HomeMy WebLinkAbout2010/02/02 Item 7
CITY COUNCIL
AGENDA STATEMENT
~\'f::. CITY OF
:~CHULA VISTA
ITEM TITLE:
SUBMITTED BY:
REVIEWED BY:
FEBRUARY 2, 2010, ItemL
RESOLUTION OF THE CHULA VISTA PUBLIC
FINANCING AUTHORITY APPROVING A
LEASE/PURCHASE AGREEMENT WITH THE CITY OF
CHULA VISTA AND CERTAIN OTHER DOCUMENTS IN
CONNECTION WITH THE EXECUTION AND DELIVERY
OF THE 2010 CERTIFICATES OF PARTICIPATION IN A
PRINCIPAL AMOUNT NOT TO EXCEED $30,000,000
DIRECTOR OF FINANCE/TREASUREIi..~
CITY MANAGE~
ASSISTANT CIT~ANAGER '01
4/STHS VOTE: YES D NO 0
SUMMARY
On January 20, 2009, the City Council endorsed the City Manager's "Fiscal Health Plan" which
included the review of the outstanding debt obligations to ensure that the City will continue to
meet its debt obligations and minimize the impacts to City services.
The City Council approved the bond sale and related bond documents at the January 26, 2010
City Council meeting. The Public Financing Authority (Authority) was unable to approve the
bond sale and related bond documents at the January 26, 2010 meeting because the Authority
had not established a "regular" meeting date as required by the recent passage of Government
Code Section 6592.1 which became effective on January 1,2010. A regular meeting date for the
Authority was established as the first Tuesday of each month and was approved at the January
26, 2010 meeting by the Board of Directors for the Authority (City Council).
ENVIRONMENTAL REVIEW
The Environmental Review Coordinator has reviewed the proposed activity for compliance with the
California Environmental Quality Act (CEQA) and has determined that authorizing a bond sale is
not a "Project" as defined under Section 15378 of the State CEQA Guidelines because it will not
result in a physical change to the environment; therefore, pursuant to Section 15060( c )(3) of the
State CEQA Guidelines the actions proposed are not subject to CEQA.
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February 2, 2010
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RECOMMENDA nON
Public Financing Authority approve the resolution.
BOARDS/COMMISSION RECOMMENDA nON
Not Applicable
DISCUSSION
Background
Fiscal Health Plan
In January 2009, the City Council endorsed the City Manager's "Chula Vista Fiscal Health Plan"
which provided an outline to preserve City services, mitigate the current budget issues, and
provide long-term financial stability for the City of Chula Vista. The Fiscal Health Plan is
comprised of the following major components:
1. Reduce Operating Expenditures
2. Increase Revenues
3. Economic Development and Job Creation
4. Budget Reforms
Since the development of the Fiscal Health Plan, the City has taken steps in implementing the
plan and begins to put the City back on strong financial standing. As noted above, one of the
components of the fiscal health plan was to implement budget reforms. Some of the specific
actions recommended in the short term included implementation of a zero-based budget process,
establishing cross departmental analyst support, updating the existing General Fund reserve
policy, and restructuring current debt obligations.
Evaluating the feasibility of restructuring the debt obligations is being recommended at this time
because the significant slow down in development has created a cash flow issue in the Public
Facilities Development Impact Fee (PFDIF) fund. If the restructuring of the PFDIF debt is not
pursued the General Fund would need to assume the PFDIFs debt obligation. Over the last few
years, Council has taken decisive actions to address the changing economic picture and the
impact it has on the General Fund and the services the City is able to deliver to the community.
Adding the PFDIF debt service to the General Fund would likely trigger additional program and
service reductions. For this reason, staff is recommending pursuing other alternatives.
PFDIF Pro!!:ram
In 1991, the City Council approved the creation of the Public Facilities Development Impact Fee
("PFDIF") program which would generate funds paid by new development to fund the construction
and acquisition of public facilities and equipment, using cash on hand, long-term debt fmancing, or
7-2
February 2,2010
Page 3 of8
a combination thereof. A total of $99 million has been spent from the PFDlF program funding fire
stations, recreation centers, a library and related equipment on a cash basis. The City financed the
construction of the new Corporation Yard and the Police Facility with the debt service payments
split between the PFDlF program and the General Fund. As a result of the significant reduction in
development-related fees currently being collected, the City is anticipating restructuring a portion of
the debt related to its PFDlF obligations. The City anticipates that this modification will provide
necessary cash flow relief to the PFDlF fund during this severe downturn in development as well as
spare the General Fund ITom paying the PFDlF share of the debt. Additional information on the
City's PFDlF program is included under Attachment A.
The Public Facilities Development Impact Fee (PFDlF) fund's armual debt service requirement is
approximately $5.2 million. The PFDlF fund met its debt service commitment in fiscal year 2008-
09 and 2009-10 through an inter-fund loan from the Transportation Development Impact Fee
(TDlF) fund. Without the inter-fund loan the General Fund would have been required to make the
debt service payments on behalf of the PFDlF fund, which would have a significant impact on the
City's General Fund. The inter-fund loans from the TDlF approved to date are not anticipated to
impact capital project construction timing. A debt restructuring was not proposed at the time of the
approval of the inter-fund loans due to the severe challenges surrounding the financial markets.
Additional inter-fund loans are not recommended due to the potential to impact scheduled
transportation projects.
Due to the economic downturn over the past two years the General Fund budget has been reduced
by more than $37 million. Any added costs would have a severe impact on the City's ability to
maintain services. At this time, a modification of the PFDlF's debt is recommended with the
objective of generating cash flow relief for approximately three years as well as reduced armual debt
payments through fiscal year 2012-13 at which time the City's Pension Obligation Bonds (POB)
debt is paid off and the 2002 COPs are eligible for refunding.
Staff has worked with the City's Financial Advisor to review all outstanding PFDlF debt obligations
and identify the bond issuances most appropriate for restructuring and/or refunding. Following this
review, the debt related to the Corporation Yard (2000 COP) and the potential to issue COPs to
reimburse the PFDlF fund for expenses incurred related to the Civic Center have been identified as
viable options to provide cash flow relief to the PFDIF fund.
It should be emphasized that the intent ofthe restructuring is to provide the PFDIF fund with
cash flow relief for the next three years, not a reduction in the total debt. This modification of
existing debt is expected to increase the PFDlF's total debt service payments by approximately
$27.6 million that includes $17.6 million in fmancing costs over the next 23 years. The net present
value of the financing costs is $1.6 million. The debt will be structured to allow the City the
opportunity to call bonds (payoff early) as development returns to minimize the overall debt to the
PFDlF program through build out.
Debt Restructuring Proposal
Staff is working with the City's Financial Advisor to develop a financing plan that provides the
desired cash flow relief to the PFDlF over the next three years (FY 2011 to FY 2013).
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February 2, 20 I 0
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The restructuring plan involves two series of bonds:
I. Issue COPs to reimburse the PFDIF fund for cost incurred in completing the Civic Center
Expansion.
2. Refund the 2000 COPs (Corporation Yard) which are currently callable and may generate
annual debt service savings (cash flow savings) by extending the term of the debt out an
additional 10 years.
Restructuring Summary
The City is considering issuing two series of bonds: PFDIF Reimbursement COPs and
Refunding COP Corporation Yard, which should provide the PFDIF fund with cash flow relief
through FY 2012-2013. The cash flow analysis included under Attachment B provides an
analysis of the cash flows for existing debt service obligations and the projected cash flows with
the proposed restructuring. The two series of proposed bonds are described below.
Civic Center COPs Reimbursement
Under this series the City would "reimburse" the PFDIF fund for approximately $9.3 million in
Phase III City Hall Improvements previously paid from PFDIF funds. The proceeds from the
new money issue would be available to the PFDIF fund to enable it to make debt service
payments. The preliminary estimated additional debt service obligations to the PFDIF fund will
be approximately $18.0 million that includes $9.0 million in financing costs.
2000 Certificates of Participation - Corporation Yard
In October 2000, the Chula Vista Public Financing Authority (Authority) issued $25,255,000 in
2000 Certificates of Participation Series A ("2000 COPs"), to provide funds to improve the City's
800 Megahertz emergency communications system, improve the City's Corporation Yard, finance a
reserve account for the certificates, and pay the costs of issuance incurred in connection with the
execution and delivery of the certificates. The 2000 COPs are backed by a pledge of the City's
General Fund.
The certificates mature in amounts ranging ITom $855,000 in 2001 to $1,790,000 in 2020. Interest
is payable semi-annually on March I and September I, at interest rates ranging ITom 4.25% to
5.25%. The certificates maturing after September I, 2010, are subject to redemption at premiums
ranging ITom zero to 2%. The outstanding balance at October 30, 2009 is approximately $15.64
million.
Since the City needs to significantly reduce the PFDIF debt service payments over the next few
years, the term of the bonds are proposed to be extended out an additional I 0 years to provide the
cash flow savings necessary to meet debt obligations. The preliminary estimated additional debt
service obligations to the PFDIF fund is approximately $5.6 million at a net present value
savings of $200,000.
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DECISION MAKER CONFLICT
Staff has reviewed the property holdings of the City Council and has found a conflict exists, in
that Council Member Castaneda has property holdings within 500 feet of the boundaries of the
property (Civic Center), which is the subject of this action.
CURRENT YEAR FISCAL IMPACT
If the City successfully restructures the 2000 COPs by February 2010, the PFDIF fund may
realize $384,000 in cash flow savings in the current fiscal year. All costs associated with the
Financial Advisor, Bond Council, and Underwriter will be paid out of the bond issuance and not
existing reserves.
ONGOING FISCAL IMP ACT
The cost of restructuring the debt will largely depend on the market conditions, interest rates,
credit rating, market demand, insurance coverage and actual structure achieved at the time the
bonds are sold.
At this time, based on assumptions regarding the market, the restructuring of the 2000 COPs will
result in a net cost of $5.6 million over the term of the debt or a net present value savings of
$200,000. The cost of issuing a COP to reimburse the PFDIF fund for the Civic Center Phase III
project is preliminary estimated to be approximately $18.0 million that includes $9.0 million in
financing costs. The additional financing cost would also impact the PFDIF fee by
approximately $375 per EDU. The actual impacts to the fee will be determined during the next
fee update which will take into account other expenditure adjustments and changes to the
planned development.
Attachments
Appendix A - PFDIF Program
Appendix B - PFDIF Cash Flow Projections
Preliminary Official Statement
Trust Agreement
Escrow Agreement
Lease Purchase Agreement
Site Lease
Assignment Agreement
Continuing Disclosure Agreement
Certificate Purchase Agreement
Prepared by: Maria Kachadoorian , Director of Finance, Finance Department
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February 2, 2010
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Attachment A - PFDIF Program
The Public Facilities Development Impact Fee (PFDIF) program was established in 1991. The fee
program is a cost spreading mechanism, ensuring that development mitigates its impacts on public
facilities. All development projects in the City that generate additional demand for services are
required to pay a PFDIF fee in conjunction with the building permit process. The PFDIF program
then uses these fees to finance the construction and acquisition of public facilities and equipment,
using cash on hand, long-term debt financing, or a combination thereof.
The fee program was last comprehensively updated in 2006. At that time, future program
expenditures were estimated at $250.8 million. The future cost assumed in the 2006 PFDIF Update
was a combination of debt service payments, direct project expenditures (cash on hand), capital
equipment acquisitions, and program administration. The table below summarizes the future PFDIF
expenditures included in the 2006 PFDIF Update by type.
PFDIF Program Future Expenditures per 2006 Update
(Millions)
Debt Service Expenditures
CIP Projects
Non-CIP Expenditures
Total PFDIF Expenditures
$ 132.6
$ 95.5
$ 22.7
$ 250.8
The future program cost was spread over future anticipated development, including 27,320
residential units and 1,400 commercial and industrial acres. Over a 25 year period (fiscal year
2005-06 through buildout in fiscal year 2029-30) this equates to an average of over 1,000 residential
units annually.
Of the total $250 million in future expenditures included in the 2006 PFDIF Update, $132.6 million
in costs were associated with debt repayments. At that time, the residential permits paying fees
annually required to meet the PFDIF's debt obligation was estimated at approximately 600 units. In
light of the historic levels of development in the City and the significant number of future units to be
built in the City by fiscal year 2029-30, it was reasonable to consider this level of development
would continue in the future. The City's historic residential permit activity is illustrated in the chart
below.
Annual Residential Permits Issued*
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
Avg 1991,2005:
1,710 Units
A vg 2006-2009:
735 Units
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
* 1991 through 1997 data is per calendar year; 1998 through 2009 data is per fiscal year.
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February 2, 2010
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For those projects which had already been constructed, the program reflects the actual cash
expenditures or debt service obligations. For facilities not yet constructed in 2006, construction and
financing costs were estimated.
Overall, the PFDIF's funding priorities are to first meet external debt obligations, then internal debt
obligations, and finally to construct new facilities and acquire additional capital equipment.
In total, the PFDIF program reflects tax exempt financing (debt issuance) for the construction and/or
acquisition of eight facilities:
1. Corporation Yard - 2000 COP A
2. Police Facility - 2002 COP
3. 800 Megahertz Radio System - 2003 Refunding COP
4. CAD (Computer Aided Dispatch) System ~ 2003 Refunding COP
5. Fiscal System - 2003 Refunding COP
6. Civic Center - Adamo Property Acquisition
7. Civic Center - Phase I
8. Civic Center - Phase II
9. Civic Center - Phase III (actually funded on a cash basis)
All other projects (either previously constructed or planned for construction) have been financed
using cash on hand. The future major facilities to be constructed were prioritized in the 2006
Update in the following order:
1. Rancho del Rey Library
2. EUC Fire Station
3. EUC Library
4. Otay Ranch Village 4 Recreation Facility
5. Otay Ranch Village 4 Aquatic Facility
In order to meet its current debt obligation, the PFDIF must collect fees trom approximately 700
residential units annually. As a result of the recent downturn in the development market, the City
has not issued sufficient permits to meet this annual debt obligation since fiscal year 2006-07.
Development is not anticipated to return to the levels necessary to meet the debt obligation for
possibly several years. It is therefore necessary to restructure existing PFDIF debt to reduce the
annual external debt payments in the short term, allowing time for development to recover. An
analysis showing projected cash flow for the PFDIF with and without the proposed restructuring is
included as Attachment B.
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February 2, 2010
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Attachment B - PFDIF Cash Flows
FY 2009-10 FY 2010-11 FY 2011-12 FY 2012-13
CASH FLOW - NO DEBT RESTRUCTURING
Beginning Cash Balance (2,280,529) (1,559,692) (5,742,751) (11,148,577)
Revenues
Loan from TDIF 5,300,581
Projected DIP Fee Revenue* 695,794 1,000,000 1,250,000 1,500,000
Total Revenues 5,996,375 1,000,000 1,250,000 1,500,000
Expenditures
External Debt Service (5,275,538) (5,183,059) (5,185,826) (5,186,023)
Repay TDlF Loan 1 (1,470,000) (1,428,000)
C1P & Non-CIP Exp.
Total Expenditures (5,275,538) (5,183,059) (6,655,826) (6,614,023)
Ending Cash Balance (1,559,692) (5,742,751) (11,148,577) ( 16,262,600)
CASH FLOW - RECOMMENDED DEBT RESTRUCTURING
FY 2009-10 FY 2010-11 n 2011-12 FY 2012-13
Beginning Cash Balance $ (2,280,529) $ (1,175,201) $ $
Revenues
Loan ITom TDIF $ 5,300,581 $ $ $
Projected DIF Fee Revenue* $ 695,794 $ 1,000,000 $ [,250,000 $ 1,500,000
Civic Center Phase III Reimb2 $ $ 4,268,555 $ 4,321,973 $ 1,409,472
Total Revenues $ 5,996,375 $ 5,268,555 $ 5,571,973 $ 2,909,472
Expenditures
External Debt Service $ (4,89[,047) $ (4,093,354) $ (4,10 I ,973) $ (4,101,443)
Repay TDlF Loan 1 $ $ $ (1,470,000) $ (1,428,000)
crp & Non-CIP Exp. $ $ $ $
Total Expenditures $ (4,891,Q4 7) $ (4,093,354) $ (5,571,973) $ (5,529,443)
Ending Cash Balance $ (1,175,201) $ $ $ (2,619,971)
*Projectedfee paying multi-family units 85 120 ]50 ]80
1. Annual inter-fund loan repayments trom the PFDIF fund to TDlF fund are projected at $1.4 million annually
beginning in fiscal year 2011-12.
2, Projected Civic Center Phase III reimbursements total $10 million. The actual reimbursement amount per year may
vary trom the above estimate. All reimbursement monies will be applied to existing debt service payments through
fiscal year 2012-13
NOTES:
Cash flow relief of approximately $] 3.6 million (represents 3 years of bonded debt payments) is projected to result trom
the restructuring.
Cash flows reflect the City's Fee Deferral Program which is expected to expire in December 31, 2010. The exception is
the EVC which is eligible to defer their DIF obligations for their entire project but payable upon occupancy.
The fmal debt payment for the City's Pension Obligation Bonds (POBs) will occur in fiscal year 2011-12. After this
period, approximately $2.6 million may be available to pay the PFDlF's share of debt payments without impacting the
City's General Fund. This option will be evaluated at the time of the bond restructuring anticipated in fiscal year 20]2-
13.
7-8
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PRELIMINARY OFFICIAL STATEMENT DATED
,2010
NEW ISSUE
BOOK-ENTRY ONLY
RATING
S&P: _
(See "CONCLUDING INFORMATION-Rating on the Certificates" herein).
In the opinion of Stradling Yocca Car/son & Rauth, a Professional CO/po rat ion, Newport Beach, California, Special Counsel,
under existing statutes, regulations, rulings and judicial decisions, and assuming the accuracy of certain representations and compliance
with certain covenants and requirements described herein, the interest (and original issue discount) 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. The difference betv.Jeen the issue price of a Certificate (the, first price at
which a substantial amount of a maturity is to be sold to the public) and the stated redemption price at maturity with respect to such
Certificate constitutes original issue discount. In the further opinion of Special Counsel, the interest (and original issue discount) due with
respect to the Certificates is exempt from State of California personal income tax. See "LEGAL MATTERS-Tax Exemption" herein
SAN DIEGO COUNTY STATE OF CALIFORNIA
$[COP Amount]
CITY OF CHULA VISTA
2010 CERTIFICATES OF PARTICIPATION
(CAPITAL FACILITIES REFUNDING PROJECTS)
Evidencing Undivided Proportionate Interests in Lease Payments to be Made by the
CITY OF CHULA VISTA, CALIFORNIA
Pursuant to a Lease with the
CHULA VISTA PUBLIC FINANCING AUTHORITY
Dated: Date of Delivery Due: March 1, as Shown on the Inside Front Cover.
The cover page contains certain information for quick reference only. It is not a summary of the issue. Potential investors
must read the entire Official Statement to obtain information essential to the making of an informed investment decision. See
"CERTIFICATE OWNERS' RISKS" herein for a discussion of special risk factors that should be considered in evaluating the
investment quality of the Certificates.
The City of Chula Vista 2010 Certificates of Participation (Capital Facilities Refunding Projects) (the "Certificates") are being
executed and delivered to (i) finance certain capital improvements (the "Project") for the City of Chula Vista (the "City"), (ii) refinance the
City's Certificates of Participation Series A (2000 Financing Project), (iii) fund capitalized interest with respect to a portion of the
Certificates through and including , _, (iv) fund a reserve fund for the Certificates and (v) pay the costs incurred in
connection with the execution and delivery of the Certificates. The Certificates evidence direct, undivided proportionate interests in lease
payments ("Lease Payments") to be made by the City to the Chula Vista Public Financing Authority (the "Authority") as rental for certain
real property and the improvements thereon (referred to herein as the "Leased Premises") consisting of the City's Civic Center Library,
Corporation Yard Administration Building and certain Fire Stations pursuant to a LeaselPurchase Agreement, dated February 1, 2010, by and
between the City and the Authority ( the "Lease"), as described herein. See "THE LEASED PRE:rv1ISES" herein. The City is required under
the Lease to make Lease Payments in each fiscal year in consideration of the use and possession of the Leased Premises from any source of
available funds, induding certain funds held under a trust agreement, as described herein, and insurance or condemnation awards, in an
amount sufficient to pay the annual principal and interest due with respect to the Certificates, subject to abatement, as described herein. See
"SOURCES OF PAYMENT FOR THE CERTIFICATES" and "CERTIFICATE OWNERS' RlSKS" herein.
Interest represented by the Certificates is payabJe on September 1,2010, and semiannually thereafter on March 1 and September 1
of each year until maturity or earlier prepayment. See "'THE CERTIFICATES-GeneraI Provisions.' and "THE CERTIFICATES-
Prepayment" herein.
THE CERTIFICATES DO NOT CONSTITUTE AN OBLIGATION OF THE AUTHORITY OR THE CITY FOR
WHICH THE AUTHORITY OR THE CITY IS OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION OR FOR
WHICH THE AUTHORITY OR THE CITY HAS LEVIED OR PLEDGED ANY FORM OF TAXATION. THE OBLIGATION
OF THE CITY TO MAKE LEASE PAYMENTS UNDER THE LEASE DOES NOT CONSTITUTE AN OBLIGATION OF THE
CITY FOR WIDCH THE CITY IS OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION OR FOR WIDCH 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 POLITICAL SUBDIVISION THEREOF WITHIN THE MEANING OF ANY
CONSTITUTIONAL OR STATUTORY DEBT LIMITATION OR RESTRICTION.
The Certificates are offered, when, as and if executed and delivered, subject to the approval as to their legality by Stradling Yocca
Carlson & Rauth, a Professional Corporation, Newport Beach, California, Special Counsel. Certain legal matters will be passed on for the
City by the City Attorney, and by Stradling Y oeca Carlson & Rauth, a Professional Corporation, Newport Beach, California, as Disclosure
CounseL It is anticipated that the Certificates, in book-entry form, will be available for delivery on or about ,2010
through the facilities of The Depository Trust Company (see APPENDIX F-"BOOK-ENTRY ONLY SYSTEM" herein).
[Insert De La Rosa & Co. Logo]
The date of the Official Statement is
. 2010
DOCSOC/I 3 76669v5/024036-0045
7-9
$[COP Amount]
CITY OF CHULA VISTA
2010 CERTIFICATES OF PARTICIPATION
(CAPITAL FACILITIES REFUNDING PROJECTS)
Evidencing Undivided Proportionate Interests in Lease Payments to be Made by the
CITY OF CHULA VISTA, CALIFORNIA
Pursuant to a Lease with the
CHULA VISTA PUBLIC FINANCING AUTHORITY
MATURITY SCHEDULE
(Base CUSIP@t
$
)
Serial Bonds
Maturifv Date
March I
Princioal
Amount
Interest
Rate
Reofferinf{
Yield
CUSIP@!
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
$
_ % Term Bond maturing March 1, _, Yield _ % CUSIPt _
t CUSIP@A registered trademark afthe American Bankers Association. Copyright it) 1999-2006 Standtlrd & Poor's, a Division
afThe 1I1cGi"aw-Hill Companies. Inc. CUSIP@data herein is provided by Standard & Poor's CUSIP@Service Bureau. This
data in not intended to create a database and does not serve in Qny way as a substitute for the CUSIP@ Service Bureau.
CUSIP@ numbers are providedfor convenience afreference only. Neither the City nor the Underwriter takes any responsibility
for the accuracy of such numbers.
DOCSOC/1376669v5/024036-0045
7-10
GENERAL INFORMATION ABOUT THIS OFFICIAL STATEMENT
Use of Official Statement. This Official Statement is submitted in connection with the offer and sale
of the Certificates referred to herein and may not be reproduced or used, in whole or in part, for any other
purpose. This Official Statement is not to be construed as a contract with the purchasers of the Certificates.
Estimates and Forecasts. When used in this Official Statement and in any continuing disclosure by
the Authority or the City in any press release and in any oral statement made with the approval of an
authorized officer of the City or any other entity described or referenced herein, the words or phrases "will
likely result," "are expected to," "will continue," "is anticipated," "estimate/' "project," "forecast," "expect,"
"intend" and similar expressions identify "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Such statements are subject to risks and uncertainties that could
cause actual results to differ materially from those contemplated in such forward- looking statements. Any
forecast is subiect to such uncertainties. Inevitablv. some assumptions used to develop the forecasts will not
be realized and unanticipated events and circumstances may occur. Therefore, there are likely to be
differences between forecasts and actual results, and those differences may be material.
Limit of Offering. No dealer, broker, salesperson or other person has been authorized by the
Authority or the City to give any information or to make any representations in connection with the offer or
sale of the Certificates other than those contained herein and if given or made, such other information or
representation must not be relied upon as having been authorized by the Authority, the City, the Financial
Advisor or the Underwriter. This Official Statement does not constitute an offer to sell or the solicitation of an
offer to buy nor shall there be any sale of the Certificates by a person in any jurisdiction in which it is unlawful
for ~uch person to make such an offer, solicitation or sale.
IlIvolvement of Underwriter. The Underwriter has submitted the following sentence for inclusion in
this Official Statement: The Underwriter has reviewed the information in this Official Statement in accordance
with, and as a part of, its responsibilities to investors under the federal securities laws as applied to the facts
and circumstances of this transaction. but the Underwriter does not guarantee the accuracy or completeness of
such information.
Information Subject to Challge. The infonnation and expressions of opinions herein are subject to
change without notice and neither delivery of this Official Statement nor any sale made hereunder shall, under
any circumstances, create any implication that there has been no change in the affairs of the Authority or the
City or any other entity described or referenced herein since the date hereof. All summaries of the documents
referred to in this Official Statement are made subject to the provisions of such documents, respectively, and
do not purport to be complete statements of any or all of such provisions.
Stabilization of Prices. In connection with this offering, the Underwriter may overallot or effect
transactions which stabilize or maintain the market price of the Certificates at a level above that which might
otherwise prevail in the open market. Such stabilizing, if commenced, may be discontinued at any time. The
Underwriter may offer and sell the Certificates to certain dealers and others at prices lower than the public
offering prices set forth on the inside front cover page hereof and said public offering prices may be changed
from time to time by the Underwriter.
THE CERTIFICATES HAVE NOT BEEN REGISTERED UNDER THE SECURlTIES ACT OF
1933, AS AMENDED, IN RELIANCE UPON AN EXCEPTION FROM THE REGISTRATION
REQUIREMENTS CONTAINED IN SUCH ACT. THE CERTIFICATES HAVE NOT BEEN
REGISTERED OR QUALIFIED UNDER THE SECURlTIES LAWS OF ANY STATE.
DOCSOCIl376669v5/024036-0045
7-11
CITY OF CHULA VISTA, CALIFORNIA
CITY COUNCIL
Cheryl Cox, Mayor
Rudy Ramirez, Councilmember
Mitch Thompson, Councilmember
Steve Castaneda, Councilmember
Pamela Bensoussan, Councilmember
CITY STAFF
James D. Sandoval, City Manager
Scott Tulloch, Assistant City Manager
Maria Kachadoorian, Director of Finance/Treasurer
Bart Miesfeld, Esq., City Attorney
Donna Norris, City Clerk
PROFESSIONAL SERVICES
Special Counsel and Disclosnre Connsel
Stradling Y occa Carlson & Rauth,
a Professional Corporation
Newport Beach, California
Financial Advisor
Public Financial Management, Inc.
Los Angeles, California
Trustee
U.S. Bank National Association
Los Angeles, California
DOCSOC/13 76669v5/02403 6-0045
7-12
TABLE OF CONTENTS
INTRODUCTION ................................ ............. ............1
The City ....................................................................1
Security and Sources of Repayment... ................ .....1
Additional Certificates.............................................. 3
Tax Exemption........................................................ ..3
Professional Services................................................ 3
Offering of the Certificates .......................................3
Information Concerning this Official Statement .......4
THE CERTIFICATES ..................... .............................4
General Provisions............................... n...................4
Prepayment.............. .................................................5
Scheduled Deht Service ............................................7
THE FINANCING PLAN ............................................8
Estimates Sources and Uses ofFtrn8S .^.\'ailael. ......g
The Project ....... ..... ... .................................. ...............8
The Refunding....................................... ....................8
THE LEASED PREMISES...........................................9
Description of the Leased Premises ..........................9
SOURCES OF PAYMENT FOR THE
CERTIFICATES .......................................... ...............1 0
General.................................................................... 10
Lease Payments; Ahatement ...................................10
Reserve Fund ..........................................................11
Capitalized Interest .................................................12
Insurance Relating to the Leased Premises .............12
Remedies on Default...............................................13
THE AUTHORlTY......................................................13
CITY OF CHULA VISTA.........................................13
General Information ......................... .... ...................13
General Organization ......................... ............. ........13
Governmental Services ...........................................14
FINANCIAL INFORMA TION...................................14
Budgetary Process and Administration ...................14
Appropriations Limit...............................................15
Revenues and Expenditures ....................................15
Local Taxes .............................................................17
Taxable Property and Assessed Valuation ..............18
Largest Taxpayers ...................................................19
Redevelopment Agencies ......... ...............................19
State Legislative Shift of Property Tax
Allocation......................... .............. ..................20
Motor Vehicle License Fees....................................20
Other Revenue Sources .............................. .............21
Public Facilities Development Impact Fees
[DISCUSSIUPDA TE]......................................21
Personnel.................................... ............................ .22
Employee Relations and Collective Bargaining......22
Retirement Programs.............................................. .22
DOCSOCII 376669v5/024036-0045
Insw'ance Program ...... ............................. ............... 25
Outstanding Indehtedness of the City .....................26
Direct and Overlapping Debt ..................................27
Financial Statements............... .......................... ......28
City Investment Policy............................................31
CERTIFICATE OWNERS' RlSKS..........................32
The Lease Payments ...............................................32
State Budget............................................................ 34
2009II 0 State Budget ........ ....................... ...... .........35
Constitutional Limitation on Taxes and
Expenditures ..................................... .. ......38
Limited Recourse on Default ..................................40
Release or Substitution ofProperty.........................41
Loss gfT1x Ex.mptioR........ 41
Secondary Market .......... ............... .... .... ..................41
LEGAL MATTERS................ .............................41
Enforceability of Remedies..................................... 41
Approval of Legal Proceedings.... .......................... .42
Tax Exemption........................................................ 42
Absence of Litigation.. ............................................43
CONCLUDING INFORMATION.............. .............. ..44
Ratings on the Certificates ......................................44
Underwriting........................................................... 44
The Financial Advisor................... ..........................44
Continuing Disclosure .......... ........................... .......44
VERIFICATION OF MATHEMATICAL
ACCURACy....... ...... ...................................... ..........45
FINANCIAL STATEMENTS ....................................45
Additional Information........................................... 45
References............................................................... 45
Execution.. ................ ................ ... ......... ......... .......45
APPENDIX A - GENERAL INFORMATION
REGARDING THE CITY AND
REGION ......................................... A-I
APPENDIX B - SUMMARY OF PRINCIPAL
LEGAL DOCUMENTS ..................B-]
APPENDIX C - CITY AUDITED FINANCIAL
STATEMENTS ..............................C-I
APPENDIX D - FORM OF CONTINUING
DISCLOSURE AGREEMENT...... D-I
APPENDIX E - FORM OF SPECIAL COUNSEL
OPINION ........................................E-I
APPENDIX F - BOOK-ENTRY ONLY SYSTEM...F-I
APPENDIX G - CITY INVESTMENT POLICY
7-13
OFFICIAL STATEMENT
$[COP Amount]
CITY OF CHULA VISTA
2010 CERTIFICATES OF PARTICIPATION
(CAPITAL FACILITIES REFUNDING PROJECTS)
Evideucing Undivided Proportionate Interests in Lease Payments to be Made by the
CITY OF CHULA VISTA, CALIFORNIA
Pursuant to a Lease with the
CHULA VISTA PUBLIC FINANCING AUTHORITY
This Official Statement which includes the cover page and appendices (the "Official Statement"), is
provided to furnish certain information concerning the sale, execution and delivery of the 20 I 0 Certificates of
Participation (the "Certificates"), in the aggregate principal amount of$[COP Amouut), evidencing undivided
proportionate interests in Lease Payments (defined below) to be made by the City of Chula Vista, California
(the "City"), pursuant to a Lease as more fully described herein (the "Lease") with the Chula Vista Public
Financing Authority (the "Authority").
INTRODUCTION
This Introduction contains only a brief description of this issue and does not purport to be complete.
The Introduction is subject in all respects to more complete information in the entire Official Statement and
the offering of the Certificates to potential investors is made only by means of the entire Official Statement and
the docwnents swnmarized herein. Potential investors must read the entire Official Statement to obtain
information essential to the making of an informed investment decision (see "CERTIFICATE OWNERS'
RISKS" herein).
The City
The City of Chula Vista (the "City") is located in San Diego County in Southern California, 8 miles
south of the City of San Diego and 7 miles north of the Mexico border in an area generally known as "South
Bay." The City encompasses approximately 50 square miles. Based on population, Chula Vista is the second
largest city in San Diego County. For further information concerning the City, see "CITY OF CHULA
VISTA" herein and APPENDIX A-"GENERAL INFORMATION CONCERNING THE CITY AND
REGION."
Security and Sources of Repayment
The Certificates are payable from lease payments (the "Lease Payments") made pursuant to a
LeaselPurchase Agreement dated as of February 1,2010 (the "Lease") between the City, as lessee, and the
Authority, as lessor, for the lease of certain real property and improvements comprising the City's Civic Center
Library, Corporation Yard Administration Building and certain Fire Stations (the "Leased Premises"). See
"THE LEASED PREMISES" herein. The City will lease such real property and improvements to the
Authority under a Site Lease dated as of February 1, 2010 (the "Site Lease").
The Certificates are being executed and delivered pursuant to a Trust Agreement dated as of
February I, 2010 (the "Trust Agreement"). by and among the City, the Authority and U.S. Bank National
Association, as trustee (the "Trustee"). The City will use a portion of the proceeds of the Certificates to
(i) finance certain capital improvements consisting of expenditures for the Civic Center Phase 3 (the "Project")
for the City of Chula Vista, (1i) refinance the City's Certificates of Participation Series A (2000 Financing
Project), (iii) fund capitalized interest with respect to a portion of the Certificates through and including
DOCSOC/1376669v5/024036-0045
I
7-14
, , (iv) fund a reserve fund for the Certificates and (v) pay the costs incurred in connection
with the execution and delivery of the Certificates. See "THE FINANCING PLAN-The Project" herein.
Under the Trust Agreement, the Certificates are equally secured by the Lease Payments, Net Proceeds
and other amounts held by the Trustee under the Trust Agreement. In the event that amounts in the Lease
Payment Fund are insufficient to pay all of the interest and principal due on the Certificates and any Additional
Certificates on any date, the Trustee is to allocate the available funds on a proportionate basis to each series
such that an equal percentage of the total principal and interest then due on each series is paid. The Trustee is
then to transfer from the Reserve Fund the amount necessary to pay any shortfall on each series. See
APPENDIXA-"SUMMARY OF PRINCIPAL LEGAL DOCUMENTS-TRUST AGREEMENT-LEASE
PAYMENTS; LEASE PAYMENT FUND" and "RESERVE FUND."
Pursuant to an Assigrunent Agreement, dated as of February I, 2010 ( the "Assignment Agreement"),
hy "no hetween the A "thadly and the Trustee. the Authority assigns to the Trustee, for the benefit of the
owners of the Certificates, substantially all of its rights under the Lease, including its right to receive and
collect Lease Payments and prepayments from the City under the Lease and rights as may be necessary to
enforce payment of Lease Payments and prepayments. All rights assigned by the Authority pursuant to the
Assignment Agreement will be administered by the Trustee in accordance with the provisions of the Trust
Agreement for the equal and proportionate benefit of all owners of the Certificates.
For a summary of the Trust Agreement, the Lease, the Site Lease and the Assigrunent Agreement, see
APPENDIX A-"SUMMARY OF PRINCIPAL LEGAL DOCUMENTS" herein. Certain capitalized tenus
used in this Official Statement and not otherwise defined have the meanings given them in Appendix A.
In general, the City is required under the Lease to pay to the Trustee specified amounts for use and
possession of the Leased Premises which amounts are calculated to be sufficient in both time and amount to
pay, when due, the principal and interest payable with respect to the Certificafes. The City is also required to
pay any taxes and assessments levied on the Leased Premises and all costs of maintenance and repair of the
Leased Premises. The City has covenanted in the Lease to take such actions as may be necessary to include all
Lease Payments in its armual budgets and to make the necessary armual appropriations for all such Lease
Payments subject to complete or partial abatement of such Lease Payments resulting from a taking of the
Leased Premises (either in whole or in part) under the powers of eminent domain or resulting from damage or
loss of all or any portion of the Leased Premises. Except for the Authority's right, title and interest in and to
the Lease which have been assigned to the Trustee, no funds or properties of the Authority or the City are
pledged to or otherwise liable for the obligations of the Authority (see "CERTIFICATE OWNERS' RISKS"
herein).
The Lease is, in the opinion of Special Counsel, a valid and binding obligation of the City enforceable
against the City in accordance with its tenus, except to the extent enforceability thereof may be limited by
bankruptcy, insolvency, moratorium and other similar laws affecting creditors' rights heretofore or hereinafter
enacted, by equitable principles, by the exercise of judicial discretion and by the limitations on legal remedies
against municipalities in the State of California (see "CERTIFICATE OWNERS' RISKS-The Lease
Payments-Limited Recourse on Default" herein). The form of Special Counsel's opinion is attached hereto
as Appendix D.
The obligation of the City to pay Lease Payments does not constitute an obligation for which the
City is obligated to levy or pledge any form of taxation or for which the City has pledged any form of
taxation. The obligation of the City to pay Lease Payments does not constitute a debt or liability of the
State of California or of any political subdivision thereof within the meaning of any constitutional or
statutory debt limitation or restriction.
DOCSOC/1376669v51024036-0045
2
7-15
Additional Certificates
Pursuant to the Trust Agreement, the City may cause Additional Certificates to be delivered from time
to time for authorized purposes, payable from Lease Payments, as amended pursuant to the Lease, on a parity
with the Certificates. In connection with the execution and delivery of such Additional Certificates, the City is
required to amend the schedule of Lease Payments payable under the Lease to provide for additional Lease
Payments corresponding to the Additional Certificates, in addition to the Lease Payments payable with respect
to the Certificates. The Certificates and the Additional Certificates, if any, will be secured on a parity under
the Trust Agreement by Lease Payments and other amounts held in the funds established thereunder other than
the Project Fund and the Rebate Fund. See APPENDIX A-"SUMMARY OF PRINCIPAL LEGAL
DOCUMENTS-TERMS OF THE CERTIFICATES AND ADDITIONAL CERTIFICATES-Additional
Certificates. "
Tay Fxemption
In the opinion of Stradling Y occa Carlson & Rauth, a Professional Corporation, Newport Beach,
California ("Special Counsel"), under existing statutes, regulations, rulings and judicial decisions, and
assuming certain representations and compliance with certain covenants and requirements described herein, the
interest (and original issue discount) due with respect to the Certificates is excluded from gross income for
federal income tax purposes and is not an item of tax preference for purposes of calculating the federal
alternative minimum tax imposed on individuals and corporations. In the further opinion of Special Counsel,
the interest (and original issue discount) due with respect to the Certificates is exempt from State of California
personal income tax. See "LEGAL MA TTERS- Tax Exemption" herein.
Professional Services
The legal proceedings relating to the execution and delivery of the Certificates are subject to the
approving opinion of Stradling Y occa Carlson & Rauth, a Professional Corporation, Newport Beach,
California, Special Counsel. Certain legal matters will be passed on for the City by Bart Miesfeld, Esq., City
Attorney and by Stradling Y occa Carlson & Rauth, a Professional Corporation, as Disclosure Counsel.
U.S. Bank National Association, serves as Trustee under the Trust Agreement. The Trustee will act
on behalf of the Certificate Owners for the purpose of receiving all moneys required to be paid to the Trustee,
to allocate, use and apply the same, to hold, receive and disburse the Lease Payments and other funds held
under the Trust Agreement, and otherwise to hold all the offices and perfonn all the functions and duties
provided in the Trust Agreement to be held and performed by the Trustee.
Public Financial Management, Inc. (the "Financial Advisor") advised the City as to the financial
structure and certain other financial matters relating to the Certificates.
The City's audited general purpose [mancial statements for the fiscal year ended June 30, 2009,
attached hereto as Appendix B have been audited by Caporicci & Larson, Certified Public Accountants, Costa
Mesa, California. The City's audited financial statements are public documents and are included within this
Official Statement without the prior approval of the auditor. Accordingly, the auditor has not performed any
post-audit of the financial condition of the City.
Offering of the Certificates
Authority for Execution and Delivery. The Certificates are to be executed and delivered pursuant to
the Trust Agreement, and have been authorized by a resolution adopted by the City Council of the City on
January 26, 2010. The Site Lease and the Lease will be entered into in accordance with the laws ofthe State of
California (the "State"), and particularly Section 37350 of the Government Code of the State.
DOCSOC/1376669v5/024036-0045
3
7-16
Offering and Delivery of tlte Certificates. The Certificates are offered, when, as and if executed and
delivered, subject to the approval as to their legality by Stradling Y occa Carlson & Rauth, a Professional
Corporation, Newport Beach, California, Special Counsel. It is anticipated that the Certificates, in book-entry
fOI1TI, will be available for delivery on , 20 I 0 through the facilities of The Depository Trust
Company. See APPENDIX F-"BOOK-ENTRY ONLY SYSTEM."
Information Concerning this Official Statement
This Official Statement speaks only as of its date. The infol1TIation set forth herein which has been
obtained by the City with the assistance of the Financial Advisor ITom sources other than the City are believed
to be reliable and such infonnation is believed to be accurate and complete, but such infonnation is not
guaranteed as to accuracy or completeness, nor has it been independently verified and is not to be construed as
a representation by the Financial Advisor or the Disclosure Counsel. Statements contained in this Official
Statement whr~h involve estimates forecasts or matters of opinion. whether or not expressly so described
herein, are intended as such and are not to be construed as representations of fact. The infonnation and
expressions of opinion herein are subject to change without notice and the delivery of this Official Statement
shall not, under any circumstances, create any implication that there has been no change in the infonnation or
opinions set forth herein or in the affairs of the City since the date hereof.
Availability of Legal Documents. The sunuTIaries and references contained herein with respect to the
Trust Agreement, the Lease, the Site Lease, the Assigrunent Agreement, the Certificates and other statutes or
documents do not purport to be comprehensive or definitive and are qualified by reference to each such
document or statute, and references to the Certificates are qualified in their entirety by reference to the fOI1TI
thereof included in the Trust Agreement. Copies of the documents described herein are available for
inspection during the period of initial offering of the Certificates at the offices of the Financial Advisor.
Copies of these documents may be obtainedafier delivery of the Certificates at the trust office of the Trustee,
U.S. Bank National Association, Los Angeles, California or from the City at 276 Fourth A venue, Chula Vista,
California 91910.
THE CERTIFICATES
General Provisions
Payment of tlte Certificates. The Certificates will be executed and delivered in the fonn of fully
registered Certificates in the principal amount of $5,000 each or any integral multiple thereof. hlterest
represented by the Certificates is payable at the rates per annum set forth on the inside ITont cover page hereof,
on September I, 2010 and each March I and September I thereafter (each, an "Interest Payment Date") until
maturity. Said interest will represent the portion of Lease Payments designated as interest and coming due on
each Interest Payment Date. The share of the portion of Lease Payments designated as interest with respect to
any Certificate will be computed by multiplying the portion of Lease Payments designated as principal with
respect to such Certificates by the rate of interest represented by such Certificates. Interest represented by the
Certificates and the Lease Payments will be computed on the basis of a year consisting of 360 days and twelve
30-day months. Principal with respect to the Certificates is payable ITom the principal component of Lease
Payments allocable to the Certificates on March I in each of the years and in the amounts set forth on the
inside ITont cover page hereof.
Each Certificate will be dated as of the date of original delivery of the Certificates, and interest with
respect to the Certificates will be payable from the Interest Payment Date next preceding the date of execution
thereof, unless (a) it is executed following the 15th day of the month preceding an Interest Payment Date (a
"Record Date") and on or before such Interest Payment Date, in which event interest with respect thereto will
be payable from such Interest Payment Date; or (b) it is executed on or before the first Record Date, in which
event interest represented thereby will be payable from the Date of Delivery. Notwithstanding the foregoing,
if, as of the date of any Certificate, interest represented by such Certificate is in default, interest represented by
DOCSOC/ 13 76669v5/024036-0045
4
7-17
such Certificate will be payable from the Interest Payment Date to which interest has previously been paid or
made available for payment with respect to such Certificate.
Book-Entry Only System. The Depository Trust Company ("DTC"), New York, New York, will act
as securities depository for the Certificates. The Certificates will be issued as fully registered securities
registered in the name of Cede & Co. (DTC's partnership nominee) or such other name as may be requested by
an authorized representative of DTC. Interest on and principal of the Certificates will be payable when due by
wire of the Trustee to DTC which will in turn remit such interest and principal to DTC Participants (as defined
herein), which will in turn remit such interest and principal to Beneficial Owners (as defined herein) of the
Certificates (see APPENDIX F-"BOOK-ENTRY ONLY SYSTEM" herein). As long as DTC is the
registered owner of the Certificates and DTC's book-entry method is used for the Certificates, the Trustee will
send any notices to certificate owners only to DTC.
n;o;;l'nnf;,.mnnrp nf Rnnk_Rntry S:Y"fpm DTC: ma.y discontinue providing its services as securities
depository with respect to the Certificates at any time by giving reasonable notice to the City or the Trustee.
Under such circumstances, in the event that a successor securities depository is not obtained, Certificates are
required to be printed and delivered as described in the Trust Agreement. The City may decide to discontinue
USe of the system of book-entry transfers through DTC (or a successor securities depository). In that event, the
Certificates will 6e, printed and delivered as described in the Trust Agreement. In addition, the following
provisions shall apply: interest represented by each Certificate will be paid on each Interest Payment Date by
check of the Trustee mailed on such Interest Payment Date by first class mail, to the person appearing on the
registration books of the Trustee as the Owner thereof as of the close of business on the preceding Record
Date, at such Owner's address as it appears on the registration books of the Trustee; provided however, that at
the written request of the Owner of Certificates in an aggregate principal amount of at least $1,000,000, which
request is on file with the Trustee as of any Record Date, interest with respect to such Certificates shall be paid
on each succeeding Interest Payment Date by wire transfer in immediately available funds to such account
within the United States of America as shall be specified in such request. The principal and prepayment price
represented by any Certificate at maturity or upon prepayment will be payable upon presentation and surrender
of such Certificate at the Office of the Trustee in Los Angeles, California, or at such place as may be
designated by the Trustee.
Prepayment
Optional Prepayment. The Certificates maturing on or before March 1, _ are not subject to
prepayment prior to maturity. The Certificates maturing on or after March 1, _ are subject to prepayment
prior to maturity at the option of the City, on any date on or after March 1, _, as a whole or in part among
maturities designated by the City and by lot within a maturity, from any source of available funds at a
prepayment price equal, to 100% of the principal amount thereof to be prepaid, without a premium, together
with accrued interest thereon to the date fixed for prepayment.
Prepayment From Net Proceeds of Insurance or CondemnatiOlI. The Certificates are subject to
mandatory prepayment, without premium as a whole, on any date, or in part on any Interest Payment Date,
from net hazard or title insurance proceeds not used to repair or replace any portion of the Leased Premises
damaged or destroyed, or ITom condemnation proceeds received with respect to any portion of the Leased
Premises and elected by the City to be used for such purpose (collectively, "Net Proceeds"), pro-rata among
maturities, at a prepayment price equal to the principal amount of the Certificates to be prepaid, plus accrued
interest thereon to the date fixed for prepayment, without premium. There can be no assurance that such
proceeds will be adequate to prepay all of the Certificates (see "SOURCES OF PAYMENT FOR THE
CERTIFICATES-Certificate Insurance" and "CERTIFICATE OWNERS' RISKS-The Lease Payments-
Insurance" herein). In the event that Net Proceeds are to be applied to the prepayment of Certificates and
Additional Certificates, if any, are outstanding, the Net Proceeds will be applied to prepay a proportionate
amount of Certificates and Additional Certificates based on the Outstanding principal amount.
DOCSOC/1376669v5/024036-0045
5
7-18
Mandatory Sinking Account Prepayment. The Certificates maturing March 1, _ (the "_ Tenn
Certificates") will be subject to prepayment in part by lot, on March 1 in each of the following years !Tom
sinking account payments as set forth below at a prepayment price equal to the principal amount thereof to be
prepaid, without premium, provided, however, that if some but not all of the _ Term Certificates have been
prepaid pursuant to an optional or extraordinary prepayment, the total amount of all future sinking account
payments will be reduced pro rata, in integral multiples of $5,000, by the aggregate principal amount of the
_ Term Certificates so prepaid. In addition, in lieu of prepayment thereof, the _ Term Certificates may
be purchased by the City and tendered to the Trustee pursuant to the provisions of the Trust Agreement.
Mandatory
Prepayment Date
(March 1)
Sinking Account
Prepayment
$
(maturity)
Notice of Prepaymellt. When prepayment is authorized or required, the Trustee is required to give
written notice to the respective Certificate Owners of any Certificates designated for prepayment at their
addresses appearing on the Certificate registration books, and to the Municipal Securities Rulemaking Board,
all as provided in the Trust Agreement, by first class mail, postage prepaid, no less than 30, nor more than 60,
days prior to the date fixed for prepayment. Neither failure to receive such notice nor any defect in the notice
so mailed will affect the validity of the proceedings for prepayment of such Certificates or the cessation of
accrual of interest from and after the prepayment date.
So long as DTC is the registered Owner of the Certificates, all such notices will be provided to DTC
as the Owner, without respect to the beneficial ownership of the Certificates. See APPENDIX F-"BOOK-
ENTRY ONLY SYSTEM."
Rescission of Notice. The City has the right to rescind any notice of the optional prepayment of
Certificates by written notice to the Trustee on or prior to the dated fixed for prepayment. Any notice of
optional prepayment will be cancelled and annulled if for any reason funds will not be or are not available on
the date fixed for prepayment for the payment in full of the Certificates then called for prepayment, and such
cancellation will not constitute an Event of Default. The City and the Trustee have no liability to the Owners
or any other party related to or arising !Tom such rescission of prepayment. The Trustee shall mail notice of
such rescission of prepayment in the same manner as the original notice of prepayment was sent.
Effect of Prepayment. Interest represented by the Certificates (or portions thereof) called for
prepayment will cease to accrue on the date fixed for prepayment provided that on the prepayment date the
Trustee holds funds sufficient to make such prepayment. In such event, such Certificates (or portions thereof)
will cease to be entitled to any benefit or security under the Trust Agreement and the Owners of such
Certificates will have no rights in respect thereof except to receive payment of the prepayment price.
Partial Prepaymellt. In the event only a portion of any Certificate is called for prepayment, then upon
surrender of such Certificate the Trustee will execute and deliver to the Certificate Owner thereof, at the
expense of the City, a new Certificate or Certificates of authorized denominations equal in aggregate principal
amount equal to the unprepaid portion of the Certificate surrendered and of the same tenor and the maturity.
DOCSOCIl376669v5/024036-0045
6
7-19
Scheduled Debt Service
The following is a schedule of principal and interest represented by the Certificates.
Certificate
Year Ending
March 1
2011
2012
2013
2014
2015
2016
lUll
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
Total
DOCSOC/13 76669v5/02403 6-0045
Principal
Interest
Annual Total
$
$
$
$
$
$
7
7-20
THE FINANCING PLAN
Estimated Sources and Uses of Funds Available
Under the provisions of the Trust Agreement, the Trustee will receive the proceeds of the Certificates,
together with other available funds, and will apply them as follows:
Sources of Funds
Par Amount of Certificates
Net Original Issue Discount
2000 Certificate Amount
Available Funds
Uses of Funds
Project Fund
Escrow Fund
Reserve Fund
Interest Account(1)
Delivery Costs Account(2)
Total Uses
$
$
$
$
(1)
Capitalized interest which, together with interest earnings is projected to be sufficient to pay interest due with respect to the
portion of the Certificates attributable to the Project through~,_..
(2) Expenses include fees and expenses of Special Counsel, the Financial Advisor, Disclosure Counsel, Underwriter's Discount
and Trustee, rating fees, bond insurance premium, costs of printing the Official Statement, and other costs of delivery of the
Certificates.
The Project
The proceeds of the Certificates deposited in the Project Fund will finance (i) the Project, consisting of
reimbursement to the City of $ expended prior to the delivery of the Certificates for improvements
comprising part of Phase 3 of the City's Civic Center and (ii) capitalized interest with respect to a portion of
the Certificates attributable to the Project through , in the amount of $
Assets comprising the Project are not part of the Leased Premises.
The Refunding
A portion of the proceeds of the Certificates will be used to provide funds to currently refund the
City's Certificates of Participation, Series A of 2000 (2000 Financing Project) (the "2000 Certificates"),
delivered in the initial principal amount of $25,255,000, of which $ is outstanding. A portion
of the proceeds of the Bonds, along with certain remaining funds from the 2000 Certificates, will be used to
establish an escrow fund (the "Refunding Escrow") for the 2000 Certificates to be held in trust by U.S. Bank
National Association, acting as escrow bank for the 2000 Certificates (the "Escrow Agent") under an escrow
agreement between the City and the Escrow Agent, dated as of February 1, 2010 (the "Escrow Agreement").
Proceeds deposited into the Refunding Escrow will be used to purchase direct obligations of, or obligations tlle
timely payment of principal and interest on which is fully guaranteed by, the United States ("Federal
Securities"). Principal of and interest on the Federal Securities will be used by the Escrow Agent to pay the
debt service on tlle 2000 Certificates until redemption thereof on , 20 I 0 and to pay the redemption
price consisting of principal and accrued interest to the redemption date, plus a premium of2% of the principal
amount thereof as specified in the Escrow Agreement. See "Verification of Mathematical Accuracy" herein.
Upon deposit of such proceeds and other monies into the Refunding Escrow, the 2000 Certificates will no
longer be deemed outstanding. Monies and Federal Securities deposited in the Refunding Escrow are not
available to pay principal of or interest on the Bonds.
DOCSOC/ 13 76669v5/024036-0045
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THE LEASED PREMISES
Description of the Leased Premises
Pursuant to the tenns of the Site Lease, the City leases the Site to tbe Authority. Pursuant to the tenns
of the Lease, the Authority leases the Site back to the City. The Site consists of multiple parcels of improved
land and the buildings thereon consisting of the following assets, each of which is described more fully below.
(I) Civic Center Main Library; (2) Corporation Yard Administration Building; (3) Fire Station numbers 4, 6,
7 and 8.
Civic Center Library. The City's Main Library is located at 365 F Street and consists of a 55,166
square foot masonry constructed building originally constructed in 1974. It is located on a 4.01 acre site in the
Civic Center area.
Corporation Yard Administration Building (UAdministration Building"). The Administration
Building oftbe City's Corporation Yard is located at 1800 Maxwell Road in the City J. Lippitt Public Works
Center. The Administration Building is a 42,210 square foot building fonning part of the City's Corporation
Yard, which encompass an aggregate of approximately 149,000 square feet of space, including buildings and
spaces essential to many City operations, such as a 55,745 square foot auto and truck garage, 9,000 square foot
receiving building, 6,500 square foot bus washing/fueling buildings and 36,000 square feet of space in an
enlarged shops building. The Administration Building was substantially improved with the proceeds of the
2000 Certificates and other City funds. (The 2000 Certificates are being refunded with the proceeds of the
Certificates. )
The current legal description of the land associated with tbe Administration Building encompasses the
entire City Corporation Yard located at 1800 Maxwell Road and described above. [However, the City retains
the right pursuant to the Lease to release from the Leased Premises, with no adjustment in Lease Payments, at
any future date, all of the Corporation Yard excepting tbe Administration Building and related parking and
ingress/egress. See "APPENDIX B-SUMMARY OF PRJNCIP AL LEGAL DOCUMENTS-Lease
Agreement; Substitution and Release." Investors should assume that only the Administration Building
component of the Corporation Yard will constitute a portion of the Leased Premises.
Fire Station No.4. This is a 8,906 square foot fire station and training classroom constructed in 2000
featuring wood frame construction. Fire Station No.4 is located at 850 Paseo Ranchero in the City on 9.74
acres ofland.
Fire Station No.6. This is a 6,400 square foot reinforced concrete structure constructed in 2006
located on 1.37 acres at 605 Mount Miguel Road in the City.
Fire Station No.7. Fire Station No.7 is a ]3,947 square foot fire station located on 1.69 acres at
1640 Santa Venitia. It consists of wood frame construction and was originally constructed in 2003.
Fire Station No.8. Fire Station No. 8 is an 8,800 square foot reinforced concrete fire station
constructed in 2007 located at 1180 Woods Drive on \.36 acres ofland.
The total insured value of the Leased Premises detennined by the City is approximately $34,967,036,
which amount does not attribute any value to the land underlying the improvements.
The current legal description of the land associated with the Administration Building encompasses the
entire City Corporation Yard located at 1800 Maxwell Road and described above. [However, the City retains
the right pursuant to the Lease to release from the Leased Premises, with no adjustment in Lease Payments, at
any future date all of the Corporation Yard excepting the Administration Building and related parking and
ingress/egress. See "APPENDIXB-SUMMARY OF PRJNCIPAL LEGAL DOCUMENTS-Lease
DOCSOC/1376669v5/024036-0045
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Agreement; Substitution and Release." Investors should assume that only the Administration Building
component of the Corporation Yard will constitute a portion of the Leased Premises.
Pursuant to the Lease, the City and the Authority have agreed and determined that the Lease Payments
required to be made under the Lease represent fair rental value of the Leased Premises. Under the terms of the
Lease, the City may substitute other property for the Leased Premises, or any portion thereof, and may release
other portions of the Leased Premises provided that certain conditions set forth in the Lease are met. See
APPENDIX A-"SUMMARY OF PRINCIPAL LEGAL DOCUMENTS----COVENANTS WITH RESPECT
TO THE PROPERTY-Substitution or Release of the Leased Premises" and "CERTIFICATE OWNERS'
RISKS-Release or Substitution of Property" herein.
SOURCES OF PAYMENT FOR THE CERTIFICATES
~pnpr~1
Each Certificate represents an undivided proportionate interest in the Lease Payments to be made by
the City to the Authority under the Lease. Under the Assignment Agreement, the Authority has assigned all of
its rights under the Lease, including its rights to receive Lease Payments ITom the City and its remedies under
the Lease to the Trustee for the benefit of the Owners of the Certificates. The Lease Payments are calculated
to be sufficient to pay, when due, the annual principal of and interest due with respect to the Certificates.
Principal and interest with respect to the Certificates will be paid ITom the Lease Payments payable by
the City for the use and possession of the Leased Premises, a proportionate share of insurance or condemnation
Net Proceeds received in respect to the Leased Premises to the extent that such Net Proceeds are not used for
repair or replacement, interest or other income derived from the investment of the funds held by the Trustee
under the Trust Agreement, and if necessa,ry, ITom amounts in the Reserve Fund established by the Trust
Agreement.
Lease Payments; Abatement
The City is required to pay to the Authority specified amounts for use and possession of the Leased
Premises, which are equal to the principal of and interest due with respect to the Certificates. The Lease
requires the City to make Lease Payments to the Authority fifteen days preceding each Interest Payment Date.
Under the Assigrunent Agreement, the Authority has assigned its rights to receive Lease Payments to the
Trustee for the benefit of the owners of the Certificates, as a result of which all Lease Payments will be made
by the City directly to the Trustee. The Trust Agreement provides that the Lease Payments will be deposited
in tlle Lease Payment Fund maintained by the Trustee under the Trust Agreement, and be applied to pay the
principal and interest with respect to tlle Certificates when due.
The City covenants in the Lease to take such action as may be necessary to include all Lease
Payments in its annual budgets and to make annual appropriations for all such Lease Payments. The Lease
provides that the several actions required by such covenants are deemed to be and shall be construed to be
duties imposed by law and that it is the duty of each and every public official of the City to take such action
and do such things as are required by law in the performance of the official duty of such official to enable the
City to canry out and perform the covenants in tlle Lease agreed to be carried out and performed by the City.
The Lease provides that, except as set forth below, Lease Payments will be abated during any period
in which there is substantial interference with the City's use of any portion of the Leased Premises because of
damage, destruction, title defect or condemnation of such portion. The amount of such abatement will be an
amount such that the resulting Lease Payments do not exceed the fair rental value for the use and occupancy of
the portions of the Leased Premises not taken, damaged or destroyed or affected by title defect. Such
abatement will continue for the period commencing with such taking, damage, destruction or interference with
use and ending with the substantial completion of the work of replacement, repair or reconstruction or removal
DOCSOCIl376669v5/024036-0045
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of the title defect causing an interference with use. In the event of any event causing an abatement, the Lease
will continue in full force and effect and the City waives any right to terminate the Lease by virtue of any such
event.
Notwithstanding the foregoing, there shall be no abatement of Lease Payments under the Lease to the
extent that the proceeds of rental interruption insurance or amounts in the Lease Payment Fund or the Reserve
Fund are available to pay Lease Payments which would otherwise be abated under the Lease.
During any period of abatement of Lease Payments, the Trustee shall pay principal and interest with
respect to the Certificates (and Additional Certificates, if any) allocable to such portions of the Leased
Premises from moneys on deposit in the Reserve Fund, and, if available, proceeds of insurance or
condemnation award. The City's reduced rental payments will constitute the total Lease Payments. The
reduced Lease Payments and other amounts available to the Trustee under the Trust Agreement may not be
sufficient to pay princiDal and interest with reSDect to the Certificates (and Additional Certificates, if any)
when due. In the event and to the extent the Lease Payments are subject to abatement, there could be
insufficient amounts to pay principal of and interest on the Certificates (and, Additional Certificates, if any) in
full, and such insufficiency would not constitute a default by the City under the Trust Agreement, the Lease or
otherwise.
The obligation of the City to make Lease Payments does not constitute an indebtedness of the
City for which the City is obligated to levy or pledge any form of taxation or for which the City has
levied or pledged any form of taxation. Neither the Certificates nor the obligation of the City to make
Lease Payments constitutes an indebtedness of the City, the State of California, or any of its political
subdivisions within the meaning of any constitutional or statutory debt limitation or restriction.
The City expects legally available revenues to pay Lease Payments will be derived principally ITom
the City's General Fund and certain PFDIF revenues described under "FINANCIAL INFORMATION-
Public Facilities Development Impact Fee Revenues" below. The City may incur other obligations payable
from the general funds of the City or PFDIF revenues at any time in amounts which may materially affect its
ability to make timely payment of Lease Payments. See "CERTIFICATE OWNER'S RISKS-The Lease
Payments. "
Reserve Fund
A Reserve Fund is established by the Trust Agreement and a 2010 Certificates Account is established
therein. The Reserve Fund is required to be maintained in an amount equal to the least of (i) maximum
aggregate annual Lease Payments payable under the Lease in any Certificate Year (exclusive of Lease
Payments attributable to Certificates and Additional Certificates that have been defeased), (ii) 125% of the
average annual aggregate Lease Payments (in any Certificate Year) then payable under the Lease (exclusive of
Lease Payments attributable to Certificates and Additional Certificates, if any, that have been defeased), or
(iii) 10% of the face amount of the Certificates and any Additional Certificates, if any, (Jess original issue
discount if in excess of two percent of the stated payment amount at maturity) (the "Reserve Requirement").
The full amount available in the Reserve Fund may be used by the Trustee to make payments due with respect
to the Certificates and Additional Certificates, if any, in the event of abatement or a failure by the City to make
Lease Payments when due.
Interest or income received by the Trustee on investment of moneys in the Reserve Fund will be
retained in the Reserve Fund so long as amounts on deposit in the Reserve Fund are less than the Reserve
Requirement. In the event that amounts on deposit in the Reserve Fund exceed the Reserve Requirement,
subject to the requirement of transfers to the Rebate Fund, such excess shall be transferred to the Lease
Payment Fund on or before February IS and August 15 of each year.
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The Reserve Requirement, or any portion thereof, may also be satisfied by the City by crediting to the
Reserve Fund a letter of credit, a surety bond insurance policy, or any other comparable credit facility or any
combination thereof which in the aggregate make funds available in the Reserve Fund in an amount equal to
the Reserve Requirement. See APPENDIXA-"SUMMARY OF PRINCIPAL LEGAL DOCUMENTS-
DEFINITIONS AND SUMMARY OF CERTAIN PROVISIONS OF THE TRUST AGREEMENT-
DEFINITIONS."
Capitalized Interest
There will an initial deposit by the Trustee to the Interest Account of the Lease Payment Fund from
proceeds of the Certificates. The amount deposited has been calculated, together with earnings thereon and on
the 20 I 0 Certificates Account of the Reserve Fund, to be sufficient to make interest payments on the portion of
the Certificates attributable to the Project through and including _ Such amounts will be
rrf"nltp:r! t()w~rr1" fh~ T P.::t,,~ P::tyments cine under the Lea.;;;e through such date.
Insurance Relating to the Leased Premises
Pursuant to the Lease, the City is required to obtain an ALTA leasehold title insurance policy (with
Western Regional Exceptions) on the Leased Premises in an arnount equal to the aggregate principal
component of unpaid Lease Payments. The Lease also requires that the City maintain casualty insurance on
the Leased Premises in amount equal to replacement value (subject to a deductible clause not to exceed
$500,000) and rental interruption insurance to insure against loss of Lease Payments caused by loss or damage
to the Leased Premises covered under the City's casualty insurance. The rental interruption insurance is to be
in an amount not less than the maximum remaining scheduled Lease Payments in any future two-year period.
The City also is obligated under the Lease to obtain a standard comprehensive general public liability and
property damage insurance policy or policies and workers' compensation insurance. See "FINANCIAL
INFORMATION-Insurance Program" and APPENDIXA-"SUMMARY OF PRINCIPAL LEGAL
DOCUMENTS-INSURANCE" herein.
The City does not currently maintains earthquake insurance with respect to the Leased Premises but it
does maintain flood insurance with respect to the Leased Premises.
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. TI1e Lease requires the City to
apply the Net Proceeds of any casualty insurance award either to replace or repair the Leased Premises or to
prepay Certificates and Additional Certificates, if any, if certain certifications with respect to the adequacy of
the Net Proceeds to make repairs, and the timing thereof, cannot be made. See APPEI\1)!X A-"SUMMARY
OF PRINCIPAL LEGAL DOCUMENTS-DAMAGE, DESTRUCTION AND EMINENT DOMAIN; USE
OF NET PROCEEDS," and "THE CERTIFICATES-Prepayment-Prepayment fl'om Net Proceeds of
Insurance or Condemnation." The amount of Lease Payments will be abated and Lease Payments due under
the Lease may be reduced during any period in which by reason of damage, destruction, title defect or taking
by eminent domain or condemnation there is substantial interference with the City's use and possession of all
or part of the Leased Premises. See "CERTIFICATE OWNERS' RISKS-The Lease Payments-Abatement'
herein.
If there are not sufficient insurance proceeds to complete repair of the Leased Premises, the
Lease Payment schedule will be proportionally reduced in accordance with the Lease. Such reduced
Lease Payments may not be sufficient to pay principal and interest with respect to the Certificates. Such
reduction would not constitute a default under either the Trust Agreement or the Lease.
DOCSOC/13 76669v5/02403 6-0045
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Remedies on Defanlt
If the City defaults in perfonnance of its obligations under the Lease, the Trustee, as assignee of the
Authority, may elect not to terminate the Lease and may re-enter and relet the Leased Premises and may
enforce the Lease and hold the City liable for all Lease Payments on an annual basis while re-entering and
reletting the Leased Premises. Such re-entry and reletting shall not effect a surrender of the Lease.
Altematively, the Trustee may elect to terminate the Lease and may re-enter and relet the Leased Premises and
seek to recover all costs, losses or damages caused by the City's default. See APPENDIX A-"SUMMARY
OF PRINCIPAL LEGAL DOCUMENTS-EVENTS OF DEFAULT AND REMEDIES OF CERTIFICATE
OWNERS."
THE AUTHORITY
To~ Coula 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 Authority has acted as a conduit issuer for the City for a variety offinancings.
The Authority is govemed by a five-member Board which consists of all members of the City
Council. The Mayor serves as the Chairman of the Authority. The City Manager acts as the Executive
Director, the City Clerk acts as the Secretary and the Finance Director acts as the Treasurer of the Authority.
CITY OF CHULA VISTA
General Information
Chula Vista is located on San Diego Bay in Southem Califomia, 8 miles south of the City of San
Diego and 7 miles north of the Mexico border, in an area generally know as "South Bay." Chula Vista's city
limits cover approximately 50 square miles. Neighboring communities include the City of San Diego and
National City to the north and the City of Imperial Beach and the communities of San Ysidro and Otay Mesa
to the south. With a January 2009 estimated population of233,108, Chula Vista is the second largest city in
the County.
General Organization
The City of Chula Vista was incorporated as a general law city on March 17, 1911, and operates under
the councilJmanager form of govemment. It became a charter city in 1949. The City is govemed by a five-
member council consisting of four members and a Mayor, each elected at large for four-year altemating terms.
The position of City Manager is filled by appointment of the Council and the City Attomey is an elected
position with a four year term. The City's Fiscal Year 2009-10 budget provides authorized staffing levels of
approximately 1,005 full-time equivalent (FTE) staff members including swom officers and fire personnel.
The members of the City Council, the expiration dates of their terms and key administrative personnel are set
forth in the charts below.
CITY COUNCIL
COUllcil Member
Cheryl Cox, Mayor
Rudy Ramirez
Mitch Thompson
Steve Castaneda
Pamela Bensoussan
Term Expires
December 20 I 0
December 20 I 0
December 20 I 0
December 2012
December 2012
DOCSOC/1376669v5/024036-0045
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CHIEF ADMINISTRATIVE PERSONNEL
James D. Sandoval, City Manager
Scott Tulloch, Assistant City Manager
Gary Halbert, Deputy City Manager
Maria Kachadoorian, Director of Finance/Treasurer
Bart Miesfeld, City Attorney
Donna Norris, City Clerk
Governmental Services
Public Safety and Welfare. For Fiscal Year 2009-10 the .City of Chula Vista Police Department
consists of 322 FTE sworn officers and non-sworn personnel providing patrol, traffic, and investigations.
Th@re arB ning fin~ stations located in ~nt1 nr~r::1tp.~ hy fhp. rity c:::t~fff>rl hy 1 R fire personnel
Community Services. Services provided by the City include building permit and inspection, planning
and zoning, landscape and public inITastructure maintenance, street cleaning, traffic signal maintenance and
municipal code compliance.
Public Services. Water is supplied to Chula Vista by the Otay Water District and the Sweetwater
Water District. Sewer service is provided by the City. Electric power and natural gas are provided by San
Diego Gas and Electric.
Parks and Recreation. The Chula Vista Public Library is comprised of three individual libraries with
over [432,000] volumes available and connected by a wide-area network. The Library delivers books in
English and Spanish, videos and CDs, and community programming to the City's residents nearly every day of
the year. The Library contains an Office of Cultural Arts dedicated to advancing the arts and culture in a
manner designed to preserve the diverse cultures of the area.
In addition, Chula Vista provides a variety of cultural and educational facilities such as the Chula
Vista Heritage Museum, Onstage Playhouse, and the San Diego Junior Theater.
The Chula Vista Recreation Department provides citizens with a variety of park and recreational
services on a year round basis. Facilities include nine community and recreation centers, including a youth
community center and a senior center. The City also has two community pools open year round, 43
community and neighborhood parks, and a Memorial Bowl with seating for 700 at which the City's Summer
Concert Series is hosted. The City also has after-school programs throughout the community.
FINANCIAL INFORMATION
Budgetary Process and Administration
In accordance with the provisions of Chapter I, Division 3, Title 3, of the Government Code of the
State of California, the City prepares and adopts a budget for each fiscal year. Prior to July I, the City
Manager is required to submit to the City Council a proposed budget for the fiscal year commencing the
following July I. The budget includes proposed expenditures and tlle means of fmancing them. On or before
June 30, public hearings are conducted to obtain public comments. On or before June 30, the budget is
required to be enacted through the passage of a resolution by the City Council.
From the effective date of the budget, the amounts stated as proposed expenditures become
appropriated to the several departments, offices and agencies for the objects and purposes named, provided that
the City Manager may transfer appropriations of a fund ITom 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.a
DOCSOC/1376669v5/024036-0045
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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 Councii may amend or
supplement the budget by motion adopted by four votes of the City Council.
Appropriations Limit
Section 7910 of the Government Code of the State of California requires the City to adopt a formal
appropriations limit for each fiscal year. The City's appropriations limit for fiscal year 2009/10 is
$618,401,675. The City's appropriations subject to the limit for 2009/10 are estimated to be $84,016,291.
Based on this, the appropriations limit is not expected to have any impact on the ability of the City to budget
and appropriate the Lease Payments as required by the Lease.
Revenues and Expenditures
Overview. The City has experienced significant economic stress as a result of the general downward
trend of the economy and impacts on real estate development and property values in particular. From 2000-09,
tbe City's population grew from 173,543 to 233,108 representing a 34.3% increase. The State Department of
Finance reports that from 2008-09 the City added just 1,803 new residents. Although assessed values in the
City have decreased by 10.4% for Fiscal Year 2009-10, the City anticipates a further decline in assessed values
due to a number of factors such as the drop in housing prices, foreclosures and Proposition 8 reassessment.
However, the City does expect development to return at moderate levels sometime in the future.
In early Fiscal Year 2008-09 the City identified a budget gap resulting from reduced revenues and
unanticipated expenditures. In January, 2009 the City Council authorized a series of budget reductions to close
both the Fiscal Year 2008-09 gap and the anticipated Fiscal Year 2009-10 gap. The City's Fiscal Year 2009-
10 budget presented in Table I reflects tbeCity's response to revenue reduction expectations. Since Fiscal
Year 2006-07 the City has eliminated a total of259 positions as a result of the City's budget reduction plan.
The City has achieved a balanced budget through a series of expenditure reductions and application of
General Fund reserves. Since 2006, primarily due to the significant slow down in the housing market and the
overall economy, the reserves dropped to 6.1 % at the end of Fiscal Year 2008 and stabilized at this general
level in Fiscal Year 2008-09 due to the implementation of the City's budget reduction plan. The City has
continued an ongoing hiring freeze during Fiscal Year 2009-10 to allow flexibility to address unanticipated
impacts and reduce the potential for further layoff. The 2009-10 General Fund Budget does not anticipate
further reductions in available reserves.
The City General Fund Budget includes programs which are provided on a largely city-wide basis.
The programs and services are financed primarily by the City's share of property taxes, sales taxes, utility
taxes, transient occupancy taxes, revenues from the State and/or federal government, and charges for services
provided. See "CER TIFICA TE OWNERS' RISKS-The Lease Payments-State Budget" herein.
Table No.1 compares the adopted General Fund 2009/1 0 Budget with actual revenue and
expenditures for 2008/09. Sales and use taxes and property taxes provide the major source of revenues to the
General Fund, comprising approximately 19.2% and 20.4% respectively, oftbe City's 2009/10 General Fund
Budget. Other significant 2009/10 General Fund budgeted revenue sources are motor vehicle fees, 13.7%,
franchise fees, 7.5%, and the utility users tax, 6.1 %.
Public safety represents the major use of General Fund moneys, accounting for approximately 49% of
total expenditures of the 2009110 General Fund Budget.
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TABLE NO.1
CITY OF CHULA VISTA
GENERAL FUND REVENUES AND EXPENDITURES
Item 2008/09 Actual 2009/IO Budget
Beginning Un designated Fund Balance $ 34,076,142 $ 33,149,521
Revenues
Taxes $ 77,400,152 75,851,000
Intergovernmental Revenues(1) 24,021,395 21,065,557
Licenses and Penn its 1,987,734 879,820
Charges for Services 10,534,277 7,641,630
Fines and Forfeitures 2,357,044 2,379,692
Use of Money and Property 5,096,660 1,812,922
Other Revenues 19,127,752 11,636,307
Transfers In 9.645.429 12.339.604
Total Revenues $ 150,166,803 $ 133,356,532
Expenditures
General Government $ 32,146,583 $ 20,601,712
Public Safety 68,365,801 65,269,269
Public Works 26,860,757 28,843,017
Parks and Recreation 5,761,607 5,196,980
Library 7,192,979 5,167,425
Furlough and Pension Obligation Bonds 2,721,955 2,496,862
Capital Outlay 104,941 741,737
Debt Service 1,005,569 1,761,627
Transfers Out 6,933,232 4,417,736
Total Expenditures 151.093.424 134.496.365
Ending Undesignated Fund Balance(l) $ 33 149521 $ 32.009.688
(1) Includes Motor Vehic1e License Fees.
Source: City of Chula Vista.
DOCSOC!l376669v5/024036-0045
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Local Taxes
The City receives the following local taxes attributable to the General Fund.
TABLE NO.2
CITY OF CHULA VISTA
TAX REVENUES BY SOURCE
(in Thonsands)
Budget
2004/05 2005/06 2006/07 2007/08 2008/09 2009/10
Property Taxes $ 18,134,869 $ 22,192,789 $ 26,657,759 $ 29,306,623 $ 29,537,473 $ 27,199,440
Sales and Use Taxes 23,600,000 26,715,515 28,827,392 28,304,989 26,263,317 25,545,500
Fr~n('h;<::F> T::IYP'<:: 9.R17 ROO 9492759 8813 064 9.662.517 9.379,964 10,033,000
Utility Users Taxes 6,579,578 6,363,446 6,981,762 7,378,301 7,848,557 8,169,144
Business License
Tax 1,185,187 1,234,912 1,237,316 1,237,322 1,212,126 1,190,000
Transient
Occupancy Tax 2,268,944 2,336,204 2,551,570 2,697,286 2,302,412 2,602,514
Real Property
Transfer Tax 2,439.190 2.122.860 1.423.599 795.606 856.658 841,402
Total Tax Revenues $ 64 045 568 $ 70458485 $ 76502462 $ 79382644 $ 77 400 ] 52 $75581 000
Source: City ofChu]a Vista.
Although the City budget for Fiscal Year 2009-10 anticipates some increased revenues from utility
users tax, transfers from other funds and development revenue, these amounts are more than offset by
anticipated reductions in property tax revenues, motor vehicle license fee revenues, sales tax and investment
earnings, as well as certain specialized programs. Property taxes, sales tax and motor vehicle license fees
comprise the principal revenue sources to the general fund, comprising 21%,19% and 14%, respectively of
budgeted Fiscal Year 2009-10 revenues.
Sales and Use Taxes. Sales tax is collected and distributed by the State Board of Equalization. Each
local jurisdiction received an amount equal to one percent of taxable sales within their jurisdiction. In
addition, the City receives a portion of a 1/2 cent sales tax increase approved by voters in 2003. Sales tax
generated by this increase is used to offset certain expenses for public safety. .
On March 2, 2004, voters approved a bond proposition formally known as the "Economic Recovery
Bond Act." This act authorized the issuance of$15 billion in bonds to finance the 2002-03 and 2003-04 State
budget deficits, which would be payable ITom a fund to be established by the redirection of tax revenues
through the Triple Flip.
Under the "Triple Flip," one-quarter oflocal governments' one percent share of the sales tax imposed
on taxable transactions within their jurisdiction are redirected to the State. In an effort to eliminate the adverse
impact of the sales tax revenue redirection on local govermnent, the legislation provides for property taxes in
the ERAF to be redirected to local government. Because the ERAF moneys were previously e81marked for
schools, the legislation provides for schools to receive other state general fund revenues. It is expected that the
swap of sales taxes for property taxes will terminate once the deficit financing bonds are repaid, which is not
expected to occur for some years. See "CERTIFICATE OWNERS' RlSKS-State Budget-Triple Flip"
herein.
The City receives significant sales tax revenues from certain "big-box" retailers, including Wal-Mart,
Costco, Target 8l1d Best Buy as well as ITom car dealerships. General retail and tr811sportation (including car
DOCSOCIl376669v5/024036-0045
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dealers) currently generate 70% of the total sales tax received by the City. In the second quarter of2009 the
top 25 sales tax generators in the City accounted for 47.33% of the total sales tax received by the City.
A significant portion of amounts recognized in the City's financial statements as sales tax consist of
payments made by the State in replacement of lost sales tax related to the "Triple Flip". In Fiscal Year 2008-
09, amounts attributed to the Triple Flip accounted for approximately $6,277,818 of the total amount treated as
sales tax revenues.
Ad Valorem Property Taxes. Taxes are levied for each fiscal year on taxable real and personal
property is situated in the City as of the preceding January 1. For assessment and collection purposes, property
is classified either as "secured" or "unsecured," and is listed accordingly on separate parts of the assessment
roll. The "secured roll" is that part ofthe assessment roll containing State assessed property, and real property
having a tax lien which is sufficient, in the opinion of the assessor, to secure payment of the taxes. Other
rrnrprty ic;: :::I55PC:;:C;:P.r1 ('m tnp "llnC;:PC"llrp-r1 rnl1 "
Property taxes on the secured roll are due in two installments, on November 1 and February 1 of the
fiscal year. If unpaid, such taxes become delinquent on December 10 and April 10, respectively, and a 10%
penalty attaches to any delinquent payment. In addition, property on the secured roll with respect to which
taxes are delinquent is sold to the State on or about June 30 of the fiscal year. Such property' may thereafter
be redeemed by payment of the delinquent taxes and the delinquency penalty, plus a redemption penalty of
11,% per month to the time of redemption. If taxes are unpaid for a period of five years or more, the property
is subject to sale by the County Tax Collector.
Property taxes on the unsecured roll become delinquent, if unpaid on August 31. A 10% penalty
attaches to delinquent taxes on property on the unsecured roll, and an additional penalty of 11/2% per month
begins to accrue on November 1 of the fiscal.year. The City has four ways of collecting delinquent unsecured
personal property taxes: (1) a civil action against the taxpayer; (2) filing a certificate in the office of the
County Clerk 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, improvements or possessory
interests belonging or assessed to the assessee.
Taxable Property and Assessed Valuation
Set forth in Table Nos. 3 and 4 below are historical assessed valuation for secured and unsecured
property within the City of Chula Vista and tax levies and collections. Amounts shown are inclusive of
incremental valuation attributable to redevelopment areas of the City.
TABLE NO. 3
CITY OF CHULA VISTA
GROSS ASSESSED VALUE OF ALL TAXABLE PROPERTY
Fiscal Year Secured Unsecured Less Exemptions Total
2004/05 $ 15,390,029,359 $ 402,366,184 $ (426,140,493) $ 15,366,255,050
2005/06 18,481,902,606 442,863,514 (452,332,435) 18,472,433,685
2006/07 21,254,352,374 582,720,155 (496,479,594) 21,340,592,935
2007/08 24,381,647,068 544,113,016 (567,257,524) 24,358,502,560
2008/09 24,861,548,900 565,347,815 (603,500,966) 24,823,395,749
2009/10 24,046,100,000 565,348,000 (1,799,018,000) 22,812,430,000
Source: City ofChu]a Vista.
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TABLE NO.4
CITY OF CHULA VISTA
PROPERTY TAX LEVIES AND COLLECTIONS
Fiscal Total Tax Current Tax Percent Delinquent Tax Total Tax
Year Levy Collections Collected Collections Collections
2004/05 $ 18,652,193 $ 18,324,623 98.24% $ 106,497 $ 18,431,120
2005/06 22,096,604 21,617,022 97.83% 162,806 21,779,829
2006/07 25,159,692 24,409,063 97.02% 209,442 24,618,505
2007/08 28,641,734 27,506,299 96.04% 460,875 27,967,173
2008/09 29,304,771 28,147,698 96.05% 765,703 28,913,402
Source: City of Chula Vista.
Largest Taxpayers
The principal taxpayers in the City as of June 30, 2009 are as measured by taxable assessed value, as
shown in Table No.5.
TABLE NO.5
CITY OF CHULA VISTA
LARGEST TAXPAYERS
Property Owner
1. San Diego Expressway Limited
2. JPB Development
3. Village II ofOtay HB SUB
4. Equity Residential
5. Regulo Place Apartments Investor
6. GGP-Otay Ranch LP
7. Rohr Inc.
8. Shea Homes LId Partnership
9. Roman Catholic Bishop of San Diego
10. Rancho MesaLP
Assessed
Valuation (1)
$ 852,000,000
658,525,097
302,617,988
244,346,081
227,230,960
194,702,833
168,162,566
108,564,317
85,713,620
$ 85.503.816
$ 2 927 367 278
TotaPJ
3.43%
2.65%
1.22%
0.98%
0.92%
0.78%
0.68%
0.44%
0.35%
0.34%
] 1.79%
(1) The amounts shown above include assessed value data for both the City and the RedeveJopment Agency.
(2) Percentage of assessed valuation to total assessed valuation.
Source: City of Chula Vista.
Redevelopment Agencies
The California Redevelopment Law authorizes the redevelopment agency of any city or county to
receive an allocation of tax revenues resulting ITom increased assessed values of properties within designated
redevelopment project areas (the "incremental value") occurring after the year the project area is formed. In
effect, local taxing authorities, such as the City, realize tax revenues only on the assessed value of such
property at the time the redevelopment project is created for the duration of such redevelopment project. There
have been six redevelopment projects formed in the City (exclusive of merged areas). The following table sets
forth total assessed valuations and redevelopment agency incremental values.
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TABLE NO.6
CITY OF CHULA VISTA
TOTAL TAXABLE AND NET PROPERTY TAX VALUATIONS
Fiscal Year
Taxable Assessed
Valuation
Redevelopment Agency
Incremental Value
Net Value
2004/05
2005/06
2006/07
2007/08
2008/09
$15,366,255,050
18,4 72,433,685
21,340,592,393
24,358,502,580
24,823,395,749
$688,121,299
810,982,322
1,048,284,855
1,152,820,438
1,167,448,745
$14,678,133,751
17,654,451,363
20,291,707,538
23,205,682,122
23,655,947,004
Source: County of San Diego Audjtor-Controller.
State Legislative Shift of Property Tax Allocation
Beginning in 1992/93, the State has periodically required that local agencies remit a portion of
property taxes received to augment school funding. The General Fund's share of this property tax reduction
was approximately $1,835,000 for 2004/05 and again in 2005/06. Although a further shift in property taxes
occurred in 2009110, the City expects to be fully reimbursed for this shift. See "CERTIFICATE OWNERS'
RISKS-State Budget-Proposition 1A" below. However, certain provisions in the State budget have resulted
in a realignment of property tax revenues in future years. See "CERTIFICATE OWNERS' RISKS-State
Budget" herein and "Local Taxes-Sales and Use Taxes" above.
Franchise Taxes. The City levies a franchise tax on its cable television, trash collection and utility
franchises. In the past, San Diego Gas and Electric has been a significant contributor to the City's franchise
tax receipts as a result of a significant power plant located within the City. From 2007-2009 the City received
an average of $2,000,000 in arumal franchise fee revenues. However the City projects it will receive under
$950,000 in such revenues for Fiscal Year 2009-10 and no revenues thereafter as a result of the anticipated
closure of the power plant. Currently, the power plant is scheduled to close in December, 2010, although the
City cannot predict whether or when the actual closing will occur.
Utility Users Taxes. A utility users tax is levied on gas and electric based on usage and telephone
services based on gross receipts. The utility tax was first levied in 1970 and the last increase in tax rates was in
1979. See "CERTIFICATE OWNERS' RISKS-The Lease Payments-Proposition 62 and Proposition 218"
herein. [DISCUSS MODERNIZATION OF TAX]
Business License Taxes. The City levies a business license tax based on number of employees.
Transient Occupancy Taxes. The City levies a 10% transient occupancy tax on hotel and motels
bills. See "CERTIF1CATE OWNERS' RISKS-The Lease Payments-Proposition 62 and Proposition 218"
herein.
Property Transfer Taxes. A documentary stamp tax is assessed for recordation of real property
transfers.
Motor Vehicle License Fees
A significant revenue source of the City is State of California payments in-lieu of taxes. The City
receives a portion of Department of Motor Vehicles license fees ("VLF") collected statewide. Payments of
VLF to the City are budgeted to be $18,287,000 or 13.7% of the total General Fund Budget for 2009/10.
Payment of State assistance depends on the adoption by the State of its budget, including the appropriations
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therein providing for local assistance. These revenues are shown in the accompanying financial statements as
"intergovernmental revenues from other agencies."
Several years ago, the state-wide VLF was reduced by approximately two-thirds. However, the State
continued to remit to cities and counties the same amount that those local agencies would have received if the
VLF had not been reduced, known as the "VLF backfill." On June 19, 2003, the State triggered an increase in
VLF to be effective beginning October I, 2003. However, the State Legislature adopted AB 1768 which
would defer payment to local agencies of the amount of the VLF backfill that relates to the period from
June 20, 2003 to September 30, 2003 when the higher VLF went into effect, until August 2006. The City's
share of the resulting "loan" was $3,500,000.
The Governor signed an executive order on November 17, 2003 to reduce the VLF, revising the
triggered increase. On December 17, 2003 the Governor issued another executive order, this time
opprnprioting ~? Ii?, hillinn In pmvirle h,ckfil1 ftmdin[' for the city and county VLF funding in 2003/04 which
covered the backfill except for the VLF loan.
The City's budgeted VLF amount of $18,287,000 for Fiscal Year 2009110 is based on projected
amounts at the reduced VLF rates and no assumed State VLF backfill. See "CERTIFICATE OWNERS'
RJSKS- The Lease Payments~State Budget" herein.
Other Revenue Sources
Licenses and Permits. These revenues consist primarily of building, construction and engineering
permits.
Fines, Forfeitures and Penalties. These revenues include parking citations and traffic fines.
Use of Money and Property. These revenues consist primarily of investment earnings and rental
income received for the City's community buildings.
Charges for Services. The City charges fees for zoning, plan check and inspection, as well as for
various City-sponsored recreational programs and other services.
Public Facilities Developmeut Impact Fees
The City assesses certain fees on new development. One such fee is the Public Facilities
Development Impact Fee, or "PFDIF." These revenues are recorded in a Development Impact Fee Fund. See
APPENDIX B-"CITY AUDITED FINANCIAL STATEMENTS." The City utilizes the PFDIF to offset the
cost of constructing or financing certain public facilities, such as the renovation of the Civic Center complex.
The City expects to utilize PFDIF revenues to pay approximately 59% of Lease Payments attributable to the
refunding of the 2000 Certificates and ail of the Lease Payments attributable to the reimbursement for Civic
Center Phase 3 Project expenses. The other major improvements funded with the PFDIF revenues are the
City's City Hall fmancing, certain other public improvements and the City's police headquarters financing.
See "Outstanding Indebtedness of the City" below.
PFDIF Revenues, which are based on projected development of approximately 4,000 single family
residential units, 21,000 multifamily residential units and 1,300 acres of commercial or industrial development
over the next 30 years are expected by the City to generate in excess of $200 million. The City expects to
apply a portion of these amounts to the payment of Lease Payments and other lease obligations, although such
amounts are payable in any event from ail legally available funds afthe City, including generally moneys held
in the General Fund. See "Outstanding Indebtedness of the City" below.
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The receipt of the PFDIF is dependent upon building activity in the City and such revenues have been
significantly reduced in recent years. Over the last five years PFDIF revenues have ranged from a high of
$17.9 million in Fiscal Year 2005-06 to a low of $540,000 in Fiscal Year 2008-09. Such amounts have not
been adequate in recent years to pay lease payments as expected with resulting significant adverse impact on
the City's General Fund. The City's budget for Fiscal Year 2009-10 includes $811,250 in PFDIF fee revenues.
\Vhile the City has projected future development based on available information and expects that annual
PFDIF revenues, or accumulated PFDIF revenues, eventually will be available in sufficient amounts to pay the
allocable portion of Lease Payments referenced above as well as other outstanding lease obligations, there can
be no guarantee that building activity will occur as anticipated, and as a result, the City General Fund may be
required to pay a greater share of Lease Payments than currently anticipated by the City.
Personnel
Fmr1nypp <::;:IIRrips ;:mn henr:fits account for over 78% of the City's General Fund expenditures
estimate for Fiscal Year 2009-10. Table No.7 sets forth historical employee information for the City as of
July 30 in each of the last five fiscal years based on authorized, budgeted full-time equivalent positions.
TABLE NO.7
CITY OF CHULA VISTA
CITY PERSONNEL
Year
Number of
Employees
1,169
1,227
1,264
1,248
1,109
1,005
2005
2006
2007
2008
2009
2010
Source: City ofChula Vista.
Employee Relations and Collective Bargaining
Number of Employees
per Thousands
Population
7.11
5.49
5.55
5.39
4.80
4.31
City employees are represented by six labor unions and associations-the Chula Vista Employees'
Association (CVEA), the Chula Vista Police Officers' Association, the International Association of Fire
Fighters, the Western Council of Engineers and Mid Managers, and Professional Association. CVEA is the
largest association, representing approximately 45.5% of all City employees. Currently 95% of all City
employees are covered by negotiated agreements. Current negotiated agreements expire June 30, 2012.
Retirement Programs
California Public Employee's Retirement System. The City contributes to the California Public
Employee's Retirement System (PERS), an agent multiple-employer public employee retirement system that
acts as a common investment and administrative agent for participating public entities within the State of
California.
All full-time employees are eligible to participate in PERS. City employee's contribution rates are 8%
(9% for safety employees) of their annual covered salary. The City makes the contributions required of City
employees on their behalf and for their account, which amounted to $7,097,135 for the year ended June 30,
2009. The City was required to contribute at an actuarial determined rate of 19.317% of annual covered
payroll for miscellaneous employees and 23.936% of annual covered payroll for safety employees for the
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fiscal year ended Jnne 30, 2009. City contribution rates in 2010 are approximately 23.23% of annual covered
payroll for safety employees and 18.5% for miscellaneous employees. The City's share ofPERS payments for
2006-07 through 2008-09 are shown in the table below. The expected contribution for 2009-10 is
$20,514,900.
Fiscal Year End
Annual Pension Cost
6/30/07
6/30/08
6/30/09
$ 17,773,292
19,084,940
18,938,442
PERS unfunded actuarial accrued liability (or surplus) for both miscellaneous and safety employees
are being amortized as a level percentage of projected payrolls over a closed 20-year period for prior and
current service unfunded liability. The unfunded actuarial accrued liability as of June 30, 2009 is
approxllTIately $28.7 million.
Defined Contribution Pension Plan. The City provides pension plan benefits for all of its part-time
employees throllgh a defined contribution pension plan. All part-time employees are eligible to participate
from the date of employment. Federal legislation requires contributions of at least 7.5% to a retirement plan,
and City Council resolved to match the employees' contributions of 3.75%. The City's contributions for each
employee (and interest earned by the accounts) are fully vested immediately.
For the year ended June 30,2009, the City's total payroll and covered payroll was $2,565,493. The
City made employer contributions of $92,206 (3.75% of current covered payroll), and employees contributed
$92,606 (3.75% of current covered payroll).
Other Post-Employment Benefits. The City provides a Retiree Healthcare Plan, which allows retirees
to purchase healthcare coverage under the City's medical plan. Retirees pay 100% of the premiums. Retirees
not eligible for Medicare pay the same healthcare premiums as active employees, even though retiree's
healthcare costs are greater than that of active employees. This results in an implied subsidy of retiree's
healthcare costs by the City.
On April 22, 2008 the City council approved a medical incentive program for early retirement. The
City offered to pay the employees single premium until December 31, 2009 if employees retired bet\veen
January I, 2009 to March 27,2009 and March 28, 2009 to June 26,2009, respectively.
Employees are eligible for retiree health benefits if they retired from the City on or after age 50
(unless disabled) and are eligible for PERS pension. The benefits are available only to employees who retired
rrom the City. Membership of the plan consisted of the following at June 30, 2009:
Police
Fire
Miscellaneous
Eligible active employees
Enrolled eligible retirees
228
35
123
17
638
62
The above does not reflect current retirees not enrolled in the healthcare plan who are eligible to enroll
in the plan at a later date.
The City offers an implied subsidy benefit paid by the City. The City's contribution is based on pay
as-you-go. The retirees pay 100% of their individual preminm except for the retirees who retired under the
incentive plan. The City is contributing between $379 to $676 in monthly premiums on behalf of the
employee who retired under the incentive plan.
23
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The City's annual other postemployment benefit (OPEB) cost (expense) is calculated based on the
annual required contribution of the employer (ARC), an amount actuarially determined in accordance with the
parameters of GASB Statement No. 45. The ARC represents a level of funding that, if paid on an ongoing
basis, is proj ected to cover the normal cost each year and amortize any unfunded actuarial liabilities (or
funding excess) not to exceed thirty years.
The following table shows the components of the City's annual OPEB cost for the year, the amount
actually contributed to the plan, and changes in the City's net OPEB obligation:
Beginning
Balance Net Annual Ending Balance
OPEB Required Actual Accrued Net OPEB
Obligation Contributions Contributions Interest Obligation
2007-2008 $ $1,36J,UUU $ (724,248) $ $ 638,752
2008-2009 638,752 1,407,000 (320,688) 28,744 1,753,808
The City's annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net
OPEB obligation for 2008 and 2009 were as follows:
Percentage of
Annual AnnualOPEB Increase iI. Net Net OPEB
Fiscal Year OPEB Cost Cost Contributed OPEB Obligation Obligation
6/30/08 $ 1,363,000 53% $ 638,752 $ 638,752
6/30/09 1,435,744 22% 1,115,056 1,753,808
As of June 30, 2007, the most recent actuarial valuation date, the plan was not funded in its initial year
of implementation. The actuarial accrued liability for benefits was $9,608,000, and the actuarial value of
assets was $0, resulting in an unfunded actuarial liability (VAAL) of $9,608,000 and a funded ratio (actuarial
value of assets as a percentage of the actuarial liability) of 0 percent. The next actuarial valuation will be
prepared for Fiscal Year 2009-10, late in the fiscal year.
Actuarial Methods and Asswnvtions
The actuarial cost method used for determining the benefit obligation is the Entry Age Normal Cost
Method. The actuarial assumptions included a 4.50% discount rate, the inflation rate for HMO's starts at 9.7%
(the increase in 2010 premiums over 2009) and grades down to 4.5% (2017 premiums over 2016) and remains
at 4.5% into the future. This assumption means healthcare is assumed to increase, on the average, 7.1 % for
HMO's and 7.5% for PPO's a year for the next 8 years after 2009. The general inflation assumption rate is 3%
and is assumed that healthcare will level off at 1.5% over general inflation. The VAAL is being amortized as a
level percentage of projected payroll over 30 years.
Most Recent Actuariol Studv - Schedule of Fundin" Prov'ess
Over funded
(Unfunded) Actuarial
Entry Age Overfunded Liability as
Actuarial Actuarial Actuarial Percentage
Valuation Actuarial Accrued Accrued Funded Covered of Covered
Date Asset Value Liability Liability Ratio Payroll Payroll
6/30/2007 $ $9,608,000 $(9,608,000) 0.00% $93,172,648 (10.31)%
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Insurance Program
The City is self-insured for the first $500,000 per occurrence for its general liability losses including
personal injury, property damage, errors and omissions, automobile liability and employment practices
liability. For those losses between $500,000 and $2,000,000 per occurrence the City pools its liabilities
through its membership in the San Diego Pooled Insurance Program Authority (SANDPIPA). Insurance for
liability losses in excess of the $2,000,000 up to $45,000,000 is purchased on a group basis by the member
cities.
The City maintains its property insurance and rental interruption insurance coverage through the
Public Entity Property Insurance Program (PEPIP) purchased on a group basis by SANDPIPA members. The
City has an all risk basic deductible of $10,000 with losses in excess of that amount covered by the PEPIP
insurance. The current coverage limit for all insured member agencies on a combined basis is $1 billion per
oC'C'm-rpn('F', <::nnjf'C't tn V:::Ir;{)l11;: snh-limits for certain claims. The sub-limit for rental interruption insurance is
$100 million per insured member where values have been reported to SANDPIPA. The Lease requires the
City to maintain specific rental interruption and other insurance. See "SOURCES OF PAYMENTS FOR THE
CERTIFICATES-Insurance Relating to the Leased Premises" herein.
SANDPIPA is a joint powers authority comprised of twelve San Diego County cities. The Board of
Directors consists of one staff representative (and an alternate) from each of the member cities as designated
by the city's governing body. Each member city has equal representation on the Board of Directors. The
Board of Directors is responsible for all actions ofSANDPIPA.
Annual pool premiums and assessments are approved by the Board of Directors and are adjusted
annually based on the member city's incurred losses; the member's share of such losses and other expenses as
a proportion of all member's losses; historical contributions to reserves (including reserves for incurred but-
not-reported losses); the cost to purchase excess liability insurance and other coverage and a proportionate
share of administrative expenses.
The City is self-insured for the first $1,000,000 per occurrence for workers' compensation liabilities.
Excess workers' compensation coverage is obtained through participation in the CSAC Excess Insurance
Authority's Excess Workers' Compensation Program. As of June 30, 2009, there are 160 member entities
participating in the program that offers per occurrence coverage up to $5,000,000 through pooled resources
and from $5,000,000 to statutory limits via a group purchased excess insurance policy.
Only the probable amounts of loss as estimated by the City's Risk Manager and Attorney, including
an estimate of incurred-but-not-reported losses, have been recorded as liabilities in the City's financial
statements. As of June 30, 2009, there were no reductions in insurance from the prior year and there were no
insurance settlements that exceeded coverage in each of the past three years. The aggregate balance of claims
payable as ofJune 30, 2008 and June 30, 2009 were $15,667,881 and $17,869,948, respectively.
DOCSOC/13 76669v5/02403 6-0045
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Outstanding Indebtedness of the City
The City had the following outstanding indebtedness as of June 30, 2009, exclusive of obligations to
be paid from specifically pledged revenues, such as revenue bonds, tax allocation bonds and assessment
district or special tax bonds. The City has never defaulted in the payment of any of its obligations.
Original Amount Final
Category of Indebtedness Obligation Outstanding Maturity
(I) Pension Obligation Bonds, Series 1994 $16,786,532 $7,000,000 2012
(2) 2000 Certificates of Participation, Series A 25,255,000 16,710,000 2021
(3) 2002 Certificates of Participation Police Facility 60,145,000 55,420,000 2033
(4) 2003 Refunding Certificates of Participation 11,320,000 4,145,000 2014
(5) 2004 Certificates of Participation, Civic Center 1 37,240,000 34,865,000 2034
la) 2UUb Lenltlcates or Panlclpanon, Civic Cemer II 20,323,000 19,440,006 2036
(7) Section 108 Loan 9,500,000 9,500,000 2029
(8) Notes Payable 1,072,269 861,023 2014
(9) Capital Leases 2,809,405 1,859,595 2014
(10) Compensated Absences 6,262,953 N/A
(1) The Pension Obligation Bonds, Series 1994 were issued by the City to pay the obligations from the City to the California
Public Employees Retirement System for the City's unfunded pension liability. The bonds are not limited as to payment to
any special source of funds of the City. The total issue is comprised of current interest bonds and capital appreciation
bonds. Annual debt service is approximately $2.2 million.
(2) In October 2000, the Authority issued its 2000 Certificates of Participation, Series A to provide funds to improve the City's
800 Megahertz emergency communications system and improve the City's Corporation Yard. The Certificates are to be
repaid from lease payments to be made by the City to the Authority. Annual 1ease payments are approximately $2.1 million.
Currently, 61 % of these lease payments are funded from the PFDIF.
(3) In June 2002, the Authority issued its 2002 Certificates of Participation to provide funds to construct the City's Police
Headquarters. The Certificates are to be repaid from lease payments to be made by the City to the Authority. Annual lease
payments are approximately $3.9 million. Currently, 48.2% of these lease payments are funded from the PFDIF.
(4) In May 2003, the City issued its 2003 Refunding Certificates of Participation to defease its outstanding 1993 Certificates of
Participation and reimburse the City for amounts it advanced to prepay an equipment lease. The Certificates are to be repaid
from lease payments made by the City to the Authority. Annual lease payments are approximately $1.6 million.
(5) In September 2004, the City issued its 2004 Certificates of Participation to provide funding for the first phase of the
reconstruction, renovation, and equipping of the City's Civic Center Complex as well as approximately $9 million in
infrastructure improvements throughout the City. The Certificates are to be repaid from lease payments to be made by the
City to the Authority. Annual lease payments are approximately $2.4 million. The City expects that, approximately
$1,540,000 of the annual lease payments will be funded from the PFDIF and an additional $680,000 will be funded from
residential construction taxes.
(6) In March 2006, the City issued its 2006 Certificates of Participation to provide funding for the construction and equipping of
certain improvements to the Civic Center Complex of the City of Chula Vista and other existing City facilities. Annual
lease payments commence in Fiscal Year 2009-10 and begin at approximately $1,270,000 annually to $6,350,000 annually
beginning in Fiscal Year 2014-15.
(7) In 2008, the City entered into a Contract for Loan Guarantee Assistance with the US Department of Housing and Urban
Development (HUD) as part of the Section 108 Loan program in the amount of $9,500,000. The Section 108 Loan is an
"advance" of future CDBG entitlement funds and, as such. is repaid with a portion of the City's annual entitlement. Debt
service payments will be made with future CDBG entitlements for the next 20 years beginning fiscal year 2008/2009.
[DISCUSS MATURITY] As of June 30,2009, the outstanding balance is $9,500,000. The annual debt service payments
increase over time.
(8) In January 1994, the City entered into a note payable with a private party in order to purchase certain land and
improvements for the ultimate purpose of constructing a three-level parking structure. As of June 30, 2009, the outstanding
balance is $195.139.and the note matures in 2014. In September, 2007, the City Council authorized the City's participation
in the California Energy Commission (CEC) and the SDG&E On-Bill Financing program. The loans would bridge the
financial gap between energy conservation project capital costs and the available rebates for energy conservation equipment.
The debt service payment will be computed after the projects have been completed.
(9) The City has capitalized a certain lease for its share of the San Diego County Regional Communications System. As of
June 30, 2009, the outstanding balance is $1,257,685. In 2008 the City entered into a five year lease purchase agreement for
DOCSOC11376669v5/024036-0045
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the acquisition of medical resuscitation equipment for use by the Fire Department with an outstanding balance of$601,910
as of June 30, 2009. Lease payments run through 2013.
(10) Represents that portion of compensated absences not expected to be paid during the current year.
Direct and Overlapping Debt
Set forth below is a direct and overlapping debt report (the "Debt Report") prepared by Muni
Financial as of June 30, 2009. The Debt Report is included for general information purposes only. The City
has not independently verified this information and makes no representations as to its accuracy or
completeness. The Debt Report generally includes long-term obligations sold in the public credit markets by
public agencies whose boundaries overlap the boundaries of the City in whole or in part. Such long-term
obligations are not payable from City's General Fund nor are they necessarily obligations secured by property
within the City. In many cases, long-term obligations issued by a public agency are payable only from the
general fund or other revenues of such public agency.
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TABLE NO.8
CITY OF CHULA VISTA
DIRECT AND OVERLAPPING DEBT
2008-09 Assessed Valuation:
Redevelopment Incremental Valuation:
Adjusted Assessed Valuation:
$ 24,823,395,749
L167,448.745
$23,655,947,004
OVERLAPPING TAX AND ASSESSMENT DEBT:
Metropolitan Water Distriot
OtayMunicipal Water District,I.D. No. 27
Southwestern Community College District
Sweetwater Union High School District
rhnh. V1<:t!'l C'i1y f::~'hMl Dimict
City of Chula VlSta Community Facilities Districts
Sweetwater Union High Schoci District Community Facilities Districts
Chula Vista City School Distriot Commwrity Facilities Districts
City of Chula VlSta 1915 Act Bonds
TOTAL OVERLA.PPING TAX AND ASSESSMENT DEBT
Total Debt
6/30/09
293,425,000
8,395,000
84,254,962
347,829,415
81.050.000
240,100,000
198,030,]08
6,790,000
34,469,]86
%Armlicab1em
1.281%
99.997
57.014
66.740
87.585
100.
3.978-100.
100.
100.
DIRECT AND OVERLAPpmG GENERAL FUND DEBT:
SanDiegoCountyGene:ralFundObligations $ 462,405,000
San Diego CcuntyPe:nsiOll Obligations 986,677,916
San Dil:go County Su~dm of Schools Obligations 16,395,000
Southwestem Community College District Certificates of Participation 1,700,000
Sweetwater Union High School. District Certificates of Participation 12,810,000
Chula Vista City School District Certificates of Participation 128,975,000
City or Cbula Vlsta Certificates or PartidpatloQ 130,580,000
City o(Cbula Vista Pen.sjoQ ObliiPtiol1l 7,000,000
Otay Municipal Water District Catificates ofParti0-pation 63,635,000
TOTAL GROSS DIRECT AND OVERl..APPING GENER."-L FUND DEBT
Less: Otay Municipal Water District Certificates of Participation
Sweetwater Union High School District QZABs supported by investment fund payments
TOTAL NET DIRECT AND OVERLAPPING GENERAL FUND DEBT
6.621%
6.621
6.621
57.014
66.740
87.585
100.
100.
66.375
GROSS COMBINED TOTAL DEBT
NET COMBINED TOTAL DEBT
City's Share of
Debt6/30J09
S 3,758,774
8,394,748
48,037,124
232,141,352
70,987,643
240,100,000
184,242,894
6,790,000
34469386
S 818,921,911
30,615,835
65,327,945
1,085,513
969,238
8,549,394
112,961,754
130,:580,000
7,000,000
42.237,731
399,328,410
42,237,731
3,337,000
353,753,679
$1,228,250,331 (2)
$1,182,675,600
(1) Percentageofowrlappingag.ency'sass~sedvaluationloca1edwithinboundarieS'ofthe city.
(2) Excludes t.a:o; and rcvenue anticipation notes, enteIprise rew=, mortgage revenne and tax allocation bonds and non-bonded capital
leas:eob1igad.ons.
Ratios to 2008..{)9 Assessed Valuation:
Total Overlapping Tax and Assessment Debt.. 3.34%
Ratios to Adiu.sted Assf:ssed Valuation:
Combined Direct Debt (S137,580,000).........~....................... 0.58%
Gross Combined Total Debt.. 5.19%
Net Combined Total Debt...... 5.00%
STATE SCHOOL BUILDINGAlD REPAYABLE AS OF 06/3C/09: $0
Source: California Municipal Smtistics, Inc.
Financial Statements
The City's accounting policies confonn to generally accepted accounting principles and reporting
standards set forth by the State Controller. The audited financial statements also confonn to the principles and
standards for public financial reporting established by the National Council of Government Accounting and the
Governmental Accounting Standards Board.
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GASB No. 34. The Governmental Accounting Standards Board (GASB) puhlished its Statement
No. 34 "Basic Financial Statements - and Management's Discussion and Analysis - for State and Local
Governments" on June 30, 1999. Statement No. 34 provides guidelines to auditors, comptrollers, and financial
officers on requirements for financial reporting for all governmental agencies in the United States. Retroactive
reporting is required four years after the effective date on the basic provisions for all major general
infrastructure assets that were acquired or significantly reconstructed, or that received significant
improvements, in fiscal years ending after June 30, 1980. The City was required to implement the provision of
GASB 34 for the fiscal year ending June 30, 2002.
Basis of Accounting and Finallcial Statemellt Preselltatioll. The government-wide financial
statements are reported using the accrual basis of accounting. Revenues are recorded when earned and
expenses are recorded when a liahility is incurred, regardless of the timing of related cash flows. Property
taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized
as r€P.'@llblg as soon ag aU eligibilit), fE;>qI1irpmpnt" imrn<;:p.!'1 hy fhl": rrnvicip:r n;:!vp: hp.p.n met
Governmental fund financial statements are reported using the modified accrual basis of accounting.
Revenues are recognized as soon as they are hoth measurahle and available. Revenues are considered to be
available when they are collectible within the current period or soon enough thereafter to pay liabilities of the
current period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting.
However, debt service expenditures are recorded only when payment is due.
The City retained the firm of Caporicci & Larson, Certified Public Accountants, San Diego,
California. to examine the general purpose financial statements of the City as of and for the year ended
June 30, 2009. The following tables summarize the Balance Sheet and Statement of Revenues, Expenditures
and Changes in Fund Balance of the City's General Fund for the last four fiscal years.
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TABLE NO.9
CITY OF CHULA VISTA
GENERAL FUND
BALANCE SHEET
As of June 30
2006 2007 2008 2009
ASSETS
Cash and investments $ 6,267,747 $ 2,748,905 $ 4,430,932 $ 6,362,226
Receivables:
Accounts 455,507 269,729 937,308 813,712
Taxes 12,130,159 12,457,365 11,593,038 10,008,394
Interest 36,879 93,224 75,957 87,419
Loans 156,250 143,750 131,250 118,750
Other 20,917
Due from other funds 1,623,716 237,908 368,200
Due from other governments 5,553,133 3,237,273 2,133,566 1,953,644
Advances to other funds 28,227,313 30,321,245 30,751,209 27,770,339
Inventories and prepaid items 33,537 48.187 66.537 29.263
Total assets $ 54,484,241 $ 49,557,586 $ 50,487,997 $ 47,164,664
LIABILITIES AND FUND BALANCES
Liabilities:
Accounts payable and accrued liabilities $ 6,427,936 $ 5,462,933 $ 6,389,496 $ 5,530,444
Deferred revenue 8.170.352 8.592.396 10.022.359 8.484.699
Total liabilities $ 14,598,288 $ 14,055,329 $ 16,411,855 $ 14,015,143
Fund Balances:
Reserved:
Encumbrances $ 911,813 $ 328,560 $ 332,316 $ 298,763
Long-term receivables and advances 20,859,197 21,872,599 21,860,098 20,404,390
Prepaid items 48.187 66.537 29.263
Total reserved $ 21,771,010 $ 22,249,346 $ 22,258,951 $ 20,732,416
Unreserved:
Designated for:
Contingency 2,196,499 2,982,950 2,982,945 2,982,950
Capital projects 1,696,295 577,129 741,736
Designated Undesignated: 14.222.149 9.692.832 8.834.246 8.692.419
T atal unreserved 18,114,943 13,242,911 11,817,191 12,417,105
Total fund balances $ 39.885.953 $ 35.502.257 $ 34.076.142 $ 33.149.521
Total liabilities, fund balances $ 54484 241 $ 49 557 586 $ 50 487 997 $ 47164664
Source: City of Chula Vista Comprehensive Annual Financial Report.
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TABLE NO. 10
CITY OF CHULA VISTA
GENERAL FUND
STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE
For the year ended Jnne 30
2006 2007 2008 2009
REVENUES:
Taxes $ 71,236,036 $ 77,561,166 $ 80,428,081 $ 77,400,512
Intergovernmental 24,638,703 23,873,593 24,989,256 24,021,395
Licenses and permits 3,216,540 2,730,534 2,697,338 1,987,734
Charges for services 15234,970 16,259,086 14,471,074 10,534,277
Fines and forfeitures 1,144,189 1,315,262 1,519,716 2,357,044
Use of money and property 1,497,921 2,355.304 2,912,583 5,096,660
Other 22.316,686 21.970 468 19,868,698 19,127,752
Total revenues $ 139,285,045 $ 146,065,413 $ 146,886,746 $ 14U,)23,3/4
EXPENDITURES:
Current:
General government $ 37,480,118 $ 35,845,234 $ 32,742,746 $ 34,868,538
Public safety 66,645,773 72,343,819 71,326,196 68,365,801
Public works 37,040,900 38,270,890 32,584,177 26,860,757
Parks and recreation 6,2] 0,040 7,268,640 6,843,070 5,761,607
Library 9,680,381 9,642,064 8,224,897 7,192,979
Capital outlay 1,466,149 400,584 920,699 104,941
Debt service:
Principal interest and fiscal charges 151.696 1.005.570
Total expenditures $ 158,523,361 $ ]63,771,321 $ 152,802,481 $ 144,160,193
REVENUES OVER (UNDER) $ (19,238,316) $ (17,705,908) $ (5,916,735) $ (3,634,819)
OTHER FINANCING SOURCES (USES):
Transfers in $ 21,274,417 $ 18,679,983 $ 9,736,285 $ 9,641,430
Transfers out (5,238.426) (5.357,771) (6,009,889) (6,933232)
Total other financing sources $ ]6,035,991 $ 13,322,212 $ 4,490,620 $ 2,708,198
NET CHANGE IN FUND BALANCES $ (3,202,325) $ (4,383,696) $ (1,426,115) $ (926,621 )
FUND BALANCE
Beginning of Year $ $ $ $ 34,076,142
Prior year adjustment [DISCUSS]
End of year $ 39881 193 $ 35502217 $ 34076 142 $ 33149521
Source: City of Chula Vista Comprehensive Annual Financial Report.
City Investment Policy
General. Pursuant to the City's Investment Policy and Guidelines (the "Investment Policy") the
City's Finance Director is responsible for investing the cash balances in all City Funds in accordance with the
California Government Code, Sections 53600 et seg, and 53635 et seg, The Investment Policy does not
include long tenn debt reserve funds and deferred compensation funds, which are exceptions covered by other
more specific Government Code sections and the legal documents unique to each debt transaction. The
Investment Policy provides that investment practices shall confonn to a prudent investor standard which
provides, in essence, that in investing or managing public funds, a trustee shall act with care, skill, prudence
and diligence under the circumstances then prevailing that a prudent person would use to safeguard the
principal and maintain the liquidity needs of the agency,
Under the Investment Policy, the Finance Director and other individuals assigned to manage the
investment portfolio, acting within the intent and scope of the investment policy and other written procedures,
and exercising due diligence, shall be relieved of personal responsibility and liability for an individual
investment's credit risk or market price changes, provided material deviations from expectations are reported
to the City Council in a timely manner and appropriate action is taken to control any adverse developments.
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The Investment Policy states that the City's primary objective is to maintain safety of principal.
However, it is anticipated that market prices of securities purchased as investments will vary depending on
economic conditions, interest rate fluctuations, or individual security credit factors. In a diversified investment
portfolio, such temporary variations in market value will inevitably result in measurable losses at any specific
point in time. From time to time, changes in economic or market conditions may dictate that it is in the City's
hest interest to sell a security prior to maturity.
The thIee principal factors of safety, liquidity and yield are to be taken into consideration, in that
order, when making investment decisions.
The City's current Investment Policy (including a schedule of eligible investments), adopted
February 17, 2009 is attached hereto as APPENDIX G-"CITY INVESTMENT POLICY."
The par "alJ1E', R):::Irlcp.t \1:::11111", :::Irijl1c;;tpon rnc::t n:::ic::ic:: :::Inn pp:rr.p:nt ()ft()t~l investments for each categ-ory of
the City's investments, as of September 30, 2009, are set forth in Table No. 18 below.
TABLE NO. 11
CITY OF CHULA VISTA
SCHEDULE OF INVESTMENTS
(As of September 30, 2009)
Investment Type
Cash/Time Deposits
Pooled Investment
Federal Securities
Local Agency Investment Fund
Corporate Bonds
Subtotal
Cash/Investments with Fiscal Agent
U.S. Government
Investment Agreements
Mutual Funds
Cash with Fiscal Agents
Restricted Cash
Subtotal
Totals
% of Total
Par Valu,!l} Market Valui2) Book Value(3) Investments
$ 3,366,440 $ 3,366,440 $ 3,366,440 1.25%
$ 116,000,000 $ 112,206,893 $ 115,994,925 42.98%
33,979,887 59,300,071 33,979,887 12.59
4.000.000 4.073.540 3.992.960 1.48
$ 153,979,887 $ 175,580,504 $ 153,967,772 57.05%
$ 28,587,902 $ 34,384,821 $ 28,587,902 10.59%
25,909,456 25,909,456 25,909,456 9.60
45,406,287 45,406,287 45,406,287 16.82
0.00
12.676.523 12.676.523 12.676.523 -.UQ
$ 112.580.168 $ 118,377.087 $ 112.580.168 41.71%
$ 269 926 49) $ 297124011 $269914380 100.00%
OJ Par value is the principal amount ofthe investment at maturity.
(2) All market values contained herein are received from sources the City believes are reliable; however, the City does not
guarantee their accuracy.
(3) Original cost of investments when purchased.
Source: City of Chula Vista
CERTIFICATE OWNERS' RISKS
The pw-chase of the Certificates involves investment risk. If a risk factor materializes to a sufficient
degree, it could delay or prevent paymenl of principal and/or interest represented hI' the Certificates. Such
risk factors include, bul are not limited to, lhe following matlers and should be considered, along wilh olher
information in this Official Statement, by potential investors.
The Lease Payments
City's Lease Payments and Other Payments. The City's Lease Payments and other payments due
under the Lease (including the costs of improvement, repair and maintenance of the Leased Premises and
taxes, other governmental charges and assessments levied against the Leased Premises) are not secured by any
DOCSOC/13 76669v5/02403 6-0045
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pledge of taxes or other revenues of the City but are payable from yearly appropriations of any funds lawfully
avai1able to the City. If the City's revenue sources are less than its total obligations, the City could choose to
fund other services before making Lease Payments and other payments due under the Lease. The same result
could occur if, because of State Constitutional limits on expenditures, the City is not permitted to appropriate
and spend all of its available revenues (see "Constitutiona] Limitation on Taxes and Expenditures" herein). To
the extent these types of events or other events adversely affecting the funds available to the City occur in any
year, the funds available to make Lease Payments may be decreased.
The City has the capacity to enter into other obligations which may constitute additional charges
against its revenues. To the extent that additional obligations are incurred by the City, the funds available to
the City to make Lease Payments may be decreased. The City is currently liable on other obligations payable
from general revenues, including pension obligation bonds and certificates of participation issued by the City
in 2002, 2003, 2004 and 2006 respectively. 1n the event of a shortfall in revenues, a court might require that
tnp rity hr<::t o:::pt ~o:::i(h'" rp:vPnJlt>o::: to r~Y tne: ppnsTon ohlie:8tion bonds or other obligations of the City or to make
expenditures necessary to preserve the health and welfare of City residents. See "FINANCIAL
INFORMATION-Outstanding Indebtedness of the City" herein.
Abatement. The amount of Lease Payments due under the Lease will be adjusted or abated during
any period in which by reason of damage or destruction to the Leased Premises or eminent domain
proceedings or title defects there is substantial interference with the use and possession of the Leased Premises.
Notwithstanding the provisions of the Lease and the Trust Agreement specifying the extent of abatement in the
event of the City's failure to have use and possession of the Leased Premises, such provisions may be
superseded by operation of law, and, in such event, the resulting Lease Payments of the City may not be
sufficient to pay all of that portion of the remaining principal and interest represented by the Certificates.
Insurance. The Lease obligates the City to obtain and keep in force various fonns of insurance, to
assure repair or replacement of the Leased Premises in the event of damage or destruction to the Leased
Premises (see APPENDIX A-"SUMMARY OF PRINCIPAL LEGAL DOCUMENTS-AGREEMENT TO
LEASE; TERMS OF LEASE; LEASE PAYMENTS" and "INSURANCE" herein). The City makes no
representation as to the ability of any insurer to fulfill its obligations under any insurance policy provided for
in the Lease. In addition, certain risks, such as damage from earthquakes and floods, may not be covered by
such property insurance (see "SOURCES OF PAYMENT FOR THE CERTIFICATES-Insurance Relating to
the Leased Premises" herein). The City does not currently have earthquake insurance on the Leased Premises
and does not anticipate purchasing such insurance in the foreseeable future. The City does currently maintain
flood insurance with respect to some of the Leased Premises. See "Sources of Payment for the Certificates-
Insurance Relating to the Leased Premises."
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
rupture, ground shaking and landslides.
If the Leased Premises is partially or completely damaged or destroyed due to any uninsured or
underinsured event, it is likely that Lease Payments will be partially or completely abated. Apart from the Net
Proceeds of insurance, the City and the Authority will have no obligation to expend any funds to repair or
replace such damaged or destroyed property. If any Leased Premises so damaged or destroyed is not repaired
or replaced within the period during which the proceeds of rental interruption insurance or amounts in the
Reserve Fund are available, any such abatement could prevent the City from making timely Lease Payments.
Discovery of a Hazardous Substance That Would Limit the Beneficial Use of the Leased Premises.
In general, the owners and lessees of a parcel may be required by law to remedy conditions of the property
DOCSOCI! 376669v5/024036-0045
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relating to the releases or threatened releases of hazardous substances. The federal Comprehensive
Environmental Response, Compensation and Liability Act of 1980 sometimes referred to as CERCLA or the
Superfund Act, is the most well known and widely applicable of these laws but California laws with regard to
hazardous substances are also stringent and similar. Under many of these laws, the owner (or lessee) is
obligated to remedy a hazardous substance condition of property whether or not the owner ( or lessee) had any
involvement in creating or handling the hazardous substance. The effect, therefore, should the Leased
Premises be affected by a hazardous substance, might be to limit the beneficial use of the Leased Premises
upon discovery and during remediation.
State Budget
The following information concerning the State's budgets fur the current and most recent preceding
years has been compiled fom publicly-availabie information provided by the Stale. Neither the City nor the
5ir.al1cis! Advi::er lqas !ruiepfl'4d-entl)' l'(lV'ifioA QT' rQ fhoy g"nrnnfpp tJu~ nrrlirf7ry nfthp. in/nrmntinn r(dating to
the State's budgets provided in this section. Further information is available fom the Public Finance Division
of the State Treasurer's Office.
The Budget Process. Through the State budget process, the State can enact legislation that
significantly impacts the source, amount and timing of the receipt of revenues by local agencies including the
City. As in recent years, State budget deficits can result in legislation that adversely impacts local agency
budgets.
The State's fiscal year begins on July I and ends on June 30. The annual budget is proposed by the
Governor by January 10 of each year for the next fiscal year (the "Governor's Budget"). Under State law, the
annual proposed Governor's Budget cannot provide for projected expenditures in excess of projected revenues
and balances available trom prior fiscal years. Following the submission of the Governor's Budget, the
Legislature takes up the proposal.
Under the State Constitution, money may be drawn from the Treasury only through an appropriation
made by law. The primary source of the annual expenditure authorizations is the Budget Act as approved by
the Legislature and signed by the Governor. The Budget Act must be approved by a two-thirds majority vote
of each House of the Legislature. n,e Governor may reduce or eliminate specific line items in the Budget Act
or any other appropriations bill without vetoing the entire bill. Such individual line-item vetoes are subject to
override by a two-thirds majority vote of each House of the Legislature.
Appropriations also may be included in legislation other than the Budget Act. Bills containing
appropriations (except for K-14 education) must be approved by a two-thirds majority vote in each House of
the Legislature and be signed by the Governor. Bills containing K-14 education appropriations only require a
simple majority vote. Continuing appropriations, available without regard to fiscal year may also be provided
by statute or the State Constitution.
Funds necessary to meet an appropriation need not be in the State Treasury at the time such
appropriation is enacted; revenues may be appropriated in anticipation of their receipt.
Recent State Budgets. Certain information about the State budgeting process and the State Budget is
available through several State of California sources. A convenient source of information is the State's
web site, where recent official statements for State bonds are posted. The references to internet web sites shown
below are shown for reference and convenience only; the information contained within the websites has not
been reviewed by the City and is not incorporated herein by reference.
The California State Treasurer's Internet home page at www.treasurer.ca.gov. under the heading
"Bond Information," posts various State of California Official Statements, many of which contain a summary
of the current State Budget, past State Budgets, and the impact of those budgets on school districts in the State.
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The California State Treasurer)s Inten1et home page at W\V\V.treasurer.ca.gov, under the heading
"Financial Information," posts the State's audited financial statements. In addition, the "Financial
Information" section includes the State's Rule 15c2-12 filings for State bond issues. The "Financial
Information" section also includes the "Overview of the State Economy and Government, State Finances, State
Indebtedness, Litigation" ITom the State's most current Official Statement, which discusses the State budget
and its impact on school districts.
The California Department of Finance's Internet home page at www.dof.ca.gov. under the heading
"California Budget," includes the text of proposed and adopted State Budgets.
The State Legislative Analyst's Office prepares analyses of the proposed and adopted State budgets.
The analyses are accessible on the Legislative Analyst's Internet home page at www.lao.ca.gov under the
heading "Products."
For a number of years, the State Legislature has shifted property taxes from cities, counties and
special districts to the Educational Revenue Augmentation Fund. The term "ERAF" is often used as a
shorthand reference for this shift of property taxes. In 1992-93 and 1993-94, in response to serious budgetary
shortfalls, the State Legislature and administration pennanently redirected over $3 billion of property taxes
from cities, counties, and special districts to schools and community college districts. The 2004-05 California
State Budget included an additional $1.3 billion shift of property taxes from certain local agencies, including
the City, to occur in Fiscal Years 2004-05 and 2005-06. The City's portion of such property tax shift for each
ofthese two Fiscal Years was $2,716,305. To date, over $45 million has been shifted.
Proposition lA. On November 2, 2004, California voters approved Proposition lA, which amended
the State Constitution to significantly reduce the State's authority over major local government revenue
sources. Under Proposition lA, the State .may not (i) reduce local sales tax rates or alter the method of
allocating the revenue generated by such taxes, (ii) shift property taxes ITom local governments to schools or
community colleges, (iii) change how property tax revenues are shared among local governments without two-
third approval of both houses of the State Legislature, or (iv) decrease Vehicle License Fees revenues without
providing local govemments with equal replacement funding. Under Proposition lA, the State may shift to
schools and community colleges a limited amount of local government property tax revenue if certain
conditions are met, including (a) a proclamation by the Govemor that the shift is needed due to a severe
financial hardship of the State, and (b) approval of the shift by the State Legislature with a two-thirds vote of
both houses. Under such a shift, the State must repay local governments for their property tax losses, with
interest, within three years. Proposition lA does allow the State to approve voluntary exchanges of local sales
tax and property tax revenues among local goverrunents within a county.
2009-10 State Budget
The following information concerning the State's budgets has been obtained from publicly availabie
information which the City believes to be reliable; however, the City does not guaranty the accw'acy or
completeness of this information and has not independently verified such information. Furthermore, it should
not be inferred from the inclusion of this information in this Official Statement that the principal of or interest
on the Certificates is payable by or the responsibility of the State of California.
The State of California is experiencing significant financial and budgetary stress. State budgets are
affected by national and state economic conditions and other factors over which the City has no control. TIle
State's financial condition and budget policies affect communities and local public agencies throughout
California. 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. Each State budget, and notably the State's 2009-10 budget,
contains a number of measures which impact the City's finances.
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The State Budget Act for Fiscal Year 2008-09 was signed by the Governor on September 23,2008-
the latest in State history. Thereafter, on-going weak. economic conditions resulted in significant revenue
shortfalls and the Governor declared a fiscal emergency and called special sessions of the Legislature to
consider budget actions to address the problems. The Governor's proposed budget for Fiscal Year 2009-10,
released December 31,2008, estimated there would be a budget gap of more than $40 billion for the 18-month
period ending June 30, 2010. Following lengthy budget negotiations, on February 19, 2009, the State
Legislature passed revisions to the State Budget Act for the remainder of Fiscal Year 2008-09, as well as the
State Budget Act for Fiscal Year 2009-10 and related legislation, which the Governor signed on February 20,
2009 after making additional line-item vetoes. On July 28, 2009, the Governor signed into law a series of
amendments to the 2009-1.0 State Budget (the "2009-10 Budget Amendments").
The State's financial difficulties may affect the amount and timing of payments to or for the benefit
of cities of funds provided by the State. From time to time, some of the State's budget solutions may increase
thg financial f.:tress ofdtiea a:rr1 ntfw-r 1Q/"'::I1 gnvprnmp:nt" hf':(,~l1C:::P. t"~y (1) decrea.o;;e 10cal revenues (particularly
the property tax, road improvement funding, public safety or other categorical funded initiatives) or (2) directly
or indirectly increase demand for local programs (such as public safety or indigent health programs). There
can be no assurances that the State's financial difficulties will not materially adversely affect the financial
condition of the City.
The 2009-10 Budget Amendments were designed to address the State's budget deficit. The 2009-10
Budget Amendments project $89.5 billion of General Fund revenues and authorize $84.6 billion of
expenditures. Since many of the actions taken to balance the State's Fiscal Year 2009-10 Budget were either
one-time actions, or involve loans which have to be repaid, or are based on temporary revenue increases or the
limited receipt of federal stimulus funds, budget gaps of several billions of dollars a year are expected to recur
in 2010-11 and subsequent years. The State Department of Finance has projected that, using expenditure
obligations under existing law and various assumptions concerning revenues in future years, the State would,
in the absence of taking additional steps to balance its budget, face an "operating deficit" (expenditures
exceeding revenues in the same fiscal year) of $7.4 billion in fiscal year 2010-11, $15.5 billion in 2011-12 and
$15.1 billion in 2012-13. These projections in turn are based on a number of assumptions.
The financial condition of the State is subject to a number of other risks in the future, including
particularly potential significant increases in required state contributions to the Public Employees' Retirement
System, increased financial obligations related to Other Post-Employment Benefits, and increased debt service.
City Impact. The State's 2009-10 Budget includes an approximately $2 billion borrowing of property
tax funds from local government under the provisions of Proposition IA. As a result of the Proposition IA
borrowing, the State will withhold approximately $4,488,610 of property tax revenues in Fiscal Year 2010,
which the City would otherwise expect the State to repay within 3 years. However, the City and other local
governments have elected to participate in a securitization financing offered by a joint powers authority in
which they will receive, up front, property tax revenues being borrowed by the State. California Communities,
the joint powers authority, has issued bonds securitizing the future payments by the State and will remit the
proceeds of the bonds to the local governments, including the City, which opted to participate in the
securitization. TIle State will then repay the bondholders to payoff the outstanding bonds, including interest
costs. As a participant in the financing, the City will receive the full amount of its property tax reduction.
Payments to all participating agencies are scheduled to occur in two equal installments on or about January IS,
20 I 0 and May 3, 2010.
The 2009-10 Budget Amendments include a total of $2.05 billion to be taken from local
redevelopment agencies through a seizure of $1.7 billion in Fiscal Year 2009-10, and then an additional
$350 million in Fiscal Year 2010-11. These funds are to be deposited in county "Supplemental" Educational
Revenue Augmentation Funds ("SERAF") to be distributed to meet the State's constitutional minimum
funding obligation to schools. The SERAF shift is similar to prior educational augmentation fund shifts which
most recently have been invalidated by a local California Superior Court. While the legislative formulation of
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the SERAF shift is different from prior shifts in certain respects, the California Redevelopment Association
believes the shift represents an unconstitutional diversion of redevelopment funds which are dedicated to
redevelopment, and has filed suit to invalidate the provisions. The City estimates the share of this diversion
assessed against the City's redevelopment agency is $4,160,694 for Fiscal Year 2009-10 and $855,797 for
Fiscal Year 2010-11. The 2009-10 Budget Amendments allow these funds to be paid by a redevelopment
agency through the use of any available funds, and does not require the City to make the payments. However,
significant penalties are imposed upon redevelopment agencies which do not make the payments. The City
cam10t predict the outcome of the currently pending or any future challenge to the SERAF shift or other
legislative changes which may affect the City's redevelopment agency, or the impact of such changes on the
City's General Fund.
The SERAF shift of redevelopment property tax increment funds is significant and, if upheld by the
courts and repeated in future fiscal years by the Legislature, could affect the finances of the City's
redeuelgpm~Il.t ageI1(,)' f-9r YE'\OIf<: to ('limp Nf'vpdhf':lf':<'::<:: {hp. rity P.Xpf':cts thM ifultimateJy required to be paid.
the City's redevelopment agency will fund its SERAF payment for Fiscal Year 2009-10 and 2010-11 from its
own property tax increment and without direct impact on the City's General Fund.
The State's Fiscal Year 2009-10 Budget also deferred payments of certain gas tax revenues payable to
the City in the total amount of $ . If additional gas tax transfer deferrals are included in future
state budgets the City would expect to apply other available special fund revenues to supplement general fund
activities funded from these sources.
Triple Flip. Currently, a significant portion of City revenues which are treated as sales tax in fact
represent State diversion of property taxes in replacement of lost sales tax revenues because of legislation,
commonly referred to as the "Triple Flip," which was submitted to the voters on March 2, 2004, as part of a
bond proposition formally known as the "Economic Bond Recovery Act." This act authorized the issuance of
$15 billion in bonds to fmance the 2002/03 and 2003/04 State budget deficits, which are payable from a fund
established by the redirection of tax revenues through the Triple Flip.
Under the "Triple Flip" one-quarter of local governments' one percent share of the sales tax imposed
on taxable transactions within their jurisdiction is redirected to the State. In an effort to eliminate the adverse
impact of the sales tax revenue redirection on local govermnent, the legislation provides for property taxes in
the ERAF to be redirected to local government. Because the ERAF moneys were previously earmarked for
schools, the legislation provides for schools to receive other state general fund revenues. It is expected that the
swap of sales taxes for property taxes would terminate once the deficit financing bonds were repaid. The
"Triple Flip" legislation was approved by voters at the election on March 2, 2004 and the bonds were sold in
May 2004. See "FINANCIAL INFORMATION-Local Taxes" herein.
Future State Budgets. The City caMot predict what actions will be taken in the future by the State
Legislature and the Governor to address the State's current and future budget deficits. Future State budgets
could be affected by national economic conditions and other factors over which the City will have no control.
On November 18,2009, the State Legislative Analyst's Office estimated the State could face a budget deficit
in excess of $20 billion through Fiscal Year 2010-11. To the extent that the State's aMual budget process
results in reduced revenues or increased expenses to the City, the City will be required to make adjustments to
its budget.
On January 8, 2010 the Governor released his proposed State Budget for Fiscal Year 2010-11 and
called for an emergency legislative session to enact budget changes for the remainder of the current fiscal year.
His budget estimates an immediate $6.6 billion gap in the State Budget for the current fiscal year. Although
the proposed budget does not contemplate any further SERAF or Proposition lA shifts, it anticipates sizable
budget shortfall absent federal budget support and other solutions. The City carmot predict whether the final
budget solution will impose further adverse impact on the City's General Fund. [DISCUSS]
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Constitutional Limitation on Taxes and Expenditures
State Initiative Measures Generally. Under the California Constitution, the power of initiative is
reserved to the voters for the purpose of enacting statutes and constitutional amendments. For more than
25 years, the voters have exercised this power to place limitations on the ability of local governments to levy
taxes and make expenditures, including through the adoption of Proposition 13 ("Article XIIIA") and similar
measures, the most recent of which was approved as Proposition 218 in the general election held on
November 5, 1996.
Any such initiative may affect the collection of fees, taxes and other types of revenue by local
agencies such as the City. Subject to overriding federal constitutional.principles, such collection may be
materially and adversely affected by voter-approved initiatives, possibly to the extent of creating cash-flow
problems in the payment of outstanding obligations such as the Lease.
Article XIIlA. Article XIIIA of the California Constitution limits the taxing powers of California
public agencies. Article XIIIA provides that the maximum ad valarem tax on real property cannot exceed one
percent of the "full cash value" of the property, and effectively prohibits the levying of any other ad valorem
property tax except for taxes above that level required to pay debt service on voter-approved general obligation
bonds. "Full cash value" is defined as "the County assessor's valuation of real property as shown on the
1975/76 tax bill under 'full cash value' or, thereafter, the appraised value of real property when purchased,
newly constructed, or a change in ownership has occurred after the 1975 assessment." The "full cash value" is
subject to annual adjustment to reflect inflation at a rate not to exceed two percent or a reduction in the
consumer price index or comparable local data. Article XIIIA has subsequently been amended to pennit
reduction of the 'full cash value' base in the event of declining property values caused by substantial damage,
destruction or other factors, and to provide that there could be no increase in the 'full cash value' base in the
event of reconstruction of property damaged or destroyed in a disaster and in other special circumstances.
The foregoing limitation does not apply to ad valorem taxes or special assessments to pay the interest
and redemption charges on any indebtedness approved by the voters before July 1, 1978 or any bonded
indebtedness for the acquisition or improvement of real property approved by two-thirds of votes cast by the
voters voting on the proposition.
In the general election held November 4, 1986, voters of the State of California approved two
measures, Propositions 58 and 60, which further amend the terms "purchase" and "change of ownership", for
purposes of detennining full cash value of property under Article XIIIA, to not include the purchase or transfer
of (1) real property between spouses and (2) the principal residence and the first $1,000,000 of other property
between parents and children. Proposition 60 amends Article XIIIA to permit the Legislature to allow persons
over age 55 who sell their residence and buy or build another of equal or lesser value within two years in the
same city, to transfer the old residence's assessed value to the new residence. In the March 26, 1996 general
election, voters approved Proposition 193, which extends the parents-children exception to the reappraisal of
assessed value. Proposition 193 amended Article XIIIA so that grandparents may transfer to their
grandchildren whose parents are deceased, their principal residences, and the fIrst $1,000,000 of other property
without a re-appraisal of assessed value.
Article XIllB. On October 6, 1979, California voters approved Proposition 4, or the Garm Initiative,
which added Article XIIrn to the California Constitution. The principal thrust of Article XIIrn is to limit the
annual appropriations of the State and any city, county, city and county, school district, authority or other
political subdivision of the State. The "base year" for establishing such appropriations limit is the 1978/79
fIscal year, and the limit is to be adjusted annually to reflect changes in population, consumer prices and
certain increases in the cost of services provided by public agencies.
Proposition 62 and Proposition 218. A statutory initiative ("Proposition 62") was adopted by the
voters of the State at the November 4, 1986 General Election which (a) requires that any tax for general
38
DOCSOC/13 76669v5/02403 6-0045
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governmental purposes imposed by local governmental enl1l1es be approved by resolution or ordinance
adopted by two-thirds vote of the governmental agency's legislative body and by a majority of the electorate of
the governmental entity, (b) requires that any special tax (defined as taxes levied for other than general
governmental purposes) imposed by a local governmental entity be approved by a two-thirds vote ofthe voters
within the jurisdiction, (c) restricts the use of revenues from a special tax to the purposes or for the service for
which the special tax is imposed, (d) prohibits the imposition of ad valorem taxes on real property by local
governmental entities except as permitted by Article XIlIA, (e) prohibits the imposition of transaction taxes
and sales taxes on the sale of real property by local governmental entities and (I) requires that any tax imposed
by a local governmental entity on or after August I, 1985 be ratified by a majority vote of the electorate within
two years of the adoption ofthe initiative or be terminated by November 15, 1988. The requirements imposed
by Proposition 62 were upheld by the California Supreme Court in Santa Clara COW1ty Local Transportation
Authority v. Guardino, II CalAth 220; 45 Cal.Rptr.2d 207 (1995).
Propesition 62 appli€s to the im.FQ~itiQll of ~ny hype;: ('IT fhp. p:fff>rtin!:: nf ;\ny tPlX inr.m~sf';s after its
enactment in 1986, but the requirements of Proposition 62 are largely subsumed by the requirements of
Proposition 218 for the imposition of any taxes or the effecting of any tax increases after November 5, 1996.
See "-Proposition 218" below.
[The City has not effected certain tax increases after the enactment of Proposition 62 in 1986 but prior
to the effective date of Proposition 218 on November 5,1996.] [DISCUSS]
The Guardino decision did not decide, and the California Supreme Court has not otherwise decided,
whether Proposition 62 applies to charter cities. The City is a charter city. Cases decided by the California
Court of Appeals have indicated that the voter approval requirements of Proposition 62 do not apply to certain
taxes imposed by charter cities. See Fielder v City of Los Angeles, 14 Cal. App. 4th 137 (1993), Fisher
v County of Alameda, 20 Cal. App. 4th 120. (1993), and Trader Sports, Inc. v. City of San Leandro, 93 Cal.
App. 4th 37, 112 Cal. Rptr. 2d 677 (2001).
As of the date of the Official Statement, the City Attorney believes that the provlSlons of
Proposition 62 do not apply to charter cities. However, the City Attorney cannot opine on whether this
position may be the subject of future litigation and can give no assurance that this position will be upheld if
properly challenged.
If ultimately found applicable to charter cities, however, Proposition 62 could affect the ability ofthe
City to continue the imposition of certain taxes, such as business license taxes, and may further restrict the
City's ability to raise revenue.
The City levies a utility tax, which was first levied in 1970 and increased the tax (prior to the adoption
of Proposition 62) in 1979, without voter approval. The total utility tax revenues are estimated at $7,848,557
for the 2008-09 fiscal year, which is approximately 5.6% of the City's total General Fund revenues for the
Fiscal Year.
On November 5, 1996, California voters approved Proposition 218 - Voter Approval for Local
Government Taxes - Limitation on Fees, Assessments, and Charges - Initiative Constitutional Amendment.
Proposition 218 added Articles XIIIC and XIlID to the California Constitution, imposing certain vote
requirements and other limitations on the imposition of new or increased taxes, assessments and property-
related fees and charges. Proposition 218 states that all taxes imposed by local governments shall be deemed
to be either general taxes or special taxes. Special purpose districts, including school districts, have no power
to levy general taxes. No local government may impose, extend or increase any general tax unless and until
such tax is submitted to the electorate and approved by a majority vote. No local government may impose,
extend or increase any special tax unless and until such tax is submitted to the electorate and approved by a
two-thirds vote.
DOCSOCI 13 76669v5/02403 6-0045
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Proposition 218 also provides that no tax, assessment, fee or charge shall be assessed by any agency
upon any parcel of property or upon any person as an incident of property ownership except: (i) the
ad valorem property tax imposed pursuant to Article X111 and Article XIIIA of the California Constitution,
(ii) any special tax receiving a two-thirds vote pursuant to the California Constitution, and (iii) assessments,
fees, and charges for property related services as provided in Proposition 218. Proposition 218 then goes on to
add voter requirements for assessments and fees and charges imposed as an incident of property ownership,
other than fees and charges for sewer, water, and refuse collection services. In addition, all assessments and
fees and charges imposed as an incident of property ownership, including sewer, water, and refuse collection
services, are subjected to various additional procedures, such as hearings and stricter and more individualized
benefit requirements and findings. The effect of such new provisions will presumably be to increase the
difficulty a local agency will have in imposing, increasing or extending such assessments, fees and charges.
Proposition 218 also extended the initiative power to reducing or repealing any local taxes,
assessmel-'Jtcr, fpp<::: ::Jnr1 rn::!rgp<:;: Thi<:: f':xtp:n"irm of thE': initiative power is not limited to taxes imposed on or
after November 6, 1996, the effective date of Proposition 218, and could result in retroactive repeal or
reduction in any existing taxes, assessments, fees and charges, subject to overriding federal constitutional
principles relating to the impairments of contracts.
Proposition 218 provides that, effective July 1,1997, fees that are charged "as an incident of property
ownership" may not "exceed the funds required to provide the property related services" and may only be
charged for services that are "immediately available to the owner of the property."
The foregoing discussion of Proposition 62 and Proposition 218 should not be considered an
exhaustive or authoritative treatment of the issues. The City does not expect to be in a position to control the
consideration or disposition of these issues and cannot predict the timing or outcome of any judicial or
legislative activity in this regard. Interim rulings, final decisions, legislative proposals and legislative
enactments may all affect the impact of Proposition 218 on the Lease Payments as well as the market for the
Certificates. Legislative and court calendar delays and other factors may prolong any uncertainty regarding the
effects of Proposition 218.
Like its antecedents, Proposition 218 is likely to continue to undergo both judicial and legislative
scrutiny before its ultimate impact on the City and its obligations can be determined. Certain provisions of
Proposition 218 may be examined by the courts for their constitutionality under both State and federal
constitutional law. The City is not able to predict the outcome of any such examination.
Future Initiatives. Articles XIIIA, XIIIB, X111C and XIIID were adopted as measures that qualified
for the ballot pursuant to California's Constitutional initiative process. From time to time other initiative
measures could be adopted, affecting the ability of the City to increase revenues and to increase appropriations.
Limited Recourse on Default
If an event of default occurs and is continuing under the Lease, there is no remedy of acceleration of
any Lease Payments which have not come due and payable in accordance with the Lease. The City will
continue to be liable for Lease Payments as they become due and payable in accordance with the Lease if the
Trustee does not terminate the Lease, and the Trustee would be required to seek a separate judgment each year
for that year's defaulted Lease Payments. Any such suit for money damages would be subject to limitations on
legal remedies against cities in California, including a limitation on enforcement of judgments against funds or
property needed to serve the public welfare and interest. In addition, the enforcement of any remedies
provided in the Lease and the Trust Agreement could prove both expensive and time-consuming.
The Lease permits the Trustee to take possession of and re-lease the Leased Premises in the event of a
default by the City under the Lease. However, due to the fact that the Leased Premises serves essential
governmental purposes, it is unlikely that a court would permit such remedy to he exercised. Even if such
DOCSOC/I 376669v5/024036-0045
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remedy may be exercised, due to the specialized nature of the Leased Premises it is unlikely that the Trustee
could readily re-lease it for rents which are sufficient to enable it to pay principal and interest represented by
the Certificates in full when due. In the event of a default, there is no remedy of acceleration of the total
Lease Payments due over the term of the Lease.
Release or Substitution of Property
The City has the right from time to time. with the consent of the Insurer, to add other real property and
improvements (subject only to Permitted Encumbrances) or to substitute other real property or improvements
(subject only to Permitted Encumbrances) for all or a portion of the Leased Premises or to release a portion of
the real property or improvements constituting the Leased Premises, subject to the conditions precedent to such
addition, substitution or release as set forth in the Lease. No addition, substitution or release under the Lease
wilJ be, by itself, the basis for any reduction in or abatement of the Lease Payments due from the City
there1mder A relE:'(1'3f" (,('\111r!, nnwpvpr Te:<O;lllt in R. reduction in the fair rental value of the Leased Premises
which would result in less security for the Owners should it be necessary to relet the Leased Premises to cure a
default in Lease Payments. See APPENDIX A-"SUMMARY OF PRINCIPAL LEGAL DOCUMENTS-
COVENANTS WITH RESPECT TO THE PROPERTY-Substitution or Release of the Leased Premises"
herein. See "THE LEASED PREMISES-Description of the Leased Premises."
Loss of Tax Exemption
As discussed under the caption "LEGAL MA TTERS- Tax Exemption" herein, the portion of the
Lease Payments designated as and comprising interest and received by the Owners of the Certificates could
become includable in gross income for purposes of federal income taxation retroactive to the date the
Certificates were executed and delivered as a result of future acts or omissions of the City or the Authority in
violation of their covenants contained in the Trust Agreement and the Lease. Should such an event of
taxability occur, the Certificates are not subject to special prepayment or any increase in interest rate and will
remain outstanding until maturity or until prepaid under one of the prepayment provisions contained in the
Trust Agreement.
Secondary Market
There can be no guarantee that there will be a secondary market for the Certificates or, if a secondary
market exists, that such Certificates can be sold for any particular price. Occasionally, because of general
market conditions or because of adverse history or economic prospects connected with a particular issue,
secondary marketing practices in connection with a particular issue are suspended or terminated. Additionally,
prices of issues for which a market is being made will depend upon then prevailing circumstances. Such prices
could be substantially different from the original purchase price.
LEGAL MATTERS
Enforceability of Remedies
The remedies available to the Trustee and the Owners of the Certificates upon an event of default
under the Trust Agreement, the Lease, the Site Lease, the Assignment Agreement or any other document
described herein are in many respects dependent upon regulatory and judicial actions which are often subject
to discretion and delay. Under existing law and judicial decisions, the remedies provided for under such
documents may not be readily available or may be limited. In the case of any bankruptcy proceeding involving
the City, the rights of the Owners could be modified at the discretion of the court. The various legal opinions
to be delivered concurrently with the delivery of the Certificates will be qualified to the extent that the
enforceability of certain legal rights related to the Trust Agreement, the Lease, the Site Lease, the Assignment
Agreement and other pertinent documents is subject to limitations imposed by bankruptcy, reorganization,
DOCSOC/1376669v5/024036-0045
4]
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insolvency or other similar laws affecting the rights of creditors generally and by equitable remedies and
proceedings generally.
Approval of Legal Proceedings
Stradling Y occa Carlson & Rauth, a Professional Corporation, Newport Beach, California, as Special
Counsel, will render an opinion which states that the Lease represents a valid and binding obligation of the
City enforceable against the City in accordance with its terms except as limited by bankruptcy, insolvency,
moratorium and other similar laws affecting creditors' rights, by equitable principles. by the exercise of
judicial discretion and by limitations on legal remedies against municipalities in the State. See Appendix D
hereto for the proposed form of Special Counsel's opinion.
The City has no knowledge of any fact or other information which would indicate that the Trust
Agreement, fhp T P::I<::.P or tnp rf'rtifirMp:" :o1Tp nnt so enforceR:hle against the City. except to the extent such
enforcement is limited by principles of equity and by state and federal laws relating to bankruptcy,
reorganization, moratorium or creditors' rights generally and by limitations on legal remedies against
municipalities in the State.
Certain legal matters will be passed on by Stradling Y occa Carlson & Rauth, a Professional
Corporation, Newport Beach, California, as Disclosure Counsel and for the City by the City Attorney. Special
Counsel and Disclosure Counsel express no opinion to the Owners of the Certificates as to the accuracy,
completeness or fairness of this Official Statement. Fees payable to Special Counsel and Disclosure Counsel
are contingent upon the sale and delivery of the Certificates.
Tax Exemption
In the opinion of Stradling Y occa . Carlson & Rauth, a Professional Corporation, Newport Beach,
California, Special Counsel, under existing statutes, regulations, rulings and judicial decisions, interest due
with respect to the Certificates is excluded from gross income for federal income tax purposes, and is not an
item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals
and corporations. 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 California
personal income tax.
Special Counsel's opinion as to the exclusion from gross income of constituting interest (and original
issue discount) due with respect to the Certificates is based upon certain representations of fact and
certifications made by the City and others and is subject to the condition that the City and the Authority
comply with all requirements of the Internal Revenue Code of 1986, as amended (the "Code"). that must be
satisfied subsequent to the execution and delivery of the Certificates to assure that the portion of each Lease
Payment constituting interest (and original issue discount) will not become includable in gross income for
federal income tax purposes. Failure to comply with such requirements of the Code might cause interest (and
DOCSOC/1376669v5/024036-0045
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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
amQrti7~bJ~ Ce-rlifirMp rrpmillm
Special Counsel's opinions may be affected by actions taken (or not taken) or events occurring (or not
occurring) after the date hereof. Special Counsel has not undertaken to determine, or to inform any person,
whether any such actions or events are taken or do occur. The Trust Agreement, the Lease, and the Tax
Certificate permit certain actions to be taken or to be omitted if a favorable opinion of Special Counsel is
provided with respect thereto. Special Counsel expresses no opinion as to the exclusion from gross income for
federal income tax purposes of interest (and original issue discount) due with respect to any Certificate if any
such action is taken or omitted based upon the advice of counsel other than Stradling Y occa Carlson & Rauth,
a Professional Corporation.
The Internal Revenue Service (the "IRS") has initiated an expanded program for the auditing of tax-
exempt bond issues, including both random. and targeted audits. It is possible that the Certificates will be
selected for audit by the IRS. It is also possible that the market value of the Certificates might be affected as a
result of such an audit of the Certificates (or by an audit of similar securities).
Although Special Counsel has rendered an opinion that the interest (and original issue discount) due
with respect to the Certificates is excluded from gross income for federal income tax purposes provided that
the City and the Authority continue to comply with certain requirements of the Code, the ownership of the
Certificates and the accrual or receipt of interest (and original issue discount) with respect to the Certificates
may otherwise affect the 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 proposed form of Special Counsel's Opinion with respect to the Certificates is attached hereto as
Appendix D.
Absence of Litigation
The City will furnish a certificate dated as of the date of delivery of the Certificates that there is not
now known to be pending or threatened any litigation restraining or enjoining the execution or delivery of the
Trust Agreement, the Lease or the sale or delivery of the Certificates or in any marmer questioning the
proceedings and authority under which the Trust Agreement, the Site Lease and the Lease are to be executed or
delivered or the Certificates are to be delivered or affecting the validity thereof.
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CONCLUDING INFORMATION
Ratings on the Certificates
Standard & Poor's Ratings Services has assigned its municipal bond rating of "_", to the
Certificates. Such rating reflects only the views of the rating agency and any desired explanation of the
significance of such rating may be obtained by contacting it at: Standard & Poor's Ratings Services, 55 Water
Street, New York, New York 10041. Generally, a rating agency bases its rating on the information and
materials furnished to it and on investigations, studies and assumptions of its own. There is no assurance such
rating will continue for any given period of time or that such rating will not be revised downward or
withdrawn entirely by the rating agency, if in the judgment of such rating agency, circumstances so warrant.
Any such downward revision or withdrawal of such rating may have an adverse effect on the market price of
the Certificates.
Underwriting
The Underwriter is offering the Certificates at the prices set forth on the inside ftont cover page
hereof. The initial offering prices may be changed from time to time and concessions from the offering prices
may be allowed to dealers, banks and others. The Underwriter has purchased the Certificates at a price equal
to $ , which amount represents the principal amount of the Certificates, less an original issue
discount of $ , and less an Underwriter's discount of $ The
Underwriter will pay certain of its expenses relating to the offering.
The Financial Advisor
The material contained in this Official Statement was prepared by the City with the assistance of the
Financial Advisor who advised the City as to the financial structure and certain other financial matters relating
to the Certificates. The information set forth herein received ftom sources other than the City has been
obtained by the City from sources which are believed to be reliable, but such information is not guaranteed by
the City or the Financial Advisor as to accuracy or completeness, nor has it been independently verified. Fees
paid to the Financial Advisor are contingent upon the sale and delivery of the Certificates.
Continuing Disclosure
The City will covenant to provide annually certain financial information and operating data by not
later than March I each year commencing March I, 20 II and to provide the audited General Purpose Financial
Statements of the City for the fiscal year ending June 30,2010 and for each subsequent fiscal year when they
are available (together, the "Annual Report"), and to provide notices of the occurrence of certain other
enumerated events if deemed by the City to be material. The Annual Report will be filed by the Trustee on
behalf of the City with the Municipal Securities Rulemaking Board. The notices of material events will be
timely filed by the City with the Municipal Securities Rulemaking Board. The specific nature of the
information to be contained in the Annual Report or the notices of material events and certain other terms of
the continuing disclosure obligation are set forth in APPENDIX C-"FORM OF CONTINUING
DISCLOSURE AGREEMENT." These covenants have been made in order to assist the Underwriter in
complying with Securities and Exchange Commission Rule 15c2-12(b)(5). Other than as described in the next
paragraph, the City has never failed to comply in all material respects with any previous undertakings with
regard to said Rule to provide 81IDual reports or notices of material events.
[Prior to 2004 the City had failed to make certain of its continuing disclosure filings. Since May 2004
the City is current on all filings required pursuant to its previous coutinuing disclosure undertakings.]
[DISCUSS]
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VERIFICATION OF MATHEMATICAL ACCURACY
The arithmetical accuracy of certain computations included in the schedules provided by the
Underwriter relating to the (a) computation of forecasted receipts of principal and interest on the securities and
cash deposits listed in the Underwriter's schedules and the forecasted payments of principal and interest to
redeem the 2000 Certificates and (b) computation of the yields on the Prior Obligations and such securities
was examined by , certified public accountants. Such computations were based solely
upon assumptions and information supplied by the Underwriter. has restricted its procedures to
examining the arithmetical accuracy of certain computations and has not made any study or evaluation of the
assumptions and information upon which the computations are based and, accordingly, has not expressed an
opinion on the data used, the reasonableness of the asswnptions or the achievability of the forecasted outcome.
FINANCIAL STATEMENTS
The audited financial statements of the city for the Fiscal Year ended June 30, 2009, included in
Appendix B to this Official Statement, have been audited by Caporicci & Larson, San Diego, California (the
"Auditor"), independent certified public accountants, as stated in their report appearing in Appendix B. The
Auditor has not undertaken to update its report or to take any action intended or likely to elicit information
concerning the accuracy, completeness or fairness 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 for the Fiscal Year ended
June 30, 2009.
Additional Information
The summaries and references contained herein with respect to the Trust Agreement, the Site Lease,
the Lease, the Assignment Agreement, the Certificates, statutes and other documents, do not purport to be
comprehensive or definitive and are qualified by reference to each such document or statute and references to
the Certificates are qualified in their entirety by reference to the fonn hereof included in the Trust Agreement.
Copies of the Trust Agreement, the Site Lease and the Lease are available for inspection from the City
Treasurer at 276 Fourth Avenue, Chula Vista, California 91910.
References
Any statements in this Official Statement involving matters of opinion, whether or not expressly so
stated, are intended as such and not as representations of fact. This Official Statement is not to be construed as
a contract or agreement between the City and the purchasers or Owners of any of the Certificates.
Execution
The execution of this Official Statement by the Finance Director has been duly authorized by the City
of Chula Vista.
CITY OF OlliLA VISTA
By: /s/ Maria Kachadoorian
Finance Director
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APPENDIX A
GENERAL INFORMATION REGARDING
THE CITY AND REGION
The information and expressions of opinion set forth herein have been obtained from sow'ces believed
to be reliable, but such information is not guaranteed as to accuracy or completeness. Statements contained
herein which involve estim.ates, 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 facts. The information and
expressions of opinion herein are subject to change without notice, and neither delivery of this Official
Statement nor any sale thereafter of the securities offered hereby shall under any circumstances create any
implication that there has been no change in the affairs of the City or in any other information contained
hcrdn si~:::c the date cftlqg Official C:tnfOJ11t>Ylf TJ1P Rn'11rh: mop nnt gp.Mp.ral ohligations of the Countv ofOranf!e
(the "County"). The following information is provided only to give prospective investors an overview of the
general economic condition of the region surrounding the City.
General Information
Chula Vista is located on San Diego Bay in Southern California, 8 miles south of the City of San
Diego and 7 miles north of the Mexico border, in an area generally know as "South Bay." Chula Vista's city
limits cover approximately 50 square miles. Neighboring communities include the City of San Diego and
National City to the north and the City of Imperial Beach and the communities of San Ysidro and Otay Mesa
to the south. With a January 2009 estimated population of233,109, Chula Vista is the second largest city in
the County.
Community Facilities and Services
Public educational instruction for kindergarten through high school is provided by the Chula Vista
Elementary School District and Sweetwater Union High School District. These districts administer 42
elementary schools, one junior high school, ten middle schools, II senior high schools, one continuation high
school, one alternative program school and one charter school. Southwestern College, a two year Community
College, has emollment of approximately [19,000]. There are also [four] adult education schools and [16]
private schools. There are seven universities or colleges within 30 minutes commuting distance from Chula
Vista in the San Diego metropolitan area. [The City is currently planning a four-year college campus, to be
located on a [400] acre property adjoining tlle Olympic Training Center.]
There are two acute-care hospitals, two psychiatric hospitals and three convalescent hospitals, and
more than [400] medical doctors and allied professionals in Chula Vista.
There are two daily, one weekly and one semi-weekly newspapers published and circulated in Chula
Vista.
Chula Vista has more than 60 churches and nearly 100 service, fraternal and civic organizations.
The City's Mediterranean climate lends itself to many outdoor recreational activities. Chula Vista is
home to the 20,000 seat Coors Amphitheatre, the Chula Vista Nature Center, Knotts Soak City USA, four golf
courses, numerous parks and open spaces, and a harbor which includes two marinas, an RV park, and several
restaurants.
In addition, ChuJa Vista is the location of the United States Olympic Training Center. This is the third
such training center in the nation and the only year round training facility. The center is located on a 150- acre
property donated by EastLake Development Company adjacent to the Otay Lake reservoir.
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Transportation
U.S. Highways 5 (along the coast) and 805 (inland) provide full freeway access from Chula Vista
north to San Diego and south to the Mexican border. SRI25 also provides north-south toll road service for
Chula Vista. Commuter rail service is provided by the San Diego Trolley, a light rail system started in 1981
and II bus routes serve Chula Vista.
The City has introduced Chula Vista Express, a three-part pilot commuting program to promote public
transportation, carpooling, vanpooling, biking and walking to work as alternatives to driving alone. If offers
free bus service from eastern Chula Vista to downtown San Diego, a free shuttle from eastern Chula Vista to
the H Street Trolley Station to a cash incentive for riding or joining a vanpool or carpool.
San Diego's Lindbergh International Airport is 15 minutes to the north of the City.
Air cargo and passenger flight services are provided at San Diego's Lindbergh International Airport,
12 miles west, which is served by all major airlines. Cargo shipping is available at the Unified Port of San
Diego, which serves as a transshipment facility for the region, which includes San Diego, Orange, Riverside,
San Bernardino and Imperial counties, plus northern Baja California, Arizona and points east.
Population
The following table provides a comparison of population growth for Chula Vista, surrounding cities
and San Diego County between 2004 and 2009.
TABLE NO. A-I
CITY CHANGE IN POPULATION
2004 - 2009
CHULA VISTA
Year
Populatioll
208,802
217,543
223,490
227,242
230,397
233,108
Percent
Change
4.0%
4.0
2.9
1.7
1.4
Percellt of
San Diego
Populatioll
6.9%
7.2
7.3
7.4
7.4
N/A
2004
2005
2006
2007
2008
2009
-.
Source: State of California Department of Finance, Population Research Unit, "Population Estimates for Calzfornia Cities and
Counties."
Personal Income
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Effective buying income information for the City of Chula Vista, San Diego County, the State of
California and the United States are summarized in the following table.
TABLE NO. A-2
EFFECTIVE BUYING INCOME
CITY OF CHULA VISTA, SAN DIEGO COUNTY, CALIFORNIA AND UNITED STATES
2005 - 2009
$
San Diego County State of California
$ $
United States
Year
Chula Vista
2005
2006
2007
2008
2009
$
Source: Sales and Marketing Management, "Suf1iey of Buying Power."
Employment and Indnstry
The City is located in the San Diego-Carlsbad-San Marcos MSA labor market. Six major job
categories constitute L..J% of the work force. They are government (L..J%), professional and business
services (L..J%), service producing (L-J%), leisure and hospitality (L..J%), educational and health
services (L..J%) and manufacturing (L..J%). The November unemployment rate in the San Diego-
Carlsbad-San Marcos area was _%. The State of California November unemployment rate
(unadjusted) was _%.
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TABLE NO. A-3
SAN DIEGO-CARLS BAD-SAN MARCOS MSA
WAGE AND SALARY WORKERS BY INDUSTRy(I)
(in Thousands)
Industry 2004 2005 2006
Government 218,8 218,9
Other Services 48,1 49.9
Leisure and Hospitality 144,0 150,2
Educational and Health Services 121.4 125,5
Professional and Business Services 207.2 207,1
Financial Activities 81.6 82.9
Information 36,5 36.8
TransportatIOn, Warehousmg and UtIlItIeS L8.4 23,6
Service Producing
Retail Trade 149,6 149.4
Wholesale Trade 42.1 42.1
Manufacturing
Nondurable Goods 25,9 25.3
Durable Goods 77.8 77.9
Goods Producing
Construction 89,5 94.6
Natural Resources and Mining 0.4 0.4
Total Nonfann 1,271.3 1,289,6
Farm 10.8 10.6
Total (all industries) 1.282.1 1.300.2
2007 2008
(1) Annually, as of November.
Source: State of California Employment Development Department, "Labor Market information."
The major employers operating within the City and their respective number of employees as of
June 30, 2009 are as follows:
Name of Company
Sweetwater Union High School District
Chula Vista Elementary School District
Southwestern Community College
Rohr DBA Goodrich Aerospace
Sharp Chula Vista Medical Center
City of Chula Vista
Scripps Mercy Hospital Chula Vista
Walmart
United Parcel Service
Target
Employment
4,435
2,753
2,400
1,903
1,799
1,350
1,079
950
627
604
Source: City of Chula Vista.
Commercial Activity
Type of Business/Product
Education
Education
Education
Aerospace Manufacturing
Hospital
Government
Hospital
General Merchandise
Parcel Delivery Service
General Merchandise
The following table summarizes the volume of retail sales and taxable transactions for the City of
Chula Vista for 2004 through 2008. The City's reported sales tax has decreased _% since 2004.
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TABLE NO. A-4
CITY OF CHULA VISTA
TOTAL TAXABLE TRANSACTIONS
(in Thousands)
2004 - 2008*
2004
2005
2006
2001
2008*
2,199
2,290
2,306
L,L~5
2,353
Total
Taxable
Transactions
$(OOO's)
$2,073,340
2,195,438
2,450,714
2,599,523
1,847,834
% Change
11.6%
Issued Sales
Permits
Year
Retail Sales
$(OOO's)
$1,845,573
1,969,633
2,218,840
2,3)U,M~
1,659,356
%Clzange
12.3%
Retail Sales
Permits
4,166
4,324
4,438
4,277
4,328
* Through 3rd Quarter 2008.
Source: State Board of Equalization, "Taxable Sales in California."
Taxable transactions by type of business for tbe City of Chu1a Vista for 2004 through 2008 are
summarized in Table No.5.
TABLE NO. A-5
CITY OF CHULA VISTA
TAXABLE TRANSACTIONS BY TYPE OF BUSINESS
(in Thousands)
2004 - 2008*
2004 2005 2006 2007 2008*
Retail Stores
Apparel Stores $ 82,165 $ 97,384 $ 113,580 $ 138,415 $ 154,015
General Merchandise Stores 609,028 657,886 720,695 742,235 507,759
Food Stores 106,056 109,036 107,241 109,296 84,005
EatingIDrinking Places 213,412 227,633 248,028 277,465 216,595
Home Furnishings and Appliances 87,203 86,380 80,769 72,707 69,242
Building Materials and Farm 142,321 149,598 147,203 123,8]4 74,922
Implements
Auto Dealers/Suppliers 191,185 188,012 262,877 312,606 198,893
. Service Stations 174,968 199,735 227,086 257,165 216,546
Other Retail Stores 239.235 253.969 311.361 3 ]6.986 198.440
Total Retail Stores 1,845,573 1,969,633 2,218,840 2,350,689 1,659,356
All Other Outlets 227.767 225.805 231.874 248.834 188.479
Total All Outlets $ 2 073 340 $ 2 ]95418 $ 2450714 $2599521 $ 1 84 7 814
* Through 3rd Quarter 2008.
Source: State Board of Equalization. "Taxable Sales in California."
Building Activity
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The following table summarizes building activity valuations for the City of Chula Vista for the years
2005 through 2009.
Total Permits
TABLE NO. A-7
CITY OF CHULA VISTA
BUILDING ACTIVITY AND VALUATION
(in Thonsands)
2005 - 2009
2005 2006 2007 2008 2009
$ 338,061,851 $ 254,096,795 $ 122,486,454 $ 59,983,313 $ 60,719,922
134.522.367 130,473.735 74.148.582 33.852.503 21.159.969
$ 472584218 $ '184.570530 $ 1966350'16 $ 93835816 $ 81 879891
1,636 1.180 578 333 266
Residential
Non-Residential
Total Valuation
Source: Construction Industry Research Board.
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APPENDIX B
SUMMARY OF PRINCIPAL LEGAL DOCUMENTS
[to come]
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APPENDIX C
CITY AUDITED FINANCIAL STATEMENTS
[to come]
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APPENDIX D
FORM OF CONTINUING DISCLOSURE AGREEMENT
This Continuing Disclosure Agreement, dated as of February 1,2010 (the "Disclosure Agreement") is
executed and delivered by the City of Chula Vista (the "City") and U.S. Bank National Association (the
"Dissemination Agent") in connection with the execution and delivery of $[COP Amount] City of Chula Vista
2010 Certificates of Participation (Reimbursement and Refunding Projects) (the "Certificates"). The
Certificates are being executed pursuant to a Trust Agreement, dated as of February I, 2010, by and among the
City, U.s. Bank National Association, as trustee (the "Trustee") and the Chula Vista Public Financing
Authority (the "Authority"). The City covenants as follows:
SECTI01'J' PnT"['nc:p nf fhp. ni"rlnC:llrf>: APTf':f':mf':nt This Disclosure Agreement is being executed
and delivered by the City for the benefit of the Holders and Beneficial Owners of the Certificates and in order
to assist the Participating Underwriter in complying with the Rule.
SECTION 2. Definitions. In addition to the definitions set forth in the Trust Agreement, which apply
to any capitalized term used in this Disclosure Agreement unless otherwise defined in this Section, the
following capitalized terms shall have the following meanings:
"Annual Report" shall mean any Comprehensive Annual Financial Report provided by the City
pursuant to, and as described in, Sections 3 and 4 of this Disclosure Agreement.
"Beneficial Owner" shall mean any person which (a) has the power, directly or indirectly, to vote or
consent with respect to, or to dispose of ownership of, any Certificates (including persons holding Certificates
through nominees, depositories or other intermediaries), or (b) is treated as the owner of any Certificates for
federal income tax purposes.
"Disclosure Representative" shall mean the City Manager of the City, the Administrative Services
Director of the City or their designee, or such other officer or employee as the City shall designate in writing
from time to time.
"Dissemination Agent" shall mean U.S. Bank National Association, or any successor Dissemination
Agent designated in writing by the City and which has filed with the City a written acceptance of such
designation.
"Listed Events" shall mean any of the events listed in Section 5(a) ofthis Disclosure Agreement.
"Official Statement" shall mean the Official Statement relating to the Certificates, dated August 21,
2009.
"Participating Underwriter" shall mean the original underwriter of the Certificates required to comply
with the Rule in COill1ection with the offering of the Certificates.
"Repository" shall mean the Municipal Securities Rulemaking Board, which can be found at
http://emma.msrb.org.
"Rule" shall mean Rule 15c2-12(b)(5) adopted by the Securities and Exchange COlllll1ission under the
Securities Exchange Act of 1934, as the same may be amended from time to time.
"State" shall mean the State of California.
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SECTION 3. Provision of Annual Reports.
(a) The City shall, or, upon delivery of the Amma! Report to the Dissemination Agent, shall
cause the Dissemination Agent to, not later than each April I of each year commencing April 1,2011, provide
to the Repository an Annual Report which is consistent with the requirements of Section 4 of this Disclosure
Agreement. The Annual Report may be submitted as a single document or as separate documents comprising
a package, and may cross-reference other infoilTlation as provided in Section 4 of this Disclosure Agreement;
provided that the audited financial statements of the City may be submitted separately ITom the balance of the
Annual Report and later than the date required above for the filing of the Annual Report if they are not
available by that date. If the City's fiscal year changes, it shall give notice of such change in the same manner
as for a Listed Event under Section 5( c).
(b) Not later than fifteen (15) business days prior to said date, the City shall provide the Annual
R~port to tl~g Di~.ser:gir~tiQ:r A 3P11t (if ntnpr th:;m t'h~ rity) Tffh~ rity is llnahle to provide to the Repository an
Annual Report by the date required in subsection (a), the City shall send a notice to the Repository in
substantially the fonn attached as Exhibit A.
(c) The Dissemination Agent shall:
(i) confum the electronic filing requirements of the Municipal Securities
Rulemaking Board for the Annual Report the name and address of each Repository; and
(ii) (if the Dissemination Agent is other than the City), file a report with the City
certifying that the Annual Report has been provided pursuant to this Disclosure Agreement and stating
the date it was provided.
SECTION 4. Content of Annual Reports. The City's Annual Report shall contain or include by
reference the following:
(a) The City's audited financial statements, prepared in accordance with generally accepted
auditing standards for municipalities in the State of California. If the City's audited financial statements are
not available by the time the Annual Report is required to be filed pursuant to Section 3(a), the Annual Report
shall contain unaudited financial statements in a fOilTlat similar to the financial statements contained in the
final Official Statement, and the audited financial statements shall be filed in the same manner as the Alillual
Report when they become available.
(b) To the extent not contained in the audited financial statements filed pursuant to the preceding
subsection (a) by the date required by Section 3 hereof, updates of Tables _, _ and _set forth in the Official
Statement.
Any or all of the items listed above may be included by specific reference to other documents,
including official statements of debt issues of the City or related public entities, which have been submitted to
each of the Repositories or the Securities and Exchange Commission. If the document included by reference is
a final official statement, it must be available ITom the Municipal Securities Rulemaking Board. The City shall
clearly identify each such other document so included by reference.
SECTION 5. Reporting of Significant Events.
(a) Pursuant to the provisions of this Section 5, the City shall give, or cause to be given, notice of
the occurrence of any of the following events with respect to the Certificates, if material:
(i) Principal and interest payment delinquencies.
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(ii) Non-payment related defaults.
(iii) Modifications to rights of Certificate holders.
(iv) Optional, contingent or unscheduled certificate calls.
(v) Defeasances.
(vi) Rating changes.
(vii) Adverse tax opinions or events affecting the tax-exempt status of the Certificates.
(viii) Unscheduled draws on the debt service reserves reflecting financial difficulties.
(ix) Unscheduled draws on the credit enhancements reflecting financial difficulties.
(x) Substitution of the credit or liquidity providers or their failure to perform.
(xi) Release, substitution or sale of property securing repayment of the Certificates.
(b) Whenever the City obtains knowledge of the occurrence of a Listed Event, the City shall as
soon as possible determine if such event would be material under applicable federal securities laws.
(c) If the City determines that knowledge of the occurrence of a Listed Event would be material
under applicable federal securities laws, the City shall promptly file a notice of such occurrence with the
Repositories. Notwithstanding the foregoing, notice of Listed Events described in subsections (a)(iv) and (v)
need not be given under this subsection any earlier than the notice (if any) of the underlying event is given to
Holders of affected Certificates pursuant to the Trust Agreement.
SECTION 6. Termination of Reporting Obligation. 111e City's obligations under this Disclosure
Agreement shall tenninate upon the legal defeasance, prior redemption or payment in full of all of the
Certificates. If such tennination occurs prior to the final maturity of the Certificates, the City shall give notice
of such termination in the same manner as for a Listed Event under Section 5( c).
SECTION 7. Dissemination Agent. The City may, from time to time, appoint or engage a
Dissemination Agent to assist it in carrying out its obligations under this Disclosure Agreement, and may
discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. The
Dissemination Agent shall not be responsible in any marmer for the content of any notice or report prepared by
the City pursuant to this Disclosure Agreement. The Dissemination Agent may resign by providing thirty days
written notice to the City and the Trustee. The Dissemination Agent shall not be responsible for the content of
any report or notice prepared by the City and shall have no duty to review any information provided to it by the
City. The Dissemination Agent shall have no duty to prepare any infonnation report nor shall the
Dissemination Agent be responsible for filing any report not provided to it by the City in a timely marmer and
in a form suitable for filing.
SECTION 8. Amendment; Waiver. Notwithstanding any other provIsIon of this Disclosure
Agreement, the City may amend this Disclosure Agreement, and any provision of this Disclosure Agreement
may be waived, provided that, in the opinion of nationally recognized bond counsel, such amendment or
waiver is permitted by the Rule; provided, the Dissemination Agent shall have first consented to any
amendment that modifies or increases its duties or obligations hereunder. In the event of any amendment or
waiver of a provision of this Disclosure Agreement, the City shall describe such amendment in the next
Annual Report, and shall include, as applicable, a narrative explanation of the reason for the amendment or
waiver and its impact on the type (or in the case of a change of accounting principles, on the presentation) of
DOCSOC/13 76669v5/024036-004 5
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financial information or operating data being presented by the City. In addition, if the amendment relates to the
accounting principles to be followed in preparing financial statements, (i) notice of such change shall be given
in the same manner as for a Listed Event under Section 5( c), and (ii) the Annual Report for the year in which
the change is made shall present a comparison (in narrative form and also, if feasible, in quantitative form)
between the financia1 statements as prepared on the basis of the new accounting principles and those prepared
on the basis of the former accounting principles.
SECTION 9. Additional Information. Nothing in this Disclosure Agreement shall be deemed to
prevent the City from disseminating any other infonnation, using the means of dissemination set forth in this
Disclosure Agreement or any other means of communication, or including any other infonnation in any
Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this
Disclosure Agreement. 1f the City chooses to include any infonnation in any Annual Report or notice of
occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Agreement,
th~ City ~b.al1 haw:> nn nhlig::ltirm l1n!'1pr t}'io::: rprtifir:::Ifr> to lIpn::ltp. ~ll['h infmmtltion or include it in any future
Alillual Report or notice of occurrence of a Listed Event.
SECTION 10. Default. In the event of a failure of the City to comply with any provision of this
Disclosure Agreement, any Holder or Beneficial Owner of the Certificates may take such actions as may be
necessary and appropriate, including seeking mandate or specific perfonnance by court order, to cause the City
to comply with its obligations under this Disclosure Agreement. A default under this Disclosure Agreement
shall not be deemed an Event of Default under the Trust Agreement, and the sole remedy under this Disclosure
Agreement in the event of any failure of the City to comply with this Disclosure Agreement shall be an action
to compel perfonnance.
No Certificate holder or Beneficial Owner may institute such action, suit or proceeding to compel
perfonnance unless they shall have first delivered to the City satisfactory written evidence of their status as
such, and a written notice of and request to cure such failure, and the City shall have refused to comply
therewith within a reasonable time.
SECTION 11. Duties. Immunities and Liabilities of Dissemination Agent. The Dissemination Agent
shall have only such duties as are specificaily set forth in this Disclosure Agreement, and the City agrees, to
the extent pennitted by law, to indemnify and save the Dissemination Agent, its officers, directors, employees
and agents, harmless against any loss, expense and liabilities which it may incur arising out of or in the
exercise or perfonnance of its powers and duties hereunder, including the costs and expenses (including
attorney's fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination
Agent's negligence or willful misconduct. The Dissemination Agent shall be paid compensation by the City
for its services provided hereunder in accordance with its schedule of fees as amended trom time to time and
ail expenses, legal fees and advances made or incurred by the Dissemination Agent in the perfonnance of its
duties hereunder. In performing its duties hereunder, the Dissemination Agent shall not be deemed to be
acting in any fiduciary capacity for the City, the Certificate holders, or any other party. The obligations of the
City under this Section shall survive resignation or removal of the Dissemination Agent and payment of the
Certificates.
SECTION 12. Notices. Any notices or communications to or among any of the parties to this
Disclosure Agreement may be given as follows:
To the City:
City of Chula Vista
276 Fourth Avenue
Chula Vista, Caiifornia 91910
Attention: City Manager
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To the Dissemination Agent:
U.S. Bank National Association
633 West Fifth Street, 24'h Floor
Los Angeles, California 90071
Attention: Corporate Trust Services
SECTION 13. Beneficiaries. This Disclosure Agreement solely to the benefit of the City, the
Dissemination Agent, the Participating Underwriter and Holders and Beneficial Owners from time to time of
the Certificates, and shall create no rights in any other person or entity.
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SECTION 14. Signature. This Disclosure Agreement has been executed by the undersigned on the
date hereof, and such signature binds the City to the undertaking herein provided.
CITY OF CHULA VISTA
By:
Its: City Manager
U.S. BANK NATIONAL ASSOClA T10N, as
Dissemination Agent
By:
lis: Authorized Officer
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EXHIBIT A
NOTICE TO REPOSITORIES OF FAILURE TO FILE ANNUAL REPORT
Name ofIssuer:
City of Chula Vista
Name of Certificate Issues:
$[COP Amount] City of Chula Vista 2010 Certificates of Participation
(Reimbursement and Refunding Projects) (Bank Qualified)
Date ofIssuance:
,2010
NOTICE IS HEREBY GIVEN that the City has not provided an Annual Report with respect to the
above-named Certificates as required by the Continuing Disclosure Agreement executed by the City on the
date of issuance of the Certificates. The City anticipates that the Annual Report will be filed by
U.S. BANK NATIONAL ASSOCIATION, as
Dissemination Agent
Dated:
By:
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APPENDIX E
FORM OF SPECIAL COUNSEL OPINION
[to come]
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APPENDIX F
BOOK-ENTRY ONLY SYSTEM
[to come]
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APPENDIX G
CITY INVESTMENT POLICY
[to come]
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THE ATTACHED AGREEMENT HAS BEEN REVIEWED
AND APPROVED AS TO FORM BY Stradling, Yocca, Carlson & Rauth
AND WILL BE
FORMALLY SIGNED UPON APPROVAL BY
THE CITY COUNCIL
Robert J. en, Special Counsel
Stradling, cca, Carlson & Rauth,
A Professional Corporation
Dated:
/l~-(//o
/ /
TRUST AGREEMENT
AMONG THE CITY OF CHULA VISTA,
PUBLIC FINANCING AUTHORITY AND
U.S. Bank National Association FOR Bond Trustee Services
7-77
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
Section 1.01. Definitions and Rules of Construction .............................................................2
Section 1.02. Authorization ..................................................................................................1 0
Section 1.03. Equal Security................................................................................................. 10
ARTICLE II
THE 2010 CERTIFICATES OF PARTICIPATION
Section 2.0 I. Authorization .................................................................................................. 10
Section 2.02. Description of Certificates.................................................................. ............10
Section 2.03. Form of Certificates.......................................................................... ..............12
Section 2.04. Execution ........................................................................................................12
Section 2.05. Application of Proceeds and Other Amounts .................................................12
Section 2.06. Transfer and Exchange. .................................................................................. 12
Section 2.07. Certificates Mutilated, Lost, Destroyed or Stolen ..........................................13
Section 2.08. Execution of Documents and Proof of Ownership .........................................13
Section 2.09. Certificate Register .........................................................................................14
Section 2.10. Book-Entry System.........................................................................................14
Section 2.11. Destruction of Cancelled Certificates............................................................. 17
Section 2.12. Additional Certificates....................................................................................17
ARTICLE III
PROJECT FUND AND ESCROW FUND
Section 3.01. Establishment of Project Fund........................................................................ 19
Section 3.02. Deposit of Moneys; Payment of Project Costs and Delivery Costs. ..............19
Section 3.03. Transfers of Unexpended Proceeds ................................................................20
Section 3.04. Escrow Fund ...................................................................................................20
ARTICLE IV
PREPAYMENT FUND
Section 4.01. Establishment of Prepayment Fund................................................................20
Section 4.02. Extraordinary Prepayment............... ............. ................ ............. ............ ......... 20
Section 4.03. Prepayment ................. ....... ........ ............. .............. ............ .............. ................ 21
Section 4.04. Selection of Certificates for Prepayment........................................................23
Section 4.05. Notice of Prepayment. ....................................................................................23
Section 4.06. Partial Prepayment of Certificates ..................................................................24
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(continued)
Page
Section 4.07. Effect of Notice of Prepayment..................................................................... .24
Section 4.08. Surplus.... .................... ......... .................. ............ ..... .............................. ..........24
ARTICLE V
LEASE PAYMENTS; LEASE PAYMENT FUND
Section 5.01.
~ection 5 02
Section 5.03.
Section 5.04.
Section 5.05.
Security Provisions. . ........ ................ ............... .................... ..................... ....... 25
E.tabli.pw~!1t ofT ~"<~ P"ym~nt l'11no 25
Deposits.... ......... ........... ........ ................... .......... ..................... ..... ...... .... .........26
Application of Moneys... ................ ................ ................... ........... ....... ........... 26
S urp 1 us ............................................................................................................ 26
ARTICLE VI
RESERVE FUND
Section 6.01. Establishment of Reserve Fund ......................................................................27
Section 6.02. Funding. ....... ......... ........ ................... .............. ................... ................... ........... 27
Section 6.03. Transfers of Excess. ........................................................................................ 27
Section 6.04. Application of Reserve Fund in Event of Deficiency in Lease Payment Fund28
Section 6.05. Transfer to Make All Lease Payments............................................................ 28
ARTICLE VII
NET PROCEEDS FUND
Section 7.01. Establishment of Net Proceeds Fund: Deposits.............................................. 28
Section 7.02. Cooperation ...... .......... .......... ................. ......................... ............. ........ ........... 29
ARTICLE VIII
MONEYS IN FUNDS; INVESTMENT
Section 8.01. Held in Trust...................................................................................................29
Section 8.02. Investments Authorized. ................................................................................. 30
Section 8.03. Disposition of Investments .............................................................................31
Section 8.04. Accounting.................... .............. ............ ...... ................ ..... .............................31
Section 8.05. Valuation and Disposition ofInvestments......................................................31
Section 8.06. Commingling of Moneys in Funds .................................................................31
Section 8.07. Tax Covenants. ...............................................................................................31
Section 8.08. Rebate Fund. ...................................................................................................32
ii
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TABLE OF CONTENTS
(continued)
Page
ARTICLE IX
THE TRUSTEE
Section 9.01. Appointment of Trustee. ................................................................................. 34
Section 9.02. Merger or Consolidation.................................................................................35
Section 9.03. Protection of the Trustee.................................................................................35
Section 9.04. Rights of the Trustee........................... ,Ii
Section 9.05. Standard of Care .............................................................................................36
Section 9.06. Compensation of the Trustee .......................................................................... 3 7
Section 9.07. Indemnification of Trustee .............................................................................37
Section 9.08. Trustee's Disclaimer of Warranties ................................................................ 38
ARTICLE X
MODIFICATION OR AMENDMENT OF AGREEMENTS
Section 10.01. Amendments Permitted. .................................................................................38
Section 10.02. Procedure for Amendment with Written Consent of the Owners...................40
Section 10.03. Disqualified Certificates .................................................................................40
Section 10.04. Effect of Supplemental Agreement ................................................................41
Section 10.05. Endorsement or Replacement of Certificates Delivered After Amendments.41
Section 10.06. Amendatory Endorsement of Certificates ......................................................41
Section 10.07. Copies of Amendments Delivered to Rating Agencies ..................................41
ARTICLE XI
COVENANTS; NOTICES
Section 11.01. Compliance With and Enforcement of the Lease ...........................................41
Section 11.02. Payment of Taxes ...........................................................................................42
Section 11.03. Observance of Laws and Regulations.............................................................42
Section 11.04. Prosecution and Defense of Suits ...................................................................42
Section 11.05. City Budgets ...................................................................................................42
Section 1'1.06. FUlther Assurances .........................................................................................42
Section 11.07. Continuing Disclosure ....................................................................................42
ARTICLE XII
LIMITATION OF LIABILITY
Section 12.01. Limited Liability of the City...........................................................................43
Section 12.02. No Liability of the City or Authority for Trustee Perfonnance......................43
Section 12.03. Limitation of Rights to Parties and Certificate Owners..................................43
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TABLE OF CONTENTS
(continued)
Page
Section 12.04. No Liability of Authority to the Owners ........................................................43
ARTICLE XIII
EVENTS OF DEFAULT AND REMEDIES OF CERTIFICATE OWNERS
Section 13.01. Assignment of Rights ........ .... ............. ................ ........... ......... ........... ..... ..... ... 44
Section 13.02. Events of Default. ....... ......... ................ ... ............... ......... .......... .... ..... ...... .......44
Sgction 13.03. ftpplic,ui911 ofF'It:\d~ 44
Section 13.04. Institution of Legal Proceedings. .................... ............... ..... .............. .......... ....45
Section 13.05 . Non-Waiver .... ....... ............ ................. ................ ......... ........... .......... ...... ........ 45
Section 13.06. Remedies Not Exclusive ...... ...... .......... .................. .................... ........ ...... ....... 45
Section 13.07. Power of Trustee to Control Proceedings.......................................................45
Section 13.08. Limitation on Certificate Owners' Right to Sue.............................................46
Section 13.09. Agreement to Pay Attorneys' Fees and Expenses ..........................................46
Section 13.10. Insurer's Rights.......... .... ..... ................. ................ ........... .......... ... ....... ............46
ARTICLE XIV
MISCELLANEOUS
Section 14.01. Defeasance. ......... ........ ......... ..................... .............. .......... ............... .......... ..... 47
Section 14.02. Non-Presentment of Certificates..... ................ ..... ......... ......... ........ ......... ........ 48
Section 14.03. Acquisition of Certificates by City .................................................................49
Section 14.04. Records ............... ........ ............................ ....... .......... ......... ......... .... ........ .... .....49
Section 14.05. Notices...... ........... ....... ..... .............. ........... ..... ............... ........ .................. ..... ... 49
Section 14.06. Governing Law..... ............ .................. .......... ....... .......... ....... ............. ...... .......49
Section 14.07. Binding Effect: Successors. .............. ........ ............ .......... .......... ... ...... ....... ...... 49
Section 14.08. Execution in Counterparts .............................................................................. 50
Section 14.09. Headings...... ........ ........ .... ....... ....... .................. ............ ......... ............ .......... ....50
Section 14.10. Waiver of Notice ............................................................................................ 50
Section 14.11. Separability ofInvalid Provisions .................................................................. 50
EXHIBIT A
EXHIBIT B-1
EXHIBIT B-2
FORM OF CERTIFICATE ................................................................................A-I
FORM OF WRITTEN DELIVERY COST REQUISITION...........................B-I-l
FORM OF WRITTEN PROJECT COST REQUISITION ..............................B-2-I
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TRUST AGREEMENT
Dated as of February 1,2010
by and among
U.S. BANK NATIONAL ASSOCIATION,
as Trustee
and the
CHULA VISTA PUBLIC FINANCING AUTHORITY
and the
CITY OF CHULA VISTA
relating to the
$
CITY OF CHULA VISTA
2010 CERTIFICATES OF PARTICIPATION
(CAPITAL FACILITIES REFUNDING PROJECTS)
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TRUST AGREEMENT
THIS TRUST AGREEMENT, dated as of February 1, 2010, by and among U.S. BANK
NA TIONAL ASSOCIATION, a national banking association organized under the laws of the United
States, as trustee (the "Trustee"), the CHULA VISTA PUBLIC FINANCING AUTHORITY, ajoint
exercise of powers authority duly organized and existing under the laws of the State of California, as
lessor under the Lease hereinafter referred to (the "Authority"), and the CITY OF CHULA VISTA, a
municipal corporation duly organized and existing under the Constitution and laws of the State of
California, as lessee under the Lease (the "City");
WIIJ:~LB~~.!EH:
WHEREAS, the City and the Authority have entered into a Lease/Purchase Agreement, dated
as of February 1, 2010 (the "Lease"), in order to reimburse the City for the costs of the construction,
reconstruction and equipping of improvements for Phase 3 of the City's Civic Center Expansion (the
"Project") and to refinance the City's outstanding Certificates of Participation Series A of 2000
(2000 Financing Project) (the "2000 Certificates"), and the City has agreed to lease the Leased
Premises (defined below) ITom the Authority; and
WHEREAS, in order to finance the Project and defease and prepay the 2000 Certificates, the
City and the Authority have authorized the sale of the $ City of Chula Vista 2010
Certificates of Participation (Capital Facilities Refunding Projects) (the "Certificates"), each
evidencing fractional interests in the Lease Payments and Prepayments made by the City under the
Lease; and
WHEREAS, as security for the Certificates, the Authority has assigned the rights to receive
all Lease Payments described in the Lease, and the Authority and the City have granted a security
interest in all moneys held by the Trustee hereunder (other than the Rebate Fund as described herein)
to the Trustee for the benefit of the Owners of Certificates and any Additional Certificates executed
and delivered hereunder; and
WHEREAS, Section 5420 et seq. of the California Goverrunent Code (the "Government
Code") provides statutory authority for pledging collateral for the payment of principal or
prepayment price of, and interest on, any agreement, including certificates of participation, and the
Goverrunent Code creates a continuing perfected security interest which shall attach irrunediately to
such collateral irrespective of whether the parties to the pledge document have notice of the pledge
and without the need for any physical delivery, recordation, filing or further act, and, therefore, the
City and the Authority hereby warrant and represent that pursuant to the Lease, this Trust Agreement
and the Goverrunent Code, the Trustee has a first priority perfected security interest in the Lease
Payments described in the Lease represented by the Certificates pursuant to the Goverrunent Code.
WHEREAS, the Trustee has agreed to apply the proceeds of the Certificates deposited in the
Project Fund to pay certain Project Costs and Delivery Costs (as such terms are defined herein).
NOW, THEREFORE, in consideration of the premises and the mutual covenants contained
herein, the parties hereto hereby agree as follows:
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ARTICLE I
DEFINITIONS
Section 1.01. Definitions and Rules of Construction. Unless the context otherwise requires,
the tenns defined in this Section shall, for all purposes of this Trust Agreement, have the meanings
herein specified. Unless the context otherwise indicates, words importing the singular number shall
include the plural number and vice versa. The tenns "hereby," "hereof," "hereto," "herein,"
"hereunder" and any similar tenns, as used in this Trust Agreement, refer to this Trust Agreement as
a whole.
"Additional Certificates" means certificates of participation authorized by a supplemental
Tn"l A grppmpnl Inel ere executed and delivered by the Trustee under and pursuant to Section 2.12.
"Additional Pavments" means all amounts payable by the City as Additional Payments as
defined in Section 4.11 ofthe Lease.
"Assignment Agreement" means the Assignment Agreement, dated as of the date hereof, by
and between the Trustee and the Authority, and any duly authorized and executed amendments
thereto.
"Authority" means the Chula Vista Public Financing Authority, a joint exercise of powers
authority organized under the laws ofthe State, its successors and assigns.
"Authoritv Representative" means the President, Vice President, Secretary, Treasurer,
Executive Director, Assistant Executive Director or Assistant Treasurer of the Authority, or any other
person authorized to act on behalf of the Authority under or with respect to the Lease.
"Beneficial Owner" means any person which (a) has the power, directly or indirectly, to vote
or consent with respect to, or to dispose of ownership of, any Certificates (including persons holding
Certificates through nominees, depositories or other intennediaries), or (b) is treated as the owner of
any Certificates for federal income tax purposes.
"Business Dav" means any day other than (i) a Saturday or Sunday, or (ii) a day on which
banking institutions in the State of New York or the State of Califomia are authorized or required by
law or executive order to remain closed.
"Certificates" means the $ aggregate principal amount of City of Chula Vista
2010 Certificates of Participation, (Capital Facilities Refunding Projects) to be executed and
delivered by the Trustee pursuant to this Trust Agreement.
"Certificate Year" means the period extending from February 2 each year to February 1 of
the subsequent calendar year, provided that the first Certificate Year shall commence on the Closing
Date and end on February 1, 2011.
"City" means the City of Chula Vista, a municipal corporation and a chartered city organized
and existing under the laws and Constitution ofthe State, and its successors and assigns.
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"City Representative" means the City Manager and Director of Finance of the City or any
other person authorized by the City Manager of the City to act on behalf of the City with respect to
the Lease or this Trust Agreement.
"Closing Date" means the date on which the Certificates, duly executed by the Trustee, are
delivered to the Original Purchaser thereof.
"Code" means the Internal Revenue Code of 1986, and the regulations issued thereunder, as
the same may be amended from time to time, and any successor provisions of law. Reference to a
particular section of the Code shall be deemed to be a reference to any successor to any such section.
"Continuing Disclosure Agreement" means that certain Continuing Disclosure Agreement
rlM"rI "' of February 1, 2010. by and between the City and U.S. Bank National Association, as
Dissemination Agent, as it may be amended from time to time in accordance with the tenns thereof.
"Delivery Cost Requisition" means a written requisition substantially in the fonn attached
hereto as Exhibit B-1.
"Delivery Costs" means and includes all items of expens~tly or indirectly payable by or
reimbursable to the City or the Authority relating to the financing of the Project from the proceeds of
the Certificates, including but not limited to costs provided in the contract of purchase with the
Original Purchaser, [the premium for the Insurance Policy,] filing and recording costs, settlement
costs, printing costs, word processing costs, reproduction and binding costs, initial fees and charges
of the Trustee, including its first annual administration fee and the fees of its counsel, legal fees and
charges, financing and other professionaf consultant fees, fees of auctioning the Certificates, costs of
rating agencies and costs of providing infonnation to such rating agencies, any computer and other
expenses incurred in connection with the Certificates, fees for execution, transportation and
safekeeping ofthe Certificates and charges and fees in connection with the foregoing.
"Deliverv Date" means
, 2010.
"De1?ositorv" means the securities depository acting as depository pursuant to Section 2.10
hereof.
"DTC" means The Depository Trust Company, New York, New York, a limited purpose trust
company organized under the laws of the State of New York in its capacity as securities depository
for the Certificates.
"Escrow Agreement" means the Escrow Agreement, dated as of February 1, 2010, by and
among the City, the Authority and U.S. Bank National Association, as Escrow Bank, providing for
the prepayment ofthe 2000 Certificates.
"Escrow Fund" means the fund by that name established and held by the Trustee pursuant to
Section 3.02.
"Event of Default" means an eyent of default under the Lease, as defined in Section 9.1
thereof.
"Fiscal Year" means the fiscal year of the City commencing July 1 and ending June 30 of the
next year.
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"Government Obligations" means Permitted Investments of the type described in paragraph
(A) ofthe definition thereof.
"Independent Counsel" means an attorney duly admitted to the practice of law before the
highest court of the state in which such attorney maintains an office and who is not an employee of
the Authority, the Trustee or the City.
"Insurance Business Day" means any day other than (i) a Saturday or Sunday, or (ii) a day on
which the Insurance Trustee or lending institutions in the State of New York are authorized or
required by law or executive order to remain closed.
["Insurance Policy" means the municipal bond insurance policy issued by the Insurer
insuring the payment when due of the principal and interest with respect to the Certificates as
provided therein.]
["Insurer" means , a stock insurance company domiciled in the
State of , or any successor thereto or assignee thereof.]
"Interest Payment Date" means March I and September I of each year commencmg
September 1,2010.
"Lease" means the LeaselPurchase Agreement related to the Certificates, dated as of the date
hereof, by and between the City and the Authority, and any duly authorized and executed
amendments thereto.
"Lease Payment" means any payment required to be paid by the City to the Authority
pursuant to Section 4.4 of the Lease.
"Lease Payment Date" means the Lease Payment Date defined in Section 4.4(a) of the Lease,
which shall be each February 15 and August 15 commencing August 15, 2010.
"Lease Payment Fund" means the fund by that name established and held by the Trustee
pursuant to Article V hereof.
"Leased Premises" has the meaning set forth in the Lease.
"Letter of Representations" means the letter of the City delivered to and accepted by the
Depository on or prior to delivery of the Certificates as book-entry certificates making reference to
the DTC Operational Artangements memorandum, as it may be amended from time to time, setting
forth the basis on which the Depository serves as depository for such book-entry certificates, as such
letters were 'originally executed or as they may be supplemented or revised or replaced by letters
from the City and the Trustee delivered to and accepted by the Depository.
"Moody's" means Moody's Investors Service or any successors or assigns thereto.
"Net Proceeds" means any proceeds of any insurance, performance bonds or taking by
eminent domain or condemnation paid with respect to the Leased Premises remaining after payment
therefrom of any expenses (including attorneys' fees) incurred in the collection thereof.
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"Net Proceeds Fund" means the fund by that name established and held by the Trustee
pursuant to Article VII hereof.
"Nominee" means the nominee of tbe Depository, which may be the Depository, as
determined from time to time pursuant to Section 2.10 hereof.
"Original Purchaser" means E.]. De La Rosa & Co., Inc. as original purchaser of the
Certificates on the Closing Date.
"Outstanding" when used as of any particular time with respect to Certificates, means
(subject to the provisions of Section 10.03 hereof) all Certificates theretofore executed and delivered
by the Trustee under this Trust Agreement except:
(1) Certificates theretofore cancelled by the Trustee or surrendered to the Trustee for
cancellation;
(2) Certificates for the payment or prepayment of which funds or Government
Obligations, together with interest earned thereon, in tbe necessary amount shall have
theretofore been deposited with the Trustee (whether upon or prior to the maturity or
prepayment date of such Certificates), provided that, if such Certificates are to be
prepaid prior to maturity, notice of such prepayment shall have been given as
provided in Section 4.05 hereof or provision satisfactory to the Trustee shall have
been made for the giving of such notice; and
(3) Certificates in lieu of or in exchange for which other Certificates shall have been
executed and delivered by the Trustee pursuant to Sections 2.06 and 2.07 hereof.
Notwithstanding anytbing herein to the contrary, in tbe event that the principal and/or interest
with respect to the Certificates shall be paid by the Insurer pursuant to the Insurance Policy, the
Certificates shall remain Outstanding for all purposes, not be defeased or otherwise satisfied and not
be considered paid by the City.
"Owner" or "Certificate Owner" or "Owner of a Certificate", or any similar term, when used
with respect to a Certificate means the person in whose name such Certificate is registered on the
registration books maintained by the Trustee.
"Participants" means tbose broker-dealers, banks and other financial institutions from time to
time for which the Depository holds book-entry certificates as securities depository.
"Permitted Investments" means, if and to tbe extent permitted by law and by any policy
guidelines promulgated by the City:
A. Direct obligations of tbe United States of America (including obligations
issued or held in book-entry form on the books of the Department of the Treasury) or
obligations the principal of and interest on which are unconditionally guaranteed by the
United States of America.
B. Bonds, debentures, notes or other evidence of indebtedness issued or
guaranteed by any of the following federal agencies and provided such obligations are
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backed by the full faith and credit of the United States of America (stripped securities are
only permitted if they have been stripped by the agency itself):
1. Farmers Home Administration (FmHA)
Certificates of beneficial ownership
2. Federal Housing Administration Debentures (FHA)
3. General Services Administration
Participation certificates
4. Government National Mortgage AssociatIOn luNMA or "Gmme
Mae")
GNMA-guaranteed mortgage-backed bonds
GNMA-guaranteed pass-through obligations
5. U.S. Maritime Administration
Guaranteed Title XI financing (qualified under the Ship Financing
Act of1972)
6. U.S. Department of Housing and Urban Development (HUD)
Project Notes
Local Authority Bonds
C. Bonds, debentures, notes or other evidence of indebtedness issued or
guaranteed by any of the following non-full faith and credit U.S. government agencies
(stripped securities are only permitted if they have been stripped by the agency itself):
I. Federal Home Loan Bank Svstem
Senior debt obligations
2. Federal Home Loan Mortgage Corporation (FHLMC or "Freddie
Mac")
Participation certificates
Senior debt obligations
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3. Federal National Mortgage Association (FNMA or "Fannie Mae")
Mortgage-backed securities and senior debt obligations (excluding
stripped mortgage securities which are valued greater than par on the portion of
unpaid principal)
4. Student Loan Marketing Association (SLMA or "Sallie Mae")
Senior debt obligations
5. Resolution Funding Corp (REF CORP)
The interest only component of REFCORP strips which have been
stripped by request to the Federal Reserve Bank ot New York
6. Farm Credit Svstem Com. - Consolidated system-wide bonds and
notes
D. Money market funds registered under the Investment Company Act of 1940,
whose shares are registered under the Securities Act of 1933, and having a rating by Standard
& Poor's of AAAm-G, AAAm, or AAm and by Moody's of Aaa, including funds for which
the Trustee, its parent holding company, if any, or any affiliates or subsidiaries of the Trustee
provide investment advisory or other management services.
E. Certificates of deposit secured at all times by collateral described in (A)
and/or (B) above and having a maturity of one year or less. Such certificates must be issued
by commercial banks, savings and loan associations or mutual savings banks whose short-
telm obligations are rated "A-]+" by Standard & Poor's, which may include the Trustee and
its affiliates. The collateral must be held by a third party and the Bondholders must have a
perfected first security interest in the collateral.
F. Certificates of deposit, savings accounts, deposit accounts or money market
deposits which are fully insured by FDIC (including those of the Trustee and its affiliates).
G. Commercial paper rated at the time of investment "Prime - 1" by Moody's
and "A-]+" or better by Standard & Poor's.
H. Investment agreements, including guaranteed investment agreements,
acceptable to the Insurer.
1. Bonds or notes issued by any state or municipality which are rated by
Moody's and Standard & Poor's in one of the two highest rating categories assigned by such
agencies.
J. Federal funds or bankers acceptances with a maximum term of one year of
any bank which has an unsecured, uninsured or unguaranteed obligation rating of "Prime - I"
or "A3" or better by Moody's and "A-I +" or better by Standard & Poor's, including those of
the Trustee and its affiliates.
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K. Repurchase agreements satisfying criteria acceptable to the Insurer that
provide for the transfer of securities from a dealer bank or securities firm (sellerlborrower) to
the Trustee (buyer/lender), and the transfer of cash from the Trustee to the dealer bank or
securities firm with an agreement that the dealer bank or securities firm will repay the cash
plus a yield to the Trustee, in exchange for the securities at a specified date or dates.
L. Pre-refunded municipal bonds rated "Aaa" by Moody's and "AAA" by
Standard & Poor's. If, however, the issue is only rated by Standard & Poor's (i.e., there is no
Moody's rating), then the pre-refunded bonds must have been pre-refunded with cash, direct
U.S. or U.S. guaranteed obligations, or AAA rated pre-refunded municipals to satisfy this
condition.
M Top T nc" 1 A gpncy Tnvp<tment Fund nf the State, provided that the Trustee
may deposit and withdraw monies in its own name.
N. Any other investment which the City is permitted by law to make (including
investment agreements and forward delivery or forward purchase agreements), but only with
prior written consent of the Insurer.
"Value" ofthe above investments shall be determined as of the end of each month, and the
value of any investments shall be calculated as follows:
(a) as to investments the bid and asked prices of which are published on a regular
basis in The Wall Street Journal (or, if not there, then in The New York Times): the average
of the bid and asked prices for such investments so published on or most recently prior to
such time of determination;
(b) as to investments the bid and asked prices of which are not published on a
regular basis in The Wall Street Journal or The New York Times: the average bid price at
such time of determination for such investments by any two nationally recognized
government securities dealers (selected by the Trustee in its absolute discretion) at the time
making a market in such investments or the bid price published by a nationally recognized
pricing service;
(c) as to certificates of deposit and bankers acceptances: the face amount thereof,
plus accrued interest;
(d) as to any investment not specified above: the value thereof established by a
methodology selected by the City and specified in writing to the Trustee; and
(e) alternatively, the value of the above investments shall be determined as of the
end of each month by the manner currently employed by the Trustee or any other manner
consistent with industry standard.
"Prepavment" means any payment made by the City pursuant to Article X of the Lease as a
prepayment of Lease Payments.
"Prepayment Fund" means the fund by that name established and held by the Trustee
pursuant to AIiicle IV hereof.
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"Principal Office or Corporate Trust Office" means the corporate trust office of the Trustee at
633 W Fifth Street, 24th Floor, Los Angeles, California 90071, Attention: Corporate Trust Services,
or such other or additional offices as may be designated by the Trustee; provided, however, that for
the purposes of payment, transfer or exchange of Certificates such term means the office or agency of
the Trustee at which, at any particular time its corporate trust agency business shall be conducted.
"Proiect" has the meaning set forth in the Lease.
"Proiect Cost Requisition" means a written requisition substantially in the form attached
hereto as Exhibit B-2.
"Proiect Costs" means, with respect to any item or portion of the Project, the contract price
paid or to be paid therefor upon acquisition, construction, procurement or improvement thereof, in
accordance with a purchase order or contract therefor. Project Costs include, but are not limited to,
the administrative, engineering, legal, financial and other costs incurred by the City and the Authority
in connection with the acquisition, construction, procurement, remodeling or improvement of the
Project, all applicable sales taxes and other charges resulting from such construction, procurement,
remodeling or improvement of the Project and the costs associated with making rebate calculations
required by the Code. Project Costs shall not include any costs of the City or the Authority to
enforce remedies hereunder or under the Lease.
"Proiect Fund" means the fund by that name established and held by the Trustee pursuant to
Article III hereof.
"Propertv" has the meaning set f6rth in the Lease.
"Record Date" means the close of business on the fifteenth day of the month preceding each
Interest Payment Date, whether or not such fifteenth day is a Business Day.
"Reserve Fund" means the fund by that name established and held by the Trustee pursuant to
Article VI hereof.
"Reserve Requirement" means, as of any calculation date, the least of (I) the maximum
aggregate annual Lease Payments (in any Certificate Year) then payable under the Lease (exclusive
of Lease Payments attributable to Certificates that have been defeased), (2) 125% of the average
annual aggregate Lease Payments (in any Certificate Year) then payable under the Lease (exclusive
of Lease Payments attributable to Certificates that have been defeased), or (3) 10% of the
Outstanding amount of the Certificates and/or the Additional Certificates, as applicable (less original
issue discount if in excess of two percent of the stated prepayment amount at maturity).
"S&P" or "Standard & Poor's" means Standard & Poor's Ratings Services or any successors
or assigns thereto.
"Site Lease" means the Site Lease related to the Certificates, dated the date hereof, by and
between the Authority and the City.
"Special Counsel" means Stradling Y occa Carlson & Rauth, a Professional Corporation, or
any other attorney or firm of attorneys of nationally recognized standing in matters pertaining to the
tax-exempt status of interest on obligations issued by states and their political subdivisions and
acceptable to the City.
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"State" means the State of California.
"Tax Certificate" means the Tax Certificate, dated as of the Closing Date, concerning matters
pertaining to the use and investment of proceeds of the Certificates executed and delivered to the
City on the date of execution and delivery of the Certificates, including any and all exhibits attached
thereto.
'Term" means the time during which the Lease is in effect, as provided in Section 4.2 of the
Lease.
"Trustee" means U.S. Bank National Association, a national banking associatIOn duly
organized and existing under the laws of the United States, and any successor trustee.
"Trust Agreement" or "Agreement" means this Trust Agreement, together with any
amendments hereof or supplements hereto permitted to be made hereunder.
Section 1.02. Authorization. Each of the parties hereby represents and warrants that it has
full legal authority and is duly empowered to enter into this Trust Agreement, and has taken all
actions necessary to authorize the execution of this Trust Agreement by the officers and persons
signing it.
Section 1.03. Equal Security. In consideration of the acceptance of the Certificates by the
Owners, this Trust Agreement shall be deemed to be and shall constitute a contract between the
Trustee and the Owners to secure the full and final payment of the interest, if any, and principal
represented by the Certificates which may be executed and delivered hereunder, subject to each of
the agreements, conditions, covenants and terms contained herein; and all agreements, conditions,
covenants and terms contained herein required to be observed or performed by or on behalf of the
Trustee shall be for the equal and proportionate benefit, protection and security of all Owners without
distinction, preference or priority as to security or otherwise of any Certificates over any other
Certificates by reason of the number or date thereof or the time of execution or delivery thereof or for
any cause whatsoever, except as expressly provided herein or therein. All of the Certificates are
equally secured as provided in this Section 1.3, except as may be otherwise expressly provided in this
Trust Agreement.
ARTICLE II
THE 2010 CERTIFICATES OF PARTICIPATION
Section 2.0 I. Authorization. Upon written request of the City Representative the Trustee
will execute and deliver to the Original Purchaser Certificates in an aggregate principal amount of
$ representing proportionate ownership interests in the Lease Payments and the
Prepayments.
Section 2.02. Description of Certificates.
(a) Each Certificate shall be dated the Delivery Date and shall mature on
September I in each of the years and in the amounts, and shall bear interest (calculated on the basis
of a 360-day year of twelve 3D-day months) at the rates, as follows:
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Maturity
(September 1)
Principal
Amount
Interest
Rate
The Certificates shall be delivered in fully registered form, numbered from one upwards in
consecutive numerical order (with such alphabetical prefix as the Trustee shall determine). The
Certificates shall be executed and delivered in the denominations of $5,000 and any integral multiple
thereof.
Each Certificate shall bear interest ITom the Interest Payment Date next preceding the date of
execution thereof, unless (i) it is executed during the period from the day after the Record Date for an
Interest Payment Date to and including such Interest Payment Date, in which event it shall bear
interest ITom such Interest Payment Date, or (ii) it is executed on or prior to the Record Date for the
first Interest Payment Date, in which event interest shall be payable ITom the Delivery Date;
provided, however, that if, at the time of execution of any Certificate interest with respect to such
Certificate is in default, such Certificate shall bear interest ITom the Interest Payment Date to which
interest has been paid or made available for payment with respect to such Certificate.
(b) Pavment Provisions. Interest with respect to any Certificate shall be payable
in lawful money of the United States of America by check or draft of the Trustee, mailed no later
than the Interest Payment Date to the Owner at his address as it appears, on the Record Date, on the
registration books maintained by the Trustee or at such other address as has been furnished to the
Trustee in writing by the Owner on or prior to such Record Date; provided, however, that at the
written request of the Owner of at least $1,000,000 in aggregate principal amount of Outstanding
Certificates filed with the Trustee prior to any Record Date, interest with respect to such Certificates
shall be paid to such Owner on each succeeding Interest Payment Date (unless such request has been
revoked in writing) by wire transfer of immediately available funds to an account in the continental
United States designated in such written request. Payments of defaulted interest with respect to the
Certificates shall be paid by check or draft to the registered Owners of the Certificates as of a special
record date to be fixed by the Trustee, notice of which special record date shall be given to the
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registered Owners of the Certificates no less than ten days prior thereto. The principal of and
premium, if any, on the Certificates is payable when due upon surrender thereof at the Principal
Office in lawful money of the United States of America.
Section 2.03. Form of Certificates. The Certificates and the assignment to appear thereon
shall be substantially in the forms set forth in Exhibit attached hereto and by this reference
incorporated herein with such appropriate additions, modifications, and insertions as are permitted or
required by this Trust Agreement or the Insurer. Pending the preparation of definitive Certificates
the Certificates may be executed and delivered in temporary form exchangeable for definitive
Certificates when ready for delivery. If the Trustee delivers temporary Certificates, it shall execute
and deliver definitive Certificates in an equal aggregate principal amount of authorized
denominations, when available, without additional charge, and thereupon the temporary Certificates
shall be s'lrret:ldered to the Trmtee ot its Pr;p<:;pal nfficp !Tnt;l <0 PYcoongp~> toP tpmrnrory
Certificates shall be entitled to the same benefits under this Trust Agreement as definitive
Certificates.
Section 2.04. Execution. The Certificates shall be executed by and in the name of the
Trustee by the manual signature of any authorized signatory of the Trustee. The Trustee shall insert
the date of execution of each Certificate in the place provided thereon.
Section 2.05. Application of Proceeds and Other Amounts. The proceeds from the sale of
the Certificates in the amount of $ (representing the par amount of the Certificates of
$ , less the Insurance Policy premium of $ , plus the net original issue premium
of $ , less Original Purchaser's discount of $ ) shall be deposited with the Trustee
as follows: $ to the Project Fund (of which $ shall be deposited to the Delivery
Costs Account therein) for the payment of Project Costs and Delivery Costs, $ to the
Interest Account of the Lease Payment Fund, $ to the Reserve Fund, which amount equals
the initial Reserve Requirement and $ to the Escrow Fund.
The Trustee may, in its discretion, establish a temporary fund or account in its books or
records to facilitate such deposits and transfers.
Section 2.06. Transfer and Exchange.
(a) Transfer of Certificates. Any Certificate may, in accordance with its terms,
be transferred upon the books required to be kept pursuant to the provisions of Section 2.09 by the
person in whose name it is registered, in person or by his duly authorized attorney, upon surrender of
such Certificate for cancellation at the Principal Office accompanied by delivery of a written
instrument of transfer in a form acceptable to the Trustee, duly executed. Whenever any Certificate
or Certificates shall be surrendered for transfer, the Trustee shall execute and deliver a new
Certificate or Certificates of the same tenor and maturity, for like aggregate principal amount in
authorized denominations. The cost of printing Certificates and any services rendered or expenses
incurred by the Trustee in connection with any transfer shall be paid by the City. The Trustee shall
require the payment by the Owner requesting such transfer of any tax or other governmental charge
required to be paid with respect to such transfer, and there shall be no other charge to any Owner for
any such transfer.
(b) Exchange of Certificates. Certificates may be exchanged at the Principal
Office for a like aggregate principal amount of Certificates of other authorized denominations of the
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same tenor and maturity. The Trustee may require the payment by the Certificate Owner requesting
such exchange of any tax or other governmental charge required to be paid with respect to such
exchange. The cost of printing Certificates and any services rendered or expenses incurred by the
Trustee in cormection with any exchange shall be paid by the City. All Certificates surrendered
pursuant to the provisions of this Section shall be cancelled and destroyed by the Trustee and shall
not be redelivered.
(c) Time for Transfer or Exchange. The Trustee shall not be obligated to transfer
or exchange any Certificate after a Record Date and before the following Interest Payment Date, or
during the period in which it is selecting Certificates for prepayment, or after notice of prepayment
has been given as provided in Section 4.05.
"pctinn ? 07 Certificates Mutilated. Lost. Destroved or Stolen. If any Certificate shall
become mutilated, the Trustee, at the expense of the Owner of said Certificate, shall execute and
deliver a new Certificate of like tenor, maturity and principal amount in exchange and substitution
for the Certificate so mutilated, but only upon surrender to the Trustee of the Certificate so mutilated.
Every mutilated Certificate so surrendered to the Trustee shall be cancelled by it. If any Certificate
shall be lost, destroyed or stolen, evidence of such loss, destruction or theft may be submitted to the
Trustee, and, if such evidence is satisfactory to the Trustee and, if an inderrmity, satisfactory to the
Trustee indemnifying the Trustee, the Authority and the City, shall be given, the Trustee, at the
expense of the Certificate Owner, shall execute and deliver a new Certificate of like tenor, maturity
and principal amount and numbered as the Trustee shall determine in lieu of and in substitution for
the Certificate so lost, destroyed or stolen. The Trustee may require payment of an appropriate fee
for each new Certificate delivered under.this Section and of the expenses which may be incurred by
the Trustee in carrying out the duties under this Section. Any Certificate executed under the
provisions of this Section in lieu of any Certificate alleged to be lost, destroyed or stolen shall be
equally and proportionately entitled to the benefits of this Trust Agreement with all other Certificates
secured by this Trust Agreement. The Trustee shall not be required to treat both the original
Certificate and any replacement Certificate as being Outstanding for the purpose of determining the
principal amount of Certificates which may be executed and delivered hereunder or for the purpose
of determining any percentage of Certificates Outstanding hereunder, but both the original and
replacement Certificate shall be treated as one and the same. Notwithstanding any other provision of
this Section, in lieu of delivering a new Certificate in place of one which has been mutilated, lost,
destroyed or stolen, and which has matured, or has been called for prepayment, the Trustee may
make payment with respect to such Certificate upon receipt ofthe above-mentioned indemnity.
Section 2.08. Execution of Documents and Proof of Ownership. Any request, direction,
consent, revocation of consent, or other instrument in writing required or permitted by this Trust
Agreement to be signed or executed by Certificate Owners may be in any number of concurrent
instruments of similar tenor, and may be signed or executed by such Owners in person or by their
attorneys or agents appointed by an instrument in writing for that purpose, or by any bank, trust
company or other depository for such Certificates. Proof of the execution of any such instrument, or
of any instrument appointing any such attorney or agent, and of the ownership of Certificates shall be
sufficient for any purpose of this Trust Agreement (except as otherwise herein provided), if made in
the following manner:
(a) The fact and date of the execution by any Owner or his attorney or agent of
any such instrument and of any instrument appointing any such attorney or agent, may be proved by
a certificate, which need not be acknowledged or verified, of an officer of any bank or trust company
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located within the United States of America, or of any notary public, or other officer authorized to
take acknowledgments of deeds to be recorded in such jurisdictions, that the persons signing such
instruments acknowledged before him the execution thereof. Where any such instrument is executed
by an officer of a corporation or association or a member of a partnership on behalf of such
corporation, association or partnership, such certificate shall also constitute sufficient proof of his
authority.
(b) The fact of the ownership of Certificates by any person, the amount and
numbers of such Certificates and the date of execution shall be proved by the registration books
maintained pursuant to Section 2.09 hereof.
Nothing contained in this Article II shall be construed as limiting the Trustee to such proof, it
h~ine intended that the Trustee may accept any other evidence ofthe matters herein stated which the
Trustee may deem sufficient. Any request or consent of the Owner of any Certificate shall bind
every future Owner of the same Certificate in respect of anything done or to be done by the Trustee
in pursuance of such request or consent.
Section 2.09. Certificate Register. The Trustee will keep or cause to be kept at its Principal
Office sufficient books for the registration and transfer of the Certificates which shall, during normal
working hours and upon reasonable notice, be open to inspection by the City and the Authority; and,
upon presentation for such purpose, the Trustee shall, under such reasonable regulations as it may
prescribe, register or transfer or cause to be registered or transferred, on said books, Certificates as
hereinbefore provided. The City, the Authority and the Trustee shall be entitled to treat the
registered owner of a Certificate as the absolute owner thereof for all purposes, whether or not a
Certificate shall be overdue and the City, the Authority and the Trustee shall not be affected by any
notice to the contrary.
Section 2.10. Book-Entry Svstem.
(a) Election of Book-Entrv Svstem. Prior to the execution and delivery of the
Celtificates, the City may provide that such Certificates shall be initially executed and delivered as
book-entry Certificates. If the City shall elect to deliver any Certificates in book-entry, then the City
shall cause the delivery of a separate single fully registered Certificate (which may be typewritten)
for each maturity date of such Certificates in an authorized denomination corresponding to that total
principal amount of the Certificates designated to mature on such date. Upon initial execution and
delivery, the ownership of each such Certificate shall be registered in the Certificate register in the
name of the Nominee, as nominee of the Depository, and ownership of the Certificates, or any
portion thereof, may not thereafter be transferred except as provided in Section 2.1 O( d).
With respect to book-entry Certificates, the City and the Trustee shall have no responsibility
or obligation to any Participant or to any person on behalf of which such a Participant holds an
interest in such book-entry Certificates. Without limiting the immediately preceding sentence, the
City and the Trustee shall have no responsibility or obligation with respect to (i) the accuracy of the
records of the Depository, the Nominee, or any Participant with respect to any ownership interest in
book-entry Certificates, (ii) the delivery to any Participant or any other person, other than an Owner
as shown in the Certificate register, of any notice with respect to book-entry Certificates, including
any notice of prepayment, (iii) the selection by the Depository and its Participants of the beneficial
interests in book-entry Certificates to be prepaid in the event the City prepays the Certificates in part,
or (iv) the payment by the Depository or any Participant or any other person, of any amount with
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respect to principal, premium, if any, or interest evidenced and represented by book-entry
Certificates. The City and the Trustee may treat and consider the person in whose name each book-
entry Certificate is registered in the Certificate register as the absolute Owner of such book-entry
Certificate for the purpose of payment of principal, premium and interest with respect to such
Certificate, for the purpose of giving notices of prepayment and other matters with respect to such
Certificate, for the purpose of registering transfers with respect to such Certificate, and for all other
purposes whatsoever. The Trustee shall pay all principal, premium, if any, and interest evidenced
and represented by the Certificates only to or upon the order of the respective Owner, as shown in the
Certificate register, or his respective attorney duly authorized in writing, and all such payments shall
be valid and effective to fully satisfy and discharge the City's obligations with respect to payment of
principal, premium, if any, and interest evidenced and represented by the Certificates to the extent of
the sum or sums so paid. No person other than an Owner, as shown in the Certificate register, shall
receive a Certificate evidencing tAS obligation to mah payments of pri9~ipal, premium, if any, and
interest evidenced and represented by the Certificates. Upon delivery by the Depository to the
Owner and the Trustee, of written notice to the effect that the Depository has determined to substitute
a new nominee in place of the Nominee, and subject to the provisions herein with respect to Record
Dates, the word "Nominee" in this Trust Agreement shall refer to such nominee of the Depository.
(b) Deliverv of Letter of Representations. In order to qualify the book-entry
Certificates for the Depository's book-entry system, the City shall execute and deliver to the
Depository a Letter of Representations. The execution and delivery of a Letter of Representations
shall not in any way impose upon the City any obligation whatsoever with respect to persons having
interests in such book-entry Certificates other than the Owners, as shown on the Certificate register.
In addition to the execution and delivery .of a Letter of Representations, the City shall take such other
actions, not inconsistent with this Trust Agreement, as are reasonably necessary to qualify book-entry
Certificates for the Depository's book-entry program.
(c) Selection of Depositorv. In the event (i) the Depository determines not to
continue to act as securities depository for book-entry Certificates, or (ii) the City determines that
continuation of the book-entry system is not in the best interest of the beneficial owners of the
Certificates or the City, then the City will discontinue the book-entry system with the Depository. If
the City determines to replace the Depository with another qualified securities depository, the City
shall prepare or direct the preparation of a new single, separate, fully registered Certificate for each
of the maturity dates of such book-entry Certificates, registered in the name of such successor or
substitute qualified securities depository or its Nominee as provided in subsection (d) hereof. If the
City fails to identify another qualified securities depository to replace the Depository, then the
Certificates shall no longer be restricted to being registered in such Certificate register in the name of
the Nominee, but shall be registered in whatever name or names the Owners transferring or
exchanging such Certificates shall designate, in accordance with the provisions of Section 2.06
hereof.
(d) Pavments to Depositorv. Notwithstanding any other provision of this Trust
Agreement to the contrary, so long as all Outstanding Certificates are held in book-entry and
registered in the name of the Nominee, all payments with respect to principal, prepayment premium,
if any, and interest evidenced and represented by such Certificate and all notices with respect to such
Certificate shall be made and given, respectively to the Nominees, as provided in the Letter of
Representations or as otherwise instructed by the Depository and agreed to by the Trustee
notwithstanding any inconsistent provisions herein.
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(i) The Certificates shall be initially executed and delivered as
provided in Section 2.0 I hereof. If such Certificates are initially registered in
the name of the Nominee, then registered ownership of such Certificates, or
any portions thereof, may not thereafter be transferred except:
(A) to any successor of DTC or its nominee, or of any
substitute depository designated pursuant to clause (B) of subsection (i)
of this Section 2.1 O( d) ("Substitute Depository"); provided that any
successor of DTC or Substitute Depository shall be qualified under any
applicable laws to provide the service proposed to be provided by it;
(B) to any Substitute Depository, upon (I) the resignation
of DTC or its successor (or any Substitute Depository or its successor)
from its functions as depository, or (2) a determination by the City that
DTC (or its successor) is no longer able to carry out its functions as
depository; provided that any such Substitute Depository shall be
qualified under any applicable laws to provide the services proposed to
be provided by it; or
(C) to any person as provided below, upon (I) the
resignation of DTC or its successor (or any Substitute Depository or its
successor) ITOm its functions as depository, or (2) a determination by
the City that DTC or its successor (or Substitute Depository or its
successor) is no longer able to carry out its functions as depository.
(ii) In the case of any transfer pursuant to clause (A) or clause (B)
of subsection (i) of this Section 2.10(d), upon receipt of all Outstanding
Certificates by the Trustee, together with a written request of the City to the
Trustee designating the Substitute Depository, a single new Certificate, which
the City shall prepare or cause to be prepared, shall be executed and delivered
for each maturity of Certificates then Outstanding, registered in the name of
such successor or such Substitute Depository or their Nominees, as the case
may be, all as specified in such written request of the City. In the case of any
transfer pursuant to clause (C) of subsection (i) of this Section 2.10(d), upon
receipt of all Outstanding Certificates by the Trustee, together with a written
request of the City to the Trustee, new Certificates, which the City shall
prepare or cause to be prepared, shall be executed and delivered in such
denominations and registered in the names of such persons as are requested in
such written request of the City, subject to the limitations of Section 2.0 I
hereof, provided that the Trustee shall not be required to deliver such new
Certificates within a period of less than sixty (60) days from the date of
receipt of such written request from the City.
(iii) In the case of a partial prepayment or an advance refunding of
any Certificates evidencing a portion of the principal maturing in a particular
year, DTC or its successor (or any Substitute Depository or its successor)
shall make an appropriate notation on such Certificates indicating the date
and amounts of such reduction in principal, in form acceptable to the Trustee,
all in accordance with the Letter of Representations. The Trustee shall not be
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liable for such Depository's failure to make such notations or errors In
making such notations.
(iv) The City and the Trustee shall be entitled to treat tbe person in
whose name any Certificate is registered as the Owner thereof for all
purposes of this Trust Agreement and any applicable laws, notwithstanding
any notice to the contrary received by the Trustee or the City; and the City
and the Trustee shall not have responsibility for transmitting payments to,
communicating with, notifying, or otherwise dealing with any beneficial
owners of the Certificates. Neither the City nor the Trustee shall have any
responsibility or obligation, legal or otherwise, to any such beneficial owners
or to any other party, including DTC or its successor (or Substitute
Dep05itnry or it, 'IJCC~"or). ~xc~rl 10 the Owner of any Certificates. and the
Trustee may rely conclusively on its records as to the identity of the Owners
of the Certificates.
Section 2.11. Destruction of Cancelled Certificates. Whenever in this Trust Agreement
provision is made for the surrender or cancellation by the Trustee and the delivery to the City of any
Certificates, the Trustee will cancel and destroy such Certificates and deliver a certificate of such
destruction to the City upon its request.
Section 2.12. Additional Certificates. Subsequent to the execution and delivery by the
Trustee of tbe Certificates, the Trustee shall, upon written request or requests of the City
Representative and of the Authority Representative, execute and deliver from time to time one or
more series of Additional Certificates in such aggregate principal amount as may be set forth in such
written request or requests, provided that there shall have been compliance witb all of the following
conditions, which are hereby made conditions precedent to the preparation, execution and delivery of
such Additional Certificates:
(a) The parties to this Trust Agreement shall have executed a supplemental
agreement which (i) sets fGlih the terms and provisions of such Additional Certificates, including the
establishment of such funds and accounts, which may be separate and apart tram the funds and
accounts established hereunder for the Certificates, as shall be necessary or appropriate, and (ii)
requires that prior to the delivery of such Additional Certificates the Reserve Requirement with
respect to such Additional Certificates shall be on deposit in the Reserve Fund established hereunder
or in a reserve fund established under such supplemental agreement;
(b) The scheduled principal and interest payable with respect to such Additional
Certificates shall be payable only on Interest Payment Dates applicable to the Certificates;
(c) The Lease shall have been amended, if necessary, to (i) increase or adjust the
Lease Payments due and payable on each Lease Payment Date to an amount sufficient to pay the
principal, premium (if any) and interest payable with respect to all Outstanding Certificates,
including all Additional Certificates as and when tbe same mature or become due and payable
(except to the extent such principal, premium and interest may be payable out of moneys then in the
Reserve Fund or otherwise on deposit with the Trustee in accordance with tbis Trust Agreement), (ii)
if appropriate, amend tbe definition of "Leased Premises" to include as part of tbe Leased Premises
all or any portion of additions, betterments, extensions, improvements or replacements, or such other
real or personal propel1y (whether or not located upon the Leased Premises as such Leased Premises
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is constituted as of the date of this Trust Agreement), to be financed, acquired or constructed by the
preparation, execution and delivery of such Additional Certificates, and (iii) make such other
revisions to the Lease as are necessitated by the execution and delivery of such Additional
Certificates (provided, however, that such other revisions shall not prejudice the rights of the Owners
of Outstanding Certificates as granted them under the terms of this Trust Agreement);
(d) There shall have been delivered to the Trustee a counterpart of the
amendments required by subsection 2.12(c) hereof;
(e) The Trustee shall have received a certificate of the Authority Representative
that there exists on the part of the Authority no Event of Default (or any event which, once all notice
or grace periods have passed, would constitute an Event of Default);
(f) The Trustee shall have received a certificate of the City Representative that
(i) there exists on the part of the City no Event of Default (or any event which, once all notice or
grace periods have passed, would constitute an Event of Default) and (ii) the Lease Payments as
increased or adjusted do not exceed in any year the fair rental value of the Leased Premises (as such
term is defined in the amended Lease);
(g) The Trustee shall have received an opinion of Special Counsel substantially
to the effect that (i) said supplemental agreement and said amendments to the Lease comply in all
respects with the requirements of this Section 2.12, (ii) said supplemental agreement and said
amendments to the Lease have been duly authorized, executed and delivered by each of the
respective parties thereto (provided that said opinion of Special Counsel, in rendering the opinions
set forth in this clause (ii), shall be entitled to rely upon one or more other opinions of counsel,
including counsel to any of the respective parties to said supplemental agreement or said
amendments to the Lease), (iii) assuming that no Event of Default has occurred and is continuing,
this Trust Agreement, as amended by said supplemental agreement, and the Lease, as amended by
the respective amendments thereto, constitute the legal, valid and binding obligations of the
respective parties thereto, enforceable against said parties in accordance with their respective terms
(except to the extent that enforcement thereof may be limited by bankruptcy, insolvency,
moratorium, debt adjustment or other laws affecting creditors' rights generally, and except to the
extent that enforcement thereof may be limited by general principles of equity, regardless of whether
enforcement is sought in a legal or equitable proceeding) and (iv) the execution of such supplemental
agreement and said amendments to the Lease, and performance by the parties thereunder, will not
result in the inclusion of the interest portion of any Lease Payments payable with respect to any
Certificates, including Additional Certificates, theretofore prepared, executed and delivered, in the
gross income of the Owners of the Certificates or the owners of any Additional Certificates for
purposes offederal income taxation;
(h) The City shall have provided the Insurer written notice of the proposed
execution and delivery of such Additional Certificates at the addresses indicated in Section 14.05 and
shall have received prior written consent of the Insurer with respect to such Additional Certificates;
provided that any Additional Certificates being delivered to refund any outstanding Certificates shall
not require the prior written consent of the Insurer if the aggregate maximum arumal debt service
with respect to the Certificates and the Additional Certificates during any remaining year that the
Certificates will be outstanding does not exceed maximum annual debt service with respect to the
Certificates prior to such refunding, as evidenced by a Certificate of the City Representative.
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(i) There shall have been delivered to the Trustee an endorsement to or
reissuance of the title insurance policy delivered under Section 5.5 of the Lease providing that the
insured amount is at least equal to the aggregate principal amount of all of the Certificates and
Additional Certificates outstanding upon the execution and delivery of such Additional Certificates;
0) Upon the execution and delivery of such Additional Certificates, the amount
on deposit in the Reserve Fund or in a reserve fund established under the supplemental agreement
pursuant to which such Additional Certificates are executed and delivered shall be equal to the
Reserve Requirement, taking into account the execution of the Additional Certificates; and
(k) Such other conditions shall have been satisfied, and such other instruments
shall have been duly executed and delivered to the Trustee (with a copy to the Insurer), as the City or
the A1lthority <;;:n~l1 n::lvP: rf':::\c;;()n::lhly rf':'1IJ~stf':ci
Upon delivery to the Trustee of the foregoing instruments, the Tl1lstee shall cause to be
executed and delivered Additional Certificates representing the aggregate principal amount specified
in such supplemental agreement, and such Additional Certificates shall be equally and ratably
secured with all Certificates, including any Additional Certificates, theretofore prepared, executed
and delivered, all without preference, priority or distinction (other than with respect to maturity,
payment, prepayment or sinking fund payment (if any)) of anyone Certificate, including Additional
Certificates, over any other; provided, however, that no provision of this Tl1lst Agreement shall
require the City to consent to or otherwise permit the preparation, execution and delivery of
Additional Certificates, it being understood and agreed that any such consent or other action of the
City to permit the preparation, execution and delivery of Additional Certificates, or lack thereof, shall
be in the sole discretion of the City.
ARTICLE III
PROJECT FUND AND ESCROW FUND
Section 3.01. Establishment of Proiect Fund. The Trustee shall establish a special fund
designated as the "City of Chula Vista (Capital Facilities Refunding Projects) Project Fund," referred
to herein as the "Project Fund" and shall establish a Delivery Costs Account therein; shall keep the
Project Fund separate and apart from all other funds and moneys held by it; and shall administer such
fund as herein provided. The Project Fund shall be held and applied by the Trustee in accordance
herewith. Moneys in the Project Fund shall be expended for Project Costs.
Section 3.02. Deposit ofMonevs; Pavment ofProiect Costs and Deliverv Costs.
(a) Deposits. There shall be credited to the Project Fund the following amounts;
(1) the proceeds of sale of the Certificates required to be deposited therein pursuant to Section 2.05
hereof; (2) all investment earnings on moneys held in the Project Fund, which shall remain in the
Project Fund until expended for Project Costs or applied to the prepayment of Certificates, as
described in Section 3.03 below; and (3) any other funds from time to time deposited with the
Trustee to pay Project Costs.
(b) Disbursements. The Tl1lstee shall disburse moneys in the Project Fund from
time to time to pay Project Costs directly or to reimburse the City for payment of Project Costs, upon
receipt by the Trustee of a Project Cost Requisition signed by the City Representative. The Trustee
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shall have no duty or liability to monitor the application of any moneys disbursed hereunder. The
Trustee shall disburse moneys from the Delivery Costs Account to pay Delivery Costs or to
reimburse the City for payment of such Delivery Costs upon receipt by the Trustee of a Delivery
Cost Requisition signed by the City Representative. The Trustee shall be absolutely protected in
making any disbursement from the Project Fund in reliance upon a Project Cost Requisition or
Delivery Cost Requisition signed by the City Representative. Each such Project Cost Requisition
and Delivery Cost Requisition shall be sufficient evidence to the Trustee of the facts stated therein
and the Trustee shall have no duty to confirm the accuracy of such facts. Any remaining balance in
the Delivery Costs Account shall be transferred by the Trustee to the Project Fund as directed in
writing by City Representative.
Section 3.03. Transfers of Unexpended Proceeds. On August 15, 2010, the Trustee shall
\vithdraw all. n~maining mone:,'~ in the PrQj~rt ~l1nr1 ~nr1 >:::n::c\ 11 tnm>:::ff':r C:;1Ich moneys to the T ,ease
Payment Fund to be applied to the payment of principal and interest with respect to the Certificates
as prescribed in Section 5.04 hereof or, at the written election of the City Representative delivered to
the Trustee, together with an opinion of Special Counsel that such transfer will not cause interest due
with respect to the Certificates to be included in gross income for federal income tax purposes, shall
transfer such moneys to the City for the purpose of capital expenditures of the City, and following
such transfer, the Project Fund shall be closed.
Section 3.04. Escrow Fund. The Trustee shall establish and maintain a separate fund to be
known as the "Escrow Fund". Except as otherwise provided herein, moneys in the Escrow Fund
shall be used solely for the funding of the Escrow Fund established pursuant to the Escrow
Agreement for the defeasance of the 2000 Certificates. Upon the transfer of moneys as contemplated
in this Section 3.02, the Trustee shall close the Escrow Fund and transfer any remaining proceeds
therein to the Lease Payment Fund for credit to the next Lease Payments then due.
ARTICLE IV
PREPAYMENT FUND
Section 4.01. Establishment of PreDavment Fund. The Trustee shall establish a special
fund designated as the "City of Chula Vista (Capital Facilities Refunding Projects) Prepayment
Fund," referred to herein as the "Prepayment Fund"; shall keep such fund separate and apart from all
other funds and moneys held by it; and shall administer such fund as herein provided. Moneys to be
used for prepayment of the Certificates shall be deposited into the Prepayment Fund and used solely
for the purpose of prepaying the Certificates in advance of their maturity on the date designated for
prepayment and upon presentation and surrender of such Certificates to the Trustee.
Section 4.02. Extraordinary PreDayment. The Certificates are subject to prepayment prior
to their respective maturity dates on any date, in whole or in part, from Net Proceeds which the
Trustee shall deposit in the Prepayment Fund as provided in Section 6.1 ( c) of the Lease at least 45
days prior to the date fixed for prepayment and credited towards the prepayment made by the City
pursuant to Section 10.2(a) of the Lease, at a prepayment price equal to the principal amount thereof
together with accrued interest to the date fixed for prepayment, without premium.
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Section 4.03. Prepayment
(a) Optional Prepayment. The Certificates maturing On or after September I,
20_ are subject to prepayment prior to maturity in whole or in part on any date on or after
1,20_, at the option of the City, in the event the City exercises its option under Section 10.3 of the
Lease to prepay all or a portion of the principal component of the Lease Payments (in integral
multiples of $5,000), at the following prepayment prices expressed as a percentage of the principal
component to be prepaid), plus accrued interest to the date fixed for prepayment:
Prepayment Date
Prepayment Price
1,20_ through
1,)0 thrnne:h
I, 20_ and thereafter
,20_
,20
%
In the event the City gives notice to the Trustee of its intention to exercise such option, but fails to
deposit with the Trustee on or prior to the prepayment date an amount equal to the prepayment price,
the City will continue to pay the Lease Payments as if nO such notice had been given.
(b) Mandatory Sinking Account Payment.
(i) The Certificates maturing September 1,20_ (the "20_ Term
Certificates") are subject to prepayment in part by lot, on September 1 in each
of the following years trom sinking account payments as set forth below at a
prepayment price equal to the principal amount thereof to be prepaid, without
premium; provided, however, that if some but not all of the 20_ Term
Certificates have been prepaid pursuant to an optional or extraordinary
prepayment, the total amount of all future sinking account payments will be
reduced pro rata by the aggregate principal amount of the 20_ Term
Certificates so prepaid. In addition, in lieu of prepayment thereof, the 20_
Term Certificates may be purchased by the City and tendered to the Trustee
pursuant to the provisions hereof.
Mandatory Prepayment
Date
(September 1)
Sinking Account
Payment
20
20 *
$
* Final Maturity
(ii) The Certificates maturing September I, 20_ (the "20_ Term
Certificates") are subject to prepayment in part by lot, on September I in each
of the following years from sinking account payments as set forth below at a
prepayment price equal to the principal amount thereof to be prepaid, without
premium; provided, however, that if some but not all of the 20_ Term
Certificates have been prepaid pursuant to an optional or extraordinary
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prepayment, the total amount of all future sinking account payments will be
reduced pro rata by the aggregate principal amount of the 20_ Term
Certificates so prepaid. In addition, in lieu of prepayment thereof, the 20_
Term Certificates may be purchased by the City and tendered to the Trustee
pursuant to the provisions hereof.
Mandatory Prepayment
Date
(September I)
Sinking Account
Pavment
20
20
,0 *
$
* Final Maturity
(iii) The Certificates maturing September, 20_ (the "20_ Term
Certificates") are subject to prepayment in part by lot, on September I in each
of the following years ITom sinking account payments as set forth below at a
prepayment price equal to the principal amount thereof to be prepaid, without
premium; provided, however, that if some but not all of the 20_ Term
Certificates have been prepaid pursuant to an optional or extraordinary
prepayment, the total amount of all future sinking account payments will be
reduced pro rata by the aggregate principal amount of the 20_ Term
Certificates so prepaid. In addition, in lieu of prepayment thereof, the 20_
Term Certificates may be purchased by the City and tendered to the Trustee
pursuant to the provisions hereof.
Mandatory Prepayment
Date
(September I)
Sinking Account
Pavment
20
20
20
20
20 *
$
* Final Maturity
If prior to one of the mandatory prepayment dates specified above the City purchases
any 20_ Term Certificates, 20_ Term Certificates or 20_ Term Certificates, then at least 45 days
prior to the prepayment date the City shall notifY the Trustee as to the principal amount purchased,
and the amount of Certificates so purchased shall be credited at the time of purchase, to the extent of
the full principal amount thereof, to reduce the upcoming sinking account payment for the applicable
maturity of the Certificates so purchased. All Certificates purchased pursuant to this subsection shall
be cancelled pursuant to Section 14.03 hereof.
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Section 4.04. Selection of Certificates for Prepavment. Whenever provision is made in this
Trust Agreement for the optional prepayment of Certificates and less than all Outstanding
Certificates are called for optional prepayment, the Trustee shall select Certificates for optional
prepayment from among maturities selected by the City and by lot within any maturity. For
extraordinary prepayment of Certificates pursuant to Section 4.02 hereof, the Trustee shall select
Certificates for prepayment pro rata among maturities and by lot within any maturity. The Trustee
shall promptly notify the City and the Authority in writing of the Certificates so selected for
prepayment by mailing to the City and the Authority copies of the notice of prepayment provided for
in Section 4.05. The City shall provide the Trustee with a revised sinking fund schedule upon any
prepayments.
Section 4.05. Notice ofPrepavment.
( a) Content. When prepayment is authorized or required pursuant to this Article
IV, the Trustee shall give notice of the prepayment of the Certificates. Such notice shall specify: (a)
the prepayment date, (b) the prepayment price, (c) if less than all of the Outstanding Certificates ofa
maturity 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, and (g) any other descriptive information regarding the Certificates needed to identify
accurately the Certificates being prepaid. Such notice shall further state that on the specified date
there shall become due and payable upon each Certificate to be prepaid, the portion of the principal
amount of such Certificate to be prepaid, together with interest accrued to said date, and that from
and after such date, provided that moneys therefor have been deposited with the Trustee, interest with
respect thereto shall cease to accrue and be payable.
Any notice of prepayment for an optional prepayment of the Certificates pursuant to
Section 4.03(a) may be conditional, and, if any condition stated in the notice of prepayment shall not
have been satisfied on or prior to the prepayment date: (i) the notice of prepayment shall be of no
force and effect, (ii) the City shall not be required to redeem such Certificates, (iii) the prepayment
shall not be made, and (iv) the Trustee shall within a reasonable time thereafter give notice to the
persons in the manner in which the conditional notice of prepayment was given that such condition
or conditions were not met and that the redemption was canceled.
(b) Recipients: Timing. Notice of such prepayment shall be sent by first class
mail or delivery service postage prepaid, or by telecopy, to the municipal Securities Depository (as
defined below) on the date of mailing of notice to the Owners by first class mail and to the
Information Services (as defined below) that disseminate securities redemption notices, on the date
notice is mailed to the Owners and by first class mail, postage prepaid, to the Authority and the
respective Owners of any Certificates designated for prepayment at their addresses appearing on the
Certificate registration books, at least thirty (30) days, but not more than sixty (60) days, prior to the
prepayment date; provided that neither failure to receive such notice nor any defect in any notice so
mailed shall affect the sufficiency of the proceedings for the prepayment of such Certificates. Under
no circumstances shall the Trustee have any liability to any party for any inaccurate CUSIP number.
The Securities Depository is The Depository Trust Company, 55 Water Street, New York,
New York 10041, Fax (212) 855-7320; or, in accordance with the then current guidelines of the
Securities and Exchange Commission to such other addresses and/or such other securities
depositories or to no such depositories as the City may designate in writing to the Trustee.
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In addition, notice of such prepayment shall also be sent by certified mail, overnight delivery
service, facsimile transmission or other secure means, postage prepaid, to all municipal registered
securities depositories and to at least two of the national information services that disseminate
securities prepayment notices, when possible, at least two (2) days prior to the mailing of notices
required by the first paragraph above, and in any event no later than simultaneously with the mailing
of notices required by the first paragraph above; provided, that neither failure to receive such notice
nor any defect in any notice so mailed shall affect the sufficiency of the proceedings for the
prepayment of such Certificates.
Section 4.06. Partial Prepavment of Certificates. Upon surrender by the Owner of a
Certificate for partial prepayment at the Principal Office, payment of such partial prepayment of the
principal amount of a Certificate will be paid to such Owner. Upon surrender of any Certificate
prcpaid in part only, the Trustee ,11011 execHtp "nr1 r1plivpr to the ree:istered Owner thereof. at the
expcnsc of the City, a new Certificate or Certificates which shall be of authorized denominations
equal in principal amount to the unprepaid portion of the Certificate surrendered and of the same
tenor and maturity. Such partial prepayment shall be valid upon payment of the amount thereby
required to be paid to such Owner, and the City, the Authority and the Trustee shall be released and
discharged from all liability to the extent of such payment.
Section 4.07. Effect of Notice of Prepavment. Notice having been given to the Owners of
the Certificates as set forth in Section 4.05 hereof, and the moneys for the prepayment (including, the
interest to the applicable date of prepayment), having, been set aside in the Prepayment Fund, the
Certificates shall become due and payable on said date of prepayment, and, upon presentation and
surrender thereof at the Principal Office, said Certificates shall be paid at the prepayment price with
respect thereto, plus interest accrued and unpaid to said date of prepayment.
If, on the date of a prepayment, moneys for the prepayment of all the Certificates to be
prepaid, together with interest to said date of prepayment, shall be held by the Trustee so as to be
available therefor on such date of prepayment, and, if notice of prepayment thereof shall have been
given as set forth in Section 4.05 hereof, then, from and after said date of prepayment, interest with
respect to the Certificates to be prepaid shall cease to accrue and become payable. All moneys held
by or on behalf of the Trustee for the prepayment of Certificates shall be held in trust for the account
of the Owners ofthe Certificates so to be prepaid, without liability for interest thereon.
All Certificates paid at maturity or prepaid prior to maturity pursuant to the provisions of this
Article shall be cancelled upon surrender thereof and destroyed.
Section 4.08. Surplus. Any funds remaining in the Prepayment Fund after prepayment and
payment of all Certificates Outstanding, including accrued interest and payment of any applicable
fees and expenses to the Trustee pursuant to Sections 9.06 and 9.07 hereof and any other Additional
Payments payable under the Lease or provision made therefor satisfactory to the Trustee, and
provision for any amounts required to be transferred to the Rebate Fund pursuant to Sections 8.07
and 8.08 hereof, shall be withdrawn by the Trustee and remitted to the City.
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ARTICLE V
LEASE PAYMENTS; LEASE PAYMENT FUND
Section 5.0!. Security Provisions.
(a) Assignment of Rights in Lease. The Authority has, pursuant to the
Assignment Agreement, absolutely assigned and set over to the Trustee certain of its rights in the
Lease, including but not limited to all of the Authority's rights to receive and coHect all of the Lease
Payments, the Prepayments and all other amounts required to be deposited in the Lease Payment
Fund pursuant to the Lease or pursuant hereto. AH Lease Payments, Prepayments and such other
amounts to which the Authority may at any time be entitled (other than amounts due to the Authority
'lIIder Se~tion 4] 1 "ftnp r P"<P) <boll bp roid directly to the Trustee. and all of the Lease Payments
and Prepayments coHected or received by the Authority shaH be deemed to be held and to have been
collected or received by the Authority as the agent of the Trustee and if received by the Authority at
any time shaH be deposited by the Authority with the Trustee within five (5) Business Days after the
receipt thereof, and aH such Lease Payments shall be forthwith deposited by the Trustee upon the
receipt thereof in the Lease Payment Fund, aH such Prepayments shall be forthwith deposited by the
Trustee upon the receipt thereof in the Prepayment Fund. If the City shall fail to deposit with the
Trustee a Lease Payment on the applicable Lease Payment Date, the Trustee shall, within three
Insurance Business Days after such Lease Payment Date, notify the Insurer of such failure. The
Insurance Policy shaH be held by the Trustee and, shaH be deemed to be held in the Lease Payment
Fund.
(b) Security Interest in Monevs and Funds. The Authority and the City, as their
interests may appear, hereby grant to the Trustee for the benefit of the Owners a lien on and a
security interest in all moneys in the funds held by the Trustee under this Trust Agreement (excepting
only the Rebate Fund and any moneys to be deposited into the Rebate Fund), including without
limitation, the Lease Payment Fund, the Reserve Fund, the Prepayment Fund, the Project Fund and
the Net Proceeds Fund, and all such moneys shall be held by the Trustee in trust and applied to the
respective purposes specified herein and in the Lease.
(c) Pledge of Lease Pavments and Proceeds. The Lease Payments and any
proceeds from the re-letting or any other disposition of the Leased Premises pursuant to Article IX of
the Lease (the "Lease Proceeds") are hereby irrevocably pledged to and shaH be used for the punctual
payment of the interest and principal represented by the Certificates and, except as permitted under
Section 2.12 hereof with respect to Additional Certificates, the Lease Payments and Lease Proceeds
shall not be used for any other purpose while any of the Certificates remain Outstanding. This
pledge shaH constitute a first lien on the Lease Payments and Lease Proceeds in accordance with the
terms hereof, subject to Section 13.03 hereof and subject to Section 2.12 hereof, which provides that
all Certificates and Additional Certificates shall be equally and ratably secured.
Section 5.02. Establishment of Lease Pavment Fund. The Trustee shaH establish a special
fund designated as the "City of Chula Vista (Capital Facilities Refunding Projects) Lease Payment
Fund and shaH establish an Interest Account therein. AH moneys at any time deposited by the
Trustee in the Lease Payment Fund shaH be held by the Trustee in trust for the benefit of the Owners
of the Certificates. So long as any Certificates are Outstanding, neither the City nor the Authority
shall have any beneficial right or interest in the Lease Payment Fund or the moneys deposited
DOCSOC!l377669v3/024036-0045
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therein, except only as provided in this Trust Agreement, and such moneys shall be used and applied
by the Trustee as hereinafter set forth.
Section 5.03. Deposits. There shall be deposited in the Interest Account of the Lease
Payment Fund the amount specified in Section 2.05 which shall be applied as a credit on the Lease
Payments due on 15,20_, 15,20_ and 15,20_ shall pay a portion of
the interest due with respect to the Certificates on the Interest Payment Dates to and including
1, 20_. There shall be deposited in the Lease Payment Fund all Lease Payments and in the
Prepayment Fund all Prepayments received by the Trustee, including any moneys received by the
Trustee for deposit therein pursuant to Section 2.05 hereof and Section 4.4 of the Lease, and any
other moneys required to be deposited therein pursuant to the Lease, including without limitation
Section 5.4(c) of the Lease (regarding proceeds of rental interruption insurance) or pursuant to this
Trust ~ greement, mhkh mO!1~)" <h"ll h~ "rrli~rI "< " crerl;t towards any I.ease Payment then due.
Section 5.04. Application of Moneys. Except as provided in this Section 5.04, in all
amounts in the Lease Payment Fund shall be used and withdrawn by the Trustee solely for the
purpose of paying the principal and interest with respect to the Certificates as the same shall become
due and payable, in accordance with the provisions of Article II and Article IV hereof, subject to the
requirement that certain investment earnings may be transferred to the Rebate Fund, as provided in
Section 8.08 hereof.
On or before each Interest Payment Date, the Trustee shall set aside an amount sufficient to
pay the interest becoming due and payable on such Interest Payment Date on all Outstanding
Certificates. Moneys so set aside shall be used and withdrawn by the Trustee solely for the purpose
of paying the interest with respect to the Certificates as it shall become due and payable (including,
accrued interest with respect to any Certificates prepaid prior to maturity).
On or before each Interest Payment Date on which the principal of the Certificates shall be
payable, the Trustee shall set aside an amount equal to (i) the principal amount of the Certificates
coming due and payable on such Interest Payment Date pursuant to Section 2.02, and (ii) the
prepayment price of the Certificates (consisting of the principal amount thereof and any applicable
premiums) required to be prepaid on such Interest Payment Date pursuant to any of the provisions of
Article IV hereof. Moneys so set aside shall be used and withdrawn by the Trustee solely for the
purpose of (i) paying the principal of the Certificates at the maturity thereof, or (ii) paying the
principal of and premium (if any) on any Certificates upon the prepayment thereof pursuant to
Section 4.03 hereof.
Section 5.05. Surplus. Any funds remaining in the Lease Payment Fund after payment of
all Certificates Outstanding, including accrued interest and payment of any applicable fees to the
Trustee pursuant to Sections 9.06 and 9.07 hereof and any other Additional Payments due under the
Lease, or provision made therefor satisfactory to the Trustee, and provision for any amounts required
to be transferred to the Rebate Fund pursuant to Section 8.08 hereof, shall be withdrawn by the
Trustee and remitted to the City.
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ARTICLE VI
RESER VB FUND
Section 6.0 I. Establishment of Reserve Fund. The Trustee shall establish a special fund
designated as the "City of Chula Vista (Capital Facilities Refunding Projects) Reserve Fund,"
referred to herein as the "Reserve Fund." All moneys at any time on deposit in the Reserve Fund
shall be held by the Trustee in trust for the benefit of the Owners of the Certificates, as a reserve for
the payment when due of all the Lease Payments to be paid pursuant to the Lease and of all payments
on the Certificates and applied solely as provided herein.
Section 6.02.
Funding.
(a)
Reserve Fund, $
Reserve Requirement. On the Closing Date, there shall be transferred to the
, which shall be in an amount equal to the initial Reserve Requirement.
The Reserve Requirement, or any portion thereof, may be satisfied by the City by crediting to
the Reserve Fund moneys or, with the prior written consent of the Insurer and with notice to S&P, a
letter of credit, a bond insurance policy, or any other comparable credit facility or any combination
thereof which, in the aggregate, make funds available in the Reserve Fund in an amount equal to the
Reserve Requirement; however, the long-term unsecured debt or claim-paying ability, as the case
may be, of the provider of any such letter of credit, bond insurance policy or any other comparable
credit facility at the time of delivery to the Trustee must have a rating of at least no less than the
current rating on the Certificates and a maturity date equal to the final maturity date of the
Certificates or provide for a drawing, in full, in the event of a nonrenewal of any such instrument
with a shorter maturity date.
(b) Delinquent Lease Pavments. The City hereby agrees that if at any time the
balance in the Reserve Fund shall be reduced below the Reserve Requirement, the first payments of
Lease Payments thereafter payable by the City and not needed to pay interest and principal
components of Lease Payments payable to the Certificate Owners on the next Interest Payment Date
shall be used to first, reimburse the provider of a surety bond, or any insurance policy or letter of
credit for any repayment obligation owing thereto for any draw on a surety bond, insurance poJicy or
letter of credit credited to the Reserve Fund and second, to increase the balance in the Reserve Fund
to the Reserve Requirement.
(c) Certain Net Proceeds. Net Proceeds of rental interruption insurance described
in Section 5.4 of the Lease shall be deposited first to the Reserve Fund to make up any deficiencies
therein and second to the Lease Payment Fund to be credited to the payment of the Lease Payments
in the order in which they become due.
Section 6.03. Transfers of Excess.
The Trustee shall, on or before February IS and August IS of each year, provide written
notice to the City of any moneys which will be on hand in the Reserve Fund (including investment
earnings) in excess of the Reserve Requirement on the next succeeding March lor September I, as
the case may be, and one Business Day immediately preceding any Lease Payment Date, the Trustee
shall transfer such excess moneys, to the Lease Payment Fund to be applied to the Lease Payment
then due from the City. In the event of the partial Prepayment of Lease Payments, the City may
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instruct the Trustee to reduce the amounts on deposit in the Reserve Fund to the Reserve
Requirement as of such date and may direct the Trustee to transfer excess amounts from the Reserve
Fund for any lawful purpose.
The transfers described above are in each case subject to the requirement that if the
Certificate proceeds shall have become subject to the arbitrage rebate provisions of Section 148(f) of
the Code as described in Section 8.08 hereof then certain investment earnings are to be transferred to
the Rebate Fund at the direction of the City as provided in Section 8.08 hereof.
Section 6.04. Application of Reserve Fund in Event of Deficiencv in Lease Pavment Fund.
Whether or not Lease Payments are then in abatement, if one (I) day immediately preceding any
Interest Payment Date, the moneys available in the Lease Payment Fund do not equal the amount of
the principal and iQterest 'vith te'rect to the CertificMes then coming due and pavable, the Trustee
first shall apply the moneys available in the Reserve Fund to make the payments due with respect to
the Certificates on such Interest Payment Date by transfelTing the amount necessary for such purpose
to the Lease Payment Fund. The Trustee shall take whatever action is necessary to liquidate or draw
upon investments of funds held in the Reserve Fund or draw upon any surety bond, insurance policy
or letter of credit securing the Reserve Fund to make such funds available for application as provided
hereunder on the Interest Payment Date.
Section 6.05. Transfer to Make All Lease Pavments. If on any Interest Payment Date the
moneys on deposit in the Reserve Fund and the Lease Payment Fund (excluding amounts required
for payment of principal or interest with respect to Certificates not presented for payment) are
sufficient to pay all Outstanding Certificates, including all principal, interest and prepayment
premiums (if any), the Trustee shall, upon the written direction of the City Representative, transfer
all amounts in the Reserve Fund to the Lease Payment Fund to be applied to the payment of the
Lease Payments or to the Prepayment Fund to make Prepayments on behalf of the City and such
moneys shall be distributed to the Owners of Certificates in accordance with Article II and Article IV
of this Trust Agreement. Any amounts remaining in the Reserve Fund upon payment in full of all
Outstanding Certificates and the Trustee's fees and expenses pursuant to Sections 9.06 and 9.07
hereof and any other Additional Payments due under the Lease, or upon provision for such payments
as provided in Section 14.01 hereof and provisions for any amounts required to be transferred to the
Rebate Fund pursuant to Section 8.08 hereof, shall at the written direction of the City Representative
be withdrawn by the Trustee and paid to the City.
ARTICLE VII
NET PROCEEDS FUND
Section 7.01. Establishment of Net Proceeds Fund: Deposits. The Trustee shall establish
when required a special fund designated as the "City of Chula Vista (Capital Facilities Refunding
Projects) Net Proceeds Fund," referred to herein as the "Net Proceeds Fund," to be maintained and
held in trust for the benefit of the Owners, subject to disbursement therefrom as provided herein. The
Trustee shall deposit Net Proceeds in the Net Proceeds Fund as provided in Section 6.1(a) of the
Lease.
(a) Casualty Insurance. The Trustee shall disburse Net Proceeds for replacement
or repair of the Leased Premises as provided in Section 6.1 (b) ofthe Lease, or transfer such proceeds
to the Prepayment Fund upon notification of the City Representative as provided in Section 6.1 (c) of
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the Lease. Pending such application, such Net Proceeds may be invested by the Trustee as directed
by the City Representative in Permitted Investments that mature not later than such times moneys are
expected to be needed to pay such costs of repair or replacement. After all of the Certificates have
been paid and the entire amount of principal and interest with respect to the Certificates has been
paid in full, or provision made for payment satisfactory to the Trustee, including provision for all
amounts required to be transferred to the Rebate Fund pursuant to Section 8.08 hereof, the Trustee
shall pay any remaining moneys in the Net Proceeds Fund to the City after payment of any amounts
due to the Trustee pursuant to Sections 9.06 and 9.07 hereof and any other Additional Payments due
under the Lease.
(b) Title Insurance. Proceeds of any policy of title insurance received by the
Trustee with respect to the Leased Premises shall be applied and disbursed by the Trustee upon the
Written Request ohile City as fullo"'"
(i) If the City determines that the title defect giving rise to such
proceeds has not substantially interfered with its use and occupancy of the
Leased Premises and will not result in an abatement of Lease Payments and
Additional Payments payable by the City under the Lease (such determination
to be certified by the City in writing), such proceeds shall, with the written
approval of the Insurer, be remitted to the City and used for any lawful
purpose thereof; or
(ii) If the City determines that the title defect giving rise to such
proceeds has substantially interfered with its use and occupancy of the Leased
Premises and will result in an abatement of Lease Payments and Additional
Payments payable by the City under the Lease; then the Trustee shall, with
the written approval of the Insurer, immediately deposit such proceeds in the
Prepayment Fund and such proceeds shall be applied to the prepayment of
Certificates in the manner provided in Section 4.02 hereof.
Section 7.02. Cooperation. The Authority and the Trustee shall cooperate fully with the
City at the expense of the City in filing any proof of loss with respect to any insurance policy
maintained pursuant to Article V of the Lease and in the prosecution or defense of any prospective or
pending condemnation proceeding with respect to the Leased Premises or any item or portion
thereof; provided, however, the Trustee shall not be obligated to take any action hereunder if it is not
indemnified to its satisfaction from and against any liability or expense arising therefrom.
ARTICLE VIII
MONEYS IN FUNDS; INVESTMENT
Section 8.0 I. Held in Trust. The moneys and investments held by the Trustee under this
Trust Agreement, other than in the Rebate Fund, are irrevocably held in trust for the benefit of the
Owners and, in the caSe of the Rebate Fund, for payment as required to the United States Treasury,
and for the purposes herein specified, and such moneys, and any income or interest earned thereon,
shall be expended only as provided in this Trust Agreement, and shall not be subject to levy or
attachment or lien by or for the benefit of any creditor of the Authority, the Trustee or the City, or
any of them.
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Section 8.02. Investments Authorized.
(a) Bv Trustee. Subject to the further provisions of this Article VIII, moneys
held by the Trustee hereunder shall be invested and reinvested on maturity thereof by the Trustee
pursuant to Section 8.02(b). The Trustee will report any such investments to the City on a monthly
basis in its regular statements. .
(b) Upon Direction of the City. The City Representative shall direct by
facsimile, to the designated trust officer responsible for the administration of this Trust Agreement,
followed by oral notification and distribution by U.S. Mail or overnight courier service of such
notice, such investment in specific Permitted Investments not less than two Business Days prior to
the date that such Permitted Investment is to take effect. Such investments and reinvestments shall
be TI1~r1P giving fil11 r(m",ir1f':1"~ti()n fill" th~ tim~ M which funds are required to be available based
among other things, scheduled completion ofthe various components of the Project. In the event that
the City Representative does not so direct the Trustee, the Trustee shall invest in the Permitted
Investments described in paragraph (D) of the definition thereof contained in Section 1.01.
Investments purchased with funds on deposit in the Lease Payment Fund and Prepayment
Fund shall mature not later than the Interest Payment Date or prepayment date, as appropriate,
immediately succeeding the investment. Investments purchased with funds on deposit in the Project
Fund shall mature not later than the dates upon which such funds shall be needed to be expended for
the payment of Project Costs. Notwithstanding anything to the contrary contained herein,
investments purchased with funds on deposit in the Reserve Fund shall have an average aggregate
weighted term to maturity of not greater than five years; provided that such amounts may be invested
in an investment agreement described in paragraph H of the definition of Permitted Investments to
the later of the final maturity of the Certificates or any Additional Certificates so long as such
amounts may be withdrawn at any time, without penalty, for application in accordance with Article
VI hereof; and provided that no such investment of amounts in the Reserve Fund allocable to the
Certificates or a series of Additional Certificates shall mature later than the respective final maturity
date ofthe Certificates or the series of Additional Certificates, as applicable.
(c) Registration. Such investments, ifregistrable, shall be registered in the name
ofthe Trustee for the benefit of the Owners and held by the Trustee or its nominee.
(d) Trustee as Purchaser or Agent. The Trustee may purchase or sell to itself or
any affiliate, as principal or agent, investments authorized by this Section. The Trustee may act as
purchaser or agent in the making or disposing of any investment. The Trustee or any of its affiliates
may act as a sponsor of, or as an advisor to any provider of, Permitted Investments hereunder. The
City acknowledges that to the extent regulations of the Comptroller of the Currency or other
applicable regulatory entity grant the City the right to receive brokerage confirmations of security
transactions as they occur, the City specifically waives receipt of such confirmations to the extent
permitted by law. The Trustee will furnish the City periodic cash transaction statements which
include detail for all investment transactions made by the Trustee hereunder.
(e) Trustee Standard of Care. Except as otherwise provided in Section 9.05, the
Trustee shall not be responsible or liable for any loss suffered in connection with any investment of
funds or sale of such investment made by it in accordance with this Section or disposition made by it
in accordance with Section 8.05(b).
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Section 8.03. Disposition of Investments. Any income, profit or loss on the investment of
moneys held by the Trustee hereunder shall be credited to the respective fund for which it is held,
except as otherwise provided herein.
Section 8.04. Accounting. The Trustee shall furnish to the City, not less than monthly, an
accounting (which may be in the form of its regular statements) of all investments made by the
Trustee and all funds and amounts held by the Trustee; provided, that the Trustee shall not be
obligated to deliver an accounting for any fund or account that (i) has a balance of zero and (ii) has
not had any activity since the last reporting date. The Trustee shall keep accurate records of all funds
administered by it and of all Certificates paid and discharged.
Section 8.05. Valuation and Disposition ofInvestments.
(a) Valuation. Subject to the provisions of Section 8.08 hereof, for the purpose
of determining the amount in any fund, all Permitted Investments (except investment agreements)
credited to such fund shall be valued at the lower ofthe cost or the market price, exclusive of accrued
interest. With respect to all funds and accounts, investments shall be valued by the Trustee (i) as
frequently as deemed necessary by the Insurer but not less often than annually nor more often than
monthly, and (ii) upon any draw upon the Reserve Fund. In making any such valuations, the Trustee
may utilize, and conclusively rely upon such valuation services as may be available to the Trustee,
including those within its regular accounting system.
(b) Disposition. Subject to the provisions of Section 8.08 hereof, the Trustee
shall sell, or present for prepayment, any Permitted Investment so purchased by the Trustee
whenever it shall be necessary in order to provide moneys to meet any required payment, transfer,
withdrawal or disbursement from the fund to which such Permitted Investment is credited.
Section 8.06. Commingling of Monevs in Funds. The Trustee may, and upon the written
request ofthe City Representative shall, commingle any of the funds held by it pursuant to this Trust
Agreement into a separate fund or funds for investment purposes only; provided, however, that all
funds or accounts held by the Trustee hereunder shall be accounted for separately notwithstanding
such commingling by the Trustee. The City shall ensure that any such commingling complies with
Section 1.148-4 of the Treasury Regulations, and shall provide direction to the Trustee accordingly.
Section 8.07. Tax Covenants.
(a) General. The City and the Authority hereby covenant with the holders of the
Certificates that, notwithstanding any other provisions of this Trust Agreement, they shall not take
any action, or fail to take any action, if any such action or failure to take action would adversely
affect the exclusion ITom gross income of interest with respect to the Certificates under Section 103
of the Code. The Authority hereby covenants with the holders of the of the Certificates that,
notwithstanding any other provision of this Trust Agreement, to the extent that the Authority may
have control over the Project or the proceeds of the Certificates, it shall not take any action that
would adversely affect the exclusion from gross income of interest with respect to the Certificates
under Section 103 of the Code. The City and the Authority (to the extent that the Authority may
have control over the Project or the proceeds of the Certificates) shall not, directly or indirectly, use
or permit the use of proceeds of the Certificates or the Project, or any portion thereof, by any person
other than a governmental unit (as such term is used in Section 141 of the Code), in such manner or
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to such extent as would result in the loss of exclusion from gross income for federal income tax
purposes of interest due with respect to the Certificates.
(b) Use of Proceeds. The City and the Authority (to the extent that the Authority
may have control over the Project or the proceeds of the Certificates) shall not take any action, or fail
to take any action, if any such action or failure to take action would cause the Certificates to be
"private activity bonds" within the meaning of Section 141 of the Code, and in furtherance thereof,
shall not make any use of the proceeds of the Certificates or the Project, or any portion thereof, or
any other funds of the City, that would cause the Certificates to be "private activity bonds" within the
meaning of Section 141 of the Code. To that end, so long as any Certificates are outstanding, the
City and the Authority, with respect to such proceeds and the Project and such other funds, will
comply with applicable requirements of the Code and all regulations of the United States Department
of the Treasury issu€d there"nder and 'mder <;~rt;r\n 1 0, nfth~ rnoe, to the extent such requirements
are, at the time, applicable and in effect. The City shall establish reasonable procedures necessary to
ensure continued compliance with Section 141 of the Code and the continued qualification of the
Certificates as "governmental bonds."
(c) Arbitrage. The City and the Authority (to the extent that the Authority may
have control over the Project or the proceeds of the Certificates) shall not, directly or indirectly, use
or pennit the use of any proceeds of any Certificates, or of the Project, or other funds of the City, or
take or omit to take any action, that would cause the Certificates to be "arbitrage bonds" within the
meaning of Section 148 ofthe Code. To that end, the City and the Authority shall comply with all
requirements of Section 148 of the Code and all regulations of the United States Department of the
Treasury issued thereunder to the extent such requirements are, at the time, in effect and applicable to
the Certificates.
(d) Federal Guarantee. The City and the Authority (to the extent that the
Authority may have control over the proceeds of the Certificates) shall not make any use of the
proceeds of the Certificates or any other funds of the City, or take or omit to take any other action,
tllat would cause the Certificates to be "federally guaranteed" within the meaning of Section 149(b)
ofthe Code.
(e) Compliance with Tax Certificate. In furtherance of the foregoing tax
covenants of this Section, the City covenants that it will comply with the provisions of the Tax
Certificate, which is incorporated herein as if fully set forth herein. These covenants shall survive
payment in full or defeasance of the Certificates.
Section 8.08. Rebate Fund.
(a) General. The Trustee shall establish a special fund designated the "City of
Chula Vista (Capital Facilities Refunding Projects) Rebate Fund" (the "Rebate Fund"). All amounts
at any time on deposit in the Rebate Fund shall be held by the Trustee in trust, to the extent required
to satisfY the requirement to make rebate payments to the United States (the "Rebate Requirement")
pursuant to Section 148 of the Code and the Treasury Regulations promulgated thereunder (the
"Treasury Regulations"). Such amounts shall be ITee and clear of any lien under this Trust
Agreement and shall be governed by this Section and Section 8.07 of this Trust Agreement and by
the Tax Certificate executed by the City. The Trustee shall be deemed conclusively to have complied
with the Rebate Requirement if it follows the directions of the City, and shall have no independent
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responsibility to, or liability resulting ITom its failure to, enforce compliance by the City with the
Rebate Requirement.
(i) Within 45 days of the end of the fifth Certificate Year and
each fifth Certificate Year thereafter, (1) the City shall calculate or cause to
be calculated with respect to the Certificates the amount that would be
considered the "rebate amount" within the meaning of Section 1.148-3 of the
Treasury Regulations, and (2) the City shall make an Additional Payment
under Section 4.1 I of the Lease and transfer to the Trustee for deposit in the
Rebate Fund, if and to the extent required. amounts sufficient to cause the
balance in the Rebate Fund to be equal to the "rebate amount" so calculated.
The City may direct the Trustee to transfer excess amounts on deposit in the
Reserre F'md, a~ set forth -in SF'rtinn h n~ ht>;rf':of to r~Y R 11 or ;l portion of
any "rebate amount" due hereunder.
(ii) The City shall not be required to deposit any amount to the
Rebate Fund in accordance with preceding sentence if the amount on deposit
in the Rebate Fund prior to the deposit required to be made under this
subsection (a) equals or exceeds the "rebate amount" calculated in accordance
with the preceding sentence. Such excess may be withdrawn ITom the Rebate
Fund to the extent permitted under subsectic.n (f) ofthis Section.
(iii) The City shall not be required to calculate the "rebate
amount," and shall not be required to deposit any amount to the Rebate Fund
in accordance with this subsection (a), with respect to all or a portion of the
proceeds of the Certificates (including amounts treated as proceeds of the
Certificates) (1) to the extent such proceeds satisfy the expenditure
requirements of Section 148(f)(4)(B) or Section 148(f)(4)(C) of the Code or
Section 1.l48-7(d) of the Treasury Regulatons, whichever is applicable, and
otherwise qualify for the exception to the Rebate Requirement pursuant to
whichever of said sections is applicable, (2) to the extent such proceeds are
subject to an election by the City under Section 148(f)(4)(C)(vii) of the Code
to pay a 1-1/2% penalty in lieu of arbitrage rebate in the event any of the
percentage expenditure requirements of Section 148(f)(4)(C) are not satisfied,
or (3) to the extent such proceeds qualify fcr the exception to arbitrage rebate
under Section 148(f)(4)(A)(ii) of the Code for amounts in a "bona fide debt
service fund."
(b) Withdrawal Following Pavment of Certificates. Any funds remaining in the
Rebate Fund after prepayment of all the Certificates and any amounts described in paragraph (ii) of
subsection (c) of this Section, or provision made therefor satisfactory to the Trustee, including
accrued interest and payment of any applicable fees to the Trustee, shall be withdrawn by the Trustee
and remitted to the City.
(c) Withdrawal for Pavment of Rebate. Upon the City's written direction, but
subject to the exceptions contained in subsection (a) of this Section to the requirement to calculate
the "rebate amount" and make deposits to the Rebate Fund, the Trustee shall pay to the United States,
ITom amounts on deposit in the Rebate Fund,
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(i) not later than 60 days after the end of (1) the fifth Certificate
Year, and (2) each fifth Certificate Year thereafter, an amount that, together
with all previous rebate payments, is equal to at least 90% of the 'rebate
amount" calculated as of the end of such Certificate Year in accordance with
Section 1.148-3 of the Treasury Regulations; and
(ii) not later than 60 days after the payment of all Certificates, an
amount equal to 100% of the "rebate amount" calculated as of the date of
such payment (and any income attributable to the "rebate amount"
determined to be due and payable) in accordance with Section 1.148-3 of the
Treasury Regulations.
(ri) R ph"tp P"vmpnts Each payment required to be made pursuant to subsection
(c) of this Section shall be made to the Intemal Revenue Service Center, Ogden, Utah 84201 on or
before the date on which such payment is due, and shall be accompanied by Internal Revenue Service
Form 8038-T, which shall be completed by the arbitrage rebate consultant for execution by the City
and provided to the Trustee.
(e) Deficiencies in the Rebate Fund. In the event that, prior to the time any
payment is required to be made from the Rebate Fund, the amount in the Rebate Fund is not
sufficient to make such payment when such payment is due, the City shall calculate the amount of
such deficiency and direct the Trustee to deposit an amount received from the City equal to such
deficiency into the Rebate Fund prior to the time such payment is due.
(f) Withdrawals of Excess Amounts. In the event that immediately following the
calculation required by subsection (a) of this Section, but prior to any deposit made under said
subsection, the amount on deposit in the Rebate Fund exceeds the "rebate amount" calculated in
accordance with said subsection, upon written instructions from the City, the Trustee shall withdraw
the excess from the Rebate Fund and credit such excess to the Lease Payment Fund.
(g) Record Keeping. The City shall retain records of all determinations made
hereunder until six years after the complete retirement ofthe Certificates.
(h) Survival of Defeasance. Notwithstanding anything in this Trust Agreement to
the contrary, the Rebate Requirement shall survive the payment in full or defeasance of the
Certificates.
ARTICLE IX
THE TRUSTEE
Section 9.01. Appointment of Trustee.
(a) Appointment. U.S. Bank National Association, a state banking corporation
organized under the laws of the State of California, is hereby appointed Trustee by the Authority and
the City.
(b) Qualifications. The Authority and the City agree that they will maintain a
Trustee having a corporate trust office in New York, New York, San Francisco, California, Seattle,
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Washington, or Los Angeles, California capable of exercising trust powers in the State of California,
with a combined capital (exclusive of borrowed capital) and a surplus of at least Fifty Million Dollars
($50,000,000), or be a member of a bank holding company system, which shall have a combined
capital and surplus of at least Fifty Million Dollars ($50,000,000), and subject to supervision or
examination by federal or state authority, so long as any Certificates are Outstanding. If such bank,
corporation or trust company publishes a report of condition at least annually pursuant to law or to
the requirements of any supervising or examining authority above referred to then for the purpose of
this Section the combined capital and surplus of such bank, corporation or trust company shall be
deemed to be its combined capital and surplus as set forth in its most recent report of condition so
published.
(c) Removal. The Insurer and, so long as there is no Event of Default, the City,
may remove the Truste@ initially appointed, and ~t:Jy 5"cce<<nr theretn, end may appoint a successor
or successors thereto.
(d) Resignation. The Trustee may, upon prior written notice to the City, the
Insurer and the Authority, resign; provided that such resignation shall not take effect until the
successor Trustee is appointed as provided in this Section 9.01. Upon receiving such notice of
resignation, the City shall promptly appoint a successor Trustee subject to written approval of the
Insurer. In the event the City does not name a successor Trustee within thirty (30) days of receipt of
notice of the Trustee's resignation, then the Trustee may petition a federal or state court to seek the
immediate appointment of a successor Trustee.
(e) Successor. Any successor Trustee shall be a bank, corporation or trust
company meeting the qualifications as set forth in Subsection (b) above. Any resignation or removal
of the Trustee and appointment of a successor Trustee shall become effective upon acceptance of
appointment by the successor Trustee and upon receipt of written approval of the Insurer. Upon such
acceptance, the successor Trustee shall mail notice thereofto the Owners at their respective addresses
set forth on the Cel1ificate registration books maintained pursuant to Section 2.12.
Section 9.02. Merger or Consolidation. Any company or banking association into which
the Trustee may be merged or converted or with which it may be consolidated or any company
resulting from any merger, conversion or consolidation to which it shall be a party or any company to
which the Trustee may sell or transfer all or substantially all of its corporate trust business, provided
that such company shall be eligible under Section 9.01, shall be the successor to the Trustee without
the execution or filing of any paper or further act, anything herein to the contrary notwithstanding.
Section 9.03. Protection of the Trustee.
(a) Reliance Upon Papers or Documents. The Trustee shall be protected and
shall incur no liability in acting or proceeding in good faith upon any resolution, notice, telegram,
facsimile, request, consent, direction, waiver, certificate, statement, affidavit, voucher, bond,
requisition or other paper or document which it shall in good faith believe to be genuine and to have
been passed or signed by the proper board or person or to have been prepared and furnished pursuant
to any of the provisions of this Trust Agreement, and the Trustee shall be under no duty to make any
investigation or inquiry as to any statements contained or matters referred to in any such instrument,
but may, in the absence of bad faith on its part, accept and rely upon the same as conclusive evidence
of the truth and accuracy of such statements. In the event the Trustee shall make any investigation
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into the content of any such certifications, the Trustee shall not thereby be deemed to have expanded
the scope of its duties. .
(b) Reliance Upon Opinions of Counsel. The Trustee may consult with its
counselor counsel to the City, with regard to legal questions and the opinion of such counsel shall be
full and complete authorization and protection in respect of any action taken or suffered by it
hereunder in good faith in accordance therewith. Before being required to take any action, the
Trustee may require an opinion of Independent Counsel acceptable to the Trustee which opinion
shall be made available to the other parties hereto upon request, which counsel may be counsel to any
of the parties hereto, or a verified certificate of any party hereto, or both, concerning the proposed
action and the opinion of such counsel shall be full and complete authorization and protection in
respect of any action taken by the Trustee in reliance thereon.
(c) Reliance Upon Requested Certificates. Whenever in the administration of its
duties under this Trust Agreement, the Trustee shall deem it necessary or desirable that a matter be
proved or established prior to taking or suffering any action hereunder, such matter (unless other
evidence in respect thereof be herein specifically prescribed), in the absence of bad faith on its part,
shall be deemed to be conclusively proved and established by the certificate of the City
Representative or the Authority Representative and such certificate shall be full warranty to the
Trustee for any action taken or suffered under the provisions of this Trust Agreement in reliance
thereon, but in its discretion the Trustee may, in lieu thereof, accept other evidence of such matter or
may require such additional evidence as to it may seem reasonable, provided however that the duties
and obligations of the Trustee shall not be deemed expanded thereby.
Section 9.04. Rights of the Trustee.
(a) Ownership of Certificates. The Trustee may become an Owner with the same
rights it would have if it were not Trustee; may acquire and dispose of other bonds or evidence of
indebtedness of the City with the same rights it would have if it were not the Trustee; and may act as
a depository for and permit any of its officers or directors to act as a member of, or in any other
capacity with respect to, any committee formed to protect the rights of Owners, whether or not such
committee shall represent the Owners of the majority in principal amount of the Certificates then
Outstanding.
(b) Attornevs. Agents. Receivers. The Trustee may execute any of the trusts or
powers hereof and perform the duties required of it hereunder by or through attorneys, agents, or
receivers, shall not be responsible for the actions or omissions of such attorneys, agents or receivers
if appointed by it with reasonable care, and shall be entitled to advice of counsel concerning all
matters oftrust and its duty hereunder.
(c) Funds and Accounts. In addition to the funds and accounts established or
required to be established pursuant to this Trust Agreement, the Trustee may establish such
additional funds and accounts as it deems necessary or appropriate to perform its duties hereunder,
and shall have the right to close such accounts in its discretion.
Section 9.05. Standard of Care. The Trustee shall not be liable in connection with the
performance of its duties hereunder, except for its own negligence or willful misconduct. The
Trustee shall only perform those duties specifically set forth herein and no implied duties, covenants
or obligations whatsoever shall be read into this Trust Agreement. In the event of and during the
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continuance of an Event of Default, the Trustee shall exercise such care in performing its duties
hereunder as a prudent man would exercise in such event.
Section 9.06. Compensation of the Trustee. As an Additional Payment under Section 4.11
of the Lease, the City shall, from time to time, pay such amounts as are specified in any written
agreement with the City and, on demand, pay to the Trustee to the extent not covered by such
agreement reasonable compensation for its services and the services of any accountants, consultants,
attorneys and other experts as may be engaged by the Trustee to provide services under this Trust
Agreement pursuant to a written agreement between the City and the Trustee. The City's obligation
hereunder shall remain valid and binding notwithstanding maturity and payment of the Certificates or
resignation and removal of the Trustee.
Section 9 07 Incipmnific"tirm of TnJ<t~~ The City shall, to the extent permitted bv law,
indemnify and save the Trustee and its officers, directors, agents, and employees harmless ITom and
against (whether or not litigated) all claims, losses, costs, expenses, liability and damages, including
legal fees and expenses, arising out of (i) the use, maintenance, condition or management of, or from
any work or thing done on, the Leased Premises by the City, (ii) any breach or default on the part of
the City in the performance of any of its obligations under this Trust Agreement and any other
agreement made and entered into for purposes of the Leased Premises, (iii) any act of negligence of
the City or of any of its agents, contractors, servants, employees or licensees with respect to the
Leased Premises, (iv) any act of negligence of any assignee of, or purchaser from, the City or of any
of its or their agents, contractors, servants, employees or licensees with respect to the Leased
Premises, (v) the construction or acquisition ofthe Project or the expenditure of Project Costs, or (vi)
the exercise and performance by the Trustee of its powers and duties hereunder or any related
document, (vii) the sale of the Certificates and the carrying out of any of the transactions
contemplated by the Certificates or this Trust Agreement, or (viii) any untrue statement or alleged
untrue statement of any material fact or omission or alleged omission to state a material fact
necessary to make the statements made in light of the circumstances in which they were made, not
misleading in any official statement or other disclosure document utilized in connection with the sale
of the Certificates. The indemnification set forth in this Section 9.07 shall extend to the Trustee's
officers, agents, employees, successors and assigns. No indemnification will be made under this
Section or elsewhere in this Trust Agreement or other agreements for willful misconduct or
negligence by the Trustee, its officers, agents, employees, successors or assigns. The City's
obligations hereunder shall remain valid and binding notwithstanding maturity and payment of the
Certificates, or the resignation or removal of the Trustee.
In accepting the trust hereby created, the Trustee acts solely as Trustee for the Owners and
not in its individual capacity, and all persons, including, without limitation, the Owners, Authority
and the City, having any claim against the Trustee arising from the Trust Agreement shall look only
to the funds and accounts held by the Trustee hereunder for payment, except as otherwise provided
herein or where the Trustee has breached its standard of care as described in Section 9.05 hereof.
Under no circumstances shall the Trustee be liable in its individual capacity for the obligations
evidenced by the Certificates.
No provision of this Trust Agreement shall require the Trustee to expend or risk its own
funds or otherwise incur any financial liability in the performance of its duties hereunder or in the
exercise of any of its rights or powers.
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The Trustee shall not be liable with respect to any action taken or omitted to be taken by it in
good faith in accordance with the direction of the Owners of not less than a majority in aggregate
principal amount of the Certificates at the time Outstanding relating to the time, method and place of
conducting any proceeding for any remedy available to the Trustee or in the exercise of any right
hereunder.
The Trustee is authorized and directed to execute, in its capacity as Trustee, the Assignment
Agreement.
Every provision of this Trust Agreement, the Lease, the Site Lease and the Assignment
Agreement relating to the conduct or liability of the Trustee shall be subject to the provisions of this
Trust Agreement, including without limitation, this Article IX.
The Trustee shall have no responsibility with respect to any infonnation, statement or recital
in any official statement, offering memorandum or any other disclosure material prepared or
distributed with respect to the Certificates.
The Trustee shall not to be deemed to have knowledge of any Event of Default hereunder or
under the Lease unless it has actual knowledge thereof at its Principal Office.
Before taking any action under Article XIII or this Article at the request of the Owners or
Insurer, the Trustee may require that a satisfactory indemnity bond be furnished by the Owners or
Insurer for the reimbursement of all expenses to which it may be put and to protect it against all
liability, except liability which is adjudicated to have resulted from its negligence or willful
misconduct in connection with any actiori so taken.
Section 9.08. Trustee's Disclaimer of Warranties. THE TRUSTEE MAKES NO
WARRANTY OR REPRESENTATION, EITHER EXPRESS OR IMPLIED, AS TO THE V ALOE,
DESIGN, CONDITION, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR
PURPOSE OR FITNESS FOR THE USE CONTEMPLATED BY THE CITY OF THE LEASED
PREMISES, OR ANY PORTION THEREOF. THE CITY ACKNOWLEDGES THAT THE CITY
IS LEASING THE LEASED PREMISES AS IS. In no event shall the Trustee be liable for
incidental, indirect, special or consequential damages, in connection with or arising out of the Lease,
the Site Lease, the Assignment Agreement or this Trust Agreement for the existence, furnishing,
functioning or the City's use and possession ofthe Leased Premises.
ARTICLE X
MODIFICATION OR AMENDMENT OF AGREEMENTS
Section 10.01. Amendments Pennitted.
(a) With Consent. This Trust Agreement and the rights and obligations of the
Owners, and the Lease and the rights and obligations of the parties thereto, may be modified or
amended at any time, with notice to any rating agency then rating .the Certificates by a supplemental
agreement or amendment thereto which shall become effective when the written consents of the
Insurer (so long as the Insurer is not in default in its payment obligations under the Insurance Policy)
and Owners of a majority in aggregate principal amount of the Certificates then Outstanding,
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exclusive of Certificates disqualified as provided in Section 10.03 hereof, shall have been filed with
the Trustee. No such modification or amendment shall:
(i) extend or have the effect of extending the fixed maturity of any
Certificate or reducing the interest rate with respect thereto or extending the time of
payment of interest, or reducing the amount of principal thereof or reducing any
premium payable upon the prepayment thereof, or diminish the security afforded by
the Insurance Policy without the express consent of the Owner of such Certificate and
the Insurer (so long as the Insurer is not in default in its payment obligations under
the Insurance Policy), or
(ii) reduce or have the effect of reducing the percentage of Certificates
req1lire-d f.Qf t'bP ~ffirmMj'lP ,,"ff" or uTritfpl1 r(")nC::f':nt to ~n ~mf':nnmf':nt or mnrlifir.::Jtinn
ofthe Lease, or
(iii) modify any of the rights or obligations of the Trustee without its
written assent thereto, or
(iv) amend this Section 10.01 without the prior written consent of the
Owners of all Certificates then outstanding and the Insurer (so long as the Insurer is
not in default in its payment obligations under the Insurance Policy).
The Trustee shall have the right to require such opinions of counsel as it deems necessary concerning
(i) the lack of material adverse effect of the amendment on Owners and (ii) the fact that the
amendment will not affect the tax status of interest with respect to the Certificates. Any such
supplemental agreement or amendments thereto shall become effective as provided in Section 10.02
hereof.
(b) Without Consent. This Trust Agreement and the rights and obligations ofthe
Owners, and the Lease and the rights and obligations of the parties thereto, may be modified or
amended at any time by a supplemental agreement or amendments thereto, with the prior written
consent of the Insurer (so long as the Insurer is not in default in its payment obligations under the
Insurance Policy) without the consent of any such Owners, but only to the extent permitted by law
and only:
(i) to add to the covenants and agreements ofthe City hereunder,
(ii) to cure, correct or supplement any ambiguous or defective provision
contained herein or therein,
(iii) in regard to matters arising hereunder or thereunder, as the parties
hereto or thereto may deem necessary or desirable (which may be based upon
opinions as provided in Section 9.03(b)), shall not adversely affect the interest of the
Owners or the Insurer,
(iv) to substitute the Leased Premises, or a portion thereof, in accordance
with Sections 3.5 and 7.12 ofthe Lease,
(v) to make such additions, deletions or modifications as may be
necessary or appropriate to assure the exclusion from gross income for federal
39
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income tax purposes of the interest component of Lease Payments and the interest
payable with respect to the Certificates,
(vi) to add to the rights of the Trustee,
(vii) to provide for the execution and delivery of Additional Certificates in
accordance with the provisions of Section 2.12 hereof.
No such modification or amendment, however, shall modify any of the rights or obligations of the
Trustee without its written assent thereto. Any such supplemental agreement shall become effective
upon execution and delivery by the parties hereto or thereto as the case may be.
Section 10.02. Procedure for Amendment with Written Consent of the Owners. This Trust
Agreement or the Lease may be amended by supplemental agreement as provided in this Section
10.02 in the event the consent of the Owners is required pursuant to Section 10.01(a) hereof. A copy
of such supplemental agreement, together with a request to the Owners for their consent thereto, shall
be mailed by the Trustee to each Owner of a Certificate at his address as set forth in the Certificate
registration books maintained pursuant to Section 2.09 hereof, but failure to receive copies of such
supplemental agreement and request so mailed shall not affect the validity of the supplemental
agreement when assented to as in this Section provided.
Such supplemental agreement shall not become effective unless there shall be filed with the
Trustee the written consent of the Owners of at least a majority in aggregate principal amount of the
Certificates then Outstanding (exclusive of Certificates disqualified as provided in Section 10.03
hereof) and notices shall have been mailed as hereinafter in this Section provided. Any such consent
shall be binding upon the Owner of the Certificate giving such consent and on any subsequent Owner
(whether or not such subsequent Owner has notice thereof) unless such consent is revoked in writing
by the Owner giving such consent or a subsequent Owner by filing such revocation with the Trustee
prior to the date when the notice hereinafter in this Section provided for has been mailed.
After the Owners of the required percentage of Certificates shall have filed their consent to
such supplemental agreement, the Trustee shall mail a notice to the Owners of the Certificates in the
manner hereinbefore provided in this Section for the mailing of such supplemental agreement, stating
in substance that such supplemental agreement has been consented to by the Owners of the required
percentage of Certificates and will be effective as provided in this Section (but failure to mail copies
of said notice shall not affect the validity of such supplemental agreement or consents thereto). A
record, consisting of the papers required by this Section to be filed with the Trustee, shall be proof of
the matters therein stated until the contrary is proved. The Trustee may obtain and conclusively rely
on an opinion of counsel with regard to such matters.
Section 10.03. Disqualified Certificates. Certificates owned or held by or for the account of
the City or the Authority or by any person directly or indirectly controlled or controlled by, or under
direct or indirect common control with tlle City or the Authority (except any Certificates held in any
pension or retirement fund) shall not be deemed Outstanding for the purpose of any vote, consent,
waiver or other action or any calculation of Outstanding Certificates provided for in this Trust
Agreement, and shall not be entitled to vote upon, consent to, or take any other action provided for in
this Trust Agreement.
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The City or the Trustee may adopt appropriate regulations to require each Owner, before his
consent provided for in this Article X shall be deemed effective, to reveal if the Certificates as to
which such consent is given are disqualified as provided in this Section 10.03 hereof. Upon request
of the Trustee, the City and Authority shall specify to the Trustee those Certificates disqualified
pursuant to this Section and the Trustee may conclusively rely on such certificate.
Section 10.04. Effect of Supplemental Agreement. From and after the time any
supplemental agreement becomes effective pursuant to this Article X, this Trust Agreement or the
Lease, as the case may be, shall be deemed to be modified and amended in accordance therewith, the
respective rights, duties and obligations of the parties hereto or thereto and all Owners of Certificates
Outstanding, as the case may be, shall thereafter be determined, exercised and enforced hereunder
subject in all respects to such modification and amendment, and all the terms and conditions of any
supplemental agreement ,hall be deemed to bp r"rt of trlP terms "nn conditions of this Trust
Agreement or the Lease, as the case may be, for any and all purposes.
Section 10.05. Endorsement or Replacement of Certificates Delivered After Amendments.
The Trustee may determine that Certificates delivered after the ,effective date of any action taken as
provided in this Article X shall bear a notation, by endorsement, in fOlm approved by the Trustee, as
to such action. In that case, upon demand of the Owner of any Outstanding Certificate at such
effective date and presentation of his Certificate for such purpose at the Principal Office, a suitable
notation shall be made on such Certificate. The Trustee may determine that new Certificates, so
modified as in the opinion of the Trustee is necessary to conform to such Owner's action, shall be
prepared, executed and delivered. In that case, upon demand of the Owner of any Certificate then
Outstanding, such new Certificate shall be exchanged in the Principal Office without cost to such
Owner, for a Certificate of the same character then Outstanding, upon surrender of such Certificate.
Section 10.06. Amendatorv Endorsement of Certificates. Subject to Section 10.01 hereof,
the provisions ofthis Article X shall not prevent an Owner ITom accepting any amendment as to the
particular Certificates held by him, provided that due notification thereof is made on such
Certificates.
Section 10.07. Copies of Amendments Delivered to Rating Agencies. Copies of any
modifications or amendments to this Agreement, the Lease, the Site Lease or the Assigrunent
Agreement shall be delivered by the City to any rating agency then rating the Certificates at least 10
days prior to the effective date thereof.
ARTICLE XI
COVENANTS; NOTICES
Section 11.0 I. Compliance With and Enforcement of the Lease. The City covenants and
agrees with the Owners to perform all obligations and duties imposed on it under the Lease. The
Authority covenants and agrees with the Owners to perform all obligations and duties imposed on it
under the Lease.
The City will not do or permit anything to be done, or omit or refrain from doing anything, in
any case where any such act done or permitted to be done, or any such omission of or refraining from
action, would or might be a ground for cancellation or termination of the Lease by the Authority
thereunder. The Authority and the City, immediately upon receiving or giving any notice,
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communication or other document in any way relating to or affecting their respective estates, or
either of them, in the Leased Premises, which mayor can in any manner affect such estate of the
City, will deliver the same, or a copy thereof, to the Trustee.
Section 11.02. Pavment of Taxes. The City shall pay all taxes as provided in Section 7.7(b)
ofthe Lease.
Section 11.03. Observance of Laws and Regulations. The City will well and truly keep,
~bserve and perform all valid and lawful obligations or regulations now or hereafter imposed on it by
contract, or prescribed by any law of the United States, or of the State, or by any officer, board or
commission having jurisdiction or control, as a condition of the continued enjoyment of any and
every right, privilege or franchise now owned or hereafter acquired by the City, including its right to
exist and c~rry nn hminp<< "< " municipal corporation to the end that such rights, privileges and
franchises shall be maintained and preserved, and shall not become abandoned, forfeited or in any
marmer impaired.
Section 11.04. Prosecution and Defense of Suits. The City shall promptly, and also upon
request of the Trustee, the Insurer or any Owner, from time to time take such action as may be
necessary or proper to remedy or cure any defect in or cloud upon the title to the Leased Premises,
whether now existing or hereafter developing and shall prosecute all such suits, actions and other
proceedings as may be appropriate for such purpose.
Section 11.05. City Budgets. In accordance with Section 4.7 of the Lease, the City
Representative shall certify to the Trustee on or before August I of each year that the City has
included all Lease Payments (other than Lease Payments of advance rental), Additional Payments
due under the Lease in the Fiscal Year covered by its annual budget and the amount so included. If
the City fails to certify that it has included all such Lease Payments and Additional Payments in such
annual budget, the Trustee shall promptly provide the City written notice specifying that the City has
failed to observe and perform its covenant and agreement in such Section 4.7 and requesting that
such failure be remedied within 30 days, or such failure shall constitute an Event of Default under
Section 9.1 (b) of the Lease. The Trustee shall forward a copy of such notice to the Authority and to
the Insurer. Upon receipt of such notice, the City shall notify the Trustee of the proceedings
proposed to be taken by the City, and shall keep the Trustee advised of all proceedings thereafter
taken by the City.
Section 11.06. Further Assurances. The Authority and the City will make, execute and
deliver any and all such further resolutions, instruments and assurances as may be reasonably
necessary or proper to carry out the intention or to facilitate the performance of this Agreement, and
for the better assuring and confirming unto the Owners the rights and benefits provided herein.
Section 11.07. Continuing Disclosure. The City hereby covenants and agrees that it will
comply with and carry out all of the provisions of the Continuing Disclosure Agreement.
Notwithstanding any other provision of this Trust Agreement, failure of the City to comply with the
Continuing Disclosure Agreement shall not be considered an Event of Default hereunder; however,
any Owner or Beneficial Owner may take such actions as may be necessary and appropriate,
including seeking mandate or specific performance by court order, to cause the City to comply with
its obligations under this Section and the Continuing Disclosure Agreement.
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ARTICLE XII
LIMITATION OF LIABILITY
Section 12.01. Limited Liability of the Citv. Except for the payment of Lease Payments,
Additional Payments and Prepayments when due in accordance with the Lease and the performance
of the other covenants and agreements of the City contained herein and in the Lease, the City shall
have no obligation or liability to any of the other parties hereto or to the Owners with respect to this
Trust Agreement or the terms, execution, delivery or transfer of the Certificates, or the distribution of
Lease Payments to the Owners by the Trustee.
Section 12.02. No Liability of the Citv or Authority for Trustee Performance. Except as
expr~..ly provirJprJ hprpin. npither the City nor the Authority shall have any obligation or liability to
any other parties hereto or to the Owners with respect to the performance by the Trustee of any duty
imposed upon it under this Trust Agreement.
(a) No Investment Advice. The Trustee shall have no obligation or responsibility
for providing information to the Owners concerning the investment character of the Certificates.
(b) Sufficiency of this Trust Agreement or Lease Pavments. The Trustee makes
no representations as to the validity or sufficiency of the Certificates, shall incur no responsibility in
respect thereof, other than in connection with the duties or obligations herein or in the Certificates
assigned to or imposed upon it. The Trustee shall not be responsible or liable for the sufficiency or
enforceability of the Lease, the Site Lease or the Assignment Agreement. The Trustee shall not be
liable for the sufficiency or collection otany Lease I'ayments or other moneys required to be paid to
it under the Lease (except as provided in this Trust Agreement), its right to receive moneys pursuant
to said Lease, or the value of or title to the Leased Premises.
(c) Actions of Authority and City. The Trustee shall have no obligation or
liability to any of the other parties or the Owners with respect to this Trust Agreement or failure or
refusal of any other paliy to perform any covenant or agreement made by any of them under this
Trust Agreement or the Lease, but shall be responsible solely for the performance of the duties and
obligations expressly imposed upon it hereunder as provided in Section 9.05.
(d) Recitals and Agreements of Authority and City. The recitals of facts,
covenants and agreements herein and in the Certificates contained shall be taken as statements,
covenants and agreements of the City or the Authority (as the case may be), and the Trustee assumes
no responsibility for the correctness ofthe same.
Section 12.03. Limitation of Rights to Parties and Certificate Owners. Nothing in this Trust
Agreement or in the Certificates expressed or implied is intended or shall be construed to give any
person other than the City, the Authority, the Trustee, the Insurer and the Owners, any legal or
equitable right, remedy or claim under or in respect of this Trust Agreement or any covenant,
condition or provision hereof; and all such covenants, conditions and provisions are and shall be for
the sole and exclusive benefit of the City, the Authority, the Trustee, the Insurer and the Owners.
Section 12.04. No Liability of Authority to the Owners. Except as expressly provided
herein, the Authority shall not have any obligation or liability to the Owners with respect to the
payment when due of the Lease Payments by the City or with respect to the observance or
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perfonnance by the City of the other agreements, conditions, and covenant imposed upon the City by
the Lease or by this Trust Agreement.
ARTICLE XIII
EVENTS OF DEFAULT AND REMEDIES OF CERTIFICATE OWNERS
Section 13.01. Assignment of Rights. The parties hereto acknowledge that pursuant to the
Assignment Agreement the Authority has transferred, assigned and set over to the Trustee for the
benefit of the Owners, certain of the Authority's rights under the Lease.
Section 13.02. Events of Default.
(a) Remedies. If an Event of Default shall happen, then, and in each and every
such case during the continuance of such Event of Default, the Trustee may exercise any and all
remedies available pursuant to law or granted pursuant to the Lease; provided, however, that
notwithstanding anything herein or in the Lease to the contrary, THERE SHALL BE NO RIGHT
UNDER ANY CIRCUMSTANCES TO ACCELERATE THE MATURITIES OF THE
CERTIFICATES OR OTHERWISE TO DECLARE ANY LEASE PAYMENTS NOT THEN IN
DEF AUL T TO BE IMMEDIATELY DUE AND PAYABLE; provided further that so long as the
Insurer shall not be in default in its payment obligations under the Insurance Policy, the Insurer shall
control all remedies upon an Event of Default. Section 9.2 of the Lease is hereby incorporated by
reference.
(b) Actual Knowledge. The Trustee shall not be deemed to have knowledge of
any Event of Default unless and until the trust officer responsible for the administration of this Trust
Agreement shall have actual knowledge thereof, or shall have received written notice thereof at the
Principal Office.
Section 13.03. Ap1Jlication of Funds. All moneys received by the Trustee pursuant to any
right given or action taken under the provisions of this At1icle XIII or of Article IX of the Lease,
shall be deposited into the Lease Payment Fund and be applied by the Trustee after payment of all
amounts due and payable under Sections 9.06 and 9.07 hereof and Section 4.11 of the Lease in the
following order upon presentation of the Certificates, and the stamping thereon of the payment if
only partially paid, or upon the surrender thereof iffully paid -
First, Costs and Expenses: to the payment ofthe costs, fees and expenses of the
Trustee in declaring such Event of Default and in perfonning its duties hereunder, including
reasonable compensation to its agents, attorneys and counsel and then to any such amounts incurred
by the Owners;
Second, Interest: to the payment to the persons entitled thereto of all installments of
interest then due in the order of the maturity of such installment, and, ifthe amount available shall
not be sufficient to pay in full any installment or installments maturing on the same date, then to the
payment thereof ratably according to the amounts due thereon, to the persons entitled thereto,
without any discrimination or preference;
Third, Principal: to the payment to the persons entitled thereto of the unpaid principal
with respect to any Certificates which shall have become due, whether at maturity or by call for
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prepayment, in the order oftheir due dates, with interest on the overdue principal and interest at a
rate equal to the rate paid with respect to the Certificates and, if the amount available shall not be
sufficient to pay in full all the amounts due with respect to the Certificates on any date, together with
such interest, then to the payment thereof ratably, according to the amounts of principal due on such
date to the persons entitled thereto, without any discrimination or preference; and
Fourth, Insurer: to the extent not included in clauses First, Second or Third above, to
the payment of all amounts then due to the Insurer, as certified in writing to the Trustee.
Section 13.04. Institution of Legal Proceedings. If one or more Events of Default shall
happen and be continuing, with the prior written consent of the Insurer, the Trustee may, and upon
the written request of the Owners of a majority in principal amount of the Certificates then
n"t,t"nc1ing, "nc1 "pnn heine: inclemnifiecl to its satisfaction therefor. shall. proceed to protect or
enforce its rights or the rights of the Owners by a suit in equity or action at law, either for the specific
performance of any covenant or agreement contained herein or in the Lease, or in aid of the
execution of any power herein granted, or by mandamus or other appropriate proceeding for the
enforcement of any other legal or equitable remedy as the Trustee shall deem most effectual in
support of any of its rights or duties hereunder; provided that such written request shall not be
otherwise than in accordance with provisions of law and this Trust Agreement and that the Trustee
shall have the right to decline to follow any such written request if the Trustee shall be advised by
counsel that the action or proceeding so requested may not be taken lawfully or if the Trustee in good
faith shall determine that the action or proceeding so requested would be unjustly prejudicial to the
Certificate Owners not a party to such written request or expose the Trustee to liability. In no event
shall counsel to the Trustee be deemed counsel to the Owners, and any communications between the
Trustee and its counsel shall be deemed confidential and privileged.
Section 13.05. Non-Waiver. Nothing in this Article XIII or in any other provision of this
Trust Agreement or in the Certificates shall affect or impair the obligation of the City to payor
prepay the Lease Payments as provided in the Lease. So long as the Insurer is not in default in its
payment obligations under the Insurance Policy, the Trustee shall not waive any default or breach of
duty or contract hereunder without the prior written consent of the Insurer. No delay or omission of
the Trustee or of any Owner of any of the Certificates to exercise any right or power arising upon the
happening of any Event of Default shall impair any such right or power or shall be construed to be a
waiver of any such Event of Default or an acquiescence therein, and every power and remedy given
by this Article XIII to the Trustee or to the Owners may be exercised from time to time and as often
as shall be deemed expedient by the Trustee or the Owners.
Section 13.06. Remedies Not Exclusive. No remedy herein conferred upon or reserved to
the Trustee or to the Owners is intended to be exclusive of any other remedy, and every such remedy
shall be cumulative and shall be in addition to every other remedy given hereunder or now or
hereafter existing, at law or in equity or by statute or otherwise.
Section 13.07. Power of Trustee to Control Proceedings. Subject to the Insurer's right to
control all remedies upon an Event of Default, in the event that the Trustee, upon the happening of an
Event of Default, shall have taken any action, by judicial proceedings or otherwise, pursuant to its
duties hereunder, whether upon its own discretion, upon the request of the Insurer, or upon the
request of the Owners of a majority in principal amount of the Certificates then Outstanding, it shall
have full power, in the exercise of its discretion for the best interest of the Owners of the Certificates,
with respect to the continuance, discontinuance, withdrawal, compromise, settlement or other
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disposal of such action; provided, however, that the Trustee shall not, unless there no longer
continues an Event of Default, discontinue, withdraw, compromise or settle, or otherwise dispose of
any litigation pending at law or in equity, if at the time there has been filed with it a written request
signed by the Owners of at least a majority in principal amount of the Outstanding Certificates
hereunder opposing such discontinuance, withdrawal, compromise, settlement or other disposal of
such litigation.
Section 13.08. Limitation on Certificate Owners' Right to Sue. No Owner of any Certificate
executed hereunder shall have the right to institute any suit, action or proceeding at law or in equity,
for any remedy under or upon this Trust Agreement, unless (a) such Owner shall have previously
given to the Trustee written notice of the occurrence of an Event of Default under the Lease; (b) so
long as the Insurer is not in default in its payment obligations under the Insurance Policy, such
Owner .hilll h~"e obt~ined the lns'lrer's coment to s'lch imtit'Jtion; (c) the Omners of ~ majority ;'1
aggregate principal amount of all the Certificates then Outstanding shall have made written request
upon the Trustee to exercise the powers hereinbefore granted or to institute such action, suit or
proceeding in its own name; (d) said Owners shall have tendered to the Trustee reasonable indemnity
against the costs, expenses and liabilities to be incurred in compliance with such request; (e) the
Trustee shall have refused or omitted to comply with such request for a period of 60 days after such
written request shall have been received by, and said tender of indemnity shall have been made to,
the Trustee; and (t) there shall have been a default in the payment of such Owner's proportionate
interest in the Lease Payments as the same become due.
Such notification, request, tender of indemnity, refusal or omission, and default are hereby
declared, in every case, to be conditions precedent to the exercise by any Owner of any remedy
hereunder; it being understood and intended that no one or more Owners shall have any right in any
malliler whatever by his or their action to enforce any right under this Trust Agreement, except in the
malliler herein provided and for the equal benefit of all Owners of the Outstanding Certificates.
The right of any Owner of any Certificate to receive payment of said Owner's proportionate
interest in the Lease Payments as the same become due, or to institute suit for the enforcement of
such payment, shall not be impaired or affected without the consent of such Owner, notwithstanding
the foregoing provisions ofthis Section or any other provision of this Trust Agreement.
Section 13.09. Agreement to Pav Attornevs' Fees and Expenses. In the event any party to
this Trust Agreement should default under any of the provisions hereof and the nondefaulting party
should employ attorneys or incur other expenses for the collection of moneys or the enforcement or
observance of any obligation or agreement on the part of the defaulting party contained herein, the
defaulting party agrees that it will on demand therefor pay to the nondefaulting party the reasonable
fees of such attorneys and such other expenses so incurred by the nondefaulting party.
Section 13.10. Insurer's Rights. Anything in this Trust Agreement to the contrary
notwithstanding, upon the occurrence and continuance of an Event of Default, the Insurer shall be
entitled to control and direct the enforcement of all rights and remedies granted to the Owners or the
Trustee for the benefit ofthe Owners under this Trust Agreement.
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ARTICLE XIV
MISCELLANEOUS
Section 14.0 I. Defeasance.
(a) Methods. If and when any Outstanding Certificates shall be paid and
discharged in anyone or more ofthe following ways:
(i) Pavment or Prepavment: by well and truly paying or causing
to be paid the principal, interest and prepayment premiums (if any) with
respect to such Certificates Outstanding, as and when the same become due
and payable;
(ii) Cash: if prior to maturity and having given at least thirty (30)
days prior written notice of prepayment by depositing with the Trustee, in
trust, concurrent with the giving of such notice, an amount of cash which
(together with cash then on deposit in the Lease Payment Fund and the
Reserve Fund together with the interest to accrue thereon, in the event of
payment or provision for payment of all Outstanding Certificates) is sufficient
to pay such Certificates Outstanding, including all principal and interest and
premium, if any; or
(iii) Government Obligations: by irrevocably depositing with the
Trustee, in trust, Government Obligations together with cash, if required, in
such amount as will, in the opinion of an independent certified public
accountant, together with interest to accrue thereon (and, in the event of
payment or provision for payment of all Outstanding Certificates, moneys
then on deposit in the Lease Payment Fund and the Reserve Fund together
with the interest to accrue thereon), be fully sufficient to pay and discharge
such Certificates (including all principal and interest represented thereby and
prepayment premiums if any) at or before their maturity or prepayment date;
and all other amounts due hereunder have been paid in full, then, notwithstanding that any
Certificates shall not have been surrendered for payment, all obligations of the Authority, the Trustee
and the City with respect to such Certificates shall cease and terminate, except only the obligation of
the City and the Authority to comply with the provisions of Sections 8.07 and 8.08 hereof and the
obligation of the Trustee to payor cause to be paid, from Lease Payments paid by or on behalf of the
City from funds deposited pursuant to paragraphs (ii) and (iii) of this Section, to the Owners of the
Certificates not so surrendered and paid all sums due with respect thereto, and in the event of
deposits pursuant to paragraphs (ii) and (iii) of this Section, the Certificates shall continue to
represent direct and proportionate interests of the Owners thereof in Lease Payments under the Lease.
Notwithstanding anything herein to the contrary, in the event that the principal and/or interest
with respect to the Certificates shall be paid by the Insurer pursuant to the Insurance Policy, the
Certificates shall remain Outstanding for all purposes, not be defeased or otherwise satisfied and not
be considered paid by the City, and the assigrunent and pledge of the Lease Payments and all
covenants, agreements and other obligations of the City to the Owners shall continue to exist and
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shall run to the benefit of the Insurer, and the Insurer shall be subrogated to the rights of such
Owners.
(b) Surplus Monevs. Any funds held by the Trustee, at the time of payment or
provision for payment of all Outstanding Certificates pursuant to the one of the procedures described
in paragraphs (a) (i) through (a)(iii) of this Section, which are not required for the payment to be
made to the Owners, shall be paid over to the City, after the payment of any amounts due to the
Trustee pursuant to Sections 9.06 and 9.07 hereof, any amounts due and owing to the Insurer, and
any other Additional Payments due under the Lease.
(c) Surviving Provisions. Notwithstanding the satisfaction and discharge hereof,
the Trustee shall retain such rights, powers and privileges hereunder as may be necessary or
cnmlenient fnr the p"yment of the principal interest and prepayment premium, if anv, on the
Certificates and for the registration, transfer and exchange of the Certificates.
(d) Opinions and Reports. Prior to any defeasance becoming effective under this
Section, the City shall cause to be delivered (i) an executed copy of a report, addressed to the
Trustee, the City and the Insurer, in form and substance acceptable to the City and the Insurer of a
nationally recognized firm of certified public accountants, verifying that the Government Obligations
and cash, if any, satisfy the requirements of Section 14.01(a) above, (ii) a copy of the escrow deposit
agreement entered into in connection with such defeasance, which escrow deposit agreement shall be
in form and substance acceptable to the Insurer, and (iii) a copy of an opinion of Special Counsel,
dated the date of such defeasance and addressed to the Trustee, the City and the Insurer, in form and
substance acceptable to the City and the Insurer, to the effect that such Certificates are no longer
Outstanding under the Trust Agreement.
Section 14.02. Non-Presentment of Certificates. In the event any Certificate shall not be
presented for payment when the principal with respect thereto becomes due, either at maturity, or at
the date fixed for prepayment thereof, if moneys sufficient to pay such Certificate shall have been
deposited in the Prepayment Fund or Lease Payment Fund, as applicable, all liability of the City and
the Trustee to the Owner thereof for payment of such Certificate shall forthwith cease, terminate and
be completely discharged, and thereupon it shall be the duty of the Trustee to hold such moneys,
without liability for interest thereon, for the benefit of the Owner of such Certificate who shall
thereafter be restricted exclusively to such moneys, for any claim of whatever nature on his or her
part under this Trust Agreement or on, or with respect to, said Certificate.
Any moneys so deposited with and held by the Trustee not so applied to the payment of
Certificates within two (2) years after the date on which the same shall have become due shall be
paid by the Trustee to the City, free from the trusts created by this Trust Agreement. Prior to
forwarding any such moneys to the City, the Trustee may publish notice of its intention to transfer
such funds in The Bond Buyer or another financial newspaper of general circulation in New York,
New York. In addition, Trustee shall be indemnified from and against any and all liabilities to third
parties resulting from its actions under this Section. Thereafter, Owners shall be entitled to look only
to the City for payment, and then only to the extent of the amount so repaid by the Trustee. The City
shall not be liable for any interest on the sums paid to it pursuant to this section and shall not be
regarded as a trustee or trustees of such money.
DOCSOC/13 77669v3/024036-004 5
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Section 14.03. Acquisition of Certificates bv City. All Certificates acquired by the City,
whether by purchase, gift or otherwise, shall be surrendered by the City to the Trustee for
cancellation.
Section 14.04. Records. The Trustee shall keep complete and accurate records of a1l moneys
received and disbursed by it under this Trust Agreement, which sha1l be available for inspection by
the City, the Authority and any Owner, or the agent of any of them, at any time during regular
business hours upon reasonable prior notice.
Section 14.05. Notices. Except as specifically provided otherwise in this Trust Agreement,
all written notices to be given under this Trust Agreement shall be given by mail or personal delivery
to the party entitled thereto at its address set forth below, or at such address as the party may provide
to the other pnty it! writ;ng frnm time tn time Notice shall be deemed to have been received upon
the earlier of actual receipt or five Business Days after deposit in the United States maiJ, in certified
form, postage prepaid or, in the case of personal delivery, upon delivery to the address set forth
below:
If to the City:
City of Chula Vista
276 Fourth A venue
Chula Vista, California 91910
Attention: Director of Finance
If to the Authority:
Chula Vista Public Financing Authority
276 Fourth Avenue
Chula Vista, California 91910
Attention: Executive Director
If to the Trustee:
U.S. Bank National Association
633 W Fifth Street, 24th Floor
Los Angeles, California 90071
Attention: Corporate Trust Services
If to S&P:
Standard & Poor's Ratings Services
5 5 Water Street
New York, New York 10004
Attention: Public Finance Department
If to the Insurer:
Section 14.06. Governing Law. This Trust Agreement shall be construed and governed in
accordance with the laws of the State.
Section 14.07. Binding Effect: Successors. This Trust Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and assigns. Whenever in this Trust
Agreement either the Authority, the City or the Trustee is named or referred to, such reference shall
be deemed to include the successors or assigns thereof and all the covenants and agreements in this
Trust Agreement contained by or on behalf of the Authority, the City or the Trustee shall bind and
inure to the benefit of the respective successors and assigns thereof whether so expressed or not.
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Section 14.08. Execution in Counterparts. This Trust Agreement may be executed in several
counterparts, each of which shall be an original and all of which shall constitute but one and the same
agreement.
Section 14.09. Headings. The headings or titles of the several Articles and Sections hereof,
and any table of contents appended to copies hereof, shall be solely for convenience of reference and
shall not affect the meaning, construction or effect of this Trust Agreement. All references herein to
"Articles", "Sections" and other subdivisions are to the corresponding Articles, Sections or
subdivisions of this Trust Agreement; and the words "herein," "hereof," "hereunder" and other words
of similar import refer to this Trust Agreement as a whole and not to any particular Article, Section
or subdivision hereof.
Spd;nn 14 10 W"iver of Notice Whenever in this Trust Agreement the giving of notice by
mail or otherwise is required, the giving of such notice may be waived in writing by the person
entitled to receive such notice and in any case the giving or receipt of such notice shall not be a
condition precedent to the validity of any action taken in reliance upon such waiver.
Section 14.11. Separability of Inyalid Provisions. In case anyone or more of the provisions
contained in this Trust Agreement or in the Certificates shall for any reason be held to be invalid,
illegal or unenforceable in any respect, then such invalidity, illegality or unenforceability shall not
affect any other provision of this Trust Agreement, and this Trust Agreement shall be construed as if
such invalid or illegal or unenforceable provision had never been contained herein. The parties
hereto hereby declare that they would have entered into this Trust Agreement and each and every
other section, paragraph, sentence, clause or phrase hereof and authorized the delivery of the
Certificates pursuant thereto irrespective of the fact that anyone or more sections, paragraphs,
sentences, clauses or phrases of this Trust Agreement may be held illegal, invalid or unenforceable.
DOCSOC/13 77 669v3/024036-0045
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date and year
first above written.
ATTEST:
Secretary
ATTEST:
City Clerk
DOCSOC/13 77669v3/02403 6-0045
U.S. BANK NATIONAL ASSOCIATION, as Trustee
By:
Its: Authorized Officer
CHULA VISTA PUBLIC FINANCING
AUTHORITY
By:
Its: Executive Director
CITY OF CHULA VISTA
By:
Its: Director of Finance
S-1
7-133
EXHIBIT A
FORM OF CERTIFICATE
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY (AS DEFINED IN THE TRUST
AGREEMENT) TO THE REGISTRAR FOR REGISTRATION OF TRANSFER,
EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS
IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH
OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
FEPFF"FNTATTVF OF THF DFPOSTTORY\ ANY TRANSFER. PLEDGE. OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE
& CO., HAS AN INTEREST HEREIN.
UNITED STATES OF AMERICA
STATE OF CALIFORNIA
COUNTY OF SAN DIEGO
CITY OF CHULA VISTA
2010 CERTIFICATE OF P ARTICIP ATION
(CAPITAL FACILITIES REFUNDING PROJECTS)
Evidencing the Fractional Interest of the Owner Hereof
In Lease Payments to be Made by
CITY OF CHULA VISTA
As Rental for Certain Project
Pursuant to a Lease/Purchase Agreement With
CHULA VISTA PUBLIC FINANCING AUTHORITY
DELIVERY DATE
16,2009
CUSIP
INTEREST RATE
%
MATURITY DATE
1,20_
REGISTERED OWNER:
CEDE & CO.
PRINCIPAL AMOUNT:
AND NO/IOO DOLLARS
THIS IS TO CERTIFY THAT the registered owner named above, or registered assigns, as
the Registered Owner of this Certificate of Participation (the "Certificate") is the owner of a
fractional and undivided interest in the right to receive certain Lease Payments and Prepayments
thereof under and as defined in that certain Lease/Purchase Agreement, dated as of February I, 2010
(the "Lease"), by and between the Chula Vista Public Financing Authority, a joint exercise of powers
authority duly organized and existing under the laws of the State of California (the "Authority') and
DOCSOC/1 3 77669v 3/024036-0045
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the City of Chula Vista, a municipal corporation and a chartered city organized and existing under
and by virtue of the laws and Constitution of the State of California (the "City"), which Lease
Payments and Prepayments and certain other rights and interests under the Lease have been assigned
to U.S. Bank National Association, as trustee (the "Trustee").
The Registered Owner of this Certificate is entitled to receive, subject to the terms of the
Lease, on the maturity date specified above, the principal amount specified above, representing a
portion of the Lease Payments designated as principal coming due during the preceding twelve
months, and to receive on September 1, 20 I 0, and semiannually thereafter on March I and
September I of each year (the "Payment Dates") until payment in full of said portion of principal, the
Registered Owner's portion of the Lease Payments designated as interest coming due during the six
months immediately preceding each of the Payment Dates provided that interest with respect hereto
shall be payable from the Payment Date ne.xt prpcp~;ng tnp ~"tp nf pxpc"tinn nf this Certificate
unless (i) this Certificate is executed during the period from the day after the fifteenth day of the
month proceeding a Payment Date (the "Record Date") to and including such Payment Date, in
which event interest shall be payable from such Payment Date, or (ii) unless this Certificate is
executed on or prior to August 15, 2010, in which event interest shall be payable from the Dated
Date hereof. The portion of the Lease Payments designated as interest is computed on the basis of a
360-day year of twelve 30-day months and is the result of the multiplication of the aforesaid portion
of the Lease Payments designated as principal by the rate per annum identified above. Said amounts
are payable in lawful money of the United States of America. The amount representing principal
payable at maturity or upon prepayment in whole or in part is payable to the Registered Owner upon
presentation and surrender of this Certificate at the Principal Office. The amounts representing
interest are payable by check mailed by the Trustee by first class mail to the Registered Owner hereof
as of the Record Date preceding the Payment Date at his address as it appears on the registration
books of the Trustee. Interest with respect to any Certificates may, at the option of any Owner of
Certificates in an aggregate principal amount of$I,OOO,OOO or more evidenced by the written request
of such Owner to the Trustee, be paid to such Owner by wire transfer to the bank and account
number on file with the Trustee as of the Record Date.
This Certificate is one of the $ aggregate principal amount of 20 I 0 Certificates
of Participation (Capital Facilities Refunding Projects) (the "Certificates") which have been executed
and delivered by the Trustee pursuant to the terms of a Trust Agreement, dated as of February I,
20 I 0 (the "Trust Agreement"), by and among the Trustee, the Authority and the City. The City is
authorized to enter into the Lease and the Trust Agreement under the Constitution and laws of the
State of California. Reference is hereby made to the Lease and the Trust Agreement (copies of
which are on file at the Principal Office) for a description of the terms on which the Certificates are
delivered, the rights thereunder of the Registered Owners of the Certificates, the rights, duties and
immunities of the Trustee and the rights and obligations of the City under the Lease, to all of the
provisions of which Lease and Trust Agreement the Registered Owner of this Certificate, by
acceptance hereof, assents and agrees.
The City is obligated to pay Lease Payments from any source of legally available funds, and
the City has covenanted in the Lease to make the necessary annual appropriations therefor. The
obligation of the City to pay the Lease Payments does not constitute an obligation of the City for
which the City is obligated to levy or pledge any fOIm of taxation or for which the City has levied or
pledged any form oftaxation. The obligation ofthe City to pay Lease Payments does not constitute a
debt of the City, the State of California or any of its political subdivisions within the meaning of any
Constitutional or statutory debt limitation or restriction. The City's obligation to pay Lease
DOCSOC/13 77669v3/02403 6-0045
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Payments may be completely or partially abated during any period in which, by reason of
noncompletion of the Project by the date specified in the Lease or material damage, destruction, title
defect, or taking by eminent domain or condemnation there is substantial interference with the use
and right of possession by the City of the Leased Premises. Failure of the City to pay Lease
Payments during any such period shall not constitute a default under the Lease, the Trust Agreement
or this Certificate.
To the extent and in the manner permitted by the terms of the Trust Agreement, the
provisions of the Trust Agreement may be amended by the parties thereto with the written consent of
the Insurer so long as the Insurer is not in default in its payment obligations under that Insurance
Policy and the Registered Owners of at least a majority in aggregate principal amount of the
Certificates then Outstanding, and may be amended, with the consent of the Insurer and without such
cons€nt afine Registered OU'TIET5 '1pr1PT f'f'rt::lin rirrl1m.:,;,t::tnr:e:.:,;" hlIt in no event such that the interests
of the Registered Owners of the Certificates are adversely affected. No such modification or
amendment shall (i) extend or have the effect of extending the fixed maturity of any Certificate or
reducing the interest rate with respect thereto or extending the time of payment of interest, or
reducing the amount of principal thereof or reducing any premium payab1e upon the prepayment
thereof, without the express consent of the Registered Owner of such Certificate, or (ii) reduce or
have the effect of reducing the percentage of Certificates required for the affirmative vote or written
consent to an amendment or modification of the Lease, (iii) modify any of the rights or obligations of
the Trustee without its written assent thereto or (iv) amend the section of the Trust Agreement
dealing with permitted amendments thereof without the prior written consent of the owners of all
Certificates and the Insurer so long as the Insurer is not in default in its payment obligations under
that Insurance Policy.
This Certificate is transferable by the Registered Owner hereof, in person or by his duly
authorized attorney, at the Principal Office, but only in the manner, subject to the limitations and
upon payment of the charges provided in the Trust Agreement and upon surrender and cancellation
of this Certificate. Upon such transfer a new Certificate or Certificates, of an authorized
denomination or denominations, for the same aggregate principal amount, maturity and interest rate,
will be delivered to the transferee. This Certificate also may be exchanged for a like aggregate
principal amount of Certificates of other authorized denominations as prescribed in the Trust
Agreement. The City, the Authority, and the Trustee may treat the Registered Owner hereof as the
absolute owner hereof for all purposes whether or not this Certificate shall be overdue, and the City,
the Authority and the Trustee shall not be affected by any notice to the contrary.
The Trustee shall not be required to transfer any Certificate selected for prepayment or be
required to transfer any Certificate during the period in which the Trustee is selecting Certificates for
prepayment.
The Certificates are subject to prepayment, on any date, in whole or in part, from Net
Proceeds deposited by the Trustee in the Prepayment Fund established under the Trust Agreement at
least forty-five (45) days prior to the date fixed for prepayment, at a prepayment price equal to the
principal amount thereof together with accrued interest to the dated fixed for prepayment, without
premIUm.
The Certificates maturing on or after September I, 20_ are subject to prepayment prior to
maturity in whole or in part on any date on or after I, 20_, at the option of the City, in the
event the City exercises its option under the Lease to prepay all or a portion of the principal
DOCSOC11377669v3/024036-0045
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component of the Lease Payments (in integral multiples of $5,000 but not in a principal amount of
less than $20,000), at the following prepayment prices, expressed as a percentage of the principal
component to be prepaid), plus accrued interest to the date fixed for prepayment:
Prepayment Date
Prepayment Price
I, 20_ through
I, 20_ through
I, 20_ and thereafter
,20_
,20_
%
The Certificates maturing September I, 20_ (the "20_ Term Certificates") are subject to
prepayment in part by lot, on September I in each of the following years from sinking account
payments as set forth below at a prepayment price equal to the principal amount thereof to be
prepaid, without premium; provided, however, that if some but not all of the 20_ Tenn Certificates
have been prepaid pursuant to an optional or extraordinary prepayment, the total amount of all future
sinking account payments will be reduced pro rata by the aggregate principal amount of the 20_
Term Certificates so prepaid. In addition, in lieu of prepayment thereof, the 20_ Term Certificates
may be purchased by the City and tendered to the Trustee pursuant to the provisions hereof.
Mandatory Prepayment
Date
(September I)
Sinking Account
Payment
20
20 *
$
* Final Maturity
The Certificates maturing September I, 20_ (the "20_ Term Certificates") are subject to
prepayment in part by lot, on September I in each of the following years from sinking account
payments as set forth below at a prepayment price equal to the principal amount thereof to be
prepaid, without premium; provided, however, that if some but not all of the 20_ Term Certificates
have been prepaid pursuant to an optional or extraordinary prepayment, the total amount of all future
sinking account payments will be reduced pro rata by the aggregate principal amount of the 20_
Term Certificates so prepaid. In addition, in lieu of prepayment thereof, the 20_ Term Certificates
may be purchased by the City and tendered to the Trustee pursuant to the provisions hereof.
Mandatory Prepayment
Date
(September I)
Sinking Account
Payment
20
20
20 *
$
* Final Maturity
DOCSOC/13 77669v 3/024036-0045
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The Certificates maturing September 1, 20_ (the "20_ Term Certificates") are subject to
prepayment in part by lot, on September 1 in each of the following years from sinking account
payments as set forth below at a prepayment price equal to the principal amount thereof to be
prepaid, without premium; provided, however, that if some but not all of the 20_ Term Certificates
have been prepaid pursuant to an optional or extraordinary prepayment, the total amount of all future
sinking account payments will be reduced pro rata by the aggregate principal amount of the 20_
Term Certificates so prepaid. In addition, in lieu of prepayment thereof, the 20_ Term Certificates
may be purchased by the City and tendered to the Trustee pursuant to the provisions hereof.
Mandatory Prepayment
Date
(September 1)
Sinking Account
Pavment
20
20
20
20
20 *
$
* Final Maturity
As provided in the Trust Agreement, notice of prepayment shall be mailed, not less than 30
nor more than 60 days before the prepayment date, to the Registered Owner of this Certificate, but
neither failure to receive such notice nor any defect in the notice so mailed shall affect the sufficiency
of the proceedings for prepayment. If this Certificate is called for prepayment and payment is duly
provided therefor as specified in the Trust Agreement, interest shall cease to accrue with respect
hereto from and after the date fixed for prepayment.
The City has certified that all acts, conditions and things required by the statutes of the State
of California and the Trust Agreement to exist, to have happened and to have been performed
precedent to and in connection with the execution and delivery of this Certificate do exist, have
happened and have been performed in regular and due time, form and manner as required by law, and
that the Trustee is duly authorized to execute and deliver this Certificate, and that the amount of this
Certificate, together with all other Certificates executed and delivered under the Trust Agreement, is
not in excess of the amount of Certificates authorized to be executed and delivered thereunder.
Terms used herein which are not otherwise defined shall have the respective meanings
assigned thereto in the Trust Agreement.
The Trustee has no obligation or liability to the Registered Owners to make payments of
principal or interest with respect to this Certificate except from Lease Payments paid to the Trustee
and from the various funds and accounts established under the Trust Agreement. The Trust
Agreement provides that the recitals of facts, covenants and agreements in this Certificate shall be
taken as statements, covenants and agreements of the City, and the Trustee assumes no responsibility
for the con'ectness of the same. The Trustee has executed this Certificate solely in its capacity as
Trustee under the Trust Agreement and not in its individual or personal capacity.
DOCSOCIl3 77 669v3/024036.0045
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IN WITNESS WHEREOF, this Certificate has been executed and delivered by U.S. Bank
National Association, as Trustee, acting pursuant to the Trust Agreement.
Date of Execution:
,2010
U.S. BANK NATIONAL ASSOCIATION,
as Trustee
By:
Its: Authorized Officer
DOCSOC/13 77669v3/02403 6-004 5
A-6
7-139
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
(print or typewrite name, address, including postal zip code, and social
security or other identifying number of Transferee)
the within Certificate and all rights thereunder, and hereby irrevocably constitutes and appoints
to transfer the within Certificate on the books kept for registration thereof, with full power of
substitution in the premises.
Dated:
Signature Guaranteed
NOTICE: Signature(s) guarantee should be made
by a guarantor institution participating in the
Securities Transfer agents Medallion Program or
such other guarantee program acceptable to the
Trustee.
NOTICE: The signature to this assignment must
correspond with the name as it appears upon the
face of the within Certificate in every particular,
without alteration or enlargement or any change
whatever.
DOCSOCIl3 77 669v 3/024036-0045
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EXHIBIT B-1
FORM OF WRITTEN DELIVERY COST REQUISITION
U.S. Bank National Association, as Trustee
RE: Disbursement from the Project Fund pursuant to Section 3.03 of the Trust Agreement related
to the City ofChula Vista 2010 Certificates of Participation (Capital Facilities Refunding
Projects), dated as of February 1,2010 (the "Agreement"), by and among you as trustee, the
Chula Vista Public Financing Authority and the City of Chula Vista (the "City")
REQUISITION NO. _
You are hereby instructed to pay to the City, or to at
$ as a Delivery Cost from the Project Fund as provided in
Section 3.03 of the Agreement. This Delivery Cost has been properly incurred, is a proper charge
against the Project Fund and has not been the basis of any previous disbursements.
The amount remaining in the Project Fund, together with interest earnings on the Project
Fund plus investment earnings on other funds that will be transferred into the Project Fund, will, after
payment of the amount set forth in this requisition, be sufficient to pay all remaining Delivery Costs
and Project Costs as presently estimated.
Very truly yours,
City Representative
DOCSOC/1 377669v3/024036-0045
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EXHIBIT B-2
FORM OF WRITTEN PROJECT COST REOUISITION
U.S. Bank National Association, as Trustee
RE: Disbursement from the Project Fund pursuant to Section 3.03 of the Trust Agreement related
to the City ofChula Vista 2010 Certificates of Participation (Capital Facilities Refunding
Projects), dated as of February I, 2010 (the "Agreement"), by and among you as trustee, the
ChuIa Vista Public Financing Authority and the City of Chula Vista (the "City")
REQUISITION NO._
You are hereby instructed to pay to the City, or to at
$ as a Project Cost from the Project Fund as provided in Section 3.03 of the Agreement.
This Project Cost has been properly incurred, is a proper charge against the Project Fund and has not
been the basis of any previous disbursements.
The amount remaining in the Project Fund, together with other moneys available to the City
and together with interest earnings on the Project Fund plus investment earnings on other funds that
will be transferred into the Project Fund, will, after payment of the amount set forth in this
requisition, be sufficient to pay all remaining Delivery Costs and Project Costs as presently
estimated.
Very truly yours,
City Representative
DOCSOC/ 13 77669v3/024036-0045
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THE ATTACHED AGREEMENT HAS BEEN REVIEWED
AND APPROVED AS TO FORM BY Stradling, Y occa, Carlson & Rauth
AND WILL BE
FORMALLY SIGNED UPON APPROVAL BY
THE CITY COUNCIL
len, Special Counsel
Stradling, occa, Carlson & Rauth,
A Professional Corporation
Dated:
t! {)..,,J JD
/ /
ESCROW AGREEMENT
BETWEEN THE CITY OF CHULA VISTA AND
U.S. Bank National Association FOR Escrow Services
7-143
ESCROW AGREEMENT
by and among
CHULA VISTA PUBLIC FINANCING AUTHORITY
and the
CITY OF CHULA VISTA
and
U.S. BANK NATIONAL ASSOCIATION,
as Escrow Bank
Dated as of February 1,2010
Relating to
$
CITY OF CHULA VISTA
2010 CERTIFICATES OF PARTICIPATION
(CAPITAL FACILITIES REFUNDING PROJECTS)
DOCSOC/1378952v2/024036-0045
7-144
ESCROW AGREEMENT
THIS ESCROW AGREEMENT, dated as of February 1,2010 (this "Agreement"), is by and
among the Chula Vista Public Financing Authority, a public body, corporate and politic, duly
organized and existing under the laws of the State of California (the "Authority"); the City of Chula
Vista, a municipal corporation and chartered city duly organized and existing under and pursuant to
the Constitution and laws of the State of California (the "City") and U.S. Bank National Association,
acting in its capacity as escrow bank (the "Escrow Bank") pursuant to this Agreement;
WIT N E SSE T H:
WHEREAS, the City and the Authority have heretofore entered into that certain
Lease/Purchase Agreement, dated as of October 1, 2000 (the "2000 Lease Agreement") pursuant to
which the Authority agreed to lease to the City certain land and parking improvements located
thereon; and
WHEREAS, the City has previously caused the delivery of its $25,525,000 Chula Vista
Certificates of Participation Series A of 2000 (2000 Financing Project) (the "2000 Certificates"),
which 2000 Certificates were secured by lease payments under and pursuant to the terms of the 2000
Lease Agreement; and
WHEREAS, the City desires to prepay the 2000 Lease Agreement and to defease and prepay
the 2000 Certificates; and
WHEREAS, the City has entered into certain leases and authorized the sale of the 2010
Refunding Certificates of Participation (Capital Facilities Refunding Projects) (the "Certificates") in
order to refinance the 2000 Certificates; and
WHEREAS, the City proposes to make the deposit of moneys and Investment Securities to
secure the payment of Lease Payments under the 2000 Lease Agreement, and to appoint the Escrow
Bank as its agent for the purpose of applying said deposit to the payment of prior payments in
accordance with the instructions provided by this Escrow Agreement and of applying said prior
payments to the payment and prepayment of the 2000 Certificates in accordance with the Trust
Agreement, dated as of October 1, 2000 (the "2000 Trust Agreement"), by and among the City, the
Authority and U.S. Bank National Association as successor trustee to U.S. Bank Trust National
Association (the "Prior Trustee"), and the Escrow Bank desires to accept said appointment; and
WHEREAS, the City wishes to make such a deposit with the Escrow Bank and to enter into
this Escrow Agreement for the purpose of providing the terms and conditions for the deposit and
application of amounts so deposited; and
WHEREAS, the Escrow Bank has full powers to act with respect to the irrevocable escrow
and trust created herein and to perform the duties and obligations to be undertaken pursuant to this
Escrow Agreement; and
WHEREAS, the Authority and the City have determined that 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
DOCSOC/1378952v2/024036-0045
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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, in consideration of the mutual covenants and agreements herein
contained, the City, the Authority and the Escrow Bank agree as follows:
SECTION 1. Deposit of Moneys.
(a) As used herein, the term "Investment Securities" means the investment
seCUrItIes set forth in Schedule A hereto which constitute direct noncallable nonprepayable
obligations issued by the United States Treasury. The City hereby deposits with the Escrow Bank
$ rprrp<pnting $ of the net sale proceeds of the Certificates, and $
transferred from the Lease Payment Fund with respect to the 2000 Certificates and $
transferred ITom the Reserve Fund with respect to the 2000 Certificates, to be held in irrevocable
escrow by the Escrow Bank separate and apart from other funds of the City, the Authority, the
Escrow Bank, and the Prior Trustee, in a fund hereby created and established and to be known as the
"Escrow Fund", and to be applied solely as provided in this Agreement. Such moneys are at least
equal to an amount sufficient to purchase the principal amount of Investment Securities set forth in
Schedule A hereto; and the aggregate principal amount of Investment Securities described in
Schedule A hereto, together with all interest due or to become due on such Investment Securities,
plus $ held as cash, will be sufficient to pay on March 1,2010 interest then due with respect
to the 2000 Certificates and to pay on , the prepayment premium, principal and
interest of the 2000 Certificates maturing on and after September 1,2010.
(b) The Escrow Bank hereby acknowledges
independent certified public accountants, dated
Investment Securities (the "Verification Report").
receipt of the written opinion of
, 20 I 0 relating to the
SECTION 2. Use and Investment of Moneys. The Escrow Bank acknowledges receipt of
the moneys described in Section 1 and agrees:
(a) immediately to invest $ of the monies described in Section I(a)
hereof in the Investment Securities all as set forth in Schedule A hereto and to deposit such
Investment Securities in the Escrow Fund and to hold $_ uninvested as cash in the Escrow
Fund; and
(b)
Section 3 hereof.
to make the payments required under Section 3 hereof at the times set forth in
SECTION 3. Refunding of2000 Certificates. The City and the Authority hereby direct the
Escrow Bank to complete any and all actions necessary in connection with the prepayment and
defeasance of all of the 2000 Certificates pursuant to the 2000 Trust Agreement on , 2010.
SECTION 4. Performance of Duties. The Escrow Bank agrees to perform the duties set
forth herein.
SECTION 5. Reinvestment. Upon written direction of the City, the Escrow Bank may
reinvest any uninvested amounts held as cash under this Agreement in noncallable nonprepayable
DOCSOC/ 13 78952v2/024036-0045
2
7-146
obligations which are direct obligations issued by the United States Treasury or obligations which are
unconditionally guaranteed as to full and timely payment by the United States of America provided
(i) the amounts of and dates on which the anticipated transfers from the Escrow Fund to the paying
agent for the payment of the principal or prepayment price, and interest evidenced and represented by
the 2000 Certificates will not be diminished or postponed thereby, (ii) the Escrow Bank shall receive
the unqualified opinion of nationally recognized municipal bond attorneys to the effect that such
reinvestment will not adversely affect the exclusion from gross income of interest with respect to the
Certificates or the 2000 Certificates, (iii) the Escrow Bank shall receive from an independent
certified public accountant a certification that, immediately after such reinvestment, the principal of
and interest on obligations in the Escrow Fund will, together with other cash on deposit in the
Escrow Fund available for such purposes, be sufficient without reinvestment to pay, when due, the
principal or prepayment price and interest on the 2000 Certificates; and (iv) the Escrow Bank shall
[~~~jv~ <ill Uj-lilliull of ll<itionall) [Ecogr,izca bORa COURSe! that sueh reinvgstment i~ permissible 'mc!pr
this Agreement. Except as provided in this Section 5 and Section 8 hereof, the Escrow Bank shall
have no power or duty to invest any funds held under this Agreement or to sell, transfer or otherwise
dispose of the moneys or Investment Securities held hereunder. In no event shall the Escrow Bank
invest or reinvest monies held under this Agreement in mutual funds or unit investment trusts.
SECTION 6. Indemnity. The City hereby assumes liability for, and hereby agrees (whether
or not any of the transactions contemplated hereby are consummated) to indemnify, protect, save and
keep harmless the Escrow Bank and its respective successors, assigns, directors, agents, employees
and servants, from and against any and all liabilities, obligations, losses, damages, penalties, claims,
actions, suits, costs, expenses and disbursements (including reasonable legal fees and disbursements)
of whatsoever kind and nature which may be imposed on, incurred by, or asserted against, the
Escrow Bank at any time (whether or not also indemnified against the same by the City or any other
person under any other agreement or instrument, but without double indemnity) in any way relating
to or arising out of the execution, delivery and performance of this Agreement, the establishment
hereunder of the Escrow Fund, the acceptance of the funds and securities deposited therein, the
purchase of the Investment Securities, the retention of the Investment Securities or the proceeds
thereof and any payment, transfer or other application of moneys or securities by the Escrow Bank
in accordance with the provisions of this Agreement; provided, however, that the City and the
Authority shall not be required to indemnify the Escrow Bank against the Escrow Bank's own
negligence or willful misconduct or the negligent or willful misconduct of the Escrow Bank's
respective agents and employees or the breach by the Escrow Bank of the terms of this Agreement.
In no event shall the City, the Authority or the Escrow Bank be liable to any person by reason of the
transactions contemplated hereby other than to each other as set forth in this Section 6. The
indemnities contained in this Section 6 shall survive the termination of this Agreement.
SECTION 7. Responsibilities of the Escrow Bank. The Escrow Bank and its respective
successors, assigns, agents and servants shall not be held to any personal liability whatsoever, in tort,
contract or otherwise, in connection with the execution and delivery of this Agreement, the
establishment of the Escrow Fund, the acceptance of the moneys or securities deposited therein, the
purchase of the Investment Securities, the retention of the Investment Securities or the proceeds
thereof, the sufficiency of the Investment Securities to accomplish the defeasance of the 2000
Certificates or any payment, transfer or other application of moneys or obligations by the Escrow
Bank in accordance with the provisions of this Agreement or by reason of any non-negligent act,
non-negligent omission or non-negligent error of the Escrow Bank made in good faith in the conduct
of its duties. The recitals of fact contained in the "Whereas" clauses herein shall be taken as the
statements of the City and the Authority, and the Escrow Bank assumes no responsibility for the
DOCSOC/1378952v2/024036-0045
3
7-147
cOITectness thereof. The Escrow Bank makes no representation as to the sufficiency of the
Investment Securities to accomplish the defeasance of the 2000 Certificates or to the validity of this
Agreement as to the City or the Authority and, except as otherwise provided herein, the Escrow Bank
shall incur no liability with respect thereto. The Escrow Bank shall not be liable in connection with
the performance of its duties under this Agreement except for its own negligence, willful misconduct
or default, and the duties and obligations of the Escrow Bank shall be determined by the express
provisions of this Agreement. The Escrow Bank may consult with counsel, who mayor may not be
counsel to the City, and in reliance upon the written opinion of such counsel shall have full and
complete authorization and protection with respect to any action taken, suffered or omitted by it in
good faith in accordance therewith. Whenever the Escrow Bank shall deem it necessary or desirable
that a matter be proved or established prior to taking, suffering, or omitting any action under this
Agreement, such matter may be deemed to be conclusively established by a certificate signed by an
~UlllUliLoJ uffic~l ofthc Cit).
The Escrow Bank shall mcur no liability for losses ansmg from any investment made
pursuant to this Agreement.
The liability of the Escrow Bank to make the payments required by this Agreement shall be
limited to the moneys and Investment Securities in the Escrow Fund.
No provision of this Agreement shall require the Escrow Bank to expend or risk its own
funds or otherwise incur any financial liability in the performance or exercise of any of its duties
hereunder, or in the exercise of its rights or powers.
The Escrow Bank shall not be liable for the accuracy of any calculations provided herein.
Any company into which the Escrow Bank may be merged or converted or with which it may
be consolidated or any company resulting ITom any merger, conversion or consolidation to which it
shall be a party or any company to which the Escrow Bank may sell or transfer all or substantially all
of its corporate trust business shall be the successor to the Escrow Bank without the execution or
filing of any paper or further act, anything herein to the contrary notwithstanding.
The City shall pay the Escrow Bank full compensation for its duties under this Agreement,
including out-of-pocket costs such as publication costs, prepayment or prepayment expenses, legal
fees and other costs and expenses relating hereto and, in addition, fees, costs and expenses relating to
the purchase of any Investment Securities after the date hereof. Under no circumstances shall
amounts deposited in the Escrow Fund be deemed to be available for said purposes.
SECTION 8. Substitution of Investment Securities. At the written request of the City and
upon compliance with the conditions hereinafter set forth, the Escrow Bank shall have the power to
sell, transfer, request the prepayment or otherwise dispose of some or all of the Investment Securities
in the Escrow Fund and to substitute noncallable nonprepayable obligations (the "Substitute
Investment Securities") constituting direct obligations issued by the United States Treasury or
obligations which are unconditionally guaranteed as to full and timely payment by the United States
of America. The foregoing may be effected only if: (i) the substitution of Substitute Investment
Securities for the Investment Securities (or Substitute Investment Securities) occurs simultaneously;
(ii) the amounts of and dates on which the anticipated transfers from the Escrow Fund to the trustee
for the payment of the principal and/or prepayment price and/or interest on 2000 Certificates will not
be diminished or postponed thereby; (iii) the Escrow Bank shall receive the unqualified opinion of
DOCSOC/1378952v2/024036-0045
4
7-148
nationally recognized bond counsel to tbe effect that such disposition and substitution would not
adversely affect the exclusion from gross income of interest on 2000 Certificates, and that the
conditions of this Section 8 as to the disposition and substitution have been satisfied and that the
substitution is permitted by this Agreement; and (iv) the Escrow Bank sha1l receive from an
independent certified public accountant a certification that, immediately after such transaction, the
principal of and interest on the Substitute Investment Securities in the Escrow Fund will, together
with other cash on deposit in tbe Escrow Fund available for such purpose, be sufficient without
reinvestment to pay, when due, tbe principal or prepayment price and interest on 2000 Certificates.
Any cash from the sale of Investment Securities (including U.S. Treasury Securities) received from
the disposition and substitution of Substitute Investment Securities pursuant to this Section 8 to the
extent such cash will not be required, in accordance with the 2000 Trust Agreement and this
Agreement, and as demonstrated in the certification described in (iv) above, at any time for the
paYlIlclIl whCJl JuG ufthc principal or prepayment price or interest on 2000 Certificates sh~11 bp poirl
to the City as received by the Escrow Bank free and clear of any trust, lien, pledge or assignment
securing such 2000 Certificates or otherwise existing under this Agreement. Any other substitution
of securities in the Escrow Fund not described in tbe previous sentence must satisfy the requirements
of this Section 8. In no event sha1l the Escrow Bank invest or reinvest monies held under this
Agreement in mutual funds or unit investment trusts.
SECTION 9. Irrevocable Instructions as to Notice. The Escrow Bank hereby
acknowledges that upon the funding ofthe Escrow Fund as provided in this Agreement, the receipt of
the opinions described in Section I(b) of this Agreement and the giving of irrevocable instructions to
publish and mail as provided in the Irrevocable Instructions and Request to Prior Trustee attached
hereto as Schedule B it is in receipt of the items constituting a1l of the conditions precedent to the
defeasance ofthe 2000 Certificates under tbe 2000 Trust Agreement.
SECTION 10. Amendments. This Agreement is made for the benefit of the City and the
holders from time to time of the 2000 Certificates and it sha1l not be repealed, revoked, altered or
amended witbout tbe written consent of a1l such holders, the Escrow Bank, the City and the Insurer,
as defined in the Trust Agreement for the Certificates; provided, however, but only after tbe receipt
by the Escrow Bank of an opinion of nationally recognized bond counsel that tbe exclusion from
gross income of interest evidenced and represented by the 2000 Certificates and the Certificates will
not be adversely affected for federal income tax purposes, the City, the Authority and the Escrow
Bank may, with the consent of the Insurer, without the consent of, or notice to, such holders, amend
this Agreement or enter into such agreements supplemental to tbis Agreement as shall not adversely
affect the rights of such holders and as sha1l not be inconsistent with the terms and provisions of this
Agreement for anyone or more of the following purposes: (i) to cure any ambiguity or formal defect
or omission in this Agreement; (ii) to grant to, or confer upon, the Escrow Bank for tbe benefit of the
holders of the 2000 Certificates any additional rights, remedies, powers or authority that may
lawfully be granted to, or conferred upon, such holders or the Escrow Bank; and (iii) to include under
this Agreement additional funds, securities or properties. The Escrow Bank shall be entitled to rely
conclusively upon an unqualified opinion of nationally recognized bond counsel with respect to
compliance with this Section 10, including the extent, if any, to which any change, modification,
addition or elimination affects the rights of the holders of the 2000 Certificates or that any instrument
executed hereunder complies with the conditions and provisions of this Section 10.
SECTION 11. Term. This Agreement shall commence upon its execution and delivery and
shall terminate on the later to occur of either (i) the date upon which the 2000 Certificates have been
DOCSOCIl3 7895 2v2/024036-0045
5
7-149
paid in accordance with this Agreement, or (ii) the date upon which no unclaimed moneys remain on
deposit with the Escrow Bank and all amounts owed to the Escrow Bank shall have been paid in full.
SECTION 12. Compensation. The Escrow Bank shall receive its reasonable fees and
expenses as previously agreed to; provided, however, that under no circumstances shall the Escrow
Bank be entitled to any lien nor will it assert a lien whatsoever on any moneys or obligations in the
Escrow Fund for the payment of fees and expenses for services rendered by the Escrow Bank under
this Agreement.
SECTION 13. Resignation or Removal of Escrow Bank.
(a) The Escrow Bank may resign by giving 30 days prior written notice in
writing to th" rity Th" P,cmw Rank mal be removed (]) by Ii) filing with the City and the Escrow
Bank of an instrument or instruments executed by the holders of at least 51 % in aggregate principal
amount of the 2000 Cettificates then remaining unpaid, (ii) the City delivering written notice to the
Escrow Bank, or (2) by a court of competent jurisdiction for failure to act in accordance with the
provisions of this Agreement upon application by the City or the holders of 5% in aggregate principal
amount ofthe 2000 Certificates then remaining unpaid.
(b) No resignation or removal of the Escrow Bank shall become effective until a
successor Escrow Bank has been appointed hereunder and until the cash and investments held under
this Agreement are transferred to the new Escrow Bank. The City or the holders of a majority in
principal amount of the 2000 Certificates then remaining unpaid may, by an instrument or
instruments filed with the City, appoint a successor Escrow Bank who shall supersede any Escrow
Bank theretofore appointed by the City. If no successor Escrow Bank is appointed by the City or the
holders of such 2000 Certificates then remaining unpaid, within 45 days after notice of any such
resignation or removal, the holder of any such 2000 Certificates or any retiring Escrow Bank may
apply to a court of competent jurisdiction for the appointment of a successor Escrow Bank.
SECTION 14. Severability. If anyone or more of the covenants or agreements provided in
this Agreement on the palt of the City or the Escrow Bank to be performed should be deternlined by
a court of competent jurisdiction to be contrary to law, such covenants or agreements shall be null
and void and shall be deemed separate from the remaining covenants and agreements herein
contained and shall in no way affect the validity of the remaining provisions of this Agreement.
SECTION 15. Counterparts. This Agreement may be executed in several counterparts, all or
any of which shall be regarded for all purposes as one original and shall constitute and be but one and
the same instrument.
SECTION 16. Governing Law. This Agreement shall be construed under the laws of the
State of California.
SECTION 17. Holidays. If the date for making any payment or the last date for performance
of any act or the exercising of any right, as provided in this Agreement, shall be a legal holiday or a
day on which banking institutions in the city in which is located the principal office of the Escrow
Bank are authorized by law to remain closed, such payment may be made or act performed or right
exercised on the next succeeding day not a legal holiday or a day on which such banking institutions
are authorized by law to remain closed, with the same force and effect as if done on the nominal date
provided in this Agreement, and no interest shall accrue for the period after such nominal date.
DOCSOC/13 7S952v2l02403 6-0045
6
7-150
SECTION 18. Assignment. This Agreement shall not be assigned by the Escrow Bank or
any successor thereto without the prior written consent ofthe City.
SECTION 19. Moodv's and Standard & Poor's. The City agrees to provide to Moody's
Investors Service, 99 Church Street, New York, New York 10007, Attention: Public Finance Rating
Desk/Refunded Certificates, and Standard & Poor's Ratings Group, 25 Broadway, New York, New
York 10004, prior notice of each amendment entered into pursuant to Section 9 hereof and a copy of
such proposed amendment, and to forward a copy (as soon as possible) of 0) each amendment hereto
entered into pursuant to Section 9 hereof, and (ii) any action relating to severability or contemplated
by Section 13 hereof.
DOCSOC/1378952v2/024036-0045
7
7-151
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by
their duly authorized officers and attested as ofthe date and year first written above.
CITY OF CHULA VISTA, CALIFORNIA
By:
Its: Director of Finance
ATTEST:
City Clerk
CHULA VISTA PUBLIC FINANCING
AUTHORITY
By:
Its: Executive Director
ATTEST:
Secretary
U.S. BANK NATIONAL ASSOCIATION,
as Escrow Bank
By:
Its: Authorized Officer
DOCSOC/1378952v2/024036-0045
SOl
7-152
SCHEDULE A
"Investment Securities" are defined to be, United States Treasury Securities - State and Local
Government Series (the "SLGS").
Settlement
Date
Principal
Interest Rate
Maturity
Date
ESCROW ACCOUNT CASH FLOW
DOCSOC/13 78952v21024036-004 5
Schedule A-I
7-153
SCHEDULE B
IRREVOCABLE INSTRUCTIONS AND
REQUEST TO PRIOR TRUSTEE
,2003
U.S. BANK NATIONAL ASSOCIATION
ESCROW AGREEMENT
RELATING TO A REFUNDING OF
$ CITY OF CHULA VISTA
CERTIFICATES OF PARTICIPATION, SERIES A OF 2000
(2000 FINANCING PROJECT)
(the "2000 Certificates")
Ladies and Gentlemen:
Ladies and Gentlemen:
As trustee under that certain Trust Agreement, dated as of October 1, 2000 (the "2000 Trust
Agreement"), you are hereby notified of the irrevocable election of the Chula Vista Public Financing
Authority (the "Authority") and the City of Chula Vista (the "City") to deposit funds concurrently
with this notice to pay interest on the 2000 Certificates on March 1, 2010, and to prepay on
, 2010 all of the 2000 Certificates maturing on and after September 1, 20 I O.
You are hereby irrevocably instructed to mail, as provided in the 2000 Trust Agreement,
notice of prepayment of the 2000 Certificates scheduled to be prepaid prior to maturity.
You are hereby further irrevocably instructed to mail, as soon as practicable, a notice to the
holders of the 2000 Certificates (in the form annexed hereto as Exhibit X) that the deposit of
investment securities and moneys has been made with U.S. Bank National Association as Escrow
Bank and that the projected withdrawals from such escrow have been calculated by on behalf of the
City and the Authority to be adequate to pay the principal, prepayment price and interest evidenced
and represented by said 2000 Certificates outstanding as such become due or are subject to
prepayment.
DOCSOC!l378952v2l024036-0045
Schedule B-1
7-154
CITY OF CHULA VISTA
By:
Its: City Manager
CHULA VISTA PUBLIC FINANCING
AUTHORITY
By:
Its: Executive Director
R~~~ijJl ~~lului'\ikdgcd aJ,d
consented to:
U.S. BANK NATIONAL ASSOCIATION
as Trustee
By:
Authorized Officer
DOCSOC/ 13 78952v2/024036-0045
Schedule B-2
7-155
EXIllBIT X
NOTICE OF DEFEASANCE OF
$ CITY OF CHULA VISTA
CERTIFICATES OF PARTICIPATION SERIES A OF 2000
(2000 FINANCING PROJECT)
(the "2000 Certificates")
Notice is hereby given to the holders of the $ Certificates of Participation
Series A of 2000 (2000 Financing Project) that (i) such 2000 Certificates have been prepaid and
defeased; (ii) there has been deposited with u.S. Bank National Association, as Escrow Bank,
money' "nrl invp,1Tnpnt spcmities as permitted by the Trust Agreement. dated as of October 1, 2000
(the "2000 Trust Agreement"), relating to the 2000 Certificates, the principal of and the interest with
respect thereto will provide moneys which, together with such other moneys deposited with the
Escrow Bank, have been calculated by on behalf of the City and the Authority to be sufficient and
available to pay interest on the 2000 Certificates on March I, 2010, and to prepay on ,
2010 all of the outstanding 2000 Certificates maturing on and after September 1, 2010, at the
applicable prepayment price contained in the Trust Agreement; and (iii) the Escrow Bank has been
irrevocably instructed to prepay all outstanding 2000 Certificates on ,2010.
At least 30 days, but not more than 60 days, prior to , 2010, in accordance with
the terms of the 2000 Trust Agreement, the Trustee will mail a prepayment notice for the 2000
Certificates.
If you have any questions regarding this notice, please contact the Account Manager,
, at L-J
Dated this _ day of
,2010.
CITY OF CHULA VISTA
U.S. BANK NATIONAL ASSOCIATION, as
Trustee
DOCSOC/1378952v2l024036-0045
X-I
7-156
THE ATTACHED AGREEMENT HAS BEEN REVIEWED
AND APPROVED AS TO FORM BY Stradling, Y occa, Carlson & Rauth
AND WILL BE
FORMALLY SIGNED UPON APPROVAL BY
THE CITY COUNCIL
a
Robert J. I, Special Counsel
Stradling, Yocca, Carlson & Rauth,
A Professional Corporation
Dated:
, / 'JJ /10
/ /
LEASE PURCHASE AGREEMENT
BETWEEN THE CITY OF CHULA VISTA AND
PUBLIC FINANCING AUTHORITY
7-157
Section 1.1.
Section 1.2.
Section 2.1.
Section 2.2.
Section 3.1.
Section 3.2.
Section 3.3.
Section 3.4.
Section 4.1.
Section 4.2.
Section 4.3.
Section 4.4.
Section 4.5.
Section 4.6.
Section 4.7.
Section 4.8.
Section 4.9.
Section 4.10.
Section 4.11.
Section 4.12.
TABLE OF CONTENTS
Page
ARTICLE 1
DEFINITIONS AND EXHIBITS
Definitions and Rules of Construction .............................................................2
Exhibits............................................................................................................. 3
A RTTrT 10 TT
REPRESENTATIONS, COVENANTS AND WARRANTIES
Representations, Covenants and Warranties ofthe City ..................................3
Representations, Covenants and Warranties of the Authority.......................... 5
ARTICLE III
APPLICATION OF PROCEEDS
Deposit of Certificate Proceeds ........................................................................7
Defeasance of 20bo Certificates ....................................................................... 7
Payment of Project and Delivery Costs ............................................................ 7
Further Assurances and Corrective Instruments............................................... 7
ARTICLE IV
AGREEMENT TO LEASE; TERM OF LEASE; LEASE PAYMENTS
Lease....... ............... ..................... .................. ........ .............. ...... ................... ..... 7
Term.................................................................................................................. 7
Extension of Lease Term... ................... ............ .......... ...................... ................ 8
Lease Payments. ....... ....... ......... ................ ........ ......... ..... ............. ....... ..............8
No Withholding ...................... .................. ......... .......... ........................... .......... 9
Fair Rental Value ................ ........ ............... .......... ..................... ........................ 9
Budget and Appropriation ................................................................................9
Assignment of Lease Payments...................................................................... 10
Use and Possession.........................................................................................10
Abatement of Lease Payments and Additional Payments. .............................10
Additional Payments.......................................................................................11
Net-Net-Net Lease ..........................................................................................11
DOCSOC/13 77686v 3/024036-0045
7-158
Section 5.1.
Section 5.2.
Section 5.3.
Section 5. 4.
Section 5.5.
Section 5.6.
Section 5.7.
TABLE OF CONTENTS
(continued)
Page
ARTICLE V
INSURANCE
Public Liability and Leased Premises Damage. .............................................11
Workers' Compensation. ............ ... .......... ....... .... ...... ...... ............. .... ....... ........ 12
Casualty and Theft Insurance. ........................................................................12
Rental Interruption Insurance. .......... 1?
Title Insurance ..... ... .... .......... .............. ......... ..... .... ........ .... ...... ............. ........ ... 13
General Insurance Provisions. ........................................................................13
Cooperation .................. ..................... .......... ..... ..... ........ ............... ........ .......... 14
ARTICLE VI
DAMAGE, DESTRUCTION AND EMINENT DOMAIN; USE OF NET PROCEEDS
Section 6.1.
Section 7.1.
Section 7.2.
Section 7.3.
Section 7.4.
Section 7.5.
Section 7.6.
Section 7.7.
Section 7.8.
Section 7.9.
Section 7.10.
Section 7.11.
Section 7.12.
Section 7.13.
Section 7.14.
Section 7.15.
Section 8.1.
Section 8.2.
Application of Net Proceeds. ............. .................. ........ ................................... 14
ARTICLE VII
COVENANTS WITH RESPECT TO THE LEASED PREMISES
Use ofthe Leased Premises ............................................................................16
Interest in the Leased Premises and the Lease................................................ 16
Option to Purchase......... ...... ....... .............. ..... .......... ........... ....... ........ ........ ..... 16
Quiet Enjoyment...... .......... ............. .......... ........... ......... ... ..... ........... ....... ........ 17
Installation of the City's Personal Property ....................................................17
Access to the Leased Premises .......................................................................17
Maintenance, Utilities, Taxes and Assessments. ............................................17
Modification of the Leased Premises. ............................................................18
Encumbrances; Alternative Financing Methods............................................. 19
Authority's Disclaimer of Warranties .......... ......... ....... ...... ....... ........ ...... ....... 20
The City's Right to Enforce Warranties of Vendors or Contractors ..............20
Substitution or Release ofthe Leased Premises. ............................................20
Compliance with Law, Regulations, Etc. .......................................................21
Environmental Compliance. ........ ........... ....... .... ....... ............ ....... ......... ..........22
Condemnation of Leased Premises............. ......... ........ .... .......... .... ......... ........ 23
ARTICLE VIII
ASSIGNMENT, SUBLEASING AND AMENDMENT
Assignment by the Authority ..........................................................................24
Assignment and Subleasing by the City. ........................................................24
ii
DOCSOCIl377686v3/024036.0045
7-159
Section 8.3.
Section 9.1.
Section 9.2.
Scctiofl 9.3.
Section 9.4.
Section 9.5.
Section 9.6.
Section 9.7.
Section 10.1.
Section 10.2.
Section 10.3.
Section 11.1.
Section 11.2.
Section 11.3.
Section 11.4.
Section 11.5.
EXHIBIT A
EXHIBIT B
EXHIBIT C
EXHIBIT D
EXHIBIT E
TABLE OF CONTENTS
(continued)
Page
Amendments and Modifications ...... .................................... ..... ...... ................ 24
ARTICLE IX
EVENTS OF DEFAULT AND REMEDIES
Events of Default Defined .............................................................................. 25
Remedies on Default ......................................................................................25
No Rem@dy Exclusive ..... . ?7
Agreement to Pay Attorneys' Fees and Expenses ..........................................28
No Additional Waiver Implied by One Waiver..............................................28
Application of the Proceeds from the Re-Lease of the Leased Premises.......28
Trustee and Owners to Exercise Rights..........................................................28
ARTICLE X
PREPAYMENT OF LEASE PAYMENTS
Security Deposit ........ ................ ........ ................ ....................... ........ .............. 28
Extraordinary Prepaym ent .............................................................................. 29
Optional Prepayment.... ......... ............................ ..... ........ ......... ...... ................. 29
ARTICLE XI
MISCELLANEOUS
Notices............................................................................................................ 29
Binding Effect................................................................................................. 29
Severability..................................................................................................... 29
Execution in Counterparts ..............................................................................29
Applicable Law............. ............ .... ............ .... ....... ................ ........ ...... .... .... ..... 29
SCHEDULE OF LEASE PAYMENTS .......................................................A-l
DESCRIPTION OF THE PROPERTY ........................................................B-l
DESCRIPTION OF THE PROJECT ...........................................................C-l
LEASE SUPPLEMENT FORM...................................................................D-l
FORM OF CERTIFICATE OF SUBSTITUTION OR ADDITION
OF PROJECT COMPONENT .....................................................................E-l
iii
DOCSOC/13 77686v 3/024036-004 5
7-160
Recording Requested By:
City of Chula Vista
When Recorded Mail To:
Stradling Y occa Carlson & Rauth
660 Newport Center Drive, Suite 1600
Newport Beach, CA 92660
Attn: Robert J. Whalen
This document is recorded for the benefit of the City of Chula Vista and recording is fee-exempt under 9 27383 of
the Government Code.
LEASE/PURCHASE AGREEMENT
by and between the
CHULA VISTA PUBLIC FINANCING AUTHORITY, as Lessor
and the
CITY OF CHULA VISTA, as Lessee
Dated as of February I, 2010
$
City ofChula Vista
20 I 0 Certificates of Participation
(Capital Facilities Refunding Projects)
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LEASEIPURCHASE AGREEMENT
THIS LEASE/PURCHASE AGREEMENT, dated as of February 1, 2010, by and between
the CHULA VISTA PUBLIC FINANCING AUTHORITY, a joint exercise of powers authority duly
organized and existing under the laws of the State of California, as lessor (the "Authority"), and the
CITY OF CHULA VISTA, a municipal corporation and a chartered city duly organized and existing
under the Constitution and laws of said State, as lessee (the "City");
WITNESSETH:
WHEREAS, the City may enter into leases and agreements relating to real property and
buildings to be used by the City; and
WHEREAS, the Authority and the City wish to provide financing to reimburse the City for
costs previously incurred by the City for the construction, reconstruction, modernization and
equipping of Phase 3 of the City's Civic Center, all as described in Exhibit C hereto (the "Project")
and to refinance the City's outstanding Certificates of Participation Series A of2000 (2000 Financing
Project) by entering into this Lease/Purchase Agreement (the "Lease") and authorizing and directing
the execution and delivery of the City of Chula Vista 20 I 0 Certificates of Participation, (Capital
Facilities Refunding Projects) (the "Certificates"), evidencing fractional interests in Lease Payments
(as defined in the Trust Agreement) to be made by the City under this Lease; and
WHEREAS, the City has entered into a Site Lease of even date herewith (the "Site Lease")
with the Authority under which the City has agreed to lease the real property described in Exhibit B
hereto, including the existing improvements thereon (the "Property"), to the Authority, and which
Site Lease provides that the title to the Property shall vest in the City at the expiration of the Site
Lease (as provided in Section 8 thereof), and contains other terms and conditions as the governing
board of the City deems to be in the best interest of the City; and
WHEREAS, to facilitate the execution and delivery of the Certificates, the City and the
Authority have agreed to enter into this Lease and in consideration of the Lease Payments to be paid
by the City to the Authority hereunder, the Authority will sublease to the City the real property
described in Exhibit B hereto (the "Leased Premises") and will cause the defeasance and prepayment
of the 2000 Certificates and the reimbursement to the City for the costs of the Project; and
WHEREAS, the Authority is authorized pursuant to the laws ofthe State of California and its
formation documents to provide financial assistance to the City by acquiring, constructing and
financing various public facilities, land and equipment and the leasing of facilities, land and
equipment for the use, benefit and enjoyment of the public;
WHEREAS, all acts, conditions and things required by law to exist, to have happened and to
have been performed precedent to and in connection with the execution and entering into of the
Lease do exist, have happened and have been performed in regular and due time, form and manner as
required by law, and the parties hereto are now duly authorized to execute and enter into the Lease;
NOW, THEREFORE, in consideration of the above premises and of the mutual covenants
hereinafter contained and for other good and valuable consideration, the parties hereto agree as
follows:
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ARTICLE I
DEFINITIONS AND EXHIBITS
Section I. I. Definitions and Rules of Construction. Unless the context otherwise requires,
the capitalized terms used herein shall, for all purposes of this Lease, have the meanings specified in
the Trust Agreement related to the Certificates (the "Trust Agreement"), dated as of the date hereof,
by and among BNY Western Trust Company, as Trustee thereunder, the Authority, and the City,
together with any amendments thereof or supplements thereto permitted to be made thereunder; and
the additional terms defined in this Section shall, for all purposes of this Lease, have the meanings
herein specified. Unless the context otherwise indicates, words importing the singular number shall
include the plural number and vice versa. The tenns "hereby," "hereof," "hereto," "herein,"
"1,G!cundcr" and any similar tCffilS, as used in tRis Lease, refer to this lease as a ",hoJe
"Environmental Regulations" shall mean all Laws and Regulations, now or hereafter in
effect, with respect to Hazardous Materials, including, without limitation, the Comprehensive
Environmental Response, Compensation, and Liability Act, as amended (42 U.S.C. Section 960 I, et
~.) (together with the regulations promulgated thereunder, "CERCLA"), the Resource
Conservation and Recovery Act, as amended (42 U.S.c. Section 6901, et g;g.) (together with the
regulations promulgated thereunder, "RCRA"), the Emergency Planning and Community Right-to-
Know Act, as amended (42 U.S.c. Section 11001, etg;g.) (together with the regulations promulgated
thereunder, "Title III"), the Clean Water Act, as amended (33 U.S.c. Section 1321 et g;g.) (together
with the regulations promulgated thereunder, "CWA"), the Clean Air Act, as amended (42 U.S.C.
Section 7401, et g;g.) (together with the regulations promulgated thereunder, "CAA") and the Toxic
Substances Control Act, as amended (15 U.S.C. Section 2601 et g;g.) (together with the regulations
promulgated thereunder, "TSCA"), and any state or local similar Jaws and regulations and any so-
called local, state or federal "superfund" or "superlien" law.
"Interest Component" means the portion of each Lease Payment designated in Exhibit A
hereto as the Interest Component.
"Leased Premises" means the real property including the improvements thereon described in
Exhibit B hereto and subleased by the Authority to the City pursuant hereto.
"Permitted Encumbrances" means, as of any particular time: (i) liens for general ad valorem
taxes and assessments, if any, not then delinquent, or which the City may, pursuant to provisions of
Section 7.7 hereof, permit to remain unpaid; (ii) the Assignment Agreement; (iii) this Lease; (iv) the
Site Lease; (v) any contested right or claim of any mechanic, laborer, materialman, supplier or
vendor filed or perfected in the manner prescribed by law to the extent permitted under
Section 7.8(b) hereof; (vi) easements, rights of way, mineral rights, drilling rights and other rights,
reservations, covenants, conditions, liens or restrictions which exist of record as of the Closing Date,
which the City hereby certifies will not materially impair the use ofthe Leased Premises by the City;
and (vii) easements, rights of way, mineral rights, drilling rights and other rights, reservations,
covenants, conditions or restrictions established following the date ofrecordation of this Lease and to
which [the Insurer,] the Authority, the City and the Trustee consent in writing.
"Principal Component" means the portion of the Lease Payments designated in Exhibit A
hereto as the Principal Component.
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"Proiect" means the capital improvements described in Exhibit C hereto, and any and all
additions or substitutions thereto made as provided in Section 3.5 hereof, and any additional
improvements financed with the proceeds of Additional Certificates.
"Property" means the site described in Exhibit B hereto and the existing improvements
thereon being leased to the Authority by the City pursuant to the Site Lease.
Section 1.2. Exhibits. The following Exhibits are attached to, and by reference made a
part of, this Lease:
Exhibit A: Schedule of Lease Payments to be paid by the City to the Authority, showing the
Lease Payment Date and amount of each Lease Payment.
Exhibit B: Legal Description of the Property.
Exhibit C: General Description of the Project.
Exhibit D: Lease Supplement Form.
Exhibit E: Form of Certificate of Substitution or Addition of Project Component.
ARTICLE II
REPRESENTATIONS, COVENANTS AND WARRANTIES
Section 2.1. Representations. Covenants and Warranties of the Citv. The City represents,
covenants and warrants to the Authority as follows:
(a) Due Organization and Existence. The City is a municipal corporation and a
chartered city duly organized and existing under the Constitution and laws of the State.
(b) Authorization; Enforceabilitv. The Constitution and laws of the State
authorize the City to enter into this Lease, the Site Lease, the Trust Agreement and the Continuing
Disclosure Agreement, and to enter into the transactions contemplated by and to carry out its
obligations under all of the aforesaid leases and agreements; the City has duly authorized and
executed all of the aforesaid leases and agreements. This Lease, the Site Lease, the Trust Agreement
and the Continuing Disclosure Agreement constitute the legal, valid and binding obligations of the
City enforceable in accordance with their respective terms, except to the extent limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws or equitable principles affecting
the rights of creditors generally.
(c) No Conflicts or Default; No Liens or Encumbrances. Neither the execution
and delivery of this Lease, the Site Lease, the Continuing Disclosure Agreement or the Trust
Agreement, nor the fulfillment of or compliance with the terms and conditions hereof or thereof, nor
the consummation of the transactions contemplated hereby or thereby, conflicts with or results in a
breach of the terms, conditions or provisions of any restriction or any agreement or instrument to
which the City is now a party or by which the City is bound, or constitutes a default under any of the
foregoing, or results in the creation or imposition of any lien, charge or encumbrance whatsoever
upon any of the property or assets of the City, or upon the Leased Premises except for Permitted
Encumbrances and the pledges contained in the Trust Agreement.
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(d) Execution and Deliverv. The City has duly authorized and executed this
Lease in accordance with the Constitution and laws of the State.
(e) Indemnification of Authority. The City covenants to defend, indemnifY and
hold harmless the Authority and its directors, officers, employees and assigns (collectively, the
"Indemnified Party") against any and all losses, claims, damages or liabilities, joint or several,
including fees and expenses incurred in connection therewith, to which such Indemnified Party may
become subject under any statute or at law or in equity or otherwise in connection with the
transactions contemplated by this Lease, and shall reimburse any such Indemnified Party for any
legal or other expenses incurred by it in connection with investigating any claims against it and
defending any actions, insofar as such losses, claims, damages, liabilities or actions arise out of the
transactions contemplated by this Lease. In particular, without limitation, the City shall and hereby
agrees to indemni~r ~nd ~a.Ue thp. Tnr1p.mnifif'rJ P~rty h::tm11p.~" from :mo ::I2"::Iinst all claims. losses and
damages, including legal fees and expenses, arising out of (i) the use, maintenance, condition or
management of, or from any work or thing done on the Leased Premises by the City, (ii) any breach
or default on the part of the City in the performance of any of its obligations under this Lease, (iii)
any act of negligence ofthe City or of any of its agents, contractors, servants, employees or licensees
with respect to the Leased Premises, (iv) any act of negligence of any assignee or sublessee of the
City with respect to the Leased Premises, or (v) the authorization of payment of the Project Costs by
the City. No indemnification is made under this Section or elsewhere in this Lease for claims, losses
or damages, including legal fees and expenses arising out of the willful misconduct or negligence
under this Lease by the Authority, its directors, officers, agents, employees, successors or assigns.
(f) General Tax and Arbitrage Covenant. The City hereby covenants that,
notwithstanding any other provision of this Lease, it shall not take any action, or fail to take any
action, if any such action or failure to take action would adversely affect the exclusion from gross
income of interest due with respect to the Certificates or any Additional Certificates under
Section 103 of the Internal Revenue Code of 1986, as amended (the "Code"). The City shall not,
directly or indirectly, use or permit the use of proceeds of the Certificates, any Additional
Certificates, the Project, the capital improvements financed and refinanced with proceeds of the 2000
Certificates or the Leased Premises, or any portion thereof, by any person other than a governmental
unit (as such term is used in Section 141 of the Code), in such manner or to such extent as would
result in the loss of exclusion from gross income for federal income tax purposes of interest with
respect to the Certificates or any Additional Certificates.
The City shall not take any action, or fail to take any action, if any such action or failure to
take action would cause the Certificates or any Additional Certificates to be "private activity bonds"
within the meaning of Section 141 of the Code, and in furtherance thereof, shall not make any use of
the proceeds of the Certi'ficates, any Additional Certificates, the Project, the capital improvements
financed and refinanced with proceeds of the 2000 Certificates or the Leased Premises, or any
portion thereof, or any other funds of the City, that would cause the Certificates or any Additional
Certificates to be "private activity bonds" within the meaning of Section 141 of the Code. To that
end, so long as any Certificates or any Additional Certificates are outstanding, the City, with respect
to such proceeds, the Leased Premises, the Project, the capital improvements financed and refinanced
with proceeds of the 2000 Certificates and such other funds, will comply with applicable
requirements of the Code and all regulations of the United States Department of the Treasury issued
thereunder and under Section 103 of the Code, to the extent such requirements are, at the time,
applicable and in effect.
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The City shall not, directly or indirectly, use or permit the use of any proceeds of the
Certificates, any Additional Certificates or other funds of the City, or take or omit to take any action,
that would cause the Certificates or any Additional Certificates to be "arbitrage bonds" within the
meaning of Section 148 of the Code. To that end, the City shall comply with all requirements of
Section 148 of the Code and all regulations of the United States Department of the Treasury issued
thereunder to the extent such requirements are, at the time, in effect and applicable to the Certificates
or any Additional Certificates.
The City shall not make any use of the proceeds of the Certificates, any Additional
Certificates or any other funds of the City, or take or omit to take any other action, that would cause
the Certificates or any Additional Certificates to be "federally guaranteed" within the meaning of
Section 149(b) of the Code.
(g) Floodplain. The City hereby represents that the Leased Premises is not in a
100 year floodplain.
(h) Essentialitv ofPropertv. The City hereby represents that the Leased Premises
is essential for the City's performance of its governmental functions.
(i) Zoning Environmental and Safetv Ordinance Compliance. The City hereby
represents that the Leased Premises complies in all respects with applicable zoning, environmental
and safety ordinances.
U) Title Insurance. The City hereby represents that the Leased Premises is the
same property which is the subject of the AL T A title insurance policy (with western regional
exceptions) issued by First American Title Insurance Company pursuant to Section 5.5 hereof.
Section 2.2. Representations. Covenants and Warranties of the Authority. The Authority
represents, covenants and warrants to the City as follows:
(a) Due Organization and Existence: Enforceability. The Authority is a joint
powers authority duly organized, existing and in good standing under and by virtue of the laws of the
State, has the power to enter into this Lease, the Assignment Agreement, the Site Lease, the Escrow
Agreement and the Trust Agreement; is possessed of full power to own and hold real and personal
property, and to lease and sell the same; and has duly authorized the execution and delivery of all of
the aforesaid leases and agreements. This Lease, the Assignment Agreement, the Site Lease, the
Escrow Agreement and the Trust Agreement constitute the legal, valid and binding obligations of the
Authority, enforceable in accordance with their respective terms, except to the extent limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws or equitable principles
affecting the rights of creditors generally.
(b) No Conflicts or Defaults: No Liens or Encumbrances. Neither the execution
and delivery of this Lease, the Assignment Agreement, the Site Lease, the Escrow Agreement or the
Trust Agreement, nor the fulfillment of or compliance with the terms and conditions hereof or
thereof, nor the consummation of the transactions contemplated hereby or thereby, conflicts with or
results in a breach of the terms, conditions or provisions of the joint powers agreement of the
Authority or any restriction or any agreement or instrument to which the Authority is now a party or
by which the Authority is bound, or constitutes a default under any of the foregoing, or results in the
creation or imposition of any lien, charge or encumbrance whatsoever upon any of the property or
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assets of the Authority, or upon the Leased Premises except by Pennitted Encumbrances and by the
pledge contained in the Trust Agreement.
(c) Execution and Deliverv. The Authority has duly authorized and executed this
Lease in accordance with the laws of the State.
(d) Maintenance of Existence. To the extent pennitted by law, the Authority
agrees that during the tenn hereof it will maintain its existence as a joint powers authority, will not
combine or consolidate with or merge into any other entity or pennit one or more other entities to
consolidate with or merge into it.
(e) General Tax and Arbitrage Covenant. The Authority covenants that,
nOPXlith~tanding ~ny Qtb~r pro"isirm of tbis T f>~<:;:p., it 5h~11 not t~kf> ~ny ~('ti()n if :::Iny <:;:11(':n ::!rt;rm
would adversely affect the exclusion from gross income of interest due with respect to the
Certificates or any Additional Certificates under Section 103 of the Code. To the extent that the
Authority may control the Leased Premises or the proceeds of the Certificates or any Additional
Certificates, the Authority shall not, directly or indirectly, use or penn it the use of proceeds of the
Certificates, any Additional Certificates or the Leased Premises, or any portion thereof, by any
person other than a governmental unit (as such tenn is used in Section 141 of the Code), in such
manner or to such extent as would result in the loss of exclusion ITom gross income for federal
income tax purposes of interest with respect to the Certificates or any Additional Certificates.
The Authority shall not take any action if any such action would cause the Certificates or any
Additional Certificates to be "private activity bonds" within the meaning of Section 141 ofthe Code,
and in furtherance thereof, to the extent that the Authority may control the Leased Premises or the
proceeds of the Certificates or any Additional Certificates, shall not make any use of the proceeds of
the Certificates, any Additional Certificates, the Leased Premises, or any portion thereof, or any other
funds of the City, that would cause the Certificates or any Additional Certificates to be "private
activity bonds" within the meaning of Section 141 of the Code. To that end, so long as any
Certificates or any Additional Certificates are outstanding, to the extent that the Authority may
control the Leased Premises or the proceeds of the Cel1ificates or any Additional Certificates, the
Authority, with respect to such proceeds, the Leased Premises and such other funds, will comply
with applicable requirements of the Code and all regulations of the United States Department of the
Treasury issued thereunder and under Section 103 of the Code, to the extent such requirements are, at
the time, applicable and in effect.
To the extent that the Authority may control the Leased Premises or the proceeds of the
Certificates or any Additional Certificates, the Authority shall not, directly or indirectly, use or
pennit the use of any proceeds of any Certificates or any Additional Certificates, or of the Leased
Premises, or other funds available to it, or take or omit to take any action, that would cause the
Certificates or any Additional Certificates to be "arbitrage bonds" within the meaning of Section 148
of the Code. To that end, to the extent that the Authority may control the Leased Premises or the
proceeds of the Certificates or any Additional Certificates, the Authority shall comply with all
requirements of Section 148 of the Code and all regulations of the United States Department of the
Treasury issued thereunder to the extent such requirements are, at the time, in effect and applicable to
the Certificates or any Additional Certificates.
To the extent that the Authority may control the proceeds of the Certificates or any
Additional Certificates, the Authority shall not make any use of the proceeds of the Certificates or
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any Additional Certificates or any other of its funds, or take or omit to take any other action, that
would cause the Certificates or any Additional Certificates to be "federally guaranteed" within the
meaning of Section 149(b) of the Code.
ARTICLE III
APPLICATION OF PROCEEDS
Section 3.1. Deposit of Certificate Proceeds. On the Closing Date for the Certificates and
on the Closing Date for any Additional Certificates, the Authority agrees to payor cause to be paid to
the Trustee the proceeds ofthe sale of the Certificates and Additional Certificates, which moneys, in
the case of the Certificates, shall be deposited with the Trustee as provided in Section 2.05 of the
Trust pgreement, or iJ:J tnpo r~,=p' of Anniti()n~l rf':rtlfic.~tf':s ~s provided in any Supplemental Trust
Agreement which relates to such Additional Certificates.
Section 3.2. Defeasance of 2000 Certificates. A portion of the net proceeds of the
Certificates shall be deposited in the Escrow Fund as provided in the Trust Agreement, which
moneys shall be disbursed for purpose of defeasing the 2000 Certificates.
Section 3.3. Payment of Proiect and Delivery Costs. Payment of the Project Costs and
Delivery Costs shall be made from the moneys deposited with the Trustee in the Project Fund as
provided in Section 3.1 hereof and Section 2.05 of the Trust Agreement, which shall be disbursed in
accordance and upon compliance with Article III of the Trust Agreement.
Section 3.4. Further Assurances and Corrective Instruments. The Authority and the City
agree that they will, from time to time, execute, acknowledge and deliver, or cause to be executed,
acknowledged and delivered, such supplements hereto and such further instruments as may
reasonably be required for correcting any inadequate or incorrect description of the Leased Premises
hereby leased or intended so to be or for carrying out the expressed intention of this Lease.
ARTICLE IV
AGREEMENT TO LEASE; TERM OF LEASE; LEASE PAYMENTS
Section 4.1. Lease. The Authority hereby leases the Leased Premises to the City, and the
City hereby leases the Leased Premises from the Authority, upon the terms and conditions set f01ih
herein. This Lease shall not operate as a merger ofthe City's leasehold estate in the Leased Premises
pursuant to this Lease and its fee estate in the Property and shall ~ot cause the extinguishment of the
leasehold interest granted to the Authority under the Site Lease.
Section 4.2. Term. The Term of this Lease shall commence on the date of execution
hereof and shall end on 1,20_, unless extended pursuant to Section 4.3 hereof, or unless
terminated prior thereto upon the earliest of any of the following events:
(a) Default and Telmination. A default by the City and the Authority's election
to terminate this Lease under Section 9.2(b) hereof;
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(b) Pavment of All Lease Pavments. The payment by the City of all Lease
Payments required under Section 4.4 hereof and any Additional Payments required under
Section 4.11 hereof; or
(c) Preoavment. The deposit of funds or Government Obligations with the
Trustee in amounts sufficient to pay all Lease Payments as the same shall become due, as provided in
Section 10.1 hereof and in Section 14.01 ofthe Trust Agreement.
(d) Purchase. Upon the exercise by the City of its option to purchase all of the
Authority's interest in the Leased Premises as provided in Section 7.3 hereof; provided, however,
that upon exercise by the City of its option to purchase the Authority's interest in a portion of the
Leased Premises, as provided in Section 7.3, the Lease shall be terminated only with respect to the
pArtinn nfthp. T p.~<::.P:r1 Prp.m1 1::.P:c::. r1Jrc.'h~"ecl
Section 4.3. Extension of Lease Term. The Tenn of this Lease may be extended up to
1, 20_ in connection with the execution and delivery of any Additional Certificates. If on
the final maturity date of the Certificates or any Additional Certificates all Interest Components and
Principal Components represented thereby shall not be fully paid by the City as a result of a default
in the payment of Lease Payments, or because the Lease Payments hereunder shall have been abated
at any time as permitted by the terms hereof, then the Term shall be extended until all Certificates
and Additional Certificates shall be fully paid, except that the Term shall in no event be extended
beyond 1,20__
Section 4.4. Lease Pavments.
(a) Time and Amount. Subject to the provlslOns of Section 4.10 (regarding
abatement in event of loss of use of any portion of the Leased Premises), Section 7.3 (regarding
option to purchase) and Article X (regarding prepayment of Lease Payments), the City agrees to pay
to the Authority, its successors and assigns, as annual rental for the use and possession of the Leased
Premises, the Lease Payments (denominated into components of principal and interest, the Interest
Component being paid semiannually) in the amounts specified in Exhibit A, to be due and payable in
arrears on the fifteenth (15th) day of the month (or if such day is not a Business Day, the next
succeeding Business Day) specified in Exhibit A (the "Lease Payment Date") which are sufficient in
both time and amount to pay when due the annual principal and interest represented by the
Certificates. In the event that any Additional Certificates are executed and delivered pursuant to the
Trust Agreement, the City and the Trustee shall execute an amendment to Exhibit A to state the
Lease Payments due hereunder as a result of the execution and delivery of such Additional
Certificates.
The obligation of the City to pay Lease Payments shall commence on the Closing Date for
the Certificates. In the event the City does not pay a Lease Payment due on the respective Lease
Payment Date, the Trustee shall provide prompt written notice to the City of such failure to pay;
provided, however, that failure to give such notice shall not excuse any event of default under
Section 9.1 hereof.
(b) Credits. Any amount held in the Lease Payment Fund on any Lease Payment
Date (other than capitalized interest, which shall be credited in accordance with Section 5.03 of the
Trust Agreement, and other than amounts resulting ITom the prepayment of the Lease Payments in
part but not in whole pursuant to Section 10.2 hereof and other amounts required for payment of
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principal with respect to any Certificates or Additional Certificates that have matured or been called
for payment and have not been presented for payment or interest) shall be credited towards the Lease
Payment then due and payable. The City need not transfer additional cash to the Trustee on any
Lease Payment Date if the amounts then held in the Lease Payment Fund (other than those amounts
excluded under the prior sentence) are at least equal to the Lease Payment then required to be paid.
(c) Rate on Overdue Pavments. In the event the City should fail to make any of
the Lease Payments required in this Section, the Lease Payment in default shall continue as an
obligation of the City until the amount in default shall have been fully paid, and the City agrees to
pay the same with interest thereon, to the extent permitted by law, from the date such amount was
originally payable at the rate equal to the original interest rate payable with respect to each
Certificate or Additional Certificate, as applicable, represented by such delinquent Lease Payment.
Section 4.5. No Withholding. Notwithstanding any dispute between the Authority and the
City, including a dispute as to the failure of any portion of the Leased Premises in use by or
possession of the City to perform the task for which it is leased, the City shall make all Lease
Payments and Additional Payments when due and shall not withhold any Lease Payments pending
the final resolution of such dispute.
Section 4.6. Fair Rental Value. The Lease Payments and Additional Payments shall be
paid by the City in consideration of the right of possession of, and the continued quiet use and
enjoyment of, the Leased Premises during each such period for which said Lease Payments are to be
paid. The parties hereto have agreed and determined that such total rental represents the fair rental
value of the Leased Premises. In making such determination, consideration has been given to the fair
market value and replacement cost of the Leased Premises, other obligations of the parties under this
Lease (including but not limited to costs of maintenance, taxes and insurance), the uses and purposes
which may be served by the Leased Premises and the benefits therefrom which will accrue to the
City and the general public, and the transfer of the Authority's leasehold interest in the Leased
Premises at the end of the Term.
Section 4.7. Budget and Appropriation. The City covenants to take such action as may be
necessary to include all Lease Payments and Additional Payments (to the extent the amounts of such
Additional Payments are known to the City at the time its annual budget is proposed), due hereunder
in its annual budget and to make the necessary annual appropriations therefor, and to maintain such
items to the extent unpaid for that Fiscal Year in its budget throughout such Fiscal Year. To the
extent the amount of such payments becomes known after the adoption of the annual budget, such
amounts shall be included and maintained in such budget as amended. During the Term, the City
will furnish annually, on or before August I of each year, to the Trustee a certificate of the City
Representative stating that all Lease Payments and Additional Payments due hereunder for the
applicable Fiscal Year have been included in its annual budget and the amount so included. The
covenants on the part of the City herein contained shall be deemed to be and shall be construed to be
duties imposed by law and it shall be the ministerial duty of each and every public official of the City
to take such action and do such things as are required by law in the performance of the official duty
of such officials to enable the City to carry out and perform the covenants and agreements in this
Lease agreed to be carried out and performed by the City.
The obligation of the City to pay Lease Payments and Additional Payments hereunder shall
constitute a current expense ofthe City and shall not in any way be construed to be a debt of the City,
or the State, or any political subdivision thereof, in contravention of any applicable constitutional or
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statutory limitation or requirements concerning the creation of indebtedness by the City, the State, or
any political subdivision thereof, nor shall anything contained herein constitute a pledge of general
revenues, funds or moneys of the City beyond the Fiscal Year for which the City has appropriated
funds to pay Lease Payments and Additional Payments hereunder or 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.
Section 4.8. Assignment of Lease Payments. Certain of the Authority's rights under this
Lease, including the right to receive and enforce payment of the Lease Payments and Additional
Payments, Prepayments, to be made by the City hereunder, have been assigned absolutely to the
Trustee, subject to certain exceptions, pursuant to the Assignment Agreement, to which assignment
the City hereby consents. The Authority hereby directs the City, and the City hereby agrees, to pay
to thg Trust@@ at the Trustee's cQrpQr~te- trl1<}t nffirf' nf':<::.if?1::atf>n in the Trust Av-eement or to the
Trustee at such other place as the Trustee shall direct in writing, all Lease Payments, or Prepayments
thereof payable by the City hereunder. The Authority will not assign or pledge the Lease Payments
or other amounts derived from the Leased Premises and from its other rights under this Lease except
as provided under the terms ofthis Lease, the Assignment Agreement and the Trust Agreement, or its
duties and obligations except as provided under this Lease.
Section 4.9. Use and Possession. The total Lease Payments due in any Fiscal Year shall
be for the City's right to use and possession of the Leased Premises for such Fiscal Year. During the
Term of this Lease, the City shall be entitled to the exclusive use and possession of the Leased
Premises, subject only to the Permitted Encumbrances.
Section 4.10. Abatement of Lease Payments and Additional Payments.
(a) In the Event of Damage. Destruction. Condemnation or Title Defect. Except
to the extent that proceeds of the type described in the following paragraph are available, the amount
of Lease Payments and Additional Payments shall be abated during any period in which by reason of
damage, destruction or taking by eminent domain or condemnation of the Leased Premises or defects
in the title with respect to the Leased Premises there is substantial interference with the use and
possession of all or a portion of the Leased Premises by the City. The amount of such abatement
shall be such that the resulting Lease Payments, exclusive of the amounts described in the following
paragraph, do not exceed the fair rental value (as determined by the City) for the use and possession
of the portion of the Leased Premises not damaged, destroyed, interfered with or taken. Such
abatement shall continue for the period commencing with such damage, destruction, interference or
taking and ending with the substantial completion of the replacement or work of repair or the
removal ofthe title defect causing such interference with use. Except as provided herein, in the event
of any such damage, destruction, interference or taking, this Lease shall continue in full force and
effect and the City waives any right to terminate this Lease by virtue of any such damage,
destruction, interference or taking.
Notwithstanding a substantial interference with the use and possession of all or a portion of
the Leased Premises, the City shall remain obligated to make Lease Payments which would
otherwise be abated (i) to the extent that moneys derived from any person as a result of any delay in
the reconstruction, replacement or repair of the Leased Premises, or any portion thereof, are available
to pay the amount which would otherwise be abated; and (ii) to the extent that moneys are available
in the Reserve Fund or the Lease Payment Fund to pay the amount which would otherwise be abated.
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The Lease Payments shall be payable from such amounts paid under (i) and (ii) above as an
obligation of the City payable from a special fund.
(b) Repair or Replacement. In the event of such abatement, unless the abatement
will be avoided as a result of a prepayment of Lease Payments from Net Proceeds pursuant to Section
6.1 (c), the City will use its best efforts to repair or replace the damaged or destroyed or taken portion
of the Leased Premises, as the case may be, from Net Proceeds or special funds of the City or other
moneys the application of which would, in the opinion of Special Counsel addressed to the Trustee,
the City and the Authority, not result in the obligations of the City hereunder constituting
indebtedness of the City in contravention of the Constitution and laws ofthe State.
Section 4.11. Additional Pavments. In addition to the Lease Payments, the City shall also
pay >'Ieh amO'lnt< ("Annitinn"1 P"yment<") as shall he required for the payment of all administrative
costs of the Authority relating to the Leased Premises, the Certificates and any Additional
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 interest in the Leased Premises or undertaking of the transactions
contemplated herein or in the Trust Agreement, fees of auditors, accountants, attorneys or engineers
and any and all other 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
and any Additional Certificates or of the Trust Agreement including premiums or insurance
maintained pursuant to Article V hereof or to indemnify the Authority and its employees, officers
and directors and the Trustee. All such Additional Payments to be paid hereunder shall be paid when
due directly by the City to the respective parties to whom such Additional Payments are owing.
Section 4.12. Net-Net-Net Lease. This Lease. shall be deemed and construed to be a "net-
net-net lease" and the City hereby agrees that the Lease Payments shall be an absolute net return to
the Authority, free and clear of any expenses, taxes, fees, insurance premiums, rebate payments,
reserve deposits, costs associated with the Leased Premises, charges or set-offs whatsoever, except as
expressly provided herein.
ARTICLE V
INSURANCE
Section 5.1. Public Liability and Leased Premises Damage.
(a) Coverage. The City shall maintain or cause to be maintained, throughout the
Term hereof, a standard comprehensive general public liability and property damage insurance policy
or policies in protection of the City and the Authority and their officers, agents and employees. Said
policy or policies shall provide for indemnification of said parties against direct or contingent loss or
liability for damages for bodily and personal injury, death or property damage occasioned by reason
of the use or operation of any City property or portion thereof.
(b) Limits. Said policy or policies shall provide coverage in the m1111mum
liability limits of $1,000,000 for personal injury or death of each person and $3,000,000 for personal
injury or deaths of two or more persons in each accident or event, and in a minimum amount of
$500,000 for damage to property resulting from each accident or event (in each case subject to a
deductible clause of not to exceed $250,000). Such public liability and property damage insurance
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may, however, be in the form of a single limit policy covering all such risks in an amount equal to
the liability limits set forth herein.
(c) Joint or Self-Insurance. Such liability insurance, including the deductible,
may be maintained as part of or in conjunction with any other insurance coverage carried by the City,
and, subject to compliance with Section 5.6(e) hereof, may be maintained in the form of self-
insurance by the City.
(d) Pavment of Net Proceeds. The proceeds of such liability insurance shall be
applied toward extinguishment or satisfaction of the liability with respect to which the insurance
proceeds shall have been paid.
S~ctinn '5 ) Workers' ComDensation. The City shall also maintain workers'
compensation insurance issued by a responsible carrier authorized under the laws of the State to
insure its employees against liability for compensation under the Workers' Compensation Insurance
and Safety Act now in force in the State, or any act hereafter enacted as an amendment or supplement
thereto (with provision for self-insurance).
Section 5.3.
Casualty and Theft Insurance.
(a) Casualty and Theft Insurance; Coverage. The City shall procure and
maintain, or cause to be procured and maintained, throughout the Term of this Lease, insurance
against loss or damage to any portion of the Leased Premises caused by fire and lightning, with
extended coverage and theft, vandalism and malicious mischief insurance. Said extended coverage
insurance shall, as nearly as practicable, cover loss or damage by explosion, windstorm, riot, aircraft,
vehicle damage, smoke and such other hazards as are normally covered by such insurance, excluding
flood and earthquake; provided, however, that a flood and earthquake rider shall be purchased if the
City, in its reasonable discretion, determines that such coverage is available from reputable insurers
at commercially reasonable rates.
(b) Amount. Such insurance shall be in an amount not less than the replacement
cost of the Leased Premises, subject to a "deductible clause" not to exceed two hundred fifty
thousand dollars ($250,000) for anyone loss or, in the case of a flood and earthquake rider, ten
percent (10%) of the coverage obtained. The term "full replacement value" as used in this Section
5.3 shall mean the actual replacement cost of the improvements constituting the Leased Premises.
(c) Joint or Self-Insurance. Such insurance may be maintained as part of or in
conjunction with any other insurance carried or required to be carried by the City, and, subject to
compliance with Section 5.6(e) hereof, may be maintained in the form of self-insurance by the City.
Insurance obtained through a California joint powers authority of which the City is a member shall
not be deemed to be self-insurance.
(d) Pavment of Net Proceeds. The Net Proceeds of such insurance shall be paid
to the Trustee and deposited in the Net Proceeds Fund and applied as provided in Section 6.1.
Section 5.4. Rental InterruDtion Insurance.
(a) Coverage and Amount. Upon delivery of the Leased Premises to it for
occupancy, the City shall maintain or cause to be maintained rental income or use and occupancy
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insurance in an amount not less than the maximum remaining scheduled Lease Payments in any
future 24-month period, to insure against loss of rental income from the Leased Premises caused by
perils covered by the insurance required to be maintained as provided in Section 5.3 hereof. Such
rental interruption insurance shall name the Trustee and the Authority as additionally insured parties
and the Trustee as the loss payee.
(b) Joint Insurance. Such insurance may be maintained as part of or in
conjunction with any other rental income or use and occupancy insurance carried by the City but may
not be maintained in the form of self-insurance by the City.
(c) Pavment of Net Proceeds. The Net Proceeds of such rental interruption
insurance shall be paid to the Trustee and deposited (1) in the Reserve Fund to make up any
deficiencies tl>~r~in, "nn (7) n~r(),iten in the r e",e Payment Fund. to be credited towards the
payment of the Lease Payments in the order in which such Lease Payments come due and payable.
Section 5.5. Title Insurance. The City shall obtain and, throughout the Term ofthis Lease,
maintain or cause to be maintained title insurance on the Leased Premises, in the form of an AL T A
title policy (with western regional exceptions), in an amount equal to the aggregate principal amount
of the Certificates and Additional Certificates Outstanding, issued by a company of recognized
standing, duly authorized to issue the same, payable to the Trustee for the benefit of the Owners,
subject only to Permitted Encumbrances. Said policy or policies shall insure the City's leasehold
estate hereunder in the Leased Premises, subject only to Permitted Encumbrances. All Net Proceeds
received under said policy or policies shall be deposited with the Trustee and applied as provided in
Section 7.01 of the Trust Agreement. So long as any of the Certificates and Additional Certificates
remain Outstanding, each policy of the title insurance obtained pursuant hereto or required hereby
shall provide that all proceeds thereunder shall be payable to the Trustee for the benefit of the
Certificate Owners and the owners of any Additional Certificates. Such policy of title insurance,
including the endorsements thereto, shall be in form and substance acceptable to [the Insurer]. The
Net Proceeds of such insurance shall be applied as provided in Section 6.1.
Section 5.6.
General Insurance Provisions.
(a) Form of Policies. All policies of insurance required to be procured and
maintained pursuant to this Lease and any statements of self-insurance shall be in a form certified by
the City Representative or an insurance agent, broker or consultant to the City to comply with the
provisions hereof. All such policies shall provide that the insured parties shall be given thirty (30)
days' notice of each expiration, any intended cancellation thereof or reduction of the coverage
provided thereby. Each policy of insurance required to be procured and maintained pursuant to
Section 5.3 (regarding casualty and theft insurance), Section 5.4 (regarding rental interruption
insurance) and Section 5.5 (regarding title insurance) shall provide that all proceeds thereunder shall
be payable to the Trustee for the benefit of the Owners. All policies shall name the City, the
Authority and the Trustee as insureds and the Trustee as a loss payee.
(b) Payment of Premiums. The City shall payor cause to be paid when due the
premiums for all insurance policies required by this Lease, and shall promptly furnish or cause to be
furnished to the Trustee a certificate to such effect, as described in paragraph (d) below.
(c) Protection of the Trustee. The Trustee shall not be responsible for the
sufficiency or adequacy of any insurance herein required and shall be fully protected in accepting
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payment on account of such insurance or any adjustment, compromise or settlement of any loss
agreed to by the Trustee.
(d) Evidence of Insurance. The City shall cause to be delivered to the Trustee
[and the Insurer] annually on or before August 1 a certificate stating that the insurance policies
required by this Lease are in full force and effect.
(e) Self Insurance. The City may only elect to self insure pursuant to Sections
5.1 and 5.2 hereof if and to the extent such self-insurance method or plan of protection shall afford
reasonable protection to the Authority and the Trustee, in light of all circumstances, giving
consideration to cost, availability and similar plans or methods of protection adopted by other cities
in the State other than the City. Insurance provided through a California joint powers authority of
which th~ rity is a memher or with which the City contracts for insurance shall not be deemed to be
self-insurance for purposes hereof. Any self-insurance maintained by the City pursuant to this
Article V, unless otherwise consented to by [the Insurer, and] any insurer of Additional Certificates,
shall comply with the following terms:
(i) The self-insurance program shall be approved in writing by the City's
City Manager or Assistant City Manager/Finance Director or an independent insurance consultant in
accordance with the California Labor Code and the California Government Code;
(ii) The self-insurance program shall include an actuarially sound claims
reserve fund out of which each self-insured claim shall be paid; the adequacy of such fund shall be
evaluated on an annual basis by the City Representative in a certified statement delivered to [the
Insurer]; and any deficiencies in any' self-insured claims reserve fund shall be remedied in
accordance with the recommendation ofthe City Representative; and
(iii) In the event the self-insurance program shall be discontinued, the
actuarial soundness of its claims reserve fund, as determined by the City Representative, shall be
maintained.
Section 5.7. Cooperation. The Authority shall cooperate fully with the City at the expense
of the City in filing any proof of loss with respect to any insurance policy maintained pursuant to this
Article and in the prosecution or defense of any prospective or pending condemnation proceeding
with respect to the Leased Premises or any portion thereof.
ARTICLE VI
DAMAGE, DESTRUCTION AND EMINENT DOMAIN; USE OF NET PROCEEDS
Section 6.1. Application of Net Proceeds.
(a) Deposit in Net Proceeds Fund. The City shall remit promptly to the Trustee
any Net Proceeds received by the City and the Trustee as provided in Section 5.3 (regarding casualty
and theft insurance) and Section 5.5 (regarding title insurance) promptly upon receipt thereof, and
pursuant to Section 7.01 of the Trust Agreement, the Trustee shall deposit such Net Proceeds of
insurance in the Net Proceeds Fund. The City and/or the Authority shall transfer to the Trustee any
other Net Proceeds (other than Net Proceeds paid under Sections 5.1, 5.2 and 5.4 hereof which shall
be applied as described in such sections) received by the City and/or Authority in the event of any
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accident, destruction, theft or taking by eminent domain or condemnation with respect to the Project,
for deposit in the Net Proceeds Fund.
(b) Disbursement for Replacement or Repair of the Leased Premises. Upon
receipt of the prior written consent of [the Insurer and] any insurer of Additional Certificates, the
certification described in paragraph (i) below and the requisition described in paragraph (ii) below,
the Trustee shall disburse moneys in the Net Proceeds Fund to the person, firm or corporation named
in the requisition as provided in paragraph (ii) below.
(i) Certification. The City Representative must certify to the Authority
and the Trustee that:
(x) Sufficiencv of Net Proceeds. The Net Proceeds available for
such purpose, together with any other funds supplied by the City to the Trustee in a subaccount of the
Net Proceeds Fund for such purpose, are expected to equal at least 110% of the projected costs of
replacement or repair (or such lesser percentage as may be consented to by [the Insurer and] any
insurer of Additional Certificates), as demonstrated in an attached reconstruction budget, and
(y) Timely Completion. In the event that damage, destruction or
taking results, or is expected to result, in an abatement of Lease Payments, such replacement or repair
can be fully completed within a period not in excess of the period in which rental interruption
insurance proceeds, as described in Section 5.4 together with other identified available moneys, will
be available to pay in full all Lease Payments coming due during such period as demonstrated in an
attached reconstruction schedule.
(ii) Requisition. The City Representative must deliver to the Trustee a
Requisition stating with respect to each payment to be made (1) the requisition number, (2) the name
and address of the person, firm or corporation to whom payment is due, (3) the amount to be paid and
(4) that each obligation mentioned therein has been properly incurred, is a proper charge against the
Net Proceeds Fund, has not been the basis of any previous withdrawal, and specifying in reasonable
detail the nature of the obligation. Each such cost requisition shall be sufficient evidence to the
Trustee of the facts stated therein and the Trustee shall have no duty to confirm the accuracy of such
facts.
Any balance of the Net Proceeds remammg after such replacement or repair has been
completed and after payment or provision for payment of all Certificates as provided in Section 7.01
of the Trust Agreement and all Additional Certificates as provided in any Supplemental Trust
Agreement pursuant to which such Additional Certificates are executed and delivered shall be paid to
the City after payment of amounts due the Trustee pursuant to Section 9.06 and 9.07 of the Trust
Agreement.
(c) Disbursement for Prepavment. If the City Representative notifies the Trustee
in writing of the City's determination that the certification provided in Section 6.1 (b) (i) cannot be
made or that replacement or repair of any portion of the Leased Premises is not economically feasible
or in the best interest of the City, then the Trustee shall promptly transfer the Net Proceeds to the
Prepayment Fund as provided in Section 7.01 of the Trust Agreement and apply them to prepayment
of the Certificates as provided in Section 4.02 of the Trust Agreement and Additional Certificates as
provided in a Supplemental Trust Agreement and prepayment of Lease Payments as provided in
Section 10.2 hereof; provided that in the event of damage or destruction in whole of the Leased
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Premises and in the event such Net Proceeds, together with funds then on hand in the Lease Payment
Fund and Reserve Fund are not sufficient to prepay all the Certificates and Additional Certificates
then Outstanding, then the City shall not be permitted to certify that repair, replacement or
improvement of all of the Leased Premises is not economically feasible or in the best interest of the
City. In such event, the City shall proceed to repair, replace or improve the Leased Premises as
described herein from legally available funds in the then-current Fiscal Year and shall make the
required notification to the Trustee pursuant to Section 7.01 of the Trust Agreement and the Trustee
shall disburse moneys in the Net Proceeds Fund to the person, film, or corporation named in the
Requisition as provided therein.
ARTICLE VII
COVEN ANTS WITH RFSPFrT TO THE T EASED PREMISES
Section 7.1. Use of the Leased Premises. The City represents and warrants that it has an
immediate need for, and expects to make immediate use of, all ofthe Leased Premises, which need is
not temporary or expected to diminish in the foreseeable future.
Section 7.2. Interest in the Leased Premises and the Lease.
(a) Authority Holds Leasehold Interest During Term. During the Term of this
Lease, the Authority does and shall hold a leasehold interest in the Leased Premises pursuant to the
Site Lease. The City shall take any and all actions reasonably required, including but not limited to
executing and filing any and all documents reasonably required, to maintain and evidence such title
and interest at all times during the Term ofthis Lease.
(b) Title Transferred to the City at End of Term. Upon expiration of the Tenn as
provided in Section 4.2(b) or 4.2( c) hereof, all right, title and interest of the Authority in and to all of
the Leased Premises shall be transferred to and vest in the City, without the necessity of any
additional document of transfer.
Section 7.3. Option to Purchase. The City may exercise an option to purchase the
Authority's interest under the Site Lease and this Lease in the Leased Premises by depositing with
the Trustee cash and/or Govenunent Obligations as provided in Section 14.01 of the Trust
Agreement. In such event, all or a portion of the obligations of the City under this Lease, and the
security provided by this Lease for said obligations or said portion of the obligations, shall cease and
terminate as provided in Section 4.2 hereof, excepting in the case all of the Authority's interest has
been purchased, only the obligation of the City to make, or cause to be made, such Lease Payments
from such deposit. In the event Lease Payments and Additional Payments under this Lease have
been paid in full, on the date of said deposit, the Authority's interest in the Leased Premises shall
revert and transfer to the City automatically and without further action by the City or the Authority,
and the Authority shall execute and deliver such further instruments and take such further action as
may reasonably be requested by the City for carrying out the reversion and transfer of the Authority's
interests in the Leased Premises. In the event Lease Payments under this Lease have been paid in
part only, on the date of said deposit, the City shall specify a discrete portion of the Authority's
interest in the Leased Premises for reversion and transfer to the City and the Authority shall execute
and deliver such further instruments and take such further action as may reasonably be requested by
the City for carrying out the reversion and transfer of such portion of the Authority's interest in the
Leased Premises; provided, that such portion shall revert and transfer to the City only if (i) the
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reduction in the fair rental value of the Leased Premises resulting from such reversion and transfer at
the time of such reversion and transfer (as determined by an independent appraisal acceptable to the
Authority [and the Insurer]) is proportionately less than or equal to the reduction in the maximum
annual Lease Payments under this Lease resulting from such purchaser, and (ii) the Insurer shall have
provided its written consent to such reversion and transfer]. Any such deposit shall be deemed to be
and shall constitute a special fund for the payment of Lease Payments in accordance with Section 4.4
hereof.
Section 7.4. Quiet En;ovment. During the Term, the Authority shall provide the City with
quiet use and enjoyment of the Leased Premises, and the City shall during such Term peaceably and
quietly have and hold and enjoy the Leased Premises, without suit, trouble or hindrance from the
Authority, or any person or entity claiming under or through the Authority except as expressly set
f<:>rth in thi, Ieo"e The Anthnrity will. "t the request of the City. join in any legal action in which
the City asserts its right to such possession and enjoyment to the extent the Authority may lawfully
do so. Notwithstanding the foregoing, the Authority shall have the right to inspect the Leased
Premises as provided in Section 7.6 hereof.
Section 7.5. Installation of the City's Personal Property. The City may at any time and
from time to time, in its sole discretion and at its own expense, install or permit to be installed other
items of equipment or other property in or upon any portion of the Leased Premises. All such items
shall remain the sole property of the City, regardless of the manner in which the same may be affixed
to such portion of the Leased Premises, in which neither the Authority nor the Trustee shall have any
interest, and may be modified or removed by the City at any time; provided that the City shall repair
and restore any and all damage to such portion of the Leased Premises resulting from the installation,
modification or removal of any such items of equipment. Nothing in this Lease shall prevent the
City from purchasing items to be installed pursuant to this Section, provided that no lien or security
interest shall attach to any part of the Leased Premises.
Section 7.6. Access to the Leased Premises. The City agrees that the Authority, any
Authority Representative and the Authority's successors, assigns or designees shall have the right at
all reasonable times to enter upon the Leased Premises or any portion thereof to examine and inspect
the Leased Premises. The City further agrees that the Authority, any such Authority Representative,
and the Authority's successors, assigns or designees shall have such rights of access to the Leased
Premises as may be reasonably necessary to cause the proper maintenance of the Leased Premises in
the event of failure by the City to perform its obligations hereunder.
Section 7.7.
Maintenance, Utilities. Taxes and Assessments.
(a) Maintenance; Repair and Replacement. Throughout the Term of this Lease,
as part of the consideration for the rental of the Leased Premises, all repair and maintenance of the
Leased Premises shall be the responsibility of the City, and the City shall pay for or otherwise
arrange for the payment of the cost of the repair and replacement of the Leased Premises resulting
from ordinary wear and tear or want of care on the part of the City or any sublessee thereof. In
exchange for the Lease Payments herein provided, the Authority agrees to provide only the Leased
Premises, as hereinbefore more specifically set forth. The City waives the benefits of subsections I
and 2 of Section 1932 of the California Civil Code, but such waiver shall not limit any of the rights
of the City under the terms of this Lease.
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(b) Tax and Assessments: Utilitv Charges. The City shall also payor cause to be
paid all taxes and assessments, including but not limited to utility charges, of any type or nature
charged to the Authority or the City or levied, assessed or charged against any portion of the Leased
Premises or the respective interests or estates therein; provided that with respect to special
assessments or other governmental charges that may lawfully be paid in installments over a period of
years, the City shall be obligated to pay only such installments as are required to be paid during the
Term of this Lease as and when the same become due.
(c) Contests. The City may, at its expense and in its name, in good faith contest
any such taxes, assessments, utility and other charges and, in the event of any such contest, may
permit the taxes, assessments or other charges so contested to remain unpaid during the period of
such contest and any appeal therefrom; provided that prior to such nonpayment it shall furnish the
Authority and th@ Trust@@ with tile opinion of"p Tn~prpn~ent rnl1n,pl AcceptAhle to the Authority. to
the effect that, by nonpayment of any such items, the interest of the Authority in such portion of the
Leased Premises will not be materially endangered and that the Leased Premises will not be subject
to loss or forfeiture. Otherwise, the City shall promptly pay such taxes, assessments or charges or
make provisions for the payment thereof in form satisfactory to the Authority. The Authority will
cooperate fully in such contest, upon the request and at the expense of the City.
Section 7.8. Modification of the Leased Premises.
(a) Additions. Modifications and Improvements. The City shall, at its own
expense, have the right to make additions, modifications, and improvements to any portion of the
Leased Premises if such improvements are necessary or beneficial for the use of such portion of the
Leased Premises. All such additions, modifications and improvements shall thereafter comprise part
of the Leased Premises and be subject to the provisions of this Lease. Such additions, modifications
and improvements shall not in any way cause an abatement of Lease Payments with respect to the
Leased Premises or cause it to be used for purposes other than those authorized under the provisions
of State and federal law or in any way which would impair the State tax-exempt status or the
exclusion from gross income for federal income tax purposes of the interest with respect to the
Certificates and Additional Certificates: and the Leased Premises, upon completion of any additions,
modifications and improvements made pursuant to this Section, shall be of a value which is not
substantially less than the value of the Leased Premises immediately prior to the making of such
additions, modifications and improvements.
(b) No Liens. Except for Permitted Encumbrances, the City will not permit any
mechanic's or other lien to be established or remain against the Leased Premises for labor or
materials furnished in connection with any additions, modifications or improvements made by the
City pursuant to this Section; provided that if any such lien is established and the City shall first
notify or cause to be notified the Authority ofthe City's intention to do so, the City may in good faith
contest any lien filed or established against the Leased Premises, and in such event may permit the
items so contested to remain undischarged and unsatisfied during the period of such contest and any
appeal therefrom and shall provide the Authority with full security against any loss or forfeiture
which might arise from the nonpayment of any such item, in form satisfactory to the Trustee (as
assignee of the Authority). The Authority will cooperate fully in any such contest, upon the request
and at the expense of the City.
(c)
expense, or with the
Replacements. Redevelopment and Renovation. The City shall, at its own
proceeds of Additional Certificates, have the right to make replacements,
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redevelopment or renovation of all or a portion of the Leased Premises if the following conditions
precedent are satisfied:
(i) The City receives an opinion of Special Counsel, a copy of which the
City shall furnish to the Authority and the Trustee, that (I) such replacement does not adversely
affect the federal income tax exclusion or the State tax-exempt status of the interest with respect to
the Certificates and Additional Certificates, and (2) the Lease will remain the legal, valid, binding
and enforceable obligation of the City;
(ii) In the event such replacement, redevelopment or renovation would
result in the temporary abatement of Lease Payments as provided in Section 4.1 0 hereof the City
shall have notified [the Insurer and] any rating agency then providing a rating on the Certificates and
<1," 11 rl~r("it m()n~ys with the Tmstee in advance for payment of Lease Pavments from the proceeds
of Additional Certificates or from special funds of the City or other moneys, the application of which
would not, in the opinion of Special Counsel (a copy of which shall have been delivered to the
Trustee), result in such Lease Payments constituting indebtedness of the City in contravention of the
Constitution and laws of the State;
(iii) The City shall certify to the Trustee that it has sufficient funds to
complete such replacement, redevelopment or renovation; and
(iv) In the case of replacement(s), redevelopment or renovation other than
from the proceeds of Additional Certificates, the City and the Trustee receive an independent
appraisal from a California certified general appraiser that the annual fair rental value of the
replacements will be at least equal to the annual fair rental value ofthe Leased Premises immediately
prior to such replacement or redevelopment.
Section 7.9.
Encumbrances; Alternative Financing Methods.
(a) Encumbrances. Except as provided in this Article VII (including without
limitation Section 7.8 hereof and this Section 7.9), the City shall not, directly or indirectly, create,
incur, assume or suffer to exist any mortgage, pledge, liens, charges, encumbrances or claims, as
applicable, on or with respect to the Leased Premises, other than Permitted Encumbrances and other
than the respective rights of the Authority and the City as herein provided. Except as expressly
provided in this Article VII, the City shall promptly, at its own expense, take such action as may be
necessary to duly discharge or remove any such mortgage, pledge, lien, charge, encumbrance or
claim, for which it is responsible, if the same shall arise at any time; provided that the City may
contest such liens if it desires to do so. The City shall reimburse the Authority for any expense
incurred by it in order to discharge or remove any such mortgage, pledge, lien, charge, encumbrance
or claim.
(b) Alternative Financing Methods. Notwithstanding the foregoing, the City may
create or suffer to create any mortgage, pledge, liens, charges, encumbrances or claims upon the
Leased Premises or any improvements thereto, provided that (I) any such mortgage, pledge, liens,
charges, encumbrances or claims shall at any time while any of the Certificates or Additional
Certificates remain Outstanding be and remain subordinate in all respects to the Site Lease and Lease
and any security interest given to the Trustee for the benefit of the Owners and (2) the City shall have
first delivered to the Trustee an opinion of Special Counsel substantially to the effect that such
mortgage, pledge, liens, charges, encumbrances or claims would not result in the inclusion of the
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interest with respect to the Certificates and the Additional Certificates in the gross income of the
owners thereof for purposes of federal income taxation or impair the State tax-exempt status of such
interest payments.
Section 7.10. Authority's Disclaimer of Warranties. THE AUTHORITY MAKES NO
WARRANTY OR REPRESENTATION, EITHER EXPRESS OR IMPLIED, AS TO THE VALUE,
DESIGN, CONDITION, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR
PURPOSE OR FITNESS FOR THE USE CONTEMPLATED BY THE CITY OF THE LEASED
PREMISES, OR ANY PORTION THEREOF. THE CITY ACKJ"\!OWLEDGES THAT THE CITY
IS LEASING THE LEASED PREMISES AS IS. In no event shall the Authority be liable for
incidental, indirect, special or consequential damages, in connection with or arising out of this Lease,
the Site Lease, the Assignment Agreement or the Trust Agreement for the existence, furnishing,
functioning or th€-City's us~ and po""e~sion "fth- T ~"5erl premi,e,
Section 7.11. The City's Right to Enforce Warranties of Vendors or Contractors. The
Authority hereby irrevocably appoints the City its agent and attorney-in-fact during the Term of this
Lease, so long as the City shall not be in default hereunder, to assert from time to time whatever
claims and rights, including without limitation, warranty claims, claims for indemnification and
claims for breach of any representations, respecting the Leased Premises which the Authority may
have against any vendor or contractor. The City's sole remedy for the breach of any such warranty,
indemnification or representation shall be against the vendor or contractor with respect thereto, and
not against the Authority, nor shall such matter have any effect whatsoever on the rights and
obligations of the Authority with respect to this Lease, including the right to receive full and timely
Lease Payments and all other payments due hereunder. The City shall be entitled to retain any and
all amounts recovered as a result of the assertion of any such claims and rights. The Authority shall,
upon the City's request and at the City's expense, do all things and take all such actions as the City
may request in connection with the assertion of any such claims and rights.
Section 7.12. Substitution or Release of the Leased Premises.
(a) The City shall have the right at any time to notify the Authority that it intends
to release from the Leased Premises all of the real property comprising the City's Corporation Yard
as described in Exhibit B hereto except for that portion constituting the administration building
located thereon. Following such notice to the Authority and the Trustee, this Lease shall be amended
accordingly pursuant to a supplement to this Lease substantially in the form attached as Exhibit D
hereto.
(b) In addition to its rights under (a) above, the City shall have the right to
substitute alternate real property for any portion of the Leased Premises described in Exhibit B hereto
or to release a portion of the Leased Premises from the lien of this Lease by providing the Trustee
with a supplement to this Lease substantially in the form attached as Exhibit D hereto and by
satisfying the conditions set forth in paragraphs (i) through (viii) of this Section 7.12. All costs and
expenses incurred in connection with such substitution or release shall be borne by the City.
Notwithstanding any substitution pursuant to this Section, there shall be no reduction in or abatement
of the Lease Payments due from the City hereunder as a result of such substitution. No substitution
or release shall be pelmitted under this Section 7.12(b) unless:
(i) In the case of a substitution, the City provides prior written notice
thereof to the Trustee [and the Insurer] and the insurer of any Additional Certificates, together with a
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certificate that the substituted real property has an equivalent or greater useful life as the Leased
Premises to be released and that the useful life of the substituted Leased Premises exceeds the
remaining term of the Lease Payments hereunder;
(ii) the City provides a certificate to the Trustee setting forth its findings
that the Leased Premises following any release or substitution has an annual fair rental value greater
than or equal to the corresponding Lease Payments due hereunder so that the Lease Payments
payable by the City pursuant to the Lease will not be abated;
(iii) the City obtains or causes to be obtained an AL T A title insurance
policy (with western regional exceptions) with respect to any substituted property, with an
endorsement so as to be payable to the Trustee for the benefit of the Owners, showing no prior liens
'nere,," ",her ,h"" Permitted Fncllmhrances. Such policy shall comply with Section 5.5 hereof, shall
be in a form satisfactory to [the Insurer,] the insurer of any Additional Certificates and the Authority,
shall be in the amount equal to the principal component of Lease Payments attributable to the
substituted property, and shall insure the leasehold interest or the fee simple interest of the Authority
or the City, as applicable, to the substituted property;
(iv) the City provides the Authority and the Trustee with an opinion of
Special Counsel that such substitution or release does not cause, in and of itself, the interest
evidenced and represented by the Certificates and any Additional Certificates to be included in gross
income for federal income tax purposes;
(v) the City shall give, or cause to be given, any notice of the occurrence
of such substitution or release required to be given pursuant to the Continuing Disclosure Agreement;
(vi) upon the substitution of any real property and improvements thereon
for all or a portion of the Leased Premises then existing, or the release of any portion of the Leased
Premises, the City, the Authority and the Trustee shall execute and the City shall record with the
office of the County Recorder, County of San Diego, California, any document necessary to
reconvey to the City the portion of the Leased Premises being released and to include any substituted
real property and/or improvements as all or a portion of the Leased Premises;
(vii) the City shall certify to the Trustee[, the Insurer] and the insurer of
any Additional Certificates that any substituted property is of approximately the same degree of
essentiality to the City as the Leased Premises being released; and
(viii) the Trustee shall receive the prior written consent of [the Insurer and]
the insurer of any Additional Certificates to such substitution or release (which consent shall not be
unreasonably withheld), and shall provide a copy of such notice to S&P.
Section 7.13. Compliance with Law. Regulations. Etc.
(a) The City has, after due inquiry, no knowledge and has not given or received
'ny written notice indicating that the past or present use of the Leased Premises or any practice,
procedure or policy employed by it in the conduct of its business materially violates any applicable
law, regulation, code, order, rule, judgment or consent agreement, including, without limitation,
those relating to zoning, building, use and occupancy, fire safety, health, sanitation, air pollution,
ecological matters, environmental protection, hazardous or toxic materials, substances or wastes,
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conservation, parking, architectural barriers to the handicapped, or restncttve covenants or other
agreements affecting title to the Leased Premises (collectively, "Laws and Regulations"). Without
limiting the generality of the foregoing, neither the City nor to the best of its knowledge, after due
inquiry, any prior or present owner, tenant or subtenant of the Leased Premises has, other than as set
forth in subsections (a) and (b) of this Section or as may have been remediated in accordance with
Laws and Regulations, (i) used, treated, stored, transported or disposed of any material amount of
flammable explosives, polychlorinated biphenyl compounds, heavy metals, chlorinated solvents,
cyanide, radon, petroleum products, asbestos, methane, radioactive materials, pollutants, hazardous
materials, hazardous wastes, hazardous, toxic, or regulated substances or related materials, as defined
in CERCLA, RCRA, CW A, CAA, TSCA and Title III, and the regulations promulgated pursuant
thereto, and in all other Environmental Regulations applicable to the City, the Leased Premises or the
business operations conducted by the City thereon (collectively, "Hazardous Materials") on, from or
behcad, the Lea3cd Prcmi3cs, (ii) pHmped, spilled, leaked, disp,ned of, ~mptied, ni<rh"rgpn nr
released (hereinafter collectively referred to as "Release") any material amount of Hazardous
Materials on, ITom or beneath the Leased Premises, or stored any material amount of petroleum
products at the Leased Premises in underground storage tanks.
(b) Excluded from the representations and warranties in subsection (a) hereof
with respect to Hazardous Materials are those Hazardous Materials in those amounts ordinarily found
in the inventory of, or used in the maintenance of the City's Civic Center or related buildings, the
use, treatment, storage, transportation and disposal of which has been and shall be in compliance
with all Laws and Regulations.
(c) No portion of the Leased Premises located in an area of high potential
incidence ofradon has an unventilated basement or subsurface portion which is occupied or used for
any purpose other than the foundation or support of the improvements to the Leased Premises.
Section 7.14. Environmental Compliance.
(a) The City shall not use or permit the Leased Premises or any part thereof to be
used to generate, manufacture, refine, treat, store, handle, transport or dispose of, transfer, produce or
process Hazardous Materials, except, and only to the extent, if necessary to maintain the
improvements on the Leased Premises and then, only in compliance with all Environmental
Regulations, and any state equivalent laws and regulations, nor shall it permit, as a result of any
intentional or unintentional act or omission on its part or by any tenant, subtenant, licensee, guest,
invitee, contractor, employee and agent, the storage, transportation, disposal or use of Hazardous
Materials or the Release or threat of Release of Hazardous Materials on, from or beneath the Leased
Premises or onto any other Leased Premises excluding, however, those Hazardous Materials in those
amounts ordinarily found in the inventory of a municipal corporation, the use, storage, treattnent,
transportation and disposal of which shall be in compliance with all Environmental Regulations.
Upon the occurrence of any Release or threat of Release of Hazardous Materials, the City shall
promptly commence and perform, or cause to be commenced and performed promptly, without cost
to the Trustee, all investigations, studies, sampling and testing, and all remedial, removal and other
actions necessary to clean up and remove all Hazardous Materials so released, on, from or beneath
the Leased Premises, in compliance with all Environmental Regulations. Notwithstanding anything
to the contrary contained herein, underground storage tanks shall only be permitted subject to
compliance with subsection (d) and only to the extent necessary to maintain the improvements on the
Leased Premises.
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(b) The City shall comply with, and shall cause all tenants, subtenants, licensees,
guests, invitees, contractors, employees and agents on the Leased Premises to comply with, all
Environmental Regulations, and shall keep the Leased Premises rree and clear of any liens imposed
pursuant thereto; provided, however, that notwithstanding that a portion of this covenant is limited to
the City's use of its best efforts, the City shall remain solely responsible for ensuring such
compliance and such limitation shall not diminish or affect in any way the City's obligations
contained in subsection (c) hereof as provided in subsection (c) hereof. Upon receipt of any notice
from any person with regard to the Release of Hazardous Materials on, from or beneath the Leased
Premises, the City shall give prompt written notice thereof to the Trustee prior to the expiration of
any period in which to respond to such notice under any Environmental Regulation.
(c) Irrespective of whether any representation or warranty contained in
Section 7.13 is not true or CQlTect, the City sboll, tn thp pxtpnt pprmittPn hy low, defend, indemnitY
and hold harmless the Trustee, the Owners, the Authority, [the Insurer,] the insurer of any Additional
Certificates and each of their respective employees, agents, officers, directors, trustees, successors
and assigns, rrom and against any claims, demands, penalties,. fines, attorneys' fees (including,
without limitation, attorneys' fees incurred to enforce the indemnification contained in this
Section 7.14, consultants' fees, investigation and laboratory fees, liabilities, settlements (five
Business Days' prior notice of which the Trustee shall have delivered to the City) court costs,
damages, losses, costs or expenses of whatever kind or nature, known or unknown, contingent or
otherwise, occurring in whole or in part, arising out of, or in any way related to, (i) the presence,
disposal, Release, threat of Release, removal, discharge, storage or transportation of any Hazardous
Materials on, rrom or beneath the Leased Premises, (ii) any personal injury (including wrongful
death) or Leased Premises damage (real or personal) arising out of or related to such Hazardous
Materials, (iii) any lawsuit brought or threatened, settlement reached (five Business Days' prior
notice of which the Trustee shall have delivered to the City), or governmental order relating to
Hazardous Materials on, from or beneath the Leased Premises, (iv) any vi01ation of Environmental
Regulations or subsection (a) or (b) hereof by it or any of its agents, tenants, employees, contractors,
licensees, guests, subtenants or invitees, and (v) the imposition of any governmental lien for the
recovery of environmental cleanup or removal costs. To the extent that the City is strictly liable
under any Environmental Regulation, its obligation under the foregoing indemnification shall
likewise be without regard to fault on its part with respect to the violation of any Environmental
Regulation which results in liability to any indemnitee. The obligations and liabilities under this
Section 7.14(c) shall survive the payment and satisfaction of all Certificates and Additional
Certificates or resignation or removal of the Trustee.
(d) The City shall conform to and carry out a reasonable program of maintenance
and inspection of all underground storage tanks, and shall maintain, repair, and replace such tanks
only in accordance with Laws and Regulations, including but not limited to Environmental
Regulations.
Section 7.15. Condemnation of Leased Premises. The City hereby covenants and agrees, to
the extent it may lawfully do so, that, except as described in Section 6 of the Site Lease, so long as
any of the Certificates or Additional Certificates remain outstanding and unpaid, the City will not
exercise the power of condemnation with respect to the Leased Premises. The City further covenants
and agrees, to the extent it may lawfully do so, that if for any reason the foregoing covenant is
determined to be unenforceable or if the City shall fail or refuse to abide by such covenant and
condemns the Leased Premises, then the appraised value of the Leased Premises shall not be less
than the sum of: (i) as to Certificates and Additional Certificates then subject to optional
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prepayment, the principal and interest components of such Certificates and Additional Certificates
outstanding through the date of their prepayment, and (ii) as to Certificates and Additional
Certificates not then subject to optional prepayment, the amount necessary to defease such
Certificates and Additional Certificates to the first available prepayment date in accordance with the
Trust Agreement.
ARTICLE VIII
ASSIGNMENT, SUBLEASING AND AMENDMENT
Section 8.1. Assignment bv the Authority. Except as provided herein, in the Trust
Agreement and the Assigrunent Agreement, the Authority will not assign this Lease to any other
person, firm or corporation so as to impair or violate the representations, covenants and warranties
contained in Section 2.2 hereof.
Section 8.2. Assignment and Subleasing bv the City.
(a) Assignment. This Lease may be assigned by the City, with the consent of
[the Insurer and] the insurer of any Additional Certificates (which consent shall not be unreasonably
withheld), so long as such assigrunent does not, in the opinion of Special Counsel, adversely affect
the State tax-exempt status or the exclusion trom gross income for federal income tax purposes of the
interest with respect to the Certificates and any Additional Certificates or affect the validity of this
Lease, In the event that this Lease is assigned by the City, the obligation to make Lease Payments
hereunder shall remain the obligation of the City,
(b) Sublease, The City may sublease all or any portion of the Leased Premises,
with the consent of the Trustee (as assignee of the Authority), [the Insurer] and the insurer of any
Additional Certificates, subject to all of the following conditions:
(i) This Lease and the obligation of the City to make Lease Payments
and Additional Payments hereunder shall remain obligations of the City; and
(ii) The City shall, within thirty (30) days after the delivery thereof,
furnish or cause to be furnished to the Authority, the Trustee, [the Insurer] and the insurer of any
Additional Certificates a true and complete copy of such sublease;
(iii) No sublease by the City shall cause the Leased Premises to be used
for a purpose other than a governmental or proprietary function authorized under the provisions of
the laws of the State; and
(iv) The City shall furnish to the Authority, the Trustee, [the Insurer] and
the insurer of any Additional Certificates, an opinion of Special Counsel to the effect that the
sublease will not cause the interest due with respect to the Certificates and any Additional
Certificates to be subject to State personal income tax or adversely affect the exclusion from gross
income for federal income tax purposes of such amounts.
Section 8.3. Amendments and Modifications, This Lease may be amended or any of its
terms modified with the written consent of [the Insurer,] the insurer of any Additional Certificates,
the City and the Trustee (as assignee of the Authority), in accordance with Article X of the Trust
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Agreement; provided, however, that this Lease may be amended without the written consent of [the
Insurer or] the insurer of any Additional Certificates in connection with the execution and delivery of
Additional Certificates in accordance with Section 2.12 of the Trust Agreement.
ARTICLE IX
EVENTS OF DEF AUL T AND REMEDIES
Section 9.1. Events of Default Defined. The following shall be "events of default" under
this Lease and the terms "events of default" and "default" shall mean, whenever they are used in this
Lease, anyone or more ofthe following events:
(a) Pavment Default. Failure by the City to pay any Lease Payment required to
be paid hereunder by the corresponding Lease Payment Date; and
(b) Covenant Default. Failure by the City to observe and perform any warranty,
covenant, condition or agreement on its part to be observed or performed herein or otherwise with
respect hereto or in the Trust Agreement or in the Site Lease, other than as referred to in clause (a) of
this Section, for a period of 30 days after written notice specifying such failure and requesting that it
be remedied has been given to the City by the Authority, [the Insurer,] the insurer of any Additional
Certificates, the Trustee, or the Owners of not less than twenty percent (20%) in aggregate principal
amount of Certificates and Additional Certificates then Outstanding; provided, however, if the failure
stated in the notice cannot be corrected within the applicable period, the Authority, [the Insurer,] the
insurer of any Additional Certificates or such Owners, as the case may be, shall not unreasonably
withhold their consent to an extension of such time if corrective action is instituted by the City within
the applicable period and diligently pursued until the default is corrected.
(c) Bankruptcv or Insolvencv. If (i) the City's interest in this Lease or any part
thereof be assigned or transferred, either voluntarily or by operation of law or otherwise, without the
written consent of the Authority, [and the Insurer,] as hereinafter provided for, (ii) the City shall file
any petition or institute any proceeding under any act or acts, state or federal, dealing with or relating
to the subject or subjects of bankruptcy or insolvency, or under any amendment of such act or acts,
either as a bankrupt or as an insolvent, or as a debtor, or in any similar capacity, wherein or whereby
the City asks or seeks or prays to be adjudicated a bankrupt, or is to be discharged from any or all of
the City's debts or obligations, or offers to the City's creditors to effect a composition or extension of
time to pay the City's debts or asks, seeks or prays for reorganization or to effect a plan of
reorganization, or for a readjustment of the City's debts, or for any other similar relief, or if any such
petition or any such proceedings of the same or similar kind or character be filed or be instituted or
taken against the City, or if a receiver of the business or of the property or assets of the City shall be
appointed by any court, except a receiver appointed at the instance or request of the Authority, or if
the City shall make a general assignment for the benefit of the City's creditors, or (iii) the City shall
abandon or vacate the Leased Premises, then the City shall be deemed to be in default hereunder.
Section 9.2. Remedies on Default. Whenever any event of default referred to in
Section 9.1 hereof shall have happened and be continuing, it shall be lawful for the Authority to
exercise any and all remedies available pursuant to law or granted pursuant to this Lease.
Notwithstanding anything herein or in the Trust Agreement to the contrary, THERE SHALL BE NO
RIGHT UNDER ANY CIRCUMSTANCES TO ACCELERATE THE LEASE PAYMENTS OR
OTHERWISE DECLARE ANY LEASE PAYMENTS NOT THEN IN DEFAULT TO BE
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IMJ'v1EDIATEL Y DUE AND PAYABLE. After the occurrence of an event of default hereunder, the
City will surrender possession of the Leased Premises to the Authority, if requested to do so by the
Authority, the Trustee or the Owners, in accordance with the provisions of the Trust Agreement.
Upon any event of default under 9.I(a) or (b) above, the Authority, in addition to all other
rights and remedies, may be any of the following:
(1) To terminate this Lease in the manner hereinafter provided on account of
default by the City, notwithstanding any re-entry or re-letting of the Leased Premises as hereinafter
provided for in subparagraph (2) hereof, and to re-enter the Leased Premises and remove all persons
in possession thereof and all personal property whatsoever situated upon the Leased Premises and
place such personal property in storage in any warehouse or other suitable place, for the account of
and at the expense of the City. In the event of such termination, the City agrees to surrender
immediately possession of the Leased Premises, without let or hindrance, and to pay the Authority,
all damages recoverable at law that the Authority, may incur by reason of default by the City,
including, without limitation, any costs, loss or damage whatsoever arising out of, in connection
with, or incident to any such re-entry upon the Leased Premises and removal and storage of such
Leased Premises by the Authority, or its duly authorized agents, in accordance with the provisions
herein contained. Neither notice to pay Lease Payments or to deliver up possession of the Leased
Premises given pursuant to law nor any entry or re-entry by the Authority hereunder, nor any
proceeding in unlawful detainer, or otherwise, brought by the Authority, for the purpose of effecting
such re-entry or obtaining possession of the Leased Premises nor the appointment of a receiver upon
initiative of the Authority to protect the Authority's interest under this Lease, shall of itself operate to
terminate this Lease, and no termination of this Lease on account of default by the City shall be or
become effective by operation of law or acts of the parties hereto, or otherwise, unless and until the
Authority, shall have given written notice to the City of the election on the part of the Authority to
terminate this Lease. The City covenants and agrees that no surrender of the Leased Premises or of
the remainder of the term hereof or any termination of this Lease shall be valid in any manner or for
any purpose whatsoever unless stated by the Authority, by such written notice.
(2) Without terminating this Lease, (x) to collect each installment of Lease
Payments as the same become due and enforce any other terms or provisions hereof to be kept or
performed by the City, regardless of whether or not the City has abandoned the Leased Premises, or
(y) to exercise any and all rights of entry and re-entry upon the Leased Premises. In the event the
Authority, does not elect to terminate this Lease in the manner provided for in subparagraph (I)
hereof, the City shall remain liable and agrees to keep or perform all covenants and conditions herein
contained to be kept or performed by the City and, if the Leased Premises is not re-let, to pay the full
amount of the Lease Payments to the end of the term of this Lease or, in the event that the Leased
Premises is re-let, to pay any deficiency in Lease Payments that results therefrom; and further agrees
to pay said Lease Payments deficiency punctually at the same time and in the same marmer as
hereinabove provided for the payment of Lease Payments hereunder, notwithstanding the fact that
the Authority, may have received in previous years or may receive thereafter in subsequent years
Lease Payments in excess of the Lease Payments herein specified, and notwithstanding any entry or
re-entry by the Authority hereunder, or suit in unlawful detainer, or otherwise, brought by the
Authority, for the purpose of effecting such re-entry or obtaining possession of the Leased Premises.
Should the Authority, elect to re-enter as herein provided, the City hereby irrevocably appoints the
Authority, as the agent and attorney-in-fact of the City to re-let the Leased Premises, or any part
thereof, from time to time, either in the Authority's name or otherwise, upon such terms and
conditions and for such use and period as the Authority, may deem advisable and to remove all
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persons in possession thereof and all personal property whatsoever situated upon the Leased
Premises and to place such personal property in storage in any warehouse or other suitable place, for
the account of and at the expense of the City, and the City hereby indemnifies and agrees to save
harmless the Authority from any costs, loss or damage whatsoever arising out of, in connection with,
or incident to any such re-entry upon and re-letting of the Leased Premises and removal and storage
of such Leased Premises by the Authority hereunder, or its duly authorized agents in accordance with
the provisions herein contained. The City agrees that the terms of this Lease constitute full and
sufficient notice of the right of the Authority, to re-let the Leased Premises in the event of such re-
entry without effecting a surrender of this Lease, and further agrees that no acts of the Authority, in
effecting such re-letting shall constitute a surrender or termination of this Lease irrespective of the
use or the term for which such re-letting is made or the terms and conditions of such re-letting, or
otherwise, but that, on the contrary, in the event of such default by the City the right to terminate this
Lcasc shall ';C3t ifl the Authority hereUlHIer, to be effe,ted in the sole ~Qd ~Xdl"ivp m"nnpr rrnvioeo
for in subparagraph (1) hereof. The City further agrees to pay the Authority, the cost of any
alterations or additions to the Leased Premises necessary to place the Leased Premises in condition
for re-letting immediately upon notice to the City of the completion and installation of such additions
or alterations.
The City hereby waives any and all claims for damages caused or which may be caused by
the Authority, in re-entering and taking possession of the Leased Premises as herein provided and all
claims for damages that may result from the destruction of or injury to the Leased Premises and all
claims for damages to or Joss of any Leased Premises belonging to the City, or any other person, that
may be in or upon the Leased Premises.
In addition to the other remedies set forth in this Section, upon the occurrence of an event of
default, the Authority shall be entitled to proceed to protect and enforce the rights vested in the
Authority by this Lease or by law. The provisions of this Lease and the duties of the City and of its
council, officers or employees shall be enforceable by the Authority by mandamus or other
appropriate suit, action or proceeding in any court of competent jurisdiction. Without limiting the
generality of the foregoing, the Authority shall have the right to bring the following actions:
(i) Accounting. By action or suit in equity to require the City and its council,
officers and employees and its assigns to account as the trustee of an express trust.
(ii) Injunction. By action or suit in equity to enjoin any acts or things which may
be unlawful or in violation of the rights of the Authority.
(iii) Mandamus. By mandamus or other suit, action or proceeding at law or in
equity to enforce the Authority's or its assignee's rights against the City (and its council, officers and
employees) and to compel the City to perform and carry out its duties and obligations under the law
and its covenants and agreements with the City as provided herein.
Section 9.3. No Remedv Exclusive. No remedy conferred herein upon or reserved to the
Authority is intended to be exclusive and every such remedy shall be cumulative and shall be in
addition to every other remedy given under this Lease or now or hereafter existing at law or in
equity. No delay or omission to exercise any right or power accruing upon any default shall impair
any such right or power or shall be construed to be a waiver thereof, but any such right and power
may be exercised trom time to time and as often as may be deemed expedient. In order to entitle the
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Authority to exercise any remedy reserved to it in this Article it shall not be necessary to give any
notice, other than such notice as may be required in this Article or by law.
Section 9.4. Agreement to Pav Attornevs' Fees and Expenses. In the event either party to
this Lease should default under any of the provisions hereof and the nondefaulting party should
employ attorneys or incur other expenses for the collection of moneys or the enforcement of
performance or observance of any obligation or agreement on the part of the defaulting party
contained herein, the defaulting party agrees that it will pay on demand to the nondefaulting party the
reasonable fees of such attorneys and such other expenses so incurred by the nondefaulting party.
Section 9.5. No Additional Waiver Implied bv One Waiver. In the event any agreement
contained in this Lease should be breached by either party and thereafter waived by the other party;
~uch maiuer shall be limitpn tn tnp pm-ticlJ l"r hreech so waived and shall not be deemed to waive any
other breach hereunder.
Section 9.6. Application of the Proceeds from the Re-Lease of the Leased Premises. All
amounts received by the Authority under this Article IX shall, subject to Section 13.03 of the Trust
Agreement, be deposited by the Trustee in the Lease Payment Fund and credited towards the Lease
Payments in order of Lease Payment Dates.
Section 9.7. Trustee and Owners to Exercise Rights. Such rights and remedies as are
given to the Authority under this Article IX have been assigned by the Authority to the Trustee under
the Assignment Agreement, to which assignment the City hereby consents. Such rights and remedies
shall be exercised by the Trustee and the Owners as provided in the Trust Agreement. In addition to
the rights and remedies assigned by the Authority to the Trustee, to the extent that the Trust
Agreement and this Lease confer upon or gives or grant to the Trustee any right, remedy or claim
under or by reason of the Trust Agreement or this Lease, the Trustee is hereby explicitly recognized
as being a third party beneficiary hereunder and may enforce any such right, remedy or claim
conferred given or granted.
ARTICLE X
PREPAYMENT OF LEASE PAYMENTS
Section 10.1. Security Deposit. Notwithstanding any other provision of this Lease, the City
may, on any date, secure the payment of Lease Payments and Additional Payments by a deposit by it
with the Trustee of cash and/or Government Obligations as provided in Section 14.0 I of the Trust
Agreement. In such event, and provided that the City has paid any other amounts due and owing
under this Lease and the Trust Agreement, all obligations of the City under this Lease, and all
security provided by this Lease for said obligations, shall cease and terminate, excepting only the
obligation of the City to make, or cause to be made, Lease Payments and Additional Payments ITom
such deposit. On the date of said deposit title to the Leased Premises shall vest in the City
automatically and without further action by the City or the Authority (except as provided herein).
Said deposit shall be deemed to be and shall constitute a special fund for the payment of Lease
Payments in accordance with the provisions of this Lease. The Authority shall execute and deliver
such further instruments and take such further action as may reasonably be requested by the City for
carrying out the title transfer of the Leased Premises.
DOCSOC/1377686v3/024036-0045
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Section 10.2. Extraordinary Prepavment. The City shall be obligated to prepay the Lease
Payments in whole or in part on any date, from and to the extent of any Net Proceeds or other
moneys theretofore deposited in the Prepayment Fund (at least 45 days prior to the date fixed for
prepayment of the Certificates and any Additional Certificates) pursuant to Section 4.02 of the Trust
Agreement. The City and the Authority hereby agree that such Net Proceeds or other moneys shall
be credited towards the City's obligations hereunder (except in the case of such Prepayment of the
Lease Payments in whole) pro rata among Lease Payments so that following Prepayment, the
remaining annual Lease Payments will be proportional to the initial annual Lease Payments.
Section 10.3. Optional Prepavment. Subject to the terms and conditions of this Section, the
Authority hereby grants an option to the City to prepay all or a portion of the Lease Payments to the
extent and on the dates at the prepayment prices set forth in Section 4.03 of the Trust Agreement and
in any Supplemental ^ greem~nt Th~ City <,,011 rnwir!p nnticp tn thp Trllstpp M least 4'; days prior to
the date fixed for prepayment ofthe Certificates (or on such later date as shall be consented to by the
Trustee). The City and the Authority agree that such prepayments shall be credited toward the City's
obligations hereunder corresponding to the resulting prepayment of the Certificates and Additional
Certificates in accordance with Section 4.03 of the Trust Agreement and any Supplemental
Agreement on the dates and at the prepayment prices provided therein.
ARTICLE XI
MISCELLANEOUS
Section 11.1. Notices. All notices, certificates or other communications hereunder shall be
sufficiently given and shall be deemed to have been received on the earlier of the day of actual
receipt or five Business Days after deposit in the United States mail in first-class or certified form,
postage prepaid, to the City or the Authority, as the case may be, at the addresses indicated in
Section 14.05 of the Trust Agreement. The Authority, the City, and the Trustee, by notice given
hereunder, may designate different addresses to which subsequent notices, certificates or other
communications will be sent.
Section 11.2. Binding Effect. This Lease shall inure to the benefit of and shall be binding
upon the Authority and the City and their respective successors and assigns.
Section 11.3. Severability. In the event any provision of this Lease shall be held invalid or
unenforceable by a court of competent jurisdiction, such holding shall not invalidate or render
unenforceable any other provision hereof.
Section 11.4. Execution in Counterparts. This Lease may be executed in any number of
counterparts, each of which shall be an original and all of which shall constitute but one and the same
instrument.
Section 11.5. Applicable Law.
accordance with the laws ofthe State.
This Lease shall be governed by and construed 111
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IN WITNESS WHEREOF, the Authority has caused this Lease to be executed in its name by
its duly authorized officer, and the City has caused this Lease to be executed in its name by its duly
authorized officer, as ofthe date first above written.
CHULA VISTA PUBLIC FINANCING
AUTHORITY, as Lessor
By:
Its: Executive Director
Attest:
Secretary
CITY OF CHULA VISTA,
as Lessee
By:
Its: Director of Finance
Attest:
City Clerk
DOCSOC/1377686v3/024036-0045
S-I
7-191
CERTIFICATE OF ACCEPTANCE
This is to certifY that the interest in the Leased Premises conveyed under the foregoing to the
City of Chula Vista, a municipal corporation and a chartered city duly organized under the laws of
the State of California, is hereby accepted by the undersigned officer or agent on behalf of the City
Council of the City of Chula Vista, pursuant to authority conferred by resolution of the said City
Council adopted on , 2010 and the grantee consents to recordation thereof by its duly
authorized officer.
Dated:
,2010
CITY OF CHULA VISTA
By:
Its: Director of Finance
DOCSOC/13 77686v 3/024036-0045
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EXHIBIT A
SCHEDULE OF LEASE PAYMENTS
Date
Principal Component
Interest Component
Total
$
DOCSOCI1 377686v3/024036-0045
A-I
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Lease Payments
$
$
EXHIB IT B
DESCRIPTION OF THE PROPERTY
THAT REAL PROPERTY IN THE CITY OF CHULA VISTA, COUNTY OF SAN DIEGO,
STATE OF CALIFORNIA, DESCRIBED AS FOLLOWS:
DOCSOC/1377686v3/024036-0045
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EXHIBIT C
DESCRIPTION OF THE PROJECT
Phase 3 consists of the reconstruction, modernization and equipping of the Civic Center
Expansion.
DOCSOC/13 77686v 3/024036-0045
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EXHIBIT D
LEASE SUPPLEMENT FORM
There is hereby subjected to the tenns of that certain Lease/Purchase Agreement, dated as of
, 20 I 0, by and between the Chula Vista Public Financing Authority and the City of Chula
Vista (the "City') the following items which shall comprise a portion of the Leased Premises, as
defined therein:
Description of Substituted Leased Premises
[Insert Description]
Cost
I, the City Representative, hereby certify that:
(1) the fair rental value (based on the attached appraisal by an independent real estate
appraiser) and the useful life of the above-described portion of the Leased Premises, as substituted, at
least equals the fair rental value and the useful life of the portion of the Leased Premises for which it
was substituted;
(2) the above-described portion of the Leased Premises will be used by the City for
authorized public purposes and can be leased under the provisions of the Lease and the Government
Code;
and
(3) the above-described portion of the Leased Premises is currently owned by the City;
(4) the above-described portion of the Leased Premises is of approximately the same
degree of essentiality to the City as the portion of the Leased Premises being replaced.
I, the City Representative, hereby certify that the portion of the Leased Premises being
substituted is ITee and clear of all liens or claims of others, except for Pennitted Encumbrances
referred to in the Lease.
CITY OF CHULA VISTA
By: r signature 1
City Representative
DOCSOC/1377686v3/024036-0045
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EXHIBIT E
FORM OF CERTIFICATE OF SUBSTITUTION
OR ADDITION OF PROJECT COMPONENT
I, of the City of Chula Vista (the "City") hereby certify that
project is to become a part of the Project as defined under the
Lease/Purchase Agreement, dated as of , 2010 (the "Lease"), by and between the City and
the Chula Vista Public Financing Authority (the "Authority") [in addition to the components of the
Project as defined in the Lease or in substitution for component
of the Project as defined in the Lease]. This Certificate shall be filed with the Trustee under the Trust
Agreement, dated as of ,2010, by and among the City, the Authority and BNY Western
Trll<;;:t rl\mp::!ny ::1"- trll",tf'~ tnf'rf'lmnf'r until ~llch time as the Lease is tenninated.
City Representative
DOCSOC/1377686v3/024036-0045
E-l
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STATE OF CALIFORNIA )
)
COUNTY OF SAN DIEGO )
On , before me, , Notary Public,
personally appeared , who proved
to me on the basis of satisfactory evidence to be the person(s) whose names(s) is/are subscribed to
the within instrument and acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the
entity upon behalf of which the person(s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of Cali fomi a that the foregoing
p"r"ET"ph is true and correct.
WITNESS my hand and official seal
SIGNATURE OF NOTARY PUBLIC
DOCSOC/13 77 686v3/02403 6.0045
7-198
STATE OF CALIFORNIA )
)
COUNTY OF SAN DIEGO )
On , before me, , Notary Public,
personally appeared , who proved
to me on the basis of satisfactory evidence to be the person(s) whose names(s) is/are subscribed to
the within instrument and acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by hislher/their signature(s) on the instrument the person(s), or the
entity upon behalf of which the person(s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing
r:lr~eJ::Jrh ;1::;. tnJe ::Jno correct
WITNESS my hand and official seal
SIGNATURE OF NOTARY PUBLIC
DOCSOC/ 13 77686v3/024036-0045
7-199
THE ATTACHED AGREEMENT HAS BEEN REVIEWED
AND APPROVED AS TO FORM BY Stradling, Y occa, Carlson & Rauth
AND WILL BE
FORMALLY SIGNED UPON APPROVAL BY
THE CITY COUNCIL
Robert J. Whal Special Counsel
Stradling, Y occ , Carlson & Rauth,
A Professional Corporation
Dated: I /"2--1/ ID
I I
SITE LEASE
BETWEEN THE CITY OF CHULA VISTA AND
PUBLIC FINANCING AUTHORITY
7-200
Recording Requested By:
City of Chula Vista
When Recorded Mail To:
Stradling Y occa Carlson & Rauth
660 Newport Center Drive, Suite 1600
Newport Beach, CA 92660
Attn: Robert 1. Whalen
This document is recorded for the benefit of the City of Chula Vista and recording is fee-exempt under 9 27383 of
the Government Code.
SITE LEASE
by and between the
CITY OF CHULA VISTA
and the
CHULA VISTA PUBLIC FINANCING AUTHORITY
Dated as of February I, 20 I 0
$
City of Chula Vista
2010 Certificates of Participation
(Capital Facilities Refunding Projects)
DOCSOC/13 775 77v 3/024036-0045
7-201
SITE LEASE
This SITE LEASE, dated as of February I, 2010, by and between the CITY OF CffiJLA
VISTA, a municipal corporation and a chartered city duly organized and existing under and by virtue
ofthe Constitution and laws of the State of California (the "City"), and the CffiJLA VISTA PUBLIC
FINANCING AUTHORITY, a joint exercise of powers authority duly organized and existing under
and by virtue of the laws of the State of Cali fomi a (the "Authority");
WITNESSETH:
WHEREAS, the Authority has agreed to enter into this Site Lease (the "Site Lease") with the
City wherein the City will lease the real property described in Exhibit A hereto and the existing
improvements thereon (the "Property") to the Authority; and
WHEREAS, the Authority intends to lease back to the City the Property, together with any
improvements to be constructed thereon with the proceeds of any Additional Certificates (as defined
in the Trust Agreement described below) (the "Leased Premises") pursuant to a LeaseIPurchase
Agreement to be executed and entered into as of the date hereof (the "Lease"); and
WHEREAS, by resolutions the City and the Authority have agreed to execute this Site Lease,
and to deliver it upon performance and compliance by each party with all terms or conditions of this
Site Lease to be performed concurrently herewith, including, without limitation, the delivery of the
City of Chula Vista 2010 Certificates of Participation (Capital Facilities Refunding Projects) (the
"Certificates") executed and delivered pursuant to a Trust Agreement, dated as of the date hereof (the
"Trust Agreement"), by and among the City, the Authority, and U.S. Bank National Association, as
trustee (the "Trustee"); and
WHEREAS, all acts, conditions and things required by law to exist, to have happened and to
have been performed precedent to and in connection with the execution and entering into of the Site
Lease do exist, have happened and have been performed in regular and due time, form and manner as
required by law, and the parties hereto are now duly authorized to execute and enter into the Site
Lease.
NOW, THEREFORE, IN CONSIDERATION OF THE PREMISES AND OF THE
MUTUAL AGREEMENTS AND COVENANTS CONTAINED HEREIN AND FOR OTHER
VALUABLE CONSIDERATION, THE PARTIES HERETO DO HEREBY AGREE AS
FOLLOWS:
Section I. Definitions. All terms not otherwise defined herein shall have the definitions
given such terms in the Trust Agreement.
Section 2. The Property. The City hereby leases to the Authority and the Authority
hereby leases from the City, on the terms and conditions hereinafter set forth, the Property; provided
that the Lease is duly executed and delivered by the parties hereto simultaneously herewith.
Section 3. Term. The term of this Site Lease shall commence as of the date of execution
hereof and shall remain in effect until the later of I, 20_ or the Term, as defined in the
Lease, expires as provided therein, unless such term is sooner terminated as hereinafter provided;
provided, however, that in the event of a default by the City under the Lease and the Authority's
DOCSOC/ 13 77 577v3/024036-0045
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election to tenninate the Lease under Section 9.2(b) thereof, the tenn of this Site Lease shall not
tenninate until such time as all amounts payable by the City under the Lease and the Trust
Agreement have been paid in full.
Section 4. Rental. The Authority, and any assignee or successor in interest of the
Authority under this Site Lease, shall pay to the City a single rental payment of $ , from
proceeds of sale of the Certificates, by causing such amount to be deposited to the Project Fund, the
Lease Payment Fund, the Reserve Fund and the Escrow Fund as described in the Trust Agreement.
Section 5. Purpose. The Authority shall use the Property solely for the purpose of
leasing back such Property to the City pursuant to the Lease and for such purposes as may be
incidental thereto; provided, that in the event of default by the City under the Lease or termination
pms1Jent thereto, the Authority may exercise the remedies ofrepossession of the Leased Premises, as
provided in the Lease.
Section 6. Interest in Prorertv. The City warrants and covenants that it has sufficient
interest in the Property to lease it hereunder. In the event of a title defect in the Property that impairs
the right to use and occupy the Property, the City covenants that it will exercise its power, including
but not limited to, its condemnation powers to the extent pennitted by law, to obtain the necessary
rights in the Property and to cure such defect and limitation ofthe right to use and occupancy.
Section 7. Assignments and Subleases. The City acknowledges and affinns the
assignment by the Authority of its rights under this Site Lease to the Trustee, under the terms of the
Assignment Agreement dated as of the date hereof, for the benefit of the Owners of the Certificates.
This Site Lease may also be assigned arid the Leased Premises subleased, as a whole or in part, by
the Authority without necessity of obtaining the consent of the City, if any event of default occurs
under the Lease.
Section 8. Termination. The Authority agrees, upon the tennination of this Site Lease,
to quit and surrender the Property in the same good order and condition as the same was in at the
time of commencement of the tenn hereunder, reasonable wear and tear excepted, and agrees that
any permanent improvements and structures existing upon the Property at the time of the termination
of this Site Lease shall remain thereon and title thereto shall vest in the City.
Upon the exercise by the City of its option to purchase a portion of the Leased Premises, as
set forth in Section 7.3 of the Lease and upon payment therefor, a corresponding portion of the
Property may be released from this Site Lease.
Upon payment by the City of all Lease Payments and all Additional Payments due during the
tenn of the Lease, as provided for in Article IV thereof, the tenn of this Site Lease shall tenninate.
Under no circumstances may the City terminate this Site Lease as a remedy for a default by
the Authority in the performance of any obligation of the Authority hereunder.
Section 9. Ouiet Eniovment. The Authority at all times during the term of this Site
Lease shall peaceably and quietly have, hold and enjoy all of the Property; provided, however, that
the City shall have the right to demolish some or all of the existing improvements on the Property in
order to replace or renovate some or all of the existing improvements with new improvements of
equivalent or greater value.
DOCSOC/13 775 77v 3/024036-0045
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Section 10. Default. In the event the Authority shall be in default in the perfonnance of
any obligation on its part to be perfonned under the tenns of this Site Lease, which default continues
for 30 days following written notice and demand for correction thereto by the City, the City may
exercise any and all remedies granted by law; provided, however, that no merger of this Site Lease
and the Lease shall be deemed to occur as a result thereof and, so long as any Certificates and
Additional Certificates are outstanding, the Site Lease shall not be tenninated except as provided in
Section 8 hereof.
Section 11. Taxes. Subject to the provisions of Section 7.7 of the Lease, the City
covenants and agrees to pay any and all assessments of any kind or character and also all taxes,
including possessory interest taxes, levied or assessed upon the Property.
Section 12 Eminent Domain. In the event the whole or anv part of the Property is taken
by eminent domain proceedings, the interest of the Authority shall be recognized and is hereby
detennined to be the amount of unpaid Lease Payments and all Additional Payments due the
Authority under the Lease.
Section 13. Partial Invalidity. If anyone or more of the tenns, provisions, covenants or
conditions of this Site Lease shall to any extent be declared invalid, unenforceable, void or voidable
for any reason whatsoever by a court of competent jurisdiction, the finding or order or decree of
which becomes final, none of the remaining tenns, provisions, covenants and conditions of this Site
Lease shall be affected thereby, and each provision of this Site Lease shall be valid and enforceable
to the fullest extent pennitted by law.
Section 14. Applicable Law. This Site Lease shall be governed by and construed m
accordance with the laws of the State of California.
Section 15. Representatives. Whenever under the provIsIOns of this Site Lease the
approval of the Authority or the City is required, or the Authority or the City is required to take some
action at the request of the other, such approval or such request shall be given for the City by the City
Manager or the Director of Finance, or their written designees, as representative, and for the
Authority by its Executive Director, Secretary, Assistant Secretary or Treasurer, or their written
designees, as representative, and any party hereto shall be authorized to rely upon any such approval
or request.
Section 16. Captions. The captions or headings in this Site Lease are for convenience
only and in no way define, limit or describe the scope of intent of any provision or Section of this
Site Lease.
Section 17. Execution in Counterparts. This Site Lease may be executed in any number
of counterparts, each of which shall be deemed to be an original and all of which shall constitute but
one and the same instrument.
Section 18. Amendments. This Site Lease may be amended in writing as may be
mutually agreed by the City and the Authority; provided, however, that no such amendment which
materially adversely affects the rights of the Owners of the Certificates and any Additional
Certificates shall be effective unless it shall have been consented to by the Trustee and the Owners of
a majority in aggregate principal amount of the Certificates then Outstanding.
DOCSOC/ 13 77 577v3/024036-004 5
3
7-204
Section 19.
of the Lease.
Incorporation. This Site Lease shall be subject to all the teons and conditions
Section 20.
the Authority that:
Warranties of the City as to the Property. The City covenants and warrants to
(a) except for Peonitted Encumbrances, the Property is not subject to any
dedication, easement, right of way, reservation in patent, covenant, condition, restriction, lien
or encumbrance which would prohibit or materially interfere with the financing as
contemplated by the Lease;
(b) all taxes, assessments, or impositions of any kind with respect to the Property,
except current taxes have been paid in full.
(c) the Property is necessary to the City in order for the City to perfoon its
governmental functions; and
(d) the Property is properly zoned for its intended purposes.
DOCSOC!l3 77577v 3/024036-0045
4
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IN WITNESS WHEREOF, the parties have caused this Site Lease to be executed by their
duly authorized officers as of the date and year first above written.
CITY OF CHULA VISTA
By:
Its: Director of Finance
Attest:
City Clerk
CHULA VISTA
AUTHORITY
PUBLIC
FINANCING
By:
Its: Executive Director
Attest:
Secretary
DOCSOC/ 13 77 577v 3/024036-0045
S-1
7-206
CERTIFICATE OF ACCEPTANCE
This is to certify that the interest in the Property conveyed under the foregoing to the Chula
Vista Public Financing Authority (the "Authority"), a joint exercise of powers authority duly
organized under the laws of the State of California, is hereby accepted by the undersigned officer or
agent on behalf of the Authority, pursuant to authority conferred by resolution of the said Authority
adopted on , 20 I 0 and the grantee consents to recordation thereof by its duly authorized
officer.
Dated:
,2010
CHULA VISTA PUBLIC FINANCING
AUTHORITY
By:
Its: Executive Director
DOCSOC/13 77 577v 3/024036-0045
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EXHIBIT A
,
DESCRlPTION OF THE PROPERTY
THAT REAL PROPERTY IN THE CITY OF CHlJLA VISTA, COUNTY OF SAN DIEGO,
STATE OF CALIFORNIA, DESCRIBED AS FOLLOWS:
DOCSOC/13 775 77v3102403 6-0045
A-I
7-208
STATE OF CALIFORNIA )
)
COUNTY OF SAN DIEGO )
On , before me, , Notary Public,
personally appeared , who proved
to me on the basis of satisfactory evidence to be the person(s) whose names(s) is/are subscribed to
the within instrument and acknowledged to me that he/she/they executed the same in his/herltheir
authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the
entity upon behalf of which the person( s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing
r::1r::lgr:::1rh ;<::: trllf> :::Inn rorrf':rt
WITNESS my hand and official seal
SIGNATURE OF NOTARY PUBLIC
DOCSOC/1377577v3/024036-0045
7-209
STATE OF CALIFORNIA )
)
COUNTY OF SAN DIEGO )
On , before me, , Notary Public,
personally appeared , who proved
to me on the basis of satisfactory evidence to be the person(s) whose names(s) is/are subscribed to
the within instrument and acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the
entity upon behalf of which the person( s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing
paragriJph k tnlP ::Inrf rnITf"rt
WITNESS my hand and official seal
SIGNATURE OF NOTARY PUBLIC
DOCSOCIl3 77 577v 3/024036-0045
7-210
THE ATTACHED AGREEMENT HAS BEEN REVIEWED
AND APPROVED AS TO FORM BY Stradling, Y occa, Carlson & Rauth
AND WILL BE
FORMALLY SIGNED UPON APPROVAL BY
THE CITY COUNCIL
en, Special Counsel
Stradling, cca, Carlson & Rauth,
A Professional Corporation
Dated:
d21hD
I /
ASSIGNMENT AGREEMENT
BETWEEN THE CITY OF CHULA VISTA AND
U.S. Bank National Association FOR Trustee Services
7-211
Recording Requested By: )
City of Chula Vista )
)
When Recorded Mail To: )
Stradling Y occa Carlson & Rauth )
660 Newport Center Drive, Suite 1600 )
Newport Beach, California 92660 )
Attn: Robert 1. Whalen )
This document is recorded for the benefit of the City of Chula Vista and recording is fee-
exempt under 927383 of the Government Code.
ASSIGNMENT AGREEMENT
by and between the
CHULA VISTA PUBLIC FINANCING AUTHORITY
and
U.S. BANK NA nONAL ASSOCIA nON
as Trustee
Dated as of February 1,2010
$
City of Chula Vista
2010 Certificates of Participation
(Capital Facilities Refunding Projects)
DOCSOC/13 77 680v3/024036-0045
7-212
ASSIGNMENT AGREEMENT
This ASSIGNMENT AGREEMENT, dated as of February I, 2010, by the CHULA
VISTA PUBLIC FINANCING AUTHORITY, a joint exercise of powers authority duly
organized and existing under and by virtue of the laws of the State of California (the
"Authority"), and accepted by U.S. BANK NATIONAL ASSOCIATION, a national banking
association duly organized and existing under and by virtue of the laws of the United States,
as trustee under the Trust Agreement (defined below) (the 'Trustee");
WIT N E SSE T H:
WHEREAS, the Authority and the City ofChula Vista, a municipal corporation and a
chartered city duly organized and existing under and by virtue of the Constitution and laws of
the State of California (the "City"), have executed and entered into a Site Lease (the "Site
Lease") and a Lease/Purchase Agreement (the "Lease"), each dated as of the date hereof and
recorded concurrently herewith, whereby, respectively, the City has agreed to lease certain
real property of the City described in Exhibit A to the Site Lease and in Exhibit A hereto,
including the existing improvements thereon (the "Property"), to the Authority and the
Authority has agreed to lease back such Property back to the City (collectively, the "Leased
Premises"), as provided therein; and
WHEREAS, under and pursuant to the Lease, the City is obligated to make Lease
Payments, as defined therein, to the Authority for the lease of the Leased Premises; and
WHEREAS, the Authority desires to assign absolutely, without recourse, all of its
rights to receive the Lease Payments scheduled to be paid by the City under and pursuant to
the Lease to the Trustee and certain of its other rights, title and interest under the Lease as
described herein; and
WHEREAS, the Authority desires to assign absolutely, without recourse, all of its
rights to, under and pursuant to the Site Lease to the Trustee; and
WHEREAS, in consideration of such absolute assignment and the execution and
entering into of a Trust Agreement (the "Trust Agreement") dated as of the date hereof, by
and among the Trustee, the Authority and the City, the Trustee has agreed to execute and
deliver certificates of participation designated as the City of Chula Vista 20 I 0 Certificates of
Participation (Capital Facilities Refunding Projects) (the "Certificates") in an aggregate
principal amount equal to the aggregate principal components of such Lease Payments; and
WHEREAS, each party has determined that all acts conditions and things required by
law to exist, to have happened and to have been performed precedent to and in connection
with its execution and entering into of this Assignment Agreement (the "Assignment
Agreement") do exist, have happened and have been performed in regular and due time, form
and manner as required by law and it is now duly authorized to execute and enter into the
Assignment Agreement.
NOW, THEREFORE, IN CONSIDERATION OF THE PREMISES AND OF THE
MUTUAL AGREEMENTS AND COVENANTS CONTAINED HEREIN AND FOR
DOCSOC/13 77680v3/024036-004 5
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OTHER VALUABLE CONSIDERATION, THE PARTIES HERETO DO HEREBY
AGREE AS FOLLOWS:
Section 1.
Assignment.
(a) Site Lease. The Authority hereby transfers, assigns absolutely and sets over
to the Trustee, for the benefit of the Owners (as defined in the Trust Agreement) of the
Certificates and any Additional Certificates executed and delivered under the Trust
Agreement, all of the Authority's rights, title, and interest under the Site Lease.
(b) Lease. The Authority hereby transfers, assigns absolutely and sets over to the
Trustee, for the benefit of the owners of the Certificates and any Additional Certificates
~Y~ClJt~e! one! e!~livered lmder the Trust Agreement. all of the Authoritv's rights. title and
interest under the Lease (excepting only the Authority's rights to indemnity and the payment
of its fees and expenses under Sections 2.1(e), 4.11, 7.9, 7.14 and 9.4 of the Lease),
including, without limitation, (I) the right to receive and collect all of the Lease Payments,
Prepayments and Additional Payments (except to the extent payable to the Authority) (as
such terms are defined in the Trust Agreement) ITom the City under the Lease or the Trust
Agreement, as applicable, (2) the right to receive and collect any proceeds of any insurance
maintained thereunder, or any condemnation award rendered with respect to the Leased
Premises, or of any lease of the Leased Premises in the event of a default by the City under
the Lease, (3) the right to take all actions and give all consents under the Lease, including
without limitation, Section 8.2(b) (regarding subleases), Section 8.3 (regarding amendments
of the Lease) and Section 9.2 (regarding defaults), (4) the right to exercise such rights and
remedies conferred on the Authority pursuant to the Lease as may be necessary or convenient
(i) to enforce payment of the Lease Payments, Prepayments and Additional Payments and
any other amounts required to be deposited in the Lease Payment Fund, the Prepayment
Fund, the Reserve Fund or the Net Proceeds Fund established under the Trust Agreement, or
(ii) otherwise to protect the interests of the Authority in the event of a default by the City
under the Lease, and (5) the right of the Authority to receive rental in excess of Lease
Payments as compensation for re-Ieasing the Leased Premises upon events of default under
the Lease, as provided in Section 9.2(a) and (b) of the Lease.
(c) Assignment for Owners of Certificates. All rights assigned by the Authority
shall be administered by the Trustee as assignee thereof according to the provisions of the
Trust Agreement and for the equal and prop011ionate benefits of the Owners of the
Certificates and any Additional Certificates.
Section 2. Acceptance. The Trustee hereby accepts the foregoing assignment
for the benefit of the Owners of the Certificates and any Additional Certificates, subject to
the conditions and terms of the Trust Agreement, and all such Lease Payments shall be
applied and all such rights so assigned shall be exercised by the Trustee under and pursuant
to the Trust Agreement.
Section 3. Conditions. The Assignment Agreement shall confer no rights and
shall impose no obligations upon the Trustee beyond those expressly provided in the Trust
Agreement. The Trustee does not walTant the accuracy of the recitals hereto. The Trustee
shall not be responsible for any representations, covenants or warranties of the Authority.
The assignment hereunder is to the Trustee solely in its capacity as Trustee under the Trust
DOCSOC/1377680v3/024036-0045
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Agreement and not in its individual or personal capacity. The Trustee is not responsible for
any representations, warranties or covenants made by the assignor under the Lease or the Site
Lease.
Section 4. No Other Claim. The Authority hereby represents and warrants that
there are no present and outstanding claims on Lease Payments or any other moneys assigned
by the Authority to the Trustee hereunder.
Section 5. Counterparts. This Assignment Agreement may be executed in any
number of counterparts, each of which shall be an original and all of which shall constitute
but one and the same instrument.
Section 6 Annlicahle Law. This Assignment Agreement shall be governed by
and construed in accordance with the laws of the State of California.
DOCSOC/1377680v3/024036-0045
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IN WITNESS WHEREOF, the parties hereto have executed and entered into the
Assignment Agreement by their officers thereunto duly authorized as ofthe day and year first
above written.
CHULA VISTA PUBLIC FINANCING
AUTHORITY
By:
Its: Executive Director
Attest:
By:
Secretary
Accepted by:
U.S. BANK NATIONAL ASSOCIATION, as
Trustee
By:
Its: Authorized Officer
Sol
DOCSOC/13 77680v 3/024036-0045
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EXHIBIT A
DESCRIPTION OF THE PROPERTY
THAT REAL PROPERTY IN THE CITY OF CHULA VISTA, COUNTY OF SAN
DIEGO, STATE OF CALIFORNIA, DESCRIBED AS FOLLOWS:
DOCSOC/13 77 680v3/024036-0045
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STATE OF CALIFORNIA
)
)
)
COUNTY OF SAN DIEGO
On , before me, , Notary Public,
personally appeared , who proved
to me on the basis of satisfactory evidence to be the person(s) whose names(s) is/are subscribed to
the within instrument and acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/herltheir signature(s) on the instrument the person(s), or the
entity upon behalf of which the person(s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing
paragraph is tru€ and correct
WITNESS my hand and official seal
SIGNATURE OF NOTARY PUBLIC
DOCSOC/13 77680v 3/024036-0045
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STATE OF CALIFORNIA )
)
COUNTY OF SAN DIEGO )
On , before me, , Notary Public,
personally appeared , who proved
to me on the basis of satisfactory evidence to be the person(s) whose names(s) is/are subscribed to
the within instrument and acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by hislher/their signature(s) on the instrument the person(s), or the
entity upon behalf of which the person( s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of Cali fomi a that the foregoing
paragnpll is tm~ ann (,Qrrprf
WITNESS my hand and official seal
SIGNATURE OF NOTARY PUBLIC
DOCSOC/13 77680v3/024036-004 5
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THE ATTACHED AGREEMENT HAS BEEN REVIEWED
AND APPROVED AS TO FORM BY Stradling, Y occa, Carlson & Rauth
AND WILL BE
FORMALLY SIGNED UPON APPROVAL BY
THE CITY COUNCIL
Robert J. en, Special Counsel
Stradling, Y occa, Carlson & Rauth,
A Professional Corporation
Dated:
l /').-1/10
/ I
CONTINUING DISCLOSURE AGREEMENT
BETWEEN THE CITY OF CHULA VISTA AND
U.S. Bank National Association FOR Dissemination Agent Services
7-220
CONTINUING DISCLOSURE AGREEMENT
This Continuing Disclosure Agreement, dated as of February I, 2010 (the "Disclosure
Agreement") is executed and delivered by the City of Chula Vista (the "City") and U.S. Bank
National Association (the "Dissemination Agent") in connection with the execution and delivery of
$[COP Amount] City ofChula Vista 2010 Certificates of Participation (Capital Facilities Refunding
Projects) (the "Certificates"). The Certificates are being executed pursuant to a Trust Agreement,
dated as of February 1,2010, by and among the City, U.S. Bank National Association, as trustee (the
"Trustee") and the Chula Vista Public Financing Authority (the "Authority"). The City covenants as
follows:
SECTION 1. Purpose of the Disclosure Agreement. This Disclosure Agreement is being
GXGGIlted ar,d delivered by the City for thg benefit of .10P Hnlrlpr, enrl Rpnpficial Owners of the
Certificates and in order to assist the Participating Underwriter in complying with the Rule.
SECTION 2. Definitions. In addition to the definitions set forth in the Trust Agreement,
which apply to any capitalized term used in this Disclosure Agreement unless otherwise defined in
this Section, the following capitalized terms shall have the following meanings:
"Annual Report" shall mean any Comprehensive Annual Financial Report provided by the
City pursuant to, and as described in, Sections 3 and 4 of this Disclosure Agreement.
"Beneficial Owner" shall mean any person which (a) has the power, directly or indirectly, to
vote or consent with respect to, or to dispose of ownership of, any Certificates (including persons
holding Certificates through nominees, depositories or other intermediaries), or (b) is treated as the
owner of any Certificates for federal income tax purposes.
"Disclosure Representative" shall mean the City Manager of the City, the Administrative
Services Director of the City or their designee, or such other officer or employee as the City shall
designate in writing ITom time to time.
"Dissemination Agent" shall mean U.S. Bank National Association, or any successor
Dissemination Agent designated in writing by the City and which has filed with the City a written
acceptance of such designation.
"EMMA" shall mean the Electronic Municipal Market Access system of the MSRB.
"Listed Events" shall mean any of the events listed in Section Sea) of this Disclosure
Agreement.
"MSRB" shall mean the Municipal Securities Rulemaking Board and any successor entity
designated under the Rule as the repository for filings made pursuant to the Rule.
"Official Statement" shall mean the Official Statement relating to the Certificates, dated
August 21,2009.
"Participating Underwriter" shall mean the original underwriter ofthe Certificates required to
comply with the Rule in connection with the offering ofthe Certificates.
DOCSOCI1378984v2/024036-0045
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"Repository" shall mean the EM!\1A system of the MSRB, which can be found at
http://emma.msrb.org.
"Rule" shall mean Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission
under the Securities Exchange Act of 1934, as the same may be amended from time to time.
"State" shall mean the State of California.
SECTION 3. Provision of Annual Reports.
(a) The City shall, or, upon delivery of the Annual Report to the Dissemination Agent,
shall cause the Dissemination Agent to, not later than each March I of each year commencing
March I, 20 I 0, provide to the Repository an Annual Report which is consistent with the
requirements of Section 4 of this Disclosure Agreement. The Annual Report shall be provided to the
Repository in an electronic format as prescribed by the Repository and shall be accompanied by
identifying information as prescribed by the Repository. The Annual Report may be submitted as a
single document or as separate documents comprising a package, and may cross-reference other
information as provided in Section 4 of this Disclosure Agreement; provided that the audited
financial statements of the City may be submitted separately from the balance of the Annual Report
and later than the date required above for the filing of the Annual Report if they are not available by
that date.
The Annual Report shall be provided at least annually notwithstanding any fiscal year longer
than 12 calendar months. The City's fiscal year is currently effective from July I to the immediately
succeeding June 30 of the following year. The City will promptly notify the Repository and the
Dissemination Agent of a change in the fiscal year dates. The City shall provide a written
certification with each Annual Report furnished to the Dissemination Agent to the effect that such
Annual Report constitutes the Annual Report required to be furnished by it hereunder. The
Dissemination Agent may conclusively rely upon such certification of the City and shall have no
duty or obligation to review such Annual Report.
(b) Not later than fifteen (15) business days prior to each April I, the City shall provide
the Annual Report to the Dissemination Agent (if other than the City). If the City is unable to
provide to the Repository an Annual Report by the date required in subsection (a), the City shall send
a notice to the Repository in substantially the form attached as Exhibit A.
(c) The Dissemination Agent shall:
(i) confirm the electronic filing requirements of the Repository for the
Annual Report; and
(ii) (if the Dissemination Agent is other than the City), file a report with
the City certifying that the Annual Report has been provided pursuant to this Disclosure
Agreement and stating the date it was provided.
DOCSOC/l 378984v2/024036-0045
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SECTION 4. Content of Annual Reports. The Annual Report due on March 1, 2010 shall
consist of a copy of the Official Statement. Thereafter, the City's Annual Report shall contain or
include by reference the following:
(a) The City's audited financial statements, prepared in accordance with generally
accepted auditing standards for municipalities in the State of California. If the City's audited
financial statements are not available by the time the Annual Report is required to be filed pursuant
to Section 3(a), the Annual Report shall contain unaudited financial statements in a format similar to
the financial statements contained in the final Official Statement, and the audited financial statements
shall be filed in the same manner as the Annual Report when they become available.
(b) To the extent not contained in the audited financial statements filed pursuant to the
preceding s'lbse<:tioll (a) by thp ,btp rp'l"irprl hy Section, hereof updates of Tables 1. 2. 4. 7. 9. 10
and II set forth in the Official Statement.
Any or all of the items listed above may be included by specific reference to other
documents, including official statements of debt issues of the City or related public entities, which
have been submitted to each of the Repositories or the Securities and Exchange Commission. If the
document included by reference is a final official statement, it must be available from the MSRB.
The City shall clearly identify each such other document so included by reference.
SECTION 5. Reporting of Significant Events.
(a) Pursuant to the provisions of this Section 5, the City shall give, or cause to be given,
notice ofthe occurrence of any of the following events with respect to the Certificates, if material:
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
Certificates.
(viii)
difficulties.
(ix)
difficulties.
(x)
Principal and interest payment delinquencies.
Non-payment related defaults.
Modifications to rights of Certificate holders.
Optional, contingent or unscheduled certificate calls.
Defeasances.
Rating changes.
Adverse tax opinions or events affecting the tax-exempt status of the
Unscheduled draws on the debt service reserves reflecting financial
Unscheduled draws on the credit enhancements reflecting financial
Substitution of the credit or liquidity providers or their failure to perform.
DOCSOCIl3 78984 v2l024036.0045
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Certificates.
(xi) Release, substitution or sale of property securing repayment of the
(b) Whenever the City obtains knowledge of the occurrence of a Listed Event, the City
shall as soon as possible determine if such event would be material under applicable federal
securities laws.
(c) If the City determines that knowledge of the occurrence of a Listed Event would be
material under applicable federal securities laws, the City shall promptly file, or cause the
Dissemination Agent to file, a notice of such occurrence with the Repository. Notwithstanding the
foregoing, notice of Listed Events described in subsections (a)(iv) and (v) need not be given under
this subsection any earlier than the notice (if any) of the underlying event is given to Holders of
affected Certificates pursuant to the Trust Agreement.
SECTION 6. Termination of Reporting Obligation. The City's obligations under this
Disclosure Agreement shall terminate upon the legal defeasance, prior redemption or payment in full
of all of the Certificates. If such termination occurs prior to the final maturity of the Certificates, the
City shall give notice of such termination in the same manner as for a Listed Event under
Section 5(c).
SECTION 7. Dissemination Agent. The City may, from time to time, appoint or engage a
Dissemination Agent to assist it in carrying out its obligations under this Disclosure Agreement, and
may discharge any such Dissemination Agent, with or without appointing a successor Dissemination
Agent. The Dissemination Agent shall not be responsible in any manner for the content of any notice
or report prepared by the City pursuant to this Disclosure Agreement. The Dissemination Agent may
resign by providing thirty days written notice to the City and the Trustee. The Dissemination Agent
shall not be responsible for the content of any report or notice prepared by the City and shall have no
duty to review any information provided to it by the City. The Dissemination Agent shall have no
duty to prepare any information report nor shall the Dissemination Agent be responsible for filing
any report not provided to it by the City in a timely manner and in a form suitable for filing.
SECTION 8. Amendment; Waiver. Notwithstanding any other provision of this Disclosure
Agreement, the City may amend this Disclosure Agreement, and any provision of this Disclosure
Agreement may be waived, provided that, in the opinion of nationally recognized bond counsel, such
amendment or waiver is permitted by the Rule; provided, the Dissemination Agent shall have first
consented to any amendment that modifies or increases its duties or obligations hereunder. In the
event of any amendment or waiver of a provision of this Disclosure Agreement, the City shall
describe such amendment in the next Annual Report, and shall include, as applicable, a narrative
explanation of the reason for the amendment or waiver and its impact on the type (or in the case of a
change of accounting principles, on the presentation) of financial information or operating data being
presented by the City. In addition, if the amendment relates to the accounting principles to be
followed in preparing financial statements, (i) notice of such change shall be given in the same
manner as for a Listed Event under Section 5( c), and (ii) the Annual Report for the year in which the
change is made shall present a comparison (in narrative form and also, if feasible, in quantitative
form) between the financial statements as prepared on the basis of the new accounting principles and
those prepared on the basis of the former accounting principles.
SECTION 9. Additional Information. Nothing in this Disclosure Agreement shall be
deemed to prevent the City from disseminating any other information, using the means of
DOCSOC/13 78984 v2/024036-0045
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dissemination set forth in this Disclosure Agreement or any other means of communication, or
including any other information in any Annual Report or notice of occurrence of a Listed Event, in
addition to that which is required by this Disclosure Agreement. If the City chooses to include any
information in any Annual Report or notice of occurrence of a Listed Event in addition to that which
is specifically required by this Disclosure Agreement, the City shall have no obligation under this
Certificate to update such information or include it in any future Annual Report or notice of
occurrence of a Listed Event.
SECTION 10. Default. In the event of a failure of the City to comply with any provision of
this Disclosure Agreement, any Holder or Beneficial Owner of the Certificates may take such actions
as may be necessary and appropriate, including seeking mandate or specific performance by court
order, to cause the City to comply with its obligations under this Disclosure Agreement. A default
lliIder this Disclowr{1 Agreement shall not bp r!ppmpr! "n Fvpnt of Def"1J It IJnder the Trust
Agreement, and the sole remedy under this Disclosure Agreement in the event of any failure of the
City to comply with this Disclosure Agreement shall be an action to compel performance.
No Certificate holder or Beneficial Owner may institute such action, suit or proceeding to
compel performance unless they shall have first delivered to the City satisfactory written evidence of
their status as such, and a written notice of and request to cure such failure, and the City shall have
refused to comply therewith within a reasonable time.
SECTION II. Duties, Immunities and Liabilities of Dissemination Agent. The
Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure
Agreement, and the City agrees, to the extent permitted by law, to indemnify and save the
Dissemination Agent, its officers, directors, employees and agents, harm1ess against any loss,
expense and liabilities which it may incur arising out of or in the exercise or performance of its
powers and duties hereunder, including the costs and expenses (including attorney's fees) of
defending against any claim of liability, but excluding liabilities due to the Dissemination Agent's
negligence or willful misconduct. The Dissemination Agent shall be paid compensation by the City
for its services provided hereunder in accordance with its schedule of fees as amended from time to
time and all expenses, legal fees and advances made or incurred by the Dissemination Agent in the
performance of its duties hereunder. In performing its duties hereunder, the Dissemination Agent
shall not be deemed to be acting in any fiduciary capacity for the City, the Certificate holders, or any
other party. The obligations of the City under this Section shall survive resignation or removal of the
Dissemination Agent and payment of the Certificates.
SECTION 12. Notices. Any notices or communications to or among any of the parties to
this Disclosure Agreement may be given as follows:
To the City: City of Chula Vista
276 Fourth Avenue
Chula Vista, California 91910
Attention: City Manager
To the Dissemination Agent: U.S. Bank National Association
633 West Fifth Street, 24th Floor
Los Angeles, California 90071
Attention: Corporate Trust Services
5
DOCSOC/1378984v2/024036-0045 7 - 2 25
SECTION 13. Beneficiaries. This Disclosure Agreement solely to the benefit of the City,
the Dissemination Agent, the Participating Underwriter and Beneficial Owners from time to time of
the Certificates, and shall create no rights in any other person or entity.
DOCSOCIl3 78984 v2/024036-0045
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SECTION 14. Signature. This Disclosure Agreement has been executed by the undersigned
on the date hereof, and such signature binds the City to the undertaking herein provided.
CITY OF CHULA VISTA
By:
Its: City Manager
u.S. BANK NATIONAL ASSOCIATION, as
Dissemination Agent
By:
Its: Authorized Officer
DOCSOC/1378984v2l024036-0045
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EXHIBIT A
NOTICE TO REPOSITORIES OF FAILURE TO FILE ANNUAL REPORT
Name ofIssuer: City of Chula Vista
Name of Certificate Issues: $[COP Amount] City of Chula Vista 2010 Certificates of
Participation (Capita] Facilities Refunding Projects)
Date ofIssuance: ,2010
NOTICE IS HEREBY GIVEN that the City has not provided an Annual Report with respect
to the above-named Certificates as required by the Continuing Disclosure Agreement executed by the
City on the date of issuance of the Certificates. The City anticipates that the Annual Report will be
filed by
Dated:
U.S. BANK NATIONAL ASSOCIATION, as
Dissemination Agent
By:
DOCSOCI13 78984 v2/02403 6-0045
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THE ATTACHED AGREEMENT HAS BEEN REVIEWED
AND APPROVED AS TO FORM BY Stradling, Y occa, Carlson & Rauth
AND WILL BE
FORMALLY SIGNED UPON APPROVAL BY
THE CITY COUNCIL
Robert J.
Stradling, occa, Carlson & Rauth,
A Professional Corporation
Dated:
l/:2-I/ID
/ I
CERTIFICATE PURCHASE AGREEMENT
AMONG THE CITY OF CHULA VISTA,
PUBLIC FINANCING AUTHORITY AND
E.J. De La Rosa FOR Underwriter Services
7-229
$[COP Amount]
CITY OF CHULA VISTA
2010 CERTIFICATES OF PARTICIPATION
(CAPITAL FACILITIES REFUNDING PROJECTS)
'-
CERTIFICATE PURCHASE AGREEMENT
City ofChula Vista
?7 fi F o1lrth A venue
Chula Vista, CA 91910
Chula Vista Public Financing Authority
276 Fourth Avenue
Chula Vista, CA 91910
Ladies and Gentlemen:
EJ. De La Rosa & Co., Inc., as the underwriter (the "Underwriter"), does hereby offer to
enter into this Purchase Agreement (the "Purchase Agreement") with you, the City of Chula Vista
(the "City") and the Chula Vista Public Financing Authority (the "Authority") for the purchase by the
Underwriter of the 2010 Certificates of Participation (Capital Facilities Refunding Projects) (the
"2010 Certificates"), specified below. This offer is made subject to acceptance by the City and the
Authority prior to 10:00 A.M., California time, on the date hereof, and, upon such acceptance, this
Purchase Agreement shall be in full force and effect in accordance with its terms and shall be binding
upon the City, the Authority and the Underwriter. All terms not defined herein shall have the
meanings set forth in the Official Statement hereinafter mentioned.
1. Purchase and Sale.
(a) Upon the terms and conditions and upon the basis of the representations
herein set forth, the Underwriter hereby agree to purchase and the City and the Authority agree to
cause the Trustee to execute and deliver to the Underwriter all (but not less than all) of the $[COP
Amount] aggregate principal amount of the 2010 Certificates. The 2010 Certificates shall be dated
their date of delivery. The 20 I 0 Certificates shall have the maturities and evidence interest at the
rates per annum set forth on Exhibit A hereto. The purchase price for the 20 I 0 Certificates shall be
$ (representing the $[COP Amount] aggregate principal amount of the 2010 Certificates,
less $ of Underwriter's discount plus $ of net original issue premium.
(b) Each 20 I 0 Certificate shall evidence a fractional interest of the owner thereof
in 2010 Lease Payments to be paid by the City to the Authority pursuant to a certain LeaseiPurchase
Agreement, dated as of February 1, 2010 (the "Lease Agreement"), by and between the City and the
Authority. The Authority's right to receive the Lease Payments due under the Lease Agreement and
to exercise remedies upon default under such Lease Agreement shall be assigned to the Trustee for
the benefit of the owners of the 2010 Certificates pursuant to an Assignment Agreement, dated as of
DOCSOC!l3 793 81 v2/024036-0045
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February 1, 2010 (the "Assignment Agreement"), by and between the Authority and U.S. Bank
National Association, as trustee (the "Trustee").
The 2010 Certificates shall be as described in, and shall be secured under and
pursuant to a Trust Agreement, dated as of February 1,2010 (the "Trust Agreement"), by and among
the City, the Authority and the Trustee, substantially in the form previously submitted to the
Underwriter with only such changes therein as shall be mutually agreed upon by the Authority, the
City and the Underwriter.
Proceeds of the 2010 Certificates will be used to (i) refinance the City's Certificates
of Participation Series A of 2000 (2000 Financing Project), (the "2000 Certificates"), (ii) reimburse
the City for the cost of certain capital improvements of the City for its Civic Center Phase 3,
(iii) fund a r€s€r"e fund, (i") fund capit"li7?~ in'?r?,'. "n~ (v) P"y costs of rlelivery of the 2010
Certificates.
The City will execute a Continuing Disclosure Agreement, dated as of February I,
2010 (the "Continuing Disclosure Agreement"), by and between the City and U.S. Bank National
Association, as Dissemination Agent.
(c) At 8:00 A.M., California time, on ,2010, or at such other time
or on such earlier or later date as the City and the Underwriter mutually agree upon (the "Closing
Date"), the City will cause to be delivered to the Underwriter, the 2010 Certificates in the form of a
separate single fully registered Certificate for each series for each of the maturities (all of the 2010
Certificates to bear CUSIP numbers), duly executed, together with the other documents hereinafter
mentioned and, subject to the terms and conditions hereof, the Underwriter will accept such delivery
and pay the purchase price of the 2010 Certificates as set forth in subparagraph (a) above by wire
transfer to the order of the Trustee in an amount equal to the purchase price (such delivery and
payment being herein referred to as the "Closing"). Sale, delivery and payment as aforesaid shall be
made at the offices of Stradling Y occa Carlson & Rauth, a Professional Law Corporation, Newport
Beach, California ("Special Counsel"), or at such other place as shall have been mutually agreed
upon by the City and the Underwriter, except that the 2010 Certificates shall be delivered to the
Underwriter in New York, New York, through the book-entry system of The Depository Trust
Company.
2. Use and Preparation of Official Statement. The City hereby ratifies, confirms and
approves the use by the Underwriter prior to the date hereof of the Preliminary Official Statement
relating to the 2010 Certificates dated ,2010 (which, together with all appendices thereto, is
referred to herein as the "Preliminary Official Statement"). The City has deemed final the
Preliminary Official Statement as of its date for purposes of Rule 15c2-12 promulgated under the
Securities Exchange Act of 1934 ("Rule 15c2-12"), except for information permitted to be omitted
therefrom by Rule 15c2-12. The City hereby agrees to deliver or cause to be delivered to the
Underwriter, within seven business days of the date hereof, copies of the final official statement,
dated the date hereof (including all information permitted to be omitted by Rule 15c2-l2 and any
amendments and supplements to such official statement as have been approved by the City and the
Underwriter, the "Official Statement") in sufficient quantity to enable the Underwriter to comply
with the rules of the Securities and Exchange Commission and the Municipal Securities Rulemaking
Board. The City hereby approves of the use and distribution by the Underwriter of the Official
Statement in connection with the offer and sale of the 2010 Certificates. At the time of or prior to the
DOCSOC/13 79381 v2/024036-0045
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Closing Date, the Underwriter shall file a copy of the Official Statement with the Municipal
Securities Rulemaking Board and with a nationally recognized securities information repository.
3. Representations. Warranties and Agreements of the City. The City represents,
warrants and covenants to the Underwriter that:
(a) The City is a chartered city and municipal corporation duly organized and
operating pursuant to the Constitution and laws of the State of California, and the City Charter, and
has all necessary power to enter into and perform its duties under the Lease Agreement, the Site
Lease dated as of February 1,2010 by and between the City and the Authority (the "Site Lease"), the
Trust Agreement, the Escrow Agreement dated as of February 1,2010 by and between the City and
U.S. Bank National Association, as Escrow Agent (the "Escrow Agreement") the Continuing
Discl9sllre l~~greemell.t and thi-.:: 1=>llrrn::t<;:po A Elf':f':mf':nt ::Inn whp.n f':xecutf':n and delivered hy the
respective parties thereto, the Lease Agreement, the Site Lease, the Trust Agreement, the Escrow
Agreement, the Continuing Disclosure Agreement and this Purchase Agreement will constitute legal,
valid and binding obligations ofthe City enforceable in accordance with their respective terms.
(b) By official action of the City prior to or concurrently with the acceptance
hereof, the City has duly approved the distribution of tl1e Preliminary Official Statement and the
distribution of the Official Statement, and has duly authorized and approved the execution and
delivery of, and the performance by the City of the obligations on its part contained in the Lease
Agreement, the Site Lease, the Trust Agreement, the Escrow Agreement, the Continuing Disclosure
Agreement and this Purchase Agreement and the consummation by it of all other transactions
contemplated by the Official Statement and this Purchase Agreement.
(c) The execution and delivery of the Lease Agreement, the Site Lease, the Trust
Agreement, the Escrow Agreement, the Continuing Disclosure Agreement and this Purchase
Agreement and the approval and execution of the Official Statement and compliance with the
provisions on the City's part contained therein and herein, will not conflict, in any material respect,
with or constitute a breach of or default under any law, administrative regulation, judgment, decree,
loan agreement, indenture, bond, note, resolution, agreement or other instrument to which the City is
a party or is otherwise subject, nor will any such execution, delivery, adoption or compliance result
in the creation or imposition of any lien, charge or other security interest or encumbrance of any
nature whatsoever upon any of the properties or assets of the City under the terms of any such law,
administrative regulation, judgment, decree, loan agreement, indenture, bond, note, resolution,
agreement or other instrument, except as provided by the Lease Agreement, the Site Lease, the Trust
Agreement, the Escrow Agreement, the Continuing Disclosure Agreement and this Purchase
Agreement.
(d) Except as may be required under blue sky or other securities laws of any
state, there is no consent, approval, authorization or other order of, or filing with, or certification by,
any regulatory agency having jurisdiction over the City required for the execution, delivery and sale
of the 2010 Certificates or the consummation by the City of the other transactions contemplated by
the Official Statement, the Lease Agreement, the Site Lease, the Trust Agreement, the Escrow
Agreement, the Continuing Disclosure Agreement and this Purchase Agreement.
(e) The City is not in breach of or default under any applicable law or
administrative regulation of the State of California or the United States or any applicable judgment or
decree or any loan agreement, indenture, bond, note, resolution, agreement or other instrument to
DOCSOC/13 793 81 v2/024036-0045
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which the City is a party or is otherwise subject, which breach or default materially adversely affects
the financial condition of the City or its ability to perform its obligations under this Purchase
Agreement, and no event has occurred and is continuing which, with the passage of time or the
giving of notice, or both, would constitute such a default or an event of default under any such
instrument. Upon the deposit of funds with the Escrow Agent under the Escrow Agreement and the
execution and delivery of the Escrow Agreement the City will have taken all actions required under
the Trust Agreement and Lease Purchase Agreement related to the 2000 Certificates to defease the
2000 Certificates and all related Lease Payments under Section 14.0 I and _ thereof respectively.
(1) There is no action, suit, proceeding, inquiry or investigation, at law or in
equity, before or by any court, governmental agency, public office or body, pending or threatened
against the City (i) affecting the existence of the City or the titles of its officers to their respective
office, or seeking to prohihit restrain or enjoin the execution or delivery of the 20 I 0 Certificates or
the City's covenants to make Lease Payments or in any way contesting or affecting the validity or
enforceability of the 20 I 0 Certificates, the Lease Agreement, the Site Lease, the Trust Agreement,
the Escrow Agreement, the Continuing Disclosure Agreement or this Purchase Agreement or
contesting the powers of the City or its authority to enter into, adopt or perform its obligations under
any of the foregoing, or contesting in any way the completeness or accuracy of the Preliminary
Official Statement or the Official Statement, or any amendment or supplement thereto, wherein an
unfavorable decision, ruling or finding would materially adversely affect the validity or
enforceability of the 20 I 0 Certificates, the Lease Agreement, the Site Lease, the Trust Agreement,
the Escrow Agreement, the Continuing Disclosure Agreement or this Purchase Agreement, or (ii) in
which a final adverse decision could materially adversely affect the operations of the City.
(g) The City will furnish such information, execute such instruments and take
such other action in cooperation with the Underwriter as the Underwriter may reasonably request in
order (i) to qualify the 2010 Certificates for offer and sale under the blue sky or other securities laws
and regulations of such states and other jurisdictions of the United States as the Underwriter may
designate, and (ii) to determine the eligibility of the 20 I 0 Certificates for investment under the laws
of such states and other jurisdictions, and will use its best efforts to continue such qualifications in
effect so long as required for the distribution of the 20 I 0 Certificates; provided, however, that the
City shall not be required to qualify to do business or consent to service of process in connection
with any such qualification or determination in any jurisdiction.
(h) As of the date thereof, the Preliminary Official Statement did not contain any
untrue statement of a material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under which they were made,
not misleading (except for the information related to the DTC and its book-entry system and the
Insurer and its Policy, as to which no view is expressed).
(i) As of the date thereof and at all times subsequent thereto to and including the
date which is 25 days following the End of the Underwriting Period (as such term is hereinafter
defined) for the 20 I 0 Certificates, either (A) the Official Statement did not and will not contain any
untrue statement of a material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under which they were made,
not misleading, or (B) the City shall comply with the provisions of subsection G) of this Section.
GJ If between the date hereof and the date which is 25 days after the End of the
Underwriting Period (defined below) for the 2010 Certificates, an event occurs which would cause
DOCSOC/13 79381 v2/024036-0045
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the information contained in the Official Statement, as then supplemented or amended, to contain an
untrue statement of a material fact or to omit to state a material fact required to be stated therein or
necessary to make such information therein, in the light of the circumstances under which it was
presented, not misleading, the City will notify the Underwriter, and, if in the opinion of the
Underwriter, or its counsel, such event requires the preparation and publication of a supplement or
amendment to the Official Statement, the City will cooperate in the preparation of an amendment or
supplement to the Official Statement in a form and manner approved by the Underwriter, and shall
pay all expenses thereby incurred. For the purposes of this subsection, between the date hereof and
the date which is 25 days after the End of the Underwriting Period for the 2010 Certificates, the City
will furnish such information with respect to itself as the Underwriter may from time to time
reasonably request.
(k) If tbe information contained in the Offici"! StMement is "menrlerl or
supplemented pursuant to paragraph GJ hereof, at the time of each supplement or amendment thereto
and (unless subsequently again supplemented or amended pursuant to such subparagraph) at all times
subsequent thereto up to and including the date which is 25 days after the End of the Underwriting
Period for the 2010 Certificates, the portions of the Official Statement so supplemented or amended
(including any financial and statistical data contained therein) will not contain any untrue statement
of a material fact required to be stated therein or necessary to make such information therein in the
light of the circumstances under which it was presented, not misleading.
(I) After the Closing Date, the City will not participate in the issuance of any
amendment of or supplement to the Official Statement to which, after being furnished with a copy,
the Underwriter shall reasonably object in writing.
(m) As used herein and for the purposes of the foregoing, the term "End of the
Underwriting Period" for the 2010 Certificates shall mean the earlier of (i) the Closing Date unless
the City shall have been notified in writing to the contrary by the Underwriter on or prior to the
Closing Date, or (ii) the date on which the End of the Underwriting Period for the 2010 Certificates
has occurred under Rule 15c2-12; provided, however, that the City may treat as the End of the
Underwriting Period for the 2010 Certificates the date specified as such in a notice trom the
Underwriter stating the date which is the End of the Underwriting Period.
(n) The City will take no action and will cause no action to be taken that would
cause the interest with respect to the 2010 Certificates to be includable in gross income for federal
income tax purposes.
(0) Between the date hereof and the Closing Date, without the prior written
consent of the Underwriter, the City will not have issued any bonds, notes or other obligations for
borrowed money on behalf of the City or entered into any material transaction, in either case other
than in the ordinary course of business except for such borrowings or material transactions as may be
described in or contemplated by the Official Statement.
(P) The City has not been notified of any listing or proposed listing by the
Internal Revenue Service to the effect that the City is an issuer whose non-arbitrage certificates may
not be relied upon.
(q) The City's audited financial statements prepared by Caporicci & Larson,
Certified Public Accountants (the "Auditor") for the fiscal year ended June 30, 2009, is a fair
DOCSOCI13 79381 v2/024036-0045
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presentation of the financial position of the City as of the dates indicated and the results of its
operations and changes in its fund balances for the periods specified. Since June 30, 2009, there has
been no material adverse change in the condition, financial or otherwise, of the City from that set
forth in such annual report as of and for the period ended that date, and the City has not since
June 30, 2009, incurred any material liabilities, directly or indirectly, except in the ordinary course of
its operations or as described in the Official Statement.
(r) Any certificate signed by any officer of the City and delivered to the
Underwriter shall be deemed a representation and warranty by the City to the Underwriter as to the
statements made therein.
4. Representations. Warranties and Agreements of the Authority. The Authority
-repreEents, nr~rr~nt~ to, C'o"\'{"n:.'lntc;: ~nr1 ~E7P.P." with, th~ T Tncie:rwriter and the City that:
(a) The Authority is a joint exercise of powers agency, organized and validly
existing under the laws ofthe State of California, and has, and at the Closing Date will have full legal
right, power and authority (i) to enter into, execute, deliver and perform its obligations under this
Purchase Agreement and (ii) to carry out, give effect to and consummate the transactions on its part
contemplated by this Purchase Agreement, the Trust Agreement, the Lease Agreement, the 20 I 0
Certificates, the Site Lease, the Assignment Agreement and the Official Statement.
(b) The Authority has complied, and will at the Closing Date be in compliance, in
all respects with its obligations under the Trust Agreement, the Lease Agreement, the Site Lease, the
Assignment Agreement and this Purchase Agreement to be performed on or prior to the Closing
Date.
(c) The governmg board of the Authority has duly and validly adopted
Resolution No. on, 20 I 0 (the "Authority Resolution"), which: (i) approved
and authorized the execution and delivery of the Trust Agreement, the 20 I 0 Certificates, the Site
Lease, the Assignment Agreement, this Purchase Agreement, the Lease Agreement and the Official
Statement and approved the distribution of the Preliminary Official Statement, and (ii) authorized
and approved the performance by the Authority of its obligations contained in, and the taking of any
and all action on its part as may be necessary to carry out, give effect to and consummate the
transactions on its part contemplated by, each of such documents.
(d) The Authority is not in breach of or in default under, any law or
administrative rule or regulation of the State of California, the United States of America, or of any
department, division, agency or instrumentality of either thereof, or under any applicable court or
administrative decree or order, or under any loan agreement, note, resolution, indenture, contract,
agreement or other instrument to which the Authority is a party or is otherwise subject or bound, and
the performance by the Authority of its obligations under the 2010 Certificates, the Trust Agreement,
the Site Lease, the Lease Agreement, this Purchase Agreement and any other instruments
contemplated by any of such documents, and compliance by it with the provisions of each thereof,
will not conflict with or constitute a breach of or default under any applicable law or administrative
rule or regulation of the State of Califomia, the United States of America, or of any department,
division, agency or instrumentality of either thereof, or under any applicable court or administrative
decree or order, or under any loan agreement, note, resolution, indenture, contract, agreement or
other instrument to which the Authority is a party or is otherwise subject or bound, in any manner
which would materially and adversely affect the performance by the Authority of its obligations
DOCSOCI1379381 v2/024036-0045
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under this Purchase Agreement, the 20 I 0 Certificates, the Lease Agreement, the Site Lease, the
Assignment Agreement or the Trust Agreement.
(e) Except as may be required under the "blue sky" or other securities laws of
any jurisdiction, all approvals, consents, authorizations, elections and orders of, or filings or
registrations with, any governmental authority, board, agency or commission having jurisdiction
which would constitute a condition precedent to, or the absence of which would materially adversely
affect, the performance by the Authority of its obligations hereunder, under the Trust Agreement, the
Lease Agreement, the Site Lease and the 2010 Certificates, have been or will be obtained at the
Closing Date and are or will be at the Closing Date in full force and effect.
(f) The information contained in the caption entitled "THE AUTHORlTY" of
the Official Statewpnt 1<;;: trill': ~nr1 ('orrpr.t in ::.11 material respects and does not contain any untrue
statement of a material fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in the light of the circumstances under which they were made, not
misleading.
(g) If after the date of this Purchase Agreement and until twenty-five (25) days
after the End of the Underwriting Period, any event shall occur, of which the Authority has notice, as
a result of which it may be necessary to supplement the Official Statement in order to make the
statements herein, in the light of the circumstances existing at such time, not misleading, the
Authority shall forthwith notify the City and the Underwriter of any such event of which it has
knowledge and, if in the opinion of the Underwriter, the Mayor or the City Manager of the City, or
his or her written designee, or the Chair or other authorized officer of the Authority, such event
requires an amendment or supplement to the Official Statement, the Authority will cause the City, at
the expense of the appropriate party, to amend or supplement the Official Statement in a form and
manner jointly approved by the City, and the Authority and the Underwriter so that the statements
therein as so amended or supplemented will not be misleading in the light of the circumstances
existing at such time and the Authority will cause the City, to promptly furnish to the Authority and
the Underwriter a reasonable number of copies of such amendment or supplement.
(h) Except as disclosed in the Preliminary Official Statement, no action, suit,
proceeding, inquiry or investigation, at law or in equity, before or by any court, regulatory agency or
public board or body to which the Authority is a party and has been served with a summons or other
notice thereof, is pending, or to the knowledge of the Chair or other authorized officer, threatened, in
any way affecting the existence of the Authority or the titles of its officers to their respective offices
or seeking to restrain or to enjoin the issuance, sale or delivery of the 20 I 0 Certificates, the Lease
Agreement or the application of the proceeds thereof in accordance with the Trust Agreement, the
Lease Agreement, the Site Lease, the collection or application of the Lease Payments, and interest
with respect to the 20 I 0 Certificates, or the pledge thereof, or the legally available funds of the City
available to pay the principal and interest evidenced by the Lease Agreement, or in any way
contesting or affecting the validity or enforceability of the 20 I 0 Certificates, the Trust Agreement,
the Site Lease, the Assignment Agreement, the Lease Agreement, this Purchase Agreement or any
action of the City or the Authority contemplated by any of such documents, or in any way contesting
the completeness or accuracy of the Official Statement or the powers of the Authority or the City or
their authority with respect to the 20 I 0 Certificates, the Lease Agreement, the Site Lease, the
Assignment Agreement, this Purchase Agreement or any action of the City or the Authority
contemplated by any of such documents, or which contests the exclusion from gross income for
DOCSOCIl3 79381 v2/024036-0045
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federal income tax purposes of interest paid on the 2010 Certificates or the exemption of interest paid
on the 2010 Certificates from State of California personal income taxation.
(i) The Authority will, or will cause the City, as appropriate, to furnish such
information, execute such instruments and take such other action in cooperation with the Underwriter
as the Underwriter may reasonably request in order for the Underwriter to qualify the 20 I 0
Certificates for offer and sale under the "blue sky" or other securities laws and regulations of such
states and other jurisdictions of the United States of America as the Underwriter may designate;
provided, however, that neither the Authority nor the City shall be required to register as a dealer or
broker of securities or to consent to service of process or qualify to do business in any jurisdiction
where it is not now so subject. It is understood that such "blue sky" registration is the sole
responsibility ofthe Underwriter.
G) Any certificate signed by any officer or employee of the Authority authorized
to do so shall be deemed a representation and warranty by the Authority to the City and the
Underwriter as to the statements made therein.
(k) The Authority hereby approves the preparation and distribution of the Official
Statement, consisting of the Preliminary Official Statement with such changes as are noted thereon
and as may be made thereto, with the approval of Bond Counsel, and the Underwriter, from time to
time prior to the Closing Date.
The Authority hereby ratifies any prior use of and authorizes the future use by the
Underwriter, in connection with the offering and sale of the 2010 Certificates, of the Preliminary
Official Statement, the Official Statement, the Trust Agreement, the Lease Agreement, the Site
Lease, the Assignment Agreement, this Purchase Agreement and all information contained herein,
and all other documents, certificates and written statements furnished by the Authority to the
Underwriter in connection with the transactions contemplated by this Purchase Agreement.
The execution and delivery of this Purchase Agreement by the Authority shall
constitute a representation to the Underwriter that the representations and warranties contained in this
Section 4 are true as ofthe date hereof.
5. Closing Conditions. The Underwriter has entered into this Purchase Agreement in
reliance upon the representations and warranties of the City and the Authority contained herein, and
in reliance upon the representations and watTanties to be contained in the documents atld instruments
to be delivered at the Closing and upon the perfOlmance by the City of its obligations hereunder, both
as of the date hereof and as of the Closing Date. Accordingly, the Underwriter's obligations under
this Purchase Agreement to purchase, to accept delivery of and to pay for the 2010 Ce11ificates shall
be conditioned, at the option of the Underwriter, upon the performance by the City of its obligations
to be performed hereunder and under such documents and instruments at or prior to the Closing, and
shall also be subject to the following additional conditions:
(a) The Underwriter shall receive, within seven business days of the date hereof,
copies of the Official Statement (including all information permitted to have been omitted by
Rule 15c2-12 and any amendments or supplements as have been approved by the Underwriter), in
such reasonable quantity as the Underwriter shall have requested.
DOCSOC/ 13 79381 v2/024036-004 5
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(b) The representations and warranties of the City contained herein shall be true
and correct on the date hereof and on and as of the Closing Date, as if made on the Closing Date and
the statements ofthe officers and other officials ofthe City and the Authority made in any certificate
or any other document furnished pursuant to the provisions hereof are accurate.
(c) At the time of Closing, the Site Lease, the Lease Agreement, the Assignment
Agreement, the Continuing Disclosure Agreement, the Trust Agreement, the Escrow Agreement and
this Purchase Agreement, all as described in the Official Statement, shall be in full force and effect as
valid and binding agreements between or among the various parties thereto and the Site Lease, the
Lease Agreement, the Assignment Agreement, the Continuing Disclosure Agreement, the Trust
Agreement, the Escrow Agreement and this Purchase Agreement, and the Official Statement shall
not have been amended, modified or supplemented except as may have been agreed to in writing by
tl,( Underwriter, and there shall be in full force and eff~ct <l1ch r~<nll1tinn< "<. in the opinion of
Special Counsel shall be necessary in connection with the transactions contemplated hereby.
(d) At or prior to the Closing, the Underwriter shall receive the following
documents, in each case satisfactory in form and substance to the Underwriter:
(l) the unqualified approving opinions of Special Counsel, dated the Closing Date, as to
the validity of the Lease Agreement and the tax-exempt status of interest represented by the 20 I 0
Certificates, together with a reliance letter addressed to the Underwriter and the Trustee;
(2) a supplemental opinion of Special Counsel in form and substance satisfactory to the
Underwriter, dated the Closing Date and addressed to the City and the Underwriter, to the effect that:
(i) the statements in the Official Statement on the cover page thereof and
under the captions "INTRODUCTION," "THE CERTIFICATES," "THE FINANCING PLAN,"
"SOURCES OF PAYMENT FOR THE CERTIFICATES," "LEGAL MA TTERS- Tax Exemption,"
"CONCLUDING INFORMATION-Continuing Disclosure," "APPENDIX B-SUMMARY OF
PRINCIPAL LEGAL DOCUMENTS" and "APPENDIX E-FORM OF SPECIAL COUNSEL
OPINION," to the extent they purport to summarize certain provisions of the Lease Agreement, the
Assignment Agreement, the Trust Agreement, the Escrow Agreement, the Continuing Disclosure
Agreement and the final approving opinions of Special Counsel, accurately summarize such matters
in all material respects;
(ii) assuming due authorization, execution and delivery by the other
parties thereto, the Lease Agreement, the Trust Agreement, the Escrow Agreement, the Continuing
Disclosure Agreement and this Purchase Agreement have each been duly authorized, executed and
delivered by the City, and constitute legal, valid and binding agreements of the City and are
enforceable in accordance with their respective terms, except as enforcement thereof may be limited
by bankruptcy, insolvency, reorganization, moratorium or other laws relating to or affecting
generally the enforcement of creditors' rights and except as their enforcement may be subject to the
application of equitable principles and the exercise of judicial discretion in appropriate cases if
equitable remedies are sought;
(iii) the 20 I 0 Certificates are exempt from registration pursuant to the
Securities Act of 1933, as amended, and the Trust Agreement is exempt from qualification as an
indenture pursuant to the Trust Indenture Act of 1939, as amended; and
DOCSOCI1379381 v2/024036-0045
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(iv) based on Special Counsel's partIcIpation in conferences with
Underwriter, representatives of the City, the Authority, the City Attorney and others, during which
conferences the content of the Official Statement and related matters were discussed, and in reliance
thereon and on certain documents reviewed by Disclosure Counsel and on the documents, letters,
certificates and opinions described above and our understanding of applicable law, Special Counsel
advises the Underwriter as a matter of fact but not opinion that no information has come to the
attention of the attorneys in the firm representing the City which caused Special Counsel to believe
that the Official Statement as of its date contained, or as of the Closing Date contains, any untrue
statement of a material fact, or as of its date omitted, or as of the Closing Date hereof omits, to state
any material fact necessary to make the statements therein, in the light of the circumstances under
which they were made, not misleading (except that Special Counsel expresses no view with respect
to any financial, statistical or economic data or forecasts, numbers, charts, graphs, estimates,
a.p1-'la.~;:,ab, PtojcctiOhS, a,53uhJptions or expressions of opinion th~ndn, any infcnnation ~bOllt fnp'
book-entry system or The Depository Trust Company or CUSIP numbers therein, or any of the
Appendices thereto).
(3) an opinion of the City Attorney of the City, dated the Closing Date and addressed to
the City, the Trustee and the Underwriter, in form and substance satisfactory to the Underwriter, to
the effect that:
(i) the City is a chartered city and municipal corporation duly organized,
validly existing and in good standing under the Constitution and the laws of the State of California;
(ii) Resolution No. of the City approving and authorizing the
execution and delivery of the Lease Agreement, the Site Lease, the Trust Agreement, the Escrow
Agreement, the Continuing Disclosure Agreement and this Purchase Agreement and approving the
Official Statement, were duly adopted at meetings which were called and held pursuant to law and
with all public notice required by law and at which quorums were present and acting throughout;
(iii) there is no action, suit, proceeding or investigation at law or in equity
before or by any court, public office or body, pending or, to the best of such counsel's knowledge,
threatened against or affecting the City, which would adversely impact the City's ability to complete
the transactions described in and contemplated by the Official Statement, to restrain or enjoin the
payment of Lease Payments under the Lease Agreement, or in any way contesting or affecting the
validity of the 20 I 0 Certificates, the Lease Agreement, the Site Lease, the Trust Agreement, this
Purchase Agreement, the Escrow Agreement, the Continuing Disclosure Agreement or the
transactions described in and contemplated hereby and by the Official Statement wherein an
unfavorable decision, ruling or finding would adversely affect the validity and enforceability of the
20 I 0 Certificates, the Lease Agreement, the Site Lease, the Trust Agreement, the Escrow Agreement,
the Continuing Disclosure Agreement or this Purchase Agreement or in which a final adverse
decision could materially adversely affect the operations ofthe City;
(iv) the execution and delivery of the Lease Agreement, the Site Lease,
the Trust Agreement, the Continuing Disclosure Agreement and this Purchase Agreement and the
approval of the Official Statement and compliance with the provisions thereof and hereof, under the
circumstances contemplated thereby, do not and will not in any material respect conflict with or
constitute on the palt of the City a breach of or default under any agreement or other instrument to
which the City is a party or by which it is bound or any existing law, regulation, court order or
consent decree to which the City is subject;
DOCSOC/13 793 81 v2/024036-0045
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(v) no authorization, approval, consent, or other order of any court or
governmental body is required for the valid authorization, execution and delivery of the Lease
Agreement, the Site Lease, the Trust Agreement, the Escrow Agreement, the Continuing Disclosure
Agreement or this Purchase Agreement and the approval of the Official Statement or the
consummation by the City of the transactions contemplated herein and in the Official Statement,
except such as have been obtained and except such as may be required under state securities or blue
sky laws in connection with the purchase and distribution of the 20 I 0 Certificates by the
Underwriter; and
(vi) to the best knowledge of such counsel, the information in the Official
Statement under the caption "LEGAL MATTERS - Absence of Litigation" does not contain any
untrue statement of a material fact or omit to state a material fact required to be stated therein or
f!CeC3sary if! order 10 make the otalemgnts therein, in the light of the cir<:llm<t"nrp< Ilnnpr whirh they
were made, not misleading;
(vii) The members of the City Council and the Authority Board as Public
Officers are prohibited from having financial conflicts of interest pursuant to the provision of Section
1090 et seq., of the-Government Code, Section 87100 et seq., of the Government Code and Health
and Safety Code Sections 33130 and 33393. No information has come to my attention that would
lead me to believe that any conflicts of interest exist, and, to the best of such counsel's knowledge
and belief, compliance has been made with all applicable provisions of law in this regard.
(4) An opinion of the City Attorney as counsel to the Authority, dated the Closing Date,
and addressed to the Authority, the Trustee and the Underwriter, in form and substance satisfactory
to the Underwriter to the effect:
(i) the Authority is a joint exercise of powers agency duly organized,
validly existing and in good standing under the Constitution and laws of the State of California and
particularly the Marks-Roos Local Bond Pooling Act of 1982, as amended; and
(ii) the Authority Resolution was duly adopted at a regular meeting of the
Authority which was called and held pursuant to law and with all public notice required by law and
at which a quorum was present and acting throughout; and
(iii) the Authority has full power and authority to enter into the Lease
Agreement, the Site Lease, the Assignment Agreement and the Trust Agreement; and
(iv) the Lease Agreement, the Site Lease, the Assignment Agreement and
the Trust Agreement have each been duly authorized, executed and delivered by the Authority, and
constitute legal, valid and binding agreements of the Authority and are enforceable in accordance
with their respective tenns, except as enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other laws relating to or affecting generally the enforcement of
creditors' rights and except as their enforcement may be subject to the application of equitable
principles and the exercise of judicial discretion in appropriate cases if equitable remedies are sought;
and
(v) to the best knowledge of such counsel, the information in the Official
Statement under the caption "THE AUTHORITY" does not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or necessary in order to
DOCSOCI13 79381 v2/024036-0045
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make the statements therein, in the light of the circumstances under which they were made, not
misleading;
(5) the opinion of counsel to the Trustee, dated the Closing Date and addressed to the
Underwriter, to the effect that:
(i) the Trustee is a national banking association with trust powers, duly
organized and lawfully existing under the laws of the United States of America;
(ii) the Trustee has duly authorized, executed and delivered the Trust
Agreement and the Assignment Agreement, and assuming due authorization, execution and delivery
by the other parties thereto, such agreements are the valid and binding agreements of the Trustee,
pnfnr(,f"~'h1p in ::!('{':oTrhmrp with thp:;r TP"rp.rfivp. tf":rTl1"; f":XCf":pt ~" snc;h f":nfOrCf":111f'nt may he limited hy
bankruptcy, insolvency, reorganization or other similar laws affecting the enforcement of creditors'
rights and by the application of equitable principles if equitable remedies are sought; and
(iii) the Trustee has lawful authority to execute and deliver the 2010
Certificates;
(6) the opinion of counsel to the Escrow Agent, dated the Closing Date and addressed to
the Underwriter, to the effect that:
(i) the Escrow Agent is a national banking association with trust powers,
duly organized and lawfully existing under the laws ofthe United States of America;
(ii) the Escrow Agent has duly authorized, executed and delivered the
Escrow Agreement, and assuming due authorization, execution and delivery by the other parties
thereto, such agreement is the valid and binding agreements of the Escrow Agent, enforceable in
accordance with its terms, except as such enforcement may be limited by bankruptcy, insolvency,
reorganization or other similar laws affecting the enforcement of creditors' rights and by the
application of equitable principles if equitable remedies are sought; and
(7) a certificate, dated the Closing Date, signed by a duly authorized official of the City
satisfactory in form and substance to the Underwriter to the effect that the representations and
warranties of the City contained in this Purchase Agreement are true and correct on and as of the
Closing Date with the same effect as if made on the Closing Date;
(8) a certificate, dated the Closing Date, signed by a duly authorized official of the
Authority satisfactory in form and substance to the Underwriter to the effect that the representations
and warranties of the Authority contained in this Purchase Agreement are true and correct on and as
of the Closing Date with the same effect as if made on the Closing Date;
(9) a certificate, dated the Closing Date, signed by a duly authorized official of the
Trustee satisfactory in form and substance to the Underwriter to the effect that (i) the Trustee is
authorized to carry out corporate trust powers, and has full power and authority to perform its duties
under the Trust Agreement and Assignment Agreement, (ii) the Trustee is duly authorized to execute
and deliver the Trust Agreement and Assignment Agreement, to accept its obligations thereunder,
and to deliver the 2010 Certificates, (iii) to the best of such officer's knowledge, there is no action,
suit, proceeding, inquiry or investigation at law or in equity, before or by any court or governmental
DOCSOC/1379381 v2/024036-0045
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agency, public office or body that has been served on or threatened against the Trustee (a) seeking to
prohibit, restrain or enjoin the execution of the 2010 Certificates or the collection of Lease Payments
intended to pay the principal of and interest with respect to the 2010 Certificates, or (b) in any way
contesting or affecting the validity or enforceability of the 2010 Certificates, the Trust Agreement or
the Assignment Agreement, (iv) to the best of such officer's knowledge, there is no action that has
been served on or threatened against the Trustee affecting the existence of the Trustee, or contesting
the powers of the Trustee or their respective authority to enter into or perform its obligations under
any of the foregoing agreements, wherein an unfavorable decision, ruling or finding would adversely
affect the validity of the 2010 Certificates, the Trust Agreement or the Assignment Agreement, and
(v) to the best of such officer's knowledge, no consent, approval, authorization or other action by any
governmental or regulatory authority having jurisdiction over the Trustee that has not been obtained
is or will be required for the execution and delivery by the Trustee of the Trust Agreement and the
A~.::>i~UllH;lll Ao,lCI.:-IW...l1t, 0.3 applicabk;
(10) a certificate, dated the Closing Date, signed by a duly authorized official of the
Escrow Agent satisfactory in form and substance to the Underwriter to the effect that (i) the Escrow
Agent is authorized to carry out corporate trust powers, and has full power and authority to perform
its duties under the Escrow Agreement, (ii) the Escrow Agent is duly authorized to execute and
deliver the Escrow Agreement, and to accept its obligations thereunder, (iii) to the best of such
officer's knowledge, there is no action, suit, proceeding, inquiry or investigation at law or in equity,
before or by any court or governmental agency, public office or body that has been served on or
threatened against the Escrow Agent (a) seeking to prohibit, restrain or enjoin the execution of the
Escrow Agreement or defeasance of the 2000 Certificates, or (b) in any way contesting or affecting
the validity or enforceability ofthe Escrow Agreement or defeasance ofthe 2000 Certificates, (iv) to
the best of such officer's knowledge, there is no action that has been served on or threatened against
the Escrow Agent affecting the existence of the Escrow Agent, or contesting the powers of the
Escrow Agent or its authority to enter into or perform its obligations under the foregoing agreement,
wherein an unfavorable decision, ruling or finding would adversely affect the validity of the Escrow
Agreement, and (v) to the best of such officer's knowledge, no consent, approval, authorization or
other action by any governmental or regulatory authority having jurisdiction over the Escrow Agent
that has not been obtained is or will be required for the execution and delivery by the Escrow Agent
of the Escrow Agreement;
(11) two executed copies of each of the Lease Agreement, the Site Lease, the Assignment
Agreement, the Trust Agreement, the Escrow Agreement and the Continuing Disclosure Agreement;
(12)
(13)
and delivery
Agreement;
two executed copies ofthe Official Statement, delivered by the City;
two certified copies of the general resolution of the Trustee authorizing the execution
of 2010 Certificates, the Trust Agreement and the acceptance of the Assignment
(14) certified copies of resolutions adopted by the City authorizing the execution and
delivery of the Lease Agreement, the Site Lease, the Trust Agreement, the Continuing Disclosure
Agreement, the Escrow Agreement, this Purchase Agreement and the approval of the Official
Statement;
(15) certified copies of the Authority Resolution authorizing the execution and delivery of
the Site Lease, the Assignment Agreement and the Trust Agreement;
DOCSOCI13 79381 v2/024036-0045
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(16) non-arbitrage certifications by the City in form and substance acceptable to Special
Counsel;
(17) evidence that any ratings described in the Official Statement have been obtained as of
the Closing Date;
(18) verification report of required under Section l4.01(d) of the 2000
Trust Agreement as to the adequacy of the funds held under the Escrow Agreement to defease the
2000 Certificates;
(19) the defeasance opmlOn of Bond Counsel regarding the defeasance of the 2000
Certificates, in form and substance satisfactory to the Underwriter;
(20) evidence of a policy of title insurance, all as required in Section 5.5 of the Lease
Agreement;
(21) evidence of insurance, other than title insurance, as required by Article V of the Lease
Agreement; and
(22) such additional legal opmlOns, certificates, proceedings, instruments and other
documents as the Underwriter may reasonably request to evidence the tmth and accuracy, as of the
Closing Date, of the representations contained herein and in the Official Statement and the due
performance or satisfaction by the Trustee, the Authority and the City at or prior to such time of all
agreements then to be performed and all conditions then to be satisfied in connection with the
delivery and sale of the 2010 Certificates:
6. Termination bv Underwriter. The Underwriter shall have the right to cancel its
obligations to purchase the 2010 Certificates if, between the date hereof and the Closing Date:
(a) the marketability of the 2010 Certificates or the market price thereof, in the
reasonable opinion of the Underwriter, has been materially adversely affected by an amendment to
the Constitution of the United States or by any legislation in or by the Congress of the United States
or by the State of California, or the recommendation to Congress or endorsement for passage (by
press release, other form of notice or otherwise) of legislation by the President of the United States,
the Treasury Department of the United States, the Internal Revenue Service or the Chairman or
ranking minority member of the Committee on Finance ofthe United States Senate or the Committee
on Ways and Means of the United States House of Representatives, or the proposal for consideration
of legislation by either such Committee or by any member thereof, or the presentment of legislation
for the staff of either such Committee, or by the staff of the Joint Committee on taxation of the
Congress of the United States, or the favorable reporting for passage of legislation to either House of
the Congress of the United States by a Committee of such House to which such legislation has been
referred for consideration, or any decision of any federal or state court or any ruling or regulation
(final, temporary or proposed) or official statement on behalf of the United States Treasury
Department, the Internal Revenue Service or other federal or state authority affecting the federal or
state tax status of the City, or the interest on bonds or notes (including the 2010 Certificates);
(b) there shall exist any event which in the reasonable opinion of the Underwriter
either (i) makes untrue or incorrect in any material respect any statement or information contained in
the Official Statement or (ii) is not reflected in the Official Statement but should be reflected therein
DOCSOCI13 79381 v2/024036-0045
14
7-243
to make the statements and information contained therein not misleading in any material respect (for
the purposes of this paragraph the Preliminary Official Statement shall be deemed to be the Official
Statement until such time as the final Official Statement has been printed);
(c) there shall have occurred any new outbreak or escalation of hostilities or
other national or international calamity or crisis, the effect of such outbreak, calamity or crisis on the
financial markets of the United States being such as would make it impracticable, in the reasonable
opinion of the Underwriter, for the Underwriter to sell the 2010 Certificates;
(d) there shall be in force a general suspension of trading on the New York Stock
Exchange or other national securities exchange, or minimum or maximum prices for trading shall
have been fixed and be in force, or maximum ranges for prices for securities shall have been required
.nd be in force on thp Npw York Stock FxchHn)Oe or such other exchange whether bv virtue of a
determination by the New York Stock Exchange or such other exchange or by orders of the
Securities and Exchange Commission or any other governmental authority;
(e) a general banking moratorium shall have been declared by either federal,
California or New York authorities having jurisdiction and be in force;
(t) there shall be established any new restrictions on transactions in securities
materially affecting the free market for securities (including the imposition of any limitations on
interest rates) or the extension of credit by, or the charge to the net capital requirements of,
Underwriter established by the New York Stock Exchange, the Securities and Exchange
Commission, any other federal or state agency or the Congress of the United States, or by Executive
Order;
(g) an adverse event occurs in the affairs of the Trustee or the City which, in the
opinion of the Underwriter, requires or has required a supplement or amendment to the Official
Statement;
(h) the Comptroller of the Currency renders an opinion or issues a regulation
which has the effect of prohibiting the Underwriter from underwriting the 2010 Certificates.
7. Expenses. Whether or not the transactions contemplated by this Purchase Agreement
are consummated, the Underwriter shall be under no obligation to pay, and the City shall pay from
the proceeds of the 2010 Certificates or otherwise, all expenses and costs of the City and the
Authority incident to the performance of their obligations in connection with the authorization,
execution and delivery of the 2010 Certificates to the Underwriter including, without limitation, fees
and disbursements of Special Counsel and other professional advisors employed by the City or the
Authority; costs of preparation, printing, signing, transportation, delivery and safekeeping of the
20 I 0 Certificates; costs of printing and distribution of the preliminary and final Official Statements;
Trustee fees and charges; travel by City or Authority officials; and rating agency fees. The
Underwriter shall pay its out-of-pocket expenses, including, but not limited to, SIFMA, MSRB,
CUSIP and CDIAC fees.
Notice. Any notice or other communication to be given to the Underwriter under this
Purchase Agreement may be given by delivering the same in writing to E.J. De La Rosa & Co., Inc.,
10866 Wilshire Boulevard, Penthouse Suite 1650, Los Angeles, CA 90024, Attention: Raul
Amezcua. Any notice or communication to be given the City under this Purchase Agreement may be
DOCSOC/13 793 81 v2/024036.0045
15
7-244
given by delivering the same to the City at the address indicated on the first page hereof, Attention:
City Manager. Any notice or communication to be given the Authority under this Purchase
Agreement may be given by delivering the same to the Authority at the address indicated on the first
page hereof, Attention: Treasurer. The approval of the Underwriter when required hereunder or the
determination of satisfaction as to any document referred to herein shall be in writing signed by the
Underwriter and delivered to the City.
8. Parties in Interest. This Purchase Agreement is made solely for the benefit of the
City, the Authority and the Underwriter (including the successors or assigns thereof) and no other
person shall acquire or have any right hereunder or by virtue hereof. All representations, warranties
and agreements of the City and the Authority in this Purchase Agreement shall remain operative and
in full force and effect regardless of any investigation made by or on behalf of the Underwriter and
shall survive tho doli'iery of and payment for the 2010 Certifico'p<
9. Effectiveness and Counterparts. This Purchase Agreement shall become effective
and binding upon the respective parties hereto upon the execution of the acceptance hereof by duly
authorized officers of the City and the Authority and shall be valid and enforceable as of the time of
such acceptance. This Purchase Agreement may be executed by the parties hereto by facsimile
transmission and in separate counterparts, each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute but one and the same instrument.
DOCSOC/13 79381 v2/024036-0045
16
7-245
10. Governing Law. This Purchase Agreement shall be construed in accordance with the
laws of the State of California.
E.J. DE LA ROSA & CO., INC.
By:
Its: Authorized Officer
Accepted:
CITY OF CHULA VISTA
By:
Its: Director of Finance
CHULA VISTA PUBLIC FINANCING AUTHORITY
By:
Its: Executive Director
DOCSOC/13 79381 v2/024036-0045
S-l
7-246
Year Ending
(September 1)
$
$
EXHIBIT A
$[COP Amount]
CITY OF CHULA VISTA
2010 CERTIFICATES OF PARTICIPATION,
(CAPITAL FACILITIES REFUNDING PROJECTS)
MATURITY SCHEDULE
Principal
Rate
YIeld
$
%
%
_% Term Certificates due September 1,20_ Yield: _% Price
_% Term Certificates due September 1,20_ Yield: _% Price
DOCSOC/13 79381 v2/024036-0045
A-I
7-247
Pnce
%
%
%
RESOLUTION NO.
RESOLUTION OF THE CHULA VISTA PUBLIC FINANCING
AUTHORITY APPROVING A LEASE/PURCHASE
AGREEMENT WITH THE CITY OF CHULA VISTA AND
CERTAIN OTHER DOCUMENTS IN CONNECTION WITH
THE EXECUTION AND DELIVERY OF THE 2010
CERTIFICATES OF PARTICIPATION IN A PRINCIPAL
AMOUNT NOT TO EXCEED $30,000,000
WHEREAS, the Chula Vista Public Financing Authority (the "Authority") is a joint
exercise of powers authority organized and existing under Article 4 of Chapter 5 of Division 7 of
Title I of the Government Code of the State of California (the "JP A Act") with the authority to
assist in the financing of the construction, reconstruction, modernization and equipping of certain
capital improvements on behalf of the City of Chula Vista (the "City"); and
WHEREAS, in order to reimburse the City for the costs of the construction,
reconstruction, modernization and equipping of Phase 3 of the Civic Center Expansion and to
refinance the City's Certificates of Participation Series A of 2000 (2000 Financing Project) (the
"2000 Certificates"), 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 2010 Certificates of Participation (Capital Facilities Refunding Projects) in one or
more series and in an aggregate principal amount not to exceed $30,000,000 (the "Certificates");
and
WHEREAS, in order to facilitate the execution and delivery of the Certificates, the City
and the Authority desire to enter into a Site Lease for each series between the City and the
Authority (the "Site Lease") and a Lease/Purchase Agreement for each series 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 for a series lease to the Authority certain property of the City to be
designated by the City prior to the execution of the Lease (the "Property") and under the Lease
for a series will lease the Property back from the Authority and pay certain Lease Payments (as
defined in the Lease); and
WHEREAS, each series of the Certificates will be executed and delivered to the owners
thereof 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 the Lease Payments for a
series from the City to the Trustee pursuant to an Assignment Agreement for such series 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; and
7-248
Resolution No.
Page 2
WHEREAS, in order to refinance and defease the 2000 Certificates, the City desires to
enter into an Escrow Agreement, between the City, the Authority and U.S. Bank National
Association, as Escrow Bank (collectively, the "Escrow Agreement"); and
WHEREAS, the City Council of the City held a public hearing on January 26, 2010
pursuant to Section 6586.5 of the JP A Act, and found that the financing of Phase 3 of the Civic
Center Expansion and the execution and delivery of the Certificates by the Authority will result
in significant public benefits for the residents of the City; and
WHEREAS, the Authority has determined and hereby finds that the Authority's
assistance in the execution and delivery of the Certificates by the Authority will result in
significant public benefits of the type described in Section 6586 (a) and (d) of the JPA Act; 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 for each series by and among
the City, the Authority and E.J. De La Rosa & Co., Inc. (the "Purchase Agreement").
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 ofthe Certificates in one or more series in an aggregate principal amount not to
exceed $30,000,000 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 2000 Certificates and reimburse the City for costs of Phase 3 of the Civic Center Expansion,
to fund certain capitalized interest with respect to the Certificates, to fund a reserve fund for each
series, and to pay the costs of the sale and delivery of the Certificates.
SECTION 2. Certificate Documents. The Site Lease, the Lease, the Trust Agreement,
the Assignment Agreement, the Certificate Purchase Agreement and the Escrow Agreement
(collectively, 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 for each series of
Certificates. The Agreements shall be executed in substantially the forms hereby approved, with
such additions thereto and changes therein as are recommended or approved by counsel to the
Authority and approved by the officer or officers of the Authority executing the Agreements,
such approval to be conclusively evidenced by the execution and delivery thereof by one or more
of the officers listed above.
SECTION 3. 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.
7-249
Resolution No.
Page 3
SECTION 4. Effect. This Resolution shall take effect from and after its date of
adoption.
Presented by
Approved as to form by
Maria Kachadoorian
Director of Finance/Treasurer
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tV'l City ~ttorney .... J
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dLc?!' c.____/
7-250