HomeMy WebLinkAboutComplete Packet 10-11-2016Lake Elsinore Facilities Authority
City of Lake Elsinore
Regular Agenda
LAKE-ELSINORE.ORG
(951) 674-3124 PHONE
CULTURAL CENTER
183 N. MAIN STREET
LAKE ELSINORE, CA
92530
BRIAN TISDALE, CHAIR
ROBERT MAGEE, VICE CHAIR
DARYL HICKMAN, AUTHORITY MEMBER
STEVE MANOS, AUTHORITY MEMBER
NATASHA JOHNSON, AUTHORITY MEMBER
GRANT YATES, EXECUTIVE DIRECTOR
Cultural Center7:00 PMTuesday, October 11, 2016
PUBLIC SESSION at 7:00 p.m.
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CITY VISION STATEMENT
The City of Lake Elsinore will be the ultimate lake destination where all can live, work and
play, build futures and fulfill dreams.
Page 1 City of Lake Elsinore Printed on 10/6/2016
October 11, 2016Lake Elsinore Facilities Authority Regular Agenda
CALL TO ORDER - 7:00 P.M.
ROLL CALL
FACILITIES AUTHORITY COMMENTS
COUNSEL COMMENTS
EXECUTIVE DIRECTOR COMMENTS
PUBLIC COMMENTS – NON-AGENDIZED ITEMS – 1 MINUTES
(Please read & complete a Request to Address the Lake Elsinore Facilities Authority
form prior to the start of the meeting and turn it in to the Authority Secretary. The Chair
or Secretary will call on you to speak.)
PUBLIC HEARING(S)
1)Issuance of the Lake Elsinore Facilities Financing Authority Lease
Revenue Bonds, Series 2016A
Recommendation:adopt A RESOLUTION OF THE BOARD OF DIRECTORS OF THE LAKE ELSINORE
FACILITIES FINANCING AUTHORITY, LAKE ELSINORE, CALIFORNIA,
AUTHORIZING THE EXECUTION AND DELIVERY BY THE AUTHORITY OF A
GROUND LEASE, LEASE AGREEMENT, AN INDENTURE, AN ASSIGNMENT
AGREEMENT AND A BOND PURCHASE AGREEMENT IN CONNECTION WITH THE
ISSUANCE OF THE LAKE ELSINORE FACILITIES FINANCING AUTHORITY LEASE
REVENUE BONDS, SERIES 2016A, AUTHORIZING THE ISSUANCE OF SUCH
BONDS IN AN AGGREGATE PRINCIPAL AMOUNT OF NOT TO EXCEED ELEVEN
MILLION ($11,000,000), AUTHORIZING THE DISTRIBUTION OF AN OFFICIAL
STATEMENT IN CONNECTION WITH THE OFFERING AND SALE OF SUCH
BONDS AND AUTHORIZING THE EXECUTION OF NECESSARY DOCUMENTS AND
CERTIFICATES OF RELATED ACTIONS
Lake Elsinore 2016 Lease Bonds - Authority Bond Approval - SR
Lease Revenue Bonds, Series 2016A - Exhibit A Reso
Lease Revenue Bonds, Series 2016A - Exhibit B Ground Lease
Lease Revenue Bonds, Series 2016A - Exhibit C Lease Agreement
Lease Revenue Bonds, Series 2016A - Exhibit D Indenture
Lease Revenue Bonds, Series 2016A - Exhibit E Assignment Agreement
Lease Revenue Bonds, Series 2016A - Exhibit F Bond Purchase Agreement
Lease Revenue Bonds, Series 2016A - Exhibit G Preliminary Official Statement
Attachments:
ADJOURNMENT
The Lake Elsinore Facilities Authority will adjourn this meeting.
Page 2 City of Lake Elsinore Printed on 10/6/2016
October 11, 2016Lake Elsinore Facilities Authority Regular Agenda
AFFIDAVIT OF POSTING
I, Diana Girón, Deputy Authority Secretary, do hereby affirm that a copy of the foregoing
agenda was posted at City Hall on October 6, 2016 at _____ p.m.
_________________________________
Diana Girón, Deputy Authority Secretary
Page 3 City of Lake Elsinore Printed on 10/6/2016
Text File
City of Lake Elsinore 130 South Main Street
Lake Elsinore, CA 92530
www.lake-elsinore.org
File Number: TMP-1775
Agenda Date: 10/11/2016 Status: Public HearingVersion: 1
File Type: ReportIn Control: Lake Elsinore Facilities Authority
Agenda Number: 1)
Page 1 City of Lake Elsinore Printed on 10/6/2016
REPORT TO LAKE ELSINORE FACILITIES FINANCING AUTHORITY
To:Chair and Members of the Financing Authority
From:Grant Yates, Chair of the Financing Authority
Prepared by: Jason Simpson, Assistant Chair of the Financing Authority
Date:October 11, 2016
SUBJECT: Issuance of the Lake Elsinore Facilities Financing Authority Lease Revenue
Bonds, Series 2016A
Recommendations
adopt A RESOLUTION OF THE BOARD OF DIRECTORS OF THE LAKE ELSINORE
FACILITIES FINANCING AUTHORITY, LAKE ELSINORE, CALIFORNIA, AUTHORIZING THE
EXECUTION AND DELIVERY BY THE AUTHORITY OF A GROUND LEASE, LEASE
AGREEMENT, AN INDENTURE, AN ASSIGNMENT AGREEMENT AND A BOND PURCHASE
AGREEMENT IN CONNECTION WITH THE ISSUANCE OF THE LAKE ELSINORE FACILITIES
FINANCING AUTHORITY LEASE REVENUE BONDS, SERIES 2016A, AUTHORIZING THE
ISSUANCE OF SUCH BONDS IN AN AGGREGATE PRINCIPAL AMOUNT OF NOT TO
EXCEED ELEVEN MILLION ($11,000,000), AUTHORIZING THE DISTRIBUTION OF AN
OFFICIAL STATEMENT IN CONNECTION WITH THE OFFERING AND SALE OF SUCH
BONDS AND AUTHORIZING THE EXECUTION OF NECESSARY DOCUMENTS AND
CERTIFICATES OF RELATED ACTION
Background
On April 12, 2016, City Council conceptually approved proceeding with the issuance of lease
revenue bonds to finance the development of the La Laguna Resort. The use of lease revenue
bonds to finance general infrastructure is commonly used by cities in California. Under this
financing structure, a joint powers authority is utilized for the sole purpose of issuing bonds for
the benefit of the issuer. Therefore, on September 13, 2016, City Council formed the Lake Elsinore
Facilities Financing Authority (the “Authority”), a joint powers agreement between the City and
Lake Elsinore Parking Authority (approved and formed on August 23, 2016) to issue the lease
revenue bonds. With formation of the Lake Elsinore Facilities Financing Authority complete, the
Authority is being asked to approve a Ground Lease, Lease Agreement, an Indenture, an
Assignment Agreement and a Bond Purchase Agreement in connection with issuing the Lake
Elsinore Facilities Financing Authority Lease Revenue Bonds, Series 2016A (the “2016 Lease
Revenue Bonds”).
Discussion
Under a “lease revenue bond” financing, the City would lease certain City-owned assets to a joint
powers authority for a nominal amount (one dollar) who would then lease these assets back to
the City for a fixed annual rental payment (rental payments). These rental payments would be
pledged by the joint powers authority toward repayment of annual bond payments (in a like
amount). The City’s rental payments would be payable from the City’s General Fund. Although
the City’s General Fund would be liable for the payments, the intended source of repayment would
be from income generated from the project (i.e. campsite/RV/cabin rental, concession and boat
storage fees & income).
The proposed lease revenue bonds are anticipated to be secured by a variety of assets which
include City Hall, Fire Station No. 10, and Rosetta Canyon Park. Should it prove to be
economically viable, the proposed lease revenue bonds will be supported with municipal bond
insurance and a debt service reserve fund insurance surety policy. The economics of the 2016
Lease Revenue Bonds are provided under the following section entitled, “Fiscal Impact.”
As a reminder, City staff continues to work with Urban Futures, Inc. (“UFI”) in evaluating the
financial feasibility of creating an Enhanced Infrastructure Financing District (“EIFD”) to fund
critical infrastructure projects aimed at improving sustainability of Lake Elsinore, enhancing public
access and utilization of the Lake, and supporting new public and private investment around the
Lake, including infrastructure upgrades and land development.
An EIFD is a prime and unique model of the legislative intent to create public benefit from
infrastructure projects focused on the health, sustainability, and utilization of the single greatest
regional asset in Lake Elsinore, the Lake itself. The Lake is not only a tourist destination and
recreational amenity for the region, it is also a vital and threatened component of the broader
watershed system. Water quality and overall sustainability of the Lake is therefore a major focus
of the EIFD. It’s staff belief the financing for the La Laguna as well as the development and
implementation of the EIFD focused on the lake itself are two critical components of managing
the City’s greatest assets and utilizing the asset for the benefit of the community and those that
wish to enjoy recreational activities in the City while also utilizing the City’s restaurants and
businesses. Simply stated, the development of La Laguna as a world class facility can be
economic engine for the local and regional economy while also providing an educational
opportunity for those interested in natural resource sustainability.
Fiscal Impact
Based on current market conditions, it is anticipated that approximately $9.6 million in par amount
of the 2016 Lease Revenue Bonds will be issued. Annual lease payments (amortized over a
period of 30 years), payable from the City’s General Fund, are expected to be approximately
$550,000. Total aggregate lease payments are estimated to be $16.7 million over the 30-year
period. The final payment date of the 2016 Lease Revenue Bonds will be April 1, 2047.
Summary of Financing Statistics*
Par Amount $9,565,000
True Interest Cost 3.15%
Average Annual Lease Payments $550,000
Approximate Aggregate Lease Payments $16,700,000
*Preliminary; Subject to Change; Market Conditions as of September 27, 2016
The exact par amount, interest rates and annual lease payments of the 2016 Lease Revenue
Bonds will not be determined until the bonds are priced and sold to investors.
Exhibits
A.Authority Resolution No. 2016-__
B.Ground Lease
C.Lease Agreement
D.Indenture
E.Assignment Agreement
F.Bond Purchase Agreement
G.Preliminary Official Statement
RESOLUTION NO. 2016 - ____
A RESOLUTION OF THE BOARD OF DIRECTORS OF THE LAKE ELSINORE
FACILITIES FINANCING AUTHORITY, LAKE ELSINORE, CALIFORNIA,
AUTHORIZING THE EXECUTION AND DELIVERY BY THE AUTHORITY OF A
GROUND LEASE, LEASE AGREEMENT, AN INDENTURE, AN ASSIGNMENT
AGREEMENT AND A BOND PURCHASE AGREEMENT IN CONNECTION
WITH THE ISSUANCE OF LAKE ELSINORE FACILITIES FINANCING
AUTHORITY LEASE REVENUE BONDS, SERIES 2016A, AUTHORIZING THE
ISSUANCE OF SUCH BONDS IN AN AGGREGATE PRINCIPAL AMOUNT OF
NOT TO EXCEED $11,000,000, AUTHORIZING THE DISTRIBUTION OF AN
OFFICIAL STATEMENT IN CONNECTION WITH THE OFFERING AND SALE
OF SUCH BONDS AND AUTHORIZING THE EXECUTION OF NECESSARY
DOCUMENTS AND CERTIFICATES AND RELATED ACTIONS
WHEREAS, the City of Lake Elsinore (the “City”) desires to finance the acquisition and/or
construction of various “public capital improvements” within the meaning of the Act (defined
below) all of which are or shall be located within the boundaries of the City and collectively
constitute the “Project;” and
WHEREAS, 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 “Lake Elsinore Facilities Financing Authority Lease Revenue Bonds, Series 2016A”
(the “Bonds”) for the purpose of financing the Project; and
WHEREAS, in order to facilitate the issuance of the Bonds, the City and the Authority
desire to enter into a Ground Lease between the City and the Authority (the “Ground Lease”)
pursuant to which the City will lease certain real property (which real property shall consist of
assets generally described as the City’s City Hall, Fire Station No. 10 and Rosetta Canyon Park
(together, the “Leased Assets”) to the Authority, and a Lease Agreement between the City and
the Authority (the “Lease Agreement”), pursuant to which the City will lease the Leased Assets
back from the Authority, and pay certain Base Rental Payments (as defined in the Lease
Agreement), which are pledged to the owners of the Bonds by the Authority pursuant to an
Indenture of Trust by and between Wilmington Trust, National Association (the “Trustee”) and the
Authority (the “Indenture”); and
WHEREAS, the Authority and the Trustee desire to enter into an Assignment Agreement
in order to provide, among other things, that all rights to receive the Base Rental Payments have
been assigned without recourse by the Authority to the Trustee;
WHEREAS, the Bonds will be issued pursuant to the Marks-Roos Local Bond Pooling Act
of 1985, commencing with Section 6584 of the California Government Code (the “Act);
WHEREAS, the City and the Authority desire to provide for the negotiated sale of the
Bonds;
WHEREAS, the City and the Authority have selected Stifel, Nicolaus & Company,
Incorporated, to act as underwriter (the “Underwriter”) to purchase the Bonds from the Authority
pursuant to a Bond Purchase Agreement (the "Bond Purchase Agreement");
WHEREAS, a form of the Preliminary Official Statement (the “Preliminary Official
Statement”) has been prepared;
WHEREAS, the City is a member of the Authority and the Project is located within the
boundaries of the City;
WHEREAS, the City has prior to the consideration of this resolution held a public hearing
on the financing of the Project with the proceeds of the issuance of the Bonds in accordance with
Section 6586.5 of the Act, which hearing was held at 183 North Main Street, Lake Elsinore on
October 11, 2016;
WHEREAS, in accordance with Section 6586.5 of the Act, notice of such hearing was
published once at least five days prior to the hearing in The Press-Enterprise, a newspaper of
general circulation in the City;
WHEREAS, the Board of Directors of the Authority (the “Board of Directors”) has been
presented with the form of each document referred to herein, and the Board of Directors has
examined and approved each document and desires to authorize and direct the execution of such
documents and the consummation of such financing; and
WHEREAS, all acts, conditions and things required by the laws of the State of California
to exist, to have happened and to have been performed precedent to and in connection with the
consummation of such financing authorized hereby do exist, have happened and have been
performed in regular and due time, form and manner as required by law, and the Authority 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, BE IT RESOLVED BY THE BOARD OF DIRECTORS OF THE
LAKE ELSINORE FACILITIES FINANCING AUTHORITY, as follows:
Section 1.All of the recitals herein contained are true and correct and the Board of
Directors so finds. The Board of Directors has determined and hereby finds that the Authority’s
assistance in financing the Project by the issuance and delivery of the Bonds will result in
significant public benefits of the type described in Section 6586 (a) through (d), inclusive, of the
Act and that all Project elements to be financed with the proceeds of the Bonds have been or will
be approved pursuant to all applicable requirements of the California Environmental Quality Act
(Public Resources Code Section 2100 et seq.) and applicable guidelines, or are exempt
therefrom.
Section 2.The forms of the Lease Agreement and the Ground Lease, on file with the
Secretary of the Authority, are hereby approved, and the Chair of the Authority, or such other
member of the Board of Directors as the Chair may designate, the Executive Director of the
Authority and the Treasurer of the Authority (the “Authorized Officers”), are each hereby
authorized and directed, for and in the name and on behalf of the Authority, to execute and deliver
the Lease Agreement and the Ground Lease, respectively, in substantially said forms, with such
changes, insertions and omissions therein as the Authorized Officer executing the same may
require or approve, such approval to be conclusively evidenced by the execution and delivery
thereof; provided, however, that the term of the Lease Agreement and the Ground Lease shall
terminate no later than April 1, 2047 (provided that such term may be extended as provided
therein) and the true interest cost applicable to the interest components of the Base Rental
Payments shall not exceed 5.00% per annum.
Section 3.The form of Indenture, on file with the Secretary of the Authority, is hereby
approved, and the Authorized Officers are each hereby authorized and directed, for and in the
name and on behalf of the Authority, to execute and deliver the Indenture in substantially said
form, with such changes, insertions and omissions therein as the Authorized Officer executing
the same may require or approve, such approval to be conclusively evidenced by the execution
and delivery thereof; provided, however, that the aggregate amount of the Bonds shall not exceed
$11,000,000, the final maturity date of the Bonds shall be no later than April 1, 2047 and the true
interest cost applicable to the Bonds shall not exceed 5.00% per annum and, provided, further,
that such changes, insertions and omissions shall be consistent with the terms of the Bonds
established at negotiated sale pursuant to the Bond Purchase Agreement.
Section 4.The issuance of not to exceed $11,000,000 aggregate principal amount of
the Bonds, in the principal amounts, bearing interest at the rates and maturing on the dates as
specified in the Indenture as finally executed, is hereby authorized and approved.
Section 5.The form of Assignment Agreement, on file with the Secretary of the
Authority, is hereby approved, and the Authorized Officers are each hereby authorized and
directed, for and in the name and on behalf of the Authority, to execute and deliver the Assignment
Agreement in substantially said form, with such changes, insertions and omissions therein as the
Authorized Officer executing the same may require or approve, such approval to be conclusively
evidenced by the execution and delivery thereof.
Section 6.The Bond Purchase Agreement on file with the Secretary of the Authority
is hereby approved. The Authorized Officers are, and each of them is, hereby authorized and
directed, for and in the name of the Authority to execute and deliver the Bond Purchase
Agreement in substantially said form, with such changes, insertions and omissions as the
Authorized Officer executing the same may require or approve, such approval to be conclusively
evidenced by the execution of the Bond Purchase Agreement by such Authorized Officer;
provided, however, that such changes, insertions and omissions shall not result in an aggregate
underwriter's discount (not including any original issue discount paid by the Underwriter) from the
principal amount of the Bonds in excess of one percent (1.00%) of the aggregate principal amount
of the Bonds.
Section 7.The form of Preliminary Official Statement, on file with the Secretary of the
Authority, with such changes, insertions and omissions therein as may be approved by an
Authorized Officer, is hereby approved, and the use of the Preliminary Official Statement in
connection with the offering and sale of the Bonds is hereby authorized and approved. The
Authorized Officers are each hereby authorized to certify on behalf of the Authority that the
Preliminary Official Statement is deemed final as of its date, within the meaning of Rule 15c2-12
promulgated under the Securities Exchange Act of 1934 (except for the omission of certain final
pricing, rating and related information as permitted by such Rule).
The Authorized Officers are each hereby authorized and directed to furnish, or cause to
be furnished, to prospective bidders for the Bonds a reasonable number of copies of the
Preliminary Official Statement.
Section 8.The preparation and delivery of an Official Statement, and its use in
connection with the offering and sale of the Bonds, is hereby authorized and approved. The
Official Statement shall be in substantially the form of the Preliminary Official Statement with such
changes, insertions and omissions as may be approved by an Authorized Officer, such approval
to be conclusively evidenced by the execution and delivery thereof. The Authorized Officers are
each hereby authorized and directed, for and in the name of and on behalf of the Authority, to
execute the final Official Statement and any amendment or supplement thereto for and in the
name and on behalf of the Authority.
Section 9.Each of the Authorized Officers is authorized to select a municipal bond
insurer to insure payments of the principal of and interest on the Bonds so long as such Authorized
Officer determines that obtaining the municipal bond insurance policy provided thereby will result
in a lower interest rate or yield to maturity with respect to the Bonds. Bond Counsel is hereby
directed to make all changes to the Indenture, the Ground Lease, the Lease, the Assignment
Agreement, the Bond Purchase Agreement, the Preliminary Official Statement and the final
Official Statement as are necessary to reflect the selection of a municipal bond insurer and the
reasonable comments thereof.
Section 10.Each of the Authorized Officers is authorized to select a municipal bond
insurer to provide a reserve fund surety bond to be deposited into the reserve fund for the Bonds
so long as such officer or officers determine that obtaining the reserve fund surety bond will be
cost effective to the Authority. Each of the Authorized Officers or the designee thereof are
authorized to execute and deliver any customary agreement with the municipal bond insurer
providing the reserve fund surety bond. Bond Counsel is hereby directed to make all changes to
the Indenture, the Ground Lease, the Lease, the Assignment Agreement, the Bond Purchase
Agreement, the Preliminary Official Statement and the final Official Statement as are necessary
to reflect the reserve fund surety bond and the reasonable comments of the municipal bond
insurer in connection therewith.
Section 11.The officers and agents of the Authority are hereby authorized and
directed, jointly and severally, to do any and all things which they may deem necessary or
advisable in order to consummate the transactions herein authorized and otherwise to carry out,
give effect to and comply with the terms and intent of this Resolution. Each of the Authorized
Officers is hereby expressly authorized to substitute one or more additional City owned properties
for any or all of the Leased Assets, should such Authorized Officer determine in his or her sole
discretion that it is in the best interests of the Authority to use an alternative City owned property.
All actions heretofore taken by the officers and agents of the Authority with respect to the
transactions set forth above are hereby approved, confirmed and ratified.
Section 12.This Resolution shall take effect from and after its date of adoption.
PASSED AND ADOPTED this 11th day of October, 2016.
_____________________________
Chair
ATTEST:
__________________________
Secretary
APPROVED AS TO FORM:
__________________________
Counsel
Stradling Yocca Carlson & Rauth
Draft of 10/3/16
RECORDING REQUESTED BY:
Lake Elsinore Facilities Financing Authority
AND WHEN RECORDED RETURN TO:
Stradling Yocca Carlson & Rauth
660 Newport Center Drive, Suite 1600
Newport Beach, California 92660
Attention: Brian Forbath, Esq.
[Space above for Recorder’s use.]
This Transaction is Exempt from California
Documentary Transfer Tax Pursuant to Section 11921
of the California Revenue and Taxation Code. This
Document is Exempt from Recording Fees Pursuant to
Section 27383 of the California Government Code.
Lease term is less than 35 years.
GROUND LEASE
by and between
CITY OF LAKE ELSINORE
and
LAKE ELSINORE FACILITIES FINANCING AUTHORITY
Dated as of November 1, 2016
Relating to
$___________
LAKE ELSINORE FACILITIES FINANCING AUTHORITY
LEASE REVENUE BONDS, SERIES 2016A
GROUND LEASE
THIS GROUND LEASE (this “Ground Lease”), executed and entered into as of November
1, 2016, is by and between the CITY OF LAKE ELSINORE (the “City”), a municipal corporation and
general law city duly organized and existing under and by virtue of the Constitution and laws of the
State of California, as lessor, and the LAKE ELSINORE FACILITIES FINANCING AUTHORITY
(the “Authority”), a joint exercise of powers entity duly organized and existing under the laws of the
State of California, as lessee.
WITNESSETH:
WHEREAS, the City and the Authority desire to finance a portion of the costs of the
acquisition, construction and installation of various public improvements (the “Project”);
WHEREAS, in order to finance the Project the City will lease certain real property and the
improvements located thereon (the “Property”) to the Authoritypursuant to this Ground Lease, and the
City will sublease the Property back from the Authority pursuant to a Lease Agreement, dated the date
hereof;
WHEREAS, the Property is more particularly described in Exhibit A hereto;
WHEREAS, the City and the Authority have determined that it would be in the best interests
of the City and the Authorityto provide the funds necessary to finance the Project through the issuance
by the Authority of bonds payable from the base rental payments (the “Base Rental Payments”) to be
made by the City under the Lease Agreement;
WHEREAS, the City and the Authority have determined that it would be in the best interests
of the City and the Authority to provide for the issuance of such bonds payable from the Base Rental
Payments pursuant to an Indenture, dated as of the date hereof, by and among the Authority, the City
and Wilmington Trust, National Association, as trustee (the “Trustee”);
WHEREAS, all rights to receive the Base Rental Payments have been assigned without
recourse by the Authority to the Trustee pursuant to an Assignment Agreement, dated as of the date
hereof (the “Assignment Agreement”);
WHEREAS, all acts, conditions and things required by law to exist, to have happened and to
have been performed precedent to and in connection with the execution and entering into of this
Ground 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
this Ground Lease;
NOW, THEREFORE, in consideration of the mutual covenants hereinafter contained, the
parties hereto agree as follows:
2
ARTICLE I
DEFINITIONS
Except as otherwise defined herein, or unless the context clearly otherwise requires, words and
phrases defined in Article I of the Lease Agreement shall have the same meaning in this Ground Lease.
ARTICLE II
LEASE OF THE PROPERTY; RENTAL
Section 2.01 Lease of Property. The City hereby leases to the Authority, and the Authority
hereby leases from the City, for the benefit of the Owners of the Bonds, the Property, subject only to
Permitted Encumbrances, to have and to hold for the term of this Ground Lease.
Section 2.02 Rental. The Authority shall pay to the City as and for rental of the Property
hereunder, the sum of $1.00, the receipt of which is hereby acknowledged.
ARTICLE III
QUIET ENJOYMENT
The parties intend that the Property will be leased back to the City pursuant to the Lease
Agreement for the term thereof. It is further intended that, to the extent provided herein and in the
Lease Agreement, if an event of default occurs under the Lease Agreement, the Authority, or its
assignee, will have the right, for the then remaining term of this Ground Lease to (a) take possession
of the Property, (b) if it deems it appropriate, cause an appraisal of the Property and a study of the then
reasonable use thereof to be undertaken, and (c) relet the Property. Subject to any rights the City may
have under the Lease Agreement (in the absence of an event of default) to possession and enjoyment
of the Property, the City hereby covenants and agrees that it will not take any action to prevent the
Authority from having quiet and peaceable possession and enjoyment of the Property during the term
hereof and will, at the request of the Authority and at the City’s cost, to the extent that it may lawfully
do so, join in any legal action in which the Authorityasserts its right to such possession and enjoyment.
ARTICLE IV
SPECIAL COVENANTS AND PROVISIONS
Section 4.01 Waste. The Authority agrees that at all times that it is in possession of the
Property, it will not commit, suffer or permit any waste on the Property, and that it will not willfully
or knowingly use or permit the use of the Property for any illegal purpose or act.
Section 4.02 Further Assurances and Corrective Instruments. The City and the
Authority 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 he required for correcting any inadequate or incorrect description of the Property hereby
leased or intended so to be or for carrying out the expressed intention of this Ground Lease, the
Indenture and the Lease Agreement.
3
Section 4.03 Waiver of Personal Liability. All liabilities under this Ground Lease on the
part of the Authority shall be solely liabilities of the Authority as a joint exercise of powers entity, and
the City hereby releases each and every director, officer and employee of the Authority of and from
any personal or individual liability under this Ground Lease. No director, officer or employee of the
Authority shall at any time or under any circumstances be individually or personally liable under this
Ground Lease to the City or to any other party whomsoever for anything done or omitted to be done
by the Authority hereunder.
All liabilities under this Ground Lease on the part of the City shall be solely liabilities of the
City as a public corporation, and the Authority hereby releases each and every member, officer and
employee of the City of and from any personal or individual liability under this Ground Lease. No
member, officer or employee of the City shall at any time or under any circumstances be individually
or personally liable under this Ground Lease to the Authority or to any other party whomsoever for
anything done or omitted to be done by the City hereunder.
Section 4.04 Taxes. 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 4.05 Right of Entry. The City reserves the right for any of its duly authorized
representatives to enter upon the Property at any reasonable time to inspect the same.
Section 4.06 Representations of the City. The City represents and warrants to the
Authority and the Trustee as follows:
(a)the City has the full power and authority to enter into, to execute and to deliver
this Ground Lease, and to perform all of its duties and obligations hereunder, and has duly authorized
the execution of this Ground Lease;
(b)except for Permitted 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 use of the Property for
governmental purposes as contemplated by the City;
(c)all taxes, assessments or impositions of any kind with respect to the Property,
except current taxes, have been paid in full; and
(d)the Property is necessary to the City in order for the City to perform its
governmental functions.
Section 4.07 Representations of the Authority. The Authority represents and warrants to
the City and the Trustee that the Authority has the full power and authority to enter into, to execute
and to deliver this Ground Lease, and to perform all of its duties and obligations hereunder, and has
duly authorized the execution and delivery of this Ground Lease.
4
ARTICLE V
ASSIGNMENT, SUBLEASING, MORTGAGING AND SELLING
Section 5.01 Assignment and Subleasing. This Ground Lease may be sold or assigned and
the Property subleased, as a whole or in part, by the Authority without the necessity of obtaining the
consent of the City, if an event of default occurs under the Lease Agreement. The Authority shall,
within 30 days after such an assignment, sale or sublease, furnish or cause to be furnished to the City
a true and correct copy of such assignment, sale or sublease, as the case may be.
Section 5.02 Restrictions on City. The City agrees that, except with respect to Permitted
Encumbrances, it will not mortgage, sell, encumber, assign, transfer or convey the Property or any
portion thereof during the term of this Ground Lease.
ARTICLE VI
TERM; TERMINATION
Section 6.01 Term. The term of this Ground Lease shall commence as of the date of
commencement of the term of the Lease Agreement and shall remain in full force and effect from such
date to and including April 1, 2047, unless such term is extended or sooner terminated as hereinafter
provided.
Section 6.02 Extension; Early Termination. If, on April 1, 2047, the Bonds shall not be
fully paid, or provision therefor made in accordance with Article X of the Indenture, or the Indenture
shall not be discharged by its terms, or if the Rental Payments payable under the Lease Agreement
shall have been abated at any time, then the term of this Ground Lease shall be automatically extended
until the date upon which all Bonds shall be fully paid, or provision therefor made in accordance with
Article X of the Indenture, and the Indenture shall be discharged by its terms, except that the term of
this Ground Lease shall in no event be extended more than ten years. If, prior to April 1, 2047, all
Bonds shall be fully paid, or provisions therefor made in accordance with Article X of the Indenture,
and the Indenture shall be discharged by its terms, the term of this Ground Lease shall end
simultaneously therewith.
ARTICLE VII
MISCELLANEOUS
Section 7.01 Binding Effect. This Ground Lease shall inure to the benefit of and shall be
binding upon the City, the Authority and their respective successors and assigns.
Section 7.02 Severability. In the event any provision of this Ground Lease shall be held
invalid or unenforceable by any court of competent jurisdiction, such holding shall not invalidate or
render unenforceable any other provision hereof.
Section 7.03 Amendments, Changes and Modifications. This Ground Lease may be
amended, changed, modified, altered or terminated only in accordance with the provisions of the Lease
Agreement.
5
Section 7.04 Assignment to Trustee. The Authority and City acknowledge that the
Authorityhas assigned its right, title and interest inand to this Ground Lease (but none of its obligations
and none of its rights to provide consents or approvals hereunder) to the Trustee pursuant to certain
provisions of the Assignment Agreement. The City consents to such assignment.
Section 7.05 Execution In Counterparts. This Ground Lease may be simultaneously
executed in several counterparts, each of which shall be an original and all of which shall constitute
but one and the same instrument.
Section 7.06 Applicable Law. This Ground Lease shall be governed by and construed in
accordance with the laws of the State of California.
Section 7.07 Captions. The captions or headings in this Ground Lease are for convenience
only and in no way define, limit or describe the scope or intent of any provisions or sections of this
Ground Lease.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
S-1
IN WITNESS WHEREOF, the Authority and the City have caused this Ground Lease to be
executed by their respective officers hereunto duly authorized, all as of the day and year first above
written.
CITY OF LAKE ELSINORE
By:
Grant Yates
City Manager
ATTEST:
Susan M. Domen, MMC
City Clerk
LAKE ELSINORE FACILITIES FINANCING
AUTHORITY
By:
Grant Yates
Executive Director
ATTEST:
Susan M. Domen, MMC
Secretary
APPROVED AS TO FORM:
Stradling Yocca Carlson & Rauth,
Special Counsel
CERTIFICATE OF ACCEPTANCE
This is to certify that the interest in real property conveyed under the foregoing to the Lake
Elsinore Facilities Financing Authority (the “Authority”), a body corporate and politic, is hereby
accepted by the undersigned officer or agent on behalf of the Board of Directors of the Authority (the
“Board”), pursuant to authority conferred by resolutions of said Board adopted on October 11, 2016,
and the grantee consents to recordation thereof by its duly authorized officer.
Dated: ____________, 2016 LAKE ELSINORE FACILITIES FINANCING
AUTHORITY
By:
Grant Yates
Executive Director
A notary public or other officer completing this certificate verifies only the identity of the
individual who signed the document to which this certificate is attached, and not the truthfulness,
accuracy, or validity of that document.
STATE OF CALIFORNIA )
)ss.
COUNTY OF RIVERSIDE )
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
paragraph is true and correct.
WITNESS my hand and official seal
SIGNATURE OF NOTARY PUBLIC
A notary public or other officer completing this certificate verifies only the identity of the
individual who signed the document to which this certificate is attached, and not the truthfulness,
accuracy, or validity of that document.
STATE OF CALIFORNIA )
)ss.
COUNTY OF RIVERSIDE )
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
paragraph is true and correct.
WITNESS my hand and official seal
SIGNATURE OF NOTARY PUBLIC
A notary public or other officer completing this certificate verifies only the identity of the
individual who signed the document to which this certificate is attached, and not the truthfulness,
accuracy, or validity of that document.
STATE OF CALIFORNIA )
)ss.
COUNTY OF RIVERSIDE )
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
paragraph is true and correct.
WITNESS my hand and official seal
SIGNATURE OF NOTARY PUBLIC
A-1
EXHIBIT A
DESCRIPTION OF THE PROPERTY
All that real property situated in the County of Riverside, State of California, described as
follows:
Stradling Yocca Carlson & Rauth
Draft of 10/3/16
RECORDING REQUESTED BY:
Lake Elsinore Facilities Financing Authority
AND WHEN RECORDED RETURN TO:
Stradling Yocca Carlson & Rauth
660 Newport Center Drive, Suite 1600
Newport Beach, California 92660
Attention: Brian Forbath, Esq.
[Space above for Recorder’s use.]
This Transaction is Exempt from California
Documentary Transfer Tax Pursuant to Section 11921
of the California Revenue and Taxation Code. This
Document is Exempt from Recording Fees Pursuant to
Section 27383 of the California Government Code.
Lease term is less than 35 years.
LEASE AGREEMENT
by and between
CITY OF LAKE ELSINORE
and
LAKE ELSINORE FACILITIES FINANCING AUTHORITY
Dated as of November 1, 2016
Relating to
$_________
Lake Elsinore Facilities Financing Authority
Lease Revenue Bonds, Series 2016A
TABLE OF CONTENTS
Page
i
ARTICLE I DEFINITIONS .......................................................................................................2
Section 1.01 Definitions..............................................................................................................2
ARTICLE II LEASE OF PROPERTY; TERM...........................................................................4
Section 2.01 Lease of Property....................................................................................................4
Section 2.02 Term; Occupancy....................................................................................................4
ARTICLE III RENTAL PAYMENTS..........................................................................................4
Section 3.01 Base Rental Payments.............................................................................................4
Section 3.02 Additional Rental Payments...................................................................................5
Section 3.03 Fair Rental Value....................................................................................................5
Section 3.04 Payment Provisions ................................................................................................6
Section 3.05 Appropriations Covenant........................................................................................6
Section 3.06 Rental Abatement...................................................................................................6
ARTICLE IV MAINTENANCE, ALTERATIONS AND ADDITIONS.....................................7
Section 4.01 [Reserved]...............................................................................................................7
Section 4.02 Maintenance and Utilities.......................................................................................7
Section 4.03 Additions to Property..............................................................................................7
Section 4.04 Installation of City’s Equipment.............................................................................7
ARTICLE V INSURANCE .........................................................................................................8
Section 5.01 Commercial General Liability and Property Damage Insurance; Workers’
Compensation Insurance.........................................................................................8
Section 5.02 Title Insurance........................................................................................................9
Section 5.03 Additional Insurance Provision; Form of Policies..................................................9
Section 5.04 Self-Insurance.........................................................................................................9
ARTICLE VI DEFAULTS AND REMEDIES...........................................................................10
Section 6.01 Defaults and Remedies.........................................................................................10
Section 6.02 Waiver...................................................................................................................12
ARTICLE VII EMINENT DOMAIN; PREPAYMENT..............................................................13
Section 7.01 Eminent Domain...................................................................................................13
Section 7.02 Prepayment...........................................................................................................13
ARTICLE VIII COVENANTS......................................................................................................14
Section 8.01 Right of Entry.......................................................................................................14
Section 8.02 Liens .....................................................................................................................14
Section 8.03 Quiet Enjoyment...................................................................................................14
Section 8.04 Authority Not Liable.............................................................................................14
Section 8.05 Assignment and Subleasing..................................................................................15
Section 8.06 Title to Property....................................................................................................16
Section 8.07 Authority’s Purpose..............................................................................................16
Section 8.08 Representations of the City...................................................................................16
Section 8.09 Representation of the Authority............................................................................16
TABLE OF CONTENTS
(continued)
Page
ii
ARTICLE IX NO CONSEQUENTIAL DAMAGES; USE OF THE PROPERTY;
SUBSTITUTION OR RELEASE.........................................................................16
Section 9.01 No Consequential Damages..................................................................................16
Section 9.02 Use of the Property...............................................................................................16
Section 9.03 Substitution or Release of the Property................................................................16
ARTICLE X MISCELLANEOUS.............................................................................................17
Section 10.01 Law Governing.....................................................................................................17
Section 10.02 Notices..................................................................................................................17
Section 10.03 Validity and Severability......................................................................................18
Section 10.04 Net-Net-Net Lease................................................................................................18
Section 10.05 Taxes.....................................................................................................................18
Section 10.06 Section Headings..................................................................................................18
Section 10.07 Amendments.........................................................................................................18
Section 10.08 Assignment...........................................................................................................19
Section 10.09 Execution..............................................................................................................19
Signatures ............................................................................................................................ S-1
EXHIBIT A DESCRIPTION OF THE PROPERTY....................................................................A-1
EXHIBIT B BASE RENTAL PAYMENT SCHEDULE .............................................................B-1
S-1
LEASE AGREEMENT
THIS LEASE AGREEMENT (this “Lease Agreement”) executed and entered into as of
Novmber 1, 2016, is by and between the CITY OF LAKE ELSINORE (the “City”), a municipal
corporation and general law city duly organized and existing under and by virtue of the Constitution
and laws of the State of California, as lessee, and the LAKE ELSINORE FACILITIES FINANCING
AUTHORITY (the “Authority”), a joint exercise of powers entity duly organized and existing under
and by virtue of the laws of the State of California, as lessor.
RECITALS
WHEREAS, the City and the Authority desire to finance a portion of the costs of the
acquisition, construction and installation of various public improvements (the “Project”);
WHEREAS, in order to finance the Project the City will lease certain real property and the
improvements located thereon (the “Property”) to the Authority pursuant to a Ground Lease, dated as
of the date hereof, and the City will sublease the Property back from the Authority pursuant to this
Lease Agreement;
WHEREAS, the City and the Authority have determined that it would be in the best interests
of the City and the Authorityto provide the funds necessary to finance the Project through the issuance
by the Authority of bonds payable from the base rental payments (the “Base Rental Payments”) to be
made by the City under this Lease Agreement;
WHEREAS, the City and the Authority have determined that it would be in the best interests
of the City and the Authority to provide for the issuance of such bonds payable from the Base Rental
Payments pursuant to an Indenture, dated as of the date hereof, by and among the Authority, the City
and Wilmington Trust, National Association, as trustee (the “Trustee”);
WHEREAS, all rights to receive the Base Rental Payments have been assigned without
recourse by the Authority to the Trustee pursuant to an Assignment Agreement, dated as of the date
hereof; and
WHEREAS, all acts, conditions and things required by law to exist, to have happened and to
have been performed precedent to and in connection with the execution and entering into of this Lease
Agreement do exist, have happened and have been performed in regular and due time, form and manner
as required by law, and the parties hereto are now duly authorized to execute and enter into this Lease
Agreement;
NOW, THEREFORE, in consideration of the mutual covenants hereinafter contained, the
parties hereto agree as follows:
2
ARTICLE I
DEFINITIONS
Section 1.01 Definitions. Unless the context otherwise requires, the terms defined in this
Section shall, for all purposes of this Lease Agreement, have the meanings herein specified, which
meanings shall be equally applicable to both the singular and plural forms of any of the terms herein
defined. Capitalized terms not otherwise defined herein shall have the meanings assigned to such terms
in the Indenture.
“Additional Bonds” means bonds other than the Series 2016A Bonds issued under the
Indenture in accordance with the provisions thereof
“Additional Rental Payments” means all amounts payable by the City as Additional Rental
Payments pursuant to Section 3.02 hereof.
“Authority” means the Lake Elsinore Facilities Financing Authority, a joint exercise of powers
authority organized and existing under the laws of the State of California.
“Base Rental Deposit Date” means the 15th day of the month next preceding each Interest
Payment Date.
“Base Rental Payments” means all amounts payable to the Authority from the City as Base
Rental Payments pursuant to Section 3.01 hereof.
“Base Rental Payment Schedule” means the schedule of Base Rental Payments payable to
the Authority from the City pursuant to Section 3.01 hereof and attached hereto as Exhibit B.
“Bonds” means the Lake Elsinore Facilities Financing Authority Lease Revenue Bonds Series
2016A issued under the Indenture, and any Additional Bonds.
“City” means the City of Lake Elsinore, a municipal corporation and general law city duly
organized and existing under and by virtue of the Constitution and laws of the State of California.
“Delivery Date” means ________, 2016.
“Ground Lease” means the Ground Lease, dated as of the date hereof, by and between the
City and the Authority, as originally executed and as it may from time to time be amended in
accordance with to the provisions thereof and hereof.
“Indenture” means the Indenture, dated as of the date hereof, by and among the Authority, the
City and the Trustee, as originally executed and as it may from time to time be amended or
supplemented in accordance with the provisions thereof.
“Joint Powers Agreement” means the Joint Exercise of Powers Agreement, dated as of
September 1, 2016, by and between the City and the California Municipal Finance Authority as
originally executed and as it may from time to time be amended in accordance with the provisions
thereof.
3
“Lease Agreement” means this Lease Agreement, as originally executed and as it may from
time to time be amended in accordance with the provisions hereof.
“Net Insurance Proceeds” means any insurance proceeds or condemnation award in excess
of $50,000, paid with respect to any of the Property, remaining after payment therefrom of all
reasonable expenses incurred in the collection thereof.
“Permitted Encumbrances” means, with respect to the Property, as of any particular time,
(a) liens for general ad valorem taxes and assessments, if any, not then delinquent, or which the City
may, pursuant to provisions of Article V hereof, permit to remain unpaid, (b) the Assignment
Agreement, (c) this Lease Agreement, (d) the Ground Lease, (e) any right or claim of any mechanic,
laborer, materialman, supplier or vendor not filed or perfected in the manner prescribed by law as
normally exist with respect to properties similar to the Property for the purposes for which it was
acquired or is held by the City, (f) easements, rights of way, mineral rights, drilling rights and other
rights, reservations, covenants, conditions or restrictions which exist of record as of the Delivery Date
which the City certifies in writing will not affect the intended use of the Property or impair the security
granted to the Trustee for the benefit of the Owners of the Bonds by the Indenture and the Assignment
Agreement and to which the Authority and the City consent in writing, and (g) easements, rights of
way, mineral rights, drilling rights and other rights, reservations, covenants, conditions or restrictions
established following the Delivery Date which the City certifies in writing do not affect the intended
use of the Property or impair the security granted to the Trustee for the benefit of the Owners of the
Bonds by the Indenture and the Assignment Agreement and to which the Authority and the City
consent in writing.
“Property” means the real property described in Exhibit A hereto and the improvements
located thereon.
“Rental Payments” means, collectively, the Base Rental Payments and the Additional Rental
Payments.
“Rental Period” means the twelve-month period commencing on April 1 of each year during
the term of the Lease Agreement.
“Series 2016A Bonds” means the Lake Elsinore Facilities Financing Authority Lease
Revenue Bonds, Series 2016A issued under the Indenture.
“Termination Date” means April 1, 2047, unless extended or sooner terminated as
provided in Section 2.02 hereof.
“Trustee” means the trustee appointed under the Indenture and referred to therein as the
Trustee.
4
ARTICLE II
LEASE OF PROPERTY; TERM
Section 2.01 Lease of Property.
(a)The Authority hereby leases to the City and the City hereby leases from the
Authority the Property, on the terms and conditions hereinafter set forth, subject to all Permitted
Encumbrances.
(b)The leasing of the Property by the City to the Authority pursuant to the Ground
Lease shall not effect or result in a merger of the City’s leasehold estate pursuant to this Lease
Agreement and its fee estate as lessor under the Ground Lease, and the Authorityshall continue to have
a leasehold estate in the Property pursuant to the Ground Lease throughout the term thereof and hereof.
The leasehold interest granted by the City to the Authority pursuant to the Ground Lease is and shall
be independent of this Lease Agreement; this Lease Agreement shall not be an assignment or surrender
of the leasehold interest granted to the Authority under the Ground Lease.
Section 2.02 Term; Occupancy. The term of this Lease Agreement shall commence on the
Delivery Date and shall end on the Termination Date, unless such term is extended or sooner terminated
as hereinafter provided. If on the Termination Date the Bonds shall not be fully paid, or provision
therefor made in accordance with Article X of the Indenture, or the Indenture shall not be discharged
by its terms, or if the Rental Payments shall remain due and payable or shall have been abated at any
time and for any reason, then the term of this Lease Agreement shall be extended until the date upon
which (i) all Bonds shall be fully paid, or provision therefor made in accordance with Article X of the
Indenture, or (ii) the Indenture shall be discharged by its terms and all Rental Payments shall have been
paid in full. Notwithstanding the foregoing, the term of this Lease Agreement shall in no event be
extended more than ten years beyond such Termination Date. Such extended date being the
“Maximum Lease Term.” If prior to the Termination Date, all Bonds shall be fully paid, or provision
therefor made in accordance with Article X of the Indenture, the Indenture shall be discharged by its
terms and all Rental Payments shall have been paid in full, the term of this Lease Agreement shall end
simultaneously therewith.
ARTICLE III
RENTAL PAYMENTS
Section 3.01 Base Rental Payments.
(a)Subject to the provisions hereof relating to a revision of the Base Rental
Payment Schedule pursuant to subsection (b) of this Section, the City shall pay to the Authority, as
Base Rental Payments (subject to the provisions of Section 3.06 and Article VII hereof) the amount at
the times specified in the Base Rental Payment Schedule, a portion of which Base Rental Payments
shall constitute principal, and a portion of which shall constitute interest. Rental Payments, including
Base Rental Payments, shall be paid by the City to the Authority for and in consideration of the right
to use and occupy the Property and in consideration of the continued right to the quiet use and
enjoyment thereof during each Rental Period for which such Rental Payments are to be paid.
5
The obligation of the City to make the Base Rental Payments does not constitute a debt
of the City or of the State of California, or of any political subdivision thereof, within the meaning of
any constitutional or statutory debt limit or restriction, and does not constitute an obligation for which
the City or the State of California is obligated to levy or pledge any form of taxation or for which the
City or the State of California has levied or pledged any form of taxation.
(b)If the term of this Lease Agreement shall have been extended pursuant to
Section 2.02 hereof, the obligation of the City to pay Rental Payments shall continue to and including
the Base Rental Deposit Date preceding the date of termination of this Lease Agreement (as so
extended pursuant to Section 2.02 hereof). Upon such extension, the Base Rental Payments shall be
established so that they will be sufficient to pay all extended and unpaid Base Rental Payments;
provided, however, that the Rental Payments payable in any Rental Period shall not exceed the annual
fair rental value of the Property.
Section 3.02 Additional Rental Payments. The City shall also pay, as Additional Rental
Payments, such amounts as shall be required for the payment of the following:
(a)all taxes and assessments of any type or nature charged to the Authority or the
City or affecting the Property or the respective interests or estates of the Authority or the City therein;
(b)all reasonable administrative costs of the Authority relating to the Property
including, but without limiting the generality of the foregoing, salaries, wages, fees and expenses,
compensation and indemnification of the Trustee payable by the Authority under the Indenture, fees
of auditors, accountants, attorneys or engineers, and all other necessary and reasonable administrative
costs of the Authorityor charges required to be paid by it in order to maintain its existence or to comply
with the terms of the Indenture or the Lease Agreement or to defend the Authority and its members,
officers, agents and employees;
(c)insurance premiums for all insurance required pursuant to Article V hereof;
(d)any amounts with respect to the Lease Agreement or the Bonds required to be
rebated to the federal government in accordance with Section 148(f) of the Code; and
(e)all other payments required to be paid by the City under the provisions of this
Lease Agreement or the Indenture.
Amounts constituting Additional Rental Payments payable hereunder shall be paid by the City
directly to the person or persons to whom such amounts shall be payable. The City shall pay all such
amounts when due or at such later time as such amounts may be paid without penalty or, in any other
case, within 60 days after notice in writing from the Trustee to the City stating the amount of Additional
Rental Payments then due and payable and the purpose thereof.
Section 3.03 Fair Rental Value. The parties hereto have agreed and determined that the
annual fair rental value of the Property is not less than the maximum annual Rental Payments due in
any year. In making such determination of fair rental value, consideration has been given to the uses
and purposes that may be served by the Property and the benefits therefrom which will accrue to the
City and the general public. Payments of the Rental Payments for the Property during each Rental
Period shall constitute the total rental for said Rental Period.
6
Section 3.04 Payment Provisions. Each installment of Base Rental Payments payable
hereunder shall be paid in lawful money of the United States of America to or upon the order of the
Authority at the principal office of the Trustee in Los Angeles, California, or such other place or entity
as the Authority shall designate. Each Base Rental Payment shall be deposited with the Trustee no
laterthan the Base Rental Deposit Date preceding the Interest Payment Date on which such Base Rental
Payment is due. Any Base Rental Payment which shall not be paid by the City when due and payable
under the terms of this Lease Agreement shall bear interest from the date when the same is due
hereunder until the same shall be paid at the rate equal to the highest rate of interest on any of the
Outstanding Bonds. Notwithstanding any dispute between the Authority and the City, the City shall
make all Rental Payments when due without deduction or offset of any kind and shall not withhold
any Rental Payments pending the final resolution of such dispute. In the event of a determination that
the City was not liable for said Rental Payments or any portion thereof, said payments or excess of
payments, as the case may be, shall be credited against subsequent Rental Payments due hereunder or
refunded at the time of such determination. Amounts required to be deposited by the City with the
Trustee pursuant to this Section on any date shall be reduced to the extent of available amounts on
deposit in the Base Rental Payment Fund, the Interest Fund or the Principal Fund.
Section 3.05 Appropriations Covenant. The City covenants to take such action as may be
necessary to include all Rental Payments due hereunder as a separate line item in its annual budgets
and to make necessary annual appropriations for all such Rental Payments. The City will deliver to
the Authority and the Trustee a Certificate of the City stating that its final annual budget includes all
Base Rental Payments due in such fiscal year within ten days after the filing or adoption thereof. 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 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 Agreement
agreed to be carried out and performed by the City.
Section 3.06 Rental Abatement. Except as otherwise specifically provided in this Section,
during any period in which, by reason of material damage to, or destruction or condemnation of, the
Property, or any defect in title to the Property, there is substantial interference with the City’s right to
use and occupy any portion of the Property, Rental Payments shall be abated proportionately, and the
City waives the benefits of Civil Code Sections 1932(1), 1932(2) and 1933(4) and any and all other
rights to terminate the Lease Agreement by virtue of any such interference, and the Lease Agreement
shall continue in full force and effect. The amount of such abatement shall be agreed upon by the City
and the Authority; provided, however, that the Rental Payments due for any Rental Period shall not
exceed the annual fair rental value of that portion of the Property available for use and occupancy by
the City during such Rental Period. The City and the Authority shall calculate such abatement and
shall provide the Trustee with a certificate setting forth such calculation and the basis therefor. Such
abatement shall continue for the period commencing with the date of interference resulting from such
damage, destruction, condemnation or title defect and, with respect to damage to or destruction of the
Property, ending with the substantial completion of the work of repair or replacement of the Property,
or the portion thereof so damaged or destroyed; and the term of this Lease Agreement shall be extended
as provided in Section 2.02 hereof, except that the term shall in no event be extended beyond the
Maximum Lease Term.
Notwithstanding the foregoing, to the extent that moneys are available for the payment of
Rental Payments in any of the funds and accounts established under the Indenture, Rental Payments
7
shall not be abated as provided above but, rather, shall be payable by the City as a special obligation
payable solely from said funds and accounts.
ARTICLE IV
MAINTENANCE, ALTERATIONS AND ADDITIONS
Section 4.01 [Reserved]
Section 4.02 Maintenance and Utilities. Throughout the term of this Lease Agreement, as
part of the consideration for rental of the Property, all improvement, repair and maintenance of the
Property shall be the responsibility of the City, and the City shall pay for or otherwise arrange for the
payment of all utility services supplied to the Property, which may include, without limitation, janitor
service, security, power gas, telephone, light, heating, ventilation, air conditioning, water and all other
utility services, and shall pay for or otherwise arrange for payment of the cost of the repair and
replacement of the Property resulting from ordinary wear and tear or want of care on the part of the
City or any assignee or sublessee thereof. In exchange for the Rental Payments, the Authority agrees
to provide only the Property.
Section 4.03 Additions to Property. Subject to Section 8.02 hereof, the City and any
sublessee shall, at its own expense, have the right to make additions, modifications and improvements
to the Property. To the extent that the removal of such additions, modifications or improvements would
not cause material damage to the Property, such additions, modifications and improvements shall
remain the sole property of the City or such sublessee, and neither the Authority nor the Trustee shall
have any interest therein. Such additions, modifications and improvements shall not in any way
damage the Property or cause it to be used for purposes other than those authorized underthe provisions
of state and federal law; and the Property, upon completion of any additions, modifications and
improvements made pursuant to this Section, shall be of a value which is at least equal to the value of
the Property immediately prior to the making of such additions, modifications and improvements.
Section 4.04 Installation of City’s Equipment. The City and any sublessee may at any
time and from time to time, in its sole discretion and at its own expense, install or permit to be installed
items of equipment or other personal property in or upon the Property. All such items shall remain the
sole property of the City or such sublessee, and neither the Authority nor the Trustee shall have any
interest therein. The City or such sublessee may remove or modify such equipment or other personal
property at any time, provided that such party shall repair and restore any and all damage to the
Property resulting from the installation, modification or removal of any such items. Nothing in this
Lease Agreement shall prevent the City or any sublessee from purchasing items to be installed pursuant
to this Section under a conditional sale or lease purchase contract, or subject to a vendor’s lien or
security agreement as security for the unpaid portion of the purchase price thereof, provided that no
such lien or security interest shall attach to any part of the Property.
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ARTICLE V
INSURANCE
Section 5.01 Commercial General Liability and Property Damage Insurance;
Workers’ Compensation Insurance.
(a)The City shall maintain or cause to be maintained, throughout the term of this
Lease Agreement, a standard commercial general liability insurance policy or policies in protection of
the City, the Authority and their respective members, 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 ownership of the Property. Said policy or policies shall provide coverage in the minimum 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 a single accident or event, and in a minimum amount of $500,000 for
damage to property (subject to a deductible clause of not to exceed [$100,000]) resulting from a single
accident or event. Such commercial general liability and property damage insurance may, however,
be in the form of a single limit policy in the amount of $3,000,000 covering all such risks. Such liability
insurance may be maintained as part of or in conjunction with any other liability insurance coverage
carried or required to be carried by the City, and may be maintained in whole or in part in the form of
self-insurance by the City provided such self-insurance complies with the provisions of Section 5.04
hereof. The Net Insurance Proceeds of such liability insurance shall be applied toward extinguishment
or satisfaction of the liability with respect to which the Net Insurance Proceeds of such insurance shall
have been paid.
(b)The City shall maintain or cause to be maintained, throughout the term of this
Lease Agreement, workers’ compensation insurance issued by a responsible carrier authorized under
the laws of the State of California to insure employers against liability for compensation under the
California Labor Code, or any act enacted as an amendment or supplement thereto or in lieu thereof,
such workers’ compensation insurance to cover all persons employed by the City in connection with
the Property and to cover full liability for compensation under any such act; provided, however, that
the City’s obligations under this subsection may be satisfied by self-insurance, provided such self-
insurance complies with the provisions of Section 5.04 hereof.
(c)The City shall maintain or cause to be maintained, fire, lightning and special
extended coverage insurance (which shall include coverage for vandalism and malicious mischief, but
need not include coverage for earthquake damage) on all improvements constituting any part of the
Property in an amount equal to the greater of 100% of the replacement cost of such improvements or
100% of the outstanding principal amount of the Bonds. The City has an insurance policy which
provides replacement cost coverage. All insurance required to be maintained pursuant to this
subsection may be subject to a deductible in an amount not to exceed [$500,000]. The City’s
obligations under this subsection may be satisfied by self-insurance, provided such self-insurance
complies with the provisions of Section 5.04 hereof.
(d)The City shall maintain rental interruption insurance to cover the Authority’s
loss, total or partial, of Base Rental Payments resulting from the loss, total or partial, of the use of any
part of the Property as a result of any of the hazards required to be covered pursuant to subsection (c)
of this Section in an amount sufficient at all times to pay an amount not less than the product of two
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times the maximum amount of Base Rental Payments scheduled to be paid during any Rental Period.
The City shall not be permitted to self-insure its obligation under this subsection.
(e)The insurance required by this Section shall be provided by reputable insurance
companies with claims paying abilities determined, in the reasonable opinion of a professionally
certified risk manager or an independent insurance consultant, to be adequate for the purposes hereof.
Section 5.02 Title Insurance. The City shall provide, at its own expense, one or more
CLTA or ALTA title insurance policies for the Property, in the aggregate amount of not less than the
initial aggregate principal amount of the Series 2016ABonds, said policy or policies shall insure (a) the
fee interest of the City in the Property, (b) the Authority’sground leasehold estate in the Property under
the Ground Lease, and (c) the City’s leasehold estate hereunder in the Property, subject only to
Permitted Encumbrances. All Net Insurance Proceeds received under said policy or policies shall be
deposited with the Trustee and applied as provided in Section 5.04 of the Indenture. So long as any of
the Bonds remain Outstanding, each policy of title insurance obtained pursuant to the Indenture or this
Lease Agreement or required thereby or hereby shall provide that all proceeds thereunder shall be
payable to the Trustee for the benefit of the Bond Owners.
Section 5.03 Additional Insurance Provision; Form of Policies. The City shall pay or
cause to be paid when due the premiums for all insurance policies required by Section 5.01 hereof, and
shall promptly furnish or cause to be furnished evidence of such payments to the Trustee. All such
policies shall provide that the Trustee shall be given 30 days notice of the expiration thereof or any
intended cancellation thereof. The Trustee shall be fully protected in accepting payment on account
of such insurance or any adjustment, compromise or settlement of any loss agreed to by the Trustee.
The City shall cause to be delivered to the Trustee on or before August 30 each year,
commencing August 30, 2017, a schedule of the insurance policies being maintained in accordance
herewith and a Certificate of the City stating that such policies are in full force and effect and that the
City is in full compliance with the requirements of this Article. The Trustee shall be entitled to rely
upon said Certificate of the City as to the City’s compliance with this Article. The Trustee shall not
be responsible for the sufficiency of coverage or amounts of such policies.
Section 5.04 Self-Insurance. Insurance provided through a California joint powers
authority of which the City is a member or with which the City contracts for insurance shall be deemed
to be self-insurance for purposes hereof. Any self-insurance maintained by the City pursuant to this
Article shall comply with the following terms:
(a)the self-insurance program shall be approved in writing by a professionally
certified risk manager or by an independent insurance consultant;
(b)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 each such fund shall be
evaluated on an annual basis by a professionally certified risk manager or by an independent insurance
consultant and any deficiencies in any self-insured claims reserve fund shall be remedied in accordance
with the recommendation of a professionally certified risk manager or such independent insurance
consultant, as applicable; and
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(c)in the event the self-insurance program shall be discontinued, the actuarial
soundness of its claims reserve fund, as determined by a professionally certified risk manager or by an
independent insurance consultant, shall be maintained.
ARTICLE VI
DEFAULTS AND REMEDIES
Section 6.01 Defaults and Remedies.
(a)(i) If the City shall fail (A) to pay any Rental Payment payable hereunder when
the same becomes due and payable, time being expressly declared to be of the essence in this Lease
Agreement, or (B) to keep, observe or perform any other term, covenant or condition contained herein
or in the Indenture to be kept or performed by the City, or (ii) upon the happening of any of the events
specified in this subsection or in subsection (b) of this Section, the City shall be deemed to be in default
hereunder and it shall be lawful for the Authority to exercise any and all remedies available pursuant
to law or granted pursuant to this Lease Agreement. The City shall in no event be in default in the
observance or performance of any covenant, condition or agreement in this Lease Agreement on its
part to be observed or performed, other than as referred to in clause (i)(A) or (ii) of the preceding
sentence, unless the City shall have failed, for a period of 30 days or such additional time as is
reasonably required to correct any such default after notice by the Authority to the City properly
specifying wherein the City has failed to perform any such covenant, condition or agreement. Upon
any such default, the Authority, in addition to all other rights and remedies it may have at law, shall
have the option to do any of the following:
(1)To terminate this Lease Agreement in the manner hereinafter provided
on account of default by the City, notwithstanding any re-entry or re-letting of the Property as
hereinafter provided for in subparagraph (2) hereof, and to re-enter the Property and remove all persons
in possession thereof and all personal property whatsoever situated upon the Property 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 Property, 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 Property and removal and storage of such property by the Authority or its duly authorized
agents in accordance with the provisions herein contained. Neither notice to pay Rental Payments or
to deliver up possession of the Property given pursuant to law nor any entry or re-entry by the Authority
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 Property nor the appointment of a receiver upon
initiative of the Authority to protect the Authority’s interest under this Lease Agreement shall of itself
operate to terminate this Lease Agreement, and no termination of this Lease Agreement 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 Agreement. The City covenants and agrees that no
surrender of the Property or of the remainder of the term hereof or any termination of this Lease
Agreement shall be valid in any manner or for any purpose whatsoever unless stated by the Authority
by such written notice.
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(2)Without terminating this Lease Agreement, (x) to collect each
installment of Rental 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
Property, or (y) to exercise any and all rights of entry and re-entry upon the Property. In the event the
Authoritydoes not elect to terminate this Lease Agreement in the manner provided for in subparagraph
(1) 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 Property is not re-let, to pay the full
amount of the Rental Payments to the end of the term of this Lease Agreement or, in the event that the
Property is re-let, to pay any deficiency in Rental Payments that results therefrom; and further agrees
to pay said Rental Payments and/or Rental Payment deficiency punctually at the same time and in the
same manner as hereinabove provided for the payment of Rental Payments hereunder, notwithstanding
the fact that the Authority may have received in previous years or may receive thereafter in subsequent
years Rental Payments in excess of the Rental Payments herein specified, and notwithstanding any
entry or re-entry by the Authority or suit in unlawful detainer, or otherwise, brought by the Authority
for the purpose of effecting such re-entry or obtaining possession of the Property. 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 Property, 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 persons in possession thereof and all personal
property whatsoever situated upon the Property 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 Property
and removal and storage of such property by the Authority or its duly authorized agents in accordance
with the provisions herein contained. The City agrees that the terms of this Lease Agreement constitute
full and sufficient notice of the right of the Authority to re-let the Property in the event of such re-entry
without effecting a surrender of this Lease Agreement, and further agrees that no acts of the Authority
in effecting such re-letting shall constitute a surrender or termination of this Lease Agreement
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 Lease Agreement shall vest in the Authority to be effected in the sole and exclusive
manner provided for in subparagraph (1) hereof. The City further agrees to pay the Authority the cost
of any alterations or additions to the Property necessary to place the Property 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 Property as herein provided and all claims
for damages that may result from the destruction of or injury to the Property and all claims for damages
to or loss of any property belonging to the City, or any other person, that may be in or upon the Property.
(b)If (i) the City’s interest in this Lease Agreement 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, as hereinafter provided for, or (ii) the City or any assignee 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 elect 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
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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
Property, then the City shall be deemed to be in default hereunder.
(c)In addition to the other remedies set forth in this Section, upon the occurrence
of an event of default, the Authority and its assignee shall be entitled to proceed to protect and enforce
the rights vested in the Authority and its assignee by the Lease Agreement or by law. The provisions
of the Lease Agreement and the duties of the City and of its city council, officers or employees shall
be enforceable by the Authority or its assignee by mandamus or other appropriate suit, action or
proceeding in any court of competent jurisdiction. Without limiting the generality of the foregoing,
the Authority and its assignee shall have the right to bring the following actions:
(i)Accounting. By action or suit in equity to require the City and its city
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 or its assignee.
(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 city 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.
Each and all of the remedies given to the Authority hereunder or by any law now or
hereafter enacted are cumulative and the single or partial exercise of any right, power or privilege
hereunder shall not impair the right of the Authority to the further exercise thereof or the exercise of
any or all other rights, powers or privileges. The term “re-let” or “re-letting” as used in this Section
shall include, but not be limited to, re-letting by means of the operation by the Authority of the
Property. If any statute or rule of law validly shall limit the remedies given to the Authorityhereunder,
the Authority nevertheless shall be entitled to whatever remedies are allowable under any statute or
rule of law.
In the event the Authorityshall prevail in any action brought to enforce any of the terms
and provisions of this Lease Agreement, the City agrees to pay a reasonable amount as and for
attorney’s fees incurred by the Authority in attempting to enforce any of the remedies available to the
Authority hereunder.
Notwithstanding anything to the contrary contained in this Lease Agreement, the
Authority shall have no right upon a default hereunder by the City to accelerate Rental Payments.
(d)Notwithstanding anything to the contrary contained in this Lease Agreement,
the termination of this Lease Agreement by the Authority and its assignees on account of a default by
the City under this Section shall not effect or result in a termination of the Ground Lease.
Section 6.02 Waiver. Failure of the Authority to take advantage of any default on the part
of the City shall not be, or be construed as, a waiver thereof, nor shall any custom or practice which
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may grow up between the parties in the course of administering this instrument be construed to waive
or to lessen the right of the Authority to insist upon performance by the City of any term, covenant or
condition hereof, or to exercise any rights given the Authority on account of such default. A waiver
of a particular default shall not be deemed to be a waiver of any other default or of the same default
subsequently occurring. The acceptance of Rental Payments hereunder shall not be, or be construed
to be, a waiver of any term, covenant or condition of this Lease Agreement.
ARTICLE VII
EMINENT DOMAIN; PREPAYMENT
Section 7.01 Eminent Domain. If all of the Property (or portions thereof such that the
remainder is not usable for public purposes by the City) shall be taken under the power of eminent
domain, the term hereof shall cease as of the day that possession shall be so taken. If less than all of
the Property shall be taken under the power of eminent domain and the remainder is usable for public
purposes by the City at the time of such taking, then the Lease Agreement shall continue in full force
and effect as to such remainder, and the parties waive the benefits of any law to the contrary, and in
such event there shall be a partial abatement of the Rental Payments in accordance with the provisions
of Section 3.06 hereof. So long as any Bonds shall be Outstanding, any award made in eminent domain
proceedings for the taking of the Property, or any portion thereof, shall be paid to the Trustee and
applied to the redemption of Bonds as provided in subsection (a) of Section 4.01 of the Indenture, in
the corresponding provisions of any Supplemental Indenture pursuant to which Additional Bonds are
issued and in Section 5.03 of the Indenture. Any such award made after all of the Bonds, and all other
amounts due under the Indenture and hereunder, have been fully paid, shall be paid to the Authority
and to the City as their respective interests may appear.
Section 7.02 Prepayment.
(a)The City may prepay all or a portion of the Base Rental Payments attributable
to the Series 2016A Bonds which are payable on or after April 1, 20__, from any source of available
funds, on any date on or after April 1, 20__, by paying (i) all or a portion, as selected by the City, of
the principal components of such Base Rental Payments, and (ii) the accrued but unpaid interest
component of such Base Rental Payments to be prepaid to the date of such prepayment.
(b)The City may prepay, from any source of available funds, all or any portion of
the Base Rental Payments attributable to the Series 2016A Bonds by depositing with the Trustee
moneys or securities as provided, and subject to the terms and conditions set forth, in Article X of the
Indenture sufficient to make such Base Rental Payments when due or to make such Base Rental
Payments through a specified date on which the City has a right to prepay such Base Rental Payments
pursuant to subsection (a) of this Section, and to prepay such Base Rental Payments on such
prepayment date, at a prepayment price determined in accordance with subsection (a) of this Section.
(c)If less than all of the Base Rental Payments attributable to the Series 2016A
Bonds are prepaid pursuant to this Section then, as of the date of such prepayment pursuant to
subsection (a) of this Section, or the date of a deposit pursuant to subsection (b) of this Section, the
principal and interest components of such Base Rental Payments shall be recalculated in order to take
such prepayment into account. The City agrees that if, following a partial prepayment of such Base
Rental Payments, the Property is damaged or destroyed or taken by eminent domain, or a defect in title
to the Property is discovered, the City shall not be entitled to, and by such prepayment waives the right
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of, abatement of such prepaid Base Rental Payments and the City shall not be entitled to any
reimbursement of such Base Rental Payments.
(d)If all of the Base Rental Payments areprepaid in accordance with the provisions
of this Lease Agreement then, as of the date of such prepayment pursuant to subsection (a) of this
Section and, if applicable, the corresponding provisions hereof relating to the prepayment of Base
Rental Payments attributable to Additional Bonds, or deposit pursuant to subsection (b) of this Section
and, if applicable, such corresponding provisions, and payment of all other amounts owed under this
Lease Agreement, the term of this Lease Agreement shall be terminated.
(e)Prepayments of Base Rental Payments attributable to the Series 2016A Bonds
made pursuant to this Section shall be applied to the redemption of the Series 2016A Bonds as directed
by the City and as provided in Section 4.01 of the Indenture.
(f)Before making any prepayment pursuant to this Article, the City shall give
written notice to the Authority and the Trustee specifying the date on which the prepayment will be
made, which date shall be not less than 45 nor more than 60 days from the date such notice is given to
the Authority.
ARTICLE VIII
COVENANTS
Section 8.01 Right of Entry. The Authority and its assignees shall have the right to enter
upon and to examine and inspect the Property during reasonable business hours (and in emergencies
at all times) for any purpose connected with the Authority’s rights or obligations under this Lease
Agreement, and for all other lawful purposes.
Section 8.02 Liens. In the event the City shall at any time during the term of this Lease
Agreement cause any changes, alterations, additions, improvements, or other work to be done or
performed or materials to be supplied, in or upon the Property, the City shall pay, when due, all sums
of money that may become due for, or purporting to be for, any labor, services, materials, supplies or
equipment furnished or alleged to have been furnished to or for the City in, upon or about the Property
and which may be secured by a mechanics’, materialmen’s or other lien against the Property or the
Authority’s interest therein, and will cause each such lien to be fully discharged and released at the
time the performance of any obligation secured by any such lien matures or becomes due, except that,
if the City desires to contest any such lien, it may do so as long as such contestment is in good faith.
If any such lien shall be reduced to final judgment and such judgment or such process as may be issued
for the enforcement thereof is not promptly stayed, or if so stayed and said stay thereafter expires, the
City shall forthwith pay and discharge said judgment.
Section 8.03 Quiet Enjoyment. The parties hereto mutually covenant that the City, by
keeping and performing the covenants and agreements herein contained, shall at all times during the
term of this Lease Agreement peaceably and quietly have, hold and enjoy the Property without suit,
trouble or hindrance from the Authority.
Section 8.04 Authority Not Liable. The Authority and its directors, officers, agents and
employees, shall not be liable to the City or to any other party whomsoever for any death, injury or
damage that may result to any person or property by or from any cause whatsoever in, on or about the
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Property. To the extent permitted by law, the City shall, at its expense, indemnify and hold the
Authority and the Trustee and all directors, members, officers and employees thereof harmless against
and from any and all claims by or on behalf of any person, firm, corporation or governmental authority
arising from the acquisition, construction, occupation, use, operation, maintenance, possession,
conduct or management of or from any work done in or about the Property or from the subletting of
any part thereof, including any liability for violation of conditions, agreements, restrictions, laws,
ordinances, or regulations affecting the Property or the occupancy or use thereof, but excepting the
negligence or willful misconduct of the persons or entity seeking indemnity. The City also covenants
and agrees, at its expense, to pay and indemnify and save the Authority and the Trustee and all
directors, officers and employees thereof harmless - against and from any and -all claims arising from
(a) any condition of the Property and the adjoining sidewalks and passageways, (b) any breach or
default on the part of the City in the performance of any covenant or agreement to be performed by the
City pursuant to this Lease Agreement, (c) any act or negligence of licensees in connection with their
use, occupancy or operation of the Property, or (d) any accident, injury or damage whatsoever caused
to any person, firm or corporation in or about the Property or upon or under the sidewalks and
passageways and from and against all costs, reasonable counsel fees, expenses and liabilities incurred
in any action or proceeding brought by reason of any claim referred to in this Section, but excepting
the negligence or willful misconduct of the person or entity seeking indemnity. In the event that any
action or proceeding is brought against the Authority or the Trustee or any director, member, officer
or employee thereof, by reason of any such claim, the City, upon notice from the Authority or the
Trustee or such director, member, officer employee thereof, covenants to resist or defend such action
or proceeding by counsel reasonably satisfactory to the Authority or the Trustee or such director,
member, officer or employee thereof.
Section 8.05 Assignment and Subleasing. Neither this Lease Agreement nor any interest
of the City hereunder shall be sold, mortgaged, pledged, assigned, or transferred by the City by
voluntary act or by operation by law or otherwise. The Property may not be subleased in whole or in
part by the City without the prior written consent of the Authority. Any such sublease shall be subject
to all of the following conditions:
(a)this Lease Agreement and the obligation of the City to make all Rental
Payments hereunder shall remain the primary obligation of the City;
(b)the City shall, within 30 days after the delivery thereof, furnish or cause to be
furnished to the Authority and the Trustee a true and complete copy of such sublease;
(c)no such sublease by the City shall cause the Property to be used for a purpose
other than a governmental or proprietary function authorized under the provisions of the Constitution
and laws of the State of California;
(d)any sublease of the Property by the City shall explicitly provide that such
sublease is subject to all rights of the Authority under the Lease Agreement, including, the right to
re-enter and re-let the Property or terminate the Lease Agreement upon a default by the City; and
(e)the City shall furnish the Authority and the Trustee with an Opinion of Counsel
to the effect that such sublease will not, in and of itself, cause the interest on the Bonds to be included
in gross income for federal income tax purposes.
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Section 8.06 Title to Property. Upon the termination or expiration of this Lease Agreement
(other than as provided in Section 6.01 and Section 7.01 hereof), and the first date upon which the
Bonds are no longer Outstanding, all right, title and interest in and to the Property shall vest in the City.
Upon any such termination or expiration, the Authority shall execute such conveyances, deeds and
other documents as may be necessary to effect such vesting of record.
Section 8.07 Authority’s Purpose. The Authority covenants that, prior to the discharge of
this Lease Agreement and the Bonds, it will not engage in any activities inconsistent with the purposes
for which the Authority is organized, as set forth in the Joint Powers Agreement.
Section 8.08 Representations of the City. The City represents and warrants to the
Authority that (a) the City has the full power and authority to enter into, to execute and to deliver this
Lease Agreement and the Indenture, and to perform all of its duties and obligations hereunder and
thereunder, and has duly authorized the execution and delivery of this Lease Agreement and the
Indenture, and (b) the Property will be used in the performance of essential governmental functions.
Section 8.09 Representation of the Authority. The Authority represents and warrants to
the City that the Authority has the full power and authority to enter into, to execute and to deliver this
Lease Agreement, the Assignment Agreement and the Indenture, and to perform all of its duties and
obligations hereunder and thereunder, and has duly authorized the execution and delivery of this Lease
Agreement, the Assignment Agreement and the Indenture.
ARTICLE IX
NO CONSEQUENTIAL DAMAGES;
USE OF THE PROPERTY; SUBSTITUTION OR RELEASE
Section 9.01 No Consequential Damages. In no event shall the Authority or the Trustee be
liable for any incidental, indirect, special or consequential damage in connection with or arising out of
this Lease Agreement or the City’s use of the Property.
Section 9.02 Use of the Property. The City will not use, operate or maintain the Property
improperly, carelessly, in violation of any applicable law or in a manner contrary to that contemplated
by this Lease Agreement. In addition, the City agrees to comply in all respects (including, without
limitation, with respect to the use, maintenance and operation of the Property) with all laws of the
jurisdictions in which its operations may extend and any legislative, executive, administrative or
judicial body exercising any power or jurisdiction over the Property; provided, however, that the City
may contest in good faith the validity or application of any such law or rule in any reasonable manner
which does not, in the opinion of the Authority, adversely affect the estate of the Authority in and to
any of the Property or its interest or rights under this Lease Agreement.
Section 9.03 Substitution or Release of the Property. The City shall have the right to
substitute alternate real property for any portion of the Property or to release a portion of the Property
from this Lease Agreement. All costs and expenses incurred in connection with such substitution or
release shall be borne by the City. Notwithstanding any substitution or release of Property pursuant to
this subsection, there shall be no reduction in or abatement of the Base Rental Payments due from the
City hereunder as a result of such substitution or release. Any such substitution or release of any
portion of the Property shall be subject to the following specific conditions, which are hereby made
conditions precedent to such substitution or release:
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(a)an independent certified real estate appraiser selected by the City shall have
found (and shall have delivered a certificate to the City and the Trustee setting forth its findings) that
the Property, as constituted after such substitution or release, (i) has an annual fair rental value at least
equal to the maximum Base Rental Payments payable by the City in any Rental Period, and (ii) has a
useful life in excess of the final maturity of any Outstanding Bonds;
(b)the City shall have obtained or caused to be obtained a CLTA or ALTA title
insurance policy or policies with respect to any substituted property in the amount at least equal to the
aggregate principal amount of any Outstanding Bonds of the type and with the endorsements described
in Section 5.02 hereof;
(c)the City shall have provided the Trustee with an Opinion of Counsel to the
effect that such substitution or release will not, in and of itself, cause the interest on the Bonds to be
included in gross income for federal income tax purposes;
(d)the City, the Authority and the Trustee shall have executed, and the City shall
have caused to be recorded with the Riverside County Recorder, any document necessary to reconvey
to the City the portion of the Property being released and to include any substituted real property in the
description of the Property contained herein and in the Ground Lease; and
(e)the City shall have provided notice of such substitution to each rating agency
then rating the Bonds.
ARTICLE X
MISCELLANEOUS
Section 10.01 Law Governing. THIS LEASE AGREEMENT SHALL BE GOVERNED
EXCLUSIVELY BY THE PROVISIONS HEREOF AND BY THE LAWS OF THE STATE OF
CALIFORNIA AS THE SAME FROM TIME TO TIME EXIST.
Section 10.02 Notices. All written notices, statements, demands, consents, approvals,
authorizations, offers, designations, requests or other communications hereunder shall be given to the
party entitled thereto at its address set forth below, or at such other address as such party may provide
to the other parties in writing from time to time, namely:
If to the City:City of Lake Elsinore
130 South Main Street
Lake Elsinore, California 92530
Attention: City Manager
If to the Authority:Lake Elsinore Facilities Financing Authority
c/o City of Lake Elsinore
130 South Main Street
Lake Elsinore, California 92350
Attention: Executive Director
Each such notice, statement, demand, consent, approval, authorization, offer, designation,
request or other communication hereunder shall be deemed delivered to the party to whom it is
18
addressed (a) if personally served or delivered, upon delivery, (b) if given by electronic
communication, whether by telex, telegram or telecopier, upon the sender’s receipt of an appropriate
answerback or other written acknowledgment, (c) if given by registered or certified mail, return receipt
requested, deposited with the United States mail postage prepaid, 72 hours after such notice is
deposited with the United States mail, (d) if given by overnight courier, with courier charges prepaid,
24 hours after delivery to said overnight courier, or (e) if given by any other means, upon delivery at
the address specified in this Section.
Section 10.03 Validity and Severability. If for any reason this Lease Agreement shall be
held by a court of competent jurisdiction to be void, voidable or unenforceable by the Authority or by
the City, or if for any reason it is held by such a court that any of the covenants and conditions of the
City hereunder, including the covenant to pay Rental Payments, is unenforceable for the full term
hereof; then and in such event this Lease Agreement is and shall be deemed to be a Lease Agreement
under which the Rental Payments are to be paid by the City annually in consideration of the right of
the City to possess, occupy and use the Property, and all of the terms, provisions and conditions of this
Lease Agreement, except to the extent that such terms, provisions and conditions are contrary to or
inconsistent with such holding, shall remain in full force and effect.
Section 10.04 Net-Net-Net Lease. This Lease Agreement shall be deemed and construed to
be a “net-net-net lease” and the City hereby agrees that the Rental Payments shall be an absolute net
return to the Authority, free and clear of any expenses, charges or set-offs whatsoever and
notwithstanding any dispute between the City and the Authority.
Section 10.05 Taxes. The City shall pay or cause to be paid all taxes and assessments of any
type or nature charged to the Authority or affecting the Property or the respective interests or estates
therein; provided, however, 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 Agreement as and when the same
become due.
The City or any sublessee may, at the City’s or such sublessee’s 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 unless the Authority or the Trustee shall notify the
City or such sublessee that, in the opinion of independent counsel, by nonpayment of any such items,
the interest of the Authority in the Property will be materially endangered or the Property, or any part
thereof, will be subject to loss or forfeiture, in which event the City or such sublessee shall promptly
pay such taxes, assessments or charges or provide the Authority with full security against any loss
which may result from nonpayment, in form satisfactory to the Authority and the Trustee.
Section 10.06 Section Headings. All section headings contained herein are for convenience
of reference only and are not intended to define or limit the scope of any provision of this Lease
Agreement.
Section 10.07 Amendments.
(a)This Lease Agreement and the Ground Lease may be amended and the rights
and obligations of the Authority and the City hereunder and thereunder may be amended at any time
by an amendment hereto or thereto which shall become binding upon execution and delivery by the
19
Authority and the City, but only with the prior written consent of the Owners of a majority of the
principal amount of the Bonds then Outstanding pursuant to the Indenture, provided that no such
amendment shall (i) extend the payment date of any Base Rental Payments, reduce the interest
component or principal component of any Base Rental Payments or change the prepayment terms and
provisions, without the prior written consent of the Owner of each Bond so affected, or (ii) reduce the
percentage of the principal amount of the Bonds the consent of the Owners of which is required-for
the execution of any amendment of this Lease Agreement or the Ground Lease.
(b)This Lease Agreement and the Ground Lease and the rights and obligations of
the Authority and the City hereunder and thereunder may also be amended at any time by an
amendment hereto or thereto which shall become binding upon execution by the Authority and the
City, without the written consents of any Owners, but only to the extent permitted by law and only for
any one or more of the following purposes:
(i)to add to the agreements, conditions, covenants and terms required by
the Authority or the City to be observed or performed herein or therein other agreements, conditions,
covenants and temps thereafter to be observed or performed by the Authority or the City, or to
surrender any right or power reserved herein or therein to or conferred herein or therein on the
Authority or the City, and which in either case shall not materially adversely affect the interests of the
Owners, as evidenced by an Opinion of Bond Counsel;
(ii)to make such provisions for the purpose of curing any ambiguity or of
correcting, curing or supplementing any defective provision contained herein or therein or in regard to
questions arising hereunder or thereunder which the Authority or the City may deem desirable or
necessary and not inconsistent herewith or therewith, and which shall not materially adversely affect
the interests of the Owners, as evidenced by an Opinion of Bond Counsel;
(iii)to make such additions, deletions or modifications as may be necessary
or appropriate to assure the exclusion from gross income for federal income tax purposes of the interest
on the Bonds;
(iv)to provide for the substitution or release of a portion of the Property in
accordance with the provisions of Section 9.03 hereof;
(v)to provide for the issuance of Additional Bonds in accordance with
Article III of the Indenture; or
(vi)to make such other changes herein or therein or modifications hereto
or thereto as the Authority or the City may deem desirable or necessary, and which shall not materially
adversely affect the interests of the Owners, as evidenced by an Opinion of Bond Counsel.
Section 10.08 Assignment. The City and the Authority hereby acknowledge the assignment
of this Lease Agreement (except for the Authority’s obligations and its rights to give consents or
approvals hereunder), and the Base Rental Payments payable hereunder, to the Trustee pursuant to the
Assignment Agreement.
Section 10.09 Execution. This Lease Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all together shall constitute but one
and the same Lease Agreement.
20
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
S-1
IN WITNESS WHEREOF, the Authority and the City have caused this Lease Agreement to
be executed by their respective officers thereunto duly authorized, all as of the day and year first above
written.
CITY OF LAKE ELSINORE
By:
Grant Yates
City Manager
ATTEST:
Susan M. Domen, MMC
City Clerk
LAKE ELSINORE FACILITIES FINANCING
AUTHORITY
By:
Grant Yates
Executive Director
ATTEST:
Susan M. Domen, MMC
Secretary
APPROVED AS TO FORM:
Stradling Yocca Carlson & Rauth,
Special Counsel
CERTIFICATE OF ACCEPTANCE
This is to certify that the interest in the Property conveyed under the foregoing to the City of
Lake Elsinore, a municipal corporation and a general law city duly organized and existing under the
Constitution and 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 Lake Elsinore, pursuant to authority conferred by
resolutions of the said City Council adopted on _______, 2016 and the grantee consents to recordation
thereof by its duly authorized officer.
Dated: _________, 2016 CITY OF LAKE ELSINORE
By:
Jason Simpson
Assistant City Manager
A notary public or other officer completing this certificate verifies only the identity of the
individual who signed the document to which this certificate is attached, and not the truthfulness,
accuracy, or validity of that document.
STATE OF CALIFORNIA )
)ss.
COUNTY OF RIVERSIDE )
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
paragraph is true and correct.
WITNESS my hand and official seal
SIGNATURE OF NOTARY PUBLIC
A notary public or other officer completing this certificate verifies only the identity of the
individual who signed the document to which this certificate is attached, and not the truthfulness,
accuracy, or validity of that document.
STATE OF CALIFORNIA )
)ss.
COUNTY OF RIVERSIDE )
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
paragraph is true and correct.
WITNESS my hand and official seal
SIGNATURE OF NOTARY PUBLIC
A-1
EXHIBIT A
DESCRIPTION OF THE PROPERTY
All that real property situated in the County of Riverside, State of California, described as
follows:
B-1
EXHIBIT B
BASE RENTAL PAYMENT SCHEDULE
Date Principal Component Interest Component Total Base Rental
Stradling Yocca Carlson & Rauth
Draft of 10/3/16
INDENTURE
by and among
LAKE ELSINORE FACILITIES FINANCING AUTHORITY
and
CITY OF LAKE ELSINORE
and
WILMINGTON TRUST, NATIONAL ASSOCIATION,
as Trustee
Dated as of November 1, 2016
Relating to
$___________
LAKE ELSINORE FACILITIES FINANCING AUTHORITY
LEASE REVENUE BONDS, SERIES 2016A
TABLE OF CONTENTS
Page
i
ARTICLE I
DEFINITIONS; EQUAL SECURITY
Section 1.01 Definitions.....................................................................................................................2
Section 1.02 Equal Security.............................................................................................................13
ARTICLE II
THE BONDS
Section 2.01 Authorization of Bonds...............................................................................................13
Section 2.02 Terms of Series 2016 Bonds.......................................................................................13
Section 2.03 Form of Series 2016 Bonds.........................................................................................15
Section 2.04 Transfer and Exchange of Bonds................................................................................15
Section 2.05 Registration Books......................................................................................................15
Section 2.06 Execution of Bonds.....................................................................................................15
Section 2.07 Authentication of Bonds.............................................................................................15
Section 2.08 Temporary Bonds........................................................................................................16
Section 2.09 Bonds Mutilated, Lost, Destroyed or Stolen...............................................................16
Section 2.10 Book-Entry Bonds ......................................................................................................16
ARTICLE III
ISSUANCE OF BONDS; APPLICATION OF PROCEEDS
Section 3.01 Issuance of Series 2016 Bonds....................................................................................18
Section 3.02 Application of Proceeds of the Series 2016 Bonds.....................................................18
Section 3.03 Costs of Issuance Fund ...............................................................................................18
Section 3.04 Construction Fund.......................................................................................................18
Section 3.05 Conditions for the Issuance of Additional Bonds.......................................................19
Section 3.06 Procedure for the Issuance of Additional Bonds ........................................................20
Section 3.07 Additional Bonds........................................................................................................21
ARTICLE IV
REDEMPTION OF BONDS
Section 4.01 Redemption of Series 2016 Bonds..............................................................................21
Section 4.02 Notice of Redemption.................................................................................................22
Section 4.03 Selection of Bonds for Redemption............................................................................22
Section 4.04 Partial Redemption of Bonds......................................................................................22
Section 4.05 Effect of Notice of Redemption..................................................................................23
ARTICLE V
SECURITY FOR BONDS; FLOW OF FUNDS; INVESTMENTS
Section 5.01 Pledge; Special Obligations........................................................................................23
Section 5.02 Flow of Funds.............................................................................................................23
Section 5.03 Application of Net Insurance Proceeds.......................................................................25
Section 5.04 Title Insurance ............................................................................................................26
Section 5.05 Rebate Fund................................................................................................................26
Section 5.06 Investment of Moneys.................................................................................................27
TABLE OF CONTENTS
(continued)
Page
ii
ARTICLE VI
COVENANTS
Section 6.01 Compliance with Agreements.....................................................................................28
Section 6.02 Compliance with Ground Lease and Lease Agreement..............................................28
Section 6.03 Observance of Laws and Regulations.........................................................................28
Section 6.04 Other Liens..................................................................................................................28
Section 6.05 Prosecution and Defense of Suits ...............................................................................29
Section 6.06 Accounting Records and Statements...........................................................................29
Section 6.07 Recordation and Filing................................................................................................29
Section 6.08 Tax Covenants ............................................................................................................29
Section 6.09 Continuing Disclosure ................................................................................................29
Section 6.10 Further Assurances......................................................................................................30
ARTICLE VII
DEFAULT AND LIMITATIONS OF LIABILITY
Section 7.01 Action on Default........................................................................................................30
Section 7.02 Other Remedies of the Trustee....................................................................................30
Section 7.03 Non-Waiver.................................................................................................................30
Section 7.04 Remedies Not Exclusive.............................................................................................31
Section 7.05 No Liability by the Authority to the Owners..............................................................31
Section 7.06 No Liability by the City to the Owners.......................................................................31
Section 7.07 No Liability of the Trustee to the Owners..................................................................31
Section 7.08 Application of Amounts After Default.......................................................................31
Section 7.09 Trustee May Enforce Claims Without Possession of Bonds......................................32
Section 7.10 Limitation on Suits......................................................................................................32
ARTICLE VIII
THE TRUSTEE
Section 8.01 Employment of the Trustee.........................................................................................32
Section 8.02 Duties, Removal and Resignation of the Trustee........................................................33
Section 8.03 Compensation of the Trustee......................................................................................33
Section 8.04 Protection of the Trustee.............................................................................................34
ARTICLE IX
MODIFICATION OR AMENDMENTS
Section 9.01 Modifications and Amendments Permitted.................................................................36
Section 9.02 Effect of Supplemental Indenture...............................................................................37
Section 9.03 Endorsement of Bonds; Preparation of New Bonds...................................................38
Section 9.04 Amendment of Particular Bonds.................................................................................38
ARTICLE X
DEFEASANCE
Section 10.01 Discharge of Indenture................................................................................................38
Section 10.02 Bonds Deemed To Have Been Paid............................................................................39
Section 10.03 Payment of Bonds After Discharge of Indenture........................................................39
TABLE OF CONTENTS
(continued)
Page
iii
ARTICLE XI
MISCELLANEOUS
Section 11.01 Benefits of Indenture Limited to Parties.....................................................................40
Section 11.02 Successor Deemed Included in all References to Predecessor...................................40
Section 11.03 Execution of Documents by Owners ..........................................................................40
Section 11.04 Waiver of Personal Liability.......................................................................................40
Section 11.05 Destruction of Bonds..................................................................................................40
Section 11.06 Funds and Accounts....................................................................................................40
Section 11.07 Article and Section Headings Gender and References...............................................41
Section 11.08 Partial Invalidity..........................................................................................................41
Section 11.09 Disqualified Bonds......................................................................................................41
Section 11.10 Money Held for Particular Bonds...............................................................................42
Section 11.11 Payment on Non-Business Days.................................................................................42
Section 11.12 California Law............................................................................................................42
Section 11.13 Notices........................................................................................................................42
Section 11.14 Notice to Rating Agencies..........................................................................................43
Section 11.15 Execution in Counterparts...........................................................................................43
Signatures ................................................................................................................................... S-1
EXHIBIT A FORM OF SERIES 2016A BOND...........................................................................A-1
1
INDENTURE
THIS INDENTURE (this “Indenture”), executed and entered into as of November 1, 2016, is
by and among the LAKE ELSINORE FACILITIES FINANCING AUTHORITY, a joint exercise of
powers entity duly organized and existing under the laws of the State of California (the “Authority”),
the CITY OF LAKE ELSINORE, a municipal corporation and general law city duly organized and
existing under and by virtue of the Constitution and laws of the State of California (the “City”) and
Wilmington Trust, National Association, a national banking association duly organized and existing
under and by virtue of the laws of the United States, as Trustee (the “Trustee”);
WITNESSETH:
WHEREAS, the City desires to finance the construction of various public improvements
within the City, and such other projects identified in the City’s capital improvement plan or on such
other projects as approved by an Opinion of Counsel to the effect that such other projects or
improvements will not adversely affect the exclusion of interest on any tax-exempt Bonds from gross
income for federal income tax purposes (the “Project”);
WHEREAS, in order to finance the Project, the City will lease certain real property and the
improvements located thereon (the “Property”) to the Authority pursuant to a Ground Lease, dated as
of the date hereof, and the City will sublease the Property back from the Authority pursuant to a Lease
Agreement, dated as of the date hereof (the “Lease Agreement”);
WHEREAS, the City and the Authority have determined that it would be in the best interests
of the City and the Authority to provide the funds necessary to finance the Project through the issuance
by the Authority of bonds payable from the base rental payments (the “Base Rental Payments”) to be
made by the City under the Lease Agreement;
WHEREAS, all rights to receive the Base Rental Payments have been assigned without
recourse by the Authority to the Trustee pursuant to an Assignment Agreement, dated as of the date
hereof;
WHEREAS, the Authority and the City desire to provide for the issuance by the Authority of
Lake Elsinore Facilities Financing Authority Lease Revenue Bonds, Series 2016A (the “Series 2016
Bonds”), in the aggregate principal amount of $___________, in order to finance the Project;
WHEREAS, the Series 2016 Bonds will be payable equally and ratably from the Base Rental
Payments;
WHEREAS, the Authority and the City desire to provide for the issuance of additional bonds
(the “Additional Bonds”) payable from the Base Rental Payments on a parity with the Series 2016
Bonds (the Series 2016 Bonds and any such Additional Bonds being collectively referred to as the
“Bonds”);
WHEREAS, in order to provide for the authentication and delivery of the Bonds, to establish
and declare the terms and conditions upon which the Bonds are to be issued and secured and to secure
the payment of the principal thereof, premium, if any, and interest thereon, the Authority and the City
have authorized the execution and delivery of this Indenture; and
2
WHEREAS, the Authority and the City have determined that all acts and proceedings required
by law necessary to make the Bonds, when executed by the Authority, authenticated and delivered by
the Trustee and duly issued, the valid, binding and legal special obligations of the Authority, and to
constitute this Indenture a valid and binding agreement for the uses and purposes herein set forth in
accordance with its terms, have been done and taken, and the execution and delivery of the Indenture
has been in all respects duly authorized;
NOW THEREFORE, in consideration of the premises and of the mutual agreements and
covenants contained herein and for other valuable consideration, the parties do hereby agree as follows:
ARTICLE I
DEFINITIONS; EQUAL SECURITY
Section 1.01 Definitions. Unless the context otherwise requires, the terms defined in this
Section shall for all purposes hereof and of any amendment hereof or supplement hereto and of the
Bonds and of any certificate, opinion, request or other document mentioned herein or therein have the
meanings defined herein, the following definitions to be equally applicable to both the singular and
plural forms of any of the terms defined herein. Capitalized terms not otherwise defined herein shall
have the meanings assigned to such terms in the Lease Agreement.
“Additional Bonds” means Bonds other than the Series 2016 Bonds issued hereunder in
accordance with the provisions of Sections 3.06 and 3.07 hereof.
“Act” means the Marks-Roos Local Bond Pooling Act of 1985, commencing with
Section 6584 of the California Government Code.
“Additional Rental Payments” means all amounts payable by the City as Additional Rental
Payments pursuant to Section 3.02 of the Lease Agreement.
“Assignment Agreement” means the Assignment Agreement, dated as of the date hereof, by
and between the Authority and the Trustee.
“Authority” means the Lake Elsinore Facilities Financing Authority, a joint exercise of powers
entity organized and existing under and by virtue of the laws of the State of California.
“Authorized Authority Representative” means the Chair, the Vice Chair, the Executive
Director or the Treasurer of the Authority, or any other person authorized by the Board of Directors of
the Authority to act on behalf of the Authority under or with respect to this Indenture.
“Authorized City Representative” means the Mayor of the City, the City Manager of the City
or the Assistant City Manager of the City, or any other person authorized by the City Council of the
City to act on behalf of the City under or with respect to this Indenture.
“Authorized Denominations” means $5,000 or any integral multiple thereof.
“Base Rental Payment Fund” means the fund by that name established in accordance with
Section 5.02 hereof.
3
“Base Rental Payments” means all amounts payable to the Authority by the City as Base
Rental Payments pursuant to Section 3.01 of the Lease Agreement.
“Beneficial Owner” means, whenever used with respect to a Book-Entry Bond, the person
whose name is recorded as the beneficial owner of such Book-Entry Bond or a portion of such Book-
Entry Bond by a Participant on the records of such Participant or such person’s subrogee.
“Bonds” means the Series 2016 Bonds and any Additional Bonds issued hereunder.
“Book-Entry Bonds” means the Bonds of a Series registered in the name of the nominee of
DTC, or any successor securities depository for such Series of Bonds, as the registered owner thereof
pursuant to the terms and provisions of Section 2.10 hereof.
“Business Day” means a day which is not (a) a Saturday, Sunday or legal holiday, (b) a day
on which banking institutions in the State of California, or in any state in which the Office of the
Trustee is located, are required or authorized by law (including executive order) to close, or (c) a day
on which the New York Stock Exchange is closed.
“Cede & Co.” means Cede & Co., the nominee of DTC, and any successor nominee of DTC
with respect to a Series of Book-Entry Bonds.
“City” means the City of Lake Elsinore, a municipal corporation and general law city duly
organized and existing under and by virtue of the Constitution and laws of the State of California.
“Closing Date” means _________, 2016.
“Code” means the Internal Revenue Code of 1986.
“Construction Fund” means the fund by that name established in accordance with
Section 3.05 hereof.
“Continuing Disclosure Certificate” means the Continuing Disclosure Certificate, dated as
of the date hereof, executed by the City, as originally executed and as it may from time to time be
amended in accordance with the provisions thereof.
“Costs of Issuance” means all the costs of issuing and delivering the Bonds, including, but not
limited to, all printing and document preparation expenses in connection with this Indenture, the Lease
Agreement, the Ground Lease, the Assignment Agreement, the Bonds and any preliminary official
statement and final official statement pertaining to the Bonds, rating agency fees, CUSIP Service
Bureau charges, market study fees, legal fees and expenses of counsel with the issuance and delivery
of the Bonds, the initial fees and expenses of the Trustee and Escrow Agent and its counsel and other
fees and expenses incurred in connection with the issuance and delivery of the Bonds, to the extent
such fees and expenses are approved by the City.
“Costs of Issuance Fund” means the fund by that name established in accordance with
Section 3.04 hereof.
“DTC” means The Depository Trust Company, a limited-purpose trust company organized
under the laws of the State of New York, and its successors as securities depository for any Series of
Book-Entry Bonds, including any such successor appointed pursuant to Section 2.10 hereof.
4
“Federal Securities” means (a) direct general obligations of the United States of America
(including obligations issuedor held in book entry form on the books of the Department of the Treasury
of the United States of America), and (b) obligations of any agency, department or instrumentality of
the United States of America the timely payment of principal of and interest on which are fully
guaranteed by the United States of America.
“Forward Purchase and Sale Agreement” means an agreement entered into by the Trustee
and/or the Authority and/or the City and a bank or financial institution (the “Provider”) rated “A2” or
higher by Moody’s and “A” or higher by S&P providing for the Provider to tender, and for the Trustee
to purchase, certain eligible securities on one or more dates occurring at least thirty (30) business days
after the date of such agreement; provided that (1) securities tendered by the Provider are purchased
on a delivery versus payment basis, (2) securities purchased constitute Permitted Investments at the
time they are tendered, and (3) the Authority and the City receive an opinion of counsel acceptable to
the Authority, to the City and to the Trustee which states that the agreement constitutes a legally valid,
binding, and enforceable obligation of the Provider and that in the event of a bankruptcy of the
Provider, securities sold by the Provider to the Trustee pursuant to the agreement do not constitute
property of the estate of the Provider within the applicable bankruptcy or insolvency laws.
“Ground Lease” means the Ground Lease, dated as of the date hereof, by and between the
City and the Authority, as originally executed and as it may from time to time be amended in
accordance with the provisions thereof and of the Lease Agreement.
“Indenture” means this Indenture, as originally executed and as it may be amended or
supplemented from time to time by any Supplemental Indenture.
“Information Services” means Municipal Securities Rulemaking Board through the
Electronic Municipal Marketplace Access (EMMA) website; and, in accordance with then current
guidelines of the Securities and Exchange Commission, such other services providing information with
respect to called bonds as the Authority may designate in a Written Certificate of the Authority
delivered to the Trustee.
“Interest Fund” means the fund by that name established in accordance with Section 5.02
hereof.
“Interest Payment Date” means April 1 and October 1 of each year, commencing on April 1,
2017.
“Lease Agreement” means the Lease Agreement, dated as of the date hereof, by and between
the City and the Authority, as originally executed and as it may be from time to time amended in
accordance with the provisions thereof.
“Moody’s” means Moody’s Investors Service, a corporation organized and existing under the
laws of the State of Delaware, its successors and assigns, except that if such corporation shall no longer
perform the function of a securities rating agency for any reason, the term “Moody’s” shall be deemed
to refer to any other nationally recognized securities rating agency selected by the Authority.
“Office of the Trustee” means the principal corporatetrust office of the Trustee in Costa Mesa,
California, or such other office as may be specified to the Authority and the City by the Trustee in
writing, except that with respect to presentation of Bonds for payment or for registration of transfer
5
and exchange such term shall mean the office or the agency of the Trustee at which, at any particular
time, its corporate trust agency shall be conducted as specified to the Authority and the City by the
Trustee in writing.
“Opinion of Counsel” means a written opinion of counsel of recognized national standing in
the field of law relating to municipal bonds, appointed and paid by the Authority or the City and which
written opinion is satisfactory to the Trustee.
“Outstanding,” when used as of any particular time with reference to Bonds, means (subject
to the provisions of Section 11.09 hereof) all Bonds theretofore, or thereupon being, authenticated and
delivered by the Trustee under this Indenture except:
(a)Bonds theretofore canceled by the Trustee or surrendered to the Trustee for
cancellation;
(b)Bonds with respect to which all liability of the Authority shall have been
discharged in accordance with Section 10.01 hereof; and
(c)Bonds for the transfer or exchange of or in lieu of or in substitution for which
other Bonds shall have been authenticated and delivered by the Trustee pursuant to this Indenture.
“Owner” means, with respect to a Bond, the Person in whose name such Bond is registered on
the Registration Books.
“Participant” means any entity which is recognized as a participant by DTC in the book-entry
system of maintaining records with respect to Book-Entry Bonds.
“Participating Underwriter” means, with respect to the Series 2016 Bonds, Stifel, Nicolaus
& Company, Incorporated, and with respect to each issue of Additional Bonds, the institution or
institutions, if any, with whom the Authority enters into a purchase contract for the sale of such issue.
“Permitted Investments” means any of the following to the extent then permitted by the
general laws of the State of California:
(1)(a) Direct obligations (other than an obligation subject to—Variation in
principal repayment) of the United States of America (“United States Treasury Obligations”),
(b) obligations fully and unconditionally guaranteed as to timely payment of principal and interest by
the United States of America, (c) obligations fully and unconditionally guaranteed as to timely
payment of principal and interest by any agency or instrumentality of the United States of America
when such obligations are backed by the full faith and credit of the United States of America, or
(d) evidences of ownership of proportionate interests in future interest and principal payments on
obligations described above held by a bank or trust company as custodian, under which the owner of
the investment is the real party in interest and has the right to proceed directly and individually against
the obligor and the underlying government obligations are not available to any person claiming through
the custodian or to whom the custodian may be obligated (collectively “United States Obligations”).
These include, but are not necessarily limited to:
-U.S. Treasury obligations
All direct or fully guaranteed obligations
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-Farmers Home Administration
Certificates of beneficial ownership
-General Services Administration
Participation certificates
-U.S. Maritime Administration
Guaranteed Title XI financing
-Small Business Administration
Guaranteed participation certificates
Guaranteed pool certificates
-Government National Mortgage Association (GNMA)
GNMA-guaranteed mortgage-backed securities
GNMA-guaranteed participation certificates
-U.S. Department of Housing & Urban Development
Local authority bonds
-Washington Metropolitan Area Transit Authority
Guaranteed transit bonds
(2)Federal Housing Administration debentures.
(3)The listed obligations of government-sponsored agencies which are not backed
by the full faith and credit of the United States of America:
-Federal Home Loan Mortgage Corporation (FHLMC)
Participation certificates (excluded are stripped mortgage securities which
are purchased at prices exceeding their principal amounts)
Senior debt obligations
-Farm Credit Banks (formerly: Federal Land Banks, Federal intermediate
Credit Banks and Banks for Cooperatives)
Consolidated systemwide bonds and notes
-Federal Home Loan Banks (FHL Banks)
Consolidated debt obligations
-Federal National Mortgage Association (FNMA)
Senior debt obligations
Mortgage-backed securities (excluded are stripped mortgages securities
which are purchased at prices exceeding their principal amounts)
-Student Loan Marketing Association (SLMA)
Senior debt obligations (excluded are securities that do not have a fixed par
value and/or whose terms do not promise a fixed dollar amount at maturity
or call date)
-Financing Corporation (FICO)
Debt obligations
-Resolution Funding Corporation (REFCORP)
Debt obligations
(4)Unsecured certificates of deposit, time deposits, and bankers’ acceptances
(having maturities of not more than 180 days) of any bank, including the Trustee and its affiliates, the
short-term obligations of which are rated “A-1+” or better by S&P and “P-1” or better by Moody’s.
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(5)Deposits the aggregate amount of which are fully insured by the Federal
Deposit Insurance Corporation (FDIC), in banks, including the Trustee and its affiliates, which have
capital and surplus of at least $5 million.
(6)Commercial paper (having original maturities of not more than 270 days) rated
“A-1+” by S&P and “Prime-1” by Moody’s.
(7)Money market funds rated “AAm” or “AAm-G” or better by S&P and “Aa2”
or better by Moody’s, 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.
(8)Repurchase agreements:
(a)With any domestic bank the long term debt of which is rated “AA” or
better by S&P and “Aa” by Moody’s (so long as an opinion is rendered that the
repurchase agreement is a “repurchase agreement” as defined in the Financial
Institutions Reform, Recovery and Enforcement Act of 1989 (“FIRREA”) and that
such bank is subject to FIRREA), or any foreign bank rated at least “AA” by S&P and
“Aaa” by Moody’s or “AA” by S & P and at least “Aa2” by Moody’s; provided the
term of such repurchase agreement is for one year or less.
(b)With (i) any broker-dealer with “retail customers” which has, or the
parent company of which has, long-term debt rated at least “AA” by S&P and “Aa2”
by Moody’s, which broker-dealer falls under the jurisdiction of the Securities Investors
Protection Corp. (SIPC); provided that:
A.The market value of the collateral is maintained for United
States Treasury Obligations, at the levels shown below under “Collateral
Levels for United States Treasury Obligations”;
B.Failure to maintain the requisite collateral percentage will
require the City or the Trustee to liquidate the collateral;
C.The Trustee, the City or a third party acting solely as agent
therefor (the “Holder of the Collateral”) has possession of the collateral or the
collateral has been transferred to the Holder of the Collateral in accordance
with applicable state and federal laws (other than by means of entries on the
transferor’s books);
D.The repurchase agreement states, and an opinion of counsel is
rendered to the effect, that the Trustee has a perfected first priority security
interest in the collateral, any substituted collateral and all proceeds thereof (in
the case of bearer securities, this means the Holder of the Collateral is in
possession);
E.The transferor represents that the collateral is free and clear of
any third-party liens or claims;
F.An opinion is rendered that the repurchase agreement is a
“repurchase agreement” as defined in the United States Bankruptcy Code;
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G.There is or will be a written agreement governing every
repurchase transaction;
H.The City represents that it has no knowledge of any fraud
involved in the repurchase transaction; and
I.The City and the Trustee receive an opinion of counsel (which
opinion shall be addressed to the City and the Trustee) that such repurchase
agreement is legal, valid and binding and enforceable against the provider in
accordance with its terms.
(9)State Obligations
(a)Direct general obligations of any state of the United States or any
subdivision or agency thereof to which is pledged the full faith and credit of a state the
unsecured general obligation debt of which is rated “A2” by Moody’s and “A” by S&P,
or better, or any obligation fully and unconditionally guaranteed by any state,
subdivision or agency whose unsecured general obligation debt is so rated.
(b)Direct, general short-term obligations of any state agency or
subdivision described in (a) above and rated “A-1+” by S&P and “Prime-1” by
Moody’s.
(c)Special Revenue Bonds (as defined in the United States Bankruptcy
Code) of any state, state agency or subdivision described in (a) above and rated “AA”
or better by S&P and “Aa2” or better by Moody’s.
(10)Local Agency Investment Fund.
(11)Investment agreements with a domestic or foreign bank or corporation (other
than a life or property casualty insurance company) the long-term debt of which, or, in the case of a
guaranteed corporation the long-term debt of the guarantor, or in the case of a monoline financial
guaranty insurance company the claims paying ability of the guarantor, is rated at least “AA” by S&P
and “Aa2” by Moody’s; provided, that prior written notice of an investment in the investment
agreement is provided to S&P and, provided, further, by the terms of the investment agreement:
(a)interest payments are to be made to the Trustee at times and in amounts
as necessary to pay debt service (or, if the investment agreement is for the construction
fund, construction draws) on the Bonds;
(b)the invested funds are available for withdrawal without penalty or
premium, at any time for purposes identified in this Indenture other than acquisition of
alternative investment property upon not more than seven days prior notice (which
notice may be amended or withdrawn at any time prior to the specified withdrawal
date); provided that the Indenture specifically requires the Trustee or the City to give
notice in accordance with the terms of the investment agreement so as to receive funds
thereunder with no penalty or premium paid;
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(c)the investment agreement shall state that it is the unconditional and
general obligation of, and is not subordinated to any other obligation of, the provider
thereof;
(d)a guaranteed rate of interest is to be paid on invested funds and all
future deposits, if any, required to be made to restore the amount of such funds to the
level specified under the Indenture;
(e)the Trustee and the City receive the opinion of domestic counsel (which
opinion shall be addressed to the City) that such investment agreement is legal, valid
and binding and enforceable against the provider in accordance with its terms and of
foreign counsel (if applicable);
(f)the investment agreement shall provide that if during its term (A) the
provider’s or the guarantor’s rating by either Moody’s or S&P is withdrawn or
suspended or falls below “AA” or “Aa2”, respectively, or, with respect to a foreign
bank, below the ratings of such provider at the delivery date of the investment
agreement, the provider must, at the direction of the City or the Trustee (acting at the
direction of the City) within 10 days of receipt of such direction, either (1) collateralize
the investment agreement by delivering or transferring in accordance with applicable
state and federal laws (other than by means of entries on the provider’s books) to the
Trustee, the City or a Holder of the Collateral, United States Treasury Obligations
which are free and clear of any third-party liens or claims at the Collateral Levels set
forth below; or (2) repay the principal of and accrued but unpaid interest on the
investment (the choice of (1) or (2) above shall be that of the City or Trustee (acting at
the direction of the City), as appropriate), and (B) the provider’s or the guarantor’s
rating by either Moody’s or S&P is withdrawn or suspended or falls below “A” or
“A2,” or, with respect to a foreign bank, below “AA” or “Aa2” by S&P or Moody’s,
as appropriate, the provider must, at the direction of the City or the Trustee (acting at
the direction of the City), within 10 days of receipt of such direction, repay the principal
of and accrued but unpaid interest on the investment, in either case with no penalty or
premium to the City or Trustee;
(g)the investment agreement shall state, and an opinion of counsel shall
be rendered to the effect, that the Trustee has a perfected first priority security interest
in the collateral, any substituted collateral and all proceeds thereof (in the case of bearer
securities, this means the Trustee is in possession); and
(h)the investment agreement must provide that if during its term (A) the
provider shall default in its payment obligations, the provider’s obligation under the
investment agreement shall, at the direction of the City or the Trustee, be accelerated
and amounts invested and accrued but unpaid interest thereon shall be repaid to the
City or Trustee, as appropriate, and (B) the provider shall become insolvent, not pay
its debts as they become due, be declared or petition to be declared bankrupt, etc.
(“event of insolvency”), the provider’s obligations shall automatically be accelerated
and amounts invested and accrued but unpaid interest thereon shall be repaid to the
City or Trustee, as appropriate.
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(12)Pre-refunded municipal obligations rated “AAA” by S&P and “Aaa” by
Moody’s meeting the following requirements:
(a)the municipal obligations are (i) not subject to redemption prior to
maturity or (ii) the trustee for the municipal obligations has been given irrevocable
instructions concerning their call and redemption and the issuer of the municipal
obligations has covenanted not to redeem such municipal obligations other than as set
forth in such instructions;
(b)the municipal obligations are secured by cash or United States Treasury
Obligations which may be applied only to payment of the principal of, interest and
premium on such municipal obligations;
(c)the principal of and interest on the United States Treasury Obligations
(plus any cash in the escrow) has been verified by the report of independent certified
public accountants to be sufficient to pay in full all principal of, interest, and premium,
if any, due and to become due on the municipal obligations (“Verification”);
(d)the cash or United States Treasury Obligations serving as security for
the municipal obligations are held by an escrow agent or trustee in trust for owners of
the municipal obligations; and
(e)no substitution of a United States Treasury Obligation shall be
permitted except with another United States Treasury Obligation and upon delivery of
a new Verification; and
(f)the cash or the United States Treasury Obligations are not available to
satisfy any other claims, including those by or against the trustee or escrow agent.
Collateral Levels For United States Treasury Obligations
Remaining Maturity
Frequency of
Valuation
1 year
or less
5 years
or less
10 years
or less
15 years
or less
30 years
or less
Daily 102 105 106 108 114
Weekly 103 111 112 114 120
Monthly 105 117 120 125 133
Quarterly 107 120 130 133 140
Further Requirements: (a) On each valuation date, the City, or the custodian who shall confirm
to the City and the Trustee, shall value the market value (exclusive of accrued interest) of the collateral,
which market value will be an amount equal to the requisite collateral percentage times the principal
amount of the investment (including unpaid accrued interest thereon) that is being secured, (b) in the
event the collateral level is below its collateral percentage on a valuation date, such percentage shall
be restored within the following restoration periods: one Business Day for daily valuations, two
Business Days for weekly and monthly valuations, and one month for quarterly valuations (the use of
different restoration periods affect the requisite collateral percentage), (c) the City or the Trustee
(acting at the direction of the City) shall terminate the repurchase agreement or the investment
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agreement, as the case may be, upon a failure to maintain the requisite collateral percentage after the
restoration period and, if not paid by the counterparty in federal funds against transfer of the collateral,
liquidate the collateral.
The Trustee shall have no responsibility to monitor the ratings of Permitted Investments after
the initial purchase of such Permitted Investments.
“Person” means an individual, corporation, firm, association, partnership, trust, or other legal
entity or group of entities, including a governmental entity or any agency or political subdivision
thereof.
“Principal Fund” means the fund by that name established in accordance with Section 5.02
hereof.
“Project Costs” means all costs of acquiring, constructing and installing the Project, including,
but not limited to:
(a)all costs which the Authority or the City shall be required to pay to a seller or
any other person under the terms of any contract or contracts for the purchase of the Project;
(b)all costs which the Authority or the City shall be required to pay a contractor
or any other person for the acquisition, construction and installation of the Project;
(c)obligations of the Authority or the City incurred for services (including
obligations payable to the Authority or the City for actual out-of-pocket expenses of the Authority or
the City) in connection with the acquisition, construction and installation of the Project, including
reimbursement to the Authority or the City for all advances and payments made in connection with the
Project prior to or after delivery of the Bonds;
(d)the actual out-of-pocket costs of the Authority or the City for test borings,
surveys, estimates and preliminary investigations therefor, as well as for the performance of all other
duties required by or consequent to the proper acquisition, construction and installation of the Project,
including administrative expenses under the Lease Agreement and hereunder relating to the
acquisition, construction and installation of the Project; and
(e)any sums required to reimburse the Authority or the City for advances made by
the Authority or the City for any of the above items or for any other costs incurred and for work done
by the Authority or the City which are properly chargeable to the Project.
“Rebate Fund” means the fund by that name established in accordance with Section 5.06
hereof.
“Rebate Requirement” has the meaning ascribed thereto in the Tax Certificate.
“Record Date” means the fifteenth day of the month next preceding an Interest Payment Date,
whether or not such day is a Business Day.
“Redemption Fund” means the fund by that name established in accordance with Section 5.02
hereof.
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“Redemption Price” means the aggregate amount of principal of and premium, if any, on the
Bonds upon the redemption thereof pursuant hereto.
“Registration Books” means the records maintained by the Trustee for the registration of
ownership and registration of transfer of the Bonds pursuant to Section 2.05 hereof.
“Rental Payments” means, collectively, the Base Rental Payments and the Additional Rental
Payments.
“Rental Period” means the period from the Closing Date through March 30, 2017 and,
thereafter, the twelve-month period commencing on April 1 of each year during the term of the Lease
Agreement.
“Representation Letter” means the Letter of Representations from the Authority to DTC, or
any successor securities depository for any Series of Book-Entry Bonds, in which the Authority makes
certain representations with respect to issues of its securities for deposit by DTC or such successor
depository.
“Reserve Fund” means the fund by that name established and held by the Trustee pursuant to
Section 5.05.
“Reserve Fund Requirement” means an amount equal to $_________.
“S&P” means Standard & Poor’s Ratings Services, a division of The McGraw-Hill
Companies, Inc., a corporation organized and existing under the laws of the State of New York, its
successors and assigns, except that if such entity shall no longer perform the functions of a securities
rating agency for any reason, the term “S&P” shall be deemed to refer to any other nationally
recognized securities rating agency selected by the Authority.
“Series” means the Series 2016 Bonds executed, authenticated and delivered on the Closing
Date and identified pursuant to this Indenture and any Additional Bonds issued pursuant to a
Supplemental Indenture and identified as a separate Series of Bonds.
“Series 2016 Bonds” means the Lake Elsinore Facilities Financing Authority Lease Revenue
Bonds, Series 2016A issued hereunder.
“Supplemental Indenture” means any supplemental indenture amendatory of or
supplemental to this Indenture, but only if and to the extent that such Supplemental Indenture is
specifically authorized hereunder.
“Tax Certificate” means the tax certificate delivered by the Authority and the City at the time
of the issuance and delivery of a Series of Bonds, as the same may be amended or supplemented in
accordance with its terms.
“Trustee” means Wilmington Trust, National Association, a national banking association duly
organized and existing under and by virtue of the laws of the United States, or any successor thereto
as Trustee hereunder, appointed as provided herein.
“Written Certificate of the Authority” and “Written Request of the Authority” mean,
respectively, a written certificate or written request signed in the name of the Authority by an
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Authorized Authority Representative. Any such certificate or request may, but need not, be combined
in a single instrument with any other instrument, opinion or representation, and the two or more so
combined shall be read and construed as a single instrument
“Written Certificate of the City” and “Written Request of the City” mean, respectively, a
written certificate or written request signed in the name of the City by an Authorized City
Representative. Any such certificate or request may, but need, not, be combined in a single instrument
with any other instrument, opinion or representation, and the two or more so combined shall be read
and construed as a single instrument.
Section 1.02 Equal Security. In consideration of the acceptance of the Bonds by the
Owners thereof, this Indenture shall be deemed to be and shall constitute a contract among the
Authority, the City, the Trustee and the Owners from time to time of all Bonds authorized, executed,
issued and delivered hereunder and then Outstanding to secure the full and final payment of the
principal of, premium, if any, and interest on all Bonds which may from time to time be authorized,
executed, issued and delivered hereunder, subject to the agreements, conditions, covenants and
provisions contained herein; and all agreements and covenants set forth herein to be performed by or
on behalf of the Authority or the City shall be for the equal and proportionate benefit, protection and
security of all Owners of the Bonds without distinction, preference or priority as to security or
otherwise of any Bonds over any other Bonds by reason of the number or date thereof or the time of
authorization, sale, execution, issuance or delivery thereof or for any cause whatsoever, except as
expressly provided herein or therein.
ARTICLE II
THE BONDS
Section 2.01 Authorization of Bonds. The Authority hereby authorizes the issuance of the
Bonds under and subject to the terms of this Indenture and applicable laws of the State of California
for the purpose of financing the Project. The Bonds may consist of one or more Series of Bonds of
varying denominations, dates, maturities, interest rates and other provisions, subject to the provisions
and conditions contained herein.
Section 2.02 Terms of Series 2016 Bonds.
(a)The Series 2016 Bonds shall be designated the “Lake Elsinore Facilities
Financing Authority Lease Revenue Bonds, Series 2016A.” Each Series of Additional Bonds shall
bear such additional designation as may be necessary or appropriate to distinguish such Series from
every other Series, of Bonds.
(b)The Series 2016Bonds shall be issued in fully registered form without coupons
in Authorized Denominations, so long as no Series 2016 Bond shall have more than one maturity date.
The Series 2016 Bonds shall be dated as of the Closing Date, shall be issued in the aggregate principal
amount of $___________, shall mature on April 1 of each year and shall bear interest (calculated on
the basis of a 360-day year comprised of twelve 30-day months) at the rates per annum as follows:
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Maturity Date
(April 1)
Principal
Amount Interest Rate
(c)Interest on the Series 2016 Bonds shall be payable from the Interest Payment
Date next preceding the date of authentication thereof unless (i) a Series 2016 Bond is authenticated
on or before an Interest Payment Date and after the close of business on the preceding Record Date, in
which event it shall bear interest from such Interest Payment Date, (ii) a Series 2016 Bond is
authenticated on or before the first Record Date, in which event interest thereon shall be payable from
the dated date thereof, or (iii) interest on any Series 2016 Bond is in default as of the date of
authentication thereof, in which event interest thereon shall be payable from the date to which interest
has been paid in full, payable on each Interest Payment Date. Interest shall be paid in lawful money
of the United States on each Interest Payment Date to the Persons in whose names the ownership of
the Series 2016 Bonds is registered on the Registration Books at the close of business on the
immediately preceding Record Date, except as provided below. Interest shall be paid by check of the
Trustee mailed by first class mail, postage prepaid, on each Interest Payment Date to the Series 2016
Bond Owners at their respective addresses shown on the Registration Books as of the close of business
on the preceding Record Date.
(d)The principal and premium, if any, of the Series 2016 Bonds shall be payable
in lawful money of the United States of America upon presentation and surrender thereof upon maturity
or earlier redemption at the Office of the Trustee. So long as the Series 2016 Bonds are registered to
Cede & Co., payment of principal and any premiums shall be made without presentment.
(e)The Series 2016 Bonds shall be subject to redemption as provided in
Article IV.
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Section 2.03 Form of Series 2016 Bonds. The Series 2016 Bonds shall be in substantially
the form set forth in Exhibit A hereto, with appropriate or necessary insertions, omissions and
variations as permitted or required hereby.
Section 2.04 Transfer and Exchange of Bonds. Any Bond may, in accordance with its
terms, be transferred upon the Registration Books by the Person in whose name it is registered, in
person or by his duly authorized attorney, upon surrender of such Bond for cancellation, accompanied
by delivery of a written instrument of transfer, duly executed in a form acceptable to the Trustee.
Whenever any Bond or Bonds shall be surrendered for transfer, the Authority shall execute and the
Trustee shall authenticate and shall deliver a new Bond or Bonds of the same Series in a like aggregate
principal amount, in any Authorized Denomination. The Trustee shall require the Bond Owner
requesting such transfer to pay any tax or other governmental charge required to be paid with respect
to such transfer.
The Bonds may be exchanged at the Office of the Trustee for a like aggregate principal amount
of Bonds of the same Series of other authorized denominations. The Trustee shall require the payment
by the Bond Owner requesting such exchange of any tax or other governmental charge required to be
paid with respect to such exchange.
The Trustee shall not be obligated to make any transfer or exchange of Bonds of a Series
pursuant to this Section during the period established by the Trustee for the selection of Bonds of such
Series for redemption, or with respect to any Bonds of such Series selected for redemption.
Section 2.05 Registration Books. The Trustee will keep or cause to be kept, at the Office
of the Trustee, sufficient records for the registration and transfer of ownership of the Bonds, which
shall be open to inspection during regular business hours and upon reasonable notice by the City; 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 such records, the ownership
of the Bonds as hereinbefore provided.
Section 2.06 Execution of Bonds. The Bonds shall be executed in the name and on behalf
of the Authority with the facsimile signature of an Authorized Officer of the Authority attested by the
manual or facsimile signature of the Secretary of the Authority. The Bonds shall then be delivered to
the Trustee for authentication by it. In case any of such officers of the Authority who shall have signed
or attested any of the Bonds shall cease to be such officers of the Authority before the Bonds so signed
or attested shall have been authenticated or delivered by the Trustee, or issued by the Authority, such
Bonds may nevertheless be authenticated, delivered and issued and, upon such authentication, delivery
and issue, shall be as binding upon the Authority as though those who signed and attested the same
had continued to be such officers of the Authority, and also any Bonds may be signed and attested on
behalf of the Authority by such Persons as at the actual date of execution of such Bonds shall be the
proper officers of the Authority although at the nominal date of such Bonds any such Person shall not
have been such officer of the Authority.
Section 2.07 Authentication of Bonds. Only such of the Bonds as shall bear thereon a
certificate of authentication substantially in the form as that set forth in Exhibit A hereto, manually
executed by the Trustee, shall be valid or obligatory for any purpose or entitled to the benefits of this
Indenture, and such certificate of or on behalf of the Trustee shall be conclusive evidence that the
Bonds so authenticated have been duly executed, authenticated and delivered hereunder and are
entitled to the benefits of this Indenture.
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Section 2.08 Temporary Bonds. The Bonds of a Series may be issued in temporary form
exchangeable for definitive Bonds of such Series when ready for delivery. Any temporary Bonds may
be printed, lithographed or typewritten, shall be of such authorized denominations as may be
determined by the Authority, shall be in fully registered form without coupons and may contain such
reference to any of the provisions of this Indenture as may be appropriate. Every temporary Bond shall
be executed by the Authority and authenticated by the Trustee upon the same conditions and in
substantially the same manner as the definitive Bonds. If the Authority issues temporary Bonds of a
Series it will execute and deliver definitive Bonds of such Series as promptly thereafter as practicable,
and thereupon the temporary Bonds of such Series, may be surrendered, for cancellation, at the Office
of the Trustee and the Trustee shall authenticate and deliver in exchange for such temporary Bonds an
equal aggregate principal amount of definitive Bonds of such Series in Authorized Denominations.
Until so exchanged, the temporary Bonds of such Series shall be entitled to the same benefits under
this Indenture as definitive Bonds of such Series authenticated and delivered hereunder.
Section 2.09 Bonds Mutilated, Lost, Destroyed or Stolen. If any Bond shall become
mutilated, the Authority, at the expense of the Owner of said Bond, shall execute, and the Trustee shall
thereupon authenticate and deliver, a new Bond of like tenor and Series in exchange and substitution
for the Bond so mutilated, but only upon surrender to the Trustee of the Bond so mutilated. Every
mutilated Bond so surrendered to the Trustee shall be canceled by it and delivered to, or in accordance
with the order of, the Authority. If any Bond shall be lost, destroyed or stolen, evidence of such loss,
destruction or theft may be submitted to the Trustee and, if such evidence and indemnity satisfactory
to the Trustee shall be given, the Authority, at the expense of the Owner, shall execute, and the Trustee
shall thereupon authenticate and deliver, a new Bond of like tenor and Series in lieu of and in
replacement for the Bond so lost, destroyed or stolen (or if any such Bond shall have matured or shall
have been selected for redemption, instead of issuing a replacement Bond, the Trustee may pay the
same without surrender thereof). The Authority may require payment by the Owner of a sum not
exceeding the actual cost of preparing each replacement Bond issued under this Section and of the
expenses which may be incurred by the Authority and the Trustee. Any Bond of a Series issued under
the provisions of this Section in lieu of any Bond of such Series alleged to be lost, destroyed or stolen
shall constitute an original additional contractual obligation on the part of the Authority whether or not
the Bond so alleged to be lost, destroyed or stolen be at any time enforceable by anyone, and shall be
entitled to the benefits of this Indenture with all other Bonds of such Series secured by this Indenture.
Section 2.10 Book-Entry Bonds.
(a)Prior to the issuance of a Series of Bonds, the Authority may provide that such
Series of Bonds shall initially be issued as Book-Entry Bonds and, in such event, the Bonds of such
Series for each maturity shall be in the form of a separate single fully registered Bond (which may be
typewritten). The Series 2016 Bonds shall initially be issued as Book-Entry Bonds.
Except as provided in subsection (c) of this Section, the registered Owner of all of the
Book-Entry Bonds shall be Cede & Co., as nominee of DTC. Notwithstanding anything to the contrary
contained in this Indenture, payment of interest with respect to any Book-Entry Bond registered as of
each Record Date in the name of Cede & Co. shall be made by wire transfer of same-day funds to the
account of Cede & Co. on the Interest Payment Date at the address indicated on the Record Date for
Cede & Co. in the Registration Books or as otherwise provided in the Representation Letter.
(b)The Trustee and the Authority may treat DTC (or its nominee) as the sole and
exclusive Owner of Book-Entry Bonds registered in its name for the purposes of payment of the
17
principal, premium, if any, or interest with respect to Book-Entry Bonds, selecting Book-Entry Bonds
or portions thereof to be redeemed, giving any notice permitted or required to be given to Owners of
Book-Entry Bonds under this Indenture, registering the transfer of Book-Entry Bonds, obtaining any
consent or other action to be taken by Owners of Book-Entry Bonds and for all other purposes
whatsoever, and neither the Trustee nor the Authority shall be affected by any notice to the contrary.
Neither the Trustee nor the Authorityshall have any responsibility or obligation to any Participant, any
person claiming a beneficial ownership interest in Book-Entry Bonds under or through DTC or any
Participant, or any other person which is not shown on the Registration Books as being an Owner, with
respect to the accuracy of any records maintained by DTC or any Participant, the payment by DTC or
any Participant of any amount in respect of the principal, premium, if any, or interest with respect to
Book-Entry Bonds, any notice which is permitted or required to be given to Owners of Book-Entry
Bonds under this Indenture, the selection by DTC or any Participant of any person to receive payment
in the event of a partial redemption of Book-Entry Bonds, or any consent given or-other action taken
by DTC as Owner of Book-Entry Bonds. The Trustee shall pay all principal, premium, if any and
interest with respect to Book-Entry Bonds, only to DTC, and all such payments shall be valid and
effective to fully satisfy and discharge the Authority’s obligations with respect to the principal,
premium, if any, and interest with respect to the Book-Entry Bonds to the extent of the sum or sums
so paid. Except under the conditions of subsection (c) of this Section, no person other than DTC shall
receive an executed Book-Entry Bond for each separate stated maturity. Upon delivery by DTC to the
Trustee of written notice to the effect that DTC has determined to substitute a new nominee in place
of Cede & Co., and subject to the provisions herein with respect to record dates, the term “Cede &
Co.” in this Indenture shall refer to such new nominee of DTC.
(c)In the event (i) DTC, including any successor as securities depository for a
Series of Bonds, determines not to continue to act as securities depository for such Series of Bonds, or
(ii) the Authority determines that the incumbent securities depository shall no longer so act, and
delivers a written certificate to the Trustee to that effect, then the Authority will discontinue the book-
entry system with the incumbent securities depository for such Series of Bonds. If the Authority
determines to replace the incumbent securities depository for such Series of Bonds with another
qualified securities depository, the Authority shall prepare or direct the preparation of a new single,
separate fully registered Bond of such Series for the aggregate outstanding principal amount of Bonds
of such Series of each maturity, registered in the name of such successor or substitute qualified
securities depository, or its nominee, or make such other arrangement acceptable to the Authority, the
Trustee and the successor securities depository for the Bonds of such Series as are not inconsistent
with the terms of this Indenture. If the Authority fails to identify another qualified successor securities
depository for such Series of Bonds to replace the incumbent securities depository, then the Bonds of
such Series shall no longer be restricted to being registered in the Registration Books in the name of
the incumbent securities depository or its nominee, but shall be registered in whatever name or names
the incumbent securities depository for such Series of Bonds, or its nominee, shall designate. In such
event the Authority shall execute, and deliver to the Trustee, a sufficient quantity of Bonds of such
Series to carry out the transfers and exchanges provided in Sections 2.04, 2.08 and 2.09 hereof. All
such Bonds of such Series shall be in fully registered form in Authorized Denominations.
(d)Notwithstanding any other provision of this Indenture to the contrary, so long
as any Book-Entry Bond is registered in the name of DTC, or its nominee, all payments with respect
to the principal, premium, if any, and interest with respect to such Book-Entry Bond and all notices
with respect to such Book-Entry Bond shall be made and given, respectively, as provided in the
Representation Letter.
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(e)In connection with any notice or other communication to be provided to
Owners of Book-Entry Bonds pursuant to this Indenture by the Authority, the City or the Trustee with
respect to any consent or other action to be taken by Owners, the Authority, the City or the Trustee, as
the case may be, shall establish a record date for such consent or other action and give DTC notice of
such record date not less than 15 calendar days in advance of such record date to the extent possible.
ARTICLE III
ISSUANCE OF BONDS; APPLICATION OF PROCEEDS
Section 3.01 Issuance of Series 2016 Bonds. The Authority may, at any time, execute the
Series 2016 Bonds for issuance hereunder and deliver the same to the Trustee. The Trustee shall
authenticate the Series 2016 Bonds and deliver the Series 2016 Bonds to the original purchaser thereof
upon receipt of a Written Request of the Authority and upon receipt of the purchase price therefor.
Section 3.02 Application of Proceeds of the Series 2016 Bonds. On the Closing Date, the
proceeds of the sale of the Series 2016 Bonds received by the Trustee, $________, shall be deposited
by the Trustee as follows:
(a)The Trustee shall deposit the amount of $________ in the Costs of Issuance
Fund.
(b)The Trustee shall deposit the amount of $_________ in the Reserve Fund.
(c)The Trustee shall deposit the amount of $________ in the Construction Fund.
Section 3.03 Costs of Issuance Fund. The Trustee shall establish and maintain a separate
fund designated the “Costs of Issuance Fund.” On the Closing Date, there shall be deposited in the
Costs of Issuance Fund the amount specified in Section 3.02 hereof. There shall be additionally be
deposited in the Cost of Issuance Fund the portion, if any, of the proceeds of the sale of any Additional
Bonds required to be deposited therein under the Supplemental Indenture pursuant to which such
Additional Bonds are issued.
The moneys in the Costs of Issuance Fund shall be used and withdrawn by the Trustee from
time to time to pay the Costs of Issuance upon submission of a Written Request of the Authority stating
(a) the Person to whom payment is to be made, (b) the amount to be paid, (c) the purpose for which
the obligation was incurred, (d) that such payment is a proper charge against the Costs of Issuance
Fund, and (e) that such amounts have not been the subject of a prior disbursement from the Costs of
Issuance Fund, in each case together with a statement or invoice for each amount requested thereunder.
On ______, 2016, all amounts, if any, remaining in the Costs of Issuance Fund shall be withdrawn
therefrom by the Trustee and transferred to the Interest Fund. Thereafter, the Costs of Issuance Fund
shall be closed.
Section 3.04 Construction Fund.
(a)The Trustee shall establish and maintain a separate fund designated the
“Construction Fund.” On the Closing Date there shall be deposited in the Construction Fund the
amount specified in Section 3.02(b) hereof.
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(b)The moneys in the Construction Fund shall be used and withdrawn by the
Trustee from time to time to pay the Project Costs upon submission of a Written Request of the City
stating (i) the Person to whom payment is to be made, (ii) the amount to be paid, (iii) the purpose for
which the obligation was incurred, (iv) that such payment constitutes a Project Cost and is a proper
charge against the Construction Fund, and (v) that such amounts have not been the subject of a prior
disbursement from the Construction Fund, in each case together with a statement or invoice for each
amount requested thereunder.
(c)Upon the filing of a Written Certificate of the City stating that the Project has
been completed and that all Project Costs have been paid, the Trustee shall transfer and apply the
amount, if any, remaining in the Construction Fund (x) if such amount is equal to or greater than
$50,000, to the Redemption Fund to be used to optionally redeem Bonds, provided that the amount so
transferred shall not exceed the amount required to provide for the redemption of all Outstanding Bonds
and (y) if such amount is less than $50,000, to the Base Rental Payment Fund to be used for the
purposes thereof. Thereafter, the Construction Fund shall be closed.
Section 3.05 Conditions for the Issuance of Additional Bonds. The Authority may at any
time issue one or more Series of Additional Bonds (in addition to the Series 2016 Bonds) payable from
Base Rental Payments as provided herein on a parity with all other Bonds theretofore issued hereunder,
but only subject to the following conditions, which are hereby made conditions precedent to the
issuance of such Additional Bonds:
(a)The issuance of such Additional Bonds shall have been authorized under and
pursuant hereto and shall have been provided for by a Supplemental Indenture which shall specify the
following:
(A)The application of the proceeds of the sale of such Additional
Bonds;
(B)The principal amount and designation of such Series of
Additional Bonds and the denomination or denominations of the Additional Bonds;
(C)The date, the maturity date or dates, the interest payment dates
and the dates on which mandatory sinking fund redemptions, if any, are to be made for such Additional
Bonds; provided, however, that (i) the serial Bonds of such Series of Additional Bonds shall be payable
as to principal annually on April 1 of each year in which principal falls due, and the term Bonds of
such Series of Additional Bonds shall have annual mandatory sinking fund redemptions on April 1,
(ii) the Additional Bonds shall be payable as to interest semiannually on April 1 and November 1 of
each year, except that the first installment of interest may be payable on either April 1 or November 1
and shall be for a period of not longer than twelve months and the interest shall be payable thereafter
semiannually on April 1 and November 1, (iii) all Additional Bonds of a Series of like maturity shall
be identical in all respects, except as to number or denomination, and (iv) serial maturities of serial
Bonds or mandatory sinking fund redemptions for term Bonds, or any combination thereof, shall be
established to provide for the redemption or payment of such Additional Bonds on or before their
respective maturity dates;
(D)The redemption premiums and terms, if any, for such
Additional Bonds;
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(E)The form of such Additional Bonds;
(F)if necessary; that from such proceeds or other sources an
amount shall be deposited in the Reserve Fund so that following such deposit there shall be on deposit
in the Reserve Fund an amount at least equal to the Reserve Fund Requirement, as may be reduced
after issuance of the Additional Bonds; and
(G)Such other provisions that are appropriate or necessary and are
not inconsistent with the provisions hereof;
(b)The Authority shall be in compliance with all agreements, conditions,
covenants and terms contained herein, in the Lease Agreement and in the Ground Lease required to be
observed or performed by it;
(c)The Cityshall be in compliance with all agreements, conditions, covenants and
terms contained herein, in the Lease Agreement and in the Ground Lease required to be observed or
performed by it; and
(d)The Ground Lease shall have been amended, to the extent necessary, and the
Lease Agreement shall have been amended so as to increase the Base Rental Payments payable by the
City thereunder by an aggregate amount equal to the principal of and interest on such Additional Bonds,
payable at such times and in such manner as may be necessary to provide for the payment of the
principal of and interest on such Additional Bonds; provided, however, that no such amendment shall
be made such that the sum of Base Rental Payments, including any increase in the Base Rental
Payments as a result of such amendment, plus Additional Rental Payments, in any Rental Period shall
be in excess of the annual fair rental value of the Property after taking into account the use of the
proceeds of any Additional Bonds issued in connection therewith (evidence of the satisfaction of such
condition shall be made by a Written Certificate of the City).
Nothing contained herein shall limit the issuance of any bonds or other obligations payable
from Base Rental Payments if, after the issuance and delivery of such bonds or other obligations, none
of the Bonds theretofore issued hereunder will be Outstanding.
Section 3.06 Procedure for the Issuance of Additional Bonds. At any time after the sale
of any Additional Bonds in accordance with the Act, such Additional Bonds shall be executed by the
Authority for issuance hereunder and shall be delivered to the Trustee and thereupon shall be
authenticated and delivered by the Trustee, but only upon receipt by the Trustee of the following:
(a)Certified copies of the Supplemental Indenture authorizing the issuance of such
Additional Bonds, the amendment to the Lease Agreement requited by Section 3.06 hereof and the
amendment to the Ground Lease, if any, required by Section 3.06 hereof, together with satisfactory
evidence that such amendment to the Lease Agreement and such amendment to the Ground Lease, if
any, have been duly recorded;
(b)A Written Request of the Authority as to the delivery of such Additional Bonds;
(c)An opinion of Bond Counsel substantially to the effect that (i) the Indenture
(including all Supplemental Indentures), the Lease Agreement (including the amendment thereto
required by Section 3.06 hereof) and the Ground Lease (including any amendment thereto required by
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Section 3.06 hereof) have been duly authorized, executed and delivered by, and constitute the valid
and binding obligations of, the Authority and the City, enforceable in accordance with their terms
(except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium and
other similar laws affecting creditors rights and by the application of equitable principles and by the
exercise of judicial discretion in appropriate cases and subject to the limitations on legal remedies
against political subdivisions in the State of California), (ii) such Additional Bonds constitute valid
and binding special obligations of the Authority payable solely from Base Rental Payments as provided
herein and are enforceable in accordance with their terms (except as enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors rights
and by the application of equitable principles and by the exercise of judicial discretion in appropriate
cases and subject to the limitations on legal remedies against political subdivisions in the State of
California), and (iii) the issuance of such Additional Bonds, in and of itself, will not adversely affect
the exclusion of interest on the Bonds Outstanding prior to the issuance of such Additional Bonds from
gross income for federal income tax purposes;
(d)a Written Certificate of the Authority that the requirements of Section 3.06
hereof have been met;
(e)a Written Certificate of the City that the requirements of Section 3.06 hereof
and Sections 5.01 and 5.02 of the Lease Agreement have been met, and a Written Certificate of the
City as to the fair rental value of the Property, after giving effect to the execution and delivery of the
Additional Bonds, and to the use of proceeds received therefrom; and
(f)Such further documents as are required by the provisions hereof or by the
provisions of the Supplemental Indenture authorizing the issuance of such Additional Bonds.
Section 3.07 Additional Bonds. So long as any of the Bonds remain Outstanding, the
Authority shall not issue any Additional Bonds or obligations payable from the Base Rental Payments,
except pursuant to Sections 3.06 and 3.07 hereof.
ARTICLE IV
REDEMPTION OF BONDS
Section 4.01 Redemption of Series 2016 Bonds.
(a)Extraordinary Redemption. The Series 2016 Bonds shall be subject to
redemption, in whole or in part, on any date, in Authorized Denominations, from and to the extent of
any Net Insurance Proceeds received with respect to all or a portion of the Property, deposited by the
Trustee in the Redemption Fund pursuant to Sections 5.03 and 5.04 hereof, at a Redemption Price
equal to the principal amount of the Series 2016 Bonds to be redeemed, plus accrued interest thereon
to the date of redemption, without premium.
(b)Optional Redemption. The Series 2016 Bonds maturing on or after April 1,
20__, shall be subject to optional redemption, in whole or in part, on any date on or after April 1, 20__,
in Authorized Denominations, from and to the extent of prepaid Base Rental Payments paid pursuant
to subsection (a) of Section 7.02 of the Lease Agreement, at a Redemption Price equal to the principal
amount of the Series 2016 Bonds to be redeemed, plus accrued interest thereon to the date of
redemption, without premium.
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(c)Sinking Fund Redemption. The Series 2016 Bonds maturing on April 1, 20__
are subject to mandatory sinking fund redemption in part (by lot) on each April 1 on and after April 1,
20__, in integral multiples of $5,000 at a Redemption Price of the principal amount thereof plus
accrued interest to the date fixed for redemption, without premium, in accordance with the following
schedule:
Sinking Fund Redemption Date
(April 1)
Principal Amount
To Be Redeemed
(maturity)
In the event of a redemption pursuant to Section 4.01(a) or (b), the City shall provide the
Trustee with a revised mandatory sinking fund schedule giving effect to the redemption so completed.
Section 4.02 Notice of Redemption. At least 20 but not more than 60 days prior to the date
fixed for redemption the Trustee on behalf and at the expense of the Authority shall mail (by first class
mail) notice of any redemption to the respective Owners of any Bonds designated for redemption at
their respective addresses appearing on the Registration Books, provided, however, so long as the
Bonds are registered in the name of the Nominee, notice shall be given in such manner as complies
with the requirements of DTC. Such notice shall state the date of the notice, the redemption date, the
redemption place and the Redemption Price and shall designate theCUSIP numbers, the Bond numbers
and the maturity or maturities (except in the event of redemption of all of the Bonds of such maturity
or maturities in whole) of the Bonds to be redeemed, and shall require that such Bonds be then
surrendered at the Office of the Trustee for redemption at the Redemption Price, giving notice also that
further interest on such Bonds will not accrue from and after the date fixed for redemption. Such notice
may state that such redemption is conditioned upon sufficient funds being on deposit on the redemption
date to redeem the Bonds so called for redemption. Such notice of redemption may also state that no
representation is made as to the accuracy or correctness of the CUSIP numbers printed therein or on
the Bonds. Neither the failure to receive any notice so mailed, nor any defect in such notice, shall
affect the validity of the proceedings for the redemption of the Bonds or the cessation of accrual of
interest thereon from and after the date fixed for redemption.
Section 4.03 Selection of Bonds for Redemption. Whenever provision is made in this
Indenture for the redemption of less than all of the Bonds, the Trustee shall select the Bonds to be
redeemed from all Bonds not previously called for redemption (a) with respect to any optional
redemption of Bonds of a Series, among maturities of Bonds of such Series as directed in a Written
Request of the Authority, (b) with respect to any redemption pursuant to Section 4.01(a) hereof and
the corresponding provision of any Supplemental Indenture pursuant to which Additional Bonds are
issued, among maturities of all Series of Bonds on a pro rata basis as nearly as practicable, and (c) with
respect to any other redemption of Additional Bonds, among maturities as provided in the
Supplemental Indenture pursuant to which such Additional Bonds are issued, and by lot among Bonds
of the same Series with the same maturity in any manner which the Trustee in its sole discretion shall
deem appropriate and fair. For purposes of such selection, all Bonds shall be deemed to be comprised
of separate $5,000 denominations and such separate denominations shall be treated as separate Bonds
which may be separately redeemed.
Section 4.04 Partial Redemption of Bonds. Upon surrender of any Bonds redeemed in
part only, the Authority shall execute and the Trustee shall authenticate and deliver to the Owner
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thereof, at the expense of the Authority, a new Bond or Bonds of the same Series in authorized
denominations equal in aggregate principal amount representing the unredeemed portion of the Bonds
surrendered.
Section 4.05 Effect of Notice of Redemption. Notice having been mailed as aforesaid, and
moneys for the Redemption Price, and the interest to the applicable date fixed for redemption, having
been set aside in the Redemption Fund, the Bonds shall become due and payable on said date, and,
upon presentation and surrender thereof at the Office of the Trustee, said Bonds shall be paid at the
Redemption Price thereof, together with interest accrued and unpaid to said date.
If, on said date fixed for redemption, moneys for the Redemption Price of all the Bonds to be
redeemed, together with interest to said date, shall be held by the Trustee so as to be available therefor
on such date, and, if notice of redemption thereof shall have been mailed as aforesaid and not canceled,
then, from and after said date, interest on said Bonds shall cease to accrue and become payable. All
moneys held by or on behalf of the Trustee for the redemption of Bonds shall be held in trust for the
account of the Owners of the Bonds so to be redeemed without liability to such Owners for interest
thereon.
All Bonds paid at maturity or redeemed prior to maturity pursuant to the provisions hereof shall
be canceled upon surrender thereof and destroyed.
ARTICLE V
SECURITY FOR BONDS; FLOW OF FUNDS; INVESTMENTS
Section 5.01 Pledge; Special Obligations. Subject only to the provisions of this Indenture
permitting the application thereof for the purposes and on the terms and conditions set forth herein, all
of the Base Rental Payments and any other amounts (including proceeds of the sale of the Bonds) held
in the Base Rental Payment Fund, the Interest Fund, the Principal Fund and the Redemption Fund are
hereby pledged to secure the payment of the principal of, premium, if any, and interest on the Bonds
in accordance with their terms, the provisions of this Indenture and the Act. Said pledge shall constitute
a first lien on such assets.
All obligations of the Authority under this Indenture shall be special obligations of the
Authority, payable solely from Rental Payments and the other assets pledged therefor hereunder;
provided, however, that all obligations of the Authority under the Bonds shall be special obligations
of the Authority, payable solely from Base Rental Payments and the other assets pledged therefor
hereunder. Neither the faith and credit nor the taxing power of the Authority, the City or the State of
California, or any political subdivision thereof, is pledged to the payment of the Bonds.
Section 5.02 Flow of Funds.
(a)The Trustee shall establish and maintain separate funds designated the “Base
Rental Payment Fund,” the “Interest Fund,” the “Principal Fund” and the “Redemption Fund.” Within
the Base Rental Fund, the Trustee shall establish the “Prepaid Base Rental Account.”
All Base Rental Payments shall be paid directly by the City to the Trustee, and if
received by the Authority at any time shall be transferred by the Authority with the Trustee within one
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Business Day after the receipt thereof. All Base Rental Payments received by the Trustee shall be
deposited by the Trustee in the Base Rental Payment Fund.
(b)The Trustee shall transfer the amounts on deposit in the Base Rental Payment
Fund, at the times and in the manner hereinafter provided, to the following respective funds:
(i)Interest Fund. On the Business Day immediately preceding each
Interest Payment Date, the Trustee shall transfer from the Base Rental Fund to the Interest Fund the
amount, if any, necessary to cause the amount on deposit in the Interest Fund to be equal to the interest
due on the Bonds on such Interest Payment Date.
(ii)Principal Fund. On the Business Day immediately preceding each
April 1, commencing April 1, 2017, the Trustee shall transfer from the Base Rental Fund to the
Principal Fund the amount, if any, necessary to cause the amount on deposit in the Principal Fund to
be equal to the principal amount of the Bonds due on such April 1, either as a result of the maturity
thereof or mandatory sinking fund redemption payments required to be made with respect thereto.
Moneys in the Principal Fund shall be used by the Trustee for the purpose of paying the principal of
the Bonds when due and payable at their maturity dates or upon earlier mandatory sinking fund
redemption.
(iii)Redemption Fund. The Trustee, on the redemption date specified in
the Written Request of the City filed with the Trustee at the time that any prepaid Base Rental Payment
is paid to the Trustee pursuant to the Lease Agreement, shall deposit in the Redemption Fund that
amount of moneys representing the portion of the Base Rental Payments designated as prepaid Base
Rental Payments. Additionally, the Trustee shall deposit in the Redemption Fund any amounts
required to be deposited therein pursuant to Section 5.03 or Section 5.04 hereof. Moneys in the
Redemption Fund shall be used by the Trustee for the purpose of paying the principal of and interest
and premium, if any, on Series 2016 Bonds redeemed pursuant to the provisions of subsections (a) and
(b) of Section 4.01 hereof and Additional Bonds redeemed pursuant to the corresponding provisions
of the Supplemental Indenture pursuant to which such Additional Bonds are issued.
(c)Upon receipt of a Written Certificate of the City pursuant to Section 3.06 of the
Lease Agreement that the City has commenced repairs of the Property, the Trustee will transfer moneys
from the Prepaid Base Rental Account at the times and in the manner required by subsection (b) above
if and to the extent there are insufficient funds in the Base Rental Payment Fund to make such transfers.
Upon receipt of a Written Certificate of the City pursuant to Section 3.06 of the Lease Agreement that
the City has completed repairs of the Property and will recommence to make Base Rental Payments,
or that the City has determined not to make such repairs or such repairs do not require the City to vacate
the Property, and made the certifications required pursuant to the Lease Agreement, the Trustee will
transfer any funds remaining on deposit in the Prepaid Base Rental Account to the City for any lawful
use.
(d)Reserve Fund. All amounts on deposit in the Base Rental Fund on April 2, to
the extent not required to pay the principal of any Outstanding Bonds then having come due and
payable, shall be transferred to the Reserve Fund, to the extent necessary to satisfy the Reserve Fund
Requirement, and otherwise shall be withdrawn therefrom and transferred to the City to be used for
any lawful purposes of the City.
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Section 5.03 Application of Net Insurance Proceeds. If the Property or any portion thereof
shall be damaged or destroyed, subject to the further requirements of this Section, the City shall, as
expeditiously as possible, continuously and diligently prosecute or cause to be prosecuted the repair or
replacement thereof, unless the City elects not to repair or replace the Property or the affected portion
thereof in accordance with the provisions hereof.
The Net Insurance Proceeds (other than Net Insurance Proceeds of rental interruption
insurance), including the proceeds of any self-insurance, received on account of any damage or
destruction of the Property or a portion thereof shall as soon as possible be deposited with the Trustee
and be held by the Trustee in a special account and made available for and, to the extent necessary,
shall be applied to the cost of repair or replacement of the Property or the affected portion thereof upon
receipt of a Written Request of the City, together with invoices therefor. Pending such application,
such proceeds may be invested by the Trustee as directed by the City in Permitted Investments that
mature not later than such times moneys are expected to be needed to pay such costs of repair or
replacement.
Notwithstanding the foregoing, the City shall, within 60 days of the occurrence of the event of
damage or destruction, notify the Trustee in writing as to whether the City intends to replace or repair
the Property or the portions of the Property which were damaged or destroyed. If the City does intend
to replace or repair the Property or portions thereof, the City shall deposit with the Trustee the full
amount of any insurance deductible to be credited to the special account.
If the damage, destruction or loss was such that there resulted a substantial interference with
the City’s right to the use or occupancy of the Property and an abatement, of Rental Payments results
from such damage or destruction pursuant to Section 3.06 of the Lease Agreement, then the City shall
be required either to (a) apply sufficient funds from the insurance proceeds and other legally available
funds to the replacement or repair of the Property or the portions thereof which have been damaged to
the condition which existed prior to such damage or destruction, or (b) apply sufficient funds from the
insurance proceeds and other legally available funds to the redemption, as set forth in subsection (a) of
Section 4.01 hereof and the corresponding provisions of any Supplemental Indenture pursuant to which
Additional Bonds are issued, in full of all the Outstanding Bonds or all of those Outstanding Bonds
which would have been payable from that portion of the Base Rental Payments which are abated as a
result of the damage or destruction. Funds to be applied to the redemption of Bonds in accordance
with clause (b) above shall be deposited in the Redemption Fund. If the City is not required to replace
or repair the Property, or the affected portion thereof, as set forth in clause (a) above or to use such
amounts to redeem Bonds as set forth in clause (b) above, then such proceeds shall, if there is first
delivered to the Trustee a Written Certificate of the City to the effect that the annual fair rental value
of the Property after such damage or destruction, and after any repairs or replacements made as a result
of such damage or destruction, is at least equal to 100% of the maximum amount of Base Rental
Payments becoming due under the Lease Agreement in the then current Rental Period or any
subsequent Rental Period and the fair replacement value of the Property after such damage or
destruction is at least equal to the principal amount of the Outstanding Bonds, be paid to the City to be
used for any lawful purpose.
Proceeds of rental interruption insurance shall be applied to the payment of Base Rental
Payments to the extent of any abatement thereof pursuant to the Lease Agreement, and otherwise as
directed in writing by the City.
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The proceeds of any award in eminent domain received in respect to the Property shall be
deposited by the Trustee in the Redemption Fund and applied to the redemption of Bonds pursuant to
subsection (a) of Section 4.01 hereof and the corresponding provisions of any Supplemental Indenture
pursuant to which Additional Bonds are issued.
Section 5.04 Title Insurance. Proceeds of any policy of title insurance received by the
Trustee in respect of the Property shall be applied and disbursed by the Trustee as follows:
(a)if the City determines that the title defect giving rise to such proceeds has not
substantially interfered with its use and occupancy of the Property and will not result in an abatement
of Rental Payments payable by the City under the Lease Agreement, such proceeds shall be remitted
to the City and used for any lawful purpose thereof; or
(b)if the City determines that the title defect giving rise to such proceeds has
substantially interfered with its use and occupancy of the Property and will result in an abatement of
Rental Payments payable by the City under the Lease Agreement, then the Trustee shall immediately
deposit such proceeds in the Redemption Fund and such proceeds shall be applied to the redemption
of Bonds in the manner provided in subsection (a) of Section 4.01 hereof and the corresponding
provisions of any Supplemental Indenture pursuant to which Additional Bonds are issued.
Section 5.05 Reserve Fund. The Authority hereby agrees to establish a separate fund titled
the “Reserve Fund,” which shall be held and maintained by the Trustee into which there shall be
deposited a portion of the 2016 Bond proceeds pursuant to Section 3.02(b) and any amounts transferred
from the Base Rental Fund pursuant to Section 5.02(d) above. All moneys in the Reserve Fund shall
be used and withdrawn by the Trustee solely for the purpose of funding the Interest Fund or the
Principal Fund, in that order, in the event of any deficiency in either of such accounts on an Interest
Payment Date.
The Trustee shall notify the Authority if any withdrawal is made from the Reserve Fund for
the purpose of funding the Interest Fund or the Principal Fund. On the final maturity date for the
Bonds, amounts in the Reserve Fund shall be transferred to the Interest Fund and the Principal Fund to
make the final payment on the Bonds, and the amount transferred shall be deemed to be a credit against
the remaining Base Rental Payments to be made by the City under the Lease Agreement.
Section 5.06 Rebate Fund.
(a)The Trustee shall establish and maintain a special fund designated the “Rebate
Fund.” There shall be deposited in the Rebate Fund such amounts as are required to be deposited
therein pursuant to the Tax Certificate, as specified in a Written Request of the Authority. All money
at any time deposited in the Rebate Fund shall be held by the Trustee in trust, to the extent required to
satisfy the Rebate Requirement, for payment to the United States of America. Notwithstanding
defeasance of the Bonds pursuant to Article X hereof or anything to the contrary contained herein, all
amounts required to be deposited into or on deposit in the Rebate Fund shall be governed exclusively
by this Section and by the Tax Certificate (which is incorporated herein by reference). The Trustee
shall be deemed conclusively to have complied with such provisions if it follows the written directions
of the Authority, and shall have no liability or responsibility to enforce compliance by the Authority
with the terms of the Tax Certificate. The Trustee may conclusively rely upon the Authority’s
determinations, calculations and certifications required by the Tax Certificate. The Trustee shall have
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no responsibility to independently make any calculation or determination or to review the Authority’s
calculations.
(b)Any funds remaining in the Rebate Fund after payment in full of all of the
Bonds and after payment of any amounts described in this Section, shall be withdrawn by the Trustee
and remitted to the Authority.
Section 5.07 Investment of Moneys. Except as otherwise provided herein, all moneys in
any of the funds or accounts established pursuant to this Indenture and held by the Trustee shall be
invested by the Trustee solely in Permitted Investments, as directed in writing by the Authority.
Moneys in all funds and accounts held by the Trustee shall be invested in Permitted Investments
maturing not later than the date on which it is estimated that such moneys will be required for the
purposes specified in this Indenture; provided, however, that such Permitted Investments may be
redeemed at par so as to be available on each Interest Payment Date. Absent timely written direction
from the Authority, the Trustee shall hold any funds held by it uninvested.
Subject to the provisions of Section 5.07 hereof, all interest, profits and other income received
from the investment of moneys in any fund or account established pursuant to this Indenture shall be
retained therein.
Permitted Investments acquired as an investment of moneys in any fund established under this
Indenture shall be credited to such fund. For the purpose of determining the amount in any fund, all
Permitted Investments credited to such fund shall be valued by the Trustee at the fair market value
thereof, such valuation to be performed not less frequently than semiannually on or before each
________ and ________. In determining fair market value, the Trustee may use and rely conclusively
on any generally recognized securities pricing service available to it (including brokers and dealers in
securities).
The Trustee may act as principal or agent in the making or disposing of any investment. Upon
the Written Request of the Authority, the Trustee shall sell or present for redemption any Permitted
Investments so purchased whenever it shall be necessary to provide moneys to meet any required
payment, transfer, withdrawal or disbursement from the fund to which such Permitted Investments is
credited, and the Trustee shall not be liable or responsible for any loss resulting from any investment
made or sold pursuant to this Section. For purposes of investment, the Trustee may commingle moneys
in any of the funds and accounts established hereunder.
The Trustee may make any investments hereunder through the bond or investment department
or trust investment department of the entity acting as Trustee hereunder, or those of such entity’s parent
or any affiliate, and such entity, or its parent or affiliate, as applicable, shall be entitled to its normal,
customary and reasonable compensation for such services.
The entity acting as Trustee hereunder, or any of its affiliates, may act as sponsor, advisor or
manager in connection with any investments made by the Trustee hereunder and such entity, or its
affiliate, as applicable, shall be entitled to its normal, customary and reasonable compensation for such
services.
The Authority and the City acknowledge that, to the extent regulations of the Comptroller of
the Currency or other applicable regulatory entity grant the Authority and the City the right to receive
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brokerage confirmations of security transactions as they occur, at no additional cost, the Authority and
the City specifically waive receipt of such confirmations to the extent permitted by law.
ARTICLE VI
COVENANTS
Section 6.01 Compliance with Agreements. The Trustee will not authenticate or deliver
any Bonds in any manner other than in accordance with the provisions hereof, and the Authority and
the City will not suffer or permit any default by them to occur hereunder, but will faithfully comply
with, keep, observe and perform all the agreements, conditions, covenants and terms hereof required
to be complied with, kept, observed and performed by them.
Section 6.02 Compliance with Ground Lease and Lease Agreement. The Authority and
the City will faithfully comply with, keep, observe and perform all the agreements, conditions,
covenants and terms contained in the Ground Lease and the Lease Agreement required to be complied
with, kept, observed and performed by them and, together with the Trustee, will enforce the Ground
Lease and the Lease Agreement against the other party thereto in accordance with their respective
terms.
Section 6.03 Observance of Laws and Regulations. The Authority, the City and the
Trustee will faithfully comply with, keep, observe and perform all valid and lawful obligations or
regulations now or hereafter imposed on them by contract, or prescribed by any law of the United
States of America or of the State of California, or by any officer, board or commission having
jurisdiction or control, as a condition of the continued enjoyment of each and every franchise, right or
privilege now owned or hereafter acquired by them, including their right to exist and carry on their
respective businesses, to the end that such franchises, rights and privileges shall be maintained and
preserved and shall not become abandoned, forfeited or in any manner impaired.
Section 6.04 Other Liens. The City will keep the Property and all parts thereof free from
judgments and materialmen’s and mechanics’ liens and free from all claims, demands, encumbrances
and other liens of whatever nature or character, and free from any claim or liability which materially
impairs the City in conducting its business or utilizing the Property, and the Trustee at its option (after
first giving the City ten days’ written notice to comply therewith and failure of the City to so comply
within such ten-day period) may, but is in no event obligated to, defend against any and all actions or
proceedings, or may pay or compromise any claim or demand asserted in any such actions or
proceedings; provided, however, that, in defending against any such actions or proceedings or in
paying or compromising any such claims or demands, the Trustee shall not in any event be deemed to
have waived or released the City from liability for or on account of any of its agreements and covenants
contained herein, or from its liability hereunder and to perform such agreements and covenants.
So long as any Bonds are Outstanding, none of the Trustee, the Authority or the City shall
create or suffer to be created any pledge of or lien the amounts on deposit in any of the funds or
accounts created hereunder, other than the pledge and lien hereof.
The Authority, the City and the Trustee shall not encumber the Property other than in
accordance with the Ground Lease, the Lease Agreement, the Indenture and the Assignment
Agreement.
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Section 6.05 Prosecution and Defense of Suits. The City will promptly, upon request of
the Trustee (which request the Trustee is not required to make), take such action from time to time as
may be necessary or proper to remedy or cure any cloud upon or defect in the title to the Property or
any part thereof, whether now existing or hereafter developing, will prosecute all actions, suits or other
proceedings as may be appropriate for such purpose and will indemnify and save the Trustee harmless
from all cost, damage, expense or loss, including attorneys’ fees and expenses, which it or the Owners
may incur by reason of any such cloud, defect, action, suit or other proceeding.
Section 6.06 Accounting Records and Statements. The Trustee will keep proper
accounting records in which complete and correct entries shall be made of all transactions relating to
the receipt, deposit and disbursement of the Base Rental Payments, and such accounting records shall
be available for inspection by the Authority and the City at reasonable hours and under reasonable
conditions.
Section 6.07 Recordation and Filing. The City will record, or cause to be recorded, with
the appropriate county recorder, the Lease Agreement, the Ground Lease and the Assignment
Agreement, or memoranda thereof.
Section 6.08 Tax Covenants.
(a)Neither the Authoritynor the City will take any action, or fail to take any action,
if such action or failure to take such action would adversely affect the exclusion from gross income of
interest on any tax-exempt Bonds under Section 103 of the Code. Without limiting the generality of
the foregoing, the Authority and the City will comply with the requirements of the Tax Certificate,
which is incorporated herein as if fully set forth herein, This covenant shall survive payment in full or
defeasance of the Bonds.
(b)In the event that at any time the Authority is of the opinion that for purposes of
this Section it is necessary or helpful to restrict or limit the yield on the investment of any moneys held
by the Trustee in any of the funds or accounts established hereunder, the Authority shall so instruct the
Trustee in writing, and the Trustee shall take such action as may be necessary in accordance with such
instructions.
(c)Notwithstanding any provisions of this Section, if the Authority shall provide
to the Trustee an Opinion of Counsel to the effect that any specified action required under this Section
is no longer required or that some further or different action is required to maintain the exclusion from
federal income tax of interest on the Bonds, the Trustee may conclusively rely on such opinion in
complying with the requirements of this Section and of the Tax Certificate, and the covenants
hereunder shall be deemed to be modified to that extent.
Section 6.09 Continuing Disclosure. The City will comply with and carry out all of the
provisions of the Continuing Disclosure Certificate. Notwithstanding any other provision of this
Indenture, failure of the City to comply with the Continuing Disclosure Certificate shall not constitute
an event of default hereunder; provided, however, that the Trustee may (and, at the written direction
of any Participating Underwriter or the holders of at least 25% of the aggregate principal amount of
Outstanding Series 2016 Bonds, and upon being indemnified to its reasonable satisfaction therefor,
shall) or any holder or beneficial owner of the Series 2016 Bonds may take such actions as may be
necessary and appropriate to compel performance, including seeking mandate or specific performance
by court order.
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Section 6.10 Further Assurances. Whenever and so often as requested to do so by the
Trustee, the Authority and the City will promptly execute and deliver or cause to be executed and
delivered all such other and further assurances, documents or instruments and promptly do or cause to
be done all such other and further things as may be necessary or reasonably required in order to further
and more fully vest in the Trustee all advantages, benefits, interests, powers, privileges and rights
conferred or intended to be conferred upon it hereby or by the Assignment Agreement, the Ground
Lease or the Lease Agreement.
ARTICLE VII
DEFAULT AND LIMITATIONS OF LIABILITY
Section 7.01 Action on Default. If an event of default (within the meaning of Article VI of
the Lease Agreement) shall happen, then such event of default shall constitute an event of default
hereunder. The Trustee shall give notice, as assignee of the Authority, of an event of default under the
Lease Agreement to the City. In each and every case during the continuance of an event of default,
the Trustee may and, at the direction of the Owners of not less than a majority of the aggregate principal
amount ofBonds then Outstanding, and upon being indemnified to its reasonable satisfaction therefor,
shall, upon notice in writing to the City and the Authority, exercise any of the remedies granted to the
Authority under the Lease Agreement and, in addition, take whatever action at law or in equity may
appear necessary or desirable to enforce its rights as assignee pursuant to the Assignment Agreement
or to protect and enforce any of the rights vested in the Trustee or the Owners by this Indenture or by
the Bonds,either at law or in equity or in bankruptcy or otherwise, whether for the specific enforcement
of any covenant or agreement or for the enforcement of any other legal or equitable right, including
any one or more of the remedies set forth in Section 7.02 hereof.
Section 7.02 Other Remedies of the Trustee. Subject to the provisions of Section 7.01
hereof, the Trustee shall have the right:
(a)by mandamus or other action or proceeding or suit at law or in equity to enforce
its rights against the Authority or the City or any member, director, officer or employee thereof, and to
compel the Authorityor the City or any such member, director, officer or employee to perform or carry
out its or his or her duties under law and the agreements and covenants required to be performed by it
or him or her contained herein;
(b)by suit in equity to enjoin any acts or things which are unlawful or violate the
rights of the Trustee; or
(c)by suit in equity upon the happening of any event of default hereunder to
require the Authority and the City to account as the trustee of an express trust.
Nothing herein shall be deemed to authorize the Trustee to authorize or consent to or accept or
adopt on behalf of any Owner any plan of reorganization, arrangement, adjustment or composition
affecting the Bonds or the rights of any Owner thereof, or to authorize the Trustee to vote in respect of
the claim of any Owner in any such proceeding without the approval of the Owners so affected.
Section 7.03 Non-Waiver. A waiver of any default or breach of duty or contract by the
Trustee shall not affect any subsequent default or breach of duty or contract or impair any rights or
remedies on any such subsequent default or breach of duty or contract. No delay or omission by the
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Trustee to exercise any right or remedy accruing upon any default or breach of duty or contract shall
impair any such right or remedy or shall be construed to be a waiver of any such default or breach of
duty or contract or an acquiescence therein, and every right or remedy conferred upon the Trustee by
law or by this Article may be enforced and exercised from time to time and as often the Trustee shall
deem expedient.
If any action, proceeding or suit to enforce any right or to exercise any remedy is abandoned
or determined adversely to the Trustee or any Owner, then subject to any adverse determination, the
Trustee, such Owner, the Authority and the City shall be restored to their former positions, rights and
remedies as if such action, proceeding or suit had not been brought or taken.
Section 7.04 Remedies Not Exclusive. Subject to the provisions of Section 7.01 hereof, no
remedy herein conferred upon or reserved to the Trustee is intended to be exclusive of any other
remedy, and each such remedy shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing in law or in equity or by statute or otherwise and may be
exercised without exhausting and without regard to any other remedy conferred by any law. The
assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the
concurrent assertion or employment of any other appropriate right or remedy.
Section 7.05 No Liability by the 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 Base Rental Payments by the City, or with respect to the performance by the
City of the other agreements and covenants required to be performed by it contained in the Lease
Agreement or herein, or with respect to the performance by the Trustee of any right or obligation
required to be performed by it contained herein.
Section 7.06 No Liability by the City to the Owners. Except for the payment when due of
the Base Rental Payments and the performance of the other agreements and covenants required to be
performed by it contained in the Lease Agreement, the Ground Lease or herein, the City shall not have
any obligation or liability to the Owners with respect to this Indenture or the preparation, execution,
delivery or transfer of the Bonds or the disbursement of the Base Rental Payments by the Trustee to
the Owners, or with respect to the performance by the Trustee of any right or obligation required to be
performed by it contained herein.
Section 7.07 No Liability of the Trustee to the Owners. Except as expressly provided
herein, the Trustee shall not have any obligation or liability to the Owners with respect to the payment
when due of the Base Rental Payments by the City, or with respect to the performance by the Authority
or the City of the other agreements and covenants required to be performed by them contained in the
Lease Agreement, the Ground Lease or herein.
Section 7.08 Application of Amounts After Default. All payments received by the Trustee
with respect to the rental of the Property after a default by the City pursuant to Article VI of the Lease
Agreement (including, without limitation, any proceeds received in connection with the sale,
assignment or sublease of the Authority’s right, title and interest in the Ground Lease), and all damages
or other payments received by the Trustee for the enforcement of any rights and powers of the Trustee
under Article VI of the Lease Agreement, shall be deposited into the Base Rental Payment Fund and
as soon as practicable thereafter applied, together with all other funds held hereunder (except funds in
the Rebate Fund):
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(a)to the payment of all amounts due the Trustee under Article VIII hereof;
(b)to the payment of all amounts then due for interest on the Bonds, in respect of
which, or for the benefit of which, money has been collected (other than Bonds which have become
payable-prior to such event of default and money for the payment of which is held by the Trustee),
ratably without preference or priority of any kind, according to the amounts of interest on such Bonds
due and payable; and
(c)to the payment of all amounts then due for principal of the Bonds, in respect of
which, or for the benefit of which, money has been collected (other than Bonds which have become
payable prior to such event of default and money for the payment of which is held by the Trustee),
ratably without preference or priority of any kind, according to the amounts of principal of such Bonds
due and payable.
Section 7.09 Trustee May Enforce Claims Without Possession of Bonds. All rights of
action and claims under this Indenture or the Bonds may be prosecuted and enforced by the Trustee
without the possession of any of the Bonds or the production thereof in any proceeding relating thereto,
and any such proceeding instituted by the Trustee shall be brought in its own name as trustee of an
express trust, and any recovery of judgment shall, after provision for the payment of the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Owners in respect of which such judgment has been recovered.
Section 7.10 Limitation on Suits. No Owner of any Bond shall have any right to institute
any proceeding, judicial or otherwise, with respect to this Indenture, or for the appointment of a
receiver or Trustee, or for any other remedy hereunder, unless (a) such Owner shall have previously
given written notice to the Trustee of a continuing event of default, (b) the Owners of not less than
25% of the aggregate principal amount of Bonds then Outstanding shall have made written request to
the Trustee to institute proceedings in respect of such event of default in its own name as Trustee
hereunder, (c) such Owner or Owners shall have afforded to the Trustee indemnity reasonably
satisfactory to the Trustee against the costs, expenses and liabilities to be incurred in compliance with
such request, (d) the Trustee for 60 days after its receipt of such notice, request and offer of indemnity
shall have failed to institute any such proceedings, and (e) no direction inconsistent with such written
request shall have been given to the Trustee during such 60 day period by the Owners of a majority of
the aggregate principal amount of Bonds then Outstanding; it being understood and intended that no
one or more Owners shall have any right in any manner whatever by virtue of, or by availing of, any
provision of this Indenture to affect, disturb or prejudice the rights of any other Owner, or to obtain or
seek to obtain priority or preference over any other Owner or to enforce any right under this Indenture,
except in the manner herein provided and for the equal and ratable benefit of all the Owners.
ARTICLE VIII
THE TRUSTEE
Section 8.01 Employment of the Trustee. The Authority hereby appoints and employs the
Trustee to receive, deposit and disburse the Base Rental Payments, to authenticate, deliver and transfer
the Bonds and to perform the other functions contained herein, all in the manner provided herein and
subject to the conditions and terms hereof. By executing and delivering this Indenture, the Trustee
accepts the appointment and employment hereinabove referred to and accepts the rights and obligations
of the Trustee provided herein, subject to the conditions and terms hereof. Other than when an event
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of default has occurred and is continuing, the Trustee undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture, and no implied covenants or obligations shall be
read into this Indenture against the Trustee. In case an event of default has occurred and is continuing,
the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same
degree of care and skill in their exercise, as a prudent man would exercise or use under the
circumstances in the conduct of his own affairs. The Trustee hereby covenants and agrees that it will
not encumber the Property.
Section 8.02 Duties, Removal and Resignation of the Trustee. The Authority may, by an
instrument in writing, remove the Trustee initially a party hereto and any successor thereto unless an
event of default shall have occurred and then be continuing, and shall remove the Trustee initially a
party hereto and any successor thereto if at any time (a) requested to do so by an instrument or
concurrent instruments in writing signed by the Owners of a majority of the aggregate principal amount
of Bonds at the time Outstanding (or their attorneys duly authorized in writing), or (b) the Trustee shall
cease to be eligible in accordance with the following sentence, and shall appoint a successor Trustee.
The Trustee and any successor Trustee shall be a banking corporation or association or trust company
having (or if such banking corporation or association or trust company is a member of a bank holding
company, its bank holding company has) a combined capital (exclusive of borrowed capital) and
surplus of at least $50,000,000 and subject to supervision or examination by federal or state authorities.
If such banking corporation or association or trust company publishes a report of condition at least
annually, pursuant to law or to the requirements of any supervising or examining authority above
referred to, then for the purposes of this Section the combined capital and surplus of such bank 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.
The Trustee may at any time resign by giving written notice of such resignation to the Authority
and the City and by giving notice, by first class mail, postage prepaid, of such resignation to the Owners
at their addresses appearing on the Registration Books. Upon receiving such notice of resignation, the
Authority shall promptly appoint a successor Trustee by an instrument in writing; provided, however,
that in the event the Authority does not appoint a successor Trustee within 30 days following receipt
of such notice of resignation, the resigning Trustee may, at the expense of the Authority, petition the
appropriate court having jurisdiction to appoint a successor Trustee. Any resignation or removal of a
Trustee and appointment of a successor Trustee shall become effective only upon acceptance of
appointment by the successor Trustee.
Any corporation, association or agency into which the Trustee may be converted or merged, or
with which it may be consolidated, or to which it may sell or transfer its corporate trust business and
assets as a whole or substantially as a whole, or any corporation or association resulting from any such
conversion, sale, merger, consolidation or transfer to which it is a party, provided that such entity meets
the combined capital and surplus requirements of this Section, ipso facto, shall be and become
successor trustee under this Indenture and vested with all the trusts, powers, discretions, immunities,
privileges and all other matters as was its predecessor, without the execution or filing of any instrument
or any further act, deed or conveyance on the part of any of the parties hereto, anything herein to the
contrary notwithstanding.
Section 8.03 Compensation of the Trustee. The City shall from time to time, subject to
any written agreement then in effect with the Trustee, pay the Trustee reasonable compensation for all
its services rendered hereunder and reimburse the Trustee for all its reasonable advances and
expenditures (which shall not include “overhead expenses” except as such expenses are included as a
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component of the Trustee’s stated annual fees) hereunder, including but not limited to advances to and
reasonable fees and reasonable expenses of accountants, agents, appraisers, consultants or other
experts, and counsel not directly employed by the Trustee but an attorney or firm of attorneys retained
by the Trustee, employed by it in the exercise and performance of its rights and obligations hereunder.
The Trustee may take whatever legal actions are lawfully available to it directly against the Authority
or the City.
The City shall, to the extent permitted by law, indemnifyand save the Trustee harmless against
any liabilities, costs, claims or expenses, including those of its attorneys, which it may incur in the
exercise and performance of its powers and duties hereunder, under the Lease Agreement, or in
connection with any document or transaction contemplated hereunder or thereunder, including the
enforcement of any remedies and the defense of any suit, and which are not due to its negligence or its
misconduct. The duty of the City to indemnify the Trustee shall survive the termination and discharge
of this Indenture and the earlier removal or resignation of the Trustee.
No provision of this Indenture shall require the Trustee to expend or risk its own funds or
otherwise incur any financial liability in the performance of any of its duties hereunder or in the
exercise of any of its rights or powers hereunder.
Upon an Event of Default, and only upon an Event of Default, the Trustee shall have a first
lien with right of payment prior to payment on account of principal of and premium, if any, and interest
on any Bond, upon the trust estate for the foregoing fees, charges and expenses incurred by it. When
the Trustee incurs expenses or renders services after the occurrence of an Event of Default, such
expenses and the compensation for such services are intended to constitute expenses of administration
under any federal or state bankruptcy, insolvency, arrangement, moratorium, reorganization or other
debtor relief law.
Section 8.04 Protection of the Trustee. The Trustee shall be protected and shall incur no
liability in acting or proceeding in good faith upon any affidavit, bond, certificate, consent, notice,
request, requisition, resolution, statement, telegram, voucher, waiver or other paper or document which
it shall in good faith believe to be genuine and to have been adopted, executed or delivered by the
proper party or pursuant to any of the provisions hereof, 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 accept and rely upon the same as conclusive evidence of the truth and accuracy of
such statements. The Trustee shall be under no obligation to exercise any of the rights or powers vested
in it by this Indenture at the request or direction of any of the Owners of the Bonds pursuant to this
Indenture, unless such Owners shall have offered to the Trustee security or indemnity, reasonably
satisfactory to the Trustee, against the reasonable costs, expenses and liabilities which might be
incurred by it in compliance with such request or direction. The Trustee may consult with counsel,
who may be counsel to the Authority or the City, with regard to legal questions, and the opinion of
such counsel shall be full and complete authorization and protection in respect to any action taken or
suffered by it hereunder in good faith in accordance therewith.
The Trustee shall not be responsible for the sufficiency of the Bonds or the Lease Agreement,
or of the assignment made to it by the Assignment Agreement, or for statements made in any
preliminary or final official statement relating to the Bonds, or of the title to the Property.
Whenever in the administration of its rights and obligations hereunder the Trustee shall deem
it necessary or desirable that a matter be proved or established prior to taking or suffering any action
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hereunder, such matter (unless other evidence in respect thereof be herein specifically prescribed) may
be deemed to be conclusively proved and established by a Written Certificate of the City or a Written
Certificate of the Authority, and such certificate shall be full warrant to the Trustee for any action taken
or suffered under the provisions hereof upon the faith thereof, but in its discretion the Trustee may, in
lieu thereof, accept other evidence of such matter or may require such additional evidence as it deems
reasonable.
The Trustee may buy, sell, own, hold and deal in any of the Bonds and may join in any action
which any Owner may be entitled to take with like effect as if the Trustee were not a party hereto, The
Trustee, either as principal or agent, may also engage in or be interested in any financial or other
transaction with the Authorityor the City, and may act as agent, depository or trustee for any committee
or body of Owners or of owners of obligations of the Authority or the City as freely as if it were not
the Trustee hereunder.
The Trustee may, to the extent reasonably necessary, execute any of the trusts or powers hereof
and perform any rights and obligations required of it hereunder by or through agents, attorneys or
receivers, and shall be entitled to advice of counsel concerning all matters of trust and its rights and
obligations hereunder, and the Trustee shall not be answerable for the negligence or misconduct of any
such agent, attorney or receiver selected by it with reasonable care; provided, however, that in the event
of any negligence or misconduct of any such attorney, agent or receiver, the Trustee shall in a
commercially reasonable manner pursue all remedies of the Trustee against such agent, attorney or
receiver. The Trustee shall not be liable for any error of judgment made by it in good faith unless it
shall be proved that the Trustee was negligent in ascertaining the pertinent facts.
The Trustee shall not be answerable for the exercise of any trusts or powers hereunder or for
anything whatsoever in connection with the funds established hereunder, except only for its own willful
misconduct, negligence or breach of an obligation hereunder.
The Trustee shall not be deemed to have knowledge of an event of default unless it has actual
knowledge thereof.
The Trustee may, on behalf of the Owners, intervene in any judicial proceeding to which the
Authority or the City is a party and which, in the opinion of the Trustee and its counsel, affects the
Bonds or the security therefor, and shall do so if requested in writing by the Owners of at least 5% of
the aggregate principal amount of Bonds then Outstanding, provided the Trustee shall have no duty to
take such action unless it has been indemnified to its reasonable satisfaction against all risk or liability
arising from such action.
The Trustee’s rights to immunities and protection from liability hereunder and its rights to
payment of its fees and expenses shall survive its resignation or removal and final payment or
defeasance of the Bonds.
All indemnifications and releases from liability granted herein to the Trustee shall extend to
the directors, officers, employees and agents of the Trustee (including its counsel).
The permissive right of the Trustee to do things enumerated in this Indenture shall not be
construed as a duty, and the Trustee shall not be answerable for other than its negligence or willful
default. The Trustee shall have no responsibility or liability with respect to any information, statements
or recitals in any offering memorandum or other disclosure material prepared or distributed with
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respect to the issuance of these Bonds. The Trustee shall not be accountable for the use or application
by the Borrower of any of the Bonds or the proceeds thereof or for the use or application of any money
paid over by the Trustee in accordance with the provisions of this Indenture or for the use and
application of money received by any paying agent.
The Trustee shall not be liable to the parties hereto or deemed in breach or default hereunder
if and to the extent its performance hereunder is prevented by reason of force majeure. The term “force
majeure” means an occurrence that is beyond the control of the Trustee and could not have been
avoided by exercising due care. Force majeure shall include but not limited to acts of God, terrorism,
war, riots, strikes, fire, floods, earthquakes, epidemics or other similar occurrences.
The Trustee agrees to accept and act upon instructions or directions pursuant to this Indenture
sent by unsecured e-mail, facsimile transmission or other similar unsecured electronic methods;
provided, however, that the Trustee shall have received an incumbency certificate listing persons
designated to give such instructions or directions and containing specimen signatures of such
designated persons, which such incumbency certificate shall be amended and replaced whenever a
person is to be added or deleted from the listing. If the Authority or the City elects to give the Trustee
e-mail or facsimile instructions (or instructions by a similar electronic method) and the Trustee in its
discretion elects to act upon such instructions, the Trustee’s understanding of such instructions shall
be deemed controlling. The Trustee shall not be liable for any losses, costs or expenses arising directly
or indirectly from the Trustee’s reliance upon and compliance with such instructions notwithstanding
such instructions conflict or are inconsistent with a subsequent written instruction. The Authority and
the City agree to assume all risks arising out of the use of such electronic methods to submit instructions
and directions to the Trustee, including, without limitation, the risk of the Trustee acting on
unauthorized instructions, and the risk of interception and misuse by third parties.
In acting or omitting to act pursuant to the Lease Agreement or Ground Lease, the Trustee shall
be entitled to all of the rights, immunities and indemnities accorded to it under this Indenture and the
Lease Agreement, including, but not limited to, this Article VIII.
ARTICLE IX
MODIFICATION OR AMENDMENTS
Section 9.01 Modifications and Amendments Permitted.
(a)This Indenture and the rights and obligations of the Authority, the City, the
Owners of the Bonds and the Trustee may be modified or amended from time to time and at any time
by a Supplemental Indenture, which the Authority, the City and the Trustee may enter into with the
written consent of the Owners of a majority in aggregate principal amount of all Bonds then
Outstanding, which shall have been filed with the Trustee. No such modification or amendment shall
(i) extend the fixed maturity of any Bonds, or reduce the amount of principal thereof or the rate of
interest thereon, or extend the time of payment, without the consent of the Owner of each Bond so
affected, or (ii) reduce the aforesaid percentage of Bonds the consent of the Owners of which is
required to effect any such modification or amendment, or (iii) permit the creation of any lien on the
Base Rental Payments and other assets pledged under this Indenture prior to or on a parity with the
lien created by this Indenture or deprive the Owners of the Bonds of the lien created by this Indenture
on such Base Rental Payments and other assets (except as expressly provided in this Indenture),
without the consent of the Owners of all of the Bonds then Outstanding. It shall not be necessary for
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the consent of the Bond Owners to approve the particular form of any Supplemental Indenture, but it
shall be sufficient if such consent shall approve the substance thereof.
(b)This Indenture and the rights and obligations of the Authority, the City, the
Trustee and the Owners of the Bonds may also be modified or amended from time to time and at any
time by a Supplemental Indenture, which the Authority, the City and the Trustee may enter into without
the consent of any Bond Owners for any one or more of the following purposes:
(i)to add to the covenants and agreements of the Authority or the City in
this Indenture contained other covenants and agreements thereafter to be observed, to pledge or assign
additional security for the Bonds (or any portion thereof), or to surrender any right or power herein
reserved to or conferred upon the Authority or the City;
(ii)to make such provisions for the purpose of curing any ambiguity,
inconsistency or omission, or of curing or correcting any defective provision contained in this
Indenture;
(iii)to provide for the issuance of one or more Series of Additional Bonds,
and to provide the terms and conditions under which such Series of Additional Bonds may be issued,
subject to and in accordance with the provisions of Article III hereof;
(iv)to modify, amend or supplement this Indenture in such manner as to
permit the qualification hereof under the Trust Indenture Act of 1939, as amended, or any similar
federal statute hereafter in effect, and to add such other terms, conditions and provisions as may be
permitted by said act or similar federal statute;
(v)to modify, amend or supplement this Indenture in such manner as to
cause interest on the Bonds to be excludable from gross income for purposes of federal income taxation
by the United States of America; and
(vi)in any other respect whatsoever as the Authorityand the City may deem
necessary or desirable, provided that such modification or amendment does not materially adversely
affect the interests of the Bond Owners hereunder, in the opinion of Bond Counsel filed with the
Authority, the City and the Trustee.
(c)Promptly after the execution by the Authority, the City and the Trustee of any
Supplemental Indenture, the Trustee shall mail a notice (the form of which shall be furnished to the
Trustee by the Authority), by first class mail postage prepaid, setting forth in general terms the
substance of such Supplemental Indenture, to the Owners of the Bonds at the respective addresses
shown on the Registration Books. Any failure to give such notice, or any defect therein, shall not,
however, in any way impair or affect the validity of any such Supplemental Indenture.
(d)No Supplemental Indenture shall modify any of the rights or obligations of the
Trustee without its prior written consent.
Section 9.02 Effect of Supplemental Indenture. Upon the execution of any Supplemental
Indenture pursuant to this Article, this Indenture shall be deemed to be modified and amended in
accordance therewith, and the respective rights, duties and obligations under this Indenture of the
Authority, the City, the Trustee and all Owners of Bonds Outstanding shall thereafter be determined,
38
exercised and enforced hereunder subject in all respects to such modification and amendment, and all
the terms and conditions of any such Supplemental Indenture shall be deemed to be part of the terms
and conditions of this Indenture for any and all purposes.
Section 9.03 Endorsement of Bonds; Preparation of New Bonds. Bonds delivered after
the execution of any Supplemental Indenture pursuant to this Article may, and if the Authority so
determines shall, bear a notation by endorsement or otherwise in form approved by the Authority and
the Trustee as to any modification or amendment provided for in such Supplemental Indenture, and, in
that case, upon demand of the Owner of any Bonds Outstanding at the time of such execution and
presentation of his Bonds for the purpose at the Office of the Trustee a suitable notation shall be made
on such Bonds. If the Supplemental Indenture shall so provide, new Bonds so modified as to conform,
in the opinion of the Authority and the Trustee, to any modification or amendment contained in such
Supplemental Indenture, shall be prepared and executed by the Authority and authenticated by the
Trustee, and upon demand of the Owners of any Bonds then Outstanding shall be exchanged at the
Office of the Trustee, without cost to any Bond Owner, for Bonds then Outstanding, upon surrender
for cancellation of such Bonds, in equal aggregate principal amount of the same interest rate and
maturity.
Section 9.04 Amendment of Particular Bonds. The provisions of this Article shall not
prevent any Bond Owner from accepting any amendment as to the particular Bonds held by such
Owner.
ARTICLE X
DEFEASANCE
Section 10.01 Discharge of Indenture. If the Authority shall pay or cause to be paid or there
shall otherwise be paid to the Owners of all Outstanding Bonds the principal thereof and the interest
and premium, if any, thereon at the times and in the manner stipulated herein and therein, then the
Owners of such Bonds shall cease to be entitled to the pledge of the Base Rental Payments and the
other assets as provided herein, and all agreements, covenants and other obligations of the Authority
and the City to the Owners of such Bonds hereunder shall thereupon cease, terminate and become void
and be discharged and satisfied. In such event, the Trustee shall execute and deliver to the Authority
and the City all such instruments as may be necessary or desirable to evidence such discharge and
satisfaction, and the Trustee shall pay over or deliver to the City all money or securities held by it
pursuant hereto which are not required for the payment of the principal of and interest and premium,
if any, on such Bonds,
Subject to the provisions of the above paragraph, when any of the Bonds shall have been paid
and if, at the time of such payment, the Authorityand the City shall have kept, performed and observed
all of the covenants and promises in such Bonds and in this Indenture required or contemplated to be
kept, performed and observed by them on or prior to that time, then this Indenture shall be considered
to have been discharged in respect of such Bonds and such Bonds shall cease to be entitled to the lien
of this Indenture and such lien and all covenants, agreements and other obligations of the Authority
and the City hereunder shall cease, terminate become void and be completely discharged as to such
Bonds.
Notwithstanding the satisfaction and discharge of this Indenture or the discharge of this
Indenture in respect of any Bonds, those provisions of this Indenture relating to the maturity of the
39
Bonds, interest payments and dates thereof, exchange and transfer of Bonds, replacement of mutilated,
destroyed, lost or stolen Bonds, the safekeeping and cancellation of Bonds, non-presentment of Bonds,
and the duties of the Trustee in connection with all of the foregoing, shall remain in effect and shall be
binding upon the Trustee and the Owners of the Bonds and the Trustee shall continue to be obligated
to hold in trust any moneys or investments then held by the Trustee for the payment of the principal of
and interest and premium, if any, on the Bonds, to pay to the Owners of Bonds the funds so held by
the Trustee as and when such payment becomes due. Notwithstanding the satisfaction and discharge
of this Indenture or the discharge of this Indenture in respect of any Bonds, those provisions of this
Indenture relating to the compensation and indemnity of the Trustee shall remain in effect and shall be
binding upon the Trustee, the City and the Authority.
Section 10.02 Bonds Deemed To Have Been Paid. If moneys shall have been set aside and
held by the Trustee for the payment or redemption of any Bonds and the interest thereon at the maturity
or redemption date thereof, such Bonds shall be deemed to have been paid within the meaning and
with the effect provided in Section 10.01 hereof. Any Outstanding Bonds shall prior to the maturity
date or redemption date thereof be deemed to have been paid within the meaning of and with the effect
expressed in Section 10.01 hereof if (a) in case any of such Bonds are to be redeemed on any date prior
to their maturity date, the Authority shall have given to the Trustee in form satisfactory to it irrevocable
instructions to mail, on a date in accordance with the provisions of Section 4.02 hereof, notice of
redemption of such Bonds on said redemption date, said notice to be given in accordance with
Section 4.02 hereof, (b) there shall have been deposited with the Trustee either (i) money in an amount
which shall be sufficient, or (ii) Federal Securities that are not subject to redemption other than at the
option of the holder thereof, the interest on and principal of which when paid will provide money
which, together with the money, if any deposited with the Trustee at the same time, shall, as verified
by an independent certified public accountant, be sufficient to pay when due the interest to become
due on such Bonds on and prior to the maturity date or redemption date thereof, as the case may be,
and the principal of and premium, if any, on such Bonds, and (c) in the event such Bonds are not by
their terms subject to redemption within the next succeeding 60 days, the Authority shall have given
the Trustee in form satisfactory to it irrevocable instructions to mail as soon as practicable, a notice to
the owners of such Bonds that the deposit required by clause (b) above has been made with the Trustee
and that such Bonds, are deemed to have been paid in accordance with this Section and stating the
maturity date or redemption date upon which money is to be available for the payment of the principal
of and premium, if any, on such Bonds.
Section 10.03 Payment of Bonds After Discharge of Indenture. Notwithstanding any
provisions of this Indenture, to the extent permitted by law, any moneys held by the Trustee in trust
for the payment of the principal of, or premium or interest on, any Bonds and remaining unclaimed for
two years after the date of deposit of such moneys, shall be repaid to the Authority (without liability
for interest) free from the trusts created by this Indenture, and all liability of the Trustee with respect
to such moneys shall thereupon cease; provided, however, that before the repayment of such moneys
to the Authority as aforesaid, the Trustee may (at the cost of the Authority) first mail, by first class
mail postage prepaid, to the Owners of Bonds which have not yet been paid, at the respective addresses
shown on the Registration Books, a notice, in such form as may be deemed appropriate by the Trustee
with respect to the Bonds so payable and not presented and with respect to the provisions relating to
the repayment to the Authority of the moneys held for the payment thereof.
40
ARTICLE XI
MISCELLANEOUS
Section 11.01 Benefits of Indenture Limited to Parties. Nothing contained herein,
expressed or implied, is intended to give to any person other than the Authority, the City, the Trustee
and the Owners any claim, remedy or right under or pursuant hereto, and any agreement, condition,
covenant or term required herein to be observed or performed by or on behalf of the Authority or the
City shall be for the sole and exclusive benefit of the Trustee and the Owners.
Section 11.02 Successor Deemed Included in all References to Predecessor. Whenever
the Authority, the City or the Trustee, or any officer thereof, is named or referred to herein, such
reference shall be deemed to include the successor to the powers, duties and functions that are presently
vested in the Authority, the City or the Trustee, or such officer, and all agreements, conditions,
covenants and terms required hereby to be observed or performed by or on behalf of the Authority, the
City or the Trustee, or any officer thereof, shall bind and inure to the benefit of the respective successors
thereof whether so expressed or not.
Section 11.03 Execution of Documents by Owners. Any declaration, request or other
instrument which is permitted or required herein to be executed by Owners may be in one or more
instruments of similar tenor and may be executed by Owners in person or by their attorneys appointed
in writing. The fact and date of the execution by any Owner or his attorney of any declaration, request
or other instrument or of any writing appointing such attorney may be proved by the certificate of any
notary public or other officer authorized to take acknowledgments of deeds to be recorded in the state
or territory in which he purports to act that the person signing such declaration, request or other
instrument or writing acknowledged to him the execution thereof, or by an affidavit of a witness of
such execution duly sworn to before such notary public or other officer, or by such other proof as the
Trustee may accept which it may deem sufficient.
The ownership of any Bonds and the amount, payment date, number and date of owning the
same may be proved by the Registration Books.
Any declaration, request or other instrument in writing of the Owner of any Bond shall bind
all future Owners of such Bond with respect to anything done or suffered to be done by the Authority,
the City or the Trustee in good faith and in accordance therewith.
Section 11.04 Waiver of Personal Liability. Notwithstanding anything contained herein to
the contrary, no member, officer or employee of the Authority or the City shall be individually or
personally liable for the payment of any moneys, including without limitation, the principal of or
interest on the Bonds, but nothing contained herein shall relieve any member, officer or employee of
the City or the Authority from the performance of any official duty provided by any applicable
provisions of law, by the Lease Agreement or hereby.
Section 11.05 Destruction of Bonds. Whenever in this Indenture provision is made for the
cancellation by the Trustee and the delivery to the Authority of any Bonds, the Trustee may, in lieu of
such cancellation and delivery, destroy such Bonds.
Section 11.06 Funds and Accounts. Any fund or account required to be established and
maintained herein by the Trustee may be established and maintained in the accounting records of the
41
Trustee either as an account or a fund, and may, for the purposes of such accounting records, any audits
thereof and any reports or statements with respect thereto, be treated either as an account or a fund, but
all such records with respect to all such funds and accounts shall at an times be maintained in
accordance with sound accounting practice and with due regard for the protection of the security of the
Bonds and the rights of the Owners.
The Trustee may commingle any of the moneys held by it hereunder for investment purposes
only; provided, however, that the Trustee shall account separately for the moneys in each fund or
account established pursuant to this Indenture. The Trustee may establish such funds and accounts as
it deems necessary or appropriate to perform its obligations hereunder.
Section 11.07 Article and Section Headings Gender and References. The singular form
of any word used herein, including the terms defined in Section 1.01 hereof, shall include the plural,
and vice versa, unless the context otherwise requires. The use herein of a pronoun of any gender shall
include correlative words of the other genders. The headings or titles of the several Articles and
Sections hereof and the table of contents appended hereto shall be solely for convenience of reference
and shall not affect the meaning, construction or effect hereof. All references herein to “Articles,”
“Sections,” subsections or clauses are to the corresponding Articles, Sections, subsections or clauses
hereof, and the words “hereby,” “herein,” “hereof,” “hereto,” “herewith,” “hereunder” and other words
of similar import refer to this Indenture as a whole and not to any particular Article, Section, subsection
or clause thereof.
Section 11.08 Partial Invalidity. If any one or more of the agreements, conditions,
covenants or terms required herein to be observed or performed by or on the part of the Authority, the
City or the Trustee shall be contrary to law, then such agreement or agreements, such condition or
conditions, such covenant or covenants or such term or terms shall be null and void to the extent
contrary to law and shall be deemed separable from the remaining agreements, conditions, covenants
and terms hereof and shall in no way affect the validity hereof or of the Bonds, and the Owners shall
retain all the benefit, protection and security afforded to them under any applicable provisions of law.
The Authority, the City and the Trustee hereby declare that they would have executed this Indenture,
and each and every Article, Section, paragraph, subsection, sentence, clause and phrase hereof and
would have authorized the execution and delivery of the Bonds pursuant hereto irrespective of the fact
that any one or more Articles, Sections, paragraphs, subsections, sentences, clauses or phrases hereof
or the application thereof to any person or circumstance may be held to be unconstitutional,
unenforceable or invalid.
Section 11.09 Disqualified Bonds. In determining whether the Owners of the requisite
aggregate principal amount of Bonds have concurred in any demand, request, direction, consent or
waiver under this Indenture, Bonds which are actually known by the Trustee to be owned or held by
or for the account of the Authority or the City, or by any Person directly or indirectly controlling or
controlled by, or under direct or indirect common control with, the Authority or the City, shall be
disregarded and deemed not to be Outstanding for the purpose of any such determination; except that,
in determining whether the Trustee shall be protected in relying upon any such demand, request,
direction, consent or waiver of an Owner, only Bonds which the Trustee actually knows to be owned
or held by or for the account of the Authority or the City, or by any Person directly or indirectly
controlling or controlled by, or under direct or indirect common control with, the Authorityor the City,
shall be disregarded unless all Bonds are so owned or held, in which case such Bonds shall be
considered Outstanding for the purpose of such determination. Bonds so owned which have been
pledged in good faith may be regarded as Outstanding for the purposes of this Section if the pledgee
42
shall establish to the satisfaction of the Trustee the pledgee’s right to vote such Bonds and that the
pledgee is not a Person directly or indirectly controlling or controlled by, or under direct or indirect
common control with, the Authority or the City. In case of a dispute as to such right, any decision by
the Trustee taken upon the advice of counsel shall be full protection to the Trustee.
Section 11.10 Money Held for Particular Bonds. The money held by the Trustee for the
payment of the interest, principal or premium due on any date with respect to particular Bonds (or
portions of Bonds in the case of Bonds redeemed in part only) shall, on and after such date and pending
such payment, be set aside on its books and held in trust by it for the Owners of the Bonds entitled
thereto, subject, however, to the provisions of Section 10.03 hereof but without any liability for interest
thereon.
Section 11.11 Payment on Non-Business Days. In the event any payment is required to be
made hereunder on a day which is not a Business Day, such payment shall be made on the next
succeeding Business Day with the same effect as if made on such non-Business Day.
Section 11.12 California Law. This Indenture shall be construed and governed in
accordance with the laws of the State of California.
Section 11.13 Notices. All written notices to be given hereunder shall be given by mail to
the party entitled thereto at its address set forth below, or at such other address as such party may
provide to the other parties in writing from time to time, namely:
If to the City:City of Lake Elsinore
130 South Main Street
Lake Elsinore, California 92530
Attention: City Manager
If to the Authority:Lake Elsinore Facilities Financing Authority
c/o City of Lake Elsinore
130 South Main Street
Lake Elsinore, California 92530
Attention: Executive Director
If to the Trustee:Wilmington Trust, National Association,
650 Town Center Drive, Suite 600
Costa Mesa, California 92626
Attention: Corporate Trust Department
Each such notice, statement, demand, consent, approval, authorization, offer, designation,
request or other communication hereunder shall be deemed delivered to the party to whom it is
addressed (a) if personally served or delivered, upon delivery, (b) if given by electronic
communication, whether by telex, telegram or telecopier, upon the sender’s receipt of an appropriate
answer back or other written acknowledgment, (c) if given by registered or certified mail, return receipt
requested, deposited with the United States mail postage prepaid, 72 hours after such notice is
deposited with the United States mail, (d) if given by overnight courier, with courier charges prepaid,
24 hours after delivery to said overnight courier, or (d) if given by any other means, upon delivery at
the address specified in this Section.
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Section 11.14 Notice to Rating Agencies. The Trustee shall provide S&P, if the Bonds are
then rated by S&P, and Moody’s, if the Bonds are then rated by Moody’s, with prompt notice of any
substitution or release of property pursuant to Section 9.03 of the Lease Agreement.
Section 11.15 Execution in Counterparts. This Indenture may be executed in several
counterparts, each of which shall be deemed an original, and all of which shall constitute but one and
the same instrument.
S-1
IN WITNESS WHEREOF, the Authority and the City have caused this Indenture to be signed
in their respective names by their representative thereunto duly authorized, and the Trustee, in token
of its acceptance of the trusts created hereunder, has caused this Indenture to be signed in its corporate
name by its officer thereunto duly authorized, all as of the day and year first above written,
LAKE ELSINORE FACILITIES FINANCING
AUTHORITY
By:
Executive Director
ATTEST:
Secretary
CITY OF LAKE ELSINORE
By:
City Manager
ATTEST:
City Clerk
APPROVED AS TO FORM:
Stradling Yocca Carlson & Rauth,
Special Counsel
S-2
WILMINGTON TRUST, NATIONAL
ASSOCIATION,
as Trustee
By:
Authorized Officer
A-1
EXHIBIT A
FORM OF SERIES 2016A BOND
No. ____$___________
UNLESS THIS BOND IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY TO THE TRUSTEE FOR REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT, AND ANY BOND ISSUED IS REGISTERED IN THE NAME OF
CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND ANY PAYMENT IS
MADE TO CEDE & CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE
OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
LAKE ELSINORE FACILITIES FINANCING AUTHORITY
LEASE REVENUE BOND
SERIES 2016A
INTEREST RATE MATURITY DATE DATED DATE CUSIP
______%April 1, 20___________, 2016 ___
REGISTERED OWNER:CEDE & CO.
PRINCIPAL AMOUNT:_________________________ DOLLARS
The Lake Elsinore Facilities Financing Authority(the “Authority”), for value received, hereby
promises to pay, solely from the Base Rental Payments (as hereinafter defined) or amounts in certain
funds and accounts held under the Indenture (as hereinafter defined), to the Registered Owner
identified above or registered assigns (the “Registered Owner”); on the Maturity Date identified above
or on any earlier redemption date, the Principal Amount identified above in lawful money of the United
States of America; and to pay interest thereon at the Rate of Interest identified above in like lawful
money from the date hereof payable semiannually on April 1 and November 1 in each year,
commencing April 1, 2017 (the “Interest Payment Dates”), until payment of such Principal Amount in
full. This Bond shall bear interest from the Interest Payment Date next preceding the date of
authentication of this Bond (unless this Bond is authenticated on or before an Interest Payment Date
and after the close of business on the fifteenth calendar day of the month next preceding such Interest
Payment Date, whether or not such day is a Business Day, in which event it shall bear interest from
such Interest Payment Date, or unless this Bond is authenticated on or prior to March 15, 2017, in
which event it shall bear interest from the Dated Date identified above; provided, however, that if, at
the time of authentication of this Bond, interest is in default on this Bond, interest on this Bond shall
be payable from the date to which interest hereon has been paid in full, payable on each Interest
Payment Date). The Principal Amount hereof is payable upon surrender hereof upon maturity or earlier
redemption at the Office of the Trustee (as hereinafter defined). Interest hereon is payable by wire or
check of Wilmington Trust, National Association,as Trustee (the “Trustee”), mailed by first class mail,
postage prepaid, on each Interest Payment Date to the Registered Owner hereof at the address of the
A-2
Registered Owner shown on the Registration Books at the close of business on the fifteenth calendar
day of the month next preceding such Interest Payment Date. “Office of the Trustee” means the
principal corporate trust office of the Trustee in Costa Mesa, California, or such other office as may be
specified to the Authority and the City of Lake Elsinore (the “City”) by the Trustee in writing, except
that with respect to presentation of Bonds for payment or for registration of transfer and exchange such
term shall mean the office or the agency of the Trustee at which, at any particular time, its corporate
trust agency shall be conducted as specified to the Authority and the City by the Trustee in writing.
This Bond is one of a series of a duly authorized issue of bonds issued for the purpose of
financing the acquisition, construction and installation of certain public improvements within the City
(the “Project”), and is one of the series of bonds designated “Lake Elsinore Facilities Financing
Authority Lease Revenue Bonds, Series 2016A” (the “Series 2016 Bonds”) in the aggregate principal
amount of $___________. The Series 2016 Bonds are issued pursuant to the Indenture, dated as of
November 1, 2016 (the “Indenture”), by and among the Authority, the City and the Trustee, and this
reference incorporates the Indenture herein, and by acceptance hereof the owner of this Bond assents
to said terms and conditions. Pursuant to and as more particularly provided in the Indenture, additional
bonds (“Additional Bonds”), may be issued by the Authority secured bya lien on a parity with the lien
securing the Series 2016 Bonds. The Series 2016 Bonds and any Additional Bonds are collectively
referred to as the “Bonds.” The Indenture is entered into, and this Bond is issued under, the Marks-
Roos Local Bond Pooling Act of 1985 (the “Act”) and the laws of the State of California.
Pursuant to the Indenture, the principal of and interest on the Bonds are payable solely from
certain base rental payments (the “Base Rental Payments”) under and pursuant to that certain Lease
Agreement, dated as of November 1, 2016 (the “Lease Agreement”), by and between the City, as
lessee, and the Authority, as lessor, all of which rights to receive such Base Rental Payments have been
assigned without recourse by the Authority to the Trustee. Subject only to the provisions of the
Indenture permitting the application thereof for the purposes and on the terms and conditions set forth
therein, all of the Base Rental Payments and any other amounts (including proceeds of the sale of the
Bonds) held in the Base Rental Payment Fund, the Interest Fund, the Principal Fund and the
Redemption Fund established under the Indenture are pledged to secure the payment of the principal
of, premium, if any, and interest on the Bonds in accordance with their terms, the provisions of the
Indenture and the Act. Said pledge constitutes a first lien on such assets.
The Series 2016Bonds are authorized to be issued in the form of fully registered bonds without
coupons in denominations of $5,000 or any integral multiple thereof (“Authorized Denominations”).
The Series 2016 Bonds shall be subject to redemption, in whole or in part, on any date, in
Authorized Denominations, from and to the extent of any net insurance proceeds received with respect
to all or a portion ofthe property leased under the Lease Agreement, remaining after payment therefrom
of all reasonable expenses incurred in the collection thereof, deposited by the Trustee in the
Redemption Fund established under the Indenture, at a Redemption Price equal to the principal amount
of the Series 2016 Bonds to be redeemed, plus accrued interest thereon to the date of redemption,
without premium.
The Series 2016 Bonds maturing on or after April 1, 20__, shall be subject to optional
redemption, in whole or in part, on any date on or after April 1, 20__, in Authorized Denominations,
from and to the extent of prepaid Base Rental Payments paid pursuant the Lease Agreement, at a
Redemption Price equal to the principal amount of the Series 2016 Bonds to be redeemed, plus accrued
interest thereon to the date of redemption.
A-3
The Series 2016 Bonds maturing on April 1, 20__ are subject to mandatory sinking fund
redemption in part (by lot) on each April 1 on and after April 1, 20__, in integral multiples of $5,000
at a Redemption Price of the principal amount thereof plus accrued interest to the date fixed for
redemption, without premium, in accordance with the following schedule:
Sinking Fund Redemption Date
(April 1)
Principal Amount
To Be Redeemed
(maturity)
The Trustee on behalf and at the expense of the Authority shall mail (by first class mail) notice
of any redemption to the respective owners of any Series 2016 Bonds designated for redemption, at
their respective addresses appearing on the Registration Books, at least 20 but not more than 60 days
prior to the date fixed for redemption; provided, however, that neither failure to receive any such notice
so mailed, nor any defect therein, shall affect the validity of the proceedings for the redemption of such
Series 2016 Bonds or the cessation of accrual of interest thereon from and after the date fixed for
redemption. The Redemption Price of the Series 2016 Bonds to be redeemed shall be paid only upon
presentation and surrender thereof at the Office of the Trustee. From and after the date fixed for
redemption of any Series 2016 Bonds, interest on such Series 2016 Bonds will cease to accrue and
become payable.
Subject to the limitations and upon payment of the charges, if any, provided in the Indenture,
fully registered Series 2016 Bonds may be exchanged at the Office of the Trustee for a like aggregate
principal amount and maturity of fully registered Series 2016 Bonds of other authorized
denominations.
This Bond is transferable by the Registered Owner hereof, in person or by his duly authorized
attorney, but only in the manner, subject to the limitations and upon payment of the charges provided
in the Indenture, and upon surrender and cancellation of this Bond. Upon such transfer a new fully
registered Series 2016 Bond or Series 2016 Bonds, in Authorized Denominations, for the same
aggregate principal amount will be issued to the transferee in exchange herefor. The Authority, the
City and the Trustee may treat the Registered Owner hereof as the absolute owner hereof for all
purposes, and the Authority, the City and the Trustee shall not be affected by any notice to the contrary.
The Indenture and the rights and obligations of the Authority, the City, the owners of the Bonds
and the Trustee may be modified or amended from time to time and at any time in the manner, to the
extent, and upon the terms provided in the Indenture; provided that no such modification or amendment
shall (a) extend the fixed maturity of any Bonds, or reduce the principal thereof or the rate of interest
thereon, or extend the time of payment, without the consent of the owner of each Bond so affected, or,
(b) reduce the percentage of Bonds the consent of the owners of which is required to effect any such
amendment or modification, or (c) permit the creation of any lien on the Base Rental Payments and
other assets pledged under the Indenture prior to or on a parity with the lien created by the Indenture
or deprive the owners of the Bonds of the lien created by the Indenture on such the Base Rental
Payments and such other assets (except as expressly provided in the Indenture), without the consent of
the owners of all Bonds then outstanding.
The Indenture contains provisions permitting the Authority to make provision for the payment
of interest on, and the principal and premium, if any, of any of the Bond so that such Bonds shall no
longer be deemed to be outstanding under the terms of the Indenture.
A-4
All obligations of the Authority under the Indenture shall be special obligations of the
Authority, payable solely from Rental Payments and the other assets pledged therefor under the
Indenture; provided, however, that all obligations of the Authority under the Bonds shall be special
obligations of the Authority, payable solely from Base Rental Payments and the other assets pledged
therefor under the Indenture. Neither the faith and credit nor the taxing power of the Authority, the
City or the State of California, or any political subdivision thereof, is pledged to the payment of the
Bonds.
IN WITNESS WHEREOF, the Authority has caused this Bond to be signed in its name and
on its behalf by the facsimile signatures of its Chair and Secretary, all as of the Dated Date identified
above.
LAKE ELSINORE FACILITIES FINANCING
AUTHORITY
By:
Chair
Attest:
Secretary
[FORM OF TRUSTEE’S CERTIFICATE OF AUTHENTICATION]
This is one of the Series 2016A Bonds described in the within-mentioned Indenture and
registered on the Registration Books.
Date: _____________________WILMINGTON TRUST, NATIONAL
ASSOCIATION, as Trustee
By:
Authorized Signatory
A-5
[FORM OF ASSIGNMENT]
For value, received the undersigned hereby sells, assigns and transfers unto
____________________________________________ whose address and social security or other tax
identifying number is ______________________, the within-mentioned Bond and hereby irrevocably
constitute(s) and appoint(s) ____________________________________ attorney, to transfer the same
on the registration books of the Trustee with full power of substitution in the premises.
Dated: ____________________
Signature Guaranteed:
Note: Signature(s) must be guaranteed by an eligible
guarantor.
Note: The signature(s) on this Assignment must
correspond with the name(s) as written on the face of
the within pond in every particular without alteration or
enlargement or any change whatsoever.
Stradling Yocca Carlson & Rauth
Draft of 10/3/16
RECORDING REQUESTED BY:
Lake Elsinore Facilities Financing Authority
AND WHEN RECORDED RETURN TO:
Stradling Yocca Carlson & Rauth
660 Newport Center Drive, Suite 1600
Newport Beach, California 92660
Attention: Brian Forbath, Esq.
[Space above for Recorder’s use.]
This Transaction is Exempt from California
Documentary Transfer Tax Pursuant to Section 11921 of
the California Revenue and Taxation Code. This
Document is Exempt From Recording Fees Pursuant to
Section 27383 of the California Government Code.
ASSIGNMENT AGREEMENT
by and between
LAKE ELSINORE FACILITIES FINANCING AUTHORITY
and
WILMINGTON TRUST, NATIONAL ASSOCIATION,
as Trustee
Dated as of November 1, 2016
Relating to
$__________
LAKE ELSINORE FACILITIES FINANCING AUTHORITY
LEASE REVENUE BONDS, SERIES 2016A
1
ASSIGNMENT AGREEMENT
THIS ASSIGNMENT AGREEMENT (this “Assignment Agreement”), executed and
entered into as of November 1, 2016, is by and between the LAKE ELSINORE FACILITIES
FINANCING AUTHORITY, a joint exercise of powers entity organized and existing under and by
virtue of the laws of the State of California (the “Authority”), and WILMINGTON TRUST,
NATIONAL ASSOCIATION, a national banking association organized and existing under the laws
of the United States, as Trustee (the “Trustee”).
WITNESSETH:
WHEREAS, the City of Lake Elsinore (the “City”) and the Authority desire to finance a
portion of the costs of the acquisition, construction and installation of various public improvements
(the “Project”);
WHEREAS, in order to finance the Project the City will lease certain real property and the
improvements located thereon (the “Property”) to the Authority pursuant to a Ground Lease, dated as
of the date hereof, and the City will sublease the Property back from the Authority pursuant to a Lease
Agreement;
WHEREAS, the Property is more particularly described in Exhibit A hereto;
WHEREAS, under the Lease Agreement, the City is obligated to make Base Rental Payments
(as defined in the Lease Agreement) to the Authority;
WHEREAS, the Authoritydesires to assign without recourse certain of its rights in the Ground
Lease and the Lease Agreement, including its right to receive the Base Rental Payments, to the Trustee
for the benefit of the owners of bonds (the “Bonds”) to be issued pursuant to the Indenture, dated as of
the date hereof (the “Indenture”), by and among the Authority, the City and the Trustee;
WHEREAS, all acts, conditions and things required by law to exist, to have happened and to
have been performed precedent to and in connection with the execution and entering into of this
Assignment Agreement do exist, have happened and have been performed in regular and due time,
form and manner as required by law, and the parties hereto are now duly authorized to execute and
enter into this Assignment Agreement;
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 1. Assignment. The Authority, for good and valuable consideration, the receipt of
which is hereby acknowledged, does hereby sell, assign and transfer to the Trustee, irrevocably and
absolutely, without recourse, for the benefit of the owners of the Bonds, all of its right, title and interest
in and to the Ground Lease and the Lease Agreement including, without limitation, its right to receive
the Base Rental Payments to be paid by the City under and pursuant to the Lease Agreement; provided,
however, that the Authority shall retain its obligations under the Lease Agreement and Ground Lease,
the rights to indemnification, to give approvals and consents under the Lease Agreement and the
Ground Lease and to payment or reimbursement of its reasonable costs and expenses under the Lease
Agreement.
2
Section 2. Acceptance. The Trustee hereby accepts the foregoing assignment, subject to the
terms and provisions of the Indenture, and all such Base Rental Payments shall be applied and the
rights so assigned shall be exercised by the Trustee as provided in the Lease Agreement and the
Indenture.
Section 3. Conditions. This Assignment Agreement shall impose no obligations upon the
Trustee beyond those expressly provided in the Indenture.
Section 4. Further Assurances. The Authority shall 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 Assignment Agreement, and for the better
assuring and confirming to the Trustee, for the benefit of the owners of the Bonds, the rights intended
to be conveyed pursuant hereto.
Section 5. Governing Law. THIS ASSIGNMENT AGREEMENT SHALL BE
GOVERNED EXCLUSIVELY BY THE PROVISIONS HEREOF AND BY THE LAWS OF THE
STATE OF CALIFORNIA AS THE SAME FROM TIME TO TIME EXIST.
Section 6. Execution. This Assignment Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all together shall constitute but one
and the same Assignment Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
3
IN WITNESS WHEREOF, the Authority and the Trustee have caused this Assignment
Agreement to be executed by their respective officers thereunto duly authorized, all as of the day and
year first above-written.
LAKE ELSINORE FACILITIES FINANCING
AUTHORITY
By:
Grant Yates
Executive Director
ATTEST:
Susan M. Domen, MMC
Secretary
APPROVED AS TO FORM:
Stradling Yocca Carlson & Rauth,
Special Counsel
WILMINGTON TRUST, NATIONAL
ASSOCIATION, as Trustee
By:
Authorized Officer
4
CONSENT
The City of Lake Elsinore hereby consents to the foregoing.
CITY OF LAKE ELSINORE, as Lessee
By:
Jason Simpson
Assistant City Manager
ATTEST:
Susan M. Domen, MMC
City Clerk
A notary public or other officer completing this certificate verifies only the identity of the
individual who signed the document to which this certificate is attached, and not the truthfulness,
accuracy, or validity of that document.
STATE OF CALIFORNIA )
)ss.
COUNTY OF RIVERSIDE )
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
paragraph is true and correct.
WITNESS my hand and official seal
SIGNATURE OF NOTARY PUBLIC
A notary public or other officer completing this certificate verifies only the identity of the
individual who signed the document to which this certificate is attached, and not the truthfulness,
accuracy, or validity of that document.
STATE OF CALIFORNIA )
)ss.
COUNTY OF RIVERSIDE )
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
paragraph is true and correct.
WITNESS my hand and official seal
SIGNATURE OF NOTARY PUBLIC
A-1
EXHIBIT A
DESCRIPTION OF THE PROPERTY
All that real property situated in the County of Riverside, State of California, described as
follows:
1
$_________
LAKE ELSINORE FACILITIES FINANCING AUTHORITY
LEASE REVENUE BONDS, SERIES 2016A
BOND PURCHASE AGREEMENT
_________, 2016
Lake Elsinore Facilities Financing Authority
130 S. Main Street
Lake Elsinore, California 92530
City of Lake Elsinore
130 S. Main Street
Lake Elsinore, California 92530
Ladies and Gentlemen:
Stifel, Nicolaus & Company, Incorporated (the “Underwriter”) hereby offers to enter into
this Bond Purchase Agreement with you, the City of Lake Elsinore (the “City”) and the Lake
Elsinore Facilities Financing Authority (the “Authority”), for the purchase by the Underwriter and
the delivery by you of the Bonds specified below. The Bonds are being issued by the Authority to
(i) finance the acquisition, construction and installation of certain capital improvements owned by
the City, (ii) purchase a municipal bond insurance policy (the “Bond Insurance Policy”) to
guarantee payment of the principal of and interest on the Bondsissued by ________ (the “Insurer”)
(iii) purchase a debt service reserve surety bond for deposit in the reserve fund (the “Reserve
Policy”) and (iv) pay the costs incurred in connection with the issuance of the Bonds. This offer
is made subject to acceptance by you prior to 11:59 p.m., Los Angeles time, on the date hereof.
Upon such acceptance, this Bond Purchase Agreement shall be in full force and effect in
accordance with its terms and shall be binding upon you and the Underwriter. All terms not
defined herein shall have the meanings set forth in the Indenture (defined below).
1.Purchase and Sale. Upon the terms and conditions and upon the basis of the
representations, warranties and agreements hereinafter set forth, the Underwriter agrees to
purchase from the Authority, and the Authority agrees to sell to the Underwriter, all (but not less
than all) of the $_______ aggregate principal amount of the Authority’s Lease Revenue Bonds,
Series 2016A (the “Bonds”). The purchase price for the Bonds shall be $_______ (being the
principal amount of the Bonds, less an Underwriter’s discount in the amount of $_______, and
plus net original issue premium of $________). At the request of the Authority, on the date of
Closing (as defined herein) the Underwriter will wire the Reserve Policy premium of $_____ to
the Insurer and the Bond Insurance Policy of $________ to the Insurer. As a result, the net amount
to be wired to the Authority as the purchase price for the Bonds will be $________.
2
The Bonds will be dated the date of delivery thereof, and will have the maturities and bear
interest at the rates set forth on Exhibit A hereto. The Bonds will be subject to redemption as set
forth in the Official Statement herein described. The Bonds will be issued in book-entry form
only. It is anticipated that CUSIP identification numbers will be inserted on the Bonds, but neither
the failure to provide such numbers nor any error with respect thereto shall constitute a cause for
failure or refusal by the Underwriter to accept delivery of the Bonds in accordance with the terms
of this Bond Purchase Agreement.
2.Authorizing Instruments and Law. The Bonds shall be issued pursuant to the
provisions of a resolution (the “Resolution”) adopted by the Authority authorizing the issuance of
the Bonds and the Marks-Roos Local Bond Pooling Act of 1985, constituting Section 6584 et seq.
of the California Government Code (the “JPA Act”). The Bonds are issued pursuant to an
Indenture, dated as of November 1, 2016 (the “Indenture”), by and among the City, the Authority
and Wilmington Trust, National Association (the “Trustee”), and shall be as described in the
Indenture.
The Bonds are limited obligations of the Authority payable primarily from and secured by
certain rental revenues (the “Base Rental Payments”) to be paid by the City pursuant to a Lease
Agreement (the “Lease Agreement”), dated as of November 1, 2016, between the City and the
Authority, for certain real property and the improvements thereon (the “Property”). The City will
lease the Propertyto the Authority pursuant to a Ground Lease, dated as of November 1, 2016 (the
“Ground Lease”), between the City and the Authority.
3.Offering the Bonds. The Underwriter agrees to offer all the Bonds to the public
initially at the prices (or yields) set forth on the cover pages of the Official Statement of the
Authority pertaining to the Bonds, dated _______, 2016 (the Official Statement, together with all
appendices thereto, and with such changes therein and supplements thereto as are consented to in
writing by the Underwriter, are herein called the “Official Statement”). Subsequent to the initial
public offering of the Bonds, the Underwriter reserves the right to change the public offering prices
(or yields) as it deems necessary in connection with the marketing of the Bonds. The Bonds may
be offered and sold to certain dealers at prices lower than such initial public offering prices.
“Public Offering” shall include an offering to a representative number of institutional investors or
registered investment companies, regardless of the number of such investors to which the Bonds
are sold.
The City and the Authority acknowledge and agree that (i) the purchase and sale of the
Bonds pursuant to this Bond Purchase Agreement is an arm’s-length commercial transaction
between the City, the Authority and the Underwriter, and that the Underwriter has financial and
other interests that differ from those of the City and the Authority, (ii) in connection with such
transaction the Underwriter is not acting as a municipal advisor, financial advisor or fiduciary to
the City and the Authority or any other person or entity and has not assumed a fiduciary
responsibility in favor of the City or the Authority with respect to the offering of the Bonds or the
process leading thereto (whether or not the Underwriter has advised or is currently advising the
City or the Authority on other matters), (iii) the only contractual obligations the Underwriter has
to the City and the Authority with respect to the transaction contemplated hereby expressly are set
forth in this Bond Purchase Agreement, except as otherwise provided by applicable rules and
regulations of the SEC or the rules of the Municipal Securities Rulemaking Board (the “MSRB”)
3
and (iv) the City and the Authority have consulted with their own legal and other professional
advisors to the extent they deemed appropriate in connection with the offering of the Bonds. The
City and the Authority acknowledge that they have previously provided the Underwriter with an
acknowledgement of receipt of the required Underwriter disclosure under Rule G-17 of the MSRB
relating to disclosures concerning the Underwriter’s role in the transaction, disclosures concerning
the Underwriter’s compensation, conflict disclosures, if any, and disclosures concerning complex
municipal securities financing, if any.
4.Delivery of Official Statement. The Authority shall deliver to the Underwriter
two (2) copies of the Official Statement manually executed on behalf of the Authority and the City
by authorized representatives. The Authority shall also deliver copies of the Official Statement in
such quantities as the Underwriter may reasonably request in order to enable the Underwriter to
distribute a single copy of each Official Statement to any potential customer of the Underwriter
requesting an Official Statement during the time period beginning when the Official Statement
becomes available and ending on the End Date (defined below). The Authority shall deliver these
copies to the Underwriter within seven (7) business days after the execution of this Bond Purchase
Agreement and in sufficient time to accompany or precede any sales confirmation that requests
payment from any customer of the Underwriter. The Authority and the Underwriter hereby agree
that the end of the underwriting period shall be the date of Closing (as defined below) unless the
Underwriter informs the Authority in writing of a different end of the underwriting period. The
Underwriter covenants to file the Official Statement with the MSRB on a timely basis.
“End Date” as used herein is that date which is the earlier of:
(a) twenty-five (25) days after the end of the underwriting period, as defined in SEC
Rule 15c2-12 originally adopted by the Securities and Exchange Commission on June 28, 1989,
as amended (“Rule 15c2-12”); or
(b) the time when the Official Statement becomes available from the MSRB, but in
no event less than twenty-five (25) days after the underwriting period (as defined in Rule 15c2-12)
ends.
The Authority and the City have authorized the use of the Official Statement in connection
with the public offering of the Bonds. The Authority and the City also have consented to the use
by the Underwriter prior to the date hereof of the Preliminary Official Statement dated
________ __, 2016, relating to the Bonds in connection with the public offering of the Bonds,
(which, together with all appendices thereto, is herein called the “Preliminary Official Statement”).
Authorized officers of the City and the Authority have certified to the Underwriter that such
Preliminary Official Statement was deemed to be final as of its date for purposes of Rule 15c2-12,
with the exception of certain final pricing and related information referred to in Rule 15c2-12. The
Underwriter has distributed a copy of each Preliminary Official Statement to potential customers
on request.
5.The Closing. At 9:00 A.M., California time, on _____ ___, 2016, or at such other
time or on such earlier or later business day as shall have been mutually agreed upon by the
Authority, the City and the Underwriter, the Authority, upon receipt of the purchase price thereof,
will deliver (i) the Bonds in book-entry form through the facilities of The Depository Trust
4
Company (“DTC”), and (ii) the closing documents hereinafter mentioned at the offices of
Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California, or
another place to be mutually agreed upon by the Authority, the City and the Underwriter. The
Underwriter will accept such delivery from the Authority. The Underwriter will pay the purchase
price of the Bonds as set forth in Section 1 hereof by wire transfer of immediately available funds.
This payment and delivery, together with the delivery of the aforementioned documents, is herein
called the “Closing.”
6.City Representations, Warranties and Covenants.The Cityrepresents, warrants
and covenants to the Underwriter that:
(a)The City is a municipal corporation of the State of California (the “State”)
organized and operating pursuant to the law of the State with power and authority to enter into and
perform its duties under the Lease Agreement, Indenture, the Continuing Disclosure Certificate,
dated ______ __, 2016 (the “Continuing Disclosure Certificate”), the Ground Lease, the Official
Statement and this Bond Purchase Agreement (collectively, the “City Documents”).
(b)To the best knowledge of the City, neither the approval, execution and
delivery of the City Documents, and compliance with the provisions on the City’s part contained
therein, nor the consummation of any other of the transactions herein and therein contemplated,
nor the fulfillment of the terms hereof and thereof, materially conflicts with or constitutes a
material breach of or default under nor materially contravenes 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 does any such execution, delivery, adoption
or compliance result in the 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 City Documents.
(c)The City Documents have been duly authorized, executed and delivered by
the City, and, assuming due authorization, execution and delivery by the other parties thereto,
constitute legal, valid and binding agreements of the City enforceable in accordance with their
respective terms, except as the enforcement thereof may be limited by bankruptcy, insolvency,
moratorium, reorganization, fraudulent conveyance or other laws affecting the enforcement of
creditors’ rights generally, and by the application of equitable principles if sought, by the exercise
of judicial discretion, and by the limitations on legal remedies imposed on actions against counties
in the State .
(d)Except as may be required under blue sky or other securities laws of any
state, there is no material 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
and delivery of the Bonds or the consummation by the City of the other transactions contemplated
by the Official Statement and this Bond Purchase Agreement.
(e)To the best of the knowledge of the City, there is, and on the Closing there
will be, no action, suit, proceeding or investigation at law or in equity before or by any court or
governmental agency or body pending (notice of which has been received by the City) or
5
threatened against the City to restrain or enjoin the delivery of any of the Bonds, or the payments
to be made pursuant to the Lease Agreement , or in any way contesting or affecting the validity of
the City Documents or the Bonds or the authority of the City to approve this Bond Purchase
Agreement, or enter into the City Documents or contesting the powers of the City to enter into or
perform its obligations under any of the foregoing or in any way contesting the powers of the City
in connection with any action contemplated by this Bond Purchase Agreement or to restrain or
enjoin the execution, sale and delivery of the Bonds, contesting the completeness or accuracy of
the Preliminary Official Statement as of its date or the Official Statement or any supplement or
amendment thereto wherein an unfavorable decision, ruling or finding would materially adversely
affect the validity or enforceability of the City Documents to be executed by it or asserting that the
Preliminary Official Statement as of its date or the Official Statement contained any untrue
statement of a material fact or omitted to state any material fact required to be stated therein or
necessary to make the statements therein, in light of all the circumstances under which they were
made, not misleading, or, except as described in the Preliminary Official Statement and the Official
Statement, the payment of Base Rental Payments, nor is there any basis for any such action, suit,
proceeding or investigation.
(f)The Preliminary Official Statement provided to the Underwriter has been
deemed final by the City, as required by Rule 15c2-12. As of the date thereof and at all times
subsequent thereto up to and including the Closing Date, the information relating to the City, the
Bonds, the Property and the City Documents contained in the Official Statement was and will be
materially complete for its intended purposes. The information relating to the City, the Bonds, the
Property and the City Documents contained in the Official Statement as of the date hereof is true
and correct in all material respects and such information does not contain any untrue or misleading
statement of a material fact or omit to state any material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not misleading in any
material respect.
(g)The City agrees to cooperate with the Underwriter in endeavoring to qualify
the Bonds for offering and sale under the securities or blue sky laws of such jurisdictions of the
United States as the Underwriter may request; provided, however, that the Citywill not be required
to execute a special or general consent to service of process in any jurisdiction in which it is not
now so subject or to qualify to do business as a foreign corporation in any jurisdiction where it is
not so qualified.
(h)By official action of the City prior to or concurrently with the execution
hereof, the City has duly approved 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 City Documents and the consummation by it of all other
transactions contemplated by the Official Statement and this Bond Purchase Agreement.
(i)To the best knowledge of the City, it is not in any material respect in breach
of or default under any material applicable law or administrative regulation of the State or the
United States or any material applicable judgment or decree or any loan agreement, indenture,
bond, note, resolution, agreement or other instrument to which the City is a party or is otherwise
subject and in connection with which the City is obligated to make payments from its own funds,
and no event has occurred and is continuing which, with the passage of time or the giving of notice,
6
or both, would constitute a default or an event of default under any such instrument the
consequence of which could materially and adversely affect the performance of the City under the
City Documents.
(j)If between the date of this Bond Purchase Agreement and the End Date an
event occurs, of which the City has knowledge, which might or would cause the information
relating to the City, the Property, or the City’s functions, duties and responsibilities 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 in any material respect, the City will notify the Underwriter, and if, in the opinion of
the Underwriter, the City or their respective legal counsel, such event requires the preparation and
publication of a supplement or amendment to the Official Statement, the City will cooperate with
the Underwriter in the preparation of an amendment or supplement to the Official Statement in a
form and in a manner approved by the Underwriter, provided all expenses thereby incurred will
be paid for by the City.
(k)If the information relating to the Property, the City, its functions, duties and
responsibilities contained in the Official Statement is amended or supplemented pursuant to the
immediately preceding subparagraph, 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 of the Closing, 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 or omit to state a material fact
required to be stated therein or necessary to make such information therein, in the light of the
circumstances under which it was presented, not misleading in any material respect.
(l)The City covenants that it will comply with all tax covenants relating to it
in the City Documents, the Tax Certificate of the City and this Bond Purchase Agreement.
(m)Substantially all the proceeds from the sale of the Bonds (after deducting
the expenses of issuance and sale of the Bonds paid for from such proceeds) will be used as set
forth in the Indenture and as described in the Official Statement, and the City will not take or omit
to take any action which action or omission will in any way cause the proceeds from the sale of
the Bonds to be applied in a manner contrary to that provided in the Indenture and the Lease
Agreement , as amended from time to time.
(n)Any certificate signed by a duly authorized official of the Cityand delivered
to the Underwriter shall be deemed a representation and warranty by the City to the Underwriter
as to the statements made therein.
(o)As of the time of acceptance hereof and as of the Closing, the City does not
and will not have outstanding any indebtedness which is payable from the City’s general fund
except as disclosed in the Official Statement.
(p)Between the date of this Bond Purchase Agreement and the date of Closing,
the City will not, and except as disclosed in the Official Statement, offer or issue any certificates,
7
notes or other obligations for borrowed money, or, other than in the normal course of its operations,
incur any material liabilities, direct or contingent, secured payable from the City’s general fund.
(q) The City, on behalf of itself and the Authority, will undertake, pursuant to
the Continuing Disclosure Certificate, to provide or cause to be provided annual financial reports
and notices of certain events; a description of this undertaking is set forth in the Official Statement.
Based on a review of its prior undertakings with respect to Rule 15c2-12, and except as disclosed
in the Preliminary Official Statement and Official Statement, the City has not failed to comply in
all material respects with a continuing disclosure undertaking under Rule 15c2-12 during the
previous five years.
(r) The financial statements of, and other financial information regarding the City
in the Official Statement fairly present the financial position and results of the operations of the
City as of the dates and for the periods therein set forth and the audited financial statements have
been prepared in accordance with generally accepted accounting principles applicable to counties.
7.Authority Representations, Warranties and Covenants.The Authority
represents, warrants and covenants to the City and the Underwriter that:
(a) The Authority is a joint powers authority, duly organized and existing under the
Constitution (the “Constitution”) and laws of the State, including the JPA Act, with full right,
power and authority to enter into, execute and deliver the Authority Documents (defined below)
and to perform its obligations hereunder.
(b) By all necessary official action, the Authorityhas duly authorized and approved
the execution and delivery of, and the performance by the Authority of the obligations on its part
contained in the Bond Purchase Agreement, the Bonds, the Indenture, the Ground Lease, and the
Lease Agreement (collectively, the “Authority Documents”), and has approved the use by the
Underwriter of the Preliminary Official Statement, and the Official Statement and, as of the date
hereof, such authorizations and approvals are in full force and effect and have not been amended,
modified or rescinded. When executed and delivered by the parties hereto, the Authority
Documents will constitute the legally valid and binding obligations of the Authority enforceable
upon the Authority in accordance with their respective terms, except as enforcement may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar laws or equitable
principles relating to or affecting creditors rights generally, to the exercise of judicial discretion
and to the limitations on legal remedies against joint powers authorities in California. The
Authority has complied, and will at the Closing be in compliance in all respects, with the terms of
the Authority Documents.
(c) The Bonds, when issued in accordance with the Indenture, will be legally valid
and binding special obligations of the Authority, entitled to the benefits of the Indenture and
enforceable in accordance with their terms, except as enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws or equitable principles relating to or
limiting creditors’ rights generally to the exercise of judicial discretion and to the limitations on
legal remedies against joint powers authorities in California.
8
(d) As of the time of acceptance hereof and as of the time of the Closing, except as
otherwise disclosed in the Official Statement, to the best knowledge of the Authority, the Authority
is not and will not be in any material respect in breach of or in default under any law or
administrative rule or regulation of the State or the United States, or any applicable judgment or
decree or any Indenture, loan agreement, bond, note, resolution, ordinance, agreement or other
instrument to which the Authority is a party or is otherwise subject, and no event has occurred and
is continuing which, with the passage of time or the giving of notice, or both, would constitute a
default or event of default under any such instrument which breach, default or event could have an
adverse effect on the Authority’s ability to perform its obligations under the Authority Documents;
and, as of such times, except as disclosed in the Official Statement, the authorization, execution
and delivery of the Authority Documents and compliance by the Authority with the provisions
thereof do not and will not conflict with or constitute a breach of or default under any applicable
constitutional provision, law or administrative rule or regulation of the State or the United States
or any applicable judgment, decree, license, permit, Indenture, loan agreement, bond, note,
resolution, ordinance, agreement or other instrument to which the Authority is subject, or by which
it or any of its properties is bound, nor will any such authorization, execution, delivery or
compliance result in the creation or imposition of any lien, charge or other security interest or
encumbrance of any nature whatsoever upon any of its assets or properties under the terms of any
such law, regulation or instrument except as provided in the Authority Documents.
(e) As of the time of acceptance hereof and the Closing, except as disclosed in the
Official Statement, there is no action, suit, proceeding, inquiry or investigation, at law or in equity,
before or by any court, government agency, public board or body, pending (notice of which has
been received by the Authority), or to the best knowledge of the Authority threatened against the
Authority in any material respect:
(i) affecting the existence of the Authority or the titles of the officers of the
Authority to their respective offices;
(ii) affecting, contesting or seeking to prohibit, restrain or enjoin the
issuance or delivery of any of the Bonds, or the payment or collection of any amounts pledged or
to be pledged to pay the principal of and interest on the Bonds, or in any way contesting or affecting
the validity of the Authority Documents or the consummation of the transactions on the part of the
Authority contemplated thereby, or contesting the exclusion of the interest on the Series A Bonds
from Federal or State taxation, as applicable, or contesting the powers of the Authority or its
authority to enter into the Lease Agreement and to pledge the Base Rental Payments for repayment
of the Bonds;
(iii) which may result in any material adverse change relating to the
financial condition of the Authority;
(iv) contesting the completeness or accuracy of the Preliminary Official
Statement as of its date or the Official Statement or any supplement or amendment thereto or
asserting that the Preliminary Official Statement as of its date or the Official Statement contained
any untrue statement of a material fact or omitted to state any material fact required to be stated
therein or necessary to make the statements therein, in light of all the circumstances under which
they were made, not misleading; or
9
(v) challenging the ability of the Authority to sell the Bonds to the
Underwriter.
(f) The Authority 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 to qualify the Bonds for offer and sale under the blue sky laws or other securities laws and
regulations of such states and other jurisdictions of the United States as the Underwriter may
designate and will use its best efforts to continue such qualification in effect so long as required
for distribution of the Bonds; provided however, that in no event shall the Authority be required to
take any action which would subject it to general or unlimited service of process in any jurisdiction
in which it is not now so subject.
(g) Any certificate signed by a duly authorized officer of the Authority and
delivered to the Underwriter shall be deemed to be a representation and warranty by the Authority
to the Underwriter as to the statements made therein.
(h) As of the time of acceptance hereof and as of the date of Closing, except as
otherwise disclosed in the Official Statement, the Authority has complied with the filing
requirements of the JPA Act.
(i) The Authority will advise the Underwriter promptly of any proposal to amend
or supplement the Official Statement from the delivery of the Official Statement to the End Date,
and will not effect or consent to any such amendment or supplement without prior consultation
with the Underwriter. The Authority will advise the Underwriter promptly of the institution of
any proceedings known to it by any governmental agency prohibiting or otherwise affecting the
use of the Official Statement in connection with the offering, sale or distribution of the Bonds.
(j) For a period beginning on the date hereof and continuing until the End Date,
(a) the Authority will not adopt any amendment of, or supplement to, the Official Statement
without prior consultation with the Underwriter and Nossaman LLP, (“Underwriter’s Counsel”)
and (b) if any event relating to or affecting the Authority shall occur as a result of which it is
necessary, in the opinion of Underwriter’s Counsel, to amend or supplement the Official Statement
in order to make the Official Statement not misleading in the light of the circumstances existing at
the time it is delivered to a purchaser of the Bonds, the Authority will forthwith cause the City to
prepare and furnish to the Underwriter a reasonable number of copies of an amendment of, or
supplement to, the Official Statement (in form and substance satisfactory to Underwriter’s
Counsel) which will amend or supplement the Official Statement so that it will not contain an
untrue statement of a material fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances existing at the time the Official Statement is
delivered to a purchaser of the Bonds, not misleading.
(k) The Authority is in compliance with all of its prior continuing disclosure
undertakings, if any, entered into pursuant to Rule 15c2-12.
8.Closing Conditions. The Underwriter has entered into this Bond Purchase
Agreement in reliance upon the representations, warranties and covenants herein and the
performance by the Authority and the City of their respective obligations hereunder, both as of the
10
date hereof and as of the date of the Closing. The Underwriter’s obligations hereunder are and
shall be subject to the following additional conditions:
(a) Bring-Down Representation. The representations, warranties and covenants of
the Authority and the City contained herein shall be true and correct at the date hereof and at the
time of the Closing, as if made on the date of the Closing.
(b) Executed Agreements and Performance Thereunder. At the time of the
Closing:
(i) the City Documents and the Authority Documents shall be in full force
and effect, and shall not have been amended, modified or supplemented except with the written
consent of the Underwriter;
(ii) there shall be in full force and effect such resolutions (the “Authorizing
Resolutions”) as, in the opinion of Stradling Yocca Carlson & Rauth, a Professional Corporation
(“Bond Counsel”), shall be necessary in connection with the transactions on the part of the
Authority and the City contemplated by this Bond Purchase Agreement, the Official Statement,
the City Documents and the Authority Documents;
(iii) the Authority shall perform or have performed its obligations required
or specified in the Authority Documents to be performed at or prior to Closing;
(iv) the City shall perform or have performed its obligations required as
specified in the City Documents to be performed at or prior to Closing; and
(v) the Official Statement shall not have been supplemented or amended,
except pursuant to Paragraph 6(j) or 7(j), or as otherwise may have been agreed to in writing by
the Underwriter.
(c) No Default. At the time of the Closing, no default shall have occurred or be
existing under the Authority Documents or the City Documents and neither the Authority nor the
City shall be in default in the payment of principal or interest on any of its bonded indebtedness
or other obligations payable from the City’s general fund which default shall adversely impact the
ability of the Authority to make payments on the Bonds or the City to make payments pursuant to
the Lease Agreement.
(d) Termination Events. The Underwriter shall have the right to terminate this
Bond Purchase Agreement, without liability therefor, by written notification to the Authority and
the City if at any time at or prior to the Closing the market price or marketability of the Bonds, or
the ability of the Underwriter to enforce contracts for the sale of the Bonds, shall have been
materially adversely affected in the reasonable judgment of the Underwriter (evidenced by a
written notice to the City and the Authority terminating the obligation of the Underwriter to accept
delivery of and pay for the Bonds) by reason of any of the following:
(i) any event occurring, or information becoming known which, in the
reasonable judgment of the Underwriter, makes untrue in any material adverse respect any
statement or information contained in the Official Statement, or has the effect that the Official
11
Statement contains any untrue statement of a material fact or omits to state a material fact required
to be stated therein or necessary to make the statements made therein, in light of the circumstances
under which they were made, not misleading; or
(ii) an amendment to the Constitution of the United States or by any
legislation in or by the Congress of the United States or by the State, or the amendment of
legislation pending as of the date of the Authority Documents or the City Documents in the
Congress of the United States, or the recommendation to Congress or endorsement for passage (by
press release, other form of notice or otherwise) of legislation by the President of the United States,
the Treasury Department of the United States, the Internal Revenue Service or the Chairman or
ranking minority member of the Committee on Finance of the United States Senate or the
Committee on Ways and Means of the United States House of Representatives, or the proposal for
consideration of legislation by either such Committee, or the presentment of legislation for
consideration as an option by either such Committee, or by the staff of the Joint Committee on
Taxation of the Congress of the United States, or the favorable reporting for passage of legislation
to either House of the Congress of the United States by a Committee of such House to which such
legislation has been referred for consideration, or any decision of any Federal or State court or any
ruling or regulation (final, temporary or proposed) or official statement on behalf of the United
States Treasury Department, the Internal Revenue Service or other Federal or State authority
materially adversely affecting the Federal or State tax status of the Authority or the City, or the
interest on bonds or notes or obligations of the general character of the Series A Bonds; or
(iii) any legislation, ordinance, rule or regulation shall be introduced in, or
be enacted by any governmental body, department or agency of the States or a decision by any
court of competent jurisdiction within the State or any court of the United States shall be rendered
which, in the reasonable opinion of the Underwriter, materially adversely affects the market price
of the Bonds; or
(iv) legislation shall be enacted by the Congress of the United States, or a
decision by a court of the United States shall be rendered, or a stop order, ruling, regulation or
official statement by, or on behalf of, the Securities and Exchange Commission or any other
governmental agency having jurisdiction of the subject matter shall be issued or made to the effect
that the issuance, offering or sale of obligations of the general character of the Bonds, or the
issuance, offering or sale of the Bonds, including all underlying obligations, as contemplated
hereby or by the Official Statement, is in violation or would be in violation of, or that obligations
of the general character of the Bonds, or the Bonds, are not exempt from registration under, any
provision of the federal securities laws, including the Securities Act of 1933, as amended and as
then in effect, or that the Indenture needs to be qualified under the Trust Indenture Act of 1939, as
amended and as then in effect; or
(v) additional material restrictions not in force as of the date hereof shall
have been imposed upon trading in securities generally by any governmental authority or by any
national securities exchange, which restrictions materially adversely affect the Underwriter’s
ability to market the Bonds; or
(vi) a general banking moratorium shall have been established by federal or
State authorities; or
12
(vii) the United States has become engaged in hostilities which have
resulted in a declaration of war or a national emergency or there has occurred any escalation of
current or other outbreak or escalation of hostilities or a national or international calamity or crisis,
financial or otherwise, the effect of such outbreak, escalation, calamity or crisis on the financial
markets of the United States being such as, in the reasonable opinion of the Underwriter, would
affect materially and adversely the ability of the Underwriter to market the Bonds or the ability of
the Underwriter to enforce contracts for the sale of the Bonds; or
(viii) the commencement of any action, suit or proceeding described in
Paragraphs 6(e) or 7(e) hereof; or
(ix) there shall be in force a general suspension of trading on the New York
Stock Exchange; or
(x) an event described in paragraph (j) of Section 6 or paragraph (j) of
Section 7 hereof shall have occurred which, in the reasonable professional judgment of the
Underwriter, requires the preparation and publication of a supplement or amendment to the
Official Statement; or
(xi) any rating of the Bonds or other obligations of the City shall have been
downgraded, suspended or withdrawn or placed on negative outlook or negative watch by a
national rating service, which, in the Underwriter’s reasonable opinion, materially adversely
affects the marketability or market price of the Bonds or the ability of the Underwriter to enforce
contracts for the sale of the Bonds; or
(xii) there shall have occurred or any notice shall have been given of any
intended downgrade, suspension, withdrawal or negative change in credit watch status by any
national credit agency of the Insurer; or
(xiii) a material disruption in securities settlement, payment or clearance
services affecting the Bonds shall have occurred; or
(xiv)a decision by a court of the United States shall be rendered, or a stop
order, release, regulation or no-action letter by or on behalf of the SEC or any other governmental
agency having jurisdiction of the subject matter shall have been issued or made, to the effect that
the issuance, offering or sale of the Bonds, including the underlying obligations as contemplated
by this Bond Purchase Agreement or by the Official Statement, or any document relating to the
issuance, offering or sale of the Bonds, is or would be in violation of any provision of the federal
securities laws at the Closing Date, including the Securities Act, the Exchange Act and the Trust
Indenture Act.
(e) Closing Documents. At or prior to the Closing, the Underwriter shall receive
with respect to the Bonds (unless the context otherwise indicates) the following documents:
(1) Bond Opinion. The approving opinion of Bond Counsel dated the date
of the Closing and substantially in the form included as APPENDIX C to the Official Statement,
together with a letter from such counsel, dated the date of the Closing and addressed to the
13
Underwriter to the effect that the foregoing opinion may be relied upon by the Underwriter to the
same extent as if such opinion was addressed to them.
(2) Supplemental Opinion. A supplemental opinion of Bond Counsel
addressed to the Underwriter, in substantially the form attached hereto as Exhibit B.
(3) City Attorney Opinion. An opinion of the City Attorney, dated as of the
Closing and addressed to the Authority and the Underwriter, in substantially the form attached
hereto as Exhibit C.
(4) Authority Counsel Opinion. An opinion of Counsel to the Authority,
dated the date of the Closing and addressed to the City and the Underwriter, in substantially the
form attached hereto as Exhibit D.
(5) Trustee Counsel Opinion. The opinion of counsel to the Trustee, dated
the date of the Closing, addressed to Bond Counsel, the City, the Authority and the Underwriter,
in form and substance acceptable to counsel for the Underwriter substantially to the following
effect:
(i) The Trustee is a national banking association duly organized,
validly existing and in good standing under the laws of the United States of America, with trust
powers, and has the corporate power and authority to carry on its business as presently conducted.
(ii) The Trustee has full power and authority to serve as Trustee as
contemplated in the Indenture.
(iii) The Indenturehas been duly authorized, executed and delivered
by the Trustee, and constitutes the legal, valid and binding obligation of the Trustee, enforceable
against it in accordance with the terms thereof, subject to applicable bankruptcy, insolvency,
moratorium, reorganization, arrangement and other similar laws affecting the rights of creditors
(including creditors of national banks) generally or by the application of general principles of
equity (regardless of whether enforcement is sought in a proceeding in equity or at law) and the
effect of judicial decisions which have held that certain provisions are unenforceable where their
enforcement would violate the implied covenant of good faith and fair dealing, or would be
commercially unreasonable and the effect of judicial decisions permitting the introduction of
extrinsic evidence to modify the terms or the interpretation of the Indenture.
(iv) To the knowledge of such counsel, the execution, delivery,
acceptance and performance of the Indenture by the Trustee and its acceptance and performance
of its duties and obligations thereunder will not violate any provisions of any law or regulation
governing the banking or trust powers of the Trustee or any order of any governmental authority
having jurisdiction over the Trustee.
(v) To the knowledge of such counsel, no authorization, approval,
consent or other order of any governmental agency or regulatory authority having jurisdiction over
the trust powers of the Trustee that has not been obtained is required for the authorization,
execution and delivery by the Trustee of the Indenture or its acceptance and performance of the
duties and obligations thereunder.
14
(vi) The execution, delivery and performance of the Indentureby the
Trustee and the consummation of the transactions contemplated thereby do not and will not (a) to
the knowledge of such counsel conflict with or result in a breach or violation of any of the terms
or provisions of, or constitute a default under, any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which the Trustee is a party or by which the Trustee
is bound or to which any of the Propertyor assets of the Trustee or any of its subsidiaries is subject,
(b) result in any violation of the provisions of the Articles of Association, By-laws, or applicable
resolutions of the Trustee, or (c) to the knowledge of such counsel result in any violation of any
statute, order, rule or regulation of any court or government agency or body having jurisdiction
over the Trustee or any of its properties or assets.
(6) Disclosure Counsel Opinion. An opinion, dated the date of the Closing
addressed to the Authority, the City and the Underwriter, of Stradling Yocca Carlson & Rauth, a
Professional Corporation (“Disclosure Counsel”), to the effect that based upon their participation
in the preparation of the Official Statement as Disclosure Counsel to the Authority and without
having undertaken to determine independently the accuracy or completeness of the contents in the
Official Statement, such counsel has no reason to believe that the Official Statement, as of its date
and as of the Closing Date (except for the financial statements and the other financial and statistical
data included therein and the information included therein relating to the Insurer, the Bond
Insurance Policy, the Reserve Policy, The Depository Trust Company and the book-entry system,
and contained in the Appendices thereto as to all of which no opinion or belief need be expressed)
contained or contains any untrue statement of a material fact or omitted or omits to state any
material fact necessary to make the statements therein, in light of the circumstances under which
they were made, not misleading.
(7) Underwriter’s Counsel Opinion. An opinion, dated the date of the
Closing addressed to the Underwriter, of Nossaman LLP, counsel to the Underwriter, in such form
as may be acceptable to the Underwriter.
(8) City Certificate. A certificate, dated the date of Closing, signed by a
duly authorized official of the City satisfactory in form and substance to the Underwriter to the
effect that: (a) the representations, warranties and covenants of the City contained in this Bond
Purchase Agreement are true and correct in all material respects on and as of the date of the Closing
as if made on the date of the Closing; (b) the City has complied with all agreements, covenants
and conditions to be complied with by the City at or prior to the Closing under the CityDocuments;
(c) to the best of such official’s knowledge, no event affecting the City has occurred since the date
of the Official Statement which either makes untrue or incorrect in any material respect as of the
Closing the statements or information contained in the Official Statement or is not reflected in the
Official Statement but should be reflected therein in order to make the statements and information
therein, in the light of the circumstances under which they were made, not misleading in any
material respect.
(9) Authority Certificate. A certificate of the Authority, dated the date of
the Closing, signed on behalf of the Authority by the Chairman or other duly authorized officer of
the Authority to the effect that (i) the representations, warranties and covenants of the Authority
contained herein and in the Authority Documents are true and correct in all material respects on
and as of the date of the Closing as if made on the date of the Closing and the Authority has
15
complied with all of the terms and conditions of the Authority Documents required to be complied
with by the Authority at or prior to the date of Closing; and (ii) to the best of such official’s
knowledge, no event affecting the Authority has occurred since the date of the Official Statement
which has not been disclosed therein or in any supplement or amendment thereto which event
should be disclosed in the Official Statement in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading.
(10) Trustee’s Certificate. A Certificate of the Trustee, dated the date of
Closing, in form and substance acceptable to counsel for the Underwriter to the effect that (i) the
Trustee is duly organized and existing as a national banking association in good standing under
the laws of the United States, having the full power and authority to accept and perform its duties
under the Indenture; (ii) subject to the provisions of the Indenture, the Trustee will apply the
proceeds from the Bonds to the purposes specified in the Indenture; and (iii) the Trustee has duly
authorized and executed the Indenture.
(11) Title Policy. A copy of a CLTA or ALTA title insurance policy in an
amount equal to the principal amount of the Bonds, insuring the City’s leasehold interest in the
Property, subject only to Permitted Encumbrances (as defined in the Indenture) or such other
acceptable encumbrances.
(12) Transcripts. Two CD transcripts of the proceedings prepared by Bond
Counsel relating to the authorization and issuance of the Bonds will be delivered in due course.
(13) Official Statement. The Official Statement and each supplement or
amendment, if any, thereto, executed on behalf of the Authority by a duly authorized officer of
each.
(14) Documents. An original executed or certified copy of each of the
Authority Documents, the City Documents and the Joint Exercise of Powers Agreement (the “JPA
Agreement”), between the City and the Parking Authority of the City of Lake Elsinore .
(15) City Resolution. Certified copy by the City Clerk, of each resolution
of the City relating to the City Documents, the actions contemplated thereby, provided that such
resolutions may be contained in the transcripts.
(16) Authority Resolution. Certified copy by the Secretary or Assistant
Secretary of the Authority, of each resolution of the Authority relating to the Authority Documents,
the Bonds and the transactions contemplated thereby, provided that such resolutions may be
contained in the transcripts.
(17) IRS Form 8038-G. Evidence that the federal tax information form
8038-G has been prepared for filing.
(18) Tax Certificate. A tax certificate in form satisfactory to Bond Counsel.
(19) Ratings. Evidence as of the Closing satisfactory to the Underwriter
that the Bonds have received the ratings set forth in the Official Statement and that such ratings
have not been reduced or withdrawn.
16
(20) CDIAC Statement. A copy of the Notice of Sale required to be
delivered to the California Debt and Investment Advisory Commission pursuant to Section 53583
of the Government Code and Section 8855(g) of the Government Code.
(21) Insurer Documents. A copy of the Reserve Policy, Bond Insurance
Policy and any such supporting opinions and certifications as shall be deemed advisable by Bond
Counsel and as may be reasonably requested by the Underwriter.
(22) Additional Documents. Such additional certificates, instruments and
other documents as the Underwriter and Bond Counsel may reasonably deem necessary.
If the Authority or the City shall be unable to satisfy the conditions contained in this Bond
Purchase Agreement, or if the obligations of the Underwriter shall be terminated for any reason
permitted by this Bond Purchase Agreement, this Bond Purchase Agreement may be terminated
by the Underwriter, and none of the Underwriter, the Authority or the City shall be under further
obligation hereunder.
9.Expenses. Except as otherwise provided in this Section, the Underwriter shall be
under no obligation to pay, and the Authority or the Cityshall pay or cause to be paid, the expenses
incident to the performance of the obligations of the Authority and the City hereunder including
but not limited to:
(a) the costs of the preparation and printing, or other reproduction (for distribution
on or prior to the date hereof) of the City Documents and the Authority Documents and the cost
of preparing, printing, issuing and delivering the Bonds;
(b) the fees and disbursements of any counsel, financial advisors, accountants or
other experts or consultants retained by the Authority or the City;
(c) the fees and disbursements of Bond Counsel and Disclosure Counsel;
(d) the cost of preparation and printing the Preliminary Official Statement and any
supplements and amendments thereto and the cost of preparation and printing of the Official
Statement, including a reasonable number of copies thereof for distribution by the Underwriter;
and
(e) charges of rating agencies for the rating of the Bonds.
The Underwriter shall pay all expenses incurred by the Underwriter in connection with the
public offering and distribution of the Bonds including, but not limited to: (i) the fees and
disbursements of Underwriter's Counsel; and (ii) all out-of-pocket disbursements and expenses
incurred by the Underwriter in connection with the offering and distribution of the Bonds
(including other expenses, fees of the California Debt and Investment Advisory Commission,
CUSIP Service Bureau fees, and any other fees and expenses), except as otherwise provided in the
preceding paragraph or otherwise agreed to by the Underwriter, the Authority and the City in
writing.Any meals in connection with or adjacent to meetings, rating agency presentations, pricing
activities or other transaction-related activities shall be considered an expense of the transaction
and included in the expense component of the Underwriter’s discount.
17
10.Notice. Any notice or other communication to be given to the Underwriter may be
given by delivering the same to Stifel, Nicolaus & Company, Incorporated, 515 South Figueroa
Street, Suite 1800, Los Angeles, California 90071, Attention: John Kim. Any notice or other
communication to be given to the Authority or the City pursuant to this Bond Purchase Agreement
may be given by delivering the same in writing to such entity, at the addresses set forth on the
cover page hereof.
11.Entire Agreement. This Bond Purchase Agreement, when accepted by the
Authority and the City, shall constitute the entire agreement among the Authority, the City and the
Underwriter and is made solely for the benefit of the Authority, the City and the Underwriter
(including the successors or assigns of any Underwriter). Except as provided in Section 15 below,
no other person shall acquire or have any right hereunder by virtue hereof, except as provided
herein. All the Authority’s and the City’s representations, warranties and agreements in this Bond
Purchase Agreement shall remain operative and in full force and effect, regardless of any
investigation made by or on behalf of the Underwriter, until the earlier of (a) delivery of and
payment for the Bonds hereunder, and (b) any termination of this Bond Purchase Agreement.
12.Counterparts. This Bond Purchase Agreement may be executed by the parties
hereto 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.
13.Severability. In case any one or more of the provisions contained herein shall for
any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality
or unenforceability shall not affect any other provision hereof.
14.State of California Law Governs. The validity, interpretation and performance
of the Authority Documents shall be governed by the laws of the State.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
18
15.No Assignment. The rights and obligations created by this Bond Purchase
Agreement shall not be subject to assignment by the Underwriter, the Authority or the City without
the prior written consent of the other parties hereto.
16.Definitions. Terms not otherwise defined herein shall have the same meaning as
when used in the Indenture.
STIFEL, NICOLAUS & COMPANY,
INCORPORATED
By:
Title:
Accepted as of the date first stated above:
LAKE ELSINORE FACILITIES FINANCING
AUTHORITY
By:
Title:
Date of Execution: _____________
Time of Execution:
CITY OF LAKE ELSINORE, CALIFORNIA
By:
Title:
Date of Execution: _____________
Time of Execution:
B-1
EXHIBIT A
MATURITYSCHEDULE
$_________
LAKE ELSINORE FACILITIES FINANCING AUTHORITY
LEASE REVENUE BONDS, SERIES 2016A
Maturity Date
(April 1 of)
Principal
Amount
Interest
Rate Yield
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
20__*
*Term Bond.
C = Yield to the optional call date of Aptil 1, 20__ at par.
B-2
EXHIBIT B
FORM OF SUPPLEMENTAL OPINION OF BOND COUNSEL
[TO COME FROM BOND COUNSEL]
C-1
EXHIBIT C
FORM OF CITY ATTORNEY OPINION
______ __, 2016
Lake Elsinore Facilities Financing Authority
Lake Elsinore, California
City of Lake Elsinore
Lake Elsinore, California
Stifel, Nicolaus & Company, Incorporated
Los Angeles, California
Lake Elsinore Facilities Financing Authority
Lease Revenue Bonds,
Series 2016A
Ladies and Gentlemen:
This office has acted as counsel to the City of Lake Elsinore (the “City”) in connection
with the issuance, sale and delivery by the Lake Elsinore Facilities Financing Authority (the
“Authority”) of the above-captioned bonds (the “Bonds”). I have examined originals (or copies
certified or otherwise identified to our satisfaction) of such documents, records and other
instruments as we deemed necessary or appropriate for the purposes of this opinion, including,
without limitation: (i) those documents relating to the existence, organization and operation of the
City; (ii) Resolution No. _____, adopted by the City Council on ____ __, 2016 (the “Resolution”);
(iii) all necessary documentation of the City relating to the authorization, execution and delivery
of the Indenture, dated as of November 1, 2016 (the “Indenture”), among the Authority, the City,
and Wilmington Trust, National Association, as trustee (the “Trustee”); the Lease Agreement,
dated as of November 1, 2016, between the Authority and the City (the “Lease Agreement ”); the
Ground Lease, dated as of November 1, 2016, between the City and the Authority (the “Ground
Lease”); the Continuing Disclosure Certificate, dated as of _____ __, 2016 (the “Continuing
Disclosure Certificate”) executed by the City; the Bond Purchase Agreement, dated ______ __,
2016, among Stifel, Nicolaus & Company, Incorporated, as underwriter (the “Underwriter”), the
Authority and the City(the “Purchase Contract”); and the Official Statement relating to the Bonds,
dated ____ __, 2016 (the “Official Statement”). The Lease Agreement, Indenture, the Ground
Lease, and the Continuing Disclosure Certificate are collectively referred to herein as the “City
Legal Documents.” All capitalized terms used herein and not otherwise defined shall have the
meanings given to such terms as set forth in the Indenture.
C-2
Based on the foregoing, we are of the opinion that:
1.The Cityis a municipal corporation, organized and operating under the Constitution
and laws of the State of California, and the City has duly and validly adopted the Resolution at a
meeting of the City Council of the City 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 the
Resolution has not been modified or amended and is in full force and effect.
2.Each of the City Legal Documents and the Purchase Contract has been duly
authorized, executed and delivered by the City, and, assuming due authorization, execution and
delivery by the other parties thereto, each constitutes a legal, valid and binding agreement of the
City enforceable against the City in accordance with its respective terms, except as enforcement
thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws or
equitable principles affecting the enforcement of creditors’ rights generally, the exercise of judicial
discretion, the application of equitable principles if equitable remedies are sought and limitations
on remedies against counties in the State of California.
3.To the best knowledge of the undersigned, after reasonable investigation, except as
may be described in the Official Statement, no approval, consent or authorization of any
governmental or public agency or authority is required for the adoption of the Resolution, the
approval of the Official Statement or the valid authorization or execution and delivery of the City
Legal Documents or the Purchase Contract which has not been obtained (provided that no opinion
is expressed as to any action required under state securities or blue sky laws in conjunction with
the purchase or distribution of the Bonds by the Underwriter).
4.To the best knowledge of the undersigned, after reasonable investigation, the
execution and delivery of the City Legal Documents and the Purchase Contract by the City, the
adoption of the Resolution, the approval of the Official Statement, and compliance with the
provisions of the City Legal Documents, the Purchase Contract, the Official Statement and the
Resolution and the performance by the City of its obligations thereunder, under the circumstances
contemplated thereby, do not and will not in any material respect conflict with or constitute a
breach of, or default under, any instrument relating to the organization, existence or operation of
the City, or any commitment, agreement or other instrument to which the City is a party or by
which it is bound, or any existing law, regulation, order or decree to which the City is subject.
5.Except as disclosed in the Official Statement, to the best knowledge of the
undersigned, there is no action, suit, proceeding or investigation at law or in equity before or by
any court, public board or body, pending as to which service of process has been made or,
threatened against the City which would materially and adversely impact the City’s ability to
complete the transactions described in and contemplated by the Official Statement, seeking to
restrain or enjoin the base rental payments under the Lease Agreement , or in any way contesting
or affecting the validity of the City Legal Documents, the Purchase Contract, the Resolution or the
Bonds or the transactions relating to the Property as described and defined in the Official
Statement.
C-3
6.To the best knowledge of the undersigned, the information contained in the Official
Statement (except for the financial, statistical or economic data or forecasts, numbers, charts,
tables, graphs, estimates, projections, assumptions or expressions of opinion, and any information
regarding The Depository Trust Company, as to which no opinion is expressed) 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 light of the circumstances under which they were
made, not misleading.
This office expresses no opinion as to any matter other than as expressly set forth above.
Without limiting the generality of the foregoing, we specifically express no opinion as to the status
of the Bonds or the interest thereon or the City Legal Documents under any federal securities laws
or any state securities “Blue Sky” law or any federal, state or local tax law. Further, we express
no opinion with respect to any indemnification, contribution, choice of law, choice of forum or
waiver provisions contained in the City Legal Documents, and we express no opinion on the laws
of any jurisdiction other than the State of California and the United States of America.
This opinion is delivered to each of the parties address above and is solely for the benefit
of each of such parties and is not to be used, circulated, quoted, or otherwise referred to or relied
upon by any other person or for any other purpose. A copy of this opinion may be included in the
transcript of proceedings relating to the Bonds.
Very truly yours,
D-1
EXHIBIT D
FORM OF AUTHORITY COUNSEL OPINION
________ __, 2016
Lake Elsinore Facilities Financing Authority
Lake Elsinore, California
City of Lake Elsinore
Lake Elsinore , California
Stifel, Nicolaus & Company, Incorporated
Los Angeles, California
Lake Elsinore Facilities Financing Authority
Lease Revenue Bonds,
Series 2016A
Ladies and Gentlemen:
This office has acted as counsel to the Lake Elsinore Facilities Financing Authority (the
“Authority”) in connection with the issuance, sale and delivery by the Authority of the above-
captioned bonds (the “Bonds”). I have examined originals (or copies certified or otherwise
identified to our satisfaction) of such documents, records and other instruments as we deemed
necessary or appropriate for the purposes of this opinion, including, without limitation: (i) those
documents relating to the existence, organization and operation of the Authority; (ii) Resolution
No. ______, adopted by the Authority Board of Directors on _______ ___, 2016 (the
“Resolution”); (iii) all necessary documentation of the Authority relating to the authorization,
execution and delivery of the Indenture, dated as of November 1, 2016 (the “Indenture”) among
the Authority, the City of Lake Elsinore (the “City”) and Wilmington Trust, National Association,
as trustee (the “Trustee”); the Lease Agreement , dated as of November 1, 2016 (the “Lease
Agreement ”), between the Authority and the City; the Ground Lease, dated as of (the “Lease
Agreement ”), between the City and the Authority (the “Ground Lease”); the Bond Purchase
Agreement, dated ______ __, 2016, among Stifel, Nicolaus & Company, Incorporated, as
underwriter, the Authority and the City (the “Purchase Contract”); and the Official Statement
relating to the Bonds, dated _____ __, 2016 (the “Official Statement”). The Indenture, the Lease
Agreement, the Ground Lease, and the Bonds are collectively referred to herein as the “Authority
Legal Documents.” All capitalized terms used herein and not otherwise defined shall have the
meanings given to such terms as set forth in the Indenture.
Based on the foregoing, we are of the opinion that:
D-2
1.The Authority is a joint exercise of powers agency duly organized and validly
existing pursuant to the Constitution and laws of the State of California with the full power and
authority to adopt the Resolution, and the Authority has duly and validly adopted the Resolution
at a meeting of the Board of Directors 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 the Resolution has not been modified or amended and is in full force and effect.
2.Each of the Authority Legal Documents, the Purchase Contract and the Official
Statement has been duly authorized, executed and delivered by the Authority, and, assuming due
authorization, execution and delivery by the other parties thereto, each of the Authority Legal
Documents and the Purchase Contract constitutes a legal, valid and binding agreement of the
Authority enforceable against the Authority in accordance with its respective terms, except as
enforcement thereof may be limited by bankruptcy, insolvency or other laws affecting the
enforcement of creditors’ rights generally, the exercise of judicial discretion, the application of
equitable principles if equitable remedies are sought and limitations on remedies against joint
powers agencies in the State of California.
3.Except as disclosed in the Official Statement, to the best knowledge of the
undersigned, there is no action, suit, proceeding or investigation at law or in equity, before or by
any court, public board or body, pending as to which service of process has been made or,
threatened against the Authority, seeking to restrain or enjoin any of the transactions referred to
herein or contemplated hereby or contesting or affecting the validity of the Authority Legal
Documents or the Purchase Contract, or the issuance, sale or delivery of the Bonds.
This office expresses no opinion as to any matter other than as expressly set forth above.
Without limiting the generality of the foregoing, we specifically express no opinion as to the status
of the Bonds or the interest thereon or the Authority Legal Documents under any federal securities
laws or any state securities “Blue Sky” law or any federal, state or local tax law. Further, we
express no opinion with respect to any indemnification, contribution, choice of law, choice of
forum or waiver provisions contained in the Authority Legal Documents, and we express no
opinion on the laws of any jurisdiction other than the State of California and the United States of
America.
D-3
This opinion is delivered to each of the parties address above and is solely for the benefit
of each of such parties and is not to be used, circulated, quoted, or otherwise referred to or relied
upon by any other person or for any other purpose. A copy of this opinion may be included in the
transcript of proceedings relating to the Bonds.
Very truly yours,
Stradling Yocca Carlson & Rauth
Draft of 10/3/16
PRELIMINARY OFFICIAL STATEMENT DATED OCTOBER __, 2016
Ratings:
Standard & Poor’s: “___”
See “RATING” herein
NEW ISSUE – BOOK-ENTRY ONLY
In the opinion of Stradling Yocca Carlson & Rauth, a Professional Corporation, Bond Counsel, under existing statutes, regulations, rulings and
judicial decisions and assuming certain representations and compliance with certain covenants and requirements described in this Official Statement,
interest (and original issue discount) on the Series 2016 Bonds is excluded from gross income for federal income tax purposes, and is not an item of tax
preference for purposes of calculating the federal alternative minimum tax imposed on individuals and corporations. In the further opinion of Bond
Counsel, interest (and original issue discount) on the Series 2016 Bonds is exempt from State of California personal income tax. See “TAX MATTERS.”
$_______________*
LAKE ELSINORE FACILITIES FINANCING AUTHORITY
LEASE REVENUE BONDS, SERIES 2016A
Dated: Date of Delivery Due: April 1, as shown on inside cover
The Lake Elsinore Facilities Financing Authority Lease Revenue Bonds, Series 2016A (the “Series 2016 Bonds”) are payable from base rental payments (the
“Base Rental Payments”) to be made by the City of Lake Elsinore (the “City”) for the right to use certain real property consisting of the City’s City Hall, a fire
station and certain park and recreation facilities as further described herein (the “Property”), pursuant to a Lease Agreement, dated as of November 1, 2016 (the
“Lease Agreement”), by and between the City, as lessee, and the Lake Elsinore Facilities Financing Authority (the “Authority”), as lessor. See “SECURITY AND
SOURCES OF PAYMENT FOR THE SERIES 2016 BONDS.” The Series 2016 Bondsare being issued to provide funds to (i) finance the acquisition, construction
and installation of certain capital improvements owned by the City, (ii) purchase a municipal bond insurance policy to guarantee payment of the principal of and
interest on the Series 2016 Bonds (iii) purchase a debt service reserve surety bond for deposit in the reserve fund and (iv) pay the costs incurred in connection with
the issuance of the Series 2016 Bonds. The City has covenanted under the Lease Agreement to make all Base Rental Payments provided for therein, to include all
such payments as a separate line item in its annual budgets, and to make all the necessary annual appropriations for such Base Rental Payments. The City’s
obligation to make Base Rental Payments is subject to abatement during any period in which, by reason of material damage to, or destruction or condemnation of,
the Property, or any defects in title to the Property, there is substantial interference with the City’s right to use and occupy any portion of the Property. See “RISK
FACTORS—Abatements.”
The Series 2016 Bondsare being issued in fully registered book-entry only form, initially registered in the name of Cede & Co., as nominee of The Depository
Trust Company, New York, New York (“DTC”). Interest on the Series 2016 Bonds is payable semiannually on April 1 and October 1 of each year, commencing
April 1, 2017. Purchasers will not receive certificates representing their interest in the Series 2016 Bonds. Individual purchases will be in principal amounts of
$5,000 or integral multiples thereof. Principal of and interest and premium, if any, on the Series 2016 Bonds will be paid by Wilmington Trust, National
Association, as trustee (the “Trustee”) to DTC for subsequent disbursement to DTC Participants who are obligated to remit such payments to the Beneficial Owners
of the Series 2016 Bonds. See “THE SERIES 2016 BONDS—Book-Entry Only System” herein.
The Series 2016 Bonds will be issued pursuant to an Indenture, dated as of November 1, 2016 (the “Indenture”) by and among the City, the Authority and
Wilmington Trust, National Association, as trustee. The Series 2016 Bonds and any additional bonds issued pursuant to the Indenture (“Additional Bonds”) are
collectively referred to as the “Bonds.”
The Series 2016 Bonds are subject to optional, mandatory sinking fund and extraordinary redemption prior to maturity, as described herein. See “THE
SERIES 2016 BONDS—Redemption” herein.
The scheduled payment of the principal of and interest on the Series 2016 Bonds when due will be guaranteed under an insurance policy to be issued
concurrently with the issuance of the Series 2016 Bonds by _______________.
[INSURER LOGO]
The Series 2016 Bonds are special obligations of the Authority, payable solely from Base Rental Payments and the other assets pledged therefor
under the Indenture. Neither the faith and credit nor the taxing power of the Authority, the City or the State of California, or any political subdivision
thereof, is pledged to the payment of the Series 2016 Bonds.
The obligation of the City to make the Base Rental Payments does not constitute a debt of the City or the State of California or of any political
subdivision thereof within the meaning of any constitutional or statutory debt limit or restriction, and does not constitute an obligation for which the City
or the State of California is obligated to levy or pledge any form of taxation or for which the City or the State of California has levied or pledged any
form of taxation. The Authority has no power to tax.
THIS COVER PAGE CONTAINS CERTAIN INFORMATION FOR QUICK REFERENCE ONLY. IT IS NOT A SUMMARY OF THIS ISSUE.
INVESTORS MUST READ THE ENTIRE OFFICIAL STATEMENT TO OBTAIN INFORMATION ESSENTIAL TO THE MAKING OF AN INFORMED
INVESTMENT DECISION.
The Series 2016 Bonds will be offered when, as and if issued and received by the Underwriter, subject to the approval as to their validity by Stradling Yocca
Carlson & Rauth, a Professional Corporation, Newport Beach, California, Bond Counsel, and certain other conditions. The Underwriter is being represented by
its counsel, Nossaman, LLP, Irvine, California. Certain legal matters will be passed upon for the City by Stradling Yocca Carlson & Rauth, a Professional
Corporation, Newport Beach, California, as Disclosure Counsel to the City, and for the Trustee by its counsel. It is anticipated that the Series 2016 Bonds will
be available for delivery through the facilities of The Depository Trust Company on or about November __, 2016.
[STIFEL LOGO]
Dated: October __, 2016
*Preliminary; subject to change.This Preliminary Official Statement and the information contained herein are subject to completion or amendment. These securities may not be sold, nor may offers to buy them be accepted, prior to the time the Official Statement is delivered in final form. Under no circumstances shall this Preliminary Official Statement constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of, these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful.
$___________*
LAKE ELSINORE FACILITIES FINANCING AUTHORITY
LEASE REVENUE BONDS, SERIES 2016A
MATURITY SCHEDULE
BASE CUSIP†@@@@@@
Maturity Date
(April 1)Principal Amount Interest Rate Yield CUSIP†
$ % %
$_________ ____% Term Bond due April 1, 20__, Yield ____%, Price ______%
_____________
*Preliminary, subject to change.
†Copyright 2016, American Bankers Association. CUSIP® is a registered trademark of the American Bankers Association. CUSIP data herein is
provided by the CUSIP Service Bureau, managed on behalf of the American Bankers Association by Standard & Poor’s. This data is not intended
to create a database and does not serve in any way as a substitute for the CUSIP Services Bureau. CUSIP numbers are included solely for the
convenience of the registered owners of the applicable Bonds. The City, Authority and the Underwriter take no responsibility for the accuracy of
such data.
No dealer, broker, salesperson or other person has been authorized by the City or the Authority to give any information
or to make any representations in connection with the offer or sale of the Series 2016 Bonds other than those contained herein and,
if given or made, such other information or representations must not be relied upon as having been authorized by the City or the
Authority. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any
sale of the Series 2016 Bonds by a person in any jurisdiction in which it is unlawful for such person to make such an offer,
solicitation or sale.
This Official Statement is not to be construed as a contract with the purchasers or Owners of the Series 2016 Bonds.
Statements contained in this Official Statement which involve estimates, forecasts or matters of opinion, whether or not expressly
so described herein, are intended solely as such and are not to be construed as representations of fact.
The Underwriter has provided the following sentence for inclusion in this Official Statement. The Underwriter has
reviewed the information in this Official Statement in accordance with, and as a part of, its responsibilities to investors under the
federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the
accuracy or completeness of such information.
This Official Statement and the information contained herein are subject to completion or amendment without notice and
neither delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that
there has been no change in the affairs of the City or the Authority or any other parties described herein since the date hereof.
These securities may not be sold nor may an offer to buy be accepted prior to the time the Official Statement is delivered in final
form. This Official Statement is being submitted in connection with the sale of the Series 2016 Bonds referred to herein and may
not be reproduced or used, in whole or in part, for any other purpose, unless authorized in writing by the City. All summaries of
documents and laws are made subject to the provisions thereof and do not purport to be complete statements of any or all such
provisions.
Certain statements included or incorporated by reference in this Official Statement constitute “forward-looking
statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995, Section 21E of the United
States Securities Exchange Act of 1934, as amended, and Section 27A of the United States Securities Act of 1933, as amended.
Such statements are generally identifiable by the terminology used such as “plan,” “expect,” “estimate,” “project,” “budget,”
“intend” or similar words. Such forward-looking statements include, but are not limited to, certain statements contained in the
information under the caption “CITY FINANCIAL INFORMATION” and “RISK FACTORS.”
THE ACHIEVEMENT OF CERTAIN RESULTS OR OTHER EXPECTATIONS CONTAINED IN SUCH
FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND
OTHER FACTORS WHICH MAY CAUSE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS
DESCRIBED TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR
ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. THE CITY DOES
NOT PLAN TO ISSUE ANY UPDATES OR REVISIONS TO THE FORWARD-LOOKING STATEMENTS SET FORTH
IN THIS OFFICIAL STATEMENT. IN EVALUATING SUCH STATEMENTS, POTENTIAL INVESTORS SHOULD
SPECIFICALLY CONSIDER THE VARIOUS FACTORS WHICH COULD CAUSE ACTUAL EVENTS OR RESULTS
TO DIFFER MATERIALLY FROM THOSE INDICATED BY SUCH FORWARD-LOOKING STATEMENTS.
IN CONNECTION WITH THE OFFERING OF THE SERIES 2016 BONDS, THE UNDERWRITER MAY
OVERALLOT OR EFFECT TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE
SERIES 2016 BONDS 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 SERIES 2016 BONDS TO CERTAIN DEALERS AND DEALER
BANKS AND BANKS ACTING AS AGENT AND OTHERS AT PRICES LOWER THAN THE PUBLIC OFFERING
PRICE STATED ON THE COVER PAGE HEREOF AND SAID PUBLIC OFFERING PRICE MAY BE CHANGED
FROM TIME TO TIME BY THE UNDERWRITER.
THE SERIES 2016 BONDS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, IN RELIANCE UPON AN EXEMPTION CONTAINED IN SUCH ACT AND HAVE NOT BEEN
REGISTERED OR QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE.
The City maintains a website; however, information presented there is not a part of this Official Statement and should
not be relied upon in making an investment decision with respect to the Series 2016 Bonds.
CITY OF LAKE ELSINORE
(County of Riverside, California)
City Council
Brian Tisdale, Mayor
Robert Magee, Mayor Pro Tem Steve Manos
Daryl Hickman Natasha Johnson
Lake Elsinore Facilities Financing Authority
Brian Tisdale, Chair
Robert Magee, Vice Chair Steve Manos
Daryl Hickman Natasha Johnson
City Manager/Executive Director
Grant Yates
City Clerk
Susan M. Domen, MMC
Assistant City Manager/Treasurer
Jason Simpson
PROFESSIONAL SERVICES
City Attorney
Leibold, McClendon & Mann, a Professional Corporation
Irvine, California
Bond Counsel and Disclosure Counsel
Stradling Yocca Carlson & Rauth, a Professional Corporation
Newport Beach, California
Financial Advisor
Urban Futures, Inc.
Orange, California
Trustee
Wilmington Trust, National Association
Costa Mesa, California
TABLE OF CONTENTS
Page
i
INTRODUCTION................................................................................................................................................1
THE SERIES 2016 BONDS.................................................................................................................................3
General..............................................................................................................................................................3
Registration, Transfers and Exchanges.............................................................................................................4
Redemption.......................................................................................................................................................4
Book-Entry Only System..................................................................................................................................5
SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2016 BONDS.............................................6
Pledge of Revenues...........................................................................................................................................6
Base Rental Payments.......................................................................................................................................7
Additional Rental Payments .............................................................................................................................7
Abatement.........................................................................................................................................................8
Additional Bonds..............................................................................................................................................8
Substitution, Addition and Removal of Property..............................................................................................9
Action on Default..............................................................................................................................................9
Reserve Fund..................................................................................................................................................10
Insurance.........................................................................................................................................................10
BOND INSURANCE.........................................................................................................................................11
SOURCES AND USES OF FUNDS..................................................................................................................11
BASE RENTAL PAYMENT SCHEDULE .......................................................................................................12
THE 2016 PROJECT..........................................................................................................................................13
THE PROPERTY...............................................................................................................................................13
THE AUTHORITY............................................................................................................................................14
Organization and Membership........................................................................................................................14
Powers.............................................................................................................................................................14
THE CITY..........................................................................................................................................................14
RISK FACTORS................................................................................................................................................14
General Considerations – Security for the Series 2016 Bonds.......................................................................14
Abatements.....................................................................................................................................................15
Seismic Activity..............................................................................................................................................15
Risks Affecting the Success of or the 2016 Project........................................................................................16
Hazardous Substances.....................................................................................................................................16
Other Financial Matters..................................................................................................................................16
Substitution, Addition and Removal of Property; Additional Bonds..............................................................17
No Limitation on Incurring Additional Obligations.......................................................................................17
Limited Recourse on Default; No Acceleration of Base Rental.....................................................................17
Possible Insufficiency of Insurance Proceeds.................................................................................................18
Limitations on Remedies................................................................................................................................18
Loss of Tax Exemption...................................................................................................................................18
No Liability of Authority to the Owners.........................................................................................................19
STATE OF CALIFORNIA BUDGET INFORMATION...................................................................................19
State Budget....................................................................................................................................................19
State Budget for Fiscal Year 2016-17.............................................................................................................19
Potential Impact of State Financial Condition on the City .............................................................................20
Future State Budgets.......................................................................................................................................20
Redevelopment Dissolution............................................................................................................................20
CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS............22
Article XIIIA of the California Constitution...................................................................................................22
ii
Article XIIIB of the California Constitution...................................................................................................22
Proposition 62.................................................................................................................................................23
Proposition 218...............................................................................................................................................23
Unitary Property .............................................................................................................................................24
Proposition 22.................................................................................................................................................24
Proposition 1A................................................................................................................................................24
Proposition 26.................................................................................................................................................25
Future Initiatives.............................................................................................................................................25
TAX MATTERS.................................................................................................................................................25
CERTAIN LEGAL MATTERS .........................................................................................................................27
ABSENCE OF LITIGATION............................................................................................................................27
UNDERWRITING .............................................................................................................................................28
RATING.............................................................................................................................................................28
FINANCIAL ADVISOR....................................................................................................................................28
CONTINUING DISCLOSURE..........................................................................................................................28
FINANCIAL STATEMENTS OF THE CITY...................................................................................................29
MISCELLANEOUS...........................................................................................................................................29
General..............................................................................................................................................................1
Government and Administration.......................................................................................................................1
Risk Management.............................................................................................................................................1
CITY FINANCIAL INFORMATION..................................................................................................................3
General..............................................................................................................................................................3
Accounting and Financial Reporting................................................................................................................3
Budget Procedure, Current Budget and Historical Budget Information...........................................................3
Comparative Change in Fund Balance of the City General Fund.....................................................................5
Comparative General Fund Balance Sheets of the City....................................................................................6
Property Taxes..................................................................................................................................................7
Sales Taxes.......................................................................................................................................................9
Services...........................................................................................................................................................10
Tax Revenues by Source.................................................................................................................................10
Indebtedness ...................................................................................................................................................10
Retirement Contributions................................................................................................................................11
Other Post-Employment Benefits...................................................................................................................15
City Investment Policy....................................................................................................................................16
APPENDIX A THE CITY .........................................................................................................................A-1
APPENDIX B SUMMARY OF THE PRINCIPAL LEGAL DOCUMENTS...........................................B-1
APPENDIX C AUDITED FINANCIAL STATEMENTS OF THE CITY FOR THE YEAR
ENDED JUNE 30, 2015....................................................................................................C-1
APPENDIX D PROPOSED FORM OF BOND COUNSEL OPINION....................................................D-1
APPENDIX E FORM OF CONTINUING DISCLOSURE CERTIFICATE............................................ E-1
APPENDIX F BOOK-ENTRY ONLY SYSTEM .....................................................................................F-1
APPENDIX G SUPPLEMENTAL INFORMATION – THE CITY OF LAKE ELSINORE....................G-1
APPENDIX H SPECIMEN MUNICIPAL BOND INSURANCE POLICY .............................................H-1
iii
[INSERT LOCATION MAP]
1
OFFICIAL STATEMENT
$__________________*
LAKE ELSINORE FACILITIES FINANCING AUTHORITY
LEASE REVENUE BONDS, SERIES 2016A
INTRODUCTION
This Official Statement (which includes the cover page and the appendices hereto) (the “Official
Statement”), provides certain information concerning the sale and delivery of $___________ aggregate principal
amount of Lake Elsinore Facilities Financing Authority Lease Revenue Bonds, Series 2016A (the “Series 2016
Bonds”).
The net proceeds of the sale of the Series 2016 Bonds will be used to (i) finance the acquisition,
construction and installation of certain capital improvements owned by the City, (ii) purchase a municipal bond
insurance policy to guarantee payment of the principal of and interest on the Series 2016 Bonds, (iii) purchase a
debt service reserve surety bond (the “Surety Bond”) for deposit in the reserve fund and (iv) pay the costs
incurred in connection with the issuance of the Series 2016 Bonds.
The Series 2016 Bonds are equally and ratably payable from base rental payments (the “Base Rental
Payments”) to be made by the City of Lake Elsinore (the “City”) for the right to use certain real property
consisting of the City’s City Hall, a fire station and certain park and recreation facilities, as further described
herein (collectively, the “Property”), pursuant to a Lease Agreement, dated as of November 1, 2016 (the “Lease
Agreement”), between the City, as lessee, and the Lake Elsinore Facilities Financing Authority(the “Authority”),
as lessor. See “THE PROPERTY.”
The Series 2016 Bonds will be issued pursuant to an Indenture, dated as of November 1, 2016 (the
“Indenture”), by and among the Authority, the City and the Trustee. Pursuant to the Indenture, the Authority
may issue additional bonds (the “Additional Bonds”) payable from the Base Rental Payments on a parity with
the Series 2016 Bonds (the Series 2016 Bonds and any such Additional Bonds being collectively referred to as
the “Bonds”).
Pursuant to a Ground Lease, dated as of November 1, 2016 (the “Ground Lease”), by and between the
City and the Authority, the City has leased the Property to the Authority. The Authority has subleased the
Property to the City under the Lease Agreement. The Lease Agreement obligates the City to make Base Rental
Payments to the Authority.
The Trustee and the Authority have entered into an Assignment Agreement, dated as of November 1,
2016, pursuant to which the Authority has assigned to the Trustee for the benefit of the Bond Owners
substantially all of the Authority’s right, title and interest in and to the Ground Lease and the Lease Agreement,
including its right to receive the Base Rental Payments due under the Lease Agreement and to enforce any
remedies in the event of a default by the City.
The City will covenant under the Lease Agreement to take such action as may be necessary to include
all Rental Payments, which are comprised of Base Rental Payments and Additional Rental Payments (which
include taxes and assessments affecting the Property, administrative costs of the Authority relating to the
Property, fees and expenses of the Trustee and other amounts payable under the Lease Agreement), due under
the Lease Agreement as a separate line item in its annual budgets and to make the necessary annual
appropriations therefor, subject to abatement as described herein.
*Preliminary; subject to change.
2
Base Rental Payments are subject to complete or partial abatement in the event and to the extent that
there is substantial interference with the City’s right to use and occupy the Property or any portion thereof. See
“RISK FACTORS—Abatements.” Abatement of Base Rental Payments under the Lease Agreement, to the
extent that payment is not made from alternative sources as set forth below, would result in all Bond Owners
receiving less than the full amount of principal of and interest on the Bonds. To the extent that proceeds of
insurance are available, Base Rental Payments (or a portion thereof) may be made during periods of abatement.
See “RISK FACTORS—Abatements” and Appendix B — “SUMMARY OF PRINCIPAL LEGAL
DOCUMENTS.”
Payment of the principal of and interest on the Series 2016 Bonds will be insured by a municipal bond
insurance policy (the “Policy”) to be issued by ____________ (the “Insurer”) concurrently with the issuance of
the Series 2016 Bonds. See the caption “BOND INSURANCE.” A specimen of the Policy is set forth in
Appendix H.
THE SERIES 2016 BONDS ARE SPECIAL OBLIGATIONS OF THE AUTHORITY, PAYABLE
SOLELY FROM BASE RENTAL PAYMENTS AND THE OTHER ASSETS PLEDGED THEREFOR
UNDER THE INDENTURE. NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE
AUTHORITY, THE CITY OR THE STATE OF CALIFORNIA (THE “STATE”), OR ANY POLITICAL
SUBDIVISION THEREOF, IS PLEDGED TO THE PAYMENT OF THE SERIES 2016 BONDS. THE
AUTHORITY HAS NO TAXING POWER.
THE OBLIGATION OF THE CITY TO MAKE THE BASE RENTAL PAYMENTS DOES NOT
CONSTITUTE A DEBT OF THE CITY, THE STATE OR ANY POLITICAL SUBDIVISION THEREOF
WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMIT OR
RESTRICTION, AND DOES NOT CONSTITUTE AN OBLIGATION FOR WHICH THE CITY OR THE
STATE IS OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION OR FOR WHICH THE CITY
OR THE STATE HAS LEVIED OR PLEDGED ANY FORM OF TAXATION.
The City has agreed to provide, or cause to be provided, to the Municipal Securities Rulemaking Board
for purposes of Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission certain annual financial
information and operating data and, in a timely manner, notice of certain listed events. These covenants have
been made in order to assist the Underwriter in complying with SEC Rule 15c2-12(b)(5). See “CONTINUING
DISCLOSURE” herein for a description of the specific nature of the annual report and notices of listed events
and a summary description of the terms of the disclosure agreement pursuant to which such reports are to be
made.
The Series 2016 Bonds are being issued in fully registered book-entry only form, initially registered in
the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York (“DTC”).
Interest on the Series 2016 Bonds is payable semiannually on April 1 and October 1 of each year, commencing
April 1, 2017. Purchasers will not receive certificates representing their interest in the Series 2016 Bonds.
Individual purchases will be in principal amounts of $5,000 or integral multiples thereof. Principal of and interest
on the Series 2016 Bonds will be paid by Wilmington Trust, National Association, as trustee (the “Trustee”) to
DTC for subsequent disbursement to DTC Participants which are obligated to remit such payments to the
Beneficial Owners of the Series 2016 Bonds. See “THE SERIES 2016 BONDS—Book-Entry Only System”
herein. The Series 2016 Bonds are subject to redemption prior to maturity as described herein. See “THE
SERIES 2016 BONDS—Redemption.”
Wilmington Trust, National Association, Costa Mesa, California, will act as Trustee with respect to the
Series 2016 Bonds. The Series 2016 Bonds will be issued subject to the approval as to their legality by Stradling
Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California, Bond Counsel, and certain
other conditions. The Underwriter is being represented by its counsel, Nossaman, LLP, Irvine, California.
Certain legal matters will be passed upon for the City by Stradling Yocca Carlson & Rauth, a Professional
Corporation, Newport Beach, California, as Disclosure Counsel to the City, and for the Trustee by its counsel.
3
The City’s financial statements for the fiscal year ended June 30, 2015 includedas Appendix C hereto have been
audited by Teaman, Ramirez & Smith, Inc., certified public accountants, Riverside, California (the “Auditor”).
See Appendix C—“AUDITED FINANCIAL STATEMENTS OF THE CITY FOR THE FISCAL YEAR
ENDED JUNE 30, 2015” herein. The City’s 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 review of the financial condition of the City.
Certain events could affect the ability of the City to make the Base Rental Payments when due. See
“RISK FACTORS” for a discussion of certain factors that should be considered, in addition to other matters set
forth herein, in evaluating an investment in the Series 2016 Bonds.
The presentation of information, including tables of receipt of revenues, is intended to show recent
historical information and, except for the unaudited estimated actual results for Fiscal Year 2016 and the budget
discussion for Fiscal Year 2016-17, is not intended to indicate future or continuing trends in the financial position
or other affairs of the City. No representation is made that past experience, as it might be shown by such financial
and other information, will necessarily continue or be repeated in the future.
The summaries or references to the Indenture, the Lease Agreement, the Ground Lease, the Assignment
Agreement and other documents, agreements and statutes referred to herein, and the description of the Series
2016 Bonds included in this Official Statement, do not purport to be comprehensive or definitive, and such
summaries, references and descriptions are qualified in their entireties by reference to each such document or
statute. All capitalized terms used in this Official Statement (unless otherwise defined herein) which are defined
in the Indenture or the Lease Agreement shall have the meanings set forth therein, some of which are summarized
in Appendix B—“SUMMARY OF THE PRINCIPAL LEGAL DOCUMENTS.”
THE SERIES 2016 BONDS
General
The Series 2016 Bonds shall be issued in fully registered form without coupons in denominations of
$5,000 or any integral multiple thereof. The Series 2016 Bonds will be dated as of and bear interest (calculated
on the basis of a 360-day year comprised of twelve 30-day months) from the dated date thereof at the rates set
forth on the inside cover page hereof. Interest on the Series 2016 Bonds will be paid semiannually on April 1
and October 1 (each, an “Interest Payment Date”) of each year, commencing April 1, 2017.
Interest on the Series 2016 Bonds will be payable from the Interest Payment Date next preceding the
date of authentication thereof unless (i) a Series 2016 Bond is authenticated on or before an Interest Payment
Date and after the close of business the fifteenth day of the month next preceding such Interest Payment Date
(the “Record Date”), in which event it will bear interest from such Interest Payment Date, (ii) a Series 2016 Bond
is authenticated on or before the first Record Date, in which event interest thereon will be payable from the dated
date thereof, or (iii) interest on any Series 2016 Bond is in default as of the date of authentication thereof, in
which event interest thereon will be payable from the date to which interest has been paid in full, payable on
each Interest Payment Date. Interest will be paid in lawful money of the United States on each Interest Payment
Date to the Persons in whose names the ownership of the Series 2016 Bonds is registered on the Registration
Books at the close of business on the immediately preceding Record Date, except as provided below. Interest
will be paid by check of the Trustee mailed by first class mail, postage prepaid, on each Interest Payment Date
to the Series 2016 Bond Owners at their respective addresses shown on the Registration Books as of the close
of business on the preceding Record Date.
The principal and premium, if any, of the Series 2016 Bonds will be payable in lawful money of the
United States of America upon presentation and surrender thereof upon maturity or earlier redemption at the
Office of the Trustee. The Series 2016 Bonds will be subject to optional, mandatory sinking fund and
extraordinary redemption as set forth herein.
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Registration, Transfers and Exchanges
The Series 2016 Bonds will be issued as fully registered bonds, registered in the name of Cede & Co.
as nominee of DTC, and will be available to actual purchasers of the Series 2016 Bonds (the “Beneficial
Owners”) in the denominations set forth above, under the book-entry system maintained by DTC, only through
brokers and dealers who are or act through DTC Participants (as defined in Appendix F) as described herein.
Beneficial Owners will not be entitled to receive physical delivery of the Series 2016 Bonds. See “THE SERIES
2016 BONDS—Book-Entry Only System.”
Redemption
Optional Redemption. The Series 2016 Bonds maturing on or after April 1, 20__, shall be subject to
optional redemption, in whole or in part, on any date on or after April 1, 20__, in Authorized Denominations,
from and to the extent of prepaid Base Rental Payments paid pursuant to the Lease Agreement, at a Redemption
Price equal to the principal amount of the Series 2016 Bonds to be redeemed, plus accrued interest thereon to
the date of redemption, without premium.
Extraordinary Redemption from Condemnation Award or Insurance Proceeds. The Series 2016
Bonds are subject to redemption, in whole or in part, on any date, in denominations of $5,000 or any integral
multiple thereof, from and to the extent of any insurance proceeds or condemnation award received with respect
to all or a portion of the Property, deposited by the Trustee in the Redemption Fund pursuant to the Indenture,
at a Redemption Price equal to the principal amount of the Series 2016 Bonds to be redeemed, plus accrued
interest thereon to the date of redemption, without premium.
Mandatory Sinking Fund Redemption. The Series 2016 Bonds maturing April 1, 20__ are subject to
mandatory sinking fund redemption in part (by lot) on each April 1 on and after April 1, 20__, in integral
multiples of $5,000 at a Redemption Price of the principal amount thereof plus accrued interest to the date fixed
for redemption, without premium, in accordance with the following schedule:
Sinking Fund Redemption Date
(April 1)
Principal Amount
To Be Redeemed
(maturity)
Selection of Bonds for Redemption. Whenever provision is made in the Indenture for the redemption
of less than all of the Bonds, the Trustee shall select the Bonds to be redeemed from all Bonds not previously
called for redemption (a) with respect to any optional redemption of Bonds of a Series, among maturities of
Bonds of such Series as directed in a Written Request of the Authority, (b) with respect to any redemption from
and to the extent of any insurance proceeds or condemnation award received with respect to all or a portion of
the Property and the corresponding provision of any Supplemental Indenture pursuant to which Additional Bonds
are issued, among maturities of all Series of Bonds on a pro rata basis as nearly as practicable, and (c) with
respect to any other redemption of Additional Bonds, among maturities as provided in the Supplemental
Indenture pursuant to which such Additional Bonds are issued, and by lot among Bonds of the same Series with
the same maturity in any manner which the Trustee in its sole discretion deemsappropriate and fair. For purposes
of such selection, all Bonds willbe deemed to be comprised of separate $5,000 denominations and such separate
denominations will be treated as separate Bonds which may be separately redeemed.
Notice of Redemption. At least 20 but not more than 60 days prior to the date fixed for redemption, the
Trustee on behalf and at the expense of the Authority will mail (by first class mail) notice of any redemption to
the respective Owners of any Bonds designated for redemption at their respective addresses appearing on the
Registration Books, provided, however, so long as the Bonds are registered in the name of the Nominee, notice
shall be given in such manner as complies with the requirements of DTC. Such notice will state the date of the
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notice, the redemption date, the redemption place and the Redemption Price and shall designate the CUSIP
numbers, the Bond numbers and the maturity or maturities (except in the event of redemption of all of the Bonds
of such maturity or maturities in whole) of the Bonds to be redeemed, and will require that such Bonds be then
surrendered at the principal corporate trust office of the Trustee for redemption at the Redemption Price, giving
notice also that further interest on such Bonds will not accrue from and after the date fixed for redemption. Such
notice may state that such redemption is conditioned upon sufficient funds being on deposit on the redemption
date to redeem the Bonds so called for redemption. Neither the failure to receive any notice so mailed, nor any
defect in such notice, will affect the validity of the proceedings for the redemption of the Bonds or the cessation
of accrual of interest thereon from and after the date fixed for redemption.
Partial Redemption of Bonds. Upon surrender of any Bonds redeemed in part only, the Authority will
execute and the Trustee will authenticate and deliver to the Owner thereof, at the expense of the Authority, a
new Bond or Bonds of the same Series in authorized denominations equal in aggregate principal amount
representing the unredeemed portion of the Bonds surrendered.
Effect of Notice of Redemption. Notice having been mailed as aforesaid, and moneys for the
Redemption Price, and the interest to the applicable date fixed for redemption, having been set aside in the
Redemption Fund, the Bonds will become due and payable on said date, and, upon presentation and surrender
thereof at the principal corporate trust office of the Trustee, said Bonds will be paid at the Redemption Price
thereof, together with interest accrued and unpaid to said date.
If, on said date fixed for redemption, moneys for the Redemption Price of all the Bonds to be redeemed,
together with interest to said date, will be held by the Trustee so as to be available therefor on such date, and, if
notice of redemption thereof has been mailed as aforesaid and not canceled, then, from and after said date,
interest on said Bonds will cease to accrue and become payable. All moneys held by or on behalf of the Trustee
for the redemption of Bonds will be held in trust for the account of the Owners of the Bonds so to be redeemed
without liability to such Owners for interest thereon. All Bonds paid at maturity or redeemed prior to maturity
pursuant to the provisions of the Indenture will be canceled upon surrender thereof and destroyed.
Book-Entry Only System
General. DTC will act as securities depository for the Series 2016 Bonds. The Series 2016 Bonds will
be issued as fully-registered bonds registered in the name of Cede & Co. (DTC’s partnership nominee). One
fully-registered Series 2016 Bond will be issued for each maturity of the Series 2016 Bonds, each in the initial
aggregate principal amount of such maturity, and will be deposited with DTC. See Appendix F —“BOOK-
ENTRY ONLY SYSTEM.”
Transfer and Exchange of Bonds. The following provisions regarding the exchange and transfer of
the Series 2016 Bonds apply only during any period in which the Series 2016 Bonds are not subject to DTC’s
book- entry system. While the Series 2016 Bonds are subject to DTC’s book-entry system, their exchange and
transfer will be effected through DTC and the Participants and will be subject to the procedures, rules and
requirements established by DTC.
Any Bond may, in accordance with its terms, be transferred upon the books required to be kept by the
Trustee pursuant to the provisions of the Indenture by the Person in whose name it is registered, in person or by
his or her duly authorized attorney, upon surrender of such Bond for cancellation, accompanied by delivery of a
written instrument of transfer, duly executed in a form acceptable to the Trustee. Whenever any Bond or Bonds
will be surrendered for transfer, the Authority will execute and the Trustee will authenticate and will deliver a
new Bond or Bonds of the same Series in a like aggregate principal amount, in any Authorized Denomination.
The Trustee will require the Bond Owner requesting such transfer to pay any tax or other governmental charge
required to be paid with respect to such transfer.
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The Bonds may be exchanged at the principal corporate trust office of the Trustee for a like aggregate
principal amount of Bonds of the same Series of other authorized denominations. The Trustee will require the
payment by the Bond Owner requesting such exchange of any tax or other governmental charge required to be
paid with respect to such exchange.
The Trustee is not obligated to make any transfer or exchange of Bonds of a Series during the period
established by the Trustee for the selection of Bonds of such Series for redemption, or with respect to any Bonds
of such Series selected for redemption.
SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2016 BONDS
Pledge of Revenues
The Series 2016 Bonds are equally and ratably payable from and secured by Base Rental Payments and
certain amounts on deposit in the funds and accounts established under the Indenture. Base Rental Payments
will be paid by the City from any and all legally available funds. See, “THE CITY,” “FINANCIAL
INFORMATION” and “RISK FACTORS.” The City has covenanted in the Lease Agreement to take such action
as may be necessary to include all Base Rental Payments and Additional Rental Payments due under the Lease
Agreement as a separate line item in its annual budgets and to make the necessary annual appropriations therefor.
The Authority, pursuant to the Assignment Agreement, will assign to the Trustee for the benefit of the
Series 2016 Bond Owners all of the Authority’s right, title and interest in and to the Ground Lease and the Lease
Agreement, including, without limitation, its right to receive Base Rental Payments to be paid by the City under
and pursuant to the Lease Agreement; provided that, the Authority will retain the rights to indemnification and
to payment of reimbursement of its reasonable costs and expenses under the Lease Agreement. The City will
pay Base Rental Payments directly to the Trustee, as assignee of the Authority. See “—Base Rental Payments”
below. Pursuant to the Indenture, the Authority may issue Additional Bonds payable from the Base Rental
Payments on a parity with the Series 2016 Bonds. See Appendix B —“SUMMARY OF THE PRINCIPAL
LEGAL DOCUMENTS—The Indenture—Additional Bonds.”
Subject only to the provisions of the Indenture permitting the application thereof for the purposes and
on the terms and conditions set forth in the Indenture, all of the Base Rental Payments and any other amounts
(including proceeds of the sale of the Bonds) held in the Base Rental Payment Fund, the Interest Fund, the
Principal Fund and the Redemption Fund are pledged by the Authority pursuant to the Indenture to secure the
payment of the principal of, premium, if any, and interest on the Bonds in accordance with their terms, the
provisions of the Indenture and the Act. Said pledge constitutes a first lien on such assets.
THE SERIES 2016 BONDS ARE SPECIAL OBLIGATIONS OF THE AUTHORITY, PAYABLE
SOLELY FROM BASE RENTAL PAYMENTS AND THE OTHER ASSETS PLEDGED THEREFOR
UNDER THE INDENTURE. NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE
AUTHORITY, THE CITY OR THE STATE, OR ANY POLITICAL SUBDIVISION THEREOF, IS
PLEDGED TO THE PAYMENT OF THE SERIES 2016 BONDS. THE AUTHORITY HAS NO TAXING
POWER.
7
Base Rental Payments
Rental Payments, including Base Rental Payments, will be paid by the City to the Authority for and in
consideration of the right to use and occupy the Property and in consideration of the continued right to the quiet
use and enjoyment thereof during each Rental Period for which such Rental Payments are to be paid. Each Base
Rental Payment will be deposited with the Trustee no later than the 15th day of the month next preceding each
Interest Payment Date (the “Base Rental Deposit Date”) on which such Base Rental Payment is due. All Base
Rental Payments will be paid directly by the City to the Trustee, and if received by the Authority at any time
will be transferred by the Authority to the Trustee within one Business Day after the receipt thereof. All Base
Rental Payments received by the Trustee will be deposited by the Trustee in the Base Rental Payment Fund.
Pursuant to the Indenture, on the Business Day immediately preceding each Interest Payment Date and
on the Business Day immediately preceding each Principal Payment Date, the Trustee will transfer amounts in
the Base Rental Payment Fund as are necessary to the Interest Fund and the Principal Fund to provide for the
payment of the interest on and principal of the Series 2016 Bonds.
Scheduled Base Rental Payments relating to the Series 2016 Bondsare set forth below under the heading
“BASE RENTAL PAYMENT SCHEDULE.”
THE OBLIGATION OF THE CITY TO MAKE THE BASE RENTAL PAYMENTS DOES NOT
CONSTITUTE A DEBT OF THE CITY OR THE STATE OR OF ANY POLITICAL SUBDIVISION
THEREOF WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMIT OR
RESTRICTION, AND DOES NOT CONSTITUTE AN OBLIGATION FOR WHICH THE CITY OR THE
STATE IS OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION OR FOR WHICH THE CITY
OR THE STATE HAS LEVIED OR PLEDGED ANY FORM OF TAXATION.
Additional Rental Payments
For the right to use and occupy the Property, the Lease Agreement requires the City to pay, as Additional
Rental Payments thereunder, in addition to the Base Rental Payments, such amounts as shall be required for the
payment of the following:
(i)All taxes and assessments of any type or nature charged to the Authority or the City or
affecting the Property or the respective interests or estates of the Authority or the City therein.
(ii)All reasonable administrative costs of the Authority relating to the Property including,
but without limiting the generality of the foregoing, salaries, wages, fees and expenses, compensation and
indemnification of the Trustee payable by the Authority under the Indenture, fees of auditors, accountants,
attorneys or engineers, and all other necessary and reasonable administrative costs of the Authority or charges
required to be paid by it in order to maintain its existence or to comply with the terms of the Indenture or the
Lease Agreement or to defend the Authority and its members, officers, agents and employees.
(iii)Insurance premiums for all insurance required pursuant to the Lease Agreement.
(iv)Any amounts with respect to the Lease Agreement or the Bonds required to be rebated
to the federal government in accordance with section 148(f) of the Internal Revenue Code of 1986, as amended.
(v)All other payments required to be paid by the City under the provisions of the Lease
Agreement or the Indenture.
Amounts constituting Additional Rental Payments payable under the Lease Agreement will be paid by
the City directly to the person or persons to whom such amounts are payable. The City will pay all such amounts
when due or at such later time as such amounts may be paid without penalty or, in any other case, within 60 days
8
after notice in writing from the Trustee to the City stating the amount of Additional Rental Payments then due
and payable and the purpose thereof.
Abatement
Base Rental Payments and Additional Rental Payments are paid by the City in each Rental Period for
and in consideration of the right to use and occupy the Property. Except as otherwise specifically provided in
the Lease Agreement, during any period in which, by reason of material damage to, or destruction or
condemnation of, the Property, or any defect in title to the Property, there is substantial interference with the
City’s right to use and occupy any portion of the Property, Rental Payments are subject to abatement
proportionately, and the City waives the benefits of Civil Code Sections 1932(1), 1932(2) and 1933(4) and any
and all other rights to terminate the Lease Agreement by virtue of any such interference, and the Lease
Agreement will continue in full force and effect. The amount of such abatement will be agreed upon by the City
and the Authority; provided, however, that the Rental Payments due for any Rental Period may not exceed the
annual fair rental value of that portion of the Property available for use and occupancy by the City during such
Rental Period. Any such abatement will continue for the period commencing with the date of interference
resulting from such damage, destruction, condemnation or title defect and, with respect to damage to or
destruction of the Property, ending with the substantial completion of the work of repair or replacement of the
Property, or the portion thereof so damaged or destroyed; and the term of the Lease Agreement will be extended
as provided in the Lease Agreement, except that the term will in no event be extended tenyears beyond the stated
termination date of the Lease Agreement. The Trustee cannot terminate the Lease Agreement in the event of
such substantial interference. Abatement of Base Rental Payments and Additional Rental Payments is not an
event of default under the Lease Agreement and does not permit the Trustee to take any action or avail itself of
any remedy against the City. See Appendix B —“SUMMARY OF THE PRINCIPAL LEGAL
DOCUMENTS—The Lease Agreement–Rental Abatement.”
Notwithstanding the foregoing, to the extent that moneys are available for the payment of Rental
Payments due under the Lease Agreement in any of the funds and accounts established under the Indenture
(including as a result of the availability of insurance proceeds), such Rental Payments will not be abated as
provided above but, rather, will be payable by the City as a special obligation payable solely from said funds
and accounts. See “RISK FACTORS—Abatements” and Appendix B — “SUMMARY OF THE PRINCIPAL
LEGAL DOCUMENTS.”
Additional Bonds
The Authority may at any time issue one or more Series of Additional Bonds payable from Base Rental
Payments on a parity with all other Bonds issued under the Indenture, subject to, among others, the following
conditions:
(a)The Authority shall be in compliance with all agreements, conditions, covenants and
terms contained herein, in the Lease Agreement and in the Ground Lease required to be observed or performed
by it;
(b)The City shall be in compliance with all agreements, conditions, covenants and terms
contained herein, in the Lease Agreement and in the Ground Lease required to be observed or performed by it;
and
(c)The Ground Lease shall have been amended, to the extent necessary, and the Lease
Agreement shall have been amended so as to increase the Base Rental Payments payable by the City thereunder
by an aggregate amount equal to the principal of and interest on such Additional Bonds, payable at such times
and in such manner as may be necessary to provide for the payment of the principal of and interest on such
Additional Bonds; provided, however, that no such amendment shall be made such that the sum of Base Rental
Payments, including any increase in the Base Rental Payments as a result of such amendment, plus Additional
9
Rental Payments, in any Rental Period shall be in excess of the annual fair rental value of the Property after
taking into account the use of the proceeds of any Additional Bonds issued in connection therewith (evidence of
the satisfaction of such condition shall be made by a Written Certificate of the City).
Nothing contained in the Indenture limits the issuance of any bonds or other obligations payable from
Base Rental Payments if, after the issuance and delivery of such bonds or other obligations, none of the Bonds
theretofore issued hereunder will be Outstanding. See Appendix B —“SUMMARY OF THE PRINCIPAL
LEGAL DOCUMENTS—THE INDENTURE—ISSUANCE OF BONDS; APPLICATION OF PROCEEDS—
Conditions for the Issuance of Additional Bonds.”
Substitution, Addition and Removal of Property
The Authority and the City may amend the Lease Agreement to substitute alternate real property for
any portion of the Property to add additional real property or to release a portion of the Property from the Lease
Agreement, upon compliance with all of the conditions set forth in the Lease Agreement and described below.
After a substitution or release, the portion of the Property for which the substitution or release has been effected
will be released from the leasehold encumbrance of the Lease Agreement.
The Lease Agreement provides that there will be no reduction in or abatement of the Base Rental
Payments due from the City thereunder as a result of such substitution or release. Any such substitution or
release is subject to the following specific conditions precedent to such substitution or release:
(a)an independent certified real estate appraiser selected by the City finds (and delivers a
certificate to the City and the Trustee setting forth its findings) that the Property, as constituted after such
substitution or release, (i) has an annual fair rental value at least equal to the maximum Base Rental Payments
payable by the City in any Rental Period, and (ii) has a useful life in excess of the final maturity of any
Outstanding Bonds.
(b)the City obtains or causes to be obtained a CLTA or ALTA title insurance policy or policies
with respect to any substituted property in an amount at least equal to the aggregate principal amount of any
Outstanding Bonds of the type and with the endorsements described in the Lease Agreement;
(c)the City provides the Trustee with an opinion of counsel to the effect that such substitution or
release will not, in and of itself, cause the interest on the Bonds to be included in gross income for federal income
tax purposes;
(d)the City, the Authority and the Trustee execute, and the City causes to be recorded with the
Riverside County Recorder, any document necessary to reconvey to the City the portion of the Property being
released and to include any substituted real property in the description of the Property contained in the Lease
Agreement and in the Ground Lease; and
(e)the City provides notice of such substitution to each rating agency then rating the Bonds.
See Appendix B —“SUMMARY OF THE PRINCIPAL LEGAL DOCUMENTS—The Lease Agreement—
Substitution or Release of the Property”
Action on Default
Should the City default under the Lease Agreement, the Trustee, as assignee of the Authority under the
Lease Agreement, may terminate the Lease Agreement and recover certain damages from the City, or may retain
the Lease Agreement and hold the City liable for all Base Rental Payments thereunder on an annual basis, and
will have the right to re-enter and re-let the Property. In the event such re-letting occurs, the City would be liable
for any resulting deficiency in Base Rental Payments. Base Rental Payments may not be accelerated upon a
10
default under the Lease Agreement. See “RISK FACTORS—Limited Recourse on Default; No Acceleration of
Base Rental.”
For purposes of certain actions of Bond Owners under the Indenture and the Lease Agreement, such as
certain consents and amendments and the direction of remedies following default, Series 2016 Bond Owners do
not act alone and may not control such matters to the extent such matters are not supported by the requisite
number of the Owners of all Bonds and Additional Bonds, if any.
For a description of the events of default and permitted remedies of the Trustee (as assignee of the
Authority) contained in the Lease Agreement and the Indenture, see Appendix B —”SUMMARY OF THE
PRINCIPAL LEGAL DOCUMENTS—The Lease Agreement—Default” and “—The Indenture—Events of
Default,” “—Other Remedies of the Trustee,” and “Limitation on Suits.”
Reserve Fund
The Indenture establishes a Reserve Fund, which is required to be maintained in an amount equal to
$________ (the “Reserve Fund Requirement”). Moneys in the Reserve Fund will be held in trust as a reserve
for the payment when due of all debt service payments on the Series 2016 Bonds. Pursuant to the Indenture, the
Authority may determine that the Reserve Fund be funded with cash, a reserve fund surety or a combination
thereof. See Appendix B —“SUMMARY OF THE PRINCIPAL LEGAL DOCUMENTS —The Indenture—
Reserve Fund.”
Concurrently with the issuance of the Series 2016 Bonds, the Surety Bond in the stated amount equal to
the Reserve Fund Requirement will be deposited in the Reserve Fund.
[Reserve Surety Provider language to come]
Insurance
The Lease Agreement requires the City to maintain or cause to be maintained fire, lightning and special
extended coverage insurance (which includes coverage for vandalism and malicious mischief, but need not
include coverage for earthquake damage) on all improvements constituting any part of the Property in an amount
equal to the greater of 100% of the replacement cost of such improvements or 100% of the outstanding principal
amount of the Bonds. The City has an insurance policy which provides replacement cost coverage. All insurance
required to be maintained pursuant to the Lease Agreement may be subject to a deductible in an amount not to
exceed $500,000. The City’s obligation to maintain the insurance described above (except for rental interruption
insurance) may be satisfied by self-insurance, provided such self-insurance complies with the requirements of
the Lease Agreement. See Appendix B —”SUMMARY OF THE PRINCIPAL LEGAL DOCUMENTS—The
Lease Agreement—Insurance.”
The Lease Agreement requires the City to maintain rental interruption insurance to cover the Authority’s
loss, total or partial, of Base Rental Payments resulting from the loss, total or partial, of the use of any part of
the Property as a result of any of the hazards covered by the casualty insurance described in the preceding
paragraph, in an amount sufficient at all times to pay an amount not less than the product of two times the
maximum amount of Base Rental Payments scheduled to be paid during any Rental Period. The City is not
permitted to self-insure its obligation to maintain rental interruption insurance.
The City is also required to maintain or cause to be maintained, throughout the term of the Lease
Agreement, a standard commercial general liability insurance policy or policies in protection of the City, the
Authority and their respective members, officers, agents and employees, and workers’ compensation insurance
as described in Appendix B —“SUMMARY OF THE PRINCIPAL LEGAL DOCUMENTS—The Lease
Agreement—Insurance.”
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The City is required under the Lease Agreement to provide, at its own expense, one or more CLTA or
ALTA title insurance policies for the Property, in the aggregate amount of not less than the initial aggregate
principal amount of the Series 2016 Bonds, insuring the fee interest of the City in the Property, the Authority’s
leasehold estate in the Property under the Ground Lease, and the City’s subleasehold estate in the Property under
the Lease Agreement, subject only to Permitted Encumbrances, and providing that all proceeds thereunder are
payable to the Trustee for the benefit of the Bond Owners.
BOND INSURANCE
[Bond insurer language to come from insurer]
SOURCES AND USES OF FUNDS
The sources and uses of funds with respect to the Series 2016 Bonds are shown below.
Series 2016
Bonds
Sources
Principal Amount of Series 2016 Bonds $
Net Original Issue Premium/Discount
Total Sources $
Uses
Construction Fund $
Cost of Issuance Fund(1)
Total Uses $
(1)Includes legal, financial advisory, rating agency, Underwriter’s Discount, premiums for the Policy and the Surety Bond,
printing fees and other miscellaneous costs of issuance.
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BASE RENTAL PAYMENT SCHEDULE
Following is the annual schedule of Base Rental Payments due with respect to the Series 2016 Bonds:
Lease Payment
Date
Series 2016 Bond
Principal
Series 2016 Bond
Interest
Total Series 2016 Bond
Payments
$ $ $
Total $___________$$
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THE 2016 PROJECT
The 2016 Project consists of the acquisition, construction and installation of certain capital
improvements for the City’s La Laguna Resort and Boat Launch (the “2016 Project”). In 2012, the City
completed construction of the La Laguna Resort and Boat Launch, a recreational boat launch on the shore of
Lake Elsinore. The 2016 Project consists of improvements to and expansion of the La Laguna Resort and Boat
Launch including: (1) a new main entry, gate house and check-in building; (2) construction of office space,
laundry facilities, a concession stand, a bait and tackle shop, a dump station and a clubhouse; (3) construction of
RV and boat parking areas; (4) improvements to accommodate 236 campsites including sewer and water main
improvements, restrooms and shower facilities; and (5) construction of recreational areas which are expected to
include, a gazebo, dog park, basketball courts, putting greenand share structures covering picnic/barbeque areas.
In April 2015, the City awarded a contract for the design of the various aspects of the 2016 Project. The
City expects to award a construction contract for the 2016 Project and commence construction in January 2017
and to complete construction in February 2018. The City has received all necessary environmental and other
approvals in connection with the 2016 Project.
The City undertook feasibility studies and rate modeling to project the increase in revenues to be
generated by the La Laguna Resort and Boat Launch upon completion of the 2016 Project. Based on such
studies, the City projectsrevenues generated at 40% occupancy/usage of the 2016 Project (i.e. camping facilities,
parking fees and revenues from vendors) to exceed projected operation and maintenance costs and debt service
on the Series 2016 Bonds. However, the City can make no assurance as to the amounts of such revenues actually
generated or as to the ultimate financial success of the 2016 Project. The success of the 2016 Project may be
reliant in part on the water quality of Lake Elsinore. See “RISK FACTORSRisks Affecting the Success of
or the 2016 Project” herein.
The Series 2016 Bonds are secured by and payable from Base Rental Payments and certain amounts on
deposit in the funds and accounts established under the Indenture and there is no special or direct pledge of
revenues generated by the 2016 Project to pay debt service on the Series 2016 Bonds.
THE PROPERTY
The Property consists of the following City-owned facilities:
City Hall. The City’s City Hall is located at 130 South Main Street, Lake Elsinore, California and
consists of an office building of approximately 7,796 square feet. The City Hall facility includes an auditorium
which includes the office space adjacent to the City Council chambers. The City Hall facility was completed in
1934.
Fire Station No. 10.The City’s Fire Station No. 10 is located at 410 W. Graham Street and consists of
a facility of approximately 5,000 square feet. Fire Station No. 10 houses three fire engines, an eight-bed
barracks/mess hall as well as offices, restrooms and a workroom. Also located on the parcel for Fire Station No.
10 and part of the Property are a community center building and a parking lot. Fire Station No. 10 was completed
in 1950.
Rosetta Canyon Park. Rosetta Canyon Park is located at 39423 Ardenwood Way and consists of a
park facility of approximately 16 acres. Completed amenities located on the park include lighted tennis courts,
basketball courts, picnic areas, a two-story concession stand, lighted synthetic turf football/soccer field and five
ball fields. Rosetta Canyon Park was completed in [2016].
The City has the right to substitute or release all or portion of the Property subject to certain conditions
precedent. See “SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2016 BONDSSubstitution
and Removal of Property.”
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THE AUTHORITY
Organization and Membership
The Authority was formed pursuant to the provisions of Article 1 (commencing with Section 6500) of
Chapter 5 of Division 7 of Title 1 of the Government Code of the State of California (the “Act”) and the Joint
Exercise of Powers Agreement, dated as of September 1, 2016 (the “JPA Agreement”), by and between the City
and the Parking Authority of the City of Lake Elsinore (the “Parking Authority”). The Authority was formed
by and between the City and the Parking Authorityto assist in financing the acquisition, construction, installation
and improvement of public facilities and other public capital improvements.
The Authority functions as a public entity, separate and apart from the City and the Parking Authority,
and is administered by a five-member governing board consisting of the members of the City Council. The City
Attorney serves as counsel to the Authority. The Authority has no employees and all staff work is performed by
the City or consultants.
Powers
Under the JPA Agreement, the Authority is empowered to assist in financing the acquisition,
construction, installation and improvement of public facilities and other public capital improvements through
the issuance of bonds in accordance with the Act. To exercise its powers, the Authority is authorized, in its own
name, to do all necessary acts, including but not limited to making and entering into contracts; employing agents
and employees; and to sue or be sued in its own name.
THE CITY
Information with respect to the City, including financial information and certain economic and
demographic information is provided in Appendix A —“THE CITY” attached hereto. A copy of the financial
statements of the City for the fiscal year ended June 30, 2015 is attached hereto as Appendix C which should be
read in its entirety. See Appendix B “AUDITED FINANCIAL STATEMENTS OF THE CITY FOR THE
YEAR ENDED JUNE 30, 2015.”
RISK FACTORS
The following factors, along with the other information in this Official Statement, should be considered
by potential investors in evaluating the purchase of the Series 2016 Bonds. However, they do not purport to be
an exhaustive listing of risks and other considerations which may be relevant to an investment in the Series 2016
Bonds. In addition, the order in which the following factors are presented is not intended to reflect the relative
importance of any such risks.
General Considerations – Security for the Series 2016 Bonds
The Series 2016 Bonds are special obligations of the Authority, payable solely from Base Rental
Payments and the other assets pledged under the Indenture. Neither the faith and credit nor the taxing power of
the Authority, the City or the State, or any political subdivision thereof, is pledged to the payment of the Series
2016 Bonds. The Authority has no taxing power.
The obligation of the City to make the Base Rental Payments does not constitute a debt of the City or
the State or of any political subdivision thereof within the meaning of any constitutional or statutory debt limit
or restriction, and does not constitute an obligation for which the City or the State is obligated to levy or pledge
any form of taxation or for which the City or the State has levied or pledged any form of taxation.
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Although the Lease Agreement does not create a pledge, lien or encumbrance upon the funds of the
City, the City is obligated under the Lease Agreement to pay the Base Rental Payments and Additional Rental
Payments from any source of legally available funds and the City has covenanted in the Lease Agreement that
it will take such action as may be necessary to include all Base Rental Payments and Additional Rental Payments
due under the Lease Agreement as a separate line item in its annual budgets and to make necessary annual
appropriations for all such Rental Payments, subject to abatement. The City is currently liable and may become
liable on other obligations payable from general revenues.
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 make Base
Rental Payments may be decreased. In the event the City’s revenue sources are less than its total obligations,
the City could choose to fund other activities before making Base Rental Payments and other payments due
under the Lease Agreement. The same result could occur if, because of California Constitutional limits on
expenditures, the City is not permitted to appropriate and spend all of its available revenues. However, the City’s
appropriations have never exceeded the limitation on appropriations under Article XIIIB of the California
Constitution. See “CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND
APPROPRIATIONS—Article XIIIB of the California Constitution.”
Abatements
In the event of substantial interference with the City’s right to use and occupy any portion of the Property
by reason of damage to, or destruction or condemnation of the Property, or any defects in title to the Property,
Base Rental Payments will be subject to abatement. See “SECURITY AND SOURCES OF PAYMENT FOR
THE SERIES 2016 BONDS—Abatement.” In the event that such portion of the Property, if damaged or
destroyed by an insured casualty, could not be replaced during the period of time in which proceeds of the City’s
rental interruption insurance will be available in lieu of Base Rental Payments, plus the period for which funds
are available from the funds and accounts established under the Indenture, or in the event that casualty insurance
proceeds are insufficient to provide for complete repair or replacement of such portion of the Property or
redemption of the Series 2016 Bonds, there could be insufficient funds to make payments to Owners in full.
It is not always possible to predict the circumstances under which abatement of rental may occur. In
addition, there is no statute, case or other law specifying how such an abatement of rental should be measured.
For example, it is not clear whether fair rental value is established as of commencement of the lease or at the
time of the abatement. If the latter, it may be that the value of the Property is substantially higher or lower than
its value at the time of the execution and delivery of the Series 2016 Bonds. Abatement, therefore, could have
an uncertain and material adverse effect on the security for and payment of the Series 2016 Bonds.
If damage, destruction, title defect or eminent domain proceedings with respect to the Property results
in abatement of the Base Rental Payments related to such Property and if such abated Base Rental Payments, if
any, together with moneys from rental interruption or use and occupancy insurance (in the event of any insured
loss due to damage or destruction), and eminent domain proceeds, if any, are insufficient to make all payments
of principal and interest with respect to the Series 2016 Bonds during the period that the Property is being
replaced, repaired or reconstructed, then all or a portion of such payments of principal and interest may not be
made. Under the Lease Agreement and the Indenture, no remedy is available to the Series 2016 Bond Owners
for nonpayment under such circumstances.
Seismic Activity
All jurisdictions in California are subject to the effects of damaging earthquakes. Earthquakes are
considered a threat to the City due to the highly active seismic region and the proximity of fault zones, which
could influence the entire southern coastal portion of the State. However, no major earthquake has caused
substantial damage to the community.
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An earthquake along one of the faults in the vicinity, either known or unknown, could cause a number
of casualties and extensive property damage. The effects of such a quake could be aggravated by aftershocks
and secondary effects such as fires, landslides, dam failure, liquefaction and other threats to public health, safety
and welfare. The potential direct and indirect consequences of a major earthquake can easily exceed the resources
of the City and would require a high level of self-help, coordination and cooperation.
No active faults are known to pass through the City. The closest active faults are the Elsinore-Glen Ivy
fault (10.1 miles away), the Chino fault (11.1 miles away), and the Newport Inglewood fault (14.4 miles away).
The occurrence of surface rupture on these segments would not be expected to produce fault surface rupture
within the City. The two known local faults, Aliso and the Cristianitos, are thought to be inactive. An earthquake
on either of these two faults would be particularly damaging to residential buildings, especially to those of older
wooden or unreinforced masonry construction, or to mobile homes, although the City currently has no mobile
homes.
Risks Affecting the Success of or the 2016 Project
The City’s projections of revenues to be generated from the 2016 Project are dependent, in part, on the
attraction of the recreational activities available at Lake Elsinore. Such recreational facilities include, boating,
fishing and other water sports. From time-to-time, Lake Elsinore experiences blue-green algae bloom, which
can result in elevated levels of toxins in the lake water posinghealth risks to humans. In recent years, decreasing
lake levels as a result of the ongoing drought in California has led has led to rising lake water temperature. Such
conditions has resulted in more common occurrences of the algae bloom. The City conducts ongoing monitoring
of the lake level and the concentration of toxins in the lake water. When the concentration of the resulting toxins
in the water increases to a degree that is harmful to humans, the City has issued health warnings to and public
safety information to residents and visitors.
The presence of toxins in the lake as a result of blue-green algae bloom could lead to reduced usage of
the facilities associated with the 2016 Project and reduced tourism to the City as a whole. The City can make
no assurance as to the amounts of revenues actually generated or as to the ultimate financial success of the 2016
Project. The Series 2016 Bonds are secured by and payable from Base Rental Payments and certain amounts on
deposit in the funds and accounts established under the Indenture and there is no special or direct pledge of
revenues generated by the 2016 Project to pay debt service on the Series 2016 Bonds.
Hazardous Substances
An additional environmental condition that may result in the reduction in the assessed value of property,
and therefor property tax revenue available to make Base Rental Payments, would be the discovery of a
hazardous substance that would limit the beneficial use of taxable property within the City. In general, the
owners and operators of a property may be required by law to remedy conditions of the property relating to
releases or threatened releases of hazardous substances. The owner or operator may be required to remedy a
hazardous substance condition of property whether or not the owner or operator has anything to do with creating
or handling the hazardous substance. The effect, therefore, should any of the property within the City be affected
by a hazardous substance, could be to reduce the marketability and value of the property by the costs of
remedying the condition. The City is not aware of any hazardous substances located on the Property.
Other Financial Matters
Future weakness in the economy of the State and the United States could result in the decline of the
City’s general revenues. Such financial matters may have a detrimental impact on the City’s General Fund, and,
accordingly, may reduce the City’s ability to make Base Rental Payments. See “CITY FINANCIAL
INFORMATION.”
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Substitution, Addition and Removal of Property; Additional Bonds
The Authority and the City may amend the Lease Agreement to substitute alternate real property for
any portion of or add additional real property to the Property or to release a portion of the Property from the
Lease Agreement, upon compliance with all of the conditions set forth in the Lease Agreement and summarized
below. After a substitution or release, the portion of the Property for which the substitution or release has been
effected will be released from the leasehold encumbrance of the Lease Agreement. See “SECURITY AND
SOURCES OF PAYMENT FOR THE SERIES 2016 BONDS―Substitution, Addition and Removal of
Property.” Moreover, the Authority may issue Additional Bonds secured by Base Rental Payments which are
increased from current levels.
Although the Lease Agreement requires, among other things, that the Property, as constituted after such
substitution or release, have an annual fair rental value at least equal to the maximum Base Rental Payments
payable by the City in any Rental Period, it does not require that such Property have an annual fair rental value
equal to the annual fair rental value of the Property at the time of substitution or release. Thus, a portion of the
Property could be replaced with less valuable real property, or could be released altogether. Such a replacement
or release could have an adverse impact on the security for the Series 2016 Bonds, particularly if an event
requiring abatement of Base Rental Payments were to occur subsequent to such substitution or release. See
Appendix B —“SUMMARY OF THE PRINCIPAL LEGAL DOCUMENTS—The Lease Agreement—
Substitution or Release of the Property.”
The Indenture requires, among other things, that upon the issuance of Additional Bonds, the Ground
Lease and the Lease Agreement will be amended, to the extent necessary, so as to increase the Base Rental
Payments payable by the City thereunder by an aggregate amount equal to the principal of and interest on such
Additional Bonds; provided, however, that no such amendment will be made such that the sum of Base Rental
Payments, including any increase in the Base Rental Payments as a result of such amendment, plus Additional
Rental Payments, in any Rental Period is in excess of the annual fair rental value of the Property after taking into
account the use of the proceeds of any Additional Bonds issued in connection therewith.
No Limitation on Incurring Additional Obligations
Neither the Lease Agreement nor the Indenture contains any limitations on the ability of the City to
enter into other obligations, without the consent of the Owners of the Outstanding Bonds, which may constitute
additional obligations payable from its General Fund. To the extent that the City incurs such additional
obligations, the City’s funds available to make Base Rental Payments may be decreased. The City is currently
liable on other obligations payable from General Fund revenues. See “THE CITY—Indebtedness” above and
Appendix C —“AUDITED FINANCIAL STATEMENTS OF THE CITY FOR THE YEAR ENDED JUNE 30,
2015.”
Limited Recourse on Default; No Acceleration of Base Rental
Failure by the City to make Base Rental Payments or other payments required to be made under the
Lease Agreement, or failure to observe and perform any other terms, covenants or conditions contained in the
Lease Agreement or in the Indenture for a period of 30 days after written notice of such failure and request that
it be remedied has been given to the City by the Authority or the Trustee, constitute events of default under the
Lease Agreement and permit the Trustee or the Authority to pursue any and all remedies available. In the event
of a default, notwithstanding anything in the Lease Agreement or in the Indenture to the contrary, there is no
right under any circumstances to accelerate the Base Rental Payments or otherwise declare any Base Rental
Payments not then in default to be immediately due and payable, nor do the Authority or the Trustee have any
right to re-enter or re-let the Property except as described in the Lease Agreement.
The enforcement of any remedies provided in the Lease Agreement and the Indenture could prove both
expensive and time consuming. If the City defaults on its obligation to make Base Rental Payments with respect
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to the Property, the Trustee, as assignee of the Authority, may retain the Lease Agreement and hold the City
liable for all Base Rental Payments thereunder on an annual basis and enforce any other terms or provisions of
the Lease Agreement to be kept or performed by the City.
Alternatively, the Authority or the Trustee may terminate the Lease Agreement, retake possession of
the Property and proceed against the City to recover damages pursuant to the Lease Agreement. Due to the
specialized nature of the Property or any property substituted therefor pursuant to the Lease Agreement and the
restrictions on its use, no assurance can be given that the Trustee will be able to re-let the Property so as to
provide rental income sufficient to make all payments of principal of, interest and premium, if any, on the Series
2016 Bonds when due, and the Trustee is not empowered to sell the Property for the benefit of the Owners of
the Series 2016 Bonds. Any 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 needed to serve the public
welfare and interest. See “SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2016 BONDS”
and Appendix B —“SUMMARY OF PRINCIPAL LEGAL DOCUMENTS—The Lease Agreement—Default.”
Possible Insufficiency of Insurance Proceeds
The Lease Agreement obligates the City to keep in force various forms of insurance, subject to
deductibles, for repair or replacement of the Property in the event of damage, destruction or title defects, subject
to certain exceptions. The Authority and the City make no representation as to the ability of any insurer to fulfill
its obligations under any insurance policy obtained pursuant to the Lease Agreement and no assurance can be
given as to the adequacy of any such insurance to fund necessary repair or replacement or to pay principal of
and interest on the Series 2016 Bonds when due. In addition, certain risks, such as earthquakes and floods, are
not required under the Lease Agreement, and therefore, are not carried by the City. See “SECURITY AND
SOURCES OF PAYMENT FOR THE SERIES 2016 BONDS—Insurance.”
Limitations on Remedies
The rights of the Owners of the Series 2016 Bonds are subject to the limitations on legal remedies
against cities in the State, including a limitation on enforcement of judgments against funds needed to serve the
public welfare and interest. Additionally, enforceability of the rights and remedies of the Owners of the Series
2016 Bonds, and the obligations incurred by the City, may become subject to the federal bankruptcy code (Title
11, United States Code) (the “Bankruptcy Code”) and applicable bankruptcy, insolvency, reorganization,
moratorium, or similar laws relating to or affecting the enforcement of creditors’ rights generally, now or
hereafter in effect, equity principles which may limit the specific enforcement under State law of certain
remedies, the exercise by the United States of America of the powers delegated to it by the U.S. Constitution,
the reasonable and necessary exercise, in certain exceptional situations, of the police powers inherent in the
sovereignty of the State and its governmental bodies in the interest of serving a significant and legitimate public
purpose and the limitations on remedies against cities in the State. Bankruptcy proceedings, or the exercise of
powers by the Federal or State government, if initiated, could subject the Owners of the Series 2016 Bonds to
judicial discretion and interpretation of their rights in bankruptcy or otherwise, and consequently may entail risks
of delay, limitation, or modification of their rights. Under Chapter 9 of the Bankruptcy Code, which governs
the bankruptcy proceedings for public agencies such as the City, there are no involuntary petitions in bankruptcy.
If the City were to file a petition under Chapter 9 of the Bankruptcy Code, the Owners of the Series 2016 Bonds,
the Trustee and the Authority could be prohibited from taking any steps to enforce their rights under the Lease
Agreement, and from taking any steps to collect amounts due from the City under the Lease Agreement.
Loss of Tax Exemption
As discussed under the heading “TAX MATTERS,” the interest on the Series 2016 Bondscould become
includable in gross income for purposes of federal income taxation retroactive to the date of delivery of the
Series 2016 Bonds, as a result of acts or omissions of the Authority or the City in violation of its covenants in
the Indenture and the Lease Agreement. Should such an event of taxability occur, the Series 2016 Bonds would
19
not be subject to a special redemption and would remain Outstanding until maturity or until redeemed under the
redemption provisions contained in the Indenture.
No Liability of Authority to the Owners
Except as expressly provided in the Indenture, the Authority will not have any obligation or liability to
the Owners of the Series 2016 Bonds with respect to the payment when due of the Base Rental Payments by the
City, or with respect to the performance by the City of other agreements and covenants required to be performed
by it contained in the Lease Agreement or the Indenture, or with respect to the performance by the Trustee of
any right or obligation required to be performed by it contained in the Indenture.
STATE OF CALIFORNIA BUDGET INFORMATION
State Budget
The following information concerning the State’s budget for fiscal year 2016-17 has been obtained from
publicly available information that the City believes to be reliable; however, the City takes no responsibility as
to the accuracy or completeness thereof and has not independently verified such information. Information about
the State budget is regularly available at various State-maintained websites. Text of proposed and adopted
budgets may be found at the website of the State Department of Finance (the “DOF”), http://www.dof.ca.gov,
under the heading “California Budget.” An impartial analysis of the budget is posted by the Legislative Analyst’s
Office (the “LAO”) at http://www.lao.ca.gov. In addition, various State official statements, many of which
contain a summary of the current and past State budgets and the impact of those budgets on counties in the State,
may be found at the website of the State Treasurer, http://www.treasurer.ca.gov. The information referred to is
prepared by the respective State agency maintaining each website and not by the City, the Authority or the
Underwriter, and the City, the Authority and the Underwriter take no responsibility for the continued accuracy
of these Internet addresses or for the accuracy, completeness or timeliness of information posted there, and such
information is not incorporated herein by these references.
State Budget for Fiscal Year 2016-17
On June 27, 2016, the Governor signed into the law the State budget for fiscal year 2016-17 (the “2016-
17 Budget”). The following information is drawn from the Department of Finance’s summary of the 2016-17
Budget and the LAO’s preliminary review of the 2016-17 Budget.
The 2016-17 Budget projects, for fiscal year 2015-16, total general fund revenues and transfers of
$117.0 billion and total expenditures of $115.6 billion. The State is projected to end fiscal year 2015-16 with
total available reserves of $7.3 billion, including $3.9 billion in the traditional general fund reserve and $3.4
billion in the Budget Stabilization Account (the “BSA”), the State’s basic reserve account. For fiscal year 2016-
17, the 2016-17 Budget projects a growth in State general fund revenues driven primarily by total general fund
revenues of $120.3 billion and authorizes expenditures of $122.5 billion. The State is projected to end the fiscal
year 2016-17 with total available reserves of $8.5 billion, including $1.8 billion in the traditional general fund
reserve and $6.7 billion in the BSA.
As a result of higher general fund revenue estimates for fiscal years 2015-16 and 2016-17, and after
accounting for expenditures that are controlled by State Constitutional funding requirements such as Proposition
2 and Proposition 98, the 2016-17 Budget allocates over $6 billion in discretionary funding for various purposes.
These include: (i) additional deposits of $2 billion to the BSA and $600 million to the State’s discretionary
budget reserve fund; (ii) approximately $2.9 billion in one-time funding for infrastructure, affordable housing,
public safety and other purposes; and (iii) $700 million in on-going funding commitments for higher education
(the California State University and the University of California systems), corrections and rehabilitation and
State courts.
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As required by Proposition 2, the 2016-17 Budget applies $1.3 billion towards the repayment of existing
State liabilities, including loans from special funds, State and University of California pension and retiree health
benefits and settle-up payments to K-14 school districts resulting from an underfunding of the Proposition 98
minimum funding guarantee in a prior fiscal year. With respect to education funding, the 2016-17 Budget sets
the Proposition 98 minimum funding guarantee at $71.9 billion, an increase of $2.8 billion over the revised level
from the prior fiscal year.
For additional information regarding the Proposed Budget and the May Revise, see the DOF website at
www.dof.ca.gov and the LAO’s website at www.lao.ca.gov. The information presented on such websites is not
incorporated herein by reference.
Potential Impact of State Financial Condition on the City
The State experienced significant financial stress in during the last economic recession, with budget
shortfalls in the several billions of dollars. There can be no assurance that, as a result of such State financial
stress, the State will not significantly reduce revenues to local governments (including the City) or shift financial
responsibility for programs to local governments as part of its efforts to address the State’s financial difficulties.
Although the State is not a significant source of City revenues, no prediction can be made by the City as to what
measures the State will adopt to respond to the current or potential future financial difficulties. There can be no
assurance that State actions to respond to State financial difficulties will not adversely affect the financial
condition of the City.
Future State Budgets
No prediction can be made by the City as to whether the State will continue to encounter budgetary
problems in future fiscal years, and if it were to do so, it is not clear what measures would be taken by the State
to balance its budget, as required by law. In addition, the City cannot predict the final outcome of future State
budget negotiations, the impact that such budgets will have on City finances and operations or what actions will
be taken in the future by the State Legislature and the Governor to deal with changing State revenues and
expenditures. There can be no assurance that actions taken by the State to address its financial condition will
not materially adversely affect the financial condition of the City. Current and future State budgets will be
affected by national and State economic conditions and other factors, including the current economic downturn,
over which the City has no control.
Redevelopment Dissolution
General. On December 29, 2011, the State Supreme Court upheld Assembly Bill 1x26 (“AB 1x26”),
which dissolved redevelopment agencies in the State. The effect of AB 1x26 upon the City is the termination of
the redevelopment functions of the Redevelopment Agency of the City of Lake Elsinore (the “Former Agency”)
and the transfer of such functions to a successor agency (the Successor Agency of the Redevelopment Agency
of the City of Lake Elsinore, referred to in the capacity of a successor agency, and being referred to in this
context as the “Successor Agency”) tasked with winding down the Former Agency’s redevelopment activities.
Under AB 1x26, the Successor Agency cannot enter into new redevelopment projects or obligations and its assets
can be used only to pay enforceable obligations, which enforceable obligations are generally limited to
obligations that were in existence in mid-2011, when AB 1x26 was signed by the Governor. In addition, the
Successor Agency will receive tax increment revenues in amounts that are sufficient to pay 100% (but no greater
amount) of such enforceable obligations until such obligations (including accrued interest, as applicable) are
paid in full, at which time the Successor Agency will be dissolved. Certain tax revenues formerly allocable to
the Former Agency will continue to be available to the Successor Agency to pay certain obligations, and a portion
of such revenues may be redirected to other taxing agencies, such as the County, school districts and the City.
The Successor Agency’s activities are subject to review by an oversight board established under AB 1x26. Under
AB 1x26, liabilities of the Successor Agency are not liabilities of the City.
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On June 27, 2012, the Governor signed Assembly Bill 1484 (“AB 1484”), which made certain
amendments to AB 1x26. Under AB 1484, the County Auditor-Controller, the DOF and the State Controller
may require the return of funds that were improperly spent or transferred to a public entity in conflict with the
provisions of the Community Redevelopment Law, as amended by AB 1x26 and AB 1484, and if such funds are
not returned within 60 days, they may be recovered through an offset of sales and use tax or property tax
allocations to the local agency, which, in the case of the Successor Agency, is the City.
On September 22, 2015, the following amendments to AB 1x26 were enacted as Senate Bill 107 (“SB
107”): (1) redevelopment successor agencies that enter into a written agreement with the DOF to remit
unencumbered cash to the county auditor-controller will receive a finding of completion, which provides
successor agencies with additional fiscal tools and reduced State oversight; (2) successor agencies that that have
a “Last and Final” ROPS (as discussed below) may expend a portion of proceeds of bonds issued in 2011, which
proceeds are currently frozen; (3) pension or State Water Project override revenues that are not pledged to or not
needed for redevelopment bond debt service will be returned to the entity that levies the override; (4) agreements
relating to State highway improvements and money loaned to successor agencies to pay costs associated with
redevelopment dissolution litigation will be considered enforceable obligations; and (5) reentered agreements
entered into after the passage of AB 1484 are unenforceable unless entered into for the purpose of providing
administrative support.
SB 107 also: (a) requires the preparation of a Recognized Obligation Payment Schedule with respect to
enforceable obligations (a “ROPS”), which are required to be submitted to the oversight board and the DOF in
accordance with AB 1x26, once a year beginning with the ROPS period that commenced on July 1, 2016 (rather
than twice a year under current law); (b) establishes an optional “Last and Final” ROPS process beginning in
September 2015; under this process, a successor agency that elected to submit a “Last and Final ROPS would
no longer submit a periodic ROPS and the enforceable obligations set forth in the “Last and Final” ROPS would
be binding on all parties; and (c) clarifies that former tax increment caps and plan limits do not apply for the
purposes of paying approved enforceable obligations.
Impact on the City. Significant provisions of AB 1x26, AB 1484, SB 107 and implementing actions of
affected parties, including the Successor Agency, the oversight board, the County and the DOF, may be subject
to legal challenge, statutory or administrative changes and other clarifications that could affect the impact of the
dissolution of redevelopment on the City and its General Fund. The DOF has periodically proposed additional
legislation that would modify statutes affecting redevelopment dissolution; it is not known whether additional
legislation will be enacted. The full extent of the impact of the implementation of AB 1x26, AB 1484 and SB
107 or potential future legislation on the City’s General Fund is unknown at this time. While certain
administrative costs previously charged to the Former Agency by the General Fund will no longer be supported
by the Successor Agency, certain property tax revenues formerly allocated to the Former Agency will now be
received by the City’s General Fund.
The City does not believe that it has received material amounts from the Former Agency or the
Successor Agency which may be asserted to be in violation of AB 1x26 or AB 1484.
Successor Agency Obligations to the General Fund. Although AB 1x26 generally invalidates
agreements between host cities and their former redevelopment agencies, AB 1484 added a provision for the
enforcement of agreements entered into with respect to obligations which meet certain specified criteria. The
only ongoing Successor Agency payment obligations to the City relate to administrative costs and the repayment
of certain outstanding loans to the City in its capacity as housing successor agency, for deposit to the low and
moderate income housing fund.
There can be no assurance that the City and the Successor Agency will not enter into loan agreements
in the future to enable the Successor Agency to meet its payment obligations in future years.
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In addition, certain moneys, real property and other assets were previously transferred to the City by the
Successor Agency as part of the DOF-mandated due diligence undertaking related to redevelopment dissolution.
There can be no assurance that the DOF, the State Controller or other State or County bodies will not compel
the City to disgorge moneys, real property or other assets received from the Successor Agency as part of the
redevelopment dissolution process in the future.
To the extent that the Successor Agency’s assets are liquidated for distribution of proceeds to the
affected taxing entities, the City currently expects that the City’s General Fund will receive approximately ___%
of such assets.
CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS
There are a number of provisions in the State Constitution that limit the ability of the City to raise and
expend tax revenues.
Article XIIIA of the California Constitution
On June 6, 1978, California voters approved an amendment (commonly known as both Proposition 13
and the Jarvis-Gann Initiative) to the California Constitution. This amendment, which added Article XIIIA to
the California Constitution, among other things affects the valuation of real property for the purpose of taxation
in that it defines the full cash property value to mean “the county assessor’s valuation of real property as shown
on the 1975/76 tax bill under ‘full cash value’, or thereafter, the appraised value of real property newly
constructed, or when a change in ownership has occurred after the 1975 assessment.” The full cash value may
be adjusted annually to reflect inflation at a rate not to exceed 2% per year, or a reduction in the consumer price
index or comparable local data at a rate not to exceed 2% per year, or reduced in the event of declining property
value caused by damage, destruction or other factors including a general economic downturn. The amendment
further limits the amount of any ad valorem tax on real property to one percent of the full cash value except that
additional taxes may be levied to pay debt service on indebtedness approved by the voters prior to December 1,
1978, and bonded indebtedness for the acquisition or improvement of real property approved on or after
December 1, 1978 by two-thirds of the votes cast by the voters voting on the proposition (55% in the case of
certain school facilities). Property taxes subject to Proposition 13 are a significant source of revenues to the
City’s General Fund. See “CITY FINANCIAL INFORMATION.”
Legislation enacted by the California Legislature to implement Article XIIIA provides that all taxable
property is shown at full assessed value as described above. Tax rates for voter approved bonded indebtedness
and pension liability are also applied to 100% of assessed value.
Future assessed valuation growth allowed under Article XIIIA (new construction, change of ownership,
2% annual value growth) is allocated on the basis of “situs” among the jurisdictions that serve the tax rate area
within which the growth occurs. Local agencies and school districts share the growth of “base” revenue from
the tax rate area. Each year’s growth allocation becomes part of each agency’s allocation the following year.
Article XIIIA effectively prohibits the levying of any other ad valorem property tax above the 1% limit except
for taxes to support indebtedness approved by the voters as described above.
Article XIIIA has subsequently been amended to permit reduction of the “full cash value” base in the
event of declining property values caused by damage, destruction or other factors, and to provide that there
would be no increase in the “full cash value” base in the event of reconstruction of property damaged or destroyed
in a disaster and in certain other limited circumstances.
Article XIIIB of the California Constitution
At the statewide special election on November 6, 1979, the voters approved an initiative entitled
“Limitation on Government Appropriations” which added Article XIIIB to the California Constitution. Under
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Article XIIIB, state and local government entities have an annual “appropriations limit” which limits the ability
to spend certain moneys which are called “appropriations subject to limitation” (consisting of tax revenues and
certain state subventions together called “proceeds of taxes” and certain other funds) in an amount higher than
the “appropriations limit.” Article XIIIB does not affect the appropriation of moneys which are excluded from
the definition of “appropriations limit” including debt service on indebtedness existing or authorized as of
October 1, 1979, or bonded indebtedness subsequently approved by the voters. In general terms, the
“appropriations limit” is to be based on certain 1978-79 expenditures, and is to be adjusted annually to reflect
changes in the consumer price index, population and services provided by these entities. Among other provisions
of Article XIIIB, if those entities’ revenues in any year exceed the amounts permitted to be spent, the excess
would have to be returned by revising tax rates or fee schedules over the subsequent two years.
The City’s appropriations have never exceeded the limitation on appropriations under Article XIIIB of
the California Constitution.
Proposition 62
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 governmental purposes imposed by local
governmental entities 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 of the 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
XIIIA; (e) prohibits the imposition of transaction taxes and sales taxes on the sale of real property by local
governmental entities; and (f) requires that any tax imposed by a local governmental entity on or after August 1,
1985 be ratified by a majority vote of the electorate within two years of the adoption of the initiative or be
terminated by November 15, 1988. The requirements imposed by Proposition 62 were upheld by the California
State Supreme Court in Santa Clara County Local Transportation Authority v. Guardino, 11 Ca1.4th 220; 45
Cal.Rptr.2d 207 (1995).
Proposition 62 applies to the imposition of any taxes or the effecting of any tax increases 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.
Proposition 218
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 XIIID to the California Constitution, imposing certain vote
requirements and other limitations on the imposition of new or increased taxes, assessments and property-related
fees and charges. Proposition 218 states that all taxes imposed by local governments are 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.
Proposition 218 also provides that no tax, assessment, fee or charge may be assessed by any agency
upon any parcel of property or upon any person as an incident of property ownership except: (i) the ad valorem
property tax imposed pursuant to Article XIII and Article XIIIA of the California Constitution, (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
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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, assessments,
fees and charges. This extension of the initiative power is not limited to taxes imposed on or after November 6,
1996, the effective date of Proposition 218, and could result in retroactive repeal or reduction in any existing
taxes, assessments, fees and charges, subject to overriding federal constitutional principles relating to the
impairments of contracts. Legislation implementing Proposition 218 provides that the initiative power provided
for in Proposition 218 “shall not be construed to mean that any owner or beneficial owner of a municipal security,
purchased before or after (the effective date of Proposition 218) assumes the risk of, or in any way consents to,
any action by initiative measure that constitutes an impairment of contractual rights” protected by the United
States Constitution. However, no assurance can be given that the voters of the City will not, in the future,
approve an initiative which reduces or repeals local taxes, assessments, fees or charges that currently are
deposited into the City’s General Fund.
Although a portion of the City’s General Fund revenues are derived from general taxes purported to be
governed by Proposition 218, all of such taxes were imposed in accordance with the requirements of Proposition
218. No assurance can be given that the voters of the City will not, in the future, approve an initiative or
initiatives which reduce or repeal local taxes, assessments, fees or charges which support the City’s General
Fund.
Unitary Property
Some amount of property tax revenue of the City is derived from utility property which is considered
part of a utility system with components located in many taxing jurisdictions (“unitary property”). Under the
State Constitution, such property is assessed by the State Board of Equalization (“SBE”) as part of a “going
concern” rather than as individual pieces of real or personal property. State-assessed unitary and certain other
property is allocated to the counties by SBE, taxed at special county-wide rates, and the tax revenues distributed
to taxing jurisdictions (including the City) according to statutory formula generally based on the distribution of
taxes in the prior year.
Proposition 22
On November 2, 2010, voters in the State approved Proposition 22, which eliminates the State’s ability
to borrow or shift local revenues and certain State revenues that fund transportation programs. It restricts the
State’s authority over a broad range of tax revenues, including property taxes allocated to cities (including the
City), counties, special districts and redevelopment agencies, the Vehicle License Fee, State excise taxes on
gasoline and diesel fuel, the State sales tax on diesel fuel, and the former State sales tax on gasoline. It also
makes a number of significant other changes, including restricting the State’s ability to use motor vehicle fuel
tax revenues to pay debt service on voter-approved transportation bonds. The application of Proposition 22 to
AB1X 26 and AB1X 27 is currently under review by the California Supreme Court. See “RISK FACTORS—
State Budget; Redevelopment Legislation and Litigation.”
Proposition 1A
As part of Governor Schwarzenegger’s agreement with local jurisdictions, Senate Constitutional
Amendment No. 4 was enacted by the Legislature and subsequently approved by the voters as Proposition 1A
(“Proposition 1A”) at the November 2004 election. Proposition 1A amended the State Constitution to, among
other things, reduce the Legislature’s authority over local government revenue sources by placing restrictions
25
on the State’s access to local governments’ property, sales, and vehicle license fee revenues as of November 3,
2004. Beginning with Fiscal Year 2008–09, the State may borrow up to 8 percent of local property tax revenues,
but only if the Governor proclaims such action is necessary due to a severe State fiscal hardship and two–thirds
of both houses of the Legislature approves the borrowing. The amount borrowed is required to be paid back
within three years. The State also will not be able to borrow from local property tax revenues for more than 2
fiscal years within a period of 10 fiscal years. In addition, the State cannot reduce the local sales tax rate or
restrict the authority of local governments to impose or change the distribution of the statewide local sales tax.
The 2009-10 State budget included a Proposition 1A diversion of $1.935 billion in local property tax
revenues from cities, counties, and special districts to the State to offset State general fund spending. Such
diverted revenues must be repaid, with interest, no later than June 30, 2013. The amount of the Proposition 1A
diversion from the City was $ 598,935. The City participated in a State-sponsored program financing the
Proposition 1A diversion and, accordingly, received its full share of property tax revenues.
Proposition 26
On November 2, 2010, voters in the State approved Proposition 26. Proposition 26 amends
Article XIIIC of the State Constitution to expand the definition of “tax” to include “any levy, charge, or exaction
of any kind imposed by a local government” except the following: (1) a charge imposed for a specific benefit
conferred or privilege granted directly to the payor that is not provided to those not charged, and which does not
exceed the reasonable costs to the local government of conferring the benefit or granting the privilege; (2) a
charge imposed for a specific government service or product provided directly to the payor that is not provided
to those not charged, and which does not exceed the reasonable costs to the local government of providing the
service or product; (3) a charge imposed for the reasonable regulatory costs to a local government for issuing
licenses and permits, performing investigations, inspections, and audits, enforcing agricultural marketing orders,
and the administrative enforcement and adjudication thereof; (4) a charge imposed for entrance to or use of local
government property, or the purchase, rental, or lease of local government property; (5) A fine, penalty, or other
monetary charge imposed by the judicial branch of government or a local government, as a result of a violation
of law; (6) a charge imposed as a condition of property development; and (7) assessments and property-related
fees imposed in accordance with the provisions of Article XIIID. Proposition 26 provides that the local
government bears the burden of proving by a preponderance of the evidence that a levy, charge, or other exaction
is not a tax, that the amount is no more than necessary to cover the reasonable costs of the governmental activity,
and that the manner in which those costs are allocated to a payor bear a fair or reasonable relationship to the
payor’s burdens on, or benefits received from, the governmental activity. The City does not believe that
Proposition 26 will adversely affect its General Fund Revenues.
Future Initiatives
Article XIIIA, Article XIIIB and Propositions 62, 218, 1A, 22 and 26 were each adopted as measures
that qualified for the ballot pursuant to the State’s initiative process. From time to time other initiative measures
could be adopted, further affecting the City’s current revenues or its ability to raise and expend revenues.
TAX MATTERS
In the opinion of Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach,
California, Bond Counsel, under existing statutes, regulations, rulings and judicial decisions, interest on the
Series 2016 Bonds is excluded from gross income for federal income tax purposes, and is not an item of tax
preference for purposes of calculating the federal alternative minimum tax imposed on individuals and
corporations. In the further opinion of Bond Counsel, interest on Series 2016 Bonds is exempt from State of
California personal income tax. Bond Counsel notes that, with respect to corporations, interest on the Series
2016 Bonds may be included as an adjustment in the calculation of alternative minimum taxable income which
may affect the alternative minimum tax liability of such corporations.
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The difference between the issue price of a Series 2016 Bond (the first price at which a substantial
amount of the Bonds of the same series and maturity is to be sold to the public) and the stated redemption price
at maturity with respect to such Series 2016 Bond constitutes original issue discount. Original issue discount
accrues under a constant yield method, and original issue discount will accrue to the owner of the Series 2016
Bond before receipt of cash attributable to such excludable income (with respect to the Series 2016 Bonds). The
amount of original issue discount deemed received by the owner of a Series 2016 Bondwill increase the owner’s
basis in the Series 2016 Bond. In the opinion of Bond Counsel original issue discount that accrues to the owner
of a Series 2016 Bond 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.
Bond Counsel’s opinion as to the exclusion from gross income for federal income tax purposes of the
portion of each Base Rental Payment constituting interest (and original issue discount) on the Series 2016 Bonds
is based upon certain representations of fact and certifications made by the City and others and is subject to the
condition that the City and the Authority comply with all requirements of the Internal Revenue Code of 1986,
as amended (the “Code”), that must be satisfied subsequent to issuance of the Series 2016 Bonds to assure that
the portion of each Base Rental Payment constituting interest (and original issue discount) will not become
includable in gross income for federal income tax purposes. Failure to comply with such requirements of the
Code might cause interest (and original issue discount) on the Series 2016 Bonds to be included in gross income
for federal income tax purposes retroactive to the date of issuance of the Series 2016 Bonds. The City and the
Authority have covenanted to comply with all such requirements applicable to each, respectively.
The amount by which a Series 2016 Bond Owner’s original basis for determining loss on sale or
exchange in the applicable Series 2016 Bond (generally, the purchase price) exceeds the amount payable on
maturity (or on an earlier call date) constitutes amortizable Series 2016 Bondpremium, which must be amortized
under Section 171 of the Code; such amortizable Series 2016 Bond premium reduces the Series 2016 Bond
Owner’s basis in the applicable Series 2016 Bond (and the amount of tax-exempt interest received with respect
to the Series 2016 Bonds), and is not deductible for federal income tax purposes. The basis reduction as a result
of the amortization of Series 2016 Bond premium may result in a Series 2016 Bond Owner realizing a taxable
gain when a Series 2016 Bond is sold by the Owner for an amount equal to or less (under certain circumstances)
than the original cost of the Series 2016 Bond to the Owner. Purchasers of the Series 2016 Bonds should consult
their own tax advisors as to the treatment, computation and collateral consequences of amortizable Series 2016
Bond premium.
Bond Counsel’s opinions may be affected by actions taken (or not taken) or events occurring (or not
occurring) after the date hereof. Bond Counsel has not undertaken to determine, or to inform any person, whether
any such actions or events are taken or do occur. The Indenture, the Lease Agreement, and the Tax Certificate
permit certain actions to be taken or to be omitted if a favorable opinion of Bond Counsel is provided with
respect thereto. Bond Counsel expresses no opinion as to the effect on the exclusion from gross income for
federal income tax purposes of interest (and original issue discount) due with respect to any Series 2016 Bond
if any such action is taken or omitted based upon the advice of counsel other than Stradling Yocca Carlson &
Rauth, a Professional Corporation.
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 Series 2016 Bonds will
be selected for audit by the IRS. It is also possible that the market value of the Series 2016 Bonds might be
affected as a result of such an audit of the Series 2016 Bonds (or by an audit of similar securities). No assurance
can be given that in the course of an audit, as a result of an audit, or otherwise, Congress or the IRS might not
change the Code (or interpretation thereof) subsequent to the issuance of the Series 2016 Bonds to the extent
that it adversely affects the exclusion from gross income of interest on the Series 2016 Bonds or their market
value.
27
It is possible that, subsequent to the issuance of the Series 2016 Bonds, there might be federal, state or
local statutory changes (or judicial or regulatory interpretations of federal, state or local law) that affect the
federal, state or local tax treatment of the Series 2016 Bonds or the market value of the Series 2016 Bonds.
Recently, proposed legislative changes have been introduced in Congress, which, if enacted, could result in
additional federal income or state tax being imposed on owners of tax-exempt state or local obligations, such as
the Series 2016 Bonds. The introduction or enactment of any of such changes could adversely affect the market
value or liquidity of the Series 2016 Bonds. No assurance can be given that, subsequent to the issuance of the
Series 2016 Bonds, such changes (or other changes) will not be introduced or enacted or interpretations will not
occur. Before purchasing any of the Series 2016 Bonds, all potential purchasers should consult their tax advisors
regarding possible statutory changes or judicial or regulatory changes or interpretations, and their collateral tax
consequences relating to the Series 2016 Bonds.
Although Bond Counsel has rendered an opinion that the interest (and original issue discount) on the
Series 2016 Bonds is excluded from gross income for federal income tax purposes provided that the City and
the Authoritycontinue to comply with certain requirements of the Code, the ownership of the Series 2016 Bonds
and the accrual or receipt of interest (and original issue discount) with respect to the Series 2016 Bonds may
otherwise affect the tax liability of certain persons. Bond Counsel expresses no opinion regarding any such tax
consequences. Accordingly, before purchasing any of the Series 2016 Bonds, all potential purchasers should
consult their tax advisors with respect to collateral tax consequences with respect to the Series 2016 Bonds.
The form of Bond Counsel’s proposed opinion with respect to the Series 2016 Bonds is attached hereto
in Appendix D.
CERTAIN LEGAL MATTERS
The validity of the Series 2016 Bondsand certain other legal matters are subject to the approving opinion
of Stradling Yocca Carlson & Rauth, a Professional Corporation, Bond Counsel. Stradling Yocca Carlson &
Rauth, a Professional Corporation, is also acting as Disclosure Counsel for the City. A complete copy of the
proposed form of Bond Counsel opinion is contained in Appendix D hereto. Bond Counsel undertakes no
responsibility for the accuracy, completeness or fairness of this Official Statement. Bond Counsel and
Disclosure Counsel will receive compensation from the City contingent upon the sale and delivery of the Series
2016 Bonds. From time to time, Bond Counsel and Disclosure Counsel represent the Underwriter on matters
unrelated to the Series 2016 Bonds. Certain legal matters will be passed upon for the City and the Authority by
Leibold, McClendon & Mann, a Professional Corporation, Irvine, California, for the Underwriter by Nossaman,
LLP, Irvine, California, and for the Trustee by its counsel. Counsel to the Underwriter will receive compensation
contingent upon that issuance of the Series 2016 Bonds.
ABSENCE OF LITIGATION
[To the best knowledge of the City and the Authority, there is no action, suit or proceeding pending or
threatened either restraining or enjoining the execution or delivery of the Series 2016 Bonds, the Lease
Agreement or the Indenture, or in any way contesting or affecting the validity of the foregoing or any proceedings
of the Authority or the City taken with respect to any of the foregoing. There are a number of lawsuits and
claims from time to time pending against the City. In the opinion of the City, and taking into account likely
insurance coverage and litigation reserves, there are no lawsuits or claims pending against the City which will
materially affect the City’s finances so as to impair its ability to pay Base Rental Payments when due.]
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UNDERWRITING
The Series 2016 Bonds are being purchased by Stifel, Nicolaus & Company, Incorporated dba Stone &
Youngberg, a Division of Stifel Nicolaus (the “Underwriter”). The Underwriter will purchase the Series 2016
Bonds from the Authority at an aggregate purchase price of $_________ (representing the principal amount of
the Series 2016 Bonds, plus $_________ of net original issue premium and less $_________ of Underwriter’s
discount).
The Series 2016 Bonds are offered for sale at the initial prices stated on the inside cover page of this
Official Statement, which may be changed from time to time by the Underwriter. The Series 2016 Bonds may
be offered and sold to certain dealers at prices lower than the public offering prices.
RATING
S&P Global Ratings (“S&P”) has assigned the Series 2016 Bonds the rating of “___” (_____ outlook).
Certain information was supplied by the City to S&P to be considered in evaluating the Series 2016 Bonds
(which may include information and material which is not included in this Official Statement). In addition,
rating agencies may base their ratings on investigations, studies and assumptions by the rating agencies. The
rating issued reflects only the views of S&P, and any explanation of the significance of such rating should be
obtained from S&P. There is no assurance that any rating will be retained for any given period of time or that
the same will not be revised downward or withdrawn entirely by S&P if, in its judgment, circumstances so
warrant. Other than as provided in the Continuing Disclosure Certificate, the City undertakes no responsibility
either to bring to the attention of the owners of any Series 2016 Bonds any downward revision or withdrawal of
any rating obtained or to oppose any such revision or withdrawal. Any such downward revision or withdrawal
of the rating obtained may have an adverse effect on the market price of and the ability to trade the Series 2016
Bonds.
FINANCIAL ADVISOR
The City has retained Urban Futures, Inc., Orange, California (the “Financial Advisor”) as financial
advisor in connection with the sale of the Series 2016 Bonds. The Financial Advisor is not obligated to
undertake, and has not undertaken to make, an independent verification or to assume any responsibility for the
accuracy, completeness or fairness of the information contained herein.
The Financial Advisor is an independent advisory firm and is not engaged in the business of
underwriting, trading or distributing municipal or other public securities.
CONTINUING DISCLOSURE
The City has covenanted for the benefit of the Owners of the Series 2016 Bonds to provide annually
certain financial information and operating data relating to the Series 2016 Bonds and the City (the “Annual
Report”), and to provide notices of the occurrence of certain enumerated events. For a complete listing of items
of information which will be provided in each Annual Report and further description of the City’s undertaking
with respect to the Annual Report and certain enumerated events, see Appendix F —“FORM OF CONTINUING
DISCLOSURE CERTIFICATE.” The Annual Report is to be provided by the City not later than nine (9) months
after the end of the City’s fiscal year (which currently would be April 1), commencing with the report for the
2015-16 Fiscal Year. The Annual Report will be filed by the City with the Municipal Securities Rulemaking
Board. These covenants have been made in order to assist the Underwriter in complying with Securities and
Exchange Commission Rule 15c2-12(b)(5).
Although the Former Agency, the Successor Agency and certain community facilities districts formed
by the City are not obligated persons pursuant to Rule 15c2-12 with respect to the Series 2016 Bonds, during the
last five years the City, the Successor Agency, the Former Agency and certain community facilities districts
29
formed by the City failed to comply in certain respects with continuing disclosure obligations related to
outstanding bonded indebtedness. The failures to comply include late filings with respect to several annual
reports and incomplete filings with respect to other annual reports. The incomplete filings omitted one or more
of the following items:
(1)Comprehensive audited financial statements of the City or the Agency, as applicable, including
the audited financial statements for Fiscal Year 2011-12 which were filed more than one year late;
(2)Updated tabular and other operating information relating to the City, the Agency and
community facilities districts; and
(3)Material event notices of changes in the ratings of outstanding bonded indebtedness of the
Authority and the Agency resulting from changes in the ratings to the bonds or to the bond insurers insuring
such bonds.
The City, the Successor Agency and various community facilities districts formed by the City have
made additional filings to provide certain of the previously omitted information; provided that with respect to
ratings changes, notice has been provided only of the existing rating or ratings applicable to each outstanding
issuance of bonds.
Other than as set forth above, the City believes in the last five years they have materially complied with
their continuing disclosure undertakings.
In order to promote compliance with continuing disclosure undertakings in the future, the City has
retained Albert A. Webb Associates to serve as the dissemination agent with respect to issuances of land-secured
bonded indebtedness and Urban Futures Incorporated to serve as the dissemination agent with respect to other
types of bonded indebtedness. Additionally, the City has adopted formal policies and procedures with respect
to its continuing disclosure practices and has reported the failures to comply with its prior continuing disclosure
obligations under the current Municipalities Continuing Disclosure Cooperation Initiative of the U.S. Securities
Exchange Commission
FINANCIAL STATEMENTS OF THE CITY
Included herein as Appendix C are the audited financial statements of the City as of and for the year
ended June 30, 2015, together with the report thereon dated January 29, 2016 of Teaman, Ramirez & Smith,
Inc., Riverside, California, certified public accountants (the “Auditor”). Such audited financial statements have
been included herein in reliance upon the report of the Auditor. The Auditor has not undertaken to update the
audited financial statements of the City or its report or to take any action intended or likely to elicit information
concerning the accuracy, completeness or 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 dated January 29, 2016.
MISCELLANEOUS
References are made herein to certain documents and reports which are brief summaries thereof which
do not purport to be complete or definitive and reference is made to such documents and reports for full and
complete statements of the contents thereof. Copies of the Indenture, the Lease Agreement, the Ground Lease
and other documents are available, upon request, and upon payment to the City of a charge for copying, mailing
and handling, from the City Clerk at the City of Lake Elsinore, 130 South Main Street, Lake Elsinore, California
92530.
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
30
a contract or agreement between the Authority or the City and the purchasers or Owners of any of the Series
2016 Bonds.
The execution and delivery of this Official Statement have been duly authorized by the Authority and
the City.
LAKE ELSINORE FACILITIES FINANCING
AUTHORITY
By:
Chair
CITY OF LAKE ELSINORE
By:
City Manager
A-1
APPENDIX A
THE CITY
General
The City is located in the western portion of the County of Riverside, California and encompasses
approximately 39 square miles and approximately 10 miles of lakeshore surrounding Lake Elsinore. The City
was incorporated on April 23, 1888 as a general law city. In 2016, the City has a population of approximately
56,000.
Government and Administration
City Council. The City operates under a Council/Manager form of government. The City Council
appoints the City Manager, who is responsible for the day-to-day administration of City business and the
coordination of City departments. The City Council is composed of five members elected biannually at large to
four-year alternating terms. The Mayor is selected by the City Council from among its members. As of June
30, 2016, the City had a staff of 82 full-time equivalent employees, 47 part-time employees and 15 contracted
employees.
The current members of the City Council and their term expiration are as follows:
Director Expiration of Term
Brian Tisdale, Mayor November 2018
Robert E. Magee, Mayor Pro Tem November 2016
Daryl Hickman November 2018
Natasha Johnson November 2016
Steve Manos November 2016
City Manager. Mr. Grant Yates is the current City Manager. Mr. Yates was appointed City Manager
on November 20, 2012. Prior to becoming City Manager, Mr. Yates spent 21 years working with the City of
Temecula and before that worked approximately 5 years with the City of Carlsbad. Mr. Yates held a number of
positions in the City of Temeculaincluding Community Relations Director, Deputy City Manager, and Financial
Services Administrator. Mr. Yates holds Bachelor’s and Master’s Degrees in Public Administration.
Assistant City Manager. Mr. Simpson joined the City in February 2014. Prior to becoming Assistant
City Manager, Mr. Simpson served as the City’s Director of Administrative Services. Mr. Simpson spent
approximately 4 years as the Director of Administrative Services and Assistant City Manager at the City of
Desert Hot Springs, 5 years as the Assistant Director of Finance at the City of Temecula, 1 year as Director of
Finance at the City of San Bernardino and as worked in local government for over 20 years at various agencies
such as, City of Vallejo, Costa Mesa, Indio, and South Orange County Wastewater Authority. Mr. Simpson
holds a Bachelor’s Degree in Accounting.
City Services. The City provides a number of services within its boundaries including the following:
police protection, fire services, parks, community services, planning and development, public works, street
lights, street maintenance, landscaping, capitalimprovements and general administration. Police and fire services
are contracted through the County of Riverside. The City is also responsible for the maintenance of several
recreational facilities which are located along the shoreline of Lake Elsinore.
Risk Management
Self-insurance Programs of the California Joint Powers Insurance Authority. The City is a member
of the California Joint Powers Insurance Authority (the “Insurance Authority”), which is composed of
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approximately 118 public entities within the State of California. The Insurance Authority arranges and
administers programs for the pooling of self-insured losses, purchases excess insurance or reinsurance, and
arranges for group-purchased insurance coverage. The Insurance Authority evaluates each member relative to
the payroll of other members. A variable credibility factor is determined for each member, which establishes
the weight applied to payroll and the weight applied to losses with the formula. The City self-insures for general
liability insurance and workers’ compensation insurance through the Insurance Authority.
In the general liability program, claims are pooled separately between police and non-police exposures.
The first layer of losses includes incurred costs up to $30,000 per occurrence and is evaluated as a percentage of
the pool’s total incurred costs within the first layer. The second layer of losses includes incurred costs from
$30,000 to $750,000 per occurrence and is evaluated as a percentage of the pool’s total incurred costs within the
second layer. Incurred costs in excess of $750,000 to $50 million are distributed based on the outcome of cost
allocation within the first and second layers. The coverage limit for each member, including all layers of
coverage, is $50 million per occurrence. Costs of covered claims for subsidence losses have a sub-limit of $30
million per occurrence.
Employer’s liability losses are pooled among members to $2 million. Coverage from $2 million to $5
million is purchased as part of a reinsurance policy, and employer’s liability losses from $5 million to $10 million
are pooled among members.
In the workers’ compensation program, claims are pooled separately between public safety (police and
fire) and non-public safety exposures. The first layer of losses includes incurred costs up to $50,000 per
occurrence and is evaluated as a percentage of the pool’s total incurred costs within the first layer. The second
layer of losses includes incurred costs from $50,000 to $100,000 per occurrence and is evaluated as a percentage
of the pool’s total incurred costs within the second layer. Incurred costs from $100,000 to statutory limits are
distributed based on the outcome of cost allocation within the first and second loss layers. For Fiscal Year 2015-
16, the Insurance Authority’s pooled retention was$2 million per occurrence, with reinsurance to statutory limits
under California Workers’ Compensation Law.
Purchased Insurance. The City participates in the all-risk property protection program of the Insurance
Authority, which is underwritten by several insurance companies. As of June 30, 2016, City’s all-risk property
coverage was in the amount of $44,629,595. The all-risk property protection program is subject to a $5,000 per
occurrence deductible, except for non-emergency vehicle insurance, which is subject to a $1,000 per occurrence
deductible. Premiums for the all-risk property protection program are paid annually and are not subject to
retroactive adjustments.
The City purchases crime insurance coverage through the Insurance Authority in the amount of
$1,000,000, which is subject to a $2,500 deductible. Premiums for crime insurance coverage are paid annually
and are not subject to retroactive adjustments.
During the past three fiscal years the City did not experience any claims, settlements or judgments that
exceeded pooled or insured coverages described above. There are no significant reductions in pooled or insured
liability coverage in Fiscal Year 2016-17 from the amounts described above.
For additional information relating to the City’s insurance coverages and the Insurance Authority, see
Note 17 to the City’s audited financial statements for Fiscal Year 2014-15 attached to the Official Statement as
Appendix C.
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CITY FINANCIAL INFORMATION
General
In Fiscal Year 2016, sales taxes, motor vehicle license fees, property taxes and in-lieu taxes make up
approximately 54 percent of the City’s general fund revenues.
Accounting and Financial Reporting
The City maintains its accounting records in accordance with Generally Accepted Accounting Principles
(GAAP) and the standards established by the Governmental Accounting Standards Board (GASB). On a semi-
annual basis, a report is prepared for the City Council and City staff which reviews fiscal performance to date
against the budget. Combined financial statements are produced following the close of each Fiscal Year.
The City Council employs an independent certified public accountant, who, at such time or times as
specified by the City Council, at least annually, and at such other times as they determine, examines the financial
statements of the City in accordance with generally accepted auditing standards, including tests of the accounting
records and other auditing procedures as such accountant considers necessary. As soon as practicable, after the
end of the Fiscal Year, a final audit and report is submitted by the independent accountant to the City Council.
The accounts of the City are organized on the basis of funds and account groups, each of which is
considered a separate accounting entity. The operations of each fund are accounted for with a separate set of
self-balancing accounts that comprise its assets, liabilities, fund equity, revenues and expenditures, or expenses,
as appropriate. Government resources are allocated to and accounted for in individual funds based upon the
purposes for which they are to be spent and the means by which spending activities are controlled. The various
governmental funds are grouped, in the City’s annual financial statements, into generic fund types, which include
the General Fund, Special Revenue Funds, Debt Service Funds and Capital Project Funds.
The General Fund is the general operating fund of the City. It is used to account for all financial
resources except those required to be accounted for in another fund. It is expected that the Lease Payments will
be paid for from amounts in the General Fund. Tables 1 through 4 below set forth certain historical and current
fiscal year budget information for the General Fund. Information on the remaining governmental funds of the
City as of June 30, 2015 is set forth in Appendix B.
Budget Procedure, Current Budget and Historical Budget Information
The City currently uses a one-year budget cycle. The fiscal year of the City begins on the first day of
July of each year and ends on the thirtiethday of June the following year. In May of every year, the City Manager
submits to the City Council the proposed budget during a special budget study session. At the conclusion of the
special budget study session, the City Council reviews and considers the proposed budget and makes any
revisions thereof that it deems advisable and on or before June 30 it adopts the budget with revisions, if any, by
the affirmative vote of at least a majority of the total members of the City Council during a public meeting. At
any public meeting after the adoption of the budget, the City Council may amend or supplement the budget by
motion adopted by the affirmative vote of at least a majority of the total members of the City Council. While the
City Manager can approve amendments that do not change the bottom-line of the adopted budget, the City
Council must approve any supplements to the budget. The budget for Fiscal Year 2016-17 was approved on
May 31, 2016.
From the effective date of the budget, the amounts stated as proposed expenditures become appropriated
to the several departments, offices and agencies for the objects and purposes named, provided that the City
Manager may transfer appropriations of a fund from one object or purpose to another within the same fund as
appropriate. All appropriations lapse at the end of the Fiscal Year to the extent that they have not been expended,
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lawfully encumbered or affirmatively reappropriated by the City Council during the adoption of the next year’s
budget.
Set forth in Table 1 is the General Fund budgets for Fiscal Years 2015, 2016 and 2017, the audited
results for Fiscal Years 2015 and the Estimated Fiscal Year End Results for Fiscal Year 2016. During the course
of each Fiscal Year, the budgets are amended and revised as necessary by the City Council.
TABLE 1
CITY OF LAKE ELSINORE
GENERAL FUND BUDGETS
Final
Fiscal Year
2015 Budget
Fiscal Year
2015 Results
Adopted
Fiscal Year
2016 Budget
Estimated
Fiscal Year
2016 Results
Adopted
Fiscal Year
2017 Budget
Revenues
Property Taxes $ 5,916,787 $ 6,249,786 $ 6,621,211 $ 6,559,959 $ 7,086,582
Other Taxes 11,065,389 11,705,293 12,500,577 13,178,135 12,432,401
Licenses, Permits and Fees 2,735,900 2,760,512 6,149,006 5,809,718 7,477,748
Intergovernmental Revenues 2,395,999 1,912,981 3,236,175 3,666,866 3,565,481
Charges for Services 4,098,975 3,189,138 2,482,873 2,275,027 --
Fines, Forfeitures and Penalties 479,800 683,574 1,031,450 1,392,271 510,450
Investment Earnings 105,000 143,058 105,000 238,569 105,000
Contributions from Property Owners 3,076,000 3,184,087 1,450,230 3,490,378 3,278,872
Miscellaneous 3,653,866 3,628,726 3,017,001 2,851,582 5,504,872
Total Revenues $33,528,316 $33,457,155 $36,593,523 $39,462,505 $40,447,406
Expenditures
Current
General Government $ 3,846,459 $ 4,336,598 $ 3,701,203 $ 3,604,927 $ 4,282,867
Public Safety and Fire Service 18,455,629 18,163,150 20,870,511 19,541,198 20,029,047
Community Development 3,093,837 3,392,086 3,572,466 3,296,915 8,873,766
Public Services 7,922,622 5,070,855 7,911,058 6,915,682 7,684,593
Community Services 1,506,241 1,371,353 2,248,536 1,961,069 2,401,053
Non-Departmental 2,851,000 1,074,885 3,222,570 2,801,932 2,567,500
Capital Outlay -- 107,567 -- -- --
Total Expenditures $37,675,788 $34,504,373 $40,526,344 $38,121,723 $41,678,028
Source: Adopted Budgets of the City for Fiscal Years 2015, 2016 and 2017, Audited Financial Statements for Fiscal Year 2015
and unaudited actual results for Fiscal Year 2016.
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Comparative Change in Fund Balance of the City General Fund
Table 2 below presents the City’s audited General Fund Statement of Revenues, Expenditures and
Change in Fund Balance for Fiscal Years 2011 through 2015 and unaudited actual results for Fiscal Year 2016.
TABLE 2
CITY OF LAKE ELSINORE GENERAL FUND STATEMENT OF
REVENUES, EXPENDITURES AND CHANGE IN FUND BALANCE
FIVE YEAR COMPARISON
Fiscal Year Ending June 30
2011 2012 2013 2014 2015 2016(1)
Revenues:
Property Taxes $ 5,438,551 $ 5,287,580 $ 5,844,498 $ 5,495,091 $ 6,249,786
$6,559,959
Other Taxes 9,557,873 9,911,400 9,572,675 11,043,792 11,705,293 13,178,135
Licenses, Permits and Fees 1,783,412 1,660,973 3,015,962 3,054,320 2,760,512 5,809,718
Intergovernmental Revenues 294,486 128,322 1,200,889 1,228,433 1,912,981 3,666,866
Charges for Services 1,383,934 1,374,351 1,746,713 2,409,558 3,189,138 2,275,027
Fines, Forfeitures and Penalties 648,643 1,530,221 592,185 486,958 683,574 1,392,271
Investment Earnings 245,583 242,769 9,010 168,608 143,058 238,569
Contributions from Property
Owners
----298,239 270,791 3,184,087 3,490,378
Miscellaneous 3,935,723 4,063,339 3,061,025 3,170,509 3,628,726 2,851,582
Total Revenues $ 23,288,205 $ 24,198,955 $ 25,341,196 $ 27,328,060 $33,457,155 $ 39,462,505
Expenditures:
Current:
General government $ 6,177,790 $ 6,300,767 $ 5,450,399 $ 4,698,485 $ 4,336,598
$3,604,927
Public Safety 10,659,634 11,306,665 11,484,210 13,292,875 18,163,150(3)19,541,198
Community Development 1,337,689 1,486,755 2,440,192 2,821,897 3,392,086 3,296,915
Public Services 1,716,863 1,393,247 3,186,797 3,661,688 5,070,855 6,915,682
Community Services 3,318,519 4,257,888 3,112,975 3,085,068 3,433,817 1,961,069
Capital Outlay --32,977 21,885 107,567 2,801,932
Total Expenditures $ 23,210,495 $ 24,745,322 $ 25,707,550 $ 27,581,898 $ 34,504,073
$ 38,121,723
Excess of Revenues Over (Under)
Expenditures $77,710 $(546,367)$(366,354)$ (253,838)$ (1,046,918)$ 1,340,782
Other Financing Sources (Uses):
Transfers In $51,752 $50,000 $126,988 $153,599 $ 3,165,803
(4)$--
Transfers Out (231,000)(987,026)(1,106,699)(1,985,749)(1,914,539)(1,015,369)
Sale of Capital Assets --------13,362 --
Total Other Financing
Sources (Uses)$(179,248)$(937,026)$(979,711)$(1,832,150)$1,264,626 $(1,015,369)
Net change in fund balances $(101,538)$ (1,483,393)$ (1,346,065)$(2,085,988)$217,708 $325,413
Fund balances, beginning of year $ 14,917,319 $ 14,815,781 $ 15,185,288 $ 13,839,223 $11,753,235 $ 11,970,943
Prior Period Adjustment(2)
--
--
(1,852,900)------
Fund balances, end of year $ 14,815,781 $ 13,332,388 $ 13,839,223 $ 11,753,235 $11,970,943 $ 12,296,356
(1) Based on unaudited actual results.
(2) Amount reflects ________.
(3)Increase from Fiscal Year 2014 and thereafter primarily attributable to consolidation of police expenditures in the City’s General Fund.
(4)Increase from prior fiscal years primarily attributable to one-time revenues and expenditures related to a reimbursement agreement and
the East Lake Specific Plan.
Source: Audited Financial Statements for Fiscal Years 2011-2015 and unaudited actual results for Fiscal Year 2016.
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Comparative General Fund Balance Sheets of the City
Table 3 below presents the City’s audited General Fund Balance Sheets for Fiscal Years 2011-2015.
TABLE 3
CITY OF LAKE ELSINORE
GENERAL FUND BALANCE SHEETS
FIVE YEAR COMPARISON
Fiscal Year Ending June 30,
2011 2012 2013 2014 2015
Assets
Cash and Investments $ 12,013,573 $ 12,306,799 $ 13,437,560 $ 12,472,070 $ 14,569,856
Cash and Investments with Fiscal Agent ----------
Accounts Receivable(2)441,896 723,406 652,763 689,727 645,485
Accrued Interest Receivable 4,198 2,526 1,108 1,411 28,266
Loans Receivable from Successor
Agency
----------
Notes Receivable --1,000,000 1,000,000 1,000,000 1,000,000
Interest Receivable on Notes --60,000 90,000 120,000 150,000
Due from Other Funds 577,981 612,986 985,026 980,121 740,969
Prepaid Items 438,990 1,070,606 1,196,881 264,392 16,468
Due from Other Governments 1,249,927 1,206,915 821,906 1,345,381 1,746,180
Prepaid Items 438,990 --------
Land Held for Resale ----------
Total Assets $ 18,314,754 $ 17,418,135 $ 18,185,244 $ 16,873,102 $ 18,897,224
Liabilities
Accounts payable $ 3,118,177 $ 2,877,426 $ 3,926,945 $ 3,909,334 $ 5,545,386
Other Accrued liabilities 198,287 105,782 315,597 365,243 1,054,627
Other Payroll Liabilities 28,247 12,919 ------
Deposits and Other Liabilities 786 ----598,999 --
Due to Other Funds --------
Due to Other Governments 43,422 --------
Other Deferred Revenue 110,054 1,089,620 ------
Unearned Revenue - Other ----13,479 4,214 27,429
Total Liabilities $ 3,498,973 $ 4,085,747 $ 4,256,021 $ 4,877,790 $ 6,627,442
Deferred Inflows of Resources
Unavailable Revenue – Interest on
Notes Receivable
$--$--$90,000 $120,000 $150,000
Unavailable Revenue – Property Taxes
and Assessments
------122,077 148,839
Unavailable Revenue –
Intergovernmental
----------
Total Deferred Inflows of Resources $--$--$90,000 $242,077 $298,839
Fund Balance
Nonspendable $ 4,027,179 $ 2,505,503 $ 1,821,906 $ 1,264,392 $ 1,016,468
Restricted ----------
Assigned ----------
Unassigned 10,788,602 10,826,885 12,017,317 10,488,843 10,954,475
Total Fund Balance $ 14,815,781 $ 13,332,388 $ 13,839,223 $ 11,753,235 $ 11,970,943
Total Liabilities and Fund Balance $ 18,314,754 $ 17,418,135 $ 18,185,244 $ 16,873,102 $ 18,897,224
(1) Based on unaudited actual results.
(2) Increase in Fiscal Year 2016 a result of __________.
Source:Audited Financial Statements for Fiscal Years 2011-2015.
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Property Taxes
Property tax receipts of $6,249,786 provided the second largest tax revenue source of the City,
contributing approximately 18.7% of total General Fund revenues during Fiscal Year 2015. Based on unaudited
actual results, the City expects property tax receipts of $6,559,959 in Fiscal Year 2016, which is approximately
16.6% of total General Fund revenues during Fiscal Year 2016. In California, property which is subject to ad
valorem taxes is classified as “secured” or “unsecured.” The secured classification includes property on which
any property tax levied by a county becomes a lien on that property. A tax levied on unsecured property does
not become a lien against the taxed unsecured property, but may become a lien on certain other property owned
by the taxpayer. Every tax which becomes a lien on secured property has priority over all other liens, arising
pursuant to State Law, on the secured property, regardless of the time of the creation of other liens. The valuation
of property is determined as of January 1 each year, and installments of taxes levied upon secured property
become delinquent on the following December 10th and April 10th of the subsequent calendar year. Taxes on
unsecured property are due July 1, and become delinquent August 31.
Secured and unsecured properties are entered separately on the assessment roll maintained by the county
assessor. The method of collecting delinquent taxes is substantially different for the two classifications of
property. The exclusive means of forcing the payment of delinquent taxes with respect to property on the secured
roll is the sale of the property securing the taxes of the State for the amount of taxes that are delinquent. The
taxing authority has four methods of collecting unsecured personal property taxes: (1) a civil action against the
taxpayer; (2) filing a certificate in the office of the county clerk specifying certain facts in order to obtain a
judgment lien on certain property of the taxpayer; (3) filing a certificate of delinquency for record in the County
Recorder’s Office in order to obtain a lien on certain property of the taxpayer, and (4) seizure and sale of personal
property, improvement or possessory interest belonging or taxable to the assessee.
A ten percent penalty is added to delinquent taxes which have been levied with respect to property on
the secured roll. In addition, beginning on the July 1 following a delinquency, interest begins accruing at the
rate of 1 1/2% per month on the amount delinquent. Such property may thereafter be redeemed by the payment
of the delinquent taxes and the ten percent penalty, plus interest at the rate of 1 1/2% per month to the time of
redemption. If taxes are unpaid for a period of five years or more, the property is deeded to the State and then
is subject to sale by the county tax collector. A ten percent penalty also applies to the delinquent taxes or property
on the unsecured roll, and further, an additional penalty of 1 1/2% per month accrues with respect to such taxes
beginning on the varying dates related to the tax billing date.
Legislation enacted in 1984 (Section 25 et seq. of the Revenue and Taxation Code of the State of
California), provides for the supplemental assignment and taxation of property as of the occurrence of a change
in ownership or completion of new construction. Previously, statutes enabled the assessment of such changes
only as of the next tax lien date following the change and thus delayed the realization of increased property taxes
from the new assessment for up to 14 months. Collection of taxes based on supplemental assessments occurs
throughout the year. Taxes due are prorated according to the amount of time remaining in the tax year, with the
exception of tax bills dated January 1 through May 31, which are calculated on the basis of the remainder of the
current fiscal year and the full 12 months of the next fiscal year.
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 permanently 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.
On November 2, 2004, California voters approved Proposition 1A, which amended the State
Constitution to significantly reduce the State’s authority over major local government revenue sources. Under
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Proposition 1A, 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 from 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
governments with equal replacement funding. Beginning in Fiscal Year 2008-09, 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 Governor 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 1A does allow the State to approve voluntary exchanges of local sales tax and property tax revenues
among local governments within a county.
The City also received a portion of Department of Motor Vehicles license fees (“VLF”) collected
statewide. 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.” The State VLF backfill was phased out and as of 2011-
12 all of the VLF is now received through an in lieu payment from State property tax revenues.
Table 4 below sets forth the secured and unsecured assessed valuations for property in the City for the
Fiscal Years 2013 through 2017. The information in Table 4 has been obtained directly from the County of
Riverside. Neither the City nor the Underwriter has independently verified the information in Table 4 and do
not guarantee its accuracy.
TABLE 4
CITY OF LAKE ELSINORE
ASSESSED VALUATION
FISCAL YEARS 2013 TO 2017
Fiscal Year Local Secured Unsecured Total
2013 $3,666,499,221 $167,898,562 $3,834,397,783
2014 3,888,934,354 142,565,053 4,031,499,407
2015 4,463,835,597 136,300,859 4,494,905,138
2016 4,719,485,076 128,870,138 4,848,355,214
2017
Source: County of Riverside Assessor.
Table 5 below sets forth property tax collections and delinquencies in the City as of June 30 for Fiscal
Years 2012 through 2016. The County operates under a statutory program entitled Alternate Method of
Distribution of Tax Levies and Collections and of Tax Sale Proceeds (the “Teeter Plan”). Under the Teeter Plan
local taxing entities receive 100% of their tax levies net of delinquencies, but do not receive interest or penalties
on delinquent taxes collected by the County. The City is included in the Teeter Plan; accordingly, the City’s
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receipt of its property tax revenues is not impacted by delinquencies in payment. However, the County may
choose to discontinue to the Teeter Plan at any time.
TABLE 5
CITY OF LAKE ELSINORE
PROPERTY TAX LEVIES AND COLLECTIONS
FISCAL YEARS 2012 THROUGH 2016
Fiscal Year
Total
Tax Levy
Current Tax
Collections as
of June 30
Percent of
Levy Collected
as of June 30
Outstanding
Delinquent
Taxes as of
June 30
2012 $1,874,319 $1,770,492 94.5%$103,827
2013 1,844,800 1,767,808 95.8 76,992
2014 1,935,629 1,822,844 94.2 112,785
2015 2,171,129 2,074,751 95.6 96,378
2016 2,328,194 2,204,969 94.7 123,225
Source: County of Riverside Auditor-Controller.
The 20 largest taxpayers in the City as shown on the Fiscal Year 2016-17 secured tax roll, the land use,
the assessed valuation and the percentage of the City’s total property tax revenues attributable to each are shown
on Table 6 below. The information in Table 6 has been provided by California Municipal Statistics, Inc. Neither
the City nor the Underwriter has independently verified the information in Table 6 and do not guarantee its
accuracy.
TABLE 6
CITY OF LAKE ELSINORE
TWENTY PRINCIPAL TAXPAYERS
Property Owner Land Use
2016-17 Assessed
Valuation % of Total(1)
1.$ %
2.
3.
4.
5.
6.
7.
8.
9.
10.
$ %
(1)2016-17 Local Secured Assessed Valuation: $__________.
Source: California Municipal Statistics, Inc.
Sales Taxes
Sales tax receipts of $8,572,066 provide the largest tax revenue source for the City, contributing
approximately 25.6% of total General Fund revenues during Fiscal Year 2015. A sales tax is imposed on retail
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sales or consumption of personal property. Based on unaudited actual results, the City expects sales tax receipts
of _________in Fiscal Year 2016, which is approximately _____% of total General Fund revenues during Fiscal
Year 2016. The basic sales tax rate is established by the State Legislature, and local overrides may be approved
by voters. The current sales tax rate in the City is 8%.
On March 2, 2004, State voters approved a bond initiative formally known as the “California Economic
Recovery Act.” This act authorized the issuance of $15 billion of Economic Recovery Bonds to finance ongoing
State budget deficits, which are payable from a fund established by the redirection of tax revenues known as the
“Triple Flip.” The State issued $11.3 billion of Economic Recovery Bonds prior to June 30, 2004. Under the
“Triple Flip,” one-quarter of local governments’1% share of the sales tax imposed on taxable transactions within
their jurisdiction was redirected to the State. In an effort to eliminate the adverse impact of the sales tax revenue
redirection on local government, State legislation provided for certain property taxes to be redirected to local
government. Because these property tax moneyswere previously earmarked for schools, the legislation provided
for schools to receive other State general fund revenues. The swap of sales taxes for property taxes terminated
in Fiscal Year 2015-16 upon the repayment of the Economic Recovery Bonds and there will be no “Triple Flip”
beginning in Fiscal Year 2016-17. See “RISK FACTORS—State Budget Information” herein.
Services
Fees of $3,189,138 collected for services provided by the City, including, but not limited to, fees for
plan checks, issuing of building permits, public works projects and for parks and recreations programs, provided
approximately 9.5% of General Fund revenues during Fiscal Year 2015. Based on unaudited actual results, such
fees are estimated to be approximately $2,275,027 for Fiscal Year 2016, representing approximately 17.7% of
estimated General Fund revenues.
Tax Revenues by Source
The following table sets forth the audited tax revenues by source for Fiscal Years 2011 through 2015
and for Fiscal Year 2016 based on unaudited actual results.
Fiscal Year Ending June 30
2011 2012 2013 2014 2015 2016(1)
Revenues:
Property Taxes(2)$ 24,237,023 $ 14,698,032 $ 5,804,265 $ 5,487,743 $ 6,276,548 $ 6,559,959
Sales Taxes 7,190,695 7,444,947 6,935,215 8,031,486 8,572,066 9,939,637
Franchise Taxes 1,913,807 2,002,550 2,097,081 2,275,619 2,389,413 2,423,707
Other Taxes 483,556 538,402 567,560 760,203 767,058 804,790
Total Revenues $ 33,825,081 $ 24,683,931 $ 15,404,121 $ 16,555,051 $18,005,085 $ 19,728,093
(1) Based on unaudited actual results.
(2) Decrease in Fiscal Year 2012 and thereafter reflects [dissolution of the Former Agency.]
Source: Audited Financial Statements for Fiscal Years 2011-2015 and unaudited actual results for Fiscal Year 2016.
Indebtedness
Long-Term Debt. As of June 30, 2016, the City had $258,570,000 of total bonds outstanding. These
amounts are comprised as follows: (a) $190,035,000 of outstanding revenue bonds, none of which are payable
from the City’s General Fund; (B) $12,750,000 of outstanding lease revenue funding bonds, all which are
payable from the City’s General Fund, (c) $48,355,000 of outstanding tax allocation revenue bonds, all of which
are redevelopment tax revenue bonds and are not payable from the City’s General Fund; and, (d) $7,430,000 of
certificates of participation, which are payable from a retail transactions and use tax and not payable from the
City’s General Fund.
As of June 30, 2016, the only long-term obligation payable from the City’s General Fund are lease
payments payable to the Lake Elsinore Recreation Authority (the “Recreation Authority”) under a Lease
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Agreement (the “2013 Lease”), dated as of September 1, 2013, entered into connection with the Authority’s
Lease Revenue Refunding Bonds (Public Facilities Project) Series 2013 (the “Series 2013 Bonds”). As of June
30, 2016, the amount payable under such lease was $12,720,000. The final payment under the 2013 Lease is
due in 2032.
For a description of the City and its related entities’ outstanding indebtedness, which are not payable
from the City’s General Fund is set forth in the following table, see Note 7 to the City’s audited financial
statements for Fiscal Year 2015 attached to the Official Statement as Appendix C.
Short-Term Debt. The City currently has no short-term debt outstanding.
For additional information relating to the City and its related entities’ outstanding indebtedness, see
Note 7 to the City’s audited financial statements for Fiscal Year 2015 attached to the Official Statement as
Appendix C.
Estimated Direct and Overlapping Debt. The estimated direct and overlapping bonded debt of the City
as of _____ __, 2016 is shown in Table 8 below. The information in Table 8 has been derived from data
assembled and reported to the City by California Municipal Statistics, Inc. Neither the City nor the Underwriter
has independently verified the information in Table 8 and do not guarantee its accuracy.
TABLE 8
CITY OF LAKE ELSINORE
ESTIMATED DIRECT AND OVERLAPPING BONDED DEBT
AS OF _______ __, 2016
[TO COME]
Source: California Municipal Statistics, Inc.
Retirement Contributions
Summary of Plans. The City contributes to California Public Employees Retirement System
(“CalPERS”), an agent multiple-employer public employee defined benefit pension plan for all of the City’s
qualified permanent and probationary employees who participate in the City’s Miscellaneous, Miscellaneous
Second Tier and Safety Plans. CalPERS provides retirement, disability and death benefits to plan members and
beneficiaries. CalPERS acts as a common investment and administrative agent for participating public entities
within the State, including the City. Members with five years of total service are eligible to retire at age 50 with
statutorily reduced benefits. All members are eligible for non-duty disability benefits after 10 years of service.
The death benefit is one of the following: the Basic Death Benefit, the 1957 Survivor Benefit, or the Optional
Settlement 2W Death Benefit. The cost of living adjustments for each plan are applied as specified by the Public
Employees’ Retirement Law.
CalPERS plan benefit provisions and all other requirements are established by State statute and City
resolution. Participants in the City’s CalPERS plan contribute the full amount of the required employee
contribution, which is up to 8% of their annual covered salary, depending on benefit level. The City’s CalPERS
Plan provisions and benefits in effect at June 30, 2015 are summarized as follows:
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CITY OF LAKE ELSINORE
SUMMARY OF CALPERS PLAN PROVISIONS AS OF JUNE 30, 2015
Miscellaneous Plan Miscellaneous Second Tier Safety Plan(2)
Hire Date
Prior to
1/1/2013
On or after
1/1/2013(1)
Prior to
1/1/2013
On or after
1/1/2013(1)
Prior to
1/1/2013
On or after
1/1/2013(1)
Benefit Formula 2.0% at 55 2.0% at 62 2.0% at 60 2.0% at 62 0.5% at 55 N/A
Benefit Vesting
Schedule 5 years 5 years 5 years 5 years
5 years N/A
Lifetime Benefit
Payments Monthly Monthly Monthly Monthly
Monthly N/A
Retirement Age 50-55+52-67+55-60 52-67 50 N/A
Monthly Benefits, as
a % of Eligible
Compensation
1.46% to
2.418%
1.0% to
2.5%
1.092% to
2.418%
1.0% to
2.5%
0.5%N/A
Required Employee
Contribution Rate 8%6.25%1.5%6.25%
N/A N/A
Required City
Contribution Rate 24.34%6.237%8.005%%6.237%
N/A N/A
(1) For employees hired on or after January 1, 2013, they are included in their respective PEPRA (California Public Employees’ Pension Reform
Act) Plans with the above provisions and benefits.
(2) The City currently does not have any safety employees. The Safety Plan represents former safety employees.
Source: Audited Financial Statement of the City for Fiscal Year 2015.
Employer contribution rates for all public employers are determined on an annual basis by the CalPERS
actuary and are effective on the July 1 following notice of a change in the rate. The total plan contributions are
determined through the CalPERS annual actuarial valuation process. The actuarially determined rate is the
estimated amount, expressed as a percentage of payroll, that is necessary to finance the costs of benefits that are
earned by employees during the year, with an additional amount to finance any unfunded accrued liability. The
employer is required to contribute the difference between the actuarially determined rate and the contribution
rate of employees. The City’s contribution rates for Fiscal Year 2015 and 2016 were 18.61% and 18.808%,
respectively. The City’s contribution rate for Fiscal Year 2017 has been established at 19.3%. The City’s
projected contribution rate for Fiscal Year 2018 is 19.9%.
For the year ended June 30, 2015, the contributions recognized as part of pension expense for the City’s
Plans were as follows:
Employer Contributions
Employee Contributions
(Paid by Employer)
Miscellaneous $734,838 $62,686
Miscellaneous Second Tier 123,737 --
PEPREA Miscellaneous 32,424 --
As of June 30, 2015, the City reported net pension liabilities for its proportionate shares of the net
pension liability of each plan as follows:
Proportionate Share of Net
Pension Liability
Miscellaneous $ 7,259,912
Miscellaneous Second Tier 10,337
PEPREA Miscellaneous 441
Safety 21,952
Total:$ 7,292,642
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Pension Liabilities, Pension Expenses and Deferred Outflow/Inflows of Resources. The City’s net
pension liability for each Plan is measured as the proportionate share of the net pension liability. The net pension
liability of each of the Plans is measured as of June 30, 2014, and the total pension liability for each Plan used
to calculate the net pension liability was determined by an actuarial valuation as of June 30, 2013 rolled forward
to June 30, 2014 using standard update procedures. The City’s proportion of the net pension liability was
actuarially determined based on a projection of the City’s long-term share of contributions to the pension plans
relative to the projected contributions of all participating employers. The City’s proportionate share of the net
pension liability for each Plan measured as of June 30, 2013 and June 30, 2014 was as follows:
Proportion Change
Increase (Decrease)June 30, 2014 June 30, 2013
Miscellaneous 0.11667%0.11247%0.00420%
Miscellaneous Second Tier 0.00017%0.00018%(0.00001)%
PEPREA Miscellaneous 0.00001%0.00001%0.00000%
Safety 0.00035%0.00035%0.00000%
For the year ended June 30, 2015, the City recognized pension expense of $686,246. At June 30, 2015,
the City reported deferred outflows of resources and deferred inflows of resources related to pensions form the
following sources:
Deferred Outflows of
Resources
Deferred Inflows of
Resources
Pension contributions subsequent to measurement date $ 953,686 $--
Differences between actual and expected experience
Changes in assumptions
Change in employer’s proportion and differences
between
the employer’s contributions and the employer’s
Proportionate share of contributions 197,470 (41,256)
Net differences between projected and actual earnings
on
plan investments (1,770,826)
Total $ 1,151,156 $ (1,812,082)
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A summary of principal assumptions and methods used to determine the total pension liability for Fiscal
Year 2016 is shown below.
Miscellaneous(1)Safety(1)
Valuation Date June 30, 2013 June 30, 2013
Measurement Date June 30, 2014 June 30, 2014
Actuarial Cost Method
Actuarial Assumptions:
Discount Rate 7.5%7.5%
Inflation 2.75%2.75%
Payroll Growth 3.0%3.0%
Projected Salary Increase 3.3% - 14.2%
(2)3.3% - 14.2%
(2)
Investment Rate of
Return
7.5%(3)7.5%(3)
Mortality CalPERS Membership Data (4)CalPERS Membership Data (4)
(1)Actuarial assumptions were the same for all Plans.
(2)Depending on age, service and type of employment.
(3)Net of pension plan investment expenses, including inflation
(4)The Mortality Rate Table was derived using CalPERS’ membership data for all funds. The table includes 20 years of
mortality improvements using Society of Actuaries Scale BB. For more details on this table, please refer to the 2014
experience study report from the CalPERS website.
Source: Audited Financial Statement of the City for Fiscal Year 2015.
In June 2012, the Governmental Accounting Standards Board (“GASB”) adopted new standards (GASB
Statement No. 68, or “GASB 68”) with respect to accounting and financial reporting by state and local
government employers for defined benefit pension plans. The new standards revise the accounting treatment of
defined benefit pension plans, changing the way expenses and liabilities are calculated and how state and local
government employers report those expenses and liabilities in their financial statements. Major changes include:
(i) the inclusion of unfunded pension liabilities on the government’s balance sheet (previously, such unfunded
liabilities were typically included as notes to the government’s financial statements); (ii) pension expense
incorporates more rapid recognition of actuarial experience and investment returns and is no longer based on the
employer’s actual contribution amounts; (iii) lower actuarial discount rates that are required to be used for
underfunded plans in certain cases for purposes of the financial statements; (iv) closed amortization periods for
unfunded liabilities that are required to be used for certain purposes of the financial statements; and (v) the
difference between expected and actual investment returns will be recognized over a closed five-year smoothing
period. The reporting requirements took effect in the fiscal year ended June 30 (“Fiscal Year”), 2015. Based
on the adoption of the new accounting standards, beginning with the Fiscal Year 2015 actuarial valuation, the
annual required contribution (the “ARC”) and the annual pension expense will be different. GASB 68 is a
change in accounting reporting and disclosure requirements, but it does not change the City’s pension plan
funding obligations.
For additional information relating to the City’s plan, see Note 14 to the City’s audited financial
statements for Fiscal Year 2015 attached to the Official Statement as Appendix B.
The above information is primarily derived from information produced by CalPERS, its independent
accountants and its actuaries. The City has not independently verified the information provided and makes no
representations nor expresses any opinion as to the accuracy of the information provided by CalPERS.
The comprehensive annual financial reports of CalPERS are available on its Internet website at
www.calpers.ca.gov. The CalPERS website also contains CalPERS’ most recent actuarial valuation reports
and other information concerning benefits and other matters. The textual reference to such Internet website is
provided for convenience only. None of the information on such Internet website is incorporated by reference
herein. The City cannot guarantee the accuracy of such information. Actuarial assessments are
“forward-looking” statements that reflect the judgment of the fiduciaries of the pension plans, and are based
upon a variety of assumptions, one or more of which may not materialize or may be changed in the future.
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Other Pension Benefits. The City offers its employees a deferred compensation plan created pursuant
to Section 457 of the Internal Revenue Code whereby they can voluntarily contribute a portion of their earnings
into a tax-deferred fund held in trust for the exclusive benefit of participants and their beneficiaries. Once the
assets and income are placed in trust the City no longer owns the amounts deferred by employees and related
income.
For additional information relating to the City’s deferred compensation plan, see Note 16 to the City’s
audited financial statements for Fiscal Year 2015 attached to the Official Statement as Appendix C.
Other Post-Employment Benefits
General. In accordance with City Resolution 89-42 dated September 1989, the City provides health
insurance premiums costs to qualifying employees. Employees who began employment with the City prior to
January 1, 2013 and who retire from the City on or after attaining age 55, with at least 5 years of service with
the City, qualify to receive the post-employment benefit. The City pays 100% of the retirees’ and authorized
dependents monthly medical premiums.
Funding Policy. The contribution requirements of the plan members and the City are established and
may be amended by the City, the City Council, and/or the employee associations. Currently, contributions are
not required from plan members.Contributions are funded on a pay-as-you-go basis. During the fiscal year ended
June 30, 2015, the City elected to fund $555,602 towards the unfunded accrued liability related to this benefit.
The City’s annual OPEB cost (expense) is calculated based on the annual required contribution of the
employer (ARC), an amount actuarially determined in accordance with parameters of GASB Statement 45. The
ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year
and to amortize any unfunded liabilities of the plan over a period not to exceed thirty years. The ARC for fiscal
year 2014-15 was $1,502,498.
The following table shows the components of the City’s annual OPEB cost for the year, the amount
actually contributed to the plan, and changes in the City’s net OPEB obligation.
Annual Required Contribution (ARC)$ 1,502,498
Interest on Net OPEB Obligation 316,371
Annual OPEB Cost 1,818,869
Contributions Made (555,602)
Increase (Decrease) in Net OPEB Obligation 1,263,267
Net OPEB Obligation – Beginning of Year 7,444,027
Net OPEB Obligation – End of Year $ 8,707,294
Funded Status and Funding Progress. As of July 1, 2014, the second actuarial valuation date, the plan
was zero percent funded. The actuarial accrued liability for benefits was $12,711,047 and the actuarial value of
assets was zero, resulting in an unfunded actuarial accruedliability (UAAL) of $12,711,047. The covered payroll
(annual payroll of active employees covered by the plan) was $4,597,240 and the ratio of the UAAL to the
covered payroll was 276.49%.
Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and
assumptions about the probability of occurrence of events far into the future. Examples include assumptions
about future employment, mortality, and the healthcare cost trend. Amounts determined regarding the funded
status of the plan and the annualrequired contributions of theemployer are subject to continual revision as actual
results are compared with past expectations and new estimates are made about the future. The schedule of
funding progress, presented as required supplementary information following the notes to the basic financial
statements, presents multi-year trend information about whether the actuarial value of the plan assets is
increasing or decreasing over time relative to the actuarial accrued liabilities for benefits.
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Actuarial Methods and Assumptions. Projections of benefits for financial reporting purposes are based
on the substantive plan (the plan as understood by the employer and plan members) and include the types of
benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the
employer and plan members to that point. The actuarial methods and assumptions used include techniques that
are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value
of assets, consistent with the long-term perspective of the calculations.
In the July 1, 2014 actuarial valuation, the frozen entry age method (closed period) was used. The
actuarial assumptions includes an inflation rate of 4.25% per annum and medical cost trend rates ranging from
4.7% to 9.0% for the first four years and an ultimate rate of 5.0% after four years, dental cost trend is 4% per
year. The City’s unfunded actuarial accrued liability is being amortized by level dollar contributions over twenty
years as a level dollar amount.
For additional information relating to the City’s OPEB obligations, see Note 15 to the City’s audited
financial statements for Fiscal Year 2015 attached to the Official Statement as Appendix B.
City Investment Policy
The City maintains an Investment Policy, which, pursuant to the provisions of Section 53646 of the
California Government Code, is annually submitted to and reviewed by the City Council. Any change in the
Investment Policy in reviewed and approved by the City Council.
Monthly reports are submitted by the Assistant City Manager (formerly the Director of Administrative
Services) to the City Council, the City Manager and the City Treasurer, setting forth investment transactions.
Additionally, quarterly reports are submitted byAssistant City Manager (formerly the Director of Administrative
Services) to the City Council, the City Manager and the City Treasurer, which provides, for each individual
investment, the type of investment, the issuer name, purchase date, maturity date, par value, purchase price,
current market value and source of valuation and the overall portfolio yield based on cost.
The goal of the Investment Policy is to set out the policies and procedures that enhance opportunities
for a prudent and systematic investment program and to organize and formalize investment-related activities.
The objectives of the Investment Policy are, in the following order of priority:
FIRST, Safety of Principal – investments shall be undertaken in a manner that seeks to ensure the
preservation of capital in the portfolio. Credit risk is to be mitigated through limiting investments to the types
of securities authorized by the Investment Policyand portfolio diversification. Interest rate risk is to be mitigated
by structuring the investment portfolio with marketable securities so that securities can be liquidated to meet
cash flow needs or structuring the portfolio to mature to meet cash requirements for ongoing operations.
SECOND,Liquidity, to ensure that the City’s investment portfolio will remain sufficiently liquid to
enable the City to meet all reasonably anticipated operating requirements.
THIRD,Yield, to attain a market rate of return throughout budgetary and economic cycles, taking into
account the investment risk constraints and the cash flow characteristics of the portfolio.
The City’s investment alternatives are specified in California Government Code Sections 53600 et seq.
Within this framework, the Investment Policy specifies authorized investments, subject to certain limitations.
According to the City Treasurer’s Quarterly Report for the quarter ending June 30, 2016, the market
value of the City’s funds was $30,057,747. The investment portfolio includes a variety of fixed income securities
that vary in maturity from one day to five years. On June 30, 2016, 12.7% of the City’s total portfolio was
invested in investments with a maturity of less than a year, 40.6% in investments with a maturity between 1 to
A-17
three years, 25.8% in investments with a maturity of 3 to 4 years and 20.9% in investments with a maturity of
up to 5 years. As of June 30, 2016, the portfolio of invested City funds had an average maturity of 2.87 years.
For additional information relating to the City’s investments, see Note 2 to the City’s audited financial
statements for Fiscal Year 2015 attached to the Official Statement as Appendix B.
B-1
APPENDIX B
SUMMARY OF THE PRINCIPAL LEGAL DOCUMENTS
[TO COME FROM BOND COUNSEL]
C-1
APPENDIX C
AUDITED FINANCIAL STATEMENTS OF THE CITY
FOR THE YEAR ENDED JUNE 30, 2015
D-1
APPENDIX D
PROPOSED FORM OF BOND COUNSEL OPINION
________ __, 2016
Lake Elsinore Facilities Financing Authority
130 South Main Street
Lake Elsinore, California 92530
Re:$___________ Lake Elsinore Facilities Financing Authority
Lease Revenue Bonds, Series 2016A
Ladies and Gentlemen:
We have acted as bond counsel in connection with the issuance by the Lake Elsinore Facilities Financing
Authority (the “Authority”) of the Lake Elsinore Facilities Financing Authority Lease Revenue Bonds,
Series 2016A (the “Bonds”) in the aggregate principal amount of $___________. In such connection, we have
reviewed the Indenture, dated as of November 1, 2016 (the “Indenture”), by and among Wilmington Trust,
National Association, as Trustee (the “Trustee”), the Authority and the City of Lake Elsinore (the “City”), the
Lease Agreement, dated as of November 1, 2016 (the “Lease Agreement”), by and between the City and the
Authority, the Ground Lease, dated as of November 1, 2016 (the “Ground Lease”), by and between the City and
the Authority, the Assignment Agreement, dated as of November 1, 2016 (the “Assignment Agreement”), by
and between the Authority and the Trustee, the Tax Certificate of the Authority and the City, dated as of the date
hereof (the “Tax Certificate”), opinions of counsel to the Authority, the City and the Trustee, certificates of the
Authority, the City and the Trustee and others and such other documents, opinions and matters to the extent we
deemed necessary to render the opinions set forth herein. Capitalized terms not otherwise defined herein shall
have the meanings ascribed thereto in the Indenture.
Based upon our examination of the foregoing, and in reliance thereon and on all matters of fact as we
deem relevant under the circumstances, and upon consideration of applicable laws, we are of the opinion that:
(1)The obligation of the City to pay Base Rental Payments in accordance with the terms of the
Lease Agreement is a valid and binding obligation payable from the funds of the City lawfully available
therefore, except as the same may be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or other laws relating to or affecting generally the enforcement of creditors’ rights, by equitable
principles, by the exercise of judicial discretion in appropriate cases and by the limitations on legal remedies
against municipalities in the State of California. The obligation of the City to make Base Rental Payments under
the Lease does not constitute a debt of the City, the State of California or any political subdivision thereof within
the meaning of any statutory or constitutional debt limitation or restriction and does not constitute a pledge of
the faith and credit or taxing power of the City, the State of California or any political subdivision thereof.
(2)The Lease Agreement and the Indenture have been duly authorized, executed and delivered by
the City and the Authority and constitute valid and legally binding agreements of the City and the Authority
enforceable against the City and the Authority in accordance with their terms, except as the same may be limited
by bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or other laws relating to or
affecting generally the enforcement of creditors’ rights, by equitable principles, by the exercise of judicial
discretion in appropriate cases and by the limitations on legal remedies against municipalities in the State of
California, except that we express no opinion as to any provisions in the Lease Agreement or the Indenture with
respect to indemnification, penalty, contribution, choice of law, choice of forum or waiver.
D-2
(3)Under existing statutes, regulations, rulings and judicial decisions, interest (and original issue
discount) on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax
preference for purposes of calculating the federal alternative minimum tax imposed on individuals and
corporations; however, it should be noted that, with respect to corporations, interest on the Bonds may be
included as an adjustment in the calculation of alternative minimum taxable income which may affect the
alternative minimum tax liability of such corporations.
(4)Interest (and original issue discount) on the Bonds is exempt from personal income taxes
imposed in the State of California.
(5)The difference between the issue price of a Bond (the first price at which a substantial amount
of the Bonds of a maturity are to be sold to the public) and the stated redemption price at maturity with respect
to such Bonds constitutes original issue discount. Original issue discount accrues under a constant yield method,
and original issue discount will accrue to a Bond owner before receipt of cash attributable to such excludable
income. The amount of original issue discount deemed received by a Bond owner will increase the Bond owner’s
basis in the applicable Bond. Original issue discount that accrues to a Bond owner is excluded from the gross
income of such owner for federal income tax purposes, is not an item of tax preference for purposes of calculating
the federal alternative minimum tax imposed on individuals or corporations (as described in paragraph 3 above)
and is exempt from State of California personal income tax.
(6)The amount by which a Bond owner’s original basis for determining loss on sale or exchange
in a Bond (generally, the purchase price) exceeds the amount payable on maturity (or on an earlier call date)
constitutes amortizable Bond premium, which must be amortized under Section 171 of the Internal Revenue
Code of 1986, as amended (the “Code”); such amortizable Bond premium reduces the Bond owner’s basis in the
applicable Bond (and the amount of tax-exempt interest received), and is not deductible for federal income tax
purposes. The basis reduction as a result of the amortization of Bond premium may result in a Bond owner
realizing a taxable gain when a Bond is sold by the owner for an amount equal to or less (under certain
circumstances) than the original cost of the Bond to the owner.
The opinions expressed in paragraphs (3) and (5) are subject to the condition that the City and the
Authority comply with all requirements of the Code, that must be satisfied subsequent to the delivery of the
Bonds to assure that such interest (and original issue discount) will not become includable in gross income for
federal income tax purposes. Failure to comply with such requirements of the Code might cause interest (and
original issue discount) with respect to the Bonds to be included in gross income for federal income tax purposes
retroactive to the date of issuance of the Bonds. The City and the Authority have covenanted to comply with all
such requirements.
Except as expressly set forth in paragraphs (3), (4), (5) and (6) we express no opinion regarding any tax
consequences with respect to the Bonds.
Certain agreements, requirements and procedures contained or referred to in the Indenture, the Tax
Certificate executed by the City and the Authority and other documents related to the Bonds may be changed
and certain actions may be taken or omitted, under the circumstances and subject to the terms and conditions set
forth in such documents, upon the advice or with the approving opinion of counsel nationally recognized in the
area of tax-exempt obligations. We express no opinion as to the effect on the exclusion from gross income for
federal income tax purposes of interest (and original issue discount) due with respect to any Bond if any such
action is taken or omitted based upon the advice of counsel other than Stradling Yocca Carlson & Rauth, a
Professional Corporation.
We have not made or undertaken to make an investigation of the state of title to any of the real property
described in the Lease Agreement, the Ground Lease and the Assignment Agreement or of the accuracy or
sufficiency of the description of such property contained therein, and we express no opinion with respect to such
matters.
D-3
We are admitted to the practice of law only in the State of California and our opinion is limited to
matters governed by the laws of the State of California and federal law. We assume no responsibility with
respect to the applicability or the effect of the laws of any other jurisdiction.
The opinions expressed herein are based upon our analysis and interpretation of existing statutes,
regulations, rulings and judicial decisions and cover certain matters not directly addressed by such authorities.
The opinions expressed herein may be affected by actions taken (or not taken) or events occurring (or not
occurring) after the date hereof. We have not undertaken to determine, or to inform any person, whether any
such actions or events are taken or do occur. Our engagement with respect to the Bonds terminates on the date
of their execution and delivery.
We express no opinion herein as to the accuracy, completeness or sufficiency of the Official Statement
or other offering material relating to the Bonds and expressly disclaim any duty to advise the owners of the
Bonds with respect to matters contained in the Official Statement.
Respectfully submitted,
E-4
APPENDIX E
FORM OF CONTINUING DISCLOSURE CERTIFICATE
F-1
APPENDIX F
BOOK-ENTRY ONLY SYSTEM
The information in this section concerning DTC and DTC’s book-entry only system has been obtained
from sources that the Authority and the Underwriter believe to be reliable, but neither the Authority nor the
Underwriter takes any responsibility for the completeness or accuracy thereof. The following description of the
procedures and record keeping with respect to beneficial ownership interests in the Series 2016 Bonds, payment
of principal, premium, if any, accreted value, if any, and interest with respect to the Series 2016 Bonds to DTC
Participants or Beneficial Owners, confirmation and transfers of beneficial ownership interests in the Series
2016 Bonds and other related transactions by and between DTC, the DTC Participants and the Beneficial
Owners is based solely on information provided by DTC.
The Depository Trust Company (“DTC”), New York, NY, will act as securities depository for the Series
2016 Bonds. The Series 2016 Bonds will be executed and delivered as fully-registered securities registered in
the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized
representative of DTC. One fully-registered bond will be executed and delivered for each annual maturity of
the Series 2016 Bonds, each in the aggregate principal amount of such annual maturity, and will be deposited
with DTC.
DTC, the world’s largest securities depository, is a limited-purpose trust company organized under the
New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member
of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform
Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities
Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S.
equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that
DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post-trade settlement
among Direct Participants of sales and other securities transactions in deposited securities, through electronic
computerized book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need
for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities
brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a
wholly-owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding
company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of
which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the
DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks,
trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct
Participant, either directly or indirectly (“Indirect Participants”). DTC is rated AA+ by Standard & Poor’s. The
DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More
information about DTC can be found at www.dtcc.com and www.dtc.org.
Purchases of Bonds under the DTC system must be made by or through Direct Participants, which will
receive a credit for the Series 2016 Bonds on DTC’s records. The ownership interest of each actual purchaser
of each Bond (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records.
Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are,
however, expected to receive written confirmations providing details of the transaction, as well as periodic
statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered
into the transaction. Transfers of ownership interests in the Series 2016 Bonds are to be accomplished by entries
made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners
will not receive certificates representing their ownership interests in Bonds, except in the event that use of the
book-entry system for the Series 2016 Bonds is discontinued.
To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered
in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested by an authorized
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representative of DTC. The deposit of Bonds with DTC and their registration in the name of Cede & Co. or
such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual
Beneficial Owners of the Series 2016 Bonds; DTC’s records reflect only the identity of the Direct Participants
to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners. The Direct and
Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants
to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be
governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect
from time to time. Beneficial Owners of Bonds may wish to take certain steps to augment the transmission to
them of notices of significant events with respect to the Series 2016 Bonds, such as redemptions, tenders,
defaults, and proposed amendments to the Bond documents. For example, Beneficial Owners of Bonds may
wish to ascertain that the nominee holding the Series 2016 Bonds for their benefit has agreed to obtain and
transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names
and addresses to the registrar and request that copies of notices be provided directly to them.
Redemption notices shall be sent to DTC. If less than all of the Series 2016 Bonds within a maturity
are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant
in such maturity to be redeemed.
Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Bonds
unless authorized by a Direct Participant in accordance with DTC’s MMI Procedures. Under its usual
procedures, DTC mails an Omnibus Proxy to the Authority as soon as possible after the record date. The
Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts
Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).
Redemption proceeds, distributions, and dividend payments on the Series 2016 Bonds will be made to
Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice
is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from
the Authority or the Trustee, on payable date in accordance with their respective holdings shown on DTC’s
records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary
practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street
name,” and will be the responsibility of such Participant and not of DTC, the Trustee, or the Authority, subject
to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption
proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by
an authorized representative of DTC) is the responsibility of the Authority or the Trustee, disbursement of such
payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the
Beneficial Owners will be the responsibility of Direct and Indirect Participants.
A Bond Owner shall give notice to elect to have its Bonds purchased or tendered, through its Participant,
to the Trustee, and shall effect delivery of such Bond by causing the Direct Participant to transfer the Participant’s
interest in the Series 2016 Bonds, on DTC’s records, to the Trustee. The requirement for physical delivery of
Bonds in connection with an optional tender or a mandatory purchase will be deemed satisfied when the
ownership rights in the Series 2016 Bonds are transferred by Direct Participants on DTC’s records and followed
by a book-entry credit of tendered Bonds to the Trustee’s DTC account.
DTC may discontinue providing its services as depository with respect to the Series 2016 Bonds at any
time by giving reasonable notice to the Authority or the Trustee. Under such circumstances, in the event that a
successor depository is not obtained, physical Bonds are required to be printed and delivered.
The Authority may decide to discontinue use of the system of book-entry only transfers through DTC
(or a successor securities depository). In that event, Bonds will be printed and delivered to DTC.
THE TRUSTEE, AS LONG AS A BOOK-ENTRY ONLY SYSTEM IS USED FOR THE SERIES
2016 BONDS, WILL SEND ANY NOTICE OF REDEMPTION OR OTHER NOTICES TO OWNERS ONLY
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TO DTC. ANY FAILURE OF DTC TO ADVISE ANY DTC PARTICIPANT, OR OF ANY DTC
PARTICIPANT TO NOTIFY ANY BENEFICIAL OWNER, OF ANY NOTICE AND ITS CONTENT OR
EFFECT WILL NOT AFFECT THE VALIDITY OF SUFFICIENCY OF THE PROCEEDINGS RELATING
TO THE REDEMPTION OF THE SERIES 2016 BONDS CALLED FOR REDEMPTION OR OF ANY
OTHER ACTION PREMISED ON SUCH NOTICE.
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APPENDIX G
SUPPLEMENTAL INFORMATION—THE CITY OF LAKE ELSINORE
The following information relating to the City of Lake Elsinore (the “City”) and the County of Riverside,
California (the “County”) is supplied solely for purposes of information. The County is not obligated in any
manner to pay principal of or interest on the Series 2016 Bonds or to cure any delinquency or default on the
Series 2016 Bonds. The Series 2016 Bonds are payable solely from the sources described in the Official
Statement.
General
The City was founded in 1883 and incorporated as a general law city effective April 23, 1888 in San
Diego County. In 1893, the Elsinore Valley, previously located in San Diego County, became part of the new
County of Riverside. The City encompasses approximately 43 square miles, with over 10 miles of lakeshore,
and is located at the southwestern end of the County, 73 miles southeast of downtown Los Angeles and 74 miles
north of downtown San Diego.
Population
The following table offers population figures for the City, the County and the State for 2011 through
2015.
Area 2011 2012 2013 2014 2015
City of Lake Elsinore 52,291 53,059 55,371 56,688 58,426
County of Riverside 2,205,731 2,229,467 2,253,516 2,280,191 2,308,441
State of California 37,427,946 37,680,593 38,030,609 38,357,121 38,714,725
Source: California State Department of Finance, Demographic Research Unit. 2010 Census Benchmark.
Building Activity
The following tables provide summaries of the building permit valuations and the number of new
dwelling units authorized in the City and County from 2010 through 2014.
BUILDING PERMIT VALUATIONS
City of Lake Elsinore
2010-2014
2010 2011 2012 2013 2014
Valuation ($000):
Residential $58,338 $20,954 $71,920 $113,861 $80,159
Non-residential 1,962 3,173 6,154 4,262 5,300
Total*$60,300 $24,127 $78,074 $118,123 $85,459
Residential Units:
Single family 318 67 401 685 429
Multiple family 0 113 0 0 0
Total 318 180 401 685 429
* Totals may not add to sums because of rounding.
Source: Construction Industry Research Board.
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BUILDING PERMIT VALUATIONS
County of Riverside
2010-2014
2010 2011 2012 2013 2014
Valuation ($000):
Residential $1,079,637 $873,411 $1,079,405 $1,375,593 $1,621,751
Non-residential 539,379 559,398 657,595 873,977 814,990
Total*$1,619,016 $1,432,809 $1,737,000 $2,249,570 $2,436,741
Residential Units:
Single family 4,031 2,659 3,720 4,716 5,007
Multiple family 526 1,061 909 1,427 1,931
Total 4,557 3,720 4,629 6,143 6,938
* Totals may not add to sums because of rounding.
Source: Construction Industry Research Board.
Employment
The following tables show the largest employers located in the City and County as of fiscal year 2014.
LARGEST EMPLOYERS
City of Lake Elsinore
2014
Rank Name of Business Employees Type of Business
1.Lake Elsinore Unified School District 2,368 School District
2.M & M Framing 500 Construction
3.Stater Bros 297 Supermarkets
4.Lake Elsinore Hotel & Casino 260 Casino & Resort
5.Walmart 237 Retail Stores
6.Costco 220 Retail Stores
7.Elsinore Valley Municipal Water District 160 Water District
8.Home Depot 140 Building Supplies
8.Cardenas Market 138 Supermarket
10.Target 125 Retail Stores
Source: City of Lake Elsinore Comprehensive Annual Financial Report for the year ending June 30, 2014.
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LARGEST EMPLOYERS
County of Riverside
2014
Rank Name of Business Employees Type of Business
1.County of Riverside 19,916 County Government
2.March Air Reserve Base 8,500 Military Reserve Base
3.Stater Bros. Markets 6,900 Supermarkets
4.University of California, Riverside 5,514 University
5.Kaiser Permanente Riverside Medical Center 5,270 Medical Center
6.Pechanga Resort & Casino 4,500 Casino & Resort
7.Corona Norco Unified School District 4,300 School District
8.Walmart 4,068 Retail Stores
8.Riverside Unified School District 4,000 School District
10.Hemet Unified School District 3,572 School District
Source: County of Riverside Comprehensive Annual Financial Report for the year ending June 30, 2014.
Employment and Industry
Employment data by industry is not separately reported on an annual basis for the City but is compiled
for the Riverside-San Bernardino-Ontario Metropolitan Statistical Area (the “MSA”), which includes all of
Riverside and San Bernardino Counties. In addition to varied manufacturing employment, the MSA has large
and growing commercial and service sector employment, as reflected in the table below.
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The following table represents the Annual Average Labor Force and Industry Employment for the
County for the period from 2010 through 2014.
RIVERSIDE-SAN BERNARDINO-ONTARIO MSA
INDUSTRY EMPLOYMENT & LABOR FORCE - BY ANNUAL AVERAGE
2010 2011 2012 2013 2014
Civilian Labor Force 1,865,800 1,866,200 1,882,900 1,897,000 1,919,900
Civilian Employment 1,610,200 1,623,100 1,665,600 1,710,500 1,763,300
Civilian Unemployment 255,500 243,100 217,300 186,500 156,600
Civilian Unemployment Rate 13.7%13.0%11.5%9.8%8.2%
Total Farm 15,000 14,900 15,000 14,500 14,300
Total Nonfarm 1,144,700 1,148,000 1,180,300 1,231,900 1,299,500
Total Private 910,400 920,600 955,700 1,006,700 1,056,400
Goods Producing 145,900 145,200 150,500 158,600 168,500
Natural Resources and Mining 1,000 1,000 1,200 1,200 1,300
Construction 59,700 59,100 62,600 70,000 77,000
Manufacturing 85,200 85,100 86,700 87,300 90,200
Service Providing 998,900 1,002,800 1,029,800 1,073,300 1,116,700
Trade, Transportation and Utilities 270,900 276,500 288,500 300,600 315,000
Wholesale Trade 48,700 49,200 52,200 56,400 59,000
Retail Trade 155,500 158,500 162,400 164,800 168,700
Transportation, Warehousing and
Utilities
66,600 68,800 73,900 79,400 87,300
Information 14,000 12,200 11,700 11,500 11,200
Financial Activities 41,000 39,900 40,900 42,200 42,700
Professional and Business Services 123,600 126,000 127,500 132,400 137,800
Educational and Health Services 154,100 157,600 167,200 184,500 193,600
Leisure and Hospitality 122,800 124,000 129,400 135,900 144,300
Other Services 38,200 39,100 40,100 41,100 43,200
Government 234,300 227,500 224,600 225,200 228,800
Total, All Industries 1,159,700 1,162,900 1,195,300 1,246,400 1,299,500
Note:Does not include proprietors, self-employed, unpaid volunteers or family workers, domestic workers in households and persons involved
in labor-management trade disputes. Employment reported by place of work. Items may not add to total due to independent rounding.
The “Total, All Industries” data is not directly comparable to the employment data found in this Appendix G.
Source:State of California, Employment Development Department, March 2014 Benchmark.
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The following table summarizes the labor force, employment and unemployment figures for the period
from 2010 through 2014 for the City, the County, the State and the nation as a whole.
CITY OF LAKE ELSINORE,
COUNTY OF RIVERSIDE,
STATE OF CALIFORNIA AND UNITED STATES
Average Annual Civilian Labor Force, Employment and Unemployment
Year and Area Labor Force Employment(1)Unemployment(2)
Unemployment
Rate (%)(3)
2010
Lake Elsinore 24,100 20,600 3,500 14.7%
Riverside County 939,500 803,300 136,200 14.5
California 18,336,300 16,068,400 2,267,900 12.4
United States(4)153,889,000 139,064,000 14,825,000 9.6
2011
Lake Elsinore 24,200 20,800 3,400 14.0%
Riverside County 942,200 812,800 129,400 13.7
California 18,417,900 16,249,600 2,168,300 11.8
United States(4)153,617,000 139,869,000 13,747,000 8.9
2012
Lake Elsinore 24,400 21,400 3,00 12.4%
Riverside County 950,600 835,200 115,400 12.1
State of California 18,519,000 16,589,700 1,929,300 10.4
United States(4)154,975,000 142,469,000 140,283,000 8.1
2013
Lake Elsinore 24,600 22,00 2,600 10.5%
Riverside County 953,200 855,300 97,900 10.3
State of California 18,596,800 16,933,300 1,663,500 8.9
United States(4)155,389,000 143,929,000 11,460,000 7.4
2014
Lake Elsinore 24,900 22,700 2,200 8.8%
Riverside County 1,011,500 928,200 83,400 8.2
State of California 18,811,400 17,397,100 1,414,300 7.5
United States(4)155,922,000 146,305,000 9,617,000 6.2
(1)Includes persons involved in labor-management trade disputes.
(2)Includes all persons without jobs who are actively seeking work.
(3)The unemployment rate is computed from unrounded data; therefore, it may differ from rates computed from rounded figures
in this table.
(4)Not strictly comparable with data for prior years.
Source: California Employment Development Department, March 2014 Benchmark and U.S. Department of Labor, Bureau of
Labor Statistics.
Personal Income
Personal Income is the income that is received by all persons from all sources. It is calculated as the
sum of wage and salary disbursements, supplements to wages and salaries, proprietors’ income with inventory
valuation and capital consumption adjustments, rental income of persons with capital consumption adjustment,
personal dividend income, personal interest income, and personal current transfer receipts, less contributions for
government social insurance.
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The personal income of an area is the income that is received by, or on behalf of, all the individuals who
live in the area; therefore, the estimates of personal income are presented by the place of residence of the income
recipients.
Total personal income in Riverside County increased by 73% between 2002 and 2013. The following
tables summarize personal income for Riverside County for 2002 through 2013.
PERSONAL INCOME
Riverside County
2002-2013
(Dollars in Thousands)
Year Riverside County
Annual
Percent Change
2002 $43,976,839 5.4%
2003 47,637,097 8.3
2004 51,612,837 8.3
2005 55,892,377 8.3
2006 61,110,773 9.3
2007 64,194,014 5.0
2008 65,140,132 1.5
2009 63,652,627 (2.3)
2010 65,219,337 2.5
2011 69,757,415 7.0
2012 73,685,111 5.6
2013 76,289,477 3.5
Source: U.S. Department of Commerce, Bureau of Economic Analysis.
The following table summarizes per capita personal income for Riverside County, California and the
United States for 2002-2013. This measure of income is calculated as the personal income of the residents of
the area divided by the resident population of the area.
PER CAPITA PERSONAL INCOME
Riverside County, State of California and the United States
2002-2013
Year Riverside County California United States
2002 $26,066 $34,229 $31,800
2003 26,888 35,303 32,677
2004 27,801 37,156 34,300
2005 28,933 38,964 35,888
2006 30,368 41,623 38,127
2007 30,934 43,152 39,804
2008 30,876 43,608 40,873
2009 29,651 41,587 39,379
2010 29,612 42,282 40,144
2011 31,196 44,749 42,332
2012 32,534 47,505 44,200
2013 33,278 48,434 44,765
Source: U.S. Department of Commerce, Bureau of Economic Analysis.
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Taxable Sales
The table below presents taxable sales for the years 2007 through 2013 for the City.
TAXABLE SALES
City of Lake Elsinore
2007-2013
(Dollars in Thousands)
Year Permits Taxable Transactions
2007 1,160 723,996
2008 1,173 639,732
2009 1,112 560,924
2010 1,197 599,836
2011 1,248 634,553
2012 1,274 665,409
2013 1,716 688,483
Note: In 2009, retail permits expanded to include permits for food services.
Source: “Taxable Sales in California (Sales & Use Tax),” California Board of Equalization.
The table below presents taxable sales for the years 2007 through 2013 for the County.
TAXABLE SALES
County of Riverside
2007-2013
(Dollars in Thousands)
Year Permits Taxable Transactions
2007 45,279 29,023,609
2008 46,272 26,003,595
2009 42,765 22,227,877
2010 45,688 23,152,780
2011 46,886 25,641,497
2012 46,316 28,096,009
2013 46,805 30,065,467
Note: In 2009, retail permits expanded to include permits for food services.
Source: “Taxable Sales in California (Sales & Use Tax),” California Board of Equalization.
H-1
APPENDIX H
SPECIMEN MUNICIPAL BOND INSURANCE POLICY