes 3,452 3,655 3,931 4,015 4,170
Federal Grants 1,838 2,883 2,541 2,744 3,107
Building Permits 2,064 3,129 3,230 2,970 3~258
Total $ 43,634 $ 58,018 $ 64,793 $ 70,320 $ 73,377
(~) Bmsed on actuals through December 31, 2002 and projections to June 30, 2003.
Source: City of Chula Vista
The method of levy and collection of ad valorem property taxes is described under the caption
"Property Taxes" below. The sales tax received by the City results from a tax imposed on retail sales and
consumption of personal property. The sales tax rate is established by the State legislature. The current
statewide tax rate is 7.75%. The City also collects a transient occupancy tax on all hotel, motel and lodging
bills within the City, a utility users tax and various franchise fees.
Property Taxes
In California, property which is subject to ad valorem taxes is classified as "secured" or "unsecured".
The secured classification includes property on which any property tax levied by a county becomes a lien on
that property. A tax levied on unsecured property does not become a lien against the taxed unsecured propeay,
but may become a lien on certain other property owned by the taxpayer. Every tax which becomes a lien on
secured property has priority over all other liens, arising pursuant to State Law, on the secured property,
regardless of the time of the creation of other liens. The valuation of property is determined as of January 1
each year, and installments of taxes levied upon secured property become delinquent on the following
April 10th and December 10th. Taxes on unsecured property are due March 1, and become delinquent
August 31.
Secured and unsecured property are entered separately on the assessment roll maintained by the
county assessor. The method of collecting delinquent taxes is substantially different for the two classifications
of property. The exclusive means of forcing the payment of delinquent taxes with respect to property on the
secured roll is the sale of the property securing the taxes of the State for the amount of taxes that are
delinquent. The taxing authority has four methods of collecting unsecured personal property taxes: (1) a civil
17 [ ~cJ I
DOC SOC\954737v7~24036.0028
action against the taxpayer; (2) filing a certificate in the office of the county clerk specifying certain facts in
order to obtain a judgment lien on certain property of the taxpayer; (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, improvement or possessory interest belonging or taxable to the
assessee.
A ten pement penalty is added to delinquent taxes which have been levied with respect to property on
the secured roll. In addition, beginning on the July 1 following a delinquency, interest begins accruing at the
rate of 1 l/2% per month on the amount delinquent. Such property may thereafter be redeemed by the
payment of the delinquent taxes and the ten percent penalty, plus interest at the rate of 1 1/2% per month to the
time of redemption. If taxes are unpaid for a period of five years or more, the property is deeded to the State
and then is subject to sale by the county tax collector. A ten percent penalty also applies to the delinquent
taxes or property on the unsecured roll, and further, an additional penalty of 1 1/2% per month accrues with
respect to such taxes beginning on the varying dates related to the tax billing date.
Legislation enacted in 1 984 ( Section 25 et seq. of the Revenue and Taxation Code of the State of
California), provides for the supplemental assignment and taxation of property as of the occurrence of a change
in ownership or completion of new construction. Previously, statutes enabled the assessment of such changes
only as of the next tax lien date following the change and thus delayed the realization of increased property
taxes from the new assessment for up to 14 months. Collection of taxes based on supplemental assessments
occurs throughout the year. Taxes due are prorated according to the amount of time remaining in the tax year,
with the exception of tax bills dated January 1 through May 31, which are calculated on the basis of the
remainder of the current fiscal year and the full 12 months of the next fiscal year.
In 1992-93 and 1993-94, in response to serious budgetary shortfalls, the State Legislature and
administration permanently redirected over $3 billion of property taxes from cities, counties, and special
districts to schools and community college districts. The Legislature, however, provided some additional
funding soumes (such as sales taxes) and reduced certain mandates for local services. Local governments sued
the State (Sonoma County, et. al. v. Commission on State Mandates, et. al) over these transfers. The appeals
court denied the plaintiffs' position and the subsequent appeal was not heard by the State Supreme Court.
The term "ERAF" is often used as a shorthand reference for this shift of property taxes. ERAF
actually i s a n acronym for the fund into which redirected property t axes a re deposited i n e ach county, the
Educational Revenue Augmentation Fund. The Governor projects that the State will experience revenue
shortfalls in excess of $34.8 billion by the end of fiscal year 2004. The City cannot predict the impact on its
General Fund resulting from future acts of the Legislature to redirect property taxes from the City to other
public agencies.
Table 5 below sets for the property tax rates for the City for the fiscal years 1998-99 through 2002-03.
The information in Table 5 has been provided by California Municipal Statistics, Inc. Neither the City nor the
Underwriter has independently verified the information in Table 5 and does not guarantee its accuracy.
DOCSOC\954737v7~24036.0028
TABLE 5
CITY OF CHULA VISTA
PROPERTY TAX RATES
FISCAL YEARS 1998-99 TO 2002-03
1998-99 1999-00 2000-01 2001-02 2002-03
General Tax Rate® 1.000000 1.000000 1.000000 1.000000 1.000000
Chula Vista Elementary School District 0.000000 0.024790 0.025150 0.023960 0.02645
Sweetwater Union High School District 0.000000 0.000000 0.000000 0.025270 0.02196
Southwestern Community College District 0.000000 0.000000 0.000000 0.015440 0.01304
San Diego County Water Agency 0.001070 0.001000 0.000910 0.000830 0.00075
Metropolitan Water District 0.008900 0.008900 0.008800 0.007700 0.00670
Total Tax Rate 1.009970 1.034690 1.034860 1.073200 1.06890
0) The passage of Proposition 13 on June 6, 1978 established a maximum countywide levy of 1% of market value or $1.00 per
$100 of assessed value.
Source: California Municipal Statistics, lnc.
Table 6 below sets forth the secured and unsecured assessed valuations for property in the City for the
fiscal years 1998-99 through 2002-03.
TABLE 6
CITY OF CHULA VISTA
ASSESSED VALUATION
FISCAL YEARS 1998-99 TO 2002-03
Year Secured Unsecured Total
1998-99 $ 7,650,510,665 $ 351,383,739 $ 8,001,894,404
1999-00 7,854,468,090 502,416,173 8,356,884,263
2000-01 8,812,650,702 326,184,542 9,138,835,244
2001-02 9,731,461,361 396,147,701 10,128,896,888
2002-03 11,204,009,831 340,623,666 11,545,381,810
Source: City of Chula Vista
Table 7 below sets forth property tax collections and delinquencies in the City as of June 30 for fiscal
years 1997-98 through 2001-02.
TABLE 7
CITY OF CItULA VISTA
PROPERTY TAX LEVIES AND COLLECTIONS
FISCAL YEARS 1997-98 TO 2001-02
Tax Delinquent Delinquent
Year Ended Total Collections as Percent of Tax Tax
June 30 Tax Levy of June 30 Levy Collected Collections Receivables
1998 $ 8,675,402 $ 8,525,374 98.27% $ 233,881 $ 338,404
1999 9,257,807 9,108,378 98.39% 243,354 280,041
2000 10,133,358 9,940,830 98.10% 144,306 253,037
2001 11,254,079 11,073,584 98.40% 165,738 223,047
2002 12,806,109 12,602,185 98.41% I60,066 199,500
Source: City of Chu]a Vista
DOCSOC\954737vT~24036.0028
Principal Taxpayers
The 20 largest taxpayem in the City as shown on thc 2002-03 secured tax roll, the amounts of taxes
levied upon each and thc percentage of the assessed valuation attributable to each are shown on Table 8 below.
The information in Table 8 has been provided by California Municipal Statistics, Inc. Neither the City nor the
Underwriter has independently verified thc information in Table 8 and does not guarantee its accuracy.
TABLE 8
CITY OF CHULA VISTA
TWENTY PRINCIPAL TAXPAYERS
2002-03
Assessed % of
Property Owner Primary Land Use Valuation Total~
1. Rohr Inc. / B.F. Goodrich Aerospace Indus~al $ 182,392,663 1.63%
2. Duke Energy South Bay LLC Power Plant 92,868,829 0.83
3. CV Center LLC Shopping Center 61,952,493 0.55
4. BRE Properties Inc. Apartments 52,518,751 0.47
5. OtayProject LP Residential Properties 44,019,356 0.39
6. Eastlake Company LLC Residential Properties 42,847,344 0.38
7. Gateway Town Center LP Apartments 41,807,866 0.37
8. Brookfield Shea Otay LLC Residential Properties 34,382,098 0.31
9. McMillin Rolling Hills Ranch LLC Residential Properties 32,297,713 0.29
10. California State Teachers Retirement System Apartments 28,617,583 0.26
11. The Price Co. Commercial Store 26,004,002 0.23
12. Eucalyptus Grove Holdings LLC Apartments 24,866,281 0.22
13. North Island Federal Credit Union Office Building 20,882,550 0.19
14. Price Reit Inc. Commercial Store 19,888,046 0.18
15. Universal Concerts Recreational- Amphitheater 16,038,938 0.14
16. C&L Delta Co. LLC Commercial Store 15,862,416 0.14
17. East Palomar Apartments LLC Apartments 14,618,000 0.I3
18. Beacon Cove Ltd. Apartments 14,546,707 0.13
19. Sunbow Villas Ltd. Apartments 14,254,702 0.13
20. KMart Corporation Commercial Store 12,800,000 0.11
$ 793,466,338 7.08%
0) 2002-03 Local Secured Assessed Valuation equals $11,204,009,831.
Source: California Municipal Statistics, Inc.
20 / ~ L/ {']/
DOCSOC\954737v7~24036.0028
Indebtedness
General Obligation Debt. The City currently has no general obligation debt outstanding.
Long Term Debt
Table 9 below is a summary of long-term obligation transactions of thc City and the Authority for the
year ended June 30, 2002.
TABLE 9
CITY OF CHULA VISTA
LONG TERM DEBT OF THE CITY AND AUTHORITYo)
IUPDATE]
Balance Balance
July 1, 2001 Additions Deductions June 30, 2002
Tax Allocation Bonds $ 43,855,000 $ -- $ (525,000) $ 43,330~000
Pension Obligation Bonds 15,971,354 285,095 (800,000) 15,456,449
Certificates of Participation 37,240,000 60,145,000 (2,140,000) 95,245,000
Notes Payable 757,739 -- (108,483) 649,256
Capital Leases 3,989,774 2,672,402 (942,959) 5,719,217
Compensated Absences 3,323~404 3,782,445 3,120A94 4,028,970
Total $ 105.180.886 $ 66.884.992 $ (7:636.936) $164.428.89~2
o) See Note 6 ~to the C'W s aud'ted financ al statements for a more dctm cd description of the debt which is a ocab e to the City
and the AuthoriW, respectively. See Appendix B -- "THE CITY OF CHULA VISTA AUDITED FINANCIAL
STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2002."
Source: City of Chula Vista
The City expects to undertake a $38 million renovation of its Civic Center Complex in 2004 and to
fimmce a majority of the costs with a lease financing payable from the City's General Fund. Table 9 does not
include the annual lease payments for this anticipated financing or for the $60,145,000 of outstanding
certificates of participation executed and delivered in 2002 to finance a new police facility for the City.
Following the execution and delivery of the Certificates, the annual lease payments due with respect to the
City's outstanding leases will be approximately $ per Fiscal Year.
Short-Term Debt: The City currently has no short-term debt outstanding.
Estimated Direct and Overlapping Bonded Debt: The estimated direct and overlapping bonded
debt of the City as of May 1, 2003 is shown in Table 10 below. The information in Table 10 has been
provided by Califomia Municipal Statistics, Inc. Neither the City nor the Underwriter has independently
verified the information in Table 10 and does not guarantee its accuracy.
21 ,4ff'
DOCSOC\954737v7X24036.0028 ~t ~
TABLE 10
CITY OF CHULA VISTA
ESTIMATED DIRECT AND OVERLAPPING BONDED DEBTm
2002-03 Assessed Valuation: $11,545,381,810
Redevelopment Incremental Valuation: 671,077,286
Adjusted Assessed Valuation: $10,874,304,524
OVERLAPPING TAX AND ASSESSMENT DEBT: % Applicable Debt 5/1/03
San Diego County Water Agency 5.338% $ 87,810
Metropolitan Water District 0.961 4,269,675
Otay Municipal Water District, I.D. No. 27 99.996 I0,639,574
Southwestern Community College District 50.866 20,112,416
Sweetwater Union High School District 61.394 22,172,443
Chula Vista City School District 84.312 42,716,675
City of Chula Vista Community Facilities Districts 100.000 98,975,000
Sweetwater Union High School District Community Facilities Districts 42.346-100.000 81,765,762
Chula Vista City School District Community Facilities Districts 100.000 8,375,000
City of Chula Vista 1915 Act Bonds 100.000 58,048,787
TOTAL OVERLAPPING TAX AND ASSESSMENT DEBT $347,163,142
DIRECT AND OVERLAPPING GENERAL FUND OBLIGATION DEBT:
San Diego County General Fund Obligations 5.153% $ 25,011,568
San Diego County Pension Obligations 5.153 42,481,074
San Diego County Superintendent of Schools Obligations 5.153 106,538
Southwestern Community College District Certificates of Participation 50.866 1,757,420
Sweetwater Union High School District Certificates of Participation 61.394 14,743,769
Chula Vista City School District Certificates of Participation 84.312 66,888,925
City of Chula Vista Certificates of Participation 100.000 92,905,000
City of Chula Vista Pension Obligations 100.000 13,231,566
Otay Municipal Water District Certificates of Participation 56.746 14,770,984
TOTAL GROSS DIRECT AND OVERLAPPING GENERAL FUND OBLIGATION DEBT $271,896,844
Less: Otay Municipal Water District Certificates of Participation 14,770,984
TOTAL NET DIRECT AND OVERLAPPiNG GENERAL FUND OBLIGATION DEBT $257,125,860
GROSS COMBINED TOTAL DEBT $619,059,986 (2)
NET COMBiNED TOTAL DEBT $604,289,002
0) Excludes certificates of participation to be sold.
Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and tax allocation bonds and non-bonded
capital lease obligations.
Ratios to 2002-03 Assessed Valuation:
Total Overlapping Tax and Assessment Debt ................... 3.01%
Ratios to Adiusted Assessed Valuation:
Combined Direct Debt ($106,136,566) ............................ 0.98%
Gross Combined Total Debt ............................................. 5.69%
Net Combined Total Debt ................................................. 5.56%
Source: California Municipal Statistics, Inc.
Assuming the total net direct and overlapping general fund obligation debt figure for the City as of
May 1, 2003 is $257,125,860 as reported by California Municipal Statistics, Inc., and the reported population
figure for 2002 of 190,900, the per capita net and direct overlapping general fund obligation debt for the City is
$1,346.91. T he net combined total debt of the City as o fMay 1, 2 003 i s $ 604,289,002, or $3,165.47 p er
capita.
22 /r4b
DOCSOC\954737v7L24036.0028
City Investment Policy
General. Pursuant to the City's Investment Policy (thc "Investment Policy") the City's Finance
Director i s r esponsible for investing t he c ash balances in all City Funds in accordancc with t he Califomia
Government Code, Sections 53600 et seq. and 53635 et seq. Thc Investment Policy does not include long tcma
debt rcserve funds a nd deferred compcnsation funds, which a re exceptions covcred b y othcr more spccific
Govcmmant Code sections and the legal documents unique to each debt transaction. The Investment Policy
provides that investment practices shall conform to California's prndcnt man rule which states, in essence, that
"in investing.., property for thc benefit of another, a trustee shall exercise the judgraant 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 thc investment policy and other written procedures,
and exercising duc 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.
Thc Investment Policy states that it is thc City's full intent, at the time of purchase, to hold all
investments until maturity in order to ensure thc 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 thc City's best interest to sell a
security prior to maturity.
Thc three principal f actors o f safety, 1 iquidity a nd yield a re t o b c taken into c onsidcration, i n t hat
order, when making investment decisions.
Authorizedlnvestmentlnstruments. Thc City may invest in the following instruments under thc
guidelines as provided in the Investment Policy:
Certificates of Deposit. 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)(1). No more than 25% of the
investment portfolio may bc 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, thc 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.
Treasury 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 thc payment of principal and interest.
Local A~cnc¥ Investment Fund (LAIF). Investment of funds in thc California LAIF which allows thc
State Treasurer to invest through thc Pooled Money Investment Account. Maximum investment is subject to
state regulation.
County of San Dic§o Treasury Pool. Invcstmant of funds in the County of San Diego Treasury which
allows the County Treasurer-Tax Collector to invest local funds through a pooled concept.
DOCSOC\954737v7X24036.0028
Bankers Acceptance. 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 (Al+). 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 Deposit. 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.
Repurchase 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 Corporate 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 any one 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.
Daily 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.
DOCSOC\954737v7~24036.0028
The par value, market value, adjusted cost basis and percent of total investments for each category of
the City's investments, as of December 31, 2002, are set forth in Table 11 below.
TABLE 11
CITY OF CItULA VISTA
SCHEDULE OF INVESTMENTS
Market Adjusted Cost % of Total
Investment Type Par Valuea~ Valuea~ Basis~3~ Investments
Pooled Investment
Federal Securities $ 138,000,000 $ 139,786~235 $ 137~988~221 38.78%
Local Authority Investment Ftmd 34,866,365 34,866,365 34,866,365 9.80
Corporate Bonds 31~750,000 33,233,888 31,743,566 8.92
Subtotal $ 204,616,365 $ 207,886,488 $ 204,598,152 58.00%
Cash/Investments with Fiscal Agent
U.S. Government $ 3,523,000 $ 3,523,000 $ 3,523,000 0.99%
Investment Agreements 94,859,450 94,859,450 94,859,450 26.66
Mutual Funds 49,800,052 49,800,052 49,800,052 14.00
Cash with Fiscal Agents 3,019,878 3,019,878 3,019,878 0.85
Subtotal $ 151,202,380 $ 151,202,380 $ 151,202,380 42.00%
Totals $ 355.818,745 $ 359.088.868 $ 355.800.53~2 100.00%
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 ofChula Vista
Insurance
The City is self-insured for general liability and worker's compensation up to $250,000 per claim. As
a member of the San Diego Pooled Insurance Program Agency ("SANDPIPA"), the City is insured for general
liability claims between $250,000 and $2 million ($1,000,000 for employment practices liabilities). In
addition, for general liability claims between $2 million and $42 million and for employment practices liability
claims between $1,000,000 and $41,000,000, the City is covered by excess insurance coverage obtained
through SANDPIPA. For worker's compensation claims, the City has purchased excess insurance for claims
exceeding $250,000.
The City also obtains casualty and rental interruption insurance from commercial carriers through
SANDPIPA.
LIMITATIONS ON TAX REVENUES
There are a number of provisions in the State Constitution that limit the ability of the City to raise and
expend tax revenues.
Article XIII A of the California Constitution
On June 6, 1978, California voters approved an amendment (commonly known as both Proposition 13
and the Jarvis-Gann Initiative) to the Califomia Constitution. This amendment, which added Article XIII A to
the California Constitution, among other things affects the valuation of real property for the purpose of
25 4 ?
DOCSOC\954737v7X24036.0028 ~ --
taxation in that it defines the full cash property value to mean "the county assessor's valuation of real property
as shown on the 1975/76 tax bill under 'full cash value', or thereafter, the appraised value of real property
newly constructed, or when a change in ownership has occurred after the 1975 assessment." The full cash
value may be adjusted annually to reflect inflation at a rate not to exceed 2% per year, or a reduction in the
consumer price index or comparable local data at a rate not to exceed 2% per year, or reduced in the event of
declining property value caused by damage, destruction or other factors including a general economic
downturn. The amendment further limits the amount of any ad valorem tax on real property to one percent of
the full cash value except that additional taxes may be levied to pay debt service on indebtedness approved by
the voters prior to July 1, 1978, and bonded indebtedness for the acquisition or improvement of real property
approved on or aRer July 1, 1978 by two-thirds of the votes cast by the voters voting on the proposition (55%
in the case of certain school facilities).
Legislation enacted by the California Legislature to implement Article XIII A provides that all taxable
property is shown at full assessed value as described above. In conformity with this procedure, all taxable
property value included in this Official Statement (except as noted) is shown at 100% of assessed value and all
general tax rates reflect the $1 per $100 of taxable value. Tax rates for voter approved bonded indebtedness
and pension liability are also applied to 100% of assessed value.
Future assessed valuation growth allowed under Article XIII A (new construction, change of
ownership, 2% annual value growth) is allocated on the basis of "situs" among the jurisdictions that serve the
tax rate area within which the growth occurs. Local agencies and school districts share the growth of "base"
revenue from the tax rate area. Each year's growth allocation becomes part of each agency's allocation the
following year. The City is unable to predict the nature or magnitude of future revenue soumes which may be
provided by the State of Califomia (the "State") in lieu of lost property tax revenues, if any. Article XIII A
effectively prohibits the levying of any other ad valorem property tax above the 1% limit except for taxes to
support indebtedness approved by the voters as described above.
Article XIII A has subsequently been amended to permit reduction of the "full cash value" base in the
event of declining property values caused by 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 certain other limited circumstances.
Pending Challenge to Property Tax Assessment Procedures. The Orange County Superior Court has
recently invalidated the method used by the Orange County Assessor to implement the provisions of
Article XIIIA (which are described under the STATE CONSTITUTIONAL LIMITATIONS ON DISTRICT
SOURCES AND EXPENDITURES -- Article XIIIA" herein) allowing the full cash value of properties to be
increased at a rate not to exceed 2% per year to account for inflation. The practice of the Orange County
Assessor is to permit increases above the 2% per year in situations where the value of properties whose
assessments had been lowered in prior years rebounds in subsequent years. In these situations, the Orange
County Assessor increases the assessments more than 2% per year to recapture the previous reductions until
the properties are again being assessed at their original assessed value, plus 2% per year from the date of the
original assessment. In late 2001, in the case of County of Orange v. Orange County Assessment Appeals
Board No. 3, this practice was held by a.judge of the Orange County Superior Court to be unconstitutional and
in violation Article XIIIA. This ruling currently applies only to Orange County taxpayers included in the
class; however, if the Court's reasoning is applied generally, it could have the effect of reducing the amount of
property tax revenues currently allocated to public agencies in the State, including the City. San Diego County
currently follows a similar process to that used by the Orange County Assessor. There currently are no
projections available from the San Diego County Assessor as to what the impact on the City would be in if the
ruling were made applicable to properties in San Diego County. Although the ruling if applied in San Diego
County would likely result in a reduction of the City's ad valorem property tax revenues, given its level of
reserves, the City does not believe that its ability to make the Lease Payments ~vhen due would be adversely
affected.
DOCSOC\954737v7~4036.0028
Article XIII B of the California Constitution
At the statewide special election on November 6, 1979, the voters approved an initiative entitled
"Limitation on Govcrament Appropriations" which added Article XIII B to thc California Constitution. Under
Article ×III B, state and local government entities have an annual "appropriations limit" which limits the
ability to spend certain moneys which are called "appropriations subject to limitation" (consisting of tax
revenues and certain state subventions together called "proceeds of taxes" and certain other funds) in an
amount higher than the "appropriations limit." Article XIII B does not affect the appropriation of monies
which are excluded from the definition of "appropriations limit" including debt service on indebtedness
existing or authorized as of October 1, 1979, or bonded indebtedness subsequently approved by the voters. In
general terms, the "appropriations limit" is to be based on certain 1978-79 expenditures, and is to be adjusted
annually to reflect changes in the consumer price index, population and services provided by these entities.
Among other provisions of Article XIII B, if those entities' revenues in any year exceed the amounts permitted
to be spent, the excess is to be returned by revising tax rates or fee schedules over the subsequent two years.
Article XIIIC and Article XIIID of the State Constitution
On November 5, 1996, the voters of the State approved Proposition 218, the so called "Right to Vote
on Taxes Act." Proposition 218 added Articles XIIIC and XIIID to the State Constitution, which contain a
number of provisions affecting the ability of local agencies, including municipalities, to levy and collect both
existing and future taxes, assessments, fees and charges. Among other things, Article XIIIC establishes that
every tax is either a "general tax" (imposed for general governmental purposes) or a "special tax" (imposed for
specific purposes); prohibits special purpose government agencies such as school districts from levying general
taxes and prohibits any local agency from imposing, extending or increasing any special tax beyond its
maximum authorized rate without a two-thirds vote. Article XIIIC also provides that no tax may be assessed
on property other than ad valorem property taxes imposed in accordance with Articles XIIIA anc~ XIIIB of the
California Constitution and special taxes approved by a two-thirds vote under Article XIIIA, Section 4.
Article XIIIC also provides that the initiative power shall not be limited in matters of reducing or repealing
local taxes, assessments, fees and charges. The City's utility tax, which totaled approximately $__ million
in fiscal year 2001-02, could be subject to repeal by voter initiative under Article XIIIC.
Article XIIID deals with assessments and property-related fees and charges. Article XIIID explicitly
provides that nothing in Article XIIIC or XIIID shall be construed to affect existing laws relating to the
imposition of fees or charges as a condition of property development; however it is not clear whether the
initiative power is therefore unavailable to repeal or reduce developer and mitigation fees imposed by the City.
The interpretation and application of Articles XIIIC and Article XIIID will be determined by the
courts with respect to a number of the matters discussed above, and it is not possible at this time to predict with
certainty the outcome of such determination. Although the City does not currently anticipate that the
provisions of Article XIIIC and XIIID will adversely affect its ability to pay the Lease Payments as and when
due, no assurance can be given regarding the ultimate interpretation or effect of Article XIIIC and
Article XIIID on the City's finances.
Proposition 62
Proposition 62, which was adopted by the voters at the November 4, 1986 general election, (a)
requires that any new or higher taxes for general govenunental purposes imposed by local governmental
entities be approved by a two-thirds vote of the governmental entity's legislative body and by a majority vote
of the voters of the governmental entity voting in an election on the tax, (b) requires that any special tax
(defined as taxes levied for other than general goverranentai purposes) imposed by a local government entity
be approved by a two4hirds vote of the voters of the governmental entity voting in an election on the tax, (c)
restricts the use of revenues from a special tax to the purposes or for the service for which the special tax was
imposed, (d) prohibits the imposition of ad valorem taxes on real property by local governmental entities
DOCSOC\954737v7X24036.0028
except as permitted by Article XIII A of the California Constitution, (e) prohibits the imposition of transaction
taxes and sales taxes on the sale of real property by local governmental entities, and (f) requires that any tax
imposed by a locaI governmental entity on or after August 1, 1985, be ratified by a majority vote of the voters
voting in an election on the tax within two years of the adoption of the initiative or be terminated by November
15, 1988.
On September 28, 1995, the California Supreme Court, in the case of Santa Clara County Local
Transportation Authority v. Guardino, upheld the constitutionality of Proposition 62. In this case, the court
held that a county-wide sales tax of one-half of one percent was a special tax that, under Section 53722 of the
Government Code, and was held invalid without the required two-thirds voter approval. The decision did not
address the question ofwhethar or not it should be applied retroactively.
Following the Guardino decision upholding Proposition 62, several actions were filed challenging
taxes imposed by public agencies since the adoption of Proposition 62. On June 4, 2001, the California
Supreme Court released its decision in one of these cases, Howard Jarvis Taxpayers Association v. City of La
Habra, et al. In this case, the court held that a public agency's continued imposition and collection of a tax is
an ongoing violation upon which the statute of limitations period begins anew with each collection. The court
also held that, unless another statute or constitutional rnle provided differently, the statute of limitations for
challenges to taxes subject to Proposition 62 is three years. Accordingly, a challenge to a tax subject to
Proposition 62 may only be made for those taxes received within three years of the date the action is brought.
However, based on the ballot argument supporting the passage of Proposition 62 and case law interpreting
Proposition 62, the City believes that the provisions of Proposition 62 do not apply to charter cities, such as the
City.
Unitary Property
Some amount of property tax revenue of the City is derived from utility property which is considered
part of a utility system with components located in many taxing jurisdictions ("unitary property"). Under the
State Constitution, such property is assessed by the State Board of Equalization ("SBE') as part of a "going
concern" rather than as individual pieces of real or personal property. State-assessed unitary and certain other
property is allocated to the counties by SBE, taxed at special county-wide rates, and the tax revenues
distributed to taxing jurisdictions (including the City) according to statutory formula generally based on the
distribution of taxes in the prior year.
Future Initiatives
Article XIII A, Article XIII B, XIII C and XIII D were each adopted as measures that qualified for the
ballot pursuant to the State's initiative process. From time to time other initiative measures could be adopted,
further affecting the City's current revenues or its ability to raise and expend revenues.
RISK FACTORS
The following factors, along with all other information in this Official Statement, should be
considered by potential investors in evaluating the Certificates.
Not a Pledge of Taxes
The obligation of the City to pay the Lease Payments and Additional Payments does not constitute an
obligation of thc 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 thc City to pay Lease Payments and
Additional Payments does not constitute a debt or indebtedness of the Authority, the City, thc State of
California or any of its political subdivisions within the meaning of any constitutional or statutory debt
limitation or restriction.
DOCSOC\954737v7L24036.0028
Although the Lease Agreement does not create a pledge, lien or encumbrance upon the funds of the
City, the City is obligated under the Lease Agreement to pay Lease Payments and Additional Payments from
any source of legally available funds (subject to certain exceptions) and the City has covenanted in the Lease
Agreement that, for as long as the Leased Properties are available for its use and possession, it will make the
necessary annual appropriations within its budget for all Lease Payments and Additional Payments. The City is
currently liable on other obligations payable from general revenues, including pension obligation bonds and
other 1 eases entered into b y t he City i n connection with t he execution a nd delivery o f other certificates o f
participation. In the event of a shortfall in revenues, a court might require that the City first set aside revenues
to pay its pension obligation bonds. See "CITY FINANCIAL INFORMATION -- Indebtedness" herein.
Certain taxes, assessments, fees and charges presently imposed by the City could be subject to the
voter approval requirements of Article XIIIC and Article XIIID of the State Constitution. Based upon the
outcome of an election by the voters, such fees, charges, assessments and taxes might no longer be permitted to
be imposed, or may be reduced or eliminated and new taxes, assessments fees and charges may not be
approved. The City believes that in the event that the initiative power was exercised so that all local taxes,
assessments, fees and charges which may be subject to the provisions of Article XIIIC and Article XIIID of the
State Constitution a re eliminated o r substantially reduced, t he financial condition o f t he City, including i ts
General Fund, could be materially adversely affected. Although the City does not currently anticipate that the
provisions of Article XIIIC and Article XIIID of the State Constitution would adversely affect its ability to pay
the principal of and interest with respect to the Certificates as and when due and its other obligations payable
from the General Fund, no assurance can be given regarding the ultimate interpretation or effect of
Article XIIIC and Article XIIID of the State Constitution on the City's finances. See "CITY FINANCIAL
INFORMATION - Major Revenues" herein.
Additional Obligations of the City
The City is permitted to enter into other obligations which constitute additional charges against its
revenues without the consent of Owners of the Certificates. To the extent that additional obligations are
incurred by the City, the funds available to pay Lease Payments may be decreased.
The Lease Payments and other payments due under the Lease Agreement (including payment of costs
of repair and maintenance of the Leased Properties, taxes and other governmental charges levied against the
Leased Properties) are payable from funds lawfully available to the City. In the event that the amounts which
the City is obligated to pay in a fiscal year exceed the City's revenues for such year, the City may choose to
make some payments rather than making other payments, including Lease Payments and Additional Payments,
based on the perceived needs of the City. The same result could occur if, because of California Constitutional
limits on expenditures, the City is not permitted to appropriate and spend all of its available revenues or is
required to expend available revenues to preserve the public health, safety and welfare.
Default
~Vhenever any event of default referred to in the Lease Agreement happens and continues, the Trustee,
as the assignee of the Authority, is authorized under the terms of the Lease Agreement to exercise any and all
remedies available pursuant to law or granted pursuant to the Lease Agreement; provided, however, that
notwithstanding anything therein or in the Trust Agreement to the contrary, THERE IS NO RIGHT UNDER
ANY CIRCUMSTANCES TO ACCELERATE THE LEASE PAYMENTS OR OTHERWISE DECLARE
ANY LEASE PAYMENTS NOT THEN DUE OR PAST DUE TO BE IMMEDIATELY DUE AND
PAYABLE. NEITHER THE AUTHORITY NOR ITS ASSIGNEE SHALL HAVE ANY RIGHT TO
REENTER OR RELET THE LEASED PROPERTIES EXCEPT FOLLOWING A DEFAULT UNDER THE
LEASE. Followinganeventofdefault, atthedirectionofthelnsurer, the Tmstee, asthe assignee ofthe
Authority, may elect either to terminate the Lease Agreement and seek to collect damages from the City or to
maintain the Lease Agreement in effect and seek to collect the Lease Payments as they become due. The
Lease Agreement further provides that so long as an event of default exists under the Lease Agreement, the
DOCSOC\954737v7~24036.0028
Authority, or its assignee, may re-enter the Leased Properties for the purpose of taking possession of any
portion o f t he L eased Properties a nd t o r e-let t he Leased Properties a nd, i n addition, a t i ts option, with o r
without such entry to terminate the Lease Agreement as described therein. See Appendix C - "Summary of
Principal Legal Documents Lease Agreement - Remedies On Default."
No assurance can be given that the Trustee will be able to re-let the Leased Properties so as to provide
rental income sufficient to pay principal and interest represented by the Certificates in a timely manner or that
such re-letting will not adversely affect the exclusion of interest with respect thereto from gross income for
federal or State income tax purposes. Furthermore, due to the public nature of the Leased Properties, it is not
certain whether a court would permit the exercise of the remedies of repossession and re-letting with respect to
the Leased Properties.
In the event of a default, there is no remedy of acceleration of the total Lease Payments due over the
term of the Lease Agreement and the Trustee is not empowered to sell the Leased Properties and use the
proceeds of such sale to prepay the Certificates or pay debt service with respect thereto. The City will be liable
only for Lease Payments on an annual basis and, in the event of a default, 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 municipalities in California, including a
limitation on enfomement of judgrnents against funds of a fiscal year other than the fiscal year in which the
Lease Payments were due and against funds neede~l to serve the public welfare and interest.
Release or Substitution of Property
The City has the fight 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 Properties or to release a portion of
the real property or improvements constituting the Leased Properties, subject to the conditions precedent to
such addition, substitution or release as set forth in the Lease Agreement. See Appendix C -- "SUMMARY
OF PRINCIPAL LEGAL DOCUMENTS -- COVENANTS WITH RESPECT TO THE PROPERTY --
Substitution or Release of the Leased Properties" herein.
In connection with a substitution or release, all interests of the Authority, and its assignee, in the
portion of the Leased Properties released shall terminate and the Authority and its assignee shall execute and
record with the Connty Recorder of the County all documents deemed necessary by the City to evidence such
termination of interest. Upon satisfaction by the City of the conditions set forth in the Lease Agreement, the
Trustee also will execute a Lease Supplement and will not impose on the City any further conditions or
prerequisites to the requested addition, substitution or release. The City will cause the Lease Supplement, or
another document substantially in the form of the Lease Supplement, to be recorded in the real property
records of the County.
All costs and expenses incurred in connection with such addition, substitution or release will be borne
by the City. No addition, substitution or release under the Lease Agreement will be, by itself, the basis for any
reduction in or abatement of the Lease Payments due from the City thereunder. See Appendix C
"SUMMARY OF PRINCIPAL LEGAL DOCUMENTS -- COVENANTS WITH RESPECT TO THE
PROPERTY -- Substitution or Release of the Leased Properties" herein.
Abatement
The City's obligation to make Lease Payments will be subject to full or partial abatement and could
result in the Trustee having inadequate funds to pay the principal and interest with respect to the Certificates
under certain circumstances related to damage, destruction, condemnation or title defects ~vhich cause a
substantial interference with the use and occupancy of the Leased Properties. See "See Appendix C --
DOCSOC\954737v7L24036.0028
"SUMMARY OF PRINCIPAL LEGAL DOCUMENTS -- AGREEMENT TO LEASE; TERM OF LEASE;
LEASE PAYMENTS -- Abatement of Lease Payments in the Event of Loss of Use" herein.
Earthquakes
Like many areas of California, the City is subject to seismic activity. According to the Public Safety
Element of the City's General Plan, the City is located in a seismically active region and could be impacted by
a major earthquake originating from the numerous faults in the area. The City is traversed by two potentially
active faults, the Sweetwater Fault and La Nacion Fault, and three inferred faults, the Otay River Fault, the
Telegraph Canyon Fault and the San Diego Bay-Tijuana Fault. Seismic hazards encompass potential surface
rapture, ground shaking and landslides. The City is not obligated under the Lease Agreement to procure and
maintain, or cause to be procured and maintained, earthquake insurance on the Leased Properties unless the
City, in its reasonable discretion determines that such coverage is available from reputable insurers at
commercially reasonable rates. Although, the City has in the past obtained limited earthquake coverage on
certain of its facilities, no assurance can be given that such coverage will be available. In the event that any
portion of the Leased Properties is destroyed by an earthquake, an abatement could occur and result in the
Trustee havIng inadequate funds to pay the principal and interest with respect to the Certificates as and when
due.
Limitations on Remedies; Bankruptcy
The rights of the owners of the Certificates are subject to the limitations on legal remedies against
municipalities in the State, including a limitation on enforcement of judgments against funds needed to serve
the public welfare and interest. Additionally, enforceability of the fights and remedies of the owners of the
Certificates, and enforcement of the City's obligations under the Lease Agreement, may become subject to the
federal bankruptcy code and applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws
relating to or affecting the enforcement of creditor's rights generally, now or hereafter in effect, equity
principles which may limit the specific enforcement under State law of certain remedies, the exemise by the
United States of America of the powers delegated to it by the Constitution, the reasonable and necessary
exercise, in certain exceptional situations, of the police powers inherent in the sovereignty of the State and its
governmental bodies in the interest of serving a significant and legitimate public purpose and the limitations on
remedies against counties in the State. Bankruptcy proceedings under Chapter 9 of the Bankruptcy Code (Title
11, United States Code), which governs the bankruptcy proceedings for public agencies such as the City, or the
exercise of powers by the federal or State government, if initiated, could subject the owners of the Certificates
to judicial discretion and interpretation of their fights in bankruptcy or otherwise, and consequently may entail
risks of delay, limitation, or modification of their rights. See "RISK FACTORS Default" herein.
Economic Conditions in California
Since early 2001, the State has been faced with severe financial challenges, which may continue for
several years. The State has experienced an economic recession in 2001 and is currently in a sluggish
recovery. The major forces in the State's economic downturn were decline in the high technology, intemet and
telecommunications sectors, lower demand for exports and large stock market declines. These adverse fiscal
and economic factors have resulted in a serious erosion of the State's General Fund tax revenues. The bulk of
the revenue declines were from personal income taxes, pfincipally from reduced capital gains realizations and
stock option income.
This revenue drop resulted in a shortfall between State revenues and anticipated spending demands for
the 2001-02 and 2002-03 fiscal years, which at the time that the State's 2002 Budget Act (the "2002-03
Budget") was enacted was an estimated $23.6 billion. The shortfall estimated at the time of the 2002-03
Budget was ultimately closed with a combination of expenditure reductions, revenue enhancements, and one-
time budgetary actions, such as fund transfers and loans, expenditure deferrals, bond issuances and other
actions. Total revenue receipts reported by the State Controller's Office for the three major revenue sources
31 t'/- ~b~
DOCSOC\954737v7~24036.0028
(personal income tax, sales tax and corporation tax) for the first five months of fiscal year 2002-03 have been
below the revenue projections included within the 2002-03 Budget. These reduced revenues have led to the
proposed mid-year budget reductions discussed below.
In mid-November, 2002, the Legislative Analyst issued a report (the "LAO Report") indicating the
State is facing dire fiscal conditions. The LAO Report was prepared to provide the Legislature with a baseline
from which budget decisions could be made. The LAO Report updated economic conditions, and revenue and
expenditure projections based on mom recent actual results since the time of the enactment of the 2002-03
Budget. The LAO Report projected that, absent corrective actions, the State General Fund would have a
budget deficit of about $6.1 billion by the end of the 2002-03 fiscal year (compared to the 2002-03 Budget
which predicted a reserve balance of $1 billion) and a cumulative budget deficit over $21 billion by the end of
the 2003-04 fiscal year. Furthermore, even given accelerating economic growth in 2003 and beyond (which is
not assured), unless corrective actions are taken, in the Legislative Analyst's view, there would continue to be
a substantial deficit between revenues and expenditures, in a potemial range from $12-16 billion armually, for
several years after 2003-04.
The principal causes of the continuing fiscal difficulty were identified in the LAO Report as (i) the use
of so many one-time budget solutions to resolve the shortfall projected at the time of the 2002-03 Budget,
without enough emphasis on closing the "structural deficit" between ongoing revenue sources (taxes) and
ongoing expenditure commitments, (ii) t he 1 ikelihood t hat some o f t he assumptions i n t he 2 002-03 Budget
would not be met, and (iii) a significant downward revision in revenue estimates for the period through June
30, 2004. The LAO Report estimated that items (i) and (ii) above would result in a cumulative $10 billion gap
between revenues and expenditures (absent further actions) by the end of the 2003-04 fiscal year, consistent
with projections the Legislative Analyst had made in the summer of 2002.
In the summer of 2002, the Govemor notified all State agencies to prepare 2003-04 budget proposals
for a minimum of 20 percent cut in funding. On November 21, 2002, the Governor announced his call for a
special session of the Legislature, which began on December 9, 2002, to address needed budget actions, and he
further directed State agencies to take immediate action to reduce any non-critical or non-essential activities by
not filling any vacant positions, to cancel, postpone or amend contracts, grants, purchase orders and similar
commitments, to eliminate additional non-essential vacant positions, to delay construction or signing of new
leases for space, to cancel or postpone non-essential trips, and to generate new proposals for current year
program reductions. The Governor stated that he would propose spending reductions, recaptures and other
changes to accomplish savings over the period through June 30, 2004. The Governor also stated that he
believed the budget shortfall would be higher than the $21 billion estimated by the LAO Report.
On December 6, 2002, the Govemor released his mid-year spending reduction proposals for
consideration at the special session of the Legislature with his proposed reductions and adjustments totaling
$10.2 billion for fiscal years 2002-03 and 2003-04. On December 18, 2002, the Governor announced that the
estimated budget shortfall through June 30, 2004 is $34.8 billion.
On January 10, 2003, the Governor released his proposed budget for fiscal year 2003-04 (the
"Govemor's Proposed 2003-04 Budget") in which he addressed deficits under the 2002 Budget Act and 2003-
04 fiscal year budget shortfalls--a combined $34.6 billion gap between projected revenues and expenditures
over the 2002-03 and 2003-04 fiscal years. To close the balance of the $34.6 billion budget gap, the Governor
proposed additional measures that are expected to address the estimated $24.4 billion budget shortfall not
addressed in the Governor's December 2002 mid-year spending reductions proposals. The following table
shows the additional measures by the Governor; Proposed 2003-04 Budget and the mid-year spending
reduction proposals announced in December 2002 which together comprise the Governor's overall solution to
closing the entire predicted $34.6 billion budget shortfall:
DOCSOC\954737v7~24036.0028
ADDRESSING THE OVERALL $34.6 BILLION GAP
(Dollars in Millions)
December ~4dditional
Revision Measures Total Percentage
Cuts/Savings $ 8,966.4 $11,761.9 $ 20,728.3 59.9%
State-Local Realignment 191.6 7,962.4 8,154.0 23.6%
Fund Shir2s 815.6 1,087.1 1,902.7 5.5%
Trans fers/Other Revenue 199.7 1914.6 2,114.3 6.1%
Loans/Borrowing 25.4 1,657.9 1,683.3 4.9%
Total $ 10.198.7 $24~.383.9 $ 34.582,6 !00,0°~
Source: Governor's Budget Summary 2003-04.
The Governor's Proposed 2003-04 Budget includes: (i) increasing personal income tax margins up to
10% and 11% for high-income taxpayers (which according to the Governor is expected to generate
approximately $2.6 billion in additional revenues fiscal year during 2003-04), (ii) raising sales and use taxes
by one cent (which according to the Governor is expected to generate approximately $4.6 billion in additional
revenues during fiscal year 2003-04) and increasing the cigarette tax $1.10 per pack (which according to the
Governor is expected to generate approximately $1.2 billion in additional revenues during fiscal year 2003-
04). The Governor's Proposed 2003-04 Budget shifts to counties roughly $8 billion of health, child care and
social service programs for which the State is currently responsible and reduces State General Fund support to
the trial courts by $300 million. To offset the financial impact of the proposed state-local realignment
measurers, $8.2 billion in revenue increases assumed by the Governor as a result of the tax generating
measures described above will be utilized to provide funding to counties and courts for the aforementioned
programs and services.
The Governor's Proposed 2003-04 Budget proposes restoration of Executive Branch authority to
make mid-year adjustments to the budget when revenues fall significantly below budgeted forecasts. The
Governor's Proposed 2003-04 Budget contemplates the creation of a special budget reserve for proceeds from
extraordinary revenue growth to be used for one-time expenditures.
The LAO, in a report issued on January 15, 2003, contends that the Govemor's Proposed 2003-04
Budget overstates both baseline costs and budget program savings in numerous areas of the budget and
understates tax revenues. The LAO notes that approximately $8 billion dollars in the difference between the
LAO Report November, 2 002 projection of a $21.1 billion deficit and the Governor's $ 34.6 billion deficit
prediction is attributable to forecasting differences of revenues and program caseloads that drive expenditures.
The balance of the discrepancy between the two projections, according to the LAO, is attributable to
definitional differences r elating t o t he baseline used for analyzing expenditure reductions; according t o t he
LAO, the Governor's baseline in some cases reflects additional spending that would be required to achieve the
administration's policy goals as well as proposals that have not yet been adopted. The LAO does predict that
based on more up-to-date information about revenues and caseload trends and other factors affecting spending,
it will update its estimate of the budget shortfall to the $26-plus billion range.
The LAO issued another report on the Governor's Proposed 2003-04 Budget on February 19, 2003 in
which it goes into further analysis of the Governor's Proposed 2003-04 Budget and the State's economy. The
LAO estimated that the adoption of the Governor's Proposed 2003-04 Budget would result in a positive
reserve of about $1.6 billion at the conclusion of 2003-04 and would address the long-term structural
imbalance in the State's budget with revenues and expenditures roughly balancing in fiscal year 2004-05. The
LAO notes that there are a number of key risk factors that could consume the projected $1.6 billion reserve
including a failure to reach agreement on $1.5 billion of revenues from Indian gaming and a reduction in
existing federal funding reimbursements. The LAO states that a restoration of California's fiscal health will
33
DOCSOC\954737v7~24036.0028 /g ~ ~ '7
occur only if the Legislature either (1) adopts the major savings and revenue proposals included in the
Governor's Proposed 2003-04 Budget or (2) finds alternative solutions of similar magnitude that are real and
largely ongoing in nature. Absent this, the modest positive fiscal balance that the LAO has projected would, in
its view, be quickly transformed into a large deficit.
On March 18, 2003, the Governor signed into law legislation passed at the special session of the
Legislature regarding mid-year budget costs for fiscal year 2002-03. The legislation approves approximately
$3.3 billion of spending reductions and budget adjustments for fiscal year 2002-03 and provides $23 million in
savings for fiscal year 2003-04. These reductions and budget adjustments did not have a material impact on
the City's General Fund.
Final action on budget adjustments for fiscal year 2002-03 and enactment of the 2003 Budget Act will
occur following negotiations between the Legislature and the Governor over the coming months. Additional
estimates and proposals will be contained in the May Revision to the 2003-04 Governor's Budget, to be
released on May 14, 2003.
Impact of State Budget on City
The Governor has proposed to reduce the vehicle license fee backfill to cities and counties by
approximately $1.3 billion in fiscal year 2002-03 and the Governor's Proposed 2003-04 Budget proposes to
reduce the backfill by $3.0 billion in fiscal year 2003-04. The City received $10.3 million in vehicle license
fees in Fiscal Year 2002, which accounted for approximately 9% of the City's General Fund Revenues. The
State Controller has stated that a provision in existing law will trigger an increase in the VLF fees due to the
lack of available State revenues to pay the backfill amount. This interpretation may be challenged in court,
and no assurance can be given that an increase will be triggered automatically to replace the backfill amount.
If the Governor's Proposed 2003-04 Budget is enacted as proposed and the State Legislature does not continue
to backfill the VLF revenues or does not increase vehicle license fees, or an increase in VLF fees is not
triggered under existing law, the City forecasts it would lose approximately $8.5 million in VLF revenues for
Fiscal Year 2004 and for each year thereafter. As of the date of this Official Statement, the State has continued
to backfill VLF revenues for Fiscal Year 2003. As of March 1, 2003, the City had received approximately
$7.5 million in VLF Revenues in Fiscal Year 2003. The City has budgeted for the receipt of $10.8 million in
VLF revenues for Fiscal Year 2003. Additionally, the City forecasts that the State will not reimburse the City
approximately $40,000 for certain State mandated reimbursements in Fiscal Year 2003 and will defer such
reimbursements to future years. The City forecasts similar deferrals of State mandated reimbursements for
Fiscal Year 2004.
The City cannot predict what actions will be taken in the future by the State Legislature and the
Governor to address the State's current or future budget deficits. The final State Budget for fiscal year
2002-03 and future State budgets will be affected by national and state economic conditions and other factors
over which the City will have 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.
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.
TAX EXEMPTION
In the opinion of Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach,
California, Special Counsel, under existing statutes, regulations, rulings a nd judiciaI decisions, interest due
34 // ~ ~--~5/
DOCSOC\954737v7~24036.0028
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, 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 alternative
minimum taxable income which may affect the alternative 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. In 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 tax preference for purposes of the federal
alternative minimum tax imposed on individuals and corporations, and is exempt from State of Califomia
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 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 Agreement, 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).
35 / --~
DOCSOC\954737v7~24036.0028
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 tax liability of certain persons. Special Counsel expresses no opinion regarding any
such tax 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.
CERTAIN LEGAL MATTERS
Certain legal matters incident to the authorization, sale, execution and delivery of the Certificates are
subject to the approval of Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach,
Califomia, Special Counsel. A complete copy of the proposed form of opinion of Special Counsel is contained
in Appendix D hereto. Special Counsel has not undertaken any responsibility to the Owners for the accuracy,
completeness or fairness of this Official Statement or other offering materials relating to the Certificates and
expresses no opinion relating thereto. Certain legal matters will be passed upon for the City and the Authority
by the City Attomey and by Stradling Yocca Carlson & Rauth, a Professional Corporation, as Disclosure
Counsel and for the UnderWriter by Harper & Burns, L.L.P., Underwriter's Counsel. Compensation of Special
Counsel and the Financial Advisor is contingent upon the execution and delivery of the Certificates.
LITIGATION
To the best knowledge of the City, there is no action, suit or proceeding known to be pending, or
threatened, restraining or enjoining the execution or delivery of the Certificates, the Trust Agreement, the
Leased Properties, the Lease A~eement, the Assignment Agreement or any other document relating to the
Certificates, or in any way contesting or affecting the validity of the foregoing.
There are a number of lawsuits and claims pending against the City. In the opinion of the City, such
suits and claims as are presently pending will not have a material adverse affect on the ability of the City to
make Lease Payments.
RATINGS
Moody's Investors Service ("Moody's"), Standard& Poor's Ratings Group ("S&P") and Fitch
Ratings Ltd. ("Fitch") are expected to assign ratings of" , ...... and .... , respectively, to the
Certificates, with the understanding that, upon delivery of the Certificates, a policy insuring the payment when
due o£ principal of and interest with respect to the Certificates will be issued by the Insurer. Such ratings
reflect only the views of such organizations and any desired explanation of the significance of such ratings
should be obtained from the rating agency furnishing the same, at the following addresses: Moody's Investors
Service, Inc., 99 Church Street, New York, New York 10007; Standard & Poor's Corporation, 55 Water Street,
New York, New York 10041; and Fitch Ratings Ltd., One State Street Plaza, New York, New York 10004.
Generally, a rating agency bases its rating on the information and materials furnished to it and on
investigations, studies and assumptions o£ its own. There is no assurance such ratings will continue for any
given period of time or that such ratings will not be revised downward or withdrawn entirely by the rating
agencies, if in the judgment of such rating agencies, circumstances so warrant. Any such downward revision
or withdrawal of such ratings may have an adverse effect on the market price of the Certificates.
DOCSOC\954737v7k24036.0028
UNDERWRITING
The Certificates were sold to US Bancorp Piper Jaffray (the "Underwriter") pursuant to the terms of
the Purchase Contract, dated May__, 2003. The Certificates are being purchased by the Underwriter for
$ (representing the par amount of the Certificates, less net original issue discount of $
less an underwriter's discount of $ ). The Underwriter is committed to purchase all of the
Certificates if any are purchased. The Underwriter may offer and sell the Certificates to certain dealers
(including dealers depositing Certificates into investment trusts) and others at prices lower than the offering
prices stated on the cover of this Official Statement. After the initial public offering, the public offering prices
of the Certificates may be changed fi.om time to time by the Underwriter.
CONTINUING DISCLOSURE
Pursuant to a Continuing Disclosure Agreement (the "Disclosure Agreement"), the City has agreed to
provide, or cause to be provided, certain annual financial and operating data, including its audited financial
statements and certain of the information of the type set forth in Tables 1 through 4, 6, 7, 9 and 11 of this
Official Statement under the heading "CITY FINANCIAL INFORMATION", by no later than February 1 of
each year commencing February 1, 2004, to each nationally recognized municipal secufities information
repository and any public or private repository or entity designated by the State as a state repository for
purposes of Rule 15c2-12(b)(5) (the "Rule") adopted by the Securities a nd Exchange Commission (each, a
"Repository").
In addition, the City has agreed to provide, or cause to be provided, to each Repository in a timely
manner notice of the following "Listed Events" if determined by the City to be material: (1) principal and
interest payment delinquencies; (2) non-payment related defaults; (3) unscheduled draws on the debt service
reserves reflecting financial difficulties; (4)unscheduled draws on credit enhancements reflecting financial
difficulties; (5) substitution of credit or liquidity providers, or their failure to perform; (6) adverse tax opinions
or events affecting the tax-exempt status of the security; (7) modifications to fights of security holders;
(8) bond calls; (9) defeasances; (10) release, substitution, or sale of property securing repayment of the
securities; a nd (11) rating changes. These covenants have been made in order to assist the Underwriter in
complying with the Rule. 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. For a detailed
description of the City's responsibilities under the Disclosure Agreement see Appendix G "Form of
Continuing Disclosure Agreement."
VERIFICATION OF MATHEMATICAL COMPUTATIONS
Upon delivery of the Certificates, Grant Thorton will deliver a report verifying the mathematical
accuracy of certain computations concerning (i) the adequacy of the maturing principal amounts of and interest
on the Escrowed Federal Securities to prepay the outstanding 1993 Certificates in full on September 1, 2003,
as described herein, and (ii) the yield on the Certificates and on such Escrowed Federal Securities considered
by Special Counsel in their determination that the interest due with respect to the Certificates is excluded from
gross income for federal income tax purposes.
FINANCIAL STATEMENTS OF THE CITY
Included herein as Appendix B are the audited financial statements of the City as of and for the year
ended June 30, 2002, together with the report thereon dated October 11, 2002 of Caporicci & Larson, Certified
Pnblic Accountants (the "Auditor"). Such audited financiaI statements have been included herein in reliance
upon the report of the Auditor. The Auditor has not undertaken to update the audited financial statements of
the City or its report or to take any action intended or likely to elicit information concerning the accuracy,
completeness or faimess of the statements made in this Official Statement, and no opinion is expressed by the
Auditor with respect to any event subsequent to its report dated October 11, 2002.
DOCSOC\954737v7~24036.0028
The GovemmentaI 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.
The requirements o f Statement N o. 34 a re effective in three phases based o n a govemment's total
annual revenues in the first fiscal year ending after June 15, 1999. Governments with total annual revenues
(excluding extraordinary items) of $100 million or more (phase 1) were required to apply Statement No. 34 for
periods beginning after June 15, 2001. Governments with at least $10 million but less than $100 million in
revenues (phase 2) are required to apply Statement No. 34 for periods beginning after June 15, 2002.
Governments with less than $I0 million in revenues (phase 3) are required to apply Statement No. 34 for
periods beginning after June 15, 2003. Governments that elect early implementation of Statement No. 34 for
periods beginning before June 15, 2000, should also implement GASB Statement No. 33, Accounting and
Financial Reporting for Nonexchange Transactions, at the same time. If a primary government chooses early
implementation of Statement No. 34, all of its component units also should implement this standard early to
provide the financial information required for the govemment-wide financial statements.
Prospective reporting of general infrastructure assets is required at the effective dates of Statement
No. 34. Retroactive reporting of all major general governmental infrastructure assets is encouraged at that date.
For phase 1 and phase 2 governments, 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. Phase 3 govemments are
encouraged to report infrastructure retroactively, but may elect to report general infrastructure prospectively
only.
The City has complied the provisions of Statement No. 34 for the fiscal year ending June 30, 2002.
MISCELLANEOUS
Included herein are brief summaries of certain documents and reports, which summaries do not
purport to be complete or definitive, and reference is made to such documents and reports for full and complete
statements of the contents thereof. Any statements in this Official Statement involving matters of opinion,
whether or not expressly so stated, are intended as such and not as representations of fact. This Official
Statement is not to be construed as a contract or agreement between the City and the purchasers or Owners of
any of the Certificates.
The execution and delivery of this Official Statement has been duly authorized by the City.
CITY OF CHULA VISTA
By:
Director of Finance
38 /
DOCSOC\954737v7~24036.0028
APPENDIX A
ECONOMIC AND DEMOGRAPHIC INFORMATION
REGARDING THE CITY OF CHULA VISTA
This appendix sets forth general information about the City of Chula Vista ("Chula Vista ") including
information with respect to its finances. The following information concerning Chula Vista, the County of San
Diego (the "County") and the State of California (the "State") is included only for general background
purposes. It is not intended to suggest that the Certificates are payable from any source other than Lease
Payments.
General Description
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 the area generally known as "South Bay." Chula Vista's city
limits cover approximately 50 square miles. Chula Vista was incorporated March 17, 1911 a nd became a
chartered city in 1949. Chula Vista operates under a Council-Manager form of government and provides the
following services: public safety, community services, engineering services, planning services, public works,
general administrative services and capital improvements. With a January 1, 2002 estimated population of
[ 190,900], Chula Vista is the second largest city in the County.
Population
The historic population of Chula Vista, the County and the State is shown below.
City of Chula Vista, County of San Diego and State of California
Population Estimates
Year City of Chula Vista County of San Diego State of California
1998 159,500 2,702,800 32,657,000
1999 164,200 2,751,000 33,140,000
2000 171,700 2,805,900 33,753,000
2001 181,200 2,859,000 34,385,000
2002 190,900 2,918,300 35,037,000
Source: California State Department of Finance, E-4 Revised Historical City, County and State Population Estimates, 1991-
2000, with 1990 and 2000 Census Counts and E-1 City/County Population Estimates, with Annual Percent Change,
January I, 2001 and 2002.
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DOCSOC\954737v7X24036,0028
Building Activity
Residential building activity for the past five calendar years for Chula Vista is shown in the following
tables.
City of Chula Vista
New Housing Units Building Permits
1998 1999 2000 2001 2002
Single Family Units 1,180 1,796 1,776 2,184 1,749
Multifamily Units 166 750 864 1,341 501_
Total Units !,346 2,546 2,640 3,525 2,250
Source: City of Chula Vista Building Department
City of Chula Vista
Building Permit Valuations
(Dollar Volume in 000's)
1998 1999 2000 2001 2002
Residential
New Single Family $ 214,986 $ 307,653 $ 3 19,086 $ 433,851 $413,648
New Multifamily 11,452 53,470 74,634 107,732 47,389
Res. Alt. & Adds 5,391 5,085 4,863 7,987 10,301
Total Residential 231,829 366,209 398,583 549,570 471,338
Nonresidential
New Commercial $ 17,432 $ 11,213 $ 17,916 $ 22,139 $ 20,927
New Industrial 5,581 7,909 17,418 2,139 738
New Other°> 11,483 5,840 17,890 11,112 22,761
Alters. & Adds. 12,783 13,552 10,527 13,092 19,368
Total Non- 47,280 38,516 63,752 48,482 63,794
Residential
Total All Building $ 279.11~0 $ 404.725 $ 462.33~5 $ 598~05~2 $535.13~1
Includes churches and religious buildings, hospitals and institutional buildings, schools and educational buildings,
residential garages, public works and utilities buildings and no-residential alterations and additions.
Note: 'TotaI All Bu'ld'ng's the sum of Residential and Nonresidential Building Permit Valuations. Totals may not add to
sums because of independent rounding.
Source: City of Chula Vista Building Department
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DOCSOC\954737v7X24036.0028
Employment
The following table summarizes the labor force, employment and unemployment figures over the
period 1998 through 2002 for Chula Vista, the County, the State and the United States.
Chula Vista, San Diego County, State of California and United States
Labor Force, Employment and Unemployment Yearly Average
Civilian Civilian Civilian Civilian
Year and Area Labor Force Employment(v Unemployment(2~ Unemployment Rate(s~
1998
Chula Vista 69,200 66,630 2,570 3.7%
San Diego County 1,321,000 1,274,600 46,400 3.5%
Califomia 16,336,500 15,367,500 969,000 5.9%
United States® 137,673,000 131,463,000 6,210,000 4.5%
1999
Chula Vista 71,300 68,980 2,320 3.3%
San Diego County 1,361,600 1,319,600 42,000 3. 1%
California 16,596,500 15,731,700 864,800 5.2%
United States® 139,368,000 133,488,000 5,580,000 4.2%
2000(5)
Chula Vista 73,410 71,080 2,330 3.2%
San Diego County 1,401,900 1,359,900 42,000 3.0%
California 17,090,800 16,245,600 845,200 4.9%
United States® 140,863,000 135,208,000 5,655,000 4.0%
2001(5)
Chula Vista 74,620 72,090 2,530 3.4%
San Diego County 1,424,900 1,379,200 45,700 3.2%
California 17,362,200 16,435,200 927,100 5.3%
United States® 141,815,000 135,073,000 6,742,000 4.8 %
2002
Chula Vista 76,980 73,490 3,490 4.5%
San Diego County 1,469,000 1,406,000 63,000 4.3%
California 17,404,600 16,241,800 1,162,800 6.7%
United States® N/A N/A 8,378,000 5.8%
0) Includes persons involved in labor-management trade disputes.
(2) Includes all persons without jobs who are actively seeking work.
(3) The unemployment rate is computed from unrounded data; therefore, it may differ from rates computed from rounded
figures in this table.
(4) Not strictly comparable with data for prior years.
(5) Based on March 2001 benchmark.
Source: California Employment Development Department, based on March 2002 benchmark and U.S. Department of Labor,
Bureau of Labor Statistics.
San Diego Metropolitan Statistical Area ("MSA"), which includes Chula Vista, civilian labor force
and wage and salary employment figures for calendar years 1998 through 2002 are shown in the folIowing
table. These figures are county-wide statistics and may not necessarily accurately reflect employment trends in
Chula Vista.
DOCSOC\954737v%24036.0028
San Diego MSA
Civilian Labor Force, Employment and Unemployment
Annual Averages, March 2002 Benchmark
1998 1999 2000 2001 2002
Civilian Labor Force 1,321,000 1,361,600 1,393,600 1,428,900 1,469,000
Civilian Employment 1,274,600 1,319,600 1,351,800 1,382,600 1,406,000
Civilian Unemployment 46,400 42,000 41,800 46,300 63,000
Civilian Unemployment Rate 3.5% 3.1% 3.0% 3.2% 4.3 %
Total Farm 10,600 11,200 11,400 11,400 l 0,800
Total Nonfarm 1,105,500 1,152,900 1,193,800 1,218,400 1,228,500
Natural Resources and Mining 300 300 300 300 300
Construction 60,200 67,000 69,700 75,100 76,000
Manufacturing 124,000 122,900 122,600 119,000 112,200
Durable Goods 93,600 92,400 92,200 89,300 84,500
Service Providing 921,000 962,700 1,001,200 1,024,000 1,039,900
Trade, Transportation and Utilities 187,900 194,200 202,600 209,000 209,400
Wholesale Trade 34,700 36,800 39,100 41,500 41,300
Retail Trade 124,700 128,200 133,800 135,600 137,500
Transportation, Warehousing and Utilities 28,600 29,200 29,800 32,000 30,700
Information 34,300 36,200 39,200 38,800 37,200
Financial Activities 66,000 70,400 71,200 72,000 73,800
Professional and Business Services 173,100 185,000 195,200 198,200 201,300
Educational and Health Services 107,100 112,200 1 l 5,300 116,000 118,700
Leisure and Hospitality 118,600 124,400 129,000 131,400 132,200
Other Services 39,500 40,900 42,200 44,900 46,300
Government 194,500 199,300 206,600 213,800 221,000
Total, All Industries 1,116,100 1,164,000 1,205,200 1,229,800 1,239,300
Note: The "Total, All Industries" data is not directly comparable to the employment data found herein.
(0 Based on place ofresidence.
(2) Based on place of work.
Source: State of California, Employment Development Department, San Diego MSA Annual Average Labor Force and
Industry Employment, March 2002 Benchmark.
A-4
DOCSOC\954737v7L24036.0028 (/~ ~:> ~
The following listings set forth Chula Vista's Principal Employers for fiscal year ending June 30,
2002:
Chula Vista's Principal Employers
Business Industrial/Office
No. of
Name Type of Business Employees
BF Goodrich Aerospace Aerostructures Group Aerospace Manufacturer 2,418
Sharp Chula Vista Medical Center Hospital 1,110
Scripps Memorial Hospital Hospital 818
Ges Exposition Services, Inc. Contractor 705
United Parcel Service Parcel Delivery 466
Wal.Mart General Merchandise 375
Remedy Temporary Services, LLC Employment Services 352
Costco Wholesaler Corp #460 General Merchandise 292
Raytheon Systems Company Communications 281
Sears Roebuck & Co. Department Store 262
Costco Wholesaler Corp 0405 General Merchandise 237
Bayview Behavioral Health Campus Hospital 236
Home Depot Building Supplies/Hardware 235
American Fashion Inc. Apparel Manufacturing 229
Gcc Industries Inc. Engineering 222
ATC Vancum of California Transit Company 214
Target Retail 204
MDI Interviewing Services, Inc. Marketing 200
Source: City of Chula Vista Finance Depamnent (excluding City of Chula Vista Employees).
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DOCSOC\954737v7~4036.0028 / ~ (:2> '7
Effective Buying Income
"Effective Buying Income" is &fined as personal income less personal tax and nontax payments, a
number often referred to as "disposable" or "after-tax" income. Personal income is thc aggregate of wages and
salaries, other than labor-related income (such as employer conthbutions to private pension funds), proprietor's
income, rental incomc (which includes imputcd rental income o f o wrier-occupants o f n on-farm d wellings),
dividends paid by corporations, interest income from all sources and transfer payments (such as pensions and
welfare assistance). Deducted from this total arc personal taxes (fcdaral, state and local, nontax payments,
fines, fees, penalties, etc.) and personal contributions to social insurance. According to U.S. govemment
dcfnitions, the resultant figure is commonly known as "disposable personal income."
The following table summarizes the total effective buying income, the per capita effective buying
income and the percentage of households over $50,000 for Chula Vista, thc County and the State between
1997 through 2002:
Chula Vista, San Diego County and California
Effective Buying Income(h)
Median
Effective Per Capita Household Percent of
Buying Effective Effective Households
lncome(2~ Buying Income Buying Income over $50,000
1997
Chula Vista $ 2,217,170 $13,762 $33,267 28.9%
San Diego County 43,212,824 15,619 35,725 31.7
California 524,439,600 15,797 36,483 33.5
1998
Chula Vista $ 2,408,888 $14,187 $33,911 30.1%
San Diego County 46,056,143 16,101 36,296 32.8
California 551,999,317 16,299 37,091 34.6
1999
Chula Vista $ 2,629,899 $15,776 $37,725 35.4%
San Diego County 49,907,828 17,270 39,213 37.4
California 590,376,663 17,245 39,492 38.3
2000
Chula Vista $ 2,959,674 $17,268 $42,550 41.6%
San Diego County 54,337,662 19,150 44,292 43.7
California 652,190,282 19,081 44,464 44.3
2002
Chula Vista $ 2,917,494 $16,182 $42,229 35.1%
San Diego County 55,210,119 19,092 44,146 42.0
California 650,521,407 18,652 43,532 41.9
(~) Not comparable with prior years. Effective Buying Income i s n ow based on money income (which does not take into
account sale of property, taxes and social security paid, receipt of food stamps, etc.) versus personal income.
(2) Dollars in thousands.
Source: "Survey of Buying Power," Sales & Marketing Management Magazine, dated 1997, 1998, 1999, 2000 and 2001.
A-6 /__~
DOCSOC\954737v7~24036.0028
Sales Taxes
The following table shows taxable transactions in Chula Vista by type of business during caIendar
years 1997 through 2001. As indicated below, total retail sales for Chula Vista in 1997 increased by
approximately 7.1% over the 1996 level, in 1998 increased by approximately 8.8% over the 1997 level, in
1999 increased approximately 10.3% over the 199g level, in 2000 increased approximately 11% over the 1999
level and in 2001 increased approximately 4% over the 2000 level.
A summary of historic taxable transactions for Chula Vista is shown in the following table.
City of Chula Vista
Taxable Transactions
(Dollars in thousands)
1997 1998 1999 2000 2001
Apparel Stores Group $ 64,979 $ 63,414 $ 61,758 $ 66,598 $ 61,937
General Merchandise Stores 337,230 382,944 439,731 495,679 524,942
Food Stores Group 81,503 81,006 85,662 90,487 92,224
Eating and Drinking Group 126,357 131,661 142,329 155,583 164,417
Household Group/Home Furn. Appli. 47,004 55,856 61,923 66,365 67,827
Building Material Group 70,930 75,812 87,902 102,370 97,827
Automotive Group 89,986 107,808 126,304 145,923 151,812
Service Stations 103,994 88,570 95,546 121,244 119,050
Other Retail Stores 120,212 133,463 139,837 157~ 152 183,303
Retail Stores Total $ 1,042,195 $ 1,120,534 $ 1,240,992 $ 1,401,401 $ 1,463,409
All Other Outlets 171,228 199,661 215,396 206,889 225,256
Total All Outlets $ L213.42~33 $ 1.320.19~55 $ 1.456.38~8 ~$ 1:608.290 $ 1.688.66~55
Note: Drugs stores are grouped with the General Merchandise Stores and package liquor stores are grouped with the Eating
and Drinking Group.
Source: State Board of Equalization.
Education
Public educational instruction from kindergarten through hig~ school is provided by the Chula Vista
Elementary School District and Sweetwater Union High School District. These districts administer twenty-six
elementary schools, nine junior high schools and eight senior high schools. Southwestern College, a two year
Community College, has an em-ollment of more than 15,000. There are also four adult education schools and
twelve 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 site adjoining the Olympic Training Center.
Community Facilities
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.
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.
Recreational facilities within or near Chula Vista include twenty-four parks, four community centers,
six "tot lots," two ball fields, twenty-eight tennis courts, three golf courses, four municipal swimming pools,
two gymnasiums and boat launching facilities. Chula Vista's bayfront area contains a marina which houses
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DOCSOC\954737v7~24036.0028
552 boats and miles of public beaches. Chula Vista also provides many trails for bicycling, hiking and
jogging.
Chula Vista is also the home 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 site
donated by EastLake Development Company adjacent to the Otay Lake reservoir.
Chula Vista has more than sixty churches and nearly 100 service, fraternal and civic organizations.
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 boarder. Commuter rail service is provided by the San Diego
Trolley, a light rail system started in 1981 and eleven bus routes serve Chula Vista.
Daily bus connections serve Chula Vista, and Southern Pacific Railway and San Diego's Lindbergh
International Airport are fifteen minutes to the north of Chula Vista.
Utilities
Electric power and natural gas are provided by San Diego Gas and Electric. Pacific Bell provides
telephone service to the area. Otay Water District and Sweetwater Water District provide water service and
Chula Vista provides sewer service.
A-8 /~ '~O
DOCSOC\954737v7L24036.0028
APPENDIX B
THE CITY OF CHULA VISTA AUDITED FINANCIAL STATEMENTS
FOR THE FISCAL YEAR ENDED JUNE 30, 2002
DOCSOC\954737v7~24036.0028
APPENDIX C
SUMMARY OF PRINCIPAL LEGAL DOCUMENTS
c-~ / ~- 72__
DOCSOC\954737v7~24036.0028
APPENDIX D
FORM OF SPECIAL COUNSEL OPINION
[Closing Date]
DOCSOC\954737v7L24036.~028
APPENDIX E
SPECIMEN MUNICIPAL BOND INSURANCE POLICY
DOC SOC\954737v7L24036.0028
APPENDIX F
CITY INVESTMENT POLICY
1. PURPOSE
Effective cash flow management and cash investment practices are recognized as essential to good
fiscal management. This Statement is intended to provide guidelines for the prudent investment of the City's
temporarily idle cash in all Funds, and outline the policies for maximizing the efficiency of the City's cash
management system.
2. OBJECTIVE
The objective of the investment policy is to provide guidelines for insuring the safety of funds
invested while maximizing investment interest income to the City.
3. INVESTMENT POLICY
A. The 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.
This 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. Investment practices shall conform to the
prudent man role (Civil Code Sect. 2261, et seq.) 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..."
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.
B. 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 ali invested principal. However, it is realistically anticipated that
market prices of securities pumhased as investments will vary depending on economic
conditions, interest rate fluctuations, or individual security credit factors. In a well 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.
C. The three principle factors of Safety, Liquidity and Yield are to be taken into consideration, in
the specific order listed, when making investment decisions.
(i) Safety of principal is the foremost factor to be considered during each investment
transaction. Safety in investing refers to minimizing the potential for loss of principal, interest or a
combination of the two due to the two types of risk, Credit Risk and Market Risk.
F-1
DOCSOC\954737v7~24036.0028 / ~ '7
(a) Credit Risk, defined as the risk of loss due to failure of the issuer of a
security, shall be mitigated by only investing in very safe, or "investment grade" securities
and diversifying where feasible.
(b) Market Risk, defined as market value fluctuations due to overall changes in
interest rates shall be mitigated by limiting the average maturity of the investment portfolio to
less than 3 years, with a maximum maturity of any one security of 5 years without prior
Council approval. Also, t he portfolio w ill b e s tinctured based o n 1 iquidity needs s o a s t o
avoid the need to sell securities prior to maturity.
(ii) Liquidity refers to the ability to convert an investment to cash promptly with
minimum risk of losing some portion of principal or interest. The investment portfolio will be
structured based on historic cash flow analysis in order to provide the necessary liquidity as
investments routinely mature. A portion of the portfolio will be maintained in liquid short-term
securities which can be converted to cash if necessary to meet unforeseen disbursement requirements.
(iii) Yield is the average annual return on an investment based on the interest rate, price,
and length of time to maturity. The City attempts to obtain the highest yield possible, provided that
the basic criteria of safety and liquidity have been met.
4. AUTHORIZED INVESTMENT INSTRUMENTS
The City may invest in the following instruments under the guidelines as provided herein:
A. Certificates of Deposit. 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 53652
and/or 53651 (m) (1). No more than 25% of the investment portfolio may be invested in this
investment type.
B. Securities of the U.S. Government or its Agencies. 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.
C. Treasury 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.
D. Local Agency Investment Fund (LAIF). 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.
E. County of San Diego Treasury 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.
F. Bankers Acceptance. Bills of Exchange or Time Drafts drawn on and accepted by a
corranereial bank, otherwise known as Bankers Acceptances, both domestic and foreign,
~vhich are eligible for purchase by the Federal Reserve System. Purchases of Bankers
F-2 [ --'7 ~
DOCSOC\954737vTk2.4036.0028
Acceptances may not exceed 270 days maturity or total more than 40% of the cost value of
the City's investment portfolio.
G. Commercial Paper. Paper of the highest rating as provided by Moody's Investors Service,
Inc. (PI), or Standard and Poor's Corporation (Al+). Eligible paper is further limited to
issuing corporations that are organized and operating within the United States and having
total assets in excess of five hundred million dollars ($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.
H. Negotiable Certificates of Deposit. Issued by a nationally or state-chartered bank or 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.
I. Repurchase 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.
J. Medium Term Corporate Notes. Corporate obligations shall be 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 any one
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.
K. 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.
5. 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 o f City funds consistent with t he City's obj ective o f attaining market rates o f
return, and consistent with constraints imposed by its safety objectives, cash flow considerations and State
laws.
6. SAFEKEEPING
All investments of the City shall have the City of Chula Vista as registered owner and shall be held in
safekeeping by a third party bank trust department, acting as agent for the City under the terms of a custody
agreement.
DOCSOC\954737v7~24036.0028
7. INVESTMENT REPORTS
A. The Director of Finance shall submit a quarterly investment report to the City Manager and
City Council in accordance with Govermnent Code Section 16481.2 containing the following
information for each individual investment:
- Financial institution
- Type of investment
- Purchase Price of investment
- Rate of interest
- Purchase date
- Maturity date
- Current market value for securities
- Other data as required by the City
In addition, the report shall include a statement of compliance of the portfolio with the
Council approved Investment Policy and a statement indicating the ability of the City to meet
its expenditure requirements for the next six months.
8. POLICY REVIEW
This investment policy and guidelines shall be adopted by resolution of the City Council on an annual
basis after being reviewed to ensure its consistency with the overall objectives of preservation of principal,
liquidity, and yield, and its relevance to current law and financial and economic trends.
DOCSOC\954737v7~24036,0028
APPENDIX G
FORM OF CONTINUING DISCLOSURE AGREEMENT
o_~
DOC SOC\954737v7~24036.0028
APPENDIX H
DTC BOOK-ENTRY SYSTEM
The Depository Trust Company ("DTC"), New York, NY, will act as securities depository for the
Certificates (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, t he world's largest depository, i s a 1 imited-purpose t rust company organized under t he New
York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of
the Federal Reserve System, a "cleating corporation" within the meaning of the New York Uniform
Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the
Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 2 million issues of U.S.
and non-U.S, equity issues, corporate and municipal debt issues, and money market instruments from over 85
countries that DTC's participants ("Direct Participants") deposit with DTC. DTC also facilitates the post-trade
settlement among Direct Participants of sales and other securities transactions in deposited securities, through
electronic computerized book-entry transfers and pledges between Direct Participants' accounts. This
eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and
non-U.S, securities brokers and dealers, banks, trust companies, cleating corporations, and certain other
organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation
("DTCC"). DTCC, in turn, is owned by a number of Direct Participants of DTC and Members of the National
Securities Clearing Corporation, Government Securities Clearing Corporation, MBS Clearing Corporation, and
Emerging Markets Clearing Corporation, (NSCC, GSCC, MB SCC, 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 ("Indirect
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.
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 ("Beneficial Owner") is in turn to be recorded on the Direct and Indirect
Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchase.
Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction,
as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the
Beneficial Owner entered into the transaction. Transfers of ownership interests in the 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 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 DTC's partnership nominee, Cede & Co., or such other name as may be requested by
an authorized representative of DTC. 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 O~vners of the Certificates; DTC's records reflect only the identity of the
Direct Participants to whose accounts such Certificates are credited, which may or may not be the Beneficial
Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on
behalf of their customers.
DOC SOC\954737v?~4036.0028
Conveyance of notices and other communications by DTC to Direct Participants, by Direct
Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners
will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be
in effect from time to time. Beneficial Owners of Certificates may wish to take certain steps to augment the
transmission to them of notices of significant events with respect to the Certificates, such as redemptions,
tenders, defaults, and proposed amendments to the Certificate documents. For example, Beneficial Owners of
Certificates m ay wish t o ascertain t hat t he nominee holding t he Certificates for t heir benefit h as a greed t o
obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide
their names and addresses to the registrar and request that copies of notices be provided directly to them.
Prepayment notices shall be sent to DTC. If less than all of the Certificates within a maturity are
being prepaid, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in
such maturity 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 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).
Prepayment proceeds, distributions, and dividend payments on the Certificates will be made to
Cede & C o-, or such other nominee a s may b e requested b y an authorized representative o f D TC. DTC's
practice is to credit Direct Participants' accounts upon DTC's receipt of funds and corresponding detail
information from the City or the Trustee, on payment date in accordance with their respective holdings shown
on DTC's records. Payments by Participants to Beneficial Owners will be governed by standing instructions
and customary practices, as is the case with securities held for the accounts of customers in bearer form or
registered in "street name," and will be the responsibility of such Participant and not of DTC nor its nominee,
the Trustee, or the City, subject to any statutory or regulatory requirements as may be in effect from time to
time. Payment of prepayment proceeds, distributions, and dividend payments to Cede & Co. (or such other
nominee as may be requested by an authorized representative of DTC) is the responsibility of the Trustee,
disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of
such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.
A 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 DTC'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 DTC's records
and followed by a book-entry credit of tendered Certificates to the Tmstee's DTC account.
DTC may discontinue providing its services as 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
depository is not obtained, physical Certificates are required to be printed and delivered.
The City may decide to discontinue use of the system of book-entry transfers through DTC (or a
successor securities depository). In that event, physical Certificates will be printed and delivered.
The information in this section concerning DTC and DTC's 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.
DOCSOC\954737v7~24036.0~28