HomeMy WebLinkAboutFile 2 of 4 - 2011 Lease Revenue Refunding Bonds - 2011 Seri $36,275,000
HUNTINGTON BEACH PUBLIC FINANCING AUTHORITY
(Orange County,California)
Lease Revenue Refunding Bonds, 2011 Series A
(Capital Improvement Refinancing Project)
Closing: September 28, 2011
Bonds Documentation is in Four Folders in SIRE Document Imaging Software Program
Folders 1, 2 and 3 are in electronic format only, no paper documents, but are contained on a CD
Folder 4 has paper documents in City Clerk Vault and CD of Folders 1-3
Folder 1 of 4—System ID#26351-600.80—09-06-2011
Contains from Index of Transcript Documents:
Base Legal Documents(Items 1 through 3)
Folder 2 of 4—System ID#26352-600.80—09-06-2011
Contains from Index of Transcript Documents:
Base Legal Documents(Items 4 through 9)
Folder 3 of 4—System ID#26353-600.80—09-06-2011
Contains from Index of Transcript Documents:
Authority Documents(Items 10 through 19)
Trustee and Escrow Bank Documents(Items 28 through 30)
Underwriter Documents(Items 31 through 36)
Refunding Documents (Items 37 through 43)
Bond Counsel and Disclosure Counsel Opinions(Items 44 through 47)
Miscellaneous(Items 48 through 49)
Folder 4 of 4—System ID#25561-600.80—09-06-2011
Contains Original RCA dated September 6, 2011
COMPLETE FIVE-PAGE "INDEX OF TRANSCRIPT DOCUMENTS"
FOLLOWS THIS PAGE
$36,275,000
HUNTINGTON BEACH PUBLIC FINANCING AUTHORITY
(Orange County, California)
Lease Revenue Refunding Bonds,2011 Series A
(Capital Improvement Refinancing Project)
Closing: September 28, 2011
INDEX OF TRANSCRIPT DOCUMENTS
All documents are dated September 28, 2011 unless otherwise indicated.
BASE LEGAL DOCUMENTS
i
1. Acknowledgement of Receipt of Report of Proposed Debt Issuance from
California Debt and Investment Advisory Commission ("CDIAC"), together with
Report.
2. Preliminary Official Statement, dated September 7, 2011, together with 15c2-12
Certificates of the Huntington Beach Public Financing Authority (the
"Authority") and the City of Huntington Beach (the "City").
3. Bond Purchase Agreement, dated September 13, 2011 (the "Purchase
Agreement"), by and among Merrill Lynch, Pierce, Fenner & Smith Incorporated,
on behalf of itself and as representative (the "Representative") of E. J. De La Rosa
& Co., Inc. (collectively, the "Underwriters"),the Authority and the City.
4. Official Statement, dated September 13, 2011.
5. Site Lease, dated as of September 1, 2011, by and between the City and the
Authority. (recorded in Official Records, County of Orange)
6. Lease Agreement, dated as of September 1, 2011 (the "Lease Agreement"), by
and between the City and the Authority, together with Memorandum of Lease
Agreement and Assignment. (Memorandum of Lease Agreement and Assignment
recorded in Official Records, County of Orange)
7. Indenture, dated as of September 1, 2011 (the "Indenture"), by and among the
Authority, the City and The Bank of New York Mellon Trust Company, N.A., as
trustee (the "Trustee").
8. Continuing Disclosure Certificate, dated as of September 1, 2011, executed by the
City and agreed and acknowledged by The Bank of New York Mellon Trust
Company,N.A., as dissemination agent.
9. Certificate of Mailing Report of Final Sale to CDIAC, together with Final Report.
AUTHORITY DOCUMENTS
10. Resolution No. 21 entitled, "Resolution of the Board of Directors of the
Huntington Beach Public Financing Authority Authorizing the Execution and j
Delivery by the Authority of a Site Lease, a Lease Agreement, an Indenture, a
Bond Purchase Agreement and Escrow Agreements in Connection with the
Issuance of Huntington Beach Public Financing Authority (Orange County,
California) Lease Revenue Refunding Bonds, Approving the Issuance of such
Bonds in an Aggregate Amount of not to Exceed $42,745,000, Authorizing the
Distribution of an Official Statement in Connection Therewith and Authorizing
the Execution of Necessary Documents and Certificates and Related Actions in
Connection Therewith," adopted on September 6, 2011, certified by the Secretary
of the Authority.
11. Joint Exercise of Powers Agreement, dated as of March 7, 1988, by and between
the City and the Redevelopment Agency of the City of Huntington Beach (the
"Agency"), as amended by the First Amendment to Joint Exercise of Powers
Agreement, dated as of May 16, 1988, by and between the City and the Agency,
certified by the Secretary of the Authority, pursuant to Section 8(e)(xxii) of the
Purchase Agreement.
12. Initial Notice of Joint Powers Agreement and Statement of Facts Roster of Public
Agencies Filing, as certified by the Secretary of State of the State of California,
pursuant to Section 8(e)(xxii) of the Purchase Agreement.
13. Incumbency and Signature Certificate of the Authority.
14. Certificate of the Authority, pursuant to Section 8(e)(ix) of the Purchase
Agreement.
15. Written Request to Trustee,pursuant to Section 2.03 of the Indenture.
16. Tax Certificate,pursuant to Section 8(e)(xix) of the Purchase Agreement.
17. Certificate of Mailing Information Return for Tax-Exempt Governmental
Obligations, Form 8038-G, to the Internal Revenue Service, together with Form
8038-G.
18. Blanket Issuer Letter of Representations of the Authority — The Depository Trust
Company,pursuant to Section 8(e)(xviii) of the Purchase Agreement.
19. Opinion of City Attorney of the City of Huntington Beach, as Authority Counsel,
pursuant to Section 8(e)(xi) of the Purchase Agreement.
2
CITY DOCUMENTS
20. Proof of Publication of Notice of Public Hearing, published in the Huntington
Beach Independent on August 18, 2011.
21. Resolution No. 2011-67 entitled, "Resolution of the City Council of the City of
Huntington Beach Authorizing the Execution and Delivery by the City of a Site I'
Lease, a Lease Agreement, an Indenture, a Bond Purchase Agreement and a f
Continuing Disclosure Certificate in Connection with the Issuance of Huntington
Beach Public Financing Authority (Orange County, California) Lease Revenue
Refunding Bonds, Approving the Issuance of Such Bonds in an Aggregate
Amount of not to Exceed $42,745,000, Authorizing the Distribution of an Official
Statement in Connection Therewith and Authorizing the Execution of Necessary
Documents and Certificates and Related Actions," adopted by the City Council of
the City on September 6, 2011, as certified by the Clerk of the City Council of the
City.
22. Incumbency and Signature Certificate of the City.
23. Certificate of the City,pursuant to Section 8(e)(x) of the Purchase Agreement.
24. Written Request No. 1 for Disbursements from Costs of Issuance, pursuant to
Section 4.02 of the Indenture.
25. Evidence of Insurance, pursuant to Section 5.01 of the Lease Agreement and
Section 8(e)(xxiv) of the Purchase Agreement.
26. Policies of title insurance issued by First American Title Insurance Company,
pursuant to Section 5.04 of the Lease Agreement.
27. Opinion of City Attorney of the City of Huntington Beach, pursuant to Section
8(e)(xii) of the Purchase Agreement.
TRUSTEE AND ESCROW BANK DOCUMENTS
28. Certificate of The Bank of New York Mellon Trust Company, N.A., pursuant to
Section 8(e)(xvi) of the Purchase Agreement, together with incumbency
certificate and general signing resolution of the Trustee and Escrow Bank,
pursuant to Section 8(e)(xxiii) of the Purchase Agreement.
29. Trustee's Receipt of Proceeds.
30. Opinion of Davis Wright & Tremaine LLP, as Trustee's Counsel and Escrow
Bank's Counsel,pursuant to Section 8(e)(xv) of the Purchase Agreement.
3
UNDERWRITER DOCUMENTS
31. Rating Letters of Moody's Investors Service and Standard & Poor's Ratings
Services,pursuant to Section 8(e)(viii) of the Purchase Agreement.
32. Specimen Bonds.
33. Receipt for Bonds.
34. Underwriters' Closing Memorandum.
35. Preliminary Blue Sky Memorandum, dated September 7, 2011, and Final Blue
Sky Memorandum, dated September 28, 2011.
36. Opinion of Stradling Yocca Carlson & Rauth, a Professional Corporation, as
Underwriters' Counsel, pursuant to Section 8(e)(xiv) of the Purchase Agreement.
REFUNDING DOCUMENTS
37. Escrow Agreement, dated as of September 1, 2011, by and between the Authority
and The Bank of New York Mellon Trust Company, N.A., as escrow bank (the
"Escrow Bank"), relating to the Huntington Beach Public Financing Authority
(Orange County, California) Lease Revenue Bonds, 2001 Series A (Capital
Improvement Financing Project) (the "Series 2001A Bonds").
38. Escrow Agreement, dated as of September 1, 2011, by and between the Authority
and the Escrow Bank, relating to the outstanding Huntington Beach Public
Financing Authority (Orange County, California) Lease Revenue Bonds, 2001
Series B (Capital Improvement Refinancing Project) (the "Series 2001B Bonds"
and together with the Series 2001A Bonds,the "Series 2001 Bonds").
39. Verification Report relating to the Series 2001 Bonds.
40. Termination Agreement, dated as of September 1, 2011, by and among the City,
the Authority and The Bank of New York Mellon Trust Company, N.A., as
trustee, relating to the Series 2001A Bonds. (recorded in Official Records,
County of Orange)
41. Termination Agreement,.dated as of September 1, 2011, by and among the City,
the Authority and The Bank of New York Mellon Trust Company, N.A., as
trustee, relating to the Series 2001B Bonds. (recorded in Official Records,
County of Orange)
42. Defeasance Opinion of Orrick, Herrington & Sutcliffe LLP, relating to the Series
2001A Bonds,pursuant to Section 8(e)(vi) of the Purchase Agreement.
43. Defeasance Opinion of Orrick, Herrington & Sutcliffe LLP, relating to the Series
2001B Bonds,pursuant to Section 8(e)(vi) of the Purchase Agreement.
4
i
I
BOND COUNSEL AND DISCLOSURE COUNSEL OPINIONS
1
44. Final Opinion of Orrick, Herrington & Sutcliffe LLP, Bond Counsel, pursuant to
Section 8(e)(iv) of the Purchase Agreement.
45. Supplemental Opinion of Orrick, Herrington & Sutcliffe LLP, Bond Counsel,
pursuant to Sections 8(e)(iv) and 8(e)(v) of the Purchase Agreement.
46. Reliance Letter of Orrick, Herrington & Sutcliffe LLP regarding Final Opinion,
addressed to the Trustee.
47. Disclosure Counsel Opinion of Orrick, Herrington & Sutcliffe LLP, pursuant to
Section 8(e)(xiii) of the Purchase Agreement.
MISCELLANEOUS
48. Recording Instructions addressed to the Title Company, dated September 26,
2011.
i
49. Interested Parties List.
5
NEW ISSUE—BOOK-ENTRY ONLY RATINGS.
Moody's"Aa3"
S&P "AA"
See"RATINGS"herein.
In the opinion of Orrick Herrington&Sutcliffe LLP,Bond Counsel to the Authority,.based upon an.analysis of existing laws, regulations, rulings and court
decisions, and assuming among other matters the accuracy of certain representations and compliance with certain covenants, interest on the Series 2011A Bonds
is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986 and is exempt from State of California
personal income taxes. In the further opinion of Bond Counsel interest on the Series 2011A Bonds is not a specific preference item for purposes of the federal
individual or corporate alternative minimum taxes although Bond Counsel observes that such interest is included in adjusted current earnings when calculating
corporate alternative minimum taxable income. Bond Counsel expresses no opinion regarding any other tax consequences related to the ownership or disposition
of or the accrual or receipt of interest on, the Serves 2011A Bonds. See "TAXMATTERS"herein.
S36,275,000
HUNTINGTON BEACH PUBLIC FINANCING AUTHORITY
(Orange County, California)
Lease Revenue Refunding Bonds, 2011 Series A
(Capital Improvement Refinancing Project)
Dated:Date of Delivery Due: September 1,as shown on inside cover
The $36,275,000 aggregate principal amount of Huntington Beach Public Financing Authority Lease Revenue Refunding Bonds, 2011 Series A (Capital
Improvement Refinancing Project)(the"Series 2011A Bonds"),are being issued by the Huntington Beach Public Financing Authority,a joint exercise of powers
entity organized and existing under the laws of the State of California (the"Authority"), pursuant to Article 4, Chapter 5,Division 7, Title 1 (commencing with
Section 6584)of the California Government Code,a resolution of the Authority authorizing the issuance of the Series 2011A Bonds and an indenture,dated as of
September 1,2011 (the"Indenture"),by and among the City of Huntington Beach(the"City"),the Authority and The Bank of New York Mellon Trust Company,
N.A.,as trustee(the"Trustee"). The Series 2011A Bonds me being issued to(a)refinance the costs of the acquisition, construction,installation and equipping of
certain public capital improvements,including the refunding of(I)the outstanding Huntington Beach Public Financing Authority Lease Revenue Bonds,2001 Series
A(Capital Improvement Financing Project),and(u)the outstanding Huntington Beach Public Financing Authority Lease Revenue Bonds,2001 Series B(Capital
Improvement Refinancing Project), (b) fund a reserve fund for the Series 2011A Bonds, and (c) pay costs of issuance of the Series 2011A Bonds. See "THE
REFUNDING PLAN"and"ESTIMATED SOURCES AND USES OF FUNDS"herein.The Series 2011A Bonds and any additional bonds which may be issued in
accordance with the Indenture will be secured by a pledge of and lien on the Lease Revenues(as defined herein)and the amounts in the Reserve Fund(as defined
herein). The Series 2011A Bonds and such additional bonds,if any,are referred to herein as`Bonds"
The Series 2011A Bonds are issuable in denominations of$5,000 and any integral multiple thereof Interest on the Series 2011A Bonds is payable on March 1
and September 1 of each year,commencing March 1,2012. See"THE BONDS"herein.
The Series 2011 A Bonds will be delivered in fully registered form only,and,when delivered,will be registered in the name of Cede&Co.,as nominee of The
Depository Trust Company,New York,New York("DTC") DTC will act as securities depository of the Series 2011A Bonds. Ownership interests in the Series
2011A Bonds maybe purchased in book-entry form only.Principal of,premium,if any,and interest on the Series 2011A Bonds will be paid by the Trustee to DTC
or its nominee,which will in turn remit such payment to its participants for subsequent disbursement to the beneficial owners of the Series 2011A Bonds. See"THE
BONDS"herein and APPENDIX G—"BOOK-ENTRY ONLY SYSTEM."
The Series 2011A Bonds are subject to optional and extraordinary redemption as described herein. See"THE BONDS Redemption"herein.
The City willlease certain real property and the improvements thereon from the Authority pursuant to a lease agreement,dated as of September 1,2011 (the
"Lease Agreement'), by and between the Authority and the City. Under the Lease Agreement, the City is required to make Base Rental Payments (as defined
herein) from legally available funds in amounts calculated to be sufficient to pay principal of and interest on the Series 2011A Bonds when due, subject to
abatement,as described herein.All of the Authority's right,title and interest in and to the Lease Agreement(except for the right to receive any Additional Payments
(as defined herein)to the extent payable to the Authority and certain rights to indemnification),including the right to receive Base Rental Payments under the Lease
Agreement,are assigned to the Trustee under the Indenture for the benefit of the Owners and beneficial owners of the Bonds. See"SECURITY FOR THE BONDS"
herein.
MATURITY SCHEDULE
See Inside Cover Page
THE BONDS ARE SPECIAL LIMITED OBLIGATIONS OF THE AUTHORITY PAYABLE SOLELY FROM AND SECURED SOLELY BY THE
LEASE REVENUES PLEDGED UNDER THE INDENTURE.THE BONDS ARE NOT A DEBT OF THE CITY,THE STATE OF CALIFORNIA OR ANY OF
ITS POLITICAL SUBDIVISIONS, EXCEPT THE AUTHORITY TO THE EXTENT DESCRIBED HEREIN, AND NEITHER THE CITY, THE STATE OF
CALIFORNIA NOR ANY OF ITS POLITICAL SUBDIVISIONS, EXCEPT THE AUTHORITY TO THE EXTENT DESCRIBED HEREIN, IS LIABLE
THEREON.IN NO EVENT SHALL THE BONDS OR ANY INTEREST OR REDEMPTION PREMIUM THEREON BE PAYABLE OUT OF ANY FUNDS OR
PROPERTIES OTHER THAN THOSE OF THE AUTHORITY AS SET FORTH IN THE INDENTURE. THE BONDS DO NOT CONSTITUTE AN
INDEBTEDNESS WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMITATION OR RESTRICTION. NEITHER THE
MEMBERS OF THE AUTHORITY, THE CITY NOR ANY PERSONS EXECUTING THE BONDS ARE LIABLE PERSONALLY ON THE BONDS BY
REASON OF THEIR ISSUANCE.
This cover page contains information for quick reference only.It is not a summary of this issue.Potential purchasers must read the entire Official Statement to
obtain information essential to making an informed investment decision.
The Series 2011A Bonds will be offered when, as and if issued and received by the Underwriters, subject to the approval as to their validity by Orrick
Herrington&Sutcliffe LLP,Bond Counsel to the Authority, and certain other conditions. Certain legal matters will be passed upon for the City and the Authority
by Jennifer McGrath, Esq., City Attorney, and by Orrick Herrington &Sutcliffe LLP, as Disclosure Counsel Certain legal matters will be passed on for the
Underwriters by Stradling Yocca Carlson&Rama, a Professional Corporation, Newport Beach, California It is anticipated that the Series 2011A Bonds will be
available for delivery through DTC in New York New York on or about September 28,2011.
DE�LA RosA&Co.
BofA Merrill Lynch
Dated. September 13,2011
MATURITY SCHEDULE
$36,275,000 Serial Bonds
CUSIP PREFIX:446216
Maturity Principal Interest CUSIP Maturity Principal Interest CUSIP
(September l) Amount Rate Yield Suffix, (September l) Amount Rate Yield Suffix,
2012 $2,120,000 2.000% 0.350% FK4 2022 $1,150,000 3.000% 3.200% FVO
2013 2,960,000 2.500 0.710 FL2 2023 1,185,000 3.375 3.580 FW8
2014 3,030,000 5.000 0.860 FMO 2024 1,225,000 3.625 3.820 FX6
2015 3,180,000 5.000 1.140 FN8 2025 1,265,000 4.000 3.960' FY4
2016 3,335,000 3.000 1.620 FP3 2026 1,315,000 4.000 4.090 FZI
2017 1,915,000 3.000 1.930 FQI 2027 1,370,000 4.000 4.200 GA5
2018 1,965,000 4.000 2.220 FR9 2028 1,425,000 4.125 4.300 GB3
2019 2,045,000 5.000 2.530 FS7 2029 1,480,000 4.250 4.380 GCI
2020 1,060,000 3.000 2.800 F175 2030 1,545,000 4.250 4.440 GD9
2021 1,095,000 5.000 2.950 FU2 2031 1,610,000 4.500 4.520 GE7
LLPriced to The optional redemption date on September 1,2021 atpar.
t Copyright 2011,American Bankers Association.CUSIP @ is a registered trademark of The American Bankers Association.CUSIP data herein
is provided by The CUSIP Service Bureau,operated by Standard&Poor's,a division of The McGraw-Fill Companies,Inc. None of The City,the
Authority or The Underwriters shall be responsible for The selection or correctness of The CUSIP numbers set forth herein.
HUNTINGTON BEACH PUBLIC FINANCING AUTHORITY
CITY OF HUNTINGTON BEACH
City of Huntington Beach
2000 Main Street
Huntington Beach, California 92648
(714)536-5630
http://www.ei.huntington-beach.ca.us/
Authority Board of Directors and City Council
Joe Carchio,Authority Chair/Mayor
Don Hansen,Authority Vice Chair/Mayor Pro Tern
Connie Boardman,Authority/City Council Member
Keith Bohr,Authority/Council Member
Devin Dwyer,Authority/Council Member
Matthew Harper,Authority/Council Member
Joe Shaw,Authority/Council Member
Authority/City Staff
Fred Wilson,Executive Director/City Manager
Paul Emery,Deputy City Manager
Robert Hall,Deputy City Manager
Alisa Cutchen, City Treasurer
Joyce Zacks,Deputy City Treasurer
Lori Ann Farrell,Director of Finance
Dahle Bulosan,Acting Budget Manager
Sunny Han, Senior Accountant
Joan L.Flynn, Secretary/City Clerk
Jennifer McGrath,Esq.,Authority Counsel and City Attorney
Special Services
Orrick, Herrington&Sutcliffe LLP
Los Angeles, California
Bond Counsel and Disclosure Counsel
Public Financial Management, Inc.
Los Angeles, California
Financial Advisor
The Bank of New York Mellon Trust Company,N.A.
Los Angeles, California
Trustee and Escrow Bank
The Arbitrage Group, Inc.
Tuscaloosa/Buhl,Alabama
Verification Agent
No dealer,broker,salesperson or other person has been authorized by the Authority,the City or the Underwriters
to give any information or to make any representations other than as set forth herein and, if given or made, such other
information or representation must not be relied upon as having been authorized by the Authority, the City or the
Underwriters. 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 2011A 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 of the Series 2011A Bonds.
Statements contained in this Official Statement that 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 facts.
The information set forth in this Official Statement has been obtained from official sources and other sources that
are believed to be reliable, but it is not guaranteed as to accuracy or completeness, and is not to be construed as a
representation of the Underwriters. The information and expressions of opinion herein are subject to change without
notice, and neither the delivery of this Official Statement nor any sale made hereunder shall under any circumstances
create any implication that there has been no change in the affairs of the Authority or the City since the date hereof. This
Official Statement is submitted in connection with the sale of the Series 2011A Bonds referred to herein and may not be
reproduced or used, in whole or in part, for any other purpose. The Underwriters have provided the following sentence for
inclusion in this Official Statement. The Underwriters have reviewed the information in this Official Statement in
accordance with, and as part of,their respective responsibilities to investors under the federal securities laws as applied to
the facts and circumstances of this transaction,but the Underwriters do not guarantee the accuracy or completeness of such
information.
This Official Statement contains forward-looking statements within the meaning of the Federal securities laws.
Such statements are based on currently available information, expectations, estimates, assumptions, projections and
general economic conditions. Such words as expects, intends,plans,believes, estimates, anticipates or variations of such
words or similar expressions are intended to identify forward-looking statements and include, but are not limited to,
statements under the captions "SECURITY FOR THE BONDS," "CITY FINANCIAL INFORMATION" and "OTHER
FINANCIAL INFORMATION." The forward-looking statements are not guarantees of future performance. Actual
results may vary materially from what is contained in a forward-looking statement. 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. No assurance is
given that actual results will meet the Authority's or the City's forecasts in any way, regardless of the level of optimism
communicated in the information. The City and the Authority assume no obligation to provide public updates of forward-
looking statements.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVERALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SERIES 2011A BONDS AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING
TRANSACTIONS, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. THE UNDERWRITERS MAY
OFFER AND SELL THE SERIES 2011A BONDS TO CERTAIN DEALERS AND OTHERS AT PRICES LOWER
THAN THE PUBLIC OFFERING PRICES STATED ON THE INSIDE COVER PAGE OF THIS OFFICIAL
STATEMENT, AND SUCH PUBLIC OFFERING PRICES MAY BE CHANGED FROM TIME TO TIME BY THE
UNDERWRITERS.
CUSIP data herein is provided by the CUSIP Service Bureau, operated by Standard&Poor's, a division of The
McGraw-Hill Companies,Inc. 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 have been assigned by an independent company not affiliated with the
Authority or the City and are included solely for the convenience of the registered owners of the Series 2011A Bonds.
None of the Authority,the City or the Underwriters are responsible for the selection or uses of these CUSIP numbers, and
no representation is made as to their correctness on the Series 2011 A Bonds or as included herein. The CUSIP number for
a specific maturity is subject to being changed after the issuance of the Series 2011A Bonds as a result of various
subsequent actions including, but not limited to, a refunding in whole or in part or as a result of the procurement of
secondary market portfolio insurance or other similar enhancement by investors that is applicable to all or a portion of
certain maturities of the Series 2011A Bonds.
The City maintains a website, however, the information presented therein is not a part of this Official Statement
and should not be relied on in making an investment decision with respect to the Series 2011A Bonds.
TABLE OF CONTENTS
Page
INTRODUCTION.................................................................................................................................................................1
GeneralDescription................................................................................................................................................1
Ternsof the Series 2011A Bonds..........................................................................................................................1
Book-Entry Only....................................................................................................................................................2
Source of Payment for the Bonds...........................................................................................................................2
ReserveFund..........................................................................................................................................................3
TheCity.................................................................................................................................................................3
TheAuthority.........................................................................................................................................................3
ContinuingDisclosure............................................................................................................................................3
CertainRisk Factors...............................................................................................................................................4
OtherInfornation...................................................................................................................................................4
ESTIMATED SOURCES AND USES OF FUNDS.............................................................................................................5
THEPROPERTY..................................................................................................................................................................5
THEREFUNDING PLAN....................................................................................................................................................5
Refundingof the 2001A Bonds..............................................................................................................................6
Refundingof the 2001B Bonds..............................................................................................................................6
THEBONDS ........................................................................................................................................................................7
General .................................................................................................................................................................7
OptionalRedemption.............................................................................................................................................7
Extraordinary Redemption from Insurance or Condemnation Proceeds................................................................8
Selection of Bonds for Redemption.......................................................................................................................8
Noticeof Redemption............................................................................................................................................8
PartialRedemption of Bonds.................................................................................................................................9
Effectof Redemption.............................................................................................................................................9
SECURITYFOR THE BONDS ...........................................................................................................................................9
General .................................................................................................................................................................9
Base Rental Payments and Additional Payments.................................................................................................10
Insurance and Condemnation Awards..................................................................................................................11
ReserveFund........................................................................................................................................................12
Abatement............................................................................................................................................................14
Insurance..............................................................................................................................................................14
DebtService Schedule.........................................................................................................................................15
AdditionalBonds.................................................................................................................................................16
Substitution and Release of Property...................................................................................................................16
THEAUTHORITY.............................................................................................................................................................17
THECITY...........................................................................................................................................................................17
CITY FINANCIAL INFORMATION................................................................................................................................17
FinancialStatements ............................................................................................................................................17
BudgetaryProcess................................................................................................................................................18
City Financial Management Policies....................................................................................................................21
CurrentInvestments.............................................................................................................................................22
Relianceon State Budget.....................................................................................................................................22
Principal Sources of General Fund Revenues......................................................................................................22
PROPERTYTAXES...........................................................................................................................................................23
AdValorem Property Taxes.................................................................................................................................23
MotorVehicle In-Lieu Tax..................................................................................................................................26
SALESTAXES...................................................................................................................................................................27
OTHERTAXES..................................................................................................................................................................28
UtilityTaxes.........................................................................................................................................................28
OtherTaxes..........................................................................................................................................................28
OTHERREVENUES..........................................................................................................................................................29
OTHER FINANCIAL INFORMATION............................................................................................................................32
LaborRelations....................................................................................................................................................32
RiskManagement.................................................................................................................................................32
EmployeeRetirement Plans.................................................................................................................................33
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TABLE OF CONTENTS
(continued)
Page
Post-Employment Medical Insurance...................................................................................................................38
Public Agency Retirement Systems(PARS)Notes Payable................................................................................41
Short-Tenn Obligations........................................................................................................................................42
Long-Tenn Obligations........................................................................................................................................43
OverlappingDebt.................................................................................................................................................43
CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES,REVENUES AND APPROPRIATIONS.......45
Article XIIIA of the California Constitution........................................................................................................45
Article XIIIB of the California Constitution........................................................................................................46
Proposition218....................................................................................................................................................47
PropositionlA of 2004........................................................................................................................................49
RecentlyApproved Initiatives..............................................................................................................................50
FutureInitiatives ..................................................................................................................................................51
RISKFACTORS.................................................................................................................................................................51
LimitedObligation...............................................................................................................................................51
Base Rental Payments Are Not Debt....................................................................................................................51
Valid and Binding Covenant to Budget and Appropriate.....................................................................................52
Abatement............................................................................................................................................................52
Riskof Uninsured Loss........................................................................................................................................53
EminentDomain..................................................................................................................................................53
HazardousSubstances..........................................................................................................................................53
Earthquakes..........................................................................................................................................................54
Tsunamiand Seiche.............................................................................................................................................54
Bankruptcy...........................................................................................................................................................55
Limitationson Remedies......................................................................................................................................56
No Liability of Authority to the Owners..............................................................................................................56
Riskof Tax Audit.................................................................................................................................................56
StateBudget.........................................................................................................................................................57
Lossof Tax Exemption........................................................................................................................................61
LimitedSecondary Market...................................................................................................................................61
Changesin Law....................................................................................................................................................62
TAXMATTERS.................................................................................................................................................................62
CERTAINLEGAL MATTERS..........................................................................................................................................64
FINANCIALSTATEMENTS ............................................................................................................................................64
LITIGATION......................................................................................................................................................................64
RATINGS ...........................................................................................................................................................................64
UNDERWRITING..............................................................................................................................................................65
VERIFICATION OF MATHEMATICAL COMPUTATIONS..........................................................................................65
FINANCIALADVISOR.....................................................................................................................................................65
CONTINUINGDISCLOSURE..........................................................................................................................................66
ADDITIONAL INFORMATION.......................................................................................................................................67
APPENDIX A—GENERAL,ECONOMIC AND DEMOGRAPHIC INFORMATION RELATING TO
THECITY............................................................................................................................................A-1
APPENDIX B—COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE CITY FOR THE FISCAL
YEAR ENDED SEPTEMBER 30,2010..............................................................................................B-1
APPENDIX C—CITY INVESTMENT POLICY............................................................................................................C-1
APPENDIX D— SUMMARY OF CERTAIN PROVISIONS OF THE PRINCIPAL LEGAL DOCUMENTS..............D-1
APPENDIX E—PROPOSED FORM OF BOND COUNSEL OPINION........................................................................E-1
APPENDIX F—FORM OF CONTINUING DISCLOSURE CERTIFICATE..................................................................F-1
APPENDIX G—BOOK-ENTRY ONLY SYSTEM.........................................................................................................G-1
ii
OFFICIAL STATEMENT
$36,275,000
HUNTINGTON BEACH PUBLIC FINANCING AUTHORITY
(ORANGE COUNTY, CALIFORNIA)
LEASE REVENUE REFUNDING BONDS, 2011 SERIES A
(CAPITAL IMPROVEMENT REFINANCING PROJECT)
INTRODUCTION
The following introduction presents a brief description of certain information in connection with
the Series 2011A Bonds (as defined below) and is qualified in its entirety by reference to the entire
Official Statement and the documents summarized or described herein. References to, and summaries of,
provisions of the Constitution and the laws of the State of California (the "State") and any documents
referred to herein do not purport to be complete and such references are qualified in their entirety by
reference to the complete provisions thereof. Capitalized terms used in this Official Statement and not
defined elsewhere herein have the meanings given such terms in the Indenture (as defined below). See
APPENDIX D — "SUMMARY OF CERTAIN PROVISIONS OF THE PRINCIPAL LEGAL
DOCUMENTSDefinitions."
General Description
This Official Statement, including the cover page, the inside cover page and the attached
appendices (this "Official Statement'), provides certain information concerning the issuance of
$36,275,000 aggregate principal amount of Huntington Beach Public Financing Authority Lease
Revenue Refunding Bonds, 2011 Series A (Capital Improvement Refinancing Project) (the "Series
2011A Bonds"), by the Huntington Beach Public Financing Authority, a joint exercise of powers entity
organized under the laws of the State (the "Authority"). The Series 2011A Bonds are being issued
pursuant to Article 4, Chapter 5, Division 7, Title 1 (commencing with Section 6584) of the California
Government Code, a resolution of the Authority authorizing the issuance of the Series 2011A Bonds(the
"Authority Resolution") and an indenture, dated as of September 1, 2011 (the "Indenture"), by and
among the City of Huntington Beach (the "City"), the Authority and The Bank of New York Mellon
Trust Company, N.A., as trustee (the "Trustee"). The Series 2011A Bonds are being issued to (a)
refinance the costs of the acquisition, construction, installation and equipping of certain public capital
improvements, including the refunding of (i) the outstanding Huntington Beach Public Financing
Authority Lease Revenue Bonds, 2001 Series A (Capital Improvement Financing Project) (the "2001A
Bonds"), and (ii) the outstanding Huntington Beach Public Financing Authority Lease Revenue Bonds,
2001 Series B (Capital Improvement Refinancing Project) (the"2001B Bonds"), (b) fund a reserve fund
for the Series 2011A Bonds, and (c) pay costs of issuance of the Series 2011A Bonds. See "THE
REFUNDING PLAN" and"ESTIMATED SOURCES AND USES OF FUNDS."
Terms of the Series 2011A Bonds
The Series 2011A Bonds will mature on the dates and in the principal amounts set forth on the
inside cover page of this Official Statement.Interest on the Series 2011A Bonds is payable semiannually
on each March 1 and September 1 (each, an "Interest Payment Date"), commencing March 1, 2012,
computed at the respective rates of interest set forth on the inside cover page of this Official Statement.
The Series 2011A Bonds will be issuable in denominations of $5,000 or any integral multiple thereof.
The Series 2011A Bonds are subject to optional and extraordinary redemption as described herein. See
"THE BONDS."
Book-Entry Only
The Depository Trust Company, New York, New York("DTC").DTC will act as the depository
of the Series 2011A Bonds and all payments due on the Series 2011A Bonds will be made to DTC or its
nominee. Ownership interests in the Series 2011A Bonds may be purchased in book-entry form only.
See APPENDIX G—"BOOK-ENTRY ONLY SYSTEM."
Source of Payment for the Bonds
Pursuant to the site lease, dated as of September 1, 2011 (the"Site Lease"), by and between the
City and the Authority, the City will lease to the Authority certain real property and certain facilities and
improvements located thereon (the "Property") owned by the City. See "THE PROPERTY"
Concurrently, the City will sublease the Property from the Authority pursuant to a lease agreement, dated
as of September 1, 2011 (the"Lease Agreement'),by and between the Authority and the City. Under the
Lease Agreement, subject to abatement as provided therein, the City is required to make rental payments
(the "Base Rental Payments") from legally available funds for use and occupancy of the Property in
amounts calculated to be sufficient to pay principal of and interest on the Series 2011A Bonds when due.
The City has covenanted in the Lease Agreement to take such action as may be necessary to include the
Base Rental Payments in each of its annual budgets during the term of the Lease Agreement and has
further covenanted to take such action as may be necessary to include all Rental Payments due under the
Lease Agreement in its annual budgets and to make necessary annual appropriations for all such Rental
Payments, such covenants to be and will be construed to be duties imposed by law and it will 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 such
covenants.
Except to the extent of amounts otherwise available to the City for payments under the Lease
Agreement, during any period in which, by reason of material damage or destruction (other than by
condemnation, which is provided for in the Lease Agreement) there is substantial interference with the
use and occupancy by the City of any portion of the Property, Base Rental Payments will be adjusted or
abated in the proportion in which the value of that portion of the Property rendered unusable bears to the
entire value of the Property. Such adjustment or abatement will end with the substantial replacement or
reconstruction of the Property. To the extent proceeds of rental interruption insurance are available or
there are moneys available for the payment of Rental Payments in any of the funds and accounts
established under the Indenture, the Lease Agreement provides there will be no abatement of Base
Rental Payments. See "SECURITY FOR THE BONDS—Abatement." The Series 2011A Bonds and
any additional bonds which may be issued in accordance with the Indenture will be secured by a pledge
of and lien on the Lease Revenues (as defined herein) and the amounts in the Reserve Fund (as defined
herein). The Series 2011A Bonds and such additional bonds, if any, are referred to herein as "Bonds."
The Bonds are special limited obligations of the Authority payable solely from and secured by
all of the Lease Revenues and all amounts on deposit from time to time in the funds and accounts
established under the Indenture(other than the Rebate Fund) are pledged to the payment of the principal
of and interest on the Bonds as provided the Indenture, and the Lease Revenues may not be used for any
other purpose while any of the Bonds remain Outstanding; provided, however, that the Lease Revenues
may be applied for such other purposes as are permitted under the Indenture.As defined in the Indenture,
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the term "Lease Revenues" means all Base Rental Payments payable by the City pursuant to the Lease
Agreement, including any prepayments thereof, any Net Proceeds and any amounts received by the
Trustee as a result of or in connection with the Trustee's pursuit of remedies under the Lease Agreement
upon a Lease Default Event.
Reserve Fund
A debt service reserve fund (the "Reserve Fund") will be established and held under the
Indenture in order to secure the payment of principal of and interest on the Series 2011A Bonds in an
amount, as of the Closing Date, equal to the Reserve Requirement. A portion of the proceeds of the
Series 2011A Bonds will be deposited in the Reserve Fund in an amount equal to the Reserve
Requirement. If, on any Interest Payment Date for the Series 2011A Bonds, the amounts on deposit
under the Indenture to pay the principal of and interest due on the Series 2011A Bonds are insufficient
therefor, the Trustee will draw on the amounts in the Reserve Fund to replenish the Interest Account or
the Principal Account, in that order, to make up such deficiencies. See "SECURITY FOR THE
BONDS—Reserve Fund" and APPENDIX D — "SUMMARY OF CERTAIN PROVISIONS OF THE
PRINCIPAL LEGAL DOCUMENTS" for additional information on the Reserve Fund.
The City
The City is a municipal corporation and chartered city of the State. See "THE CITY," "CITY
FINANCIAL INFORMATION" and APPENDIX A — "GENERAL, ECONOMIC AND
DEMOGRAPHIC INFORMATION RELATING TO THE CITY"
The Authority
The Authority is a joint exercise of powers entity formed on March 8, 1988, by agreement
between the City and the Redevelopment Agency of the City of Huntington Beach (the "Agency")
pursuant to Articles 1 through 4, Chapter 5, Division 7, Title 1 of the California Government Code. See
"THE AUTHORITY"
Continuing Disclosure
The ultimate security for the payments of principal and interest on the Bonds comes from the
Base Rental Payments to be made by the City, and, therefore, the City, as an obligated person within the
meaning of the Rule (as defined below), has agreed to undertake the continuing disclosure
responsibilities required by the Rule. The Authority has not undertaken a commitment to provide any
continuing disclosure required by the Rule.
The City has covenanted in the Continuing Disclosure Certificate (the "Continuing Disclosure
Certificate") to provide, or cause to be provided, to the Municipal Securities Rulemaking Board's
Electronic Municipal Market Access system (the"EMMA System"), for purposes of Rule 15c2-12(b)(5)
(the"Rule") adopted by the U.S. Securities and Exchange Commission (the"SEC")under the Securities
Exchange Act of 1934, as amended, certain annual financial information and operating data of the type
set forth herein including, but not limited to, its audited financial statements and, in a timely manner,
notice of certain enumerated events. See"CONTINUING DISCLOSURE" and APPENDIX F—"FORM
OF CONTINUING DISCLOSURE CERTIFICATE" for a description of the specific nature of the
3
annual report and notices of enumerated events and a summary description of the terms of the
Continuing Disclosure Certificate pursuant to which such reports and notices are to be made. The City
has not failed in the previous five years to comply in all material respects with any previous undertakings
with regard to the Rule to provide annual reports or notices of certain events.
Certain Risk Factors
Certain events could affect the ability of the City to make the Base Rental Payments when due.
See "CERTAIN 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 2011A Bonds.
Other Information
The descriptions herein of the Indenture, the Lease Agreement and any other agreements relating
to the Series 2011A Bonds are qualified in their entirety by reference to such documents, and the
descriptions herein of the Series 2011A Bonds are qualified in their entirety by the forms thereof and the
information with respect thereto included in the aforementioned documents. See APPENDIX D —
"SUMMARY OF CERTAIN PROVISIONS OF THE PRINCIPAL LEGAL DOCUMENTS." Copies of
the documents are on file and, upon request and payment to the City of a charge for copying, mailing and
handling, from the Director of Finance, City of Huntington Beach, 2000 Main Street, Huntington Beach,
CA 92648, telephone(714) 536-5630.
The information and expressions of opinion herein speak only as of their date and are subject to
change without notice. Neither the delivery of this Official Statement nor any sale made hereunder nor
any future use of this Official Statement, under any circumstances, creates any implication that there has
been no change in the affairs of the City or the Authority since the date hereof.
The presentation of information, including tables of receipt of revenues, is intended to show
recent historical information and is not intended to indicate future or continuing trends in the financial
position or other affairs of the City or the Authority. 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.
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ESTIMATED SOURCES AND USES OF FUNDS
The estimated sources and uses of funds realized upon the sale of, or in connection with, the
Series 2011A Bonds as follows:
Estimated Sources:
Principal Amount of Bonds $36,275,000.00
Plus: Original Issue Premium 1,883,667.10
Plus: Released 2001A Bonds Moneys 1,988,156.26
Plus: Released 2001B Bonds Moneys 2,620,437.50
Total Sources $42,767,260.86
Estimated Uses:
Deposit to 2001A Escrow Fund f $25,053,736.63
Deposit to 2001B Escrow Fund 14,363,458.42
Deposit to Reserve Fund(a) 3,082,659.23
Deposit to Costs of Issuance Fund(4) 267,406.58
Total Uses $42,767,260.86
(D Represents the amount necessary to refund the 2001A Bonds. See"THE REFUNDING PLAN—Refunding of the 2001A
Bonds."
(2) Represents the amount necessary to refund the 2001B Bonds. See"THE REFUNDING PLAN Refundingof the 2001B
Bonds."
(3) Represents the Reserve Requirement as of the date of delivery of the Series 201 IA Bonds.
(4) Includes,but is not limited to,the Underwriters' discount,the fees and expenses of Bond Counsel,Disclosure Counsel,the
Financial Advisor,the Trustee,the 2001A Escrow Bank,the 2001B Escrow Bank and the rating agencies,costs of printing
the Official Statement,the premium for title insurance and other costs incurred by the Authority and the City in connection
with the issuance and delivery of the Series 2011A Bonds.
THE PROPERTY
The Property is located on a 14.28 acre site, and consists of the City's unified civic center
complex located at 2000 Main Street in Huntington Beach. The 189,000 sq. ft. complex, built in 1972,
includes a five level administrative structure, a two story police/public safety building, a single level
wing containing departments relating to municipal development and a connected building containing the
City Council chambers, meeting rooms and related facilities. On December 14, 2009, the City
completed an $8.1 million seismic retrofit of the main Civic Center building. The City's Emergency
Operations Center, featuring modern computer-assisted emergency management systems including a
video display wall for incident tracking, is also located within the complex. As provided in the Lease
Agreement, the City and the Authority have agreed and determined that the Rental Payments are not in
excess of the fair rental value of the Property.
THE REFUNDING PLAN
The Series 2011A Bonds are being issued to (a) refund the 2001A Bonds, (b) refund the 2001B
Bonds, (c) fund a reserve fund for the Series 2011A Bonds, and (d) pay costs of issuance of the Series
2011A Bonds.
5
Refunding of the 2001A Bonds
The 2001A Bonds were issued pursuant to the terms of an indenture of trust, dated as of
September 1, 2001, by and between the Authority and BNY Western Trust Company, since succeeded
by The Bank of New York Mellon Trust Company, N.A., as trustee thereunder. In order to provide for
the repayment of the 2001A Bonds, the Authority leased certain real property and improvements to the
City pursuant to a lease agreement, dated as of September 1, 2001.
A portion of the proceeds of the Series 2011A Bonds, in an amount sufficient to redeem the
outstanding 2001A Bonds in full on October 17, 2011, will be deposited in an escrow fund (the"2001A
Bonds Escrow Fund") held in trust by The Bank of New York Mellon Trust Company, N.A., as escrow
bank (the "2001A Escrow Bank") under an escrow agreement by and between the Authority and the
2001A Escrow Bank. Amounts deposited in the 2001A Bonds Escrow Fund will be held as cash and
applied to the redemption of the outstanding 2001A Bonds in full on October 17, 2011, at a redemption
price equal to 100% of the principal amount thereof,plus accrued interest.
The sufficiency of the moneys deposited in the 2001A Bonds Escrow Fund will be verified by
The Arbitrage Group, Inc., Tuscaloosa/Buhl, Alabama (the "Verification Agent"). See
"VERIFICATION OF MATHEMATICAL COMPUTATIONS"herein.
Upon the issuance of the Series 2011A Bonds and the deposit in the 2001A Bonds Escrow Fund
of moneys sufficient to provide for the refunding of the 2001A Bonds, and assuming the accuracy of the
Verification Agent's computations, the 2001A Bonds will be deemed defeased and no longer
outstanding. The holders of the 2001A Bonds will be entitled to payment solely out of the moneys or
securities deposited in the 2001A Bonds Escrow Fund.
Refunding of the 2001B Bonds
The 2001B Bonds were issued pursuant to the terms of an indenture of trust, dated as of
December 1, 2001,by and between the Authority and BNY Western Trust Company, since succeeded by
The Bank of New York Mellon Trust Company, N.A., as trustee thereunder. In order to provide for the
repayment of the 2001B Bonds, the Authority leased certain real property and improvements to the City
pursuant to a lease agreement, dated as of December 1, 2001.
A portion of the proceeds of the Series 2011A Bonds, in an amount sufficient to redeem the
outstanding 2001B Bonds in full on October 17, 2011, will be deposited in an escrow fund (the "2001B
Bonds Escrow Fund") held in trust by The Bank of New York Mellon Trust Company, N.A., as escrow
bank (the "2001B Escrow Bank") under an escrow agreement by and between the Authority and the
2001B Escrow Bank. A portion of the amounts deposited in the 2001B Bonds Escrow Fund will be held
as cash and applied to the redemption of the outstanding 2001B Bonds in full on October 17, 2011, at a
redemption price equal to 102% of the principal amount thereof, plus accrued interest.
The sufficiency of the moneys deposited in the 2001B Bonds Escrow Fund will be verified by
the Verification Agent. See"VERIFICATION OF MATHEMATICAL COMPUTATIONS" herein.
Upon the issuance of the Series 2011A Bonds and the deposit in the 2001B Bonds Escrow Fund
of moneys sufficient to provide for the refunding of the 2001B Bonds, and assuming the accuracy of the
Verification Agent's computations, the 2001B Bonds will be deemed defeased and no longer
outstanding. The holders of the 2001B Bonds will be entitled to payment solely out of the moneys or
securities deposited in the 2001B Bonds Escrow Fund.
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THE BONDS
General
The Series 2011A Bonds will be issued in fully registered form without coupons in
denominations of $5,000 or any integral multiple thereof. The Series 2011A Bonds will mature on
September 1 in each of the years and in the amounts, and will bear interest(calculated on the basis of a
360-day year of twelve 30-day months)at the rates set forth on the inside cover page hereof.
Interest on the Series 2011A Bonds will be payable semiannually on each March 1 and
September 1, commencing March 1, 2012 (each, an "Interest Payment Date"), to the person whose name
appears on the Registration Books as the Owner thereof as of the fifteenth calendar day of the month
immediately preceding each such Interest Payment Date(each, a"Record Date"), such interest to be paid
by check of the Trustee mailed by first-class mail to the Owners at the respective addresses of such
Owners as they appear on the Registration Books; provided, however, that payment of interest may be
made by wire transfer in immediately available funds to an account in the United States of America to
any Owner of Bonds in the aggregate principal amount of $1,000,000 or more who furnishes written
wire instructions to the Trustee at least five days before the applicable Record Date. Principal of any
Bond and any premium upon redemption will be paid by check of the Trustee upon presentation and
surrender thereof at the corporate trust office of the Trustee, except as provided in APPENDIX G —
"BOOK-ENTRY ONLY SYSTEM" Principal of and interest and premium (if any) on the Bonds will be
payable in lawful money of the United States of America.
Each Bond will be dated as of its date of delivery and will bear interest from the Interest
Payment Date next preceding such date of authentication thereof, unless (a) it is authenticated after a
Record Date and on or before the following Interest Payment Date, in which event it will bear interest
from such Interest Payment Date, or (b) it is authenticated on or before February 15, 2012, in which
event it will bear interest from the Closing Date, provided, however, that if, as of the date of
authentication of any Bond, interest thereon is in default, such Bond will bear interest from the Interest
Payment Date to which interest has previously been paid or made available for payment thereon.
The Series 2011A Bonds, when issued, will be registered in the name of Cede & Co., as
registered owner and nominee of The Depository Trust Company, New York, New York ("DTC," and
together with any successor securities depository, the "Securities Depository"). DTC will act as
Securities Depository for the Series 2011A Bonds. Individual purchases of the Series 2011A Bonds will
be made in book-entry form. Purchasers will not receive certificates representing their ownership interest
in the Series 2011A Bonds. So long as Cede&Co. is the registered owner of the Series 2011A Bonds, as
nominee of DTC, references herein to the Owners or registered owners thereof means Cede & Co. as
aforesaid, and not the Beneficial Owners of the Series 2011A Bonds. So long as Cede & Co. is the
registered owner of the Series 2011A Bonds, principal of and interest on the Series 2011A Bonds are
payable by wire transfer of same day funds by the Trustee to Cede& Co., as nominee for DTC. DTC is
obligated, in turn, to remit such amounts to the Participants for subsequent disbursement to the
Beneficial Owners. See APPENDIX G—"BOOK-ENTRY ONLY SYSTEM."
Optional Redemption
The Series 2011A Bonds maturing on or after September 1, 2022, are subject to optional
redemption prior to their respective stated maturities, on any date on or after September 1, 2021, in
whole or in part, in Authorized Denominations, from (i) amounts received from the City in connection
7
with the City's exercise of its right pursuant to the Lease Agreement to cause Series 2011A Bonds to be
optionally redeemed, or (ii) any other source of available funds, at a redemption price equal to the
principal amount thereof, plus accrued interest thereon to the date fixed for redemption, without
premium.
Extraordinary Redemption from Insurance or Condemnation Proceeds
The Series 2011A Bonds are also subject to redemption, in whole or in part, on any date, in
Authorized Denominations, from and to the extent of any Net Proceeds (other than Net Proceeds of
rental interruption insurance) received with respect to all or a portion of the Property and deposited by
the Trustee in the Redemption Fund in accordance with the provisions of the Indenture at a redemption
price equal to the principal amount thereof, plus accrued interest thereon to the date fixed for
redemption, without premium.
Selection of Bonds for Redemption
Whenever provision is made for the redemption of less than all of the Bonds of a particular
maturity, the Trustee will select the Bonds to be redeemed from all Bonds not previously called for
redemption (a) with respect to any extraordinary redemption from and to the extent of any Net Proceeds
(other than Net Proceeds of rental interruption insurance) received with respect to all or a portion of the
Property, among maturities of all Series of Bonds on a pro rata basis as nearly as practicable, (b) with
respect to any optional redemption of Series 2011A Bonds, as directed in a Written Certificate of the
City, and(c) with respect to any other redemption of Additional Bonds, 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 deems appropriate
and fair. The Trustee will promptly notify the Authority and the City in writing of the numbers of the
Bonds so selected for redemption on such date. For purposes of such selection, any Bond may be
redeemed in part in Authorized Denominations.
Notice of Redemption
Notice of redemption will be mailed by first-class mail, postage prepaid, 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 at least 30 but not more than 60 days prior to
the date fixed for redemption. Such notice will state the date of the notice, the redemption date, the
redemption place and the redemption price and will designate the CUSIP numbers, the Bond numbers
and the maturity or maturities of the Bonds to be redeemed (except in the event of redemption of all of
the Bonds of such maturity or maturities in whole), and will 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. 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. With respect to any notice of any optional redemption of Bonds of a Series, unless at the
time such notice is given the Bonds to be redeemed will be deemed to have been paid within the
meaning of the Indenture, such notice will state that such redemption is conditional upon receipt by the
Trustee, on or prior to the date fixed for such redemption, of moneys that, together with other available
amounts held by the Trustee, are sufficient to pay the redemption price of, and accrued interest on, the
Bonds to be redeemed, and that if such moneys will not have been so received said notice will be of no
8
force and effect and the Authority will not be required to redeem such Bonds. In the event a notice of
redemption of Bonds contains such a condition and such moneys are not so received, the redemption of
Bonds as described in the conditional notice of redemption will not be made and the Trustee will, within
a reasonable time after the date on which such redemption was to occur, give notice to the Persons and in
the manner in which the notice of redemption was given, that such moneys were not so received and that
there will be no redemption of Bonds pursuant to such notice of redemption.
So long as the book-entry system is used for the Bonds, the Trustee will give any notice of
redemption or any other notices required to be given to registered Owners of Bonds only to DTC. Any
failure of DTC to advise any Participant, or of any Participant to notify the Beneficial Owner, of any
such notice and its content or effect will not affect the validity of the redemption of the Bonds called for
redemption or any other action premised on such notice. Beneficial Owners may desire to make
arrangements with a Participant so that all notices of redemption or other communications to DTC which
affect such Beneficial Owners, and notification of all interest payments, will be forwarded in writing by
such Participant. See APPENDIX G—"BOOK-ENTRY ONLY SYSTEM"
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, anew 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 Redemption
If notice of redemption has been given as aforesaid, and moneys for the redemption price, and
the interest to the applicable date fixed for redemption,having been set aside, the Bonds will become due
and payable on said date and, upon presentation and surrender thereof at the 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 will have 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 redeemed pursuant to the provisions of the Indenture will be canceled by the Trustee
upon surrender thereof and destroyed.
SECURITY FOR THE BONDS
General
The Bonds are special limited obligations of the Authority payable solely from and secured
solely by the Lease Revenues pledged therefor under the Indenture, together with amounts on deposit
9
from time to time in the funds and accounts established under the Indenture (other than the Rebate
Fund).
Under the Indenture, the Authority assigns to the Trustee, for the benefit of the Owners from
time to time of the Bonds, all of the Lease Revenues and all of the rights of the Authority in the Lease
Agreement (except for the right to receive any Additional Payments to the extent payable to the
Authority and certain rights to indemnification set forth therein). The Trustee is entitled to collect and
receive all of the Lease Revenues, and any Lease Revenues collected or received by the Authority are
required to be held, and to have been collected or received, by the Authority as the agent of the Trustee
and must be paid by the Authority to the Trustee.
THE BONDS ARE SPECIAL LIMITED OBLIGATIONS OF THE AUTHORITY PAYABLE
SOLELY FROM AND SECURED SOLELY BY THE LEASE REVENUES AND OTHER MONEYS
PLEDGED THERETO IN THE INDENTURE. THE BONDS ARE NOT A DEBT OF THE
AUTHORITY, THE CITY, THE STATE OR ANY OF ITS POLITICAL SUBDIVISIONS AND
NEITHER THE AUTHORITY, THE CITY, THE STATE NOR ANY OF ITS POLITICAL
SUBDIVISIONS, EXCEPT THE AUTHORITY TO THE EXTENT DESCRIBED HEREIN, IS
LIABLE THEREON. IN NO EVENT WILL THE BONDS OR ANY INTEREST OR REDEMPTION
PREMIUM THEREON BE PAYABLE OUT OF ANY FUNDS OR PROPERTIES OTHER THAN
THOSE OF THE AUTHORITY AS SET FORTH IN THE INDENTURE. THE BONDS DO NOT
CONSTITUTE AN INDEBTEDNESS WITHIN THE MEANING OF ANY CONSTITUTIONAL OR
STATUTORY DEBT LIMITATION OR RESTRICTION. NEITHER THE MEMBERS OF THE
AUTHORITY NOR ANY PERSONS EXECUTING THE BONDS ARE LIABLE PERSONALLY ON
THE BONDS BY REASON OF THEIR ISSUANCE.
Base Rental Payments and Additional Payments
The Lease Agreement requires the City, subject to abatement as provided therein, to deposit with
the Trustee, as assignee of the Authority, on the fifth Business Day next preceding each Interest Payment
Date, commencing on February 23, 2012 (the "Base Rental Deposit Dates"), an amount equal to the
Base Rental Payment coming due and payable on each such Base Rental Deposit Date. The Base Rental
Payments payable in any fiscal year of the City constitute payment for the use and possession of the
Property during such fiscal year. The City will receive a credit towards payment of Base Rental
Payments for amounts on deposit in the Payment Fund (including the Interest Account and the Principal
Account therein) on each Base Rental Deposit Date.
The obligation of the City to make Base Rental Payments is subject to annual appropriations of
the City from funds lawfully available therefor. The obligation of the City to make Base Rental
Payments under the Lease Agreement does not constitute a debt of the City or of the State of California
or of any political subdivision thereof in contravention 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. Neither the full faith and credit nor the taxing power of the City, the State
or any of its political subdivisions is pledged to make Base Rental Payments under the Lease Agreement.
The Authority has no taxing power. The Base Rental Payments are calculated to be sufficient to pay,
when due, the principal of and interest on the Bonds.
In addition to the Base Rental Payments, the City is required to pay when due the following
Additional Payments: (a) all taxes and assessments of any type or nature relating to or affecting the
Property; (b) all reasonable administrative costs of the Authority relating to the Property including, but
10
without limiting the generality of the foregoing, salaries, wages, fees and expenses 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; (c) insurance premiums for all
insurance required pursuant to the Lease Agreement; (d) any amounts with respect to 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 the Lease Agreement or the Indenture.
Pursuant to the Lease Agreement, the City covenants to take such action as may be necessary to
include all Rental Payments due under the Lease Agreement in its annual budgets and to make necessary
annual appropriations for all such Rental Payments. As provided in the Lease Agreement, such
covenants of the City thereunder are deemed to be and will be construed to be duties imposed by law and
it will 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 such covenants.
California law requires, and the Lease Agreement provides, that Base Rental Payments are
required to be abated in whole or in part during any period in which there is substantial interference with
the use and occupancy of the Property by the City due to damage, destruction or taking in eminent
domain proceedings. Under these circumstances, failure to make any Base Rental Payment will not be an
event of default under the Lease Agreement. See"SECURITY FOR THE BONDS —Abatement'below.
Base Rental Payments made by the City to the Authority are payable from lawful money of the
United States of America to or upon the order of the Authority at the Principal Office of the Trustee, or
such other place or entity as the Authority may designate. Notwithstanding any dispute between the
Authority and the City, the City will make all Rental Payments when due without deduction or offset of
any kind and will 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, will be credited against subsequent Rental
Payments due under the Lease Agreement or refunded at the time of such determination. The Lease
Agreement and the Indenture require that Base Rental Payments be deposited in the Payment Fund
maintained by the Trustee, which fund is held for the benefit of the owners of the Bonds.
Insurance and Condemnation Awards
In the event of any damage to or destruction of any part of the Property covered by insurance,
the Net Proceeds of any insurance (other than Net 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 will, 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, will 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, pursuant to a
Written Request of the City, be invested by the Trustee in Permitted Investments that mature not later
than such times as moneys are expected to be needed to pay such costs of repair or replacement. In
connection therewith, the City will 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 will deposit with the Trustee the full
amount of any insurance deductible to be credited to such special account.
11
If such 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 in whole or in part of Rental
Payments results from such damage or destruction pursuant to the Lease Agreement, then the City will
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 (i) of all of the Outstanding
Bonds, or (ii) of such portion of the Outstanding Bonds as will result in the remaining, non-abated Base
Rental Payments being sufficient to pay, as and when due, the principal of and interest on the Bonds that
will remain Outstanding after such redemption. If the City is required to apply funds from the insurance
proceeds and other legally available funds to the redemption of Bonds in accordance with clause (b)
above, the City will direct the Trustee, in a Written Request of the City, to transfer the funds to be
applied to such redemption to the Redemption Fund and the Trustee will transfer such funds to the
Redemption Fund. Any proceeds of any insurance, including the proceeds of any self-insurance
remaining after the portion of the Property which was damaged or destroyed is restored to and made
available to the City in substantially the same condition and annual fair rental value as that which existed
prior to the damage or destruction as required by clause (a) above, or the redemption of Bonds as
required by clause (b) above, in each case as evidenced by a Written Certificate of the City to such
effect, will be deposited in the Reserve Fund to the extent that the amount therein is less than the
Reserve Requirement. 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 will be deposited in the Reserve Fund to the extent that the amount therein is
less than the Reserve Requirement. Any amounts not required to be so deposited into the Reserve Fund
will, 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 sum of the then unpaid principal components of Base Rental
Payments,be paid to the City to be used for any lawful purpose.
The proceeds of any award in eminent domain will be deposited by the Trustee in the
Redemption Fund and applied to the redemption of Bonds pursuant to the Indenture. No assurance can
be given that the proceeds of any insurance or condemnation award will be sufficient under all
circumstances to repair or replace any damaged or taken Property or to prepay all Base Rental Payments
with respect to the Property. Also, the City makes no representation as to the sufficiency of any
insurance awards or the adequacy of any self-insurance to pay, when and as due, amounts payable under
the Lease Agreement or the Bonds.
Reserve Fund
The Reserve Fund is established under the Indenture in an amount equal to the Reserve
Requirement, which as of the date of delivery of the Series 2011A Bonds is $3,082,659.23. As defined
in the Indenture, the term "Reserve Requirement" means, as of the date of any calculation, the least of
(a) 10% of the original aggregate principal amount of the Bonds (excluding Bonds refunded with the
proceeds of subsequently issued Bonds), (b) Maximum Annual Debt Service, and (c) 125% of Average
Annual Debt Service. All amounts in the Reserve Fund are required to be used and withdrawn by the
Trustee solely for the purpose of paying principal of or interest on the Bonds when due and payable to
the extent that moneys deposited in the Interest Account or the Principal Account are not sufficient for
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such purpose, and making the final payments of principal of and interest on Bonds on the date on which
such Bonds are required to be retired or provision made therefor.
The City may substitute a Reserve Facility for all or part of the moneys on deposit in the
Reserve Fund by depositing such Reserve Facility with the Trustee, provided that, at the time of such
substitution, the amount on deposit in the Reserve Fund, together with the amount available under all
Reserve Facilities, shall be at least equal to the Reserve Requirement. Moneys for which a Reserve
Facility has been substituted as provided in the Indenture will be transferred, at the election of the City,
to the Redemption Fund or, upon receipt of an Opinion of Counsel that such transfer will not, in and of
itself, adversely affect the exclusion of interest on Outstanding Tax-Exempt Bonds from gross income
for federal income tax purposes, to the City and applied to the payment of capital costs of the City.
Amounts on deposit in the Reserve Fund which were not derived from payments under any Reserve
Facility credited to the Reserve Fund to satisfy a portion of the Reserve Requirement will be used and
withdrawn by the Trustee prior to using and withdrawing any amounts derived from payments under
such Reserve Facility. In order to accomplish such use and withdrawal of such amounts not derived from
payments under any such Reserve Facility, the Trustee will, as and to the extent necessary, liquidate any
investments purchased with such amounts.
In the event that, on the second Business Day prior to a date on which the Trustee is to transfer
money from the Payment Fund to the Interest Account or to the Principal Account each pursuant to
Indenture, amounts in the Payment Fund are insufficient for such purpose, the Trustee will withdraw
from the Reserve Fund, to the extent of any funds therein, the amount of such insufficiency, and will
transfer any amounts so withdrawn to the Payment Fund. If the amount on deposit in the Reserve Fund is
not sufficient to make such transfer, the Trustee will make a claim under any available Reserve Facility,
in accordance with the provisions thereof, in order to obtain an amount sufficient to allow the Trustee to
make such transfer as and when required.
In the event of any transfer from the Reserve Fund or the making of any claim under a Reserve
Facility, the Trustee will, within two Business Days thereafter, provide written notice to the Authority
and the City of the amount and the date of such transfer or claim; provided, however, that such notice
need not be provided if such transfer is made pursuant to the following two sentences. If, as a result of
the payment of principal of or interest on the Bonds, the Reserve Requirement is reduced, amounts on
deposit in the Reserve Fund in excess of such reduced Reserve Requirement will be transferred to the
Payment Fund. On any date on which Bonds are defeased in accordance with the Indenture, the Trustee
will, if so directed in a Written Request of the City, transfer any moneys in the Reserve Fund in excess
of the Reserve Requirement resulting from such defeasance to the entity or fund so specified in such
Written Request of the City, to be applied to such defeasance.
If the sum of the amount on deposit in the Reserve Fund, plus the amount available under all
available Reserve Facilities, is less than the Reserve Fund Requirement, the first of Base Rental
Payments thereafter received from the City under the Lease Agreement and not needed to pay the
principal of and interest on the Bonds on the next Interest Payment Date or Principal Payment Date will
be used, first, to reinstate the amounts available under any Reserve Facilities that have been drawn upon
and, second, to increase the amount on deposit in the Reserve Fund, so that the amount available under
all available Reserve Facilities, when added to the amount on deposit in the Reserve Fund, will equal the
Reserve Requirement.
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Abatement
The Lease Agreement provides for the abatement of Rental Payments 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, and the City waives the right 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. 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 therein.
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 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"—Insurance—Rental Interruption Insurance."
If all of the Property is taken permanently under the power of eminent domain or sold to a
government threatening to exercise the power of eminent domain, the Lease Agreement will terminate
with respect to the Property as of the day possession is so taken. If less than all of the Property is taken
permanently, or if all of the Property or any part thereof is taken temporarily under the power of eminent
domain, (a) the Lease Agreement will continue in full force and effect, and (b) there will be a partial
abatement of Base Rental Payments in an amount to be agreed upon by the City and the Authority such
that the resulting Base Rental Payments for the Property represent fair consideration for the use and
occupancy of the remaining usable portion of the Property.
Insurance
Fire and Extended Coverage Insurance. The City is required under the Lease Agreement to
maintain reasonable and customary liability insurance, which obligations may be satisfied by self-
insurance, provided that such self-insurance complies with the provisions of the Lease Agreement as
summarized below. The City will maintain or cause to be maintained casualty insurance insuring the
Property against fire, lightning and all other risks covered by an extended coverage endorsement
(excluding earthquake) to the full insurable value of the Property, subject to a $100,000 loss deductible
provision. Full insurable value will not be less than the aggregate principal amount of the Outstanding
Bonds. In addition, the City will 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 the prior sentence in an
amount not less than an amount equal to two times Maximum Annual Debt Service, which insurance
may not be maintained in whole or in part in the form of 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 will be deemed to be self-insurance for purposes of the Lease
Agreement. Any self-insurance maintained by the City pursuant to the Lease Agreement will comply
with the following terms: (a) the self-insurance program will be approved in writing by an Independent
Insurance Consultant; (b) the self-insurance program will include an actuarially sound claims reserve
fund out of which each self-insured claim will be paid, the adequacy of each such fund will be evaluated
on an annual basis by the Independent Insurance Consultant and any deficiencies in any self-insured
claims reserve fund will be remedied in accordance with the recommendation of such Independent
14
Insurance Consultant; (c) the self-insured claims reserve fund will be held in a separate trust fund by an
independent trustee, which may be the Trustee serving as such under the Indenture, and (d) in the event
the self-insurance program will be discontinued, the actuarial soundness of its claims reserve fund, as
determined by an Independent Insurance Consultant, will be maintained.
The City is required to obtain upon the execution and delivery of the Lease Agreement, title
insurance on the Property, in an amount not less than the aggregate principal amount of Bonds issued by
a company of recognized standing duly authorized to issue the same, subject only to Permitted
Encumbrances. Proceeds of such insurance are required to be delivered to the Trustee as a prepayment of
rent and are required to be applied by the Trustee to the redemption of Bonds.
Debt Service Schedule
The following table sets forth the debt service due on the Series 2011A Bonds.
Debt Service Schedule
Year
Ending
September 1 Principal Interest Total
2012 $2,120,000.00 $1,284,356.72 $3,404,356.72
2013 2,960,000.00 1,346,093.76 4,306,093.76
2014 3,030,000.00 1,272,093.76 4,302,093.76
2015 3,180,000.00 1,120,593.76 4,300,593.76
2016 3,335,000.00 961,593.76 4,296,593.76
2017 1,915,000.00 861,543.76 2,776,543.76
2018 1,965,000.00 804,093.76 2,769,093.76
2019 2,045,000.00 725,493.76 2,770,493.76
2020 1,060,000.00 623,243.76 1,683,243.76
2021 1,095,000.00 591,443.76 1,686,443.76
2022 1,150,000.00 536,693.76 1,686,693.76
2023 1,185,000.00 502,193.76 1,687,193.76
2024 1,225,000.00 462,200.00 1,687,200.00
2025 1,265,000.00 417,793.76 1,682,793.76
2026 1,315,000.00 367,193.76 1,682,193.76
2027 1,370,000.00 314,593.76 1,684,593.76
2028 1,425,000.00 259,793.76 1,684,793.76
2029 1,480,000.00 201,012.50 1,681,012.50
2030 1,545,000.00 138,112.50 1,683,112.50
2031 1,610,000.00 72,450.00 1,682,450.00
Pursuant to the Lease Agreement, the City is required to make Base Rental Payments which
have been calculated to be sufficient to make the interest and principal payments on the Series 2011A
Bonds when due. The City's Base Rental Payments are due on the fifth Business Day next preceding
each Interest Payment Date.
15
Additional Bonds
Pursuant to the Indenture, the Authority may at any time issue one or more series of Additional
Bonds (in addition to the Series 2011A Bonds) payable from Lease Revenues as provided in the
Indenture on a parity with all other Bonds theretofore issued under the Indenture subject to certain
conditions precedent including the following: (a) the issuance of such Additional Bonds shall have been
authorized under and pursuant to the Act and under and pursuant to the Indenture and will have been
provided for by a Supplemental Indenture which will specify the following: (i) the purposes for which
such Additional Bonds are to be issued; provided, that the proceeds of the sale of such Additional Bonds
will be applied only for one or more of the following purposes: (A) providing funds to pay costs of City
facilities (including capitalized interest), (B) providing funds to refund any Bonds issued under the
Indenture or other obligations of the City, (C) providing funds to pay Costs of Issuance incurred in
connection with the issuance of such Additional Bonds, and (D) providing funds to make any deposit to
the Reserve Fund required pursuant to paragraph (b) below; (ii) the principal amount and designation of
such Series of Additional Bonds and the denomination or denominations of the Additional Bonds, which
will be Authorized Denominations; and (iii) that such Additional Bonds will be payable as to interest on
the Interest Payment Dates, except that the first installment of interest may be payable on either March 1
or September 1; (b) upon the issuance of such Additional Bonds, the amount on deposit in the Reserve
Fund will be at least equal to the Reserve Requirement; and (c) upon the issuance of such Additional
Bonds, the sum of Base Rental Payments, including any increase in the Base Rental Payments as a result
of the issuance of such Additional Bonds, plus Additional Rental Payments, in any Rental Period will
not be in excess of the annual fair rental value of the Property after taking into account the use of the
proceeds of such Additional Bonds (evidence of the satisfaction of such condition will be made by a
Written Certificate of the City). See APPENDIX D — "SUMMARY OF CERTAIN PROVISIONS OF
THE PRINCIPAL LEGAL DOCUMENTS."
Substitution and Release of Property
The Lease Agreement provides that, upon compliance with certain conditions specified therein,
the City may release from the Lease Agreement any portion of the Property or substitute alternate real
property for all or any portion of the Property, including the following conditions: (a) an independent
certified real estate appraiser selected by the City shall have found(and shall have delivered a certificate
to the Trustee setting forth its findings) that(i) the sum of Base Rental Payments plus Additional Rental
Payments due under the Lease Agreement in any Rental Period is not in excess of the annual fair rental
value of the Property, as constituted after such substitution or release, and(ii)the Property, as constituted
after such substitution or release, has a useful life equal to or greater than the maximum remaining term
of this Lease Agreement(including extensions); (b) the City shall have obtained or caused to be obtained
an ALTA title insurance policy or policies with respect to any substituted property in the amount of the
fair market value of such substituted property(which fair market value shall have been determined by an
independent certified real estate appraiser), of the type and with the endorsements described in the Lease
Agreement; (c) the City shall have filed or caused to be filed with the Trustee an Opinion of Counsel to
the effect that such substitution or release will not, in and of itself, cause the interest on Tax-Exempt
Bonds to be included in gross income for federal income tax purposes; and (d) the City shall have
certified to the Trustee that the substituted real property is essential for performing the City's
governmental functions. See APPENDIX D — "SUMMARY OF CERTAIN PROVISIONS OF THE
PRINCIPAL LEGAL DOCUMENTS."
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THE AUTHORITY
The Authority is a public agency duly organized and existing pursuant to a Joint Exercise of
Powers Agreement (the "JPA Agreement") between the City and the Agency, dated March 8, 1988, as
amended. The Authority is governed by a board of directors comprised of the five member City Council
of the City. The Authority is statutorily authorized by Article 4 of Chapter 5 of Division 7 of Title 1 of
the Government Code of the State of California and is empowered under the JPA Agreement to issue its
bonds for, among other things, the purposes of the plan of financing described herein. 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 Authority has no employees and all staff work is performed by City staff.
THE CITY
Founded in the late 1880's, Huntington Beach was incorporated as a general law city in 1909
and became a charter city in 1937. The City has a City Council/City Manager form of government. The
City Council has seven members, each of whom is elected to a four-year term. City Council Members
are limited to two consecutive terms. There are three elected department heads, the City Attorney, City
Clerk and City Treasurer. The position of Mayor is filled on a rotating basis.
The City encompasses 31.6 square miles (26.4 square miles is land, 5.2 square miles is water) in
the coastal area of Orange County, California, adjacent to the Cities of Costa Mesa, Fountain Valley,
Newport Beach, Seal Beach and Westminster. The City is approximately 40 miles southeast of Los
Angeles and 90 miles northwest of San Diego. As of January 1, 2011, the State of California Finance
Department estimated its population at 190,377.
The City recently completed the process of annexation of the adjacent community of Sunset
Beach, a 134-acre, formerly unincorporated area of about 1,300 residents. The area was placed under
the City's sphere of influence about a year ago by the Local Agency Formation Commission (LAFCO),
which oversees the process of municipal boundary changes, in an effort to reduce the number of Orange
County "islands," the generally small, unincorporated areas that are hard to serve.
See APPENDIX A — "GENERAL, ECONOMIC AND DEMOGRAPHIC INFORMATION
RELATING TO THE CITY" for a general description of the City as well as certain demographic and
statistical information.
CITY FINANCIAL INFORMATION
Financial Statements
The City's accounting policies conform to generally accepted accounting principles. The audited
financial statements also conform to the principles and standards for public financial reporting
established by the Governmental Accounting Standards Board.
Basis of Accounting and Financial Statement Presentation. The government-wide financial
statements are reported using the accrual basis of accounting. Revenues are recorded when earned and
expenses are recorded when a liability is incurred, regardless of the timing of related cash flows.
17
Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items
are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met.
Governmental fund financial statements are reported using the modified accrual basis of
accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are
considered to be available when they are collectible within the current period or soon enough thereafter
to pay liabilities of the current period. Expenditures generally are recorded when a liability is incurred,
as under accrual accounting. However, debt service expenditures are recorded only when payment is
due.
Audited Financial Statements. The City retained the firm of Macias Gini & O'Connell, LLP,
Certified Public Accountants, Newport Beach, California, to examine the general purpose financial
statements of the City as of and for the year ended September 30, 2010. The City is the recipient of the
Government Finance Officers Association Certificate of Achievement for Excellence in Financial
Reporting for the fiscal year ended September 30, 2009. The audited financial statements for fiscal year
ended September 30, 2010, are attached hereto as APPENDIX B — "COMPREHENSIVE ANNUAL
FINANCIAL REPORT OF THE CITY FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2010."
The City has not requested, and the auditor has not provided, any review or update of such financial
statements in connection with their inclusion in this Official Statement.
Budgetary Process
The City Council adopts an annual budget with appropriations for all City funds prior to the
beginning of the fiscal year, which begins on October 1 of each year. The City Council has the legal
authority to amend the budget at any time during the fiscal year. The City maintains budgetary controls
to ensure compliance with legal provisions embodied in the appropriated budget approved by the City
Council. The level of budgetary control (that is, the level at which expenditures cannot legally exceed
the appropriated amount) for the City's operating budget is the department level within each fund, and
for the capital improvement budget it is each individual capital improvement project within each fund. A
Department Head, with the Director of Finance's approval, may transfer appropriations (with no dollar
limitation) within like categories (operating and capital expenditures) of the same department. Transfers
of appropriations for salaries and benefits require additional approval of the City Manager or his
designee. All other appropriation changes require the approval of the City Council.
All appropriations lapse at the end of the fiscal year unless specific carryovers are approved by
the City Council.
The forecasted General Fund expenditures in fiscal year 2010-11 total $173,476,000 which
represents a 1.62% increase when compared to fiscal year 2009-10 expenditures. General Fund revenues
for fiscal year 2010-11 are projected to be $173,984,000, which represents a 0.95 increase when
compared to fiscal year 2009-10 revenue.
On August 8, 2011, the City released its proposed fiscal year 2011-12 City Budget. In the
proposed fiscal year 2011-12 City Budget, the General Fund expenditures are projected at$176,815,000.
This represents a 1.92% increase from 2010-11 projected expenditures. General Fund revenues are
estimated at $176,309,000 in the proposed fiscal year 2011-12 City Budget, which represents a 1.34%
increase when compared to fiscal year 2010-11 forecasted revenues.
The City projects that the annexation of the adjacent community of Sunset Beach will result in a
net positive for the City's financial position, with no additional material expenditures. Based on an
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annexation study, the estimated fiscal impact of the Sunset Beach annexation could range from an annual
surplus of$195,528 to $624,259. The City's proposed fiscal year 2011-12 City Budget does not include
additional revenues attributable to the annexation.
The City Council conducted a public hearing approving the adoption of the fiscal year 2011-12
budget on September 6, 2011.
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The following table shows the City's budget and actual results for General Fund revenues and
expenditures for fiscal year 2009-10, budget and projections for fiscal year 2010-11 and the budget for
fiscal year 2011-12.
City of Huntington Beach
General Fund Budget Summary
Fiscal Years 2009-10 through 2011-12
(in thousands)
FY 09-10 FY 09-10 FY 10-11 FY 10-11 FY 11-12
Budget(ir Actual Budget(2) Projected(2) Budget(s)
REVENUES
Property taxes $ 66,402 $ 66,886 $ 66,825 $ 67,514 $ 68,422
Sales taxes 19,575 20,795 20,115 22,000 22,775
Utility taxes 21,725 19,757 19,480 20,250 20,200
Other taxes 13,385 11,629 11,570 12,366 13,020
License and permits 6,984 6,109 6,613 6,079 6,270
Fines and forfeitures 4,260 3,965 4,374 4,068 4,078
From use of money and property 14,915 13,826 14,378 13,423 13,753
Intergovernmental 3,841 4,219 4,383 4,088 3,575
Charges for current services 23,369 22,724 23,016 22,911 23,281
Other Revenue 1,657 2,433 1,002 1,285 935
TOTAL REVENUES $ 176,113 $ 172,343 $ 171,756 $ 173,984 $ 176,309
EXPENDITURES
City Council $ 302 $ 301 $ 306 $ 302 $ 299
City Manager 1,756 1,652 1,549 1,544 1,547
City Treasurer 1,537 1,532 1,353 1,160 133
City Attorney 2,657 2,657 2,203 2,273 2,162
City Clerk 972 868 965 872 708
Finance 4,354 4,286 3,960 3,796 5,015
Human Resources 6,231 5,209 6,114 4,898 4,843
Planning 7,411 6,330 7,008 6,595 6,177
Fire 32,522 32,398 32,623 33,677 33,159
Information Services 7,062 6,782 6,085 6,006 5,844
Police 58,946 57,521 59,334 59,294 58,869
Economic development 1,664 1,520 1,559 1,556 1,596
Community services 13,956 13,328 12,798 12,621 12,732
Library services 4,529 4,066 3,817 3,550 3,714
Public Works 19,524 17,388 17,532 17,305 20,825
Non-Departmental 13,639 14,443 16,153 16,141 17,305
Principal 526 386 1,887 1,886 1,887
Interest 48 48 0 0 0
TOTAL EXPENDITURES $ 177,636 $ 170,715 $ 175,246 $ 173,476 $ 176,815
OTHER FINANCING SOURCES(USES)
Transfers In $ 8,528 $ 8,452 $ 6,402 $ 6,670 $ 6,835
Transfers Out (7,918) (7,918) (6,523) (6,523) (6,733)
TOTAL OTHER FINANCING
SOURCES(USES) $ 610 $ 636 $ (121) $ 147 $ (121)
"'Final budget amounts as of September 30,2010
(')Fiscal year 2010-11 budget and projected amounts are as of the Nine-Month Budget Status Report.
")Fiscal year 2011-12 budget does not include Sunset Beach annexation.
Source:City of Huntington Beach Finance Department.
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City Financial Management Policies
The City Council has adopted a comprehensive set of financial management policies to provide
for: (i) establishing targeted General Fund reserves; (ii) the prudent investment of City funds; and (iii)
establishing parameters for issuing and managing debt supported by the General Fund, Enterprise Funds
and any other related funding entity of the City.
Economic Uncertainties Reserve Policy. In September 2010, the City Council revised its
Economic Uncertainties Reserve Policy. The previous policy required a minimum Economic
Uncertainties Reserve of seven percent (7%) of the annual General Fund budget at adoption, the revised
policy establishes the goal of achieving an Economic Uncertainties Reserve Commitment equal to the
value of the two months of General Fund expenditures adopted budget amount. As of September 30,
2010, the City has an Economic Uncertainties Reserve balance of $19,710,000. Since this date, there
have been no changes to the reserve. The reserve balance represents 10.7 percent of the fiscal year
2011-12 General Fund budget.
Appropriations and use of these funds will be reserved for emergency situations including, but
not limited to the following:
• An unplanned, major event such as catastrophic disaster requiring expenditures over 5%
of the General Fund adopted budget
• Budgeted revenue taken by another government entity
• Drop in projected/actual revenue of more than 5% of the General Fund adopted revenue
budget
Once established, appropriations from these reserves can only be made by formal City Council action.
Should the Economic Uncertainties Reserve commitment be used, and its level falls below the minimum
amount of two months of General Fund expenditures adopted budget, the goal is to replenish the fund
within three fiscal years.
The City has not appropriated funds from the Economic Uncertainties Reserve.
Investment Policy. The investment of funds of the City (except pension and retirement funds) is
made in accordance with the City's fiscal year 2010/11 Investment Policy, as approved on December 20,
2010 (the "Investment Policy"), and Section 53601 et seq. of the California Government Code. The
Investment Policy is subject to revision at any time and is reviewed at least annually to ensure
compliance with the stated objectives of safety, liquidity,yield, and current laws and financial trends. All
amounts held under the Indenture are invested at the direction of the City in Permitted Investments, as
defined in the Indenture, and are subject to certain limitations contained therein. See APPENDIX C —
"CITY INVESTMENT POLICY" and APPENDIX D— "SUMMARY OF CERTAIN PROVISIONS OF
THE PRINCIPAL LEGAL DOCUMENTS —INDENTURE—Investments."
21
Current Investments
The assets of the City's investment portfolio, as of June 30, 2011, are shown in the following
table:
Investment Portfolio of the City
(As of June 30,2011)
%of Days to
Type Par Value Market Value Book Value Portfolio Maturity
Federal Agency Issues—Coupon $100,000,000.00 $100,133,211.35 $99,906,886.71 54.60% 1,290
Local Agency Inv.Fund(LAIF) 59,999,029.87 59,999,029.87 59,999,029.87 32.79 1
Medium Term Notes 23,000,000.00 23,410,770.00 23,058,215.83 12.60 319
Total cash and investments $182,999,029.87 $183,543,011.22 $182,964,132.41 100.00% 745
Source:City of Huntington Beach.
Reliance on State Budget
Approximately 50.2% (consisting of the sales tax, property tax and the motor vehicle license
fee) of the City's projected General Fund revenues for fiscal year 2010-11 consisted of payments
collected by the State and passed-through to local governments or collected by the County and allocated
to local governments by State law. Approximately 50.5% of the City's General Fund revenues included
in the budget for fiscal year 2011-12 are expected to come from such sources. There can be no assurance
that current or future State budget difficulties will not adversely affect the City's revenues or its ability to
make payments under the Lease Agreement. See"RISK FACTORS — State Budgets"
Principal Sources of General Fund Revenues
The following table shows the City's General Fund tax revenues by source for the most recent
five fiscal years:
City of Huntington Beach
Tax Revenues by Source
(in thousands)
Actual Actual Actual Projected Budget
Source 2007-08 2008-09 2009-10 2010-11 2011-12"'
Property Taxes $ 65,110 $ 67,227 $ 66,886 $ 67,514 $ 68,422
Sales and Use Taxes 23,934 20,306 20,795 22,000 22,775
Utility Taxes 21,591 20,616 19,757 20,250 20,200
Other Taxes(1) 15,065 12,085 11,629 12,366 13,020
Total Tax Revenues $125,700 $120,234 $119,067 $122,130 $124,417
Includes Transient Occupancy Taxes,Franchise Taxes and other taxes.
«� Fiscal year 2011-12 budget does not include Sunset Beach annexation.
Source:City of Huntington Beach Finance Department.
Property taxes were the single largest revenue source to the General Fund in fiscal year 2010-11,
representing approximately 37.0% of projected revenues, followed by sales taxes representing
approximately 12.2%. These sources represented an aggregate of approximately 49.2% of the projected
General Fund revenues for fiscal year 2010-11 and represent an aggregate of approximately 49.9% of
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General Fund revenues in the City's fiscal year 2011-12 budget. For a discussion of potential State
Budget impacts on General Fund revenues, see"— State Budgets" For a discussion of sales tax revenues
and property taxes, see"SALES TAXES" and"PROPERTY TAXES"below.
PROPERTY TAXES
Ad Valorem Property Taxes
Tax Levies, Collections and Delinquencies. Property taxes are levied by the County for each
fiscal year on taxable real and personal property which is situated in the County.Property taxes collected
in advance are recorded as deferred revenue and recognized as revenue in the year they become
available. The County levies, bills and collects property taxes for the City. Property taxes paid to the
City by the County within 60 days after the end of the fiscal year are "available" and are, therefore,
recognized as revenue.
For assessment and collection purposes, property is classified either as "secured" or"unsecured"
and is listed accordingly on separate parts of the assessment roll. The "secured roll" is that part of the
assessment roll containing State/assessed public utilities property and property the taxes on which are a
lien on real property sufficient, in the opinion of the County Assessor, to secure payment of the taxes.
Other property is assessed on the"unsecured roll."
Secured and unsecured property taxes are levied based on the assessed value as of January 1, the
lien date, of the preceding fiscal year. Secured property tax is levied on October 1 and due in two
installments, on November 1 and March 1. Collection dates are December 10 and April 10 which are
also the delinquent dates. At that time, delinquent accounts are assessed a penalty of 10%. Accounts that
remain unpaid on June 30 are charged an additional 1.5 % per month. Such property may thereafter be
redeemed by payment of a penalty of 1.5% per month to the time of redemption, plus costs and a
redemption fee. 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 Treasurer. Although the County maintains a Teeter Plan, which
is an alternative method for the distribution of secured property taxes to local agencies, the City has
elected not to be included in the County's Teeter Plan.
Unsecured property tax is levied on July 1 and due on July 31, and has a collection date of
August 31 which is also the delinquent date. A 10% penalty attaches to delinquent unsecured taxes. If
unsecured taxes are unpaid at 5:00 p.m. on October 31, an additional penalty of 1.5% attaches to them on
the first day of each month until paid. The taxing authority has four ways of collecting delinquent
unsecured personal property taxes: (1) bringing 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 lien on certain property of
the taxpayer; (3) filing a certificate of delinquency for record in the County Clerk and County Recorder's
office in order to obtain a lien on certain property of the taxpayer; and (4) seizing and selling personal
property, improvements, or possessory interests belonging or assessed to the assessee.
Assessed Valuation.All property is assessed using full cash value as defined by Article XIIIA of
the State Constitution. State law provides exemptions from ad valorem property taxation for certain
classes of property such as churches, colleges, nonprofit hospitals and charitable institutions.
Future assessed valuation growth allowed under Article XIIIA (new construction, certain
changes of ownership, 2% inflation) will be allocated on the basis of"situs" among the jurisdictions that
serve the tax rate area within which the growth occurs. Local agencies and schools will share the growth
23
of"base" revenues from the tax rate area. Each year's growth allocation becomes part of each agency's
allocation in the following year. The availability of revenue from growth in tax bases to such entities
may be affected by the establishment of redevelopment agencies which, under certain circumstances,
may be entitled to revenues resulting from the increase in certain property values.
The passage of Assembly Bill 454 in 1987 changed the manner in which unitary and operating
nommitary property is assessed by the State Board of Equalization. The legislation deleted the formula
for the allocation of assessed value attributed to such property and imposed a State-mandated local
program requiring the assignment of the assessment value of all unitary and operating non-unitary
property in each county of each State assessee other than a regulated railway company. The legislation
established formulas for the computation of applicable countywide rates for such property and for the
allocation of property tax revenues attributable to such property among taxing jurisdictions in the county
beginning in fiscal year 1988-89. This legislation requires each county to issue each State assessee, other
than a regulated railway company, a single tax bill for all unitary and operating nommitary property.
Assessment Appeals. Property tax values determined by the County Assessor may be subject to
appeal by property owners. Assessment appeals are annually filed with the Assessment Appeals Board
for a hearing and resolution. The resolution of an appeal may result in a reduction to the County
Assessor's original taxable value and a tax refund to the applicant/property owner.
Each assessment appeal could result in a reduction of the taxable value of the real property,
personal property or possessory interest of the property which is the subject of the appeal. Alternatively,
an appeal may be withdrawn by the applicant or the Assessment Appeals Board may deny or modify the
appeal at a hearing or by stipulation.
Effect of Delinquencies and Foreclosures on Property Tax Collections. As described above,
once an installment of property tax becomes delinquent, penalties are assessed commencing on the
applicable delinquency date until the delinquent installment(s) and all assessed penalties are paid. In the
event of foreclosure and sale of property by a mortgage holder, all past due property taxes, penalties and
interest are required to be paid before the property can be transferred to a new owner.
The level of default and foreclosure activity has affected certain homeowners nationwide.
Within the State, the greatest impacts to date are in regions of the Central Valley, the Inland Empire, and
other areas in the State where the large numbers of new mortgages were originated in more affordable
areas. The increased level of default and foreclosure activity has resulted in downward pressure on home
prices in the affected areas.
Set forth in the tables below are assessed valuation for secured and unsecured property within
the City of Huntington Beach and tax levies and collections (as of the close of each fiscal year) for the
five most recent fiscal years.
24
Gross Assessed Value of All Taxable Property
(in thousands)
Fiscal Year Secured Unsecured Total al
2007-08 $24,294,709 $ 1,066,668 $25,361,377
2008-09 25,062,842 1,039,636 26,102,478
2009-10 25,325,120 1,086,770 26,411,890
2010-11 25,584,186 1,090,869 26,675,055
2011-12 25,553,372 1,170,004 26,723,376
Excludes redevelopment project area incremental assessed valuation.
Source:City of Huntington Beach Finance Department.
General Fund Property Tax Levies and Collections
Secured Taxes
(in thousands)
Total Delinquency Delinquency
Fiscal Year Total Levy Collections al Amount Percent
2006-07 $39,174 $37,816 $1,278 3.3%
2007-08 42,269 41,114 1,734 4.1
2008-09 42,569 42,087 1,582 3.7
2009-10 43,892 43,937 1,038 2.4
2010-11 44,014 43,572 746 1.7
on Includes delinquent tax collections. Although the County maintains a Teeter Plan,which is an alternative method
for the distribution of secured property taxes to local agencies, the City has elected not to be included in the
County's Teeter Plan.
Source:City of Huntington Beach Finance Department.
In 1978, the voters of the State passed Proposition 8, a constitutional amendment to Article
XIIIA that allows a temporary reduction in assessed value when real property suffers a decline in value.
A decline in value occurs when the current market value of real property is less than the current assessed
(taxable)factored base year value as of the lien date,January 1.
See also "CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND
APPROPRIATIONS —Article XIIIA of the California Constitution"
Principal Taxpayers. The following table sets forth the principal secured property taxpayers in
the City as of fiscal year 2010-11, the most current information available.
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Principal Secured Property Taxpayers
Fiscal Year 2010-11
2010-11
Assessed % of
Property Owner Primary Land Use Valuation Total o.
1. The Boeing Company/McDonnell Douglas Unsecured $ 371,433,415 1.31%
2. Bella Terra Associates LLC* Commercial 299,084,267 1.05
3. Mayer Financial LP Possessory Int. 185,071,826 0.65
4. CIM Huntington LLC Commercial 145,016,603 0.51
5. Pacific Sands LLC* Residential 83,339,009 0.29
6. AES Huntington Beach LLC Utilities 70,600,000 0.25
7. United Dominion Realty LPG Residential 68,156,166 0.24
8. Seacliff Village Shopping Center Inc.* Commercial 64,001,176 0.23
9. Cambro Manufacturing Co.* Unsecured 62,457,839 0.22
10. NF Huntington Plaza LPG Commercial 60,861,044 0.21
$1,410,042,025 4.96%
f..2010-11 Local Secured Assessed Valuation:$28,444,404,220.
* Pending appeals on parcels as of August 8,2011.
Source:HdL Coren&Cone.
Motor Vehicle In-Lieu Tax
Vehicle license fees are assessed in the amount of 2% of a vehicle's depreciation market value
for the privilege of operating a vehicle on California's public highways. A program to offset(or reduce)
a portion of the vehicle license fees ("VLF") paid by vehicle owners was established by Chapter 322,
Statutes of 1998. Beginning January 1, 1999, a permanent offset of 25% of the VLF paid by vehicle
owners became operative. Various pieces of legislation increased the amount of the offset in subsequent
years to the existing statutory level of 67.5% of 2% (resulting in the current effective rate of 0.65%).
This level of offset was estimated to provide tax relief of $3.95 billion in the fiscal year 2003-04.
Beginning in fiscal year 2004-05, the State-local agencies agreement permanently reduced the VLF rate
to 0.65% and eliminated the VLF offset program.
In connection with the offset of the VLF, the Legislature authorized appropriations from the
State general fund to "backfill" the offset so that the local governments, which receive all of the vehicle
license fee revenues, would not experience any loss of revenues. The legislation that established the VLF
offset program also provided that if there were insufficient general fund moneys to fully backfill the
VLF offset, the percentage offset would be reduced proportionately (i.e., the license fee payable by
drivers would be increased) to assure that local governments would not be disadvantaged. In June 2003,
the State Director of Finance ordered the suspension of VLF offsets due to a determination that
insufficient general fund moneys would be available for this purpose, and, beginning in October 2003,
VLF paid by vehicle owners were restored to the 1998 level. However, the offset suspension was
rescinded by the Governor on November 17, 2003, and offset payments to local governments resumed.
Local governments received backfill payments totaling $3.80 billion in fiscal year 2002-03. Backfill
payments totaling $2.65 billion were expected to be paid to local governments in fiscal year 2003-04.
The State-local agreement also provided for the repayment in August 2006 of approximately$1.2 billion
that was not received by local governments during the time period between the suspension of the offsets
and the implementation of higher fees. This repayment obligation was codified by Proposition 1A, which
was approved by voters in the November 2004 general election and was repaid early by the State in
August 2005. For a description of Proposition 1A, see "CONSTITUTIONAL AND STATUTORY
LIMITATIONS ON TAXES, REVENUES AND APPROPRIATIONS -Proposition 1A."
26
The following table sets forth the Motor Vehicle In-Lieu Tax received by the City for the last
three fiscal years, the projected amount for the current fiscal year and the budgeted amount for fiscal
year2011-12.
City of Huntington Beach
In-Lieu Payments
Actual Actual Actual Projected Budget
2007-08 2008-09 2009-10 2010-11'" 2011-12
In-Lieu of VLF $14,710,010 $14,921,724 $14,866,953 $14,959,893 $14,900,000
to Projected amounts are as of The Nine-Month Budget Status Report.
Source:City of Huntington Beach Finance Department.
SALES TAXES
A sales tax is imposed on retail sales or consumption of personal property. Sales tax revenues
represented approximately 12.1% of the City's total General Fund revenues in fiscal year 2009-10 and
represent an aggregate of approximately 12.6% and 12.9%, respectively of projected General Fund
revenues for fiscal year 2010-11 and in the fiscal year 2011-12 budget.
Triple Flip. On March 2, 2004, 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." Currently, the State has issued approximately
$14.07 billion of economic recovery bonds. 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 monies were previously earmarked for schools, the legislation provided for
schools to receive other State general fund revenues. It is expected that the swap of sales taxes for
property taxes will terminate once the economic recovery bonds are repaid, some years in the future.
Sales Tax Rates. The City's sales tax revenue represents the City's share of the sales and use tax,
imposed on taxable transactions occurring within the City's boundaries. Sales and use taxes are imposed
under the Bradley-Burns Uniform Local Sales and Use Tax Law.
Effective April 1, 2009, the State tax rate increased by 1% for a two-year period as part of the
resolution of the State's fiscal problems. This increase expired July 1, 2011. Many of the State's cities,
counties, towns and communities have special taxing jurisdictions (districts), which impose transactions
(sales) and use tax. These districts increase the tax rate in a particular area by adding the district tax to
the combined statewide tax rate of 7.25%. The rates for these districts range from 0.10% to 1.00% per
district.More than one district tax may be in effect in a given area.
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The following table shows components of the City's current 7.75% sales and use tax rate.
City of Huntington Beach
Sales Tax Rate
As of July 1,2011
Jurisdiction Rate
State 6.25%
City portion of State 1.00
Orange County Transportation Authority 0.50
Total 7.75%
n.Effective April I,2009 to June 30,2011,The State Temporarily increased its sales tax by 1%.
Source:Sate of California,Board of Equalization.
OTHER TAXES
Utility Taxes
The City levies utility users tax on users for the consumption of various utilities in the City
including water, telephone, natural gas, electric, and cable television services. The City levies a 5% tax
for electricity, gas, and water services. In November 2010, in furtherance of a telecommunications
modernization ordinance adopted in consideration of the application of State law to certain features of its
then existing ordinance, the City introduced a successful ballot measure and the electorate of the City
voted to reduce the utility users tax rate for telecommunications and video services from 5% to 4.9%,
effectively immediately. Revenue from this source can be volatile, as it reflects not only changes in
utility rates, but also business activities and changes in technology. Electricity and natural gas sales are
sensitive to weather (warmer winters and cooler summers reduce demand). Revenues generated from
utility users tax represented approximately 11.5% of the City's total General Fund revenues on the fiscal
year 2009-10 and represent an aggregate of approximately 11.6% and 11.5%, respectively, of the
projected General Fund revenues for fiscal year 2010-11 and in the fiscal year 2011-12 budget.
Other Taxes
In addition, the City receives the following local taxes:
Franchise Taxes. The City levies a franchise tax on its gas, electric, cable television and trash
collection franchises based on franchise agreements between the City and the franchise agency.
Transient Occupancy Taxes. The City levies a 10% transient occupancy tax on hotel and motel
bills. Revenues generated from transient occupancy taxes represented approximately 11.5% of the
City's total General Fund revenues on the fiscal year 2009-10 and represent an aggregate of
approximately 11.6% and 11.5%, respectively, of the projected General Fund revenues for fiscal year
2010-11 and in the fiscal year 2011-12 budget. Increases in local tourism and the addition of
Shorebreak, a 157-room luxury boutique hotel located at the Strand in downtown Huntington Beach
contributed to an increase in transient occupancy tax revenue in fiscal year 2010-11, with a 5.1%
increase in the average daily room rate and a 9.4% increase in occupancy rates.
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OTHER REVENUES
The following table illustrates other revenue sources:
City of Huntington Beach
Other Revenue Sources
(in thousands)
Actual Actual Actual Projected Budget
Source 2007-08 2008-09 2009-10 2010-11'" 2011-12
Licenses and Permits $ 7,831 $ 5,846 $ 6,109 $ 6,079 $ 6,270
Fines and Forfeitures 4,060 4,144 3,965 4,068 4,078
Use of Money and Property 13,875 13,895 13,826 13,423 13,753
Intergovernmental 4,509 4,716 4,219 4,088 3,575
Charges for Current Services 16,019 21,342 22,724 22,911 23,281
Other Revenue 1,883 1,552 2,433 1,285 935
Total Other Revenues $48,177 $51,495 $53,276 $51,854 $51,892
o.Projected amounts are as of The Nine-Month Budget Status Report.
Source:City of Huntington Beach Finance Department.
Licenses and Permits. These revenues consist primarily of building construction permit fees.
Fines, Forfeitures and Penalties. These revenues include parking citations and other fines for
municipal code violations.
Use of Money and Property. These revenues consist primarily of investment earnings and
lease/concession income.
Intergovernmenal. These revenues consist primarily of reimbursements from Federal, State, and
County sources.
Charges for Services. The City charges fees for plan checking, building inspection and a variety
of other municipal services.
Other Revenues. These revenues consist of passport processing fees, sales of surplus city
equipment, restitution and settlement payments as well as other miscellaneous and reimbursement
revenues such as reimbursement for property damage.
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The following two tables summarize the General Fund Balance Sheet and Statement of
Revenues, Expenditures and Changes in Fund Balance of the City's General Fund for the fiscal years
2005-06through 2009-10.
City of Huntington Beach
General Fund Balance Sheet
Fiscal Years 2005-06 through 2009-10
(in thousands)
Fiscal Year Ended September 30,
2006 2007 2008 2009 2010
Assets:
Cash and Investments $ 25,714 $ 29,010 $ 29,556 $ 22,069 $ 28,155
Taxes Receivable 21,281 26,355 26,529 23,839 25,758
Other Receivables,Net 2,993 4,047 4,556 4,663 4,278
Advances to Other Funds 1,836 1,620 1,321 1,004 675
Prepaids 11,201 11,163 12,958 15,111 12,502
Total Assets $ 63,025 $ 72,195 $ 74,920 $ 66,686 $ 71,368
Liabilities and Fund Balances:
Liabilities
Accounts Payable $ 3,644 $ 3,971 $ 5,860 $ 3,709 $ 4,150
Accrued Payroll 2,326 2,548 3,060 3,637 4,709
Due to Other Funds -- -- -- -- --
Advances from Other Funds -- -- -- -- --
Deposits Payable 1,591 1,824 834 1,230 1,194
Deferred Revenue 9,078 14,632 15,259 12,899 14,285
Claims Payable 5,800 5,524 5,464 6,123 5,678
Total Liabilities $ 22,439 $28,499 $30,477 $27,598 $30,016
Fund Balances(1)
Reserved $ 7,382 $ 10,679 $ 10,967
Unreserved:
Designated 29,632 28,735 33,302
Undesignated 3,572 4,282 174
Nonspendable (2) $ 4,834 $ 4,605
Restricted tal 1,921 1,452
Committed(4) 20,600 30,493
Assigned tsl 11,733 4,802
Total Fund Balance 40,586 43,696 44,443 39,088 41,352
Total Liabilities and Fund Balances $63,025 $72,195 $74,920 $66,686 $71,368
Source: City of Huntington Beach Comprehensive Annual Financial Report
to In fiscal year 2009-10,the City implemented GASB 54, "Fund Balance Reporting and Governmental Fund Type Definitions." This
statement eliminated the previous fund balance classifications(reserved,unreserved-designated,and unreserved-undesignated),which were
replaced with new fund balance categories(nonspendable,restricted,committed,assigned,and unassigned).
"t Nonspendable:includes amounts that are not in spendable form,such as inventories and prepaids,and other items that by definition are not in
spendable form.
"t Restricted:includes amounts that can be spent only for the specific purposes stipulated by constitution,external resource providers,or
through enabling legislation.
tat Committed:includes amounts that can be used only for the specific purposes determined by a formal action of the City Council. The City
Council has authority to establish,modify,or rescind a fund balance commitment.
tat Assigned:includes amounts that are intended to be used by the City for specific purposes but do not meet the criteria to be classified as
restricted or committed. The City Administrator or designee has the authority to establish,modify,or rescind a fund balance assignment.
30
City of Huntington Beach
General Fund
Statement of Revenues,Expenditures and Changes in Fund Balance
Fiscal Years 2005-06 through 2009-10
(in thousands)
Fiscal Year Ended September 30,
2006 2007 2008 2009 2010
Revenues:
Property Taxes $55,168 $60,606 $65,110 $67,227 $66,886
Sales Taxes 24,003 23,724 23,934 20,306 20,795
Utility Taxes 21,170 21,479 21,591 20,616 19,757
Other Taxes 13,226 13,776 15,065 12,085 11,629
Licenses and permits 7,209 10,026 7,831 5,846 6,109
Fines,Forfeitures and Penalties 4,288 4,165 4,060 4,144 3,965
From Use of Money and Property 12,084 14,032 13,875 13,895 13,826
From Other Agencies 5,367 6,140 4,509 4,716 4,219
Charges for Current Service 13,876 15,695 16,019 21,342 22,724
Other 3,224 2,252 1,883 1,552 2,433
Total Revenues $ 159,615 $ 171,895 $ 173,877 $ 171,729 $ 172,343
Expenditures:
Current:
City Council $ 271 $ 287 $ 295 $ 295 $ 301
City Administrator 5,504 1,490 1,588 1,839 1,652
City Treasurer 1,446 1,060 1,357 1,308 1,532
City Attorney 2,272 2,438 2,771 2,736 2,657
City Clerk 828 932 992 1,084 868
Finance 3,310 4,400 4,792 4,456 4,286
Human Resources 0 4,202 4,725 4,729 5,209
Planning 2,661 2,949 3,856 3,232 2,954
Building 3,576 4,193 3,844 3,959 3,376
Fire 23,918 25,935 26,638 33,072 32,398
Information Services 6,540 6,437 6,741. 7,339 6,782
Police 49,708 54,973 55,808 58,988 57,521
Economic Development 1,121 1,538 1,750 1,426 1,520
Community Services 13,179 13,258 13,919 14,039 13,328
Library Services 3,129 4,145 4,018 4,168 4,066
Public Works 24,752 23,488 21,824 19,573 17,388
Non-Departmental 12,793 12,873 21,382 16,683 14,443
Debt Service:
Principal 1,216 729 600 520 386
Interest 145 129 140 158 48
Total Expenditures $ 156,369 $ 165,456 $ 177,040 $ 179,604 $ 170,715
Excess of Revenues Over(Under)
Expenditures 3,246 6,439 (3,163) (7,875) 1,628
Other Financing Sources(Uses)
Transfers In 7,305 4,632 11,321 9,619 8,452
Proceeds of Long-Term Debt(Capital - 35 - - -
Leases)
Transfers Out (8,251) (7,996) (7,411) (7,099) (7,816)
Total Other Financing Sources (946) (3,329) 3,910 2,520 636
(Uses)
Net Change in Fund Balances 2,300 3,110 747 (5,355) 2,264
Fund Balance-Beginning of Year 38,286 40,586 43,696 44,443 39,088
Fund Balance-End of Year $40,586 $43,696 $44,443 $39,088 $41,352
Source:City of Huntington Beach Comprehensive Annual Financial Report
31
OTHER FINANCIAL INFORMATION
Labor Relations
City employees are represented by eight labor union associations, the principal one being
Municipal Employees Association which represents approximately 39% of all City employees.
Currently 99% of all permanent City employees are covered by negotiated agreements. Negotiated
agreements have the following expiration dates:
Negotiated Employee Agreements
Contract Number of
Bargaining Unit Expiration Date Employees
Management Employees Organization 12/19/2011 103
Municipal Employees Association 6/30/2012 394
Police Officer's Association 9/30/2013 238
Police Management Association 9/30/2011 13
Firefighters' Association 9/30/2013 126
Fire Management Association 6/30/2012 6
Marine Safety Officers' Association 9/30/2011 12
Surf City Lifeguard Employees' Association Expired 124
Source:City of Huntington Beach Finance Department.
The Surf City Lifeguard Employees' Association expired contract is currently under negotiation.
The City has never had an employee work stoppage.
Risk Management
The City is exposed to various risks of losses related to torts; theft of, damage to and destruction
of assets; errors and omissions; injuries to employees, and natural disasters. The City records all of these
claims as expenditures in the General Fund. The liability for these claims is recorded as part of long-term
obligations in the government-wide financial statements. The City records the amount of claims payable
at year-end that is due and payable at year-end in the fund financial statements. The full amount of
claims is reported as a liability in the government-wide financial statements. Liabilities include amounts
incurred,but not reported.
Claims of up to $1,000,000 are paid from the General Fund. The City is also a participant in the
Big Independent Cities Excess Pool Joint Powers Authority (BICEP), which shares payments for claims
between $1,000,000 and $2,000,000. It also provides general liability insurance of $25,000,000 above
the City's retention of$1,000,000. BICEP was created by a joint powers agreement between the City of
Huntington Beach and four other local entities for the purpose of providing joint insurance coverage and
related risk management services for member cities. BICEP allows member entities to finance claims
payment pool for certain liability claims in excess of $1,000,000 to a limit of $27,000,000. BICEP's
governing board has one representative from each city (either a member of the City Council or
designate). Current members must approve any changes to the board. Each participating City pays an
insurance premium to BICEP that is used to fund the operating and debt service requirements. Payments
for claims beyond what is covered by BICEP, from $27,000,000 to $37,000,000, are paid by excess
insurance coverage. There were no liability claims in the last three years that exceeded the coverage
limit.
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Workers' compensation claims of up to $1,000,000 per claim are paid from the General Fund.
The BICEP is a member of CSAC-Excess Insurance Authority for excess workers' compensation
coverage. Payments for claims from $1,000,000 to $5,000,000 are shared. Payments for claims between
$5,000,000 and$200,000,000 are paid by excess insurance coverage.
All funds of the City participate in the program and make payments to these funds based on
estimated cost information.
Claims activity and liabilities relating to the current and prior year are(in thousands):
Workers Liability
Compensation Insurance Total
Balance September 30, 2008 $6,504 $5,328 $11,832
Additions 6,381 2,655 9,036
Reductions (5,604) (2,764) (8,368)
Net Increase(Decrease) 777 (109) 668
Balance September 30, 2009 7,281 5,219 12,500
Additions 5,590 664 6,254
Reductions (4,086) (741) (4,827)
Net Increase(Decrease) 1,504 (77) 1,427
Balance September 30, 2010 $8,785 $5,142 $13,927
Below is a reconciliation of the above schedule of total claims payable to the financial
statements (in thousands):
Current Claims Payable-Reported on the Balance Sheet of Both the Government $ 5,678
Wide and Fund Statements
Claims Payable-Long-Term(Greater than One Year)-Reported in Government 8,249
Wide Statements,but not in Fund Statements
Total $13,927
On April 4, 2011, City Council approved the implementation of a pilot Alternative Dispute
Resolution process for workers compensation claims made by active safety employees that are members
of the City's Firefighters' Association and the Police Officer's Association. The process will also apply
to retirees who claim a presumptive injury within five years of retirement. The process is expected to
reduce overall claims costs to the City through decreased litigation and expeditious resolution of
Workers' Compensation claims.
Employee Retirement Plans
Retirement Plan-Normal
The City contributes to the California Public Employees' Retirement System (Ca1PERS), an
agent, which is a multiple-employer public employee defined benefit pension plan. CalPERS provides
retirement and disability benefits, annual cost-of living adjustments, and death benefits to plan members
and beneficiaries. Ca1PERS acts as a common investment and administrative agent for participating
public entities within California. Benefit provisions and all other requirements are established by state
33
statute and city ordinance. Copies of Ca1PERS annual financial report may be obtained from their
executive office: 400 P Street, Sacramento, CA, 95814 or on their website: www.calpers.ca.gov.
The City makes two types of contributions for covered employees. The first contribution
represents the amount the City is required to make (the employer rate). The second represents an
amount, which is made by the employee, but is reimbursed to the employee by the City (the member
rate). The member rate is set by contract and normally remains unchanged. The employer rate is an
actuarially established rate, is set by Ca1PERS, and changes from year to year.
The employer rates for the fiscal year ending June 30, 2011 year-end and for the period from
July 1, 2011 to the current year end are as follows:
10/1/10 to 6/30/11 7/1/11 to Year End
Local Miscellaneous 10.222% 15.311%
Local Safety 29.203% 34.196%
The member rates are as follows:
Local Miscellaneous 8.000%
Local Safety 9.000%
The City's annual pension cost of $23,363,000 was equal to the City's required and actual
contributions. The required contribution was determined as part of the June 30, 2009, actuarial
valuations provided by CAPERS in October 2010, using the entry age normal actuarial cost method. The
actuarial assumptions used to determine the required contribution for fiscal year ended September 30,
2011 were:
• Average amortization remaining period-18 years as of the Valuation Date—closed end
• Asset valuation method- 15 years smoothed market
• Investment Rate of Return -7.75%
• Projected salary increases - 3.55% to 13.15% (safety) and 3.55% to 14.45%
(miscellaneous) depending on age, service, and type of employment
• Inflation-3.00%
• Payroll growth-3.25%
• Individual salary growth - A merit scale varying by duration of employment coupled
with an assumed annual inflation component of 3.0% and an annual production growth
of 0.25%.
Initial unfunded liabilities are amortized over a closed period that depends on the plan's date of
entry into CAPERS. Subsequent plan amendments are amortized as a level percent of pay over a closed
20-year period. On an annual basis, the net pension obligation is the cumulative difference between the
annual pension cost and the actuarially required contributions made to the plan. Gains and losses that
occur in the operation of the plan are amortized over a rolling 30 year period with the exception of
special gains and losses in fiscal years 2008-09, 2009-10 and 2010-11. Each of these years special gains
or losses will be isolated and amortized over fixed and declining 30 year periods (as opposed to the
current rolling 30 year amortization). If the plan's accrued liability exceeds the actuarial value of the
assets, then the amortization payment on the total unfunded liability may not be lower than the payment
calculated over a 30-year amortization period.
34
Local Miscellaneous Local Safety
Annual Annual
Fiscal Year Pension Cost Percent of Net Pension Pension Cost Percentage of Net Pension
Ended 9/30 in Thousands APC Funded Obligation (in thousands) APC Funded Obligation
2009 $4765 1001/, $10,763 100%
2010 5,380 100 11,826 100
2011 8,163 100 15,200 100
Below is the three-year trend of funding progress (dollar amounts in thousands):
Schedule of Funding Progress
Retirement Plan-Normal
(in thousands)
Entry Age
Normal Excess
Actuarial Excess Assets as a
Accrued Actuarial Assets Percentage
Liability Value of (Unfunded Funded Covered of Covered
Plan (AAL) Assets Liability) Ratio Payroll Payroll
2007
Safety $409,859 $338,305 $(71,554) 82.5% $34,961 -204.7%
Miscellaneous 295,078 287,302 (7,776) 97.4% 44,249 17.6
Total $704,937 $625,607 $(79,330) 88.7% $79,210 -100.2%
2008
Safety $439,687 $357,782 $(81,905) 81.4% $36,791 -222.6%
Miscellaneous 320,209 307,549 (12,660) 96.0% 47,817 -26.5
Total $759,896 $665,331 $(94,565) 87.6% $84,608 -111.8%
2009
Safety $478,818 $370,250 $(108,568) 77.3% $40,384 -268.8%
Miscellaneous 363,638 321,435 (42,203) 88.4% 48,439 -87.1
Total $842,456 $691,685 $(150,771) 82.1% $88,823 -169.7%
The City has been negotiating with all eight of its collective bargaining units for retirement
benefit concessions and has reached agreement with four. Negotiations with the Marine Safety Officers'
Association are ongoing. The City and the Huntington Beach Firefighters' Association (HBFA) have
agreed that HBFA members will pay an increased share of the employee-paid contribution to CalPERS
of 6.75% and for the implementation of a second tier retirement formula(3% at 55) for new hires if all of
the other safety units agree. The concessions regarding the Ca1PERS pick up will sunset at the
expiration of the side-letter extension period (September 30, 2013). The City's Finance Department has
estimated the annualized savings to the City of the additional CAPERS pick-up to be approximately
$619,000. Savings over the two-year term of the side-letter extension is approximately$1.23 million.
The City and the Police Officers' Association (POA) have agreed that POA members will
continue to pay the employee-paid contribution to CAPERS of 4.25%. The continued concessions
regarding the CAPERS pick up will not sunset at the expiration of the side-letter extension period, but
will continue until a successor agreement is reached. The City's Finance Department has estimated the
annualized savings to the City to be approximately$482,339 for the CAPERS pick up. Savings over the
two-year term of the side-letter extension is approximately$964,678.
The City and the Fire Management Association(FMA)have agreed that FMA members will pay
an increased share of the employee-paid contribution to CAPERS of 6.75% and for the implementation
35
of a second tier retirement formula for new hires if all of the other safety units agree. The City's Finance
Department has estimated the annualized savings to the City of the additional Ca1PERS pick-up to be
approximately$27,000. The savings over the two-year term of the side-letter extension is approximately
$54,000.
The City and the Police Management Association (PMA) have agreed that PMA members will
continue to pay the employee-paid contribution to Ca1PERS of 4.25% and for the implementation of a
second-tier CaIPERS retirement formula for newly hired police safety employees, if POA implements a
second tier retirement formula (with any second-tier safety benefit formula to be consistent among all
new hires across all public safety groups). The City's Finance Department has estimated the annualized
savings to the City to be approximately$37,000.
Retirement Plan-Supplemental
The City provides a supplemental retirement plan (the "Supplemental Retirement Plan") for all
employees hired prior to 1997 (exact dates are different for various associations). The plan is a single-
employer defined benefit plan. It is a defined benefit plan and will pay the retiree an additional amount
to his or her CAPERS amount for life. The Supplemental Retirement Plan is a closed plan. Effective in
1998, new City employees are ineligible to participate in the plan (exact dates are different for various
associations). The City's contracts with employee bargaining associations, which establish the plan.
These associations must agree to any changes to the plan. The amount will cease upon the employee's
death. The amount that is computed as a factor of an employee's normal retirement allowance is
computed at retirement and remains constant for his or her life. Of the 920 active employees reported on
the September 30, 2011 valuation report, only 336 were eligible for plan benefits. No separately
prepared financial statements are prepared for this plan and it is not included in the financial report of
any other pension plan. Prior to fiscal year 2008-09, the City had prefunded these benefits and recorded
the amounts in a fiduciary fund. In fiscal year 2008-09, the City established the Supplemental Employee
Retirement Plan and Trust, and transferred $24,918,000 to an irrevocable trust from the prefunded
amounts. The plan and trust are still reported as a fiduciary fund pension trust.
Below is the Supplemental Retirement Plan participant data for the September 30, 2011
valuation date:
Retirees and beneficiaries receiving benefits 649
Active Plan Members 336
Total Plan Participants 985
The City annually transfers amounts from the various City funds to a pension trust fund. The
City is required under the Supplemental Employee Retirement Plan and Trust to contribute the
actuarially determined rate of 4.38% of total payroll for all permanent employees for the year ended
September 30, 2011. Administrative costs of this plan are financed through investment earnings.
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The City's annual pension cost and net pension obligation for this plan fiscal year 2010-11 were
(in thousands):
Annual required contribution $3,957
Interest on net pension obligation 229
Adjustment to annual required contribution (374)
Annual pension cost 3,812
Contributions made (3,957)
Increase(decrease) in net pension obligation (145)
Net Pension Obligation Beginning of Year 4,176
Net Pension Obligation—End of Year(r) $4,031
(r)The cumulative difference between the annual pension cost and the actuarially required contributions made to
the plan.
The annual required contribution was determined as part of an independent actuarial valuation as
of September 30, 2011,using the Entry Age Normal Actuarial Cost Method, which is a projected benefit
full-cost method which takes into account those benefits that are expected to be earned in the future as
well as those already accrued. The actuarial assumptions used were:
• Rate of return on present and future assets—5.5%per annum
• Projected salary increases for covered employees due to inflation—3.0% to 15.0% per
annum depending on years of service
• Projected salary increases due to merit—0%
• Inflation rate—3.0%
• Post employment benefit increases—0%
• Amortization of unfunded liability—level percentage of pay ending in 2027 (closed)
• Actuarial value of assets—market value
Below is the required three-year trend information(dollar amounts in thousands):
Annual Percentage of Net Pension
Fiscal Year Pension Cost APC Funded Obligation
2008-09 $3,348 104% $4,312
2009-10 3,831 104 4,176
2010-11 3,812 104 4,031
Below is other required trend information(dollar amounts in thousands):
Fiscal Year Annual Percentage
Ending Required of ARC
September 30 Contribution Contributed
2006 $3,022 130.48%
2007 2,850 156.63
2008 3,419 106.08
2009 3,476 100.00
2010 3,967 100.00
2011 3,957 100.00
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Below is the five-year trend of funding progress(dollar amounts in thousands):
Schedule of Funding Progress
Retirement Plan-Supplemental
(in thousands)
Entry Age UAAL as
Normal Actuarial Unfunded a % of
Actuarial Accrued Value of AAL Funded Covered Covered
Valuation Date Liability Assets (UAAL) Ratio Payroll(" Payroll
9/30/2006Update $43,066 $16,821 (26,245) 39.1% $40,563 -64.7%
9/30/2007 Actual 51,028 20,452 (30,576) 40.1 43,516 -70.3
9/30/2008 Update 52,777 22,722 (30,055) 43.1 44,822 -66.1
9/30/2009 Actual 59,576 24,980 (34,596) 41.9 44,978 -76.9
9/30/2010 Update 61,448 28,467 (32,981) 46.3 42,827 -77.0
9/30/2011 Actual 62,926 32,146 (30,780) 51.1 34,098 -90.3
to Covered payroll amounts reflect eligible payroll only.
Source:City of Huntington Beach Finance Department.
The schedule of funding progress above presents multiyear trend information about whether the
actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued
liability for benefits.
Since the City is required to adopt GASB 27 for the supplemental pension plan, the difference
between the Annual Required Contribution (ARC) and the amount of pension cost funded for the years
in which there was an actuarial study must be recorded as a liability in the government-wide financial
statements. The amount of this liability is $4,031,000. Benefits are recognized when due and payable
under plan provisions.
City's Retirement Supplement Plan Contributions
(in thousands)
Unfunded
Annual Percentage of Net Pension Actuarial
Fiscal Year Pension Cost ARC Funded Obligation Liability
2008-09 $3,348 104% $4,312 $34,596
2009-10 3,831 104 4,176 32,981
2010-11 3,812 104 4,031 30,780
The cumulative difference between the annual pension cost and the actuarially required contributions made to the plan.
Source:City of Huntington Beach Finance Department.
Post-Employment Medical Insurance
The City agreed, via contract, with each employee association to provide post-employment
medical insurance to retirees. These Other Post Employment Benefits (OPEB) are based on years of
service and are available to all retirees who meet all three of the following criteria:
• At the time of retirement the employee is employed by the City
• At the time of retirement the employee has a minimum of ten years of service credit or is
granted a service connected disability retirement
38
• Following official separation from the City,PERS grants a retirement allowance
The City's obligation to provide the benefits to a retiree ceases when either of the following
occurs:
• During any period the retiree is eligible to receive health insurance at the expense of
another employer
• The retiree becomes eligible to enroll automatically or voluntarily in Medicare
If an employee is terminated prior to retirement from the City, no postemployment benefits are
provided.
The maximum subsidy a retiree is entitled to is $344 per month after 25 years of service. If a
retiree dies, the benefits that would be payable for his or her insurance are provided to the spouse or
family for 18 months. Benefits for insurance premiums are payable based on the years of service credit
for the retiree. The retiree may use the subsidy for any of the medical insurance plans that the City's
active employees may enroll.
The City utilizes the California Employers' Retiree Benefit Trust (CERBT) for the post-
employment medical insurance benefit. Benefits paid from the CERBT were $741,000 for fiscal year
ending September 30, 2010. Based on the June 30, 2011 valuation report, a total of $1,026,000 of
estimated benefits will be paid from the CERBT for fiscal year ending September 30, 2011. The assets
of the CERBT are in an irrevocable trust administered by CAPERS. Copies of CAPERS annual financial
report may be obtained from their executed office: 400 P Street, Sacramento, CA 95814 or on their
website: www.calpers.ca.gov. The City's policy is to make 100% of each year's ARC. Actuarial
assumptions for the June 30, 2011 valuation were:
• Entry age normal -30 year amortization of unfunded liabilities
• Discount rate- 6.36.%. The discount rate for prior valuations was 7.75%. For the most
recent valuation, the City elected to utilize the most conservation of the three available
asset allocation strategies.
• All other retirement assumptions equivalent to Ca1PERS assumptions used for the City's
normal retirement plan
Below are the required disclosures for this plan (in thousands):
Actuarial Accrued liability $22,447
Normal Cost 845
Assets 9,639
Funded Status 42.9%
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The City's actual contributions, annually required contribution (ARC), Net OPEB
obligation/asset(NOO/NOA), and Annual OPEB Cost(AOC) were computed as follows(in thousands):
Employer Contribution
Direct Contributions City Health Plan Contributions $ 952
Indirect Contributions—Administrative Overhead 70
Implicit Subsidy 507
Total Employer Contributions $ 1,559
Development of Annual OPEB Cost(AOC)
Amortization of Actuarially Accrued Liability $ 714
Normal Cost 845
Total ARC 1,559
Interest on(NOA) (671)
Adjustment to the ARC 540
Total AOC $ 1,428
Development of Net OPEB Asset(NOA)
Net OPEB Asset(NOA),beginning of year $(8,661)
Annual OPEB Cost(AOC) 1,428
Employer Contribution (1,559)
Net OPEB Asset(NOA), end of year $(8,792)
The City's actual contributions of $1,559,000 for fiscal year ending September 30, 2011, are
greater than the annual required contribution. The annual OPEB cost is reported as expenses in the non-
departmental governmental activities program.
Three-year trend information is disclosed below(in thousands):
Annual OPEB
Cost(AOC) Net OPEB
(Employer Actual Percentage of AOC Obligation
Fiscal Year Contribution) Contribution Contributed (Asset)
9/30/2009 $1,564 $1,715 109.71/, ($8,378)
9/30/2010 1,320 1,603 121.4 ($8,661)
9/30/2011 1,428 1,559 109.2 ($8,792)
As of June 30, 2011, the most recent actuarial valuation date, the plan was 42.9% funded. The
actuarial accrued liability for benefits was $22.4 million, and the actuarial value of assets was $9.6
million,resulting in an unfunded accrued liability(UAAL) of$12.8 million. The covered payroll(annual
payroll of active employees covered by the plan) was $82.4 million, and the ratio of the UAAL to the
covered payroll was 15.5%.
40
Other Post Employment Benefits—Medical Retirement
Schedule of Funding Progress
(In Thousands)
Unfunded UAAL as a
Actuarial Actuarial Actuarial % of
Actuarial Value of Accrued Accrued Funded Covered Covered
Valuation Date Assets Liability Liability Ratio Payroll Payroll
9/30/2009Actual $8,727 $19,474 $(10,747) 44.8% $88,923 -12.1%
9/30/2010Update 9,157 20,608 (11,451) 44.4 90,465 -12.7
6/30/2011 Actual 9,639 22,447 (12,808) 42.9 82,443 -15.5
The medical trend rate represents the long-term expected growth of medical benefits paid by the
plan, due to non-age-related factors such as general medical inflation, utilization, new technology, and
the like. The following table sets forth the trend assumption used for the valuation:
PEMCHA
Year Medical Minimum
2012 10.5% 5.0%
2013 10.0 5.0
2014 9.5 5.0
2015 9.0 5.0
2016 8.5 5.0
2017 8.0 5.0
2018 7.5 5.0
2019 7.0 5.0
2020 6.5 5.0
2021 6.0 5.0
2022 5.5 5.0
2023+ 5.0 5.0
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 annual required contributions of the City 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 above, presents multiyear trend information about
whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial
liabilities for benefits.
Projections of benefits for financial reporting purposes are based on the substantive plan (the
plan as understood by the City and plan members) and include the types of benefits provided at the time
of each valuation. 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.
Public Agency Retirement Systems(PARS)Notes Payable
In May 2010, the City Council approved a retirement incentive program to eligible employees,
under the condition the program meets the fiscal, managerial, and operational goals of the City to help
mitigate declining General Fund revenues and institute long-term structural changes to avert future
41
budget shortfalls and ensure that the City remains financially sound. The following were the eligibility
requirements for the program:
• City miscellaneous (non-safety) and marine safety employees only
• Employed by the City as of May 3, 2010
• 50 years of age or older as of September 30, 2010
• Have at least five years of City service as of September 30, 2010
• Resign from City employment no later than September 30, 2010
• Retire under PERS no later than October 1, 2010
A total of 103 people participated and were approved by the Council for the retirement incentive
program through the Public Agency Retirement Systems (PARS) Supplemental Retirement Program
(SRP). The SRP offered through PARS allowed the City to map its own strategy with respect to
payment for the program, backfilling of positions — both number and timing, and program cost. The
participants of this program selected from a number of benefit options, the basic program in which one
twelfth of 7% of the individual employee's base annual salary as of July 1, 2010 would be paid monthly
over the lifetime of the participant commencing on October 1, 2010. Alternative payments are present
value equivalents to the basic program and include the following:
• Joint-and-survivor payments
• Payments made for the life of the participant subject to a ten year minimum
• Fixed term payments from five to fifteen years. These payments are guaranteed to the
participant for the full term selected
The City is funding the cost of this program through an annuity that required a one-time
payment of $82,000 in September 2010 and $1,587,000 fixed annual payments over five years due in
October of each year starting in 2010. In accordance with GAS13 47, a liability of the accrual cost for
this benefit has been recognized in the amount of$ 7,231,000 and the balance as of September 30, 2010
is $7,149,000. The cash flows associated with the five year funding was discounted at a rate of 5.5% in
the table below(in thousands):
Year Ending Annual
September 30 Principal Interest Payments
2011 $ 1,281 $306 $1,587
2012 1,351 236 1,587
2013 1,426 161 1,587
2014 1,504 83 1,587
2015 1,587 - 1,587
Total $7,149 $786 $7,935
Source:City of Huntington Beach Finance Department.
Short-Term Obligations
The City currently has no outstanding short-term obligations.
42
Long-Term Obligations.
General Obligation Debt. The City has no long-term general obligation bonded indebtedness
outstanding and has never defaulted on any of its bonded indebtedness previously issued. The City has
no authorized but unissued debt.
Lease Obligations. The City has made use of various lease arrangements with the Huntington
Beach Public Financing Authority to finance capital projects through the issuance of certificates of
participation and lease revenue bonds.
The following table is a summary of the City's long-term General Fund-secured obligations as
of September 1, 2011.
Summary of Long-Term Obligations
Original Outstanding Total FY 2011
Issue Principal Payments
2001A Lease Revenue Bonds $31,360,000 $24,900,000 $1,984,000
2001B Lease Revenue Bonds 31,095,000 13,960,000 2,617,000
2010A Lease Revenue Bonds 14,745,000 13,200,000 1,243,000
2004 Judgment Obligation Bonds 12,500,000 5,179,000 1,027,000
Total Long Obligations $89,700,000 $57,239,000 $6,871,000
(')This issue to be refunded with The proceeds of The Series 2011 A Bonds.
Source:City of Huntington Beach Finance Department.
Overlapping Debt
Set forth below is a direct and overlapping debt report (the "Debt Report") prepared by
California Municipal Statistics, Inc. and effective September 30, 2011. The Debt Report is included for
general information purposes only. The City has not reviewed the Debt Report for completeness or
accuracy and makes no representation in connection therewith.
The Debt Report generally includes long-term obligations sold in the public credit markets by
public agencies whose boundaries overlap the boundaries of the City in whole or in part. Such long-term
obligations generally are not payable from revenues of the City (except as indicated) nor are they
necessarily obligations secured by land within the City. In many cases, long-term obligations issued by a
public agency are payable only from the general fund or other revenues of such public agency.
The contents of the Debt Report are as follows: (1) the first column indicates the public agencies
which have outstanding debt as of the date of the Debt Report and whose territory overlaps the City; (2)
the second column shows the respective percentage of the assessed valuation of the overlapping public
agencies identified in column 1 which is represented by property located in the City; and (3) the third
column is an apportionment of the dollar amount of each public agency's outstanding debt (which
amount is not shown in the table) to property in the City, as determined by multiplying the total
outstanding debt of each agency by the percentage of the City's assessed valuation represented in
column 2.
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CITY OF HUNTINGTON BEACH
Direct and Overlapping Bonded Debt as of September 30,2011
2010-11 Assessed Valuation$26,675,158,861 (after deducting$1,769,142,738)of incremental redevelopment valuation.
Debt Repaid with Property Taxes(Tax and Assessment Debt):
Percent Debt Applicable
TAX DEBT: Applicable to City
Metropolitan Water District 1.4920% $ 3,396,836
Coast Community College District 30.1890 95,941,809
Huntington Beach Union High School District 77.6450 175,928,039
Huntington Beach City School District 97.1950 24,458,113
Westminster School District 41.6320 14,044,839
Los Alamitos Unified School District School Facilities District No. 1 1.2680 634,000
Los Alamitos Unified School District Community Facilities District No. 1990-1 1.1470 82,699
City of Huntington Beach Community Facilities District No.2003-1 100.0000 41,920,000
TAX AND ASSESSMENT DEBT $356,406,335
OTHER DEBT—OTHER ENTITIES:
Orange County General Fund Obligations $ 18,782,1.15
Orange County Pension Obligations 3,393,785
Orange County Board of Education Certificates of Participation 1,356,790
MWDOC Facilities Corporation 1,022,730
North Orange County Regional Occupation Program Certificates of Participation 12,243
Huntington Beach Union High School District Certificates of Participation 46,327,736
Los Alamitos Unified School District Certificates of Participation 231,310
Fountain Valley School Districts Certificates of Participation 3,107,052
Huntington Beach City School District Certificates of Participation 16,581,467
Ocean View School District Certificates of Participation 6,377,683
Westminster School District Certificates of Participation 10,054,128
City of Huntington Beach General Fund Obligations 52,060,000(D
City of Huntington Beach Judgment Obligations 5,179,000
TOTAL GROSS DIRECT AND OVERLAPPING BONDED DEBT NOT REPAID BY PROPERTY TAXES 164,486,039
Less Self Supporting Debt of MWDOC Water Facilities Corporation (1,022,730)
TOTAL NET DIRECT AND OVERLAPPING GENERAL FUND OBLIGATION DEBT 163,463,309
GROSS COMBINED TOTAL DEBT $520,892,374
Ratios to 2010-201 1 Assessed Valuation:
Total Overlapping Debt and Assessment Debt....................................... 1.25%
Ratios to Adiusted Assessed Valuation:
Combined Direct Debt($57,239,000)..................................................... 0.21%
Gross Combined Total Debt................................................................... 1.95%
Net Combined Total Debt....................................................................... 1.95%
State School Building Aid Repayable..................................................... $0
to Excludes Base Rental Payments with respect to The Series 2011 A Bonds.
Source:California Municipal Statistics,Inc.
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CITY OF HUNTINGTON BEACH
Direct and Overlapping Bonded Debt as of September 30,2011
2010-11 Assessed Valuation$26,675,158,861 (after deducting$1,769,142,738)of incremental redevelopment valuation.
Debt Repaid with Property Taxes(Tax and Assessment Debt):
Percent Debt Applicable
TAX DEBT: Applicable to City
Metropolitan Water District 1.4920% $ 3,396,836
Coast Community College District 30.1890 95,941,809
Huntington Beach Union High School District 77.6450 175,928,039
Huntington Beach City School District 97.1950 24,458,113
Westminster School District 41.6320 14,044,839
Los Alamitos Unified School District School Facilities District No. 1 1.2680 634,000
Los Alamitos Unified School District Community Facilities District No. 1990-1 1.1470 82,699
City of Huntington Beach Community Facilities District No.2003-1 100.0000 41,920,000
TAX AND ASSESSMENT DEBT $356,406,335
OTHER DEBT—OTHER ENTITIES:
Orange County General Fund Obligations $ 18,782,1.15
Orange County Pension Obligations 3,393,785
Orange County Board of Education Certificates of Participation 1,356,790
MWDOC Facilities Corporation 1,022,730
North Orange County Regional Occupation Program Certificates of Participation 12,243
Huntington Beach Union High School District Certificates of Participation 46,327,736
Los Alamitos Unified School District Certificates of Participation 231,310
Fountain Valley School Districts Certificates of Participation 3,107,052
Huntington Beach City School District Certificates of Participation 16,581,467
Ocean View School District Certificates of Participation 6,377,683
Westminster School District Certificates of Participation 10,054,128
City of Huntington Beach General Fund Obligations 52,060,000(D
City of Huntington Beach Judgment Obligations 5,179,000
TOTAL GROSS DIRECT AND OVERLAPPING BONDED DEBT NOT REPAID BY PROPERTY TAXES 164,486,039
Less Self Supporting Debt of MWDOC Water Facilities Corporation (1,022,730)
TOTAL NET DIRECT AND OVERLAPPING GENERAL FUND OBLIGATION DEBT 163,463,309
GROSS COMBINED TOTAL DEBT $520,892,374
Ratios to 2010-201 1 Assessed Valuation:
Total Overlapping Debt and Assessment Debt....................................... 1.25%
Ratios to Adiusted Assessed Valuation:
Combined Direct Debt($57,239,000)..................................................... 0.21%
Gross Combined Total Debt................................................................... 1.95%
Net Combined Total Debt....................................................................... 1.95%
State School Building Aid Repayable..................................................... $0
to Excludes Base Rental Payments with respect to The Series 2011 A Bonds.
Source:California Municipal Statistics,Inc.
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CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES,REVENUES AND
APPROPRIATIONS
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 July 1, 1978, and
bonded indebtedness for the acquisition or improvement of real property approved on or after July 1,
1978 by two-thirds of the votes cast by the voters voting on the proposition.
Legislation enacted by the California Legislature to implement Article XIIIA provides that all
taxable property is shown at full assessed value as described above. In conformity with this procedure, all
taxable property value included in this Official Statement(except as noted) is shown at 100% of assessed
value and all general tax rates reflect the $1 per $100 of taxable value. Tax rates for voter approved
bonded indebtedness and pension liability are also applied to 100% of assessed value.
The voters of the State subsequently approved various measures which further amended Article
X11 A. One such amendment generally provides that the purchase or transfer of(i) real property between
spouses or (ii) the principal residence and the first $1,000,000 of the Full Cash Value of other real
property between parents and children, do not constitute a "purchase" or "change of ownership"
triggering reappraisal under Article X11 A. Other amendments permitted the State Legislature to allow
persons over the age of 55 who meet certain criteria or "severely disabled homeowners" who sell their
residence and buy or build another of equal or lesser value within two years in the same county, to
transfer the old residence's assessed value to the new residence. Other amendments permit the State
Legislature to allow persons who are either 55 years of age or older, or who are "severely disabled," to
transfer the old residence's assessed value to their new residence located in either the same or a different
county and acquired or newly constructed within two years of the sale of their old residence.
In the November 1990 election, the voters approved an amendment of Article XIIIA to permit the
State Legislature to exclude from the definition of "new construction" certain additions and
improvements, including seismic retrofitting improvements and improvements utilizing earthquake
hazard mitigation technologies constructed or installed in existing buildings after November 6, 1990.
Article XIIIA has also been amended to provide that there would be no increase in the Full Cash
Value base in the event of reconstruction of the property damaged or destroyed in a disaster.
Section 51 of the Revenue and Taxation Code permits county assessors who have reduced the
assessed valuation of a property as a result of natural disasters, economic downturns or other factors, to
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subsequently"recapture" such value(up to the pre-decline value of the property) at an annual rate higher
than 2%, depending on the assessor's measure of the restoration of value of the damaged property.
Section 4 of Article XIIIA also provides that cities, counties and special districts cannot, without
a two-thirds vote of the qualified electors, impose special taxes, which has been interpreted to include
special fees in excess of the cost of providing the services or facility for which the fee is charged, or fees
levied for general revenue purposes.
Both the California State Supreme Court and the United States Supreme Court have upheld the
validity of Article XIIIA.
Article XIIIB of the California Constitution
On November 6, 1979, California voters approved Proposition 4, the Gann Initiative, which
added Article XIIIB to the California Constitution. In June 1990, Article XIIIB was amended by the
voters through their approval of Proposition 111. Article XIIIB of the California Constitution limits the
annual appropriations of the State and any city, county, school district, authority or other political
subdivision of the State to the level of appropriations for the prior fiscal year, as adjusted annually for
changes in the cost of living, population and services rendered by the governmental entity. The "base
year" for establishing such appropriation limit is fiscal year 1978-79. Increases in appropriations by a
governmental entity are also permitted (1) if financial responsibility for providing services is transferred
to the governmental entity, or (2) for emergencies so long as the appropriations limits for the three years
following the emergency are reduced to prevent any aggregate increase above the Constitutional limit.
Decreases are required where responsibility for providing services is transferred from the government
entity.
Appropriations subject to Article XIIIB include generally any authorization to expend during the
fiscal year the proceeds of taxes levied by the State or other entity of local government, exclusive of
certain State subventions, refunds of taxes, benefit payments from retirement, unemployment insurance
and disability insurance funds. Appropriations subject to limitation pursuant to Article XIIIB do not
include debt service on indebtedness existing or legally authorized as of January 1, 1979, on bonded
indebtedness thereafter approved according to law by a vote of the electors of the issuing entity voting in
an election for such purpose, appropriations required to comply with mandates of courts or the Federal
government, appropriations for qualified outlay projects, and appropriations by the State of revenues
derived from any increase in gasoline taxes and motor vehicle weight fees above January 1, 1990 levels.
"Proceeds of taxes" include, but are not limited to, all tax revenues and the proceeds to any entity of
government from (1) regulatory licenses, user charges, and user fees to the extent such proceeds exceed
the cost of providing the service or regulation, (2) the investment of tax revenues and (3) certain State
subventions received by local governments. As amended by Proposition 111, the appropriations limit is
tested over consecutive two-year periods.Any excess of the aggregate"proceeds of taxes"received by the
City over such two-year period above the combined appropriations limits for those two years is to be
returned to taxpayers by reductions in tax rates or fee schedules over the subsequent two years.
As amended in June 1990, the appropriations limit for the City in each year is based on the limit
for the prior year, adjusted annually for changes in the costs of living and changes in population, and
adjusted, where applicable, for transfer of financial responsibility of providing services to or from another
unit of government. The change in the cost of living is, at the City's option, either (1) the percentage
change in California per capita personal income, or (2) the percentage change in the local assessment roll
for the jurisdiction due to the addition of nonresidential new construction. The measurement of change in
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population is a blended average of statewide overall population growth, and change in attendance at local
school and community college("K-14") districts.
Article XIIIB permits any government entity to change the appropriations limit by vote of the
electorate in conformity with statutory and Constitutional voting requirements, but any such voter-
approved change can only be effective for a maximum of four years.
The City's appropriations limit was $902,730,066 for fiscal year 2010-11 and$1,181,036,690 for
fiscal year 2011-12 which is well below the total City budget amounts for both years. Therefore, the City
did not have a need to calculate the appropriations subject to limitation.
Proposition 218
On November 5, 1996, the voters of the State approved Proposition 218, a constitutional
initiative, entitled the"Right to Vote on Taxes Act" ("Proposition 218"). Proposition 218 added Articles
XIII C and XIII D to the California Constitution and contained a number of interrelated provisions
affecting the ability of local governments, including the City, to levy and collect both existing and future
taxes, assessments, fees and charges. The City is unable to predict whether and to what extent Proposition
218 may be held to be constitutional or how its terms will be interpreted and applied by the courts.
Proposition 218 could substantially restrict the City's ability to raise future revenues and could subject
certain existing sources of revenue to reduction or repeal, and increase the City's costs to hold elections,
calculate fees and assessments, notify the public and defend its fees and assessments in court. However,
the City does not presently believe that the potential financial impact on the City as a result of the
provisions of Proposition 218 will adversely affect the City's ability to pay its debt obligations and
perform its other obligations payable from the General Fund as and when due.
Article XIII C requires that all new local taxes be submitted to the electorate before they become
effective. Taxes for general governmental purposes of the City require a majority vote and taxes for
specific purposes, even if deposited in the City's General Fund, require a two-thirds vote. Further, any
general purpose tax that the City imposed, extended or increased without voter approval after December
31, 1994 may continue to be imposed only if approved by a majority vote in an election held within two
years of November 5, 1996. The City has not enacted, imposed, extended or increased any tax without
voter approval since January 1, 1995. These voter approval requirements of Proposition 218 reduce the
flexibility of the City to raise revenues through General Fund taxes, and no assurance can be given that
the City will be able to impose, extend or increase such taxes in the future to meet increased expenditure
requirements.
Article XIII C also expressly extends to voters the power to reduce or repeal local taxes,
assessments, fees and charges through the initiative process, regardless of the date such taxes,
assessments, fees or charges were imposed. This extension of the initiative power is not limited by the
terms of Proposition 218 to fees imposed after November 6, 1996 and absent other legal authority could
result in retroactive reduction in any existing taxes, assessments or fees and charges. SB 919 provides that
the initiative powers extended to voters under Article XIII C likely excludes actions construed as
impairment of contracts under the contract clause of the United States Constitution. SB 919 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 November 6, 1998, 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.Further, "fees" and
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"charges" are not defined in Article XIII C or SB 919, and it is unclear whether these terms are intended
to have the same meanings for purposes of Article XIII C as they do in Article XIII D. Accordingly, the
scope of the initiative power under Article XIII C could include all sources of General Fund monies not
received from or imposed by the federal or State government or derived from investment income.
The initiative power granted under Article XIII C of Proposition 218, by its terms, applies to all
local taxes, assessments, fees and charges. The City is unable to predict whether the courts will ultimately
interpret the initiative provision to be limited to property related local taxes, assessments, fees and
charges. 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 which are deposited into the City's
General Fund. The City believes that in the event that the initiative power was exercised so that all local
taxes, assessments, fees and charges which may be subject to the provisions of Proposition 218 are
reduced or substantially reduced, the financial condition of the City, including its General Fund, would be
materially adversely affected. As a result, there can be no assurance that the City would be able to make
Base Rental Payments under the Lease Agreement as and when due or any of its other obligations payable
from the General Fund.
Article XIII D of Proposition 218 adds several new requirements to make it more difficult for
local agencies to levy and maintain "assessments" for municipal services and programs. "Assessment" is
defined in Proposition 218 and SB 919 as any levy or charge upon real property for a special benefit
conferred upon the real property. This includes maintenance assessments imposed in City service areas
and in special districts. In most instances, in the event that the City is unable to collect assessment
revenues relating to specific programs as a consequence of Proposition 218, the City will curtail such
services rather than use amounts in the General Fund to finance such programs. Accordingly, the City
anticipates that any impact Proposition 218 may have on existing or future taxes, fees, and assessments
will not adversely affect the ability of the City to make Base Rental Payments under the Lease Agreement
as and when due and, accordingly, the ability of the Authority to make payments of principal of and
interest on the Series 2011A Bonds. However,no assurance can be given that the City may or will be able
to reduce or eliminate such services in the event the assessments that presently finance them are reduced
or repealed.
Article XIII D also adds several provisions, including notice requirements and restrictions on use,
affecting "fees" and"charges" which are defined as "any levy other than an ad valorem tax, a special tax,
or an assessment, imposed by a local government upon a parcel or upon a person as an incident of
property ownership, including a user fee or charge for a property related service." The annual amount of
revenues that are received by the City and deposited into its General Fund which may be considered to be
property related fees and charges under Article XIII D of Proposition 218 is not substantial. Accordingly,
presently the City does not anticipate that any impact Proposition 218 may have on future fees and
charges will not adversely affect the ability of the City to make Base Rental Payments under the Lease
Agreement as and when due and, accordingly, the ability of the Authority to make payments of principal
of and interest on the Series 2011A Bonds. However, no assurance can be given that the City may or will
be able to reduce or eliminate such services in the event the fees and charges that presently finance them
are reduced or repealed.
Additional implementing legislation respecting Proposition 218 may be introduced in the State
legislature from time to time that would supplement and add provisions to California statutory law. No
assurance may be given as to the terms of such legislation or its potential impact on the City.
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Proposition 1A of 2004
The California Constitution and existing statutes give the legislature authority over property
taxes, sales taxes and the vehicle license fee (the "VLF"). The legislature has authority to change tax
rates, the items subject to taxation and the distribution of tax revenues among local governments, schools,
and community college districts. The State has used this authority for many purposes, including
increasing funding for local services, reducing State costs, reducing taxation, addressing concerns
regarding funding for particular local governments, and restructuring local finance.
The California Constitution generally requires the State to reimburse the local governments when
the State "mandates" a new local program or higher level of service. Due to the ongoing financial
difficulties of the State, it has not provided in recent years reimbursements for many mandated costs. In
other cases, the State has "suspended" mandates, eliminating both responsibility of the local governments
for complying with the mandate and the need for State reimbursements.
The 2004 Budget Act, related legislation and the enactment of Proposition 1A of 2004 (described
below) dramatically changed the State-local fiscal relationship. These constitutional and statutory changes
implemented an agreement negotiated between the Governor and local government officials (the "State-
local agreement") in connection with the 2004 Budget Act.
One change related to the reduction of the VLF rate from 2% to 0.65% of the market value of the
vehicle. In order to protect local governments, which had previously received all VLF revenues, the 1.35
percent reduction in VLF revenue to cities and counties from this rate change was backfilled by an
increase in the amount of property tax revenues they receive. This worked to the benefit of local
governments, because the backfill amount annually increases in proportion to the growth in secured roll
property tax revenues, which has historically grown at a higher rate than VLF revenues. Proposition 1A of
2004 requires the State to provide local governments with equal replacement revenues.
On November 3, 2004 the voters of the State approved Proposition 1A ("Proposition 1A of
2004"). Proposition 1A of 2004 amended the State Constitution to, among other things, reduce the
Legislature's authority over local government revenue sources by placing restrictions on the State's
access to local governments' property, sales, and VLF revenues as of November 3, 2004. Pursuant to
Proposition 1A of 2004, the State is able to borrow up to 8% 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 State Legislature approve the borrowing. Any amounts borrowed are required to be repaid
within three years. Proposition 1A of 2004 also permits the State to borrow from local property tax
revenues for no more than two fiscal years within a period of 10 fiscal years, and only if previous
borrowings have been repaid. In addition, the State cannot reduce the local sales tax rate or restrict the
authority of the local governments to impose or change the distribution of the Statewide local sales tax.
Proposition 1A of 2004 generally prohibits the State from mandating activities on cities, counties, or
special districts without providing the funding needed to comply with the mandates, and if the State does
not provide funding for the activity that has been determined to be mandated, the requirement on cities,
counties, or special districts to abide by the mandate is suspended. Proposition 1A of 2004 also expanded
the definition of what constitutes a mandate to encompass State action that transfers to cities, counties,
and special districts financial responsibility for a required program for which the State previously had
partial or complete responsibility. The State mandate provisions of Proposition 1A of 2004 do not apply
to schools or community colleges or to mandates relating to employee rights.
Pursuant to statutory changes made in conjunction with amendments to the fiscal year 2008-09
State Budget Act, the fiscal year 2009-10 State Budget Act and related budget legislation adopted by the
State Legislature and signed by the Governor in February 2009 (collectively, the"February 2009 Budget
49
Package"), the VLF rate increased from 0.65% to 1.15% effective May 19, 2009. Of this 0.50% increase,
0.35% will flow to the State general fund, and 0.15% will support various law enforcement programs
previously funded by the State general fund. This increased VLF rate will be effective through fiscal year
2010-11.
During Fiscal Year 2009-10, the State declared a fiscal emergency and suspended Proposition 1A
which enabled it to borrow eight percent of the amount of property tax revenue apportioned to cities,
counties, and special districts. During this time the Proposition 1A Securitization Program was passed by
State legislators to allow local agencies to securitize their respective Proposition 1A receivable through a
debt offering, with bonds simultaneously to provide each agency with the cash proceeds in two equal
installments on January 15, 2010 and May 3, 2010. As a participant in this program, the City experienced
no net reduction in revenues from the property tax reduction borrowing by the State.
See "RISK FACTORS — State Budgets" for information relating to Proposition lA and the
suspension of Proposition lA in the State's 2009-10 budget.
Recently Approved Initiatives
At the State general election on November 2, 2010, three initiative measures that will affect State
and local fiscal affairs in the future were approved by the voters.
Proposition 22 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.
Proposition 25 reduces the legislative vote requirement for passage of the annual State budget and
certain related trailer bills from two-thirds to a simple majority. The reduced vote requirement does not
apply to measures that increase State tax revenues, which will continue to require a two-thirds vote. It
also requires members of the legislature to permanently forfeit their pay and reimbursement for travel and
living expenses for each day after June 15 that a budget is not passed. It does not change the ability of the
Governor to eliminate or reduce any appropriation using a line-item veto.
Proposition 26 imposes a two-thirds voter approval requirement for the imposition of certain fees
and charges by the State. It would also impose a majority voter approval requirement on local
governments with respect to fees and charges for general purposes, and a two-thirds voter approval
requirement with respect to fees and charges for special purposes. The initiative, according to its
supporters, is intended to prevent the circumvention of tax limitations imposed by the voters pursuant to
Proposition 13, approved in 1978, and other measures through the use of non-tax fees and charges.
Proposition 26 expressly excludes from its scope "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 cost to the [State/local government] of providing the service or product to the
payor" The City believes that the initiative is not intended to and would not apply to fees for utility
services charged by local governments such as the City; however, the City is unable to predict whether
Proposition 26 will be interpreted by the courts to apply to the provision of utility services by local
governments such as the City.
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Future Initiatives
Article XIIIA, Article XIIIB, Proposition 218 and Proposition 1A 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, which may place further limitations on the ability of the State, the City or
local districts to increase revenues or to increase appropriations which may affect the City's revenues or
its ability to expend its revenues.
RISK FACTORS
This section provides a general overview of certain risk factors which should be considered, in
addition to the other matters set forth in this Official Statement, in evaluating an investment in the Series
2011A Bonds. This section is not meant to be a comprehensive or definitive discussion of the risks
associated with an investment in the Series 2011A Bonds, and the order in which this information is
presented does not necessarily reflect the relative importance of various risks. Potential investors in the
Series 2011A Bonds are advised to consider the following factors, among others, and to review this entire
Official Statement to obtain information essential to the making of an informed investment decision. Any
one or more of the risk factors discussed below, among others, could lead to a decrease in the market
value and/or in the marketability of the Series 2011A Bonds. There can be no assurance that other risk
factors not discussed herein will not become material in the future.
Limited Obligation
The Series 2011A Bonds are not City debt and are limited obligations of the Authority. Neither
the full faith and credit of the Authority nor the City is pledged for the payment of the interest on or
principal of the Series 2011A Bonds nor for the payment of Base Rental Payments. The Authority has no
taxing power. The obligation of the City to pay Base Rental Payments when due is an obligation payable
from amounts in the General Fund of the City. The obligation of the City to make Base Rental Payments
under the Lease Agreement does not constitute an obligation of the City for which the City is obligated to
levy or pledge any form of taxation or for which the City has levied or pledged any form of taxation.
Neither the Series 2011A Bonds nor the obligation of the City to make Base Rental Payments under the
Lease Agreement constitute a debt or indebtedness of the Authority, the City, the State or any of its
political subdivisions, within the meaning of any constitutional or statutory debt limitation or restrictions.
Base Rental Payments Are Not Debt
The obligation of the City to make the Base Rental Payments under the Lease Agreement does
not constitute an obligation of the City for which the City is obligated to levy or pledge any form of
taxation or for which the City has levied or pledged any form of taxation.Neither the Series 2011A Bonds
nor the obligation of the City to make Base Rental Payments constitute a debt of the City, the State of
California or any political subdivision thereof (other than the Authority) within the meaning of any
constitutional or statutory debt limitation or restriction.
The Series 2011A Bonds are not general obligations of the Authority, but are limited obligations
payable solely from and secured by a pledge of Lease Revenues and amounts held in the funds and
accounts created under the Indenture, consisting primarily of Base Rental Payments. The Authority has no
taxing power.
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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 from any
source of legally available funds and the City has covenanted in the Lease Agreement that, for so long as
the Property is available for its use, it will make the necessary annual appropriations within its budget for
the Base Rental Payments. The City is currently liable and may become liable on other obligations
payable from general revenues, some of which may have a priority over the Base Rental Payments, or
which the City, in its discretion, may determine to pay prior to the Base Rental Payments.
The City has the capacity to enter into other obligations payable from the City's General Fund,
without the consent of or prior notice to the Owners of the Series 2011A Bonds. 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 municipal services before making Base Rental Payments. The same result could occur if,
because of State constitutional limits on expenditures, the City is not permitted to appropriate and spend
all of its available revenues. The City's appropriations, however, have never exceeded the limitations on
appropriations under Article XIIIB of the California Constitution. For information on the City's current
limitations on appropriations, see "CONSTITUTIONAL AND STATUTORY LIMITATIONS ON
TAXES, REVENUES AND APPROPRIATIONS-Article XIIIB of the California Constitution."
Valid and Binding Covenant to Budget and Appropriate
Pursuant to the Lease Agreement, the City covenants to take such action as may be necessary to
include Base Rental Payments due in its annual budgets and to make necessary appropriations for all such
payments. Such covenants are deemed to be duties imposed by law, and it is the duty of the public
officials 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 such covenants. A court,
however, in its discretion may decline to enforce such covenants. Upon issuance of the Series 2011A
Bonds, Bond Counsel will render its opinion (substantially in the form of APPENDIX E— "PROPOSED
FORM OF BOND COUNSEL OPINION") to the effect that, subject to the limitations and qualifications
described therein, the Lease Agreement constitutes a valid and binding obligation of the City. As to the
Authority's practical realization of remedies upon default by the City, see"—Limitations on Remedies."
Abatement
In the event of loss or substantial interference in the use and possession by the City of all or any
portion of the Property caused by material damage, title defect, destruction to or condemnation of the
Property, Base Rental Payments will be subject to abatement. In the event that such component of the
Property, if damaged or destroyed by an insured casualty, could not be replaced during the period of time
that proceeds of the City's rental interruption insurance will be available in lieu of Base Rental Payments,
or in the event that casualty insurance proceeds or condemnation proceeds are insufficient to provide for
complete repair or replacement of such component of the Property or prepayment of the Series 2011A
Bonds, there could be insufficient funds to make payments to Owners in full. Reduction in Base Rental
Payments due to abatement as provided in the Lease Agreement does not constitute a default thereunder.
It is not possible to predict the circumstances under which such an 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 Agreement 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 issuance of the Series 2011A Bonds.
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Abatement, therefore, could have an uncertain and material adverse effect on the security for and payment
of the Series 2011A Bonds. Depending on its severity, an earthquake could result in abatement of Base
Rental Payments under the Lease Agreement. See"—Earthquakes"
Risk of Uninsured Loss
The City covenants under the Lease Agreement to maintain insurance on the Property. See
"SECURITY FOR THE BONDS — Insurance." These insurance policies do not cover all types of risk,
and the insurance required under the Lease Agreement may be maintained in whole or in part in the form
of self-insurance, provided that such self-insurance complies with the terms thereof. The Property could
be damaged or destroyed due to earthquake or other casualty for which the Property is uninsured.
Additionally, the Property could be the subject of an eminent domain proceeding. Under these
circumstances an abatement of Base Rental Payments could occur and could continue indefinitely. There
can be no assurance that the providers of the City's liability and rental interruption insurance will in all
events be able or willing to make payments under the respective policies for such loss should a claim be
made under such policies. Further, there can be no assurances that amounts received as proceeds from
insurance or from condemnation of the Property will be sufficient to redeem the Series 2011A Bonds.
Under the Lease Agreement the City may obtain casualty insurance which provides for a
deductible up to $100,000. Should the City be required to meet such deductible expenses, the availability
of General Fund revenues to make Base Rental Payments may be correspondingly affected.
The City is not obligated under the Lease Agreement to procure and maintain, or cause to be
procured and maintained, earthquake insurance on the Property. The City currently carries earthquake
insurance on the Property although the Lease Agreement does not require it to do so. The City plans to
continue to purchase earthquake insurance on the Property so long as such insurance can be obtained on
the open market at reasonable rates. Depending on its severity, an earthquake could result in abatement
of Base Rental Payments under the Lease Agreement. See"—Abatement."
Eminent Domain
If the Property is taken permanently under the power of eminent domain or sold to a government
threatening to exercise the power of eminent domain, the term of the Lease Agreement will cease as of
the day possession is taken. If less than all of the Property is taken permanently, or if the Property or any
part thereof is taken temporarily, under the power of eminent domain, (a) the Lease Agreement will
continue in full force and effect and will not be terminated by virtue of such taking, and(b) there will be a
partial abatement of Base Rental Payments as a result of the application of net proceeds of any eminent
domain award to the prepayment of the Base Rental Payments, in an amount to be agreed upon by the
City and the Authority such that the resulting Base Rental Payments represent fair consideration for the
use and occupancy of the remaining usable portion of the Property.
Hazardous Substances
The existence or discovery of hazardous materials may limit the beneficial use of the Property. In
general, the owners and lessees of the Property may be required by law to remedy conditions of such
parcel relating to release or threatened releases of hazardous substances. The federal Comprehensive
Environmental Response, Compensation and Liability Act of 1980, sometimes referred to as "CERCLA"
or the"Superfund Act," is the most well known and widely applicable of these laws, but California laws
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with regard to hazardous substances are also similarly stringent. Under many of these laws, the owner or
lessee is obligated to remedy a hazardous substance condition of the property whether or not the owner or
lessee had anything to do with creating or handling the hazardous substance.
Further it is possible that the beneficial use of the Property may be limited in the future resulting
from the current existence on the Property of a substance currently classified as hazardous but which has
not been released or the release of which is not presently threatened, or may arise in the future resulting
from the current existence on the Property of a substance not presently classified as hazardous but which
may in the future be so classified. Further, such liabilities may arise not simply from the existence of a
hazardous substance but from the method in which it is handled. All of these possibilities could
significantly limit the beneficial use of the Property.
The City is unaware of the existence of hazardous substances on the Property site which would
materially interfere with the beneficial use thereof.
Earthquakes
Generally, within the State, some level of seismic activity occurs on a regular basis. During the
past 150 years, the Southern California area has experienced several major and numerous minor
earthquakes. The most recent major earthquake in the Southern California area was the Northridge
earthquake, which occurred on January 17, 1994. The Northridge earthquake, with an epicenter
approximately 50 miles north of the City, measured 6.5 on the Richter scale. A recent report issued by a
working group of scientists and engineers, known as the Working Group on California Earthquake
Probabilities, sponsored in part by the U.S. Geological Survey, has projected that California has more
than a 99% chance of having a magnitude 6.7 or larger earthquake within the next 30 years, according to
scientists using a new model to determine the probability of big quakes. The likelihood of a major quake
of magnitude 7.5 or greater in the next 30 years is projected at 46% and such a quake is most likely to
occur in the southern half of the state.
The City has been affected by earthquakes, in most instances attributed to the Newport-
Inglewood fault, which has been responsible for several sizable temblors including the 1933 Long Beach
quake. The City is not legally obligated under the Lease Agreement to maintain, or cause to be
maintained, earthquake insurance on the Property and no assurance is made that any earthquake insurance
will be maintained. If there were to be an occurrence of severe seismic activity in the City, there could be
substantial damage to and interference with the City's right to use and occupy all or a portion of the
Property, which could result in Base Rental Payments being subject to abatement. Additionally, severe
seismic activity in the City could impact the City's General Fund expenditures. See "CERTAIN RISK
FACTORS—Abatement" above.
Tsunami and Seiche
Similarly, the City is susceptible to tsunami and seiche hazards. A tsunami is a sea wave
generated by a submarine earthquake, landslide or volcanic eruption. A seiche is another form of
earthquake- or landslide-induced wave or oscillation that can be generated in an enclosed body of water
such as a lagoon or harbor. The entire City is less than 100 feet above sea level, and about 75 percent is
less than 25 feet above sea level. From the coast, the first 2 miles of inland homes and terrain east of the
Bolsa Chica wetlands and the Pacific Ocean range in elevation between 0 to 5 feet above sea level.
Homes in the upscale Huntington Harbour sector are at 5 to 10 feet above sea level. And at the inland
border with Fountain Valley, the elevation is about 15 feet. As such, the City is located in an area that is
54
susceptible to tsunami run up and seiche hazards. Although the City believes that no active or inactive
fault lines pass through the City, if there were to be an occurrence of severe seismic activity at the City,
there could be a negative impact on the property at the City which could have an adverse effect on the
City's ability to make Base Rental Payments under the Lease Agreement as and when due and,
accordingly, the ability of the Authority to make payments of principal of and interest on the Series
2011A Bonds.
Bankruptcy
In addition to the limitation on remedies contained in the Indenture, the rights and remedies
provided in the Indenture and the Lease Agreement may be limited by and are subject to the provisions of
federal bankruptcy laws and to other laws or equitable principles that may affect the enforcement of
creditors' rights. The City is a unit of State government and therefore is not subject to the involuntary
procedures of the United States Bankruptcy Code (the `Bankruptcy Code"). However, pursuant to
Chapter 9 of the Bankruptcy Code, the City may seek voluntary protection from its creditors for purposes
of adjusting its debts. In the event the City were to become a debtor under the Bankruptcy Code, the City
would be entitled to all of the protective provisions of the Bankruptcy Code as applicable in a Chapter 9
proceeding.Among the adverse effects of such a bankruptcy might be: (i) the application of the automatic
stay provisions of the Bankruptcy Code, which, until relief is granted, would prevent collection of
payments from the City or the commencement of any judicial or other action for the purpose of
recovering or collecting a claim against the City; (ii) the avoidance of preferential transfers occurring
during the relevant period prior to the filing of a bankruptcy petition; (iii) the existence of unsecured or
court-approved secured debt which may have a priority of payment superior to that of Owners of Series
2011A Bonds; and (iv) the possibility of the adoption of a plan for the adjustment of the City's debt (a
"Plan") without the consent of the Trustee or all of the Owners of Series 2011A Bonds, which Plan may
restructure, delay, compromise or reduce the amount of any claim of the Owners if the Bankruptcy Court
finds that the Plan is fair and equitable.
In addition, the City could either reject the Lease Agreement or assume the Lease Agreement
despite any provision of the Lease Agreement which makes the bankruptcy or insolvency of the City an
event of default thereunder. In the event the City rejects the Lease Agreement, the Trustee, on behalf of
the Owners of the Series 2011A Bonds, would have a pre-petition claim that may be limited under the
Bankruptcy Code and treated in a manner under a Plan over the objections of the Trustee or Owners of
the Series 2011A Bonds. Moreover, such rejection would terminate the Lease Agreement and the City's
obligations to make payments thereunder.
The Authority is a public agency and, like the City, is not subject to the involuntary procedures of
the Bankruptcy Code. The Authority may also seek voluntary protection under Chapter 9 of the
Bankruptcy Code. In the event the Authority were to become a debtor under the Bankruptcy Code, the
Authority would be entitled to all of the protective provisions of the Bankruptcy Code as applicable in a
Chapter 9 proceeding. Such a bankruptcy could adversely affect the payments under the Indenture.
Among the adverse effects might be: (i) the application of the automatic stay provisions of the
Bankruptcy Code, which, until relief is granted, would prevent collection of payments from the Authority
or the commencement of any judicial or other action for the purpose of recovering or collecting a claim
against the Authority; (ii)the avoidance of preferential transfers occurring during the relevant period prior
to the filing of a bankruptcy petition; (iii) the existence of unsecured or court-approved secured debt
which may have priority of payment superior to that of the Owners of the Series 2011A Bonds; and (iv)
the possibility of the adoption of a plan for the adjustment of the Authority's debt without the consent of
the Trustee or all of the Owners of the Series 2011A Bonds, which plan may restructure, delay,
compromise or reduce the amount of any claim of the Owners if the Bankruptcy Court finds that the Plan
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is fair and equitable. However, the bankruptcy of the Authority, and not the City, should not affect the
Trustee's rights under the Lease Agreement. The Authority could still challenge the assignment, and the
Trustee and/or the Owners of the Series 2011A Bonds could be required to litigate these issues in order to
protect their interests.
Limitations on Remedies
The rights of the Owners of Series 2011A Bonds are subject to the limitations on legal remedies
against cities in the State, including applicable bankruptcy, insolvency, reorganization, moratorium and
similar laws affecting the enforcement of creditors' rights generally, now or hereafter in effect, and to the
application of general principles of equity, including concepts of materiality, reasonableness, good faith
and fair dealing and the possible unavailability of specific performance or injunctive relief, regardless of
whether considered in a proceeding in equity or at law.
Under Chapter 9 of the Bankruptcy Code (Title 11, United States 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
Series 2011A 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.
All legal opinions with respect to the enforcement of the Lease Agreement and the Indenture will
be expressly subject to a qualification that such agreements may be limited by bankruptcy,reorganization,
insolvency, moratorium or other similar laws affecting creditors' rights generally and by applicable
principles of equity if equitable remedies are sought.
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 2011A 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.
Risk of Tax Audit
In December 1999, as a part of a larger reorganization of the Internal Revenue Service (the
"IRS"), the IRS commenced operation of its Tax Exempt and Government Entities Division (the"TE/GE
Division"), as the successor to its Employee Plans and Exempt Organizations division. The new TE/GE
Division has a subdivision that is specifically devoted to tax-exempt bond compliance. Public statements
by IRS officials indicate that the number of tax-exempt bond examinations (which would include the
issuance of securities such as the Bonds) is expected to increase significantly under the new TE/GE
Division. There is no assurance that if an IRS examination of the Series 2011A Bonds was undertaken
that it would not adversely affect the market value of the Series 2011A Bonds. See"TAX MATTERS."
The City has not been contacted by the IRS regarding the examination of any of its bond
transactions.
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State Budget
Approximately 50% (consisting of the sales tax, property tax and the motor vehicle license fee) of
the City's fiscal year 2010-11 General Fund budget consisted of payments collected by the State and
passed-through to local governments or collected by and allocated to local governments by State law.
The financial condition of the State has an impact on the level of these revenues. In past years the State
has reduced revenues to cities and counties to help solve the State's budget problems.
The following information concerning the State of California's budgets has been obtained from
publicly available information which the Authority and the City believe to be reliable; however, neither
the Authority nor the City can take responsibility as to the accuracy or completeness thereof and have not
independently verified such information. Information about the State Budget is regularly available at
various State-maintained websites. Text of the budget may be found at the Department of Finance
website, www.dof ca.gov, under the heading "California Budget."An impartial analysis of the budget is
posted by the State Legislative Analyst's Office at www.lao.ca.gov. In addition, various State official
statements, many of which contain a summary of the current and past State budgets, may be found at the
website of the State Treasurer, wvvw.treasurer.ca.gov. The information referred to is prepared by the
respective State agency maintaining each website and not by the Authority, the City or the Underwriters,
and the none of the Authority, the City or the Underwriters can take responsibility for the continued
accuracy of the internet addresses or for the accuracy or timeliness of information posted there, and such
information is not incorporated herein by these references.
The State's fiscal year begins on July 1 and ends on June 30. The annual budget is proposed by
the Governor by January 10 of each year for the next fiscal year (the"Governor's Budget"). Under State
law, the annual proposed Governor's Budget cannot provide for projected expenditures in excess of
projected revenues and balances available from prior fiscal years. Following the submission of the
Governor's Budget, the Legislature takes up the proposal.
Under the State Constitution, money may be drawn from the Treasury only through an
appropriation made by law. The primary source of the annual expenditure authorizations is the Budget
Act as approved by the Legislature and signed by the Governor. The Budget Act must be approved by a
two-thirds majority vote of each house of the Legislature. The Governor may reduce or eliminate specific
line items in the Budget Act or any other appropriations bill without vetoing the entire bill. Such
individual line-item vetoes are subject to override by a two-thirds majority vote of each house of the
Legislature.
Appropriations also may be included in legislation other than the Budget Act. Continuing
appropriations, available without regard to fiscal year, may also be provided by statute or the State
Constitution. Funds necessary to meet an appropriation need not be in the State treasury at the time such
appropriation is enacted; revenues may be appropriated in anticipation of their receipt.
On November 10, 2010, the State's Legislative Analyst's Office (the "LAO") released a report
entitled "The 2011-12 Budget: California's Fiscal Outlook" (the "2011-12 LAO Fiscal Outlook"), which
updated the LAO's forecast of the State's general fund revenues and expenditures. The LAO projected
that, absent corrective action, the State will have a budget deficit of approximately$25.4 billion at the end
of Fiscal Year 2011-12 (inclusive of a budget deficit of$6 billion at the end of Fiscal Year 2010-11) and
budget deficits of approximately$20 billion per fiscal year through Fiscal Year 2015-16. The LAO noted
that the Fiscal Year 2010-11 State Budget Act included $4 billion in assumed federal funding that had not
been approved at the time of its adoption, and projected that $3.5 billion of such amount (or flexibility
related thereto) will not be received. The LAO cautioned that a net $3 billion of additional budget
solutions will not be achieved and that Proposition 22, which was approved in November 2010, will
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reduce State general fund solutions by approximately $800 million. In order to address the State's
structural budget deficit, the LAO recommended that the State take a multi-year approach and minimize
the use of risky budgetary measures that it believes contribute to fiscal year-end deficits. The LAO further
recommended that the State Legislature consider revenue policies including, among other things, tax
expenditure programs such as special credits, deductions and exemptions, increasing charges for program
beneficiaries, extending certain temporary tax increases, and reconsidering the optional single sales factor
for multistate companies.According to the LAO, the approval of permanent actions and certain temporary
budget solutions could eliminate the State's structural deficit and allow the State to build reserves to
address the next economic downturn and any long-term fiscal liabilities.
The Governor released his proposed 2011-12 budget package on January 10, 2011, one week
after his inauguration. A centerpiece of the Governor's budget proposal was a major realignment of
program duties, similar to the plan enacted by the state in 1991. In short, the Governor's plan would
propose to raise $5.9 billion in taxes, and shift $5.9 billion to counties to implement increased program
obligations. Further, under the plan, the state's voters would decide whether to extend by five years two
tax increases due to expire on June 30, 2011: a one cent sales tax and the 0.5 percent VLF General Fund
rate. A key component of this plan was proposed voter approved tax extensions, which were not able to
be approved by the State legislature for placement on the ballot. Parts of the administration's proposed
realignment were to be phased in over time. For example, the community supervision responsibilities
sent to counties would expand over time as more state inmates were released from prison. The
administration estimates that counties would be responsible for about 18,500 parolees in the budget year,
growing to 66,900 upon full implementation in 2014-15. During the first years of this realignment plan,
therefore, some of the realignment revenues would be allocated to the state to pay for its costs to continue
operating the realigned programs. The administration also indicated that it planned to propose in the
future a second realignment("Phase 2") mainly involving health care and social services.
On June 15, 2011, the Legislature passed and presented the Governor with California's first on-
time State budget in approximately 25 years. This on-time delivery might have avoided the penalties of
Proposition 25, an initiative passed by California voters in November 2010, which provides that
legislators forfeit their pay for every day after the June 15 deadline that a State budget is not passed. The
budget was passed by legislative democrats, who hold majorities in the State Assembly and Senate, and
presented as an attempt to patch over the State's deficit after the Governor's talks with legislators on his
tax proposals faltered. The budget plan included taxes, cuts and various accounting and policy
maneuvers, including the delay of billions of dollars in payments, the forgoing of debt repayments, and
revenue projections. On June 16, 2011, the Governor vetoed the budget, calling the plan "unbalanced"
and including "costly borrowing and unrealistic savings."
Fiscal Year 2011-12 State Budget
On June 30, 2011, the Governor signed the 2011-12 Budget Act. The Legislature also sent a
number of budget—related trailer bills to the Governor in both March and June. The 2011-12 State
spending plan includes total budget expenditures of$120.1 billion from the State general fund and special
funds. This consists of $85.9 billion from the State general fund and $34.1 billion from special funds.
While State general fund spending has dropped by around 6 percent from 2010-11, this has, in part, been
offset by increases in special fund spending as the state shifts some programs—from state to local
responsibility under the proposed realignment from State general fund support to special fund support.
Federal funds spending continues to decline with the expiration of much of the funding made available
through the American Recovery and Reinvestment Act.
The realignment plan included in the 2011-12 budget package includes the following:
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• Sales Tax Revenue Redirected to Realignment Fund. The budget package redirects
1.0625 percentage points of SUT from the State general fund to the Local Realignment Fund 2011 to
provide funding to local governments for functions reassigned to them under the realignment plan. This is
estimated to reduce State general fund revenues by about $5.1 billion in 2011-12 and increase Local
Realignment Fund revenues by the same amount.
• Vehicle Registration Fee Increased. The Department of Motor Vehicles (DMV) is funded
from different taxes and fees collected on vehicles, including the VLF and the vehicle registration fee.
(Both of these revenue sources are deposited to special funds and not the State general fund.) The plan
increases the vehicle registration fee from $31 to $43 beginning July 1, 2011, which will generate new
annual fee revenue of about $300 million. This new fee revenue will cover DMV administration costs,
thereby freeing up a like amount of existing VLF revenue. The budget plan then directs the $300 million
of VLF revenue to realignment accounts, thereby reducing State general fund expenditure requirements
on realigned programs.
• Redirecting VLF Funds Previously Dedicated to Orange County and Cities. Under
previous law, cities and Orange County received allotments of VLF funds. The budget package shifts
these funds—totaling an estimated $153 million in 2011-12—to local realignment accounts, thereby
reducing State general fund expenditure requirements on realigned programs.
Unlike the Governor's realignment proposal, the realignment package adopted by the Legislature
does not extend the sales and vehicle license fee(VLF) tax rate increases that expired at the end of 2010-
11. Instead, the budget reallocates $5.6 billion of state sales tax and state and local VLF revenues for
purposes of realignment in 2011-12. Specifically, the Legislature approved the diversion of 1.0625 cents
of the state's sales and use tax rate to counties. This is projected to generate $5.1 billion in 2011-12,
growing to $6.4 billion in 2014-15. In addition, the realignment plan redirects an estimated $453 million
from the base 0.65 percent VLF rate for local law enforcement grant programs. Under prior law, these
VLF revenues were allocated to the Department of Motor Vehicles (DMV) ($300 million) for
administrative purposes and to cities and Orange County($153 million) for general purposes. The budget
increases the motor vehicle registration fee by$12 per automobile to offset the lost revenue to DMV.
The budget package includes two bills related to redevelopment agencies designed to generate
$1.7 billion in 2011-12 and about $400 million annually in out—years. The first bill eliminates the
statutory authority for redevelopment agencies to exist. Under this bill, successor agencies are established
for the purpose of paying off any existing redevelopment debt with revenues that otherwise would have
gone to the redevelopment agencies. Any revenue in excess of what is required to pay off these debts is
distributed to schools and other local governments (cities, counties, and special districts) pursuant to
existing property tax allocation laws.
The second bill permits a city or county that has a redevelopment agency to prevent that agency's
elimination by making a remittance payment to the K-12 schools, fire protection districts, and transit
districts that overlap with the redevelopment agency's project areas. Each city or county's remittance
payment is calculated as its proportionate share of$1.7 billion in 2011-12 and $400 million in out—years.
This calculation takes into account each redevelopment agency's 2008-09 tax increment revenues, debt
payments, and pass—through payments. On a one—time basis in 2011-12, the bill exempts redevelopment
agencies from the requirement to set aside funds (usually 20 percent of their tax increment revenues) for
low—and moderate—income housing projects.
The second bill also has provisions that adjust cities' and counties' out—year annual remittance
payments primarily based on growth in tax increment revenues and new debt issued by redevelopment
agencies (excluding debt issued for affordable housing programs). The bill also states the intent of the
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Legislature to enact legislation to establish a reduced schedule of payments for new redevelopment debt
related to projects designed to achieve statewide environmental, transportation, or community
development goals.
The State's fiscal outlook is unsettled, given several potentially negative factors, including a
cyclical slowdown in the high technology sector, the overall national economic slowdown and the stock
market decline. The City is required by law to balance its budget and does not anticipate that the
Governor's Budget, as proposed, would have any adverse effect on its ability to repay the Series 2011A
Bonds.
Impact of the Governor's Fiscal Year 2011-12 Budget on the City's Fiscal Year 2011-12
Budget.
Redevelopment "Pay-to-Play" Program. On August 1, 2011, City Council approved the
introduction of an ordinance authorizing participation in the voluntary alternative redevelopment program
under the provisions of Assembly Bill X1 27. Participation in the program exempts the Agency from the
immediate suspension of powers it would otherwise be subject to under Assembly Bill X1 26 (except for
existing obligations) as well as avoiding the successor agency and oversight committees that are part of
ABX1 26. Under the voluntary alternative redevelopment program, agencies must make `voluntary
payments" to avoid elimination and takeover by the County's "Successor Agency." The anticipated opt-
in payment for fiscal year 2011-12 is approximately $6.8 million with payments in the out-years totaling
an estimated $1.6 million annually. The payment will be funded through significant reductions in the
fiscal year 2011-12 Redevelopment Agency budget and a one-time withholding of the annual 20 percent
housing set-aside payment. Under the voluntary alternative redevelopment program, the City is required
to make the voluntary opt-in payment; however, the Redevelopment Agency will transfer the funds
required for payment to the City.
The California Redevelopment Association ("CRA') and the League of California Cities
("League") filed a petition for writ of mandate with the California Supreme County on July 18, 2011,
requesting the Court to declare unconstitutional Assembly Bills X1 26 and 27. The CRA and the League
have requested that: (1) the Court issue a stay, suspending the effectiveness of AB1X 26 and 27 until the
Court can rule on its constitutionality, and (2) expedite the briefing and hearing of the case so that a
decision can be rendered by the Court in advance of January 15, 2012, when the first payments are due.
On August 11, 2011, the California Supreme Court announced it would hear the lawsuit and also
issued a partial stay regarding suspension of the effectiveness of AB1X 26 and 27 until it can rule on the
constitutionality of the bills. The court also established an expedited briefing schedule designed to
facilitate a decision prior to January 15, 2012.
The City cannot predict the timing, terms or ultimate implementation of any final legislation
regarding AB1X 26 and 27. However, if the bills are declared constitutional, payments required under
the voluntary alternative redevelopment program will not have a material adverse effect on the City's
ability to pay debt service on the Series 2011A Bonds. The City has advanced money to the Agency for
capital improvements and operations. These advances have been made since 1984 and include direct
advances of cash, overhead charges, deferred development fees, deferred land sales, and interest. The
Agency has previously borrowed approximately $85 million. In the current fiscal year, approximately
$4.9 million was transferred from the Redevelopment Agency Debt Service Fund to the General Fund to
repay a General Fund loan to the Agency. See Note 13d to the Financial Statements appearing in
APPENDIX B — "COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE CITY FOR THE
FISCAL YEAR ENDED SEPTEMBER 30, 2010" The City cannot predict any final payment schedule
for these loans or advances in light of any final legislation regarding AB 1X 26 and 27.
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Vehicle License Fee Takeaway. The fiscal year 2011-12 State Budget funds the Governor's
realignment proposal set forth in the 2011-12 Proposed State Budget and the May Revision to the Fiscal
Year 2011-12 Proposed State Budget. The fiscal year 2011-12 State Budget funds realignment by
dedicating 1.0625 cents of the existing sales tax rate to generate a projected $5.1 billion for the 2011
Local Revenue Fund and by redirecting Vehicle License Fee ("VLF") revenues to generate $453.4
million. Approximately $130 million in annual general fund revenue allocated to cities would be
redirected into a new state Local Law Enforcement Services Account. The estimated fiscal year 2011-12
impact to the City is approximately$715,000. Increases in other General Fund revenue sources will help
to offset the loss of VLF revenues. The takeaway of VLF revenue will not have a material adverse effect
on the City's ability to pay debt service on the Series 2011A Bonds.
Future State Budgets. The City cannot predict what actions will be taken in this or any future
fiscal year by the State Legislature or the Governor to deal with the State's current or future budget
deficits, changing State revenues and expenditures, or what the effect of national and state economic
conditions on future State budgets will be. Moreover, the State Legislature or Governor could take
additional actions which could affect the State's receipts, expenditures and borrowings during the current
fiscal year, and thereby influence the City's financial situation. 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.
Further information about the State budget is available from the Public Finance Division of the
State Treasurer's Office. In addition, information about the State budget is regularly available at various
State-maintained websites, including www.dof.ca.gov (Department of Finance), www.lao.ca.gov (Office
of the Legislative Analyst) and www.treasurer.ca.gov (State Treasurer). The above-mentioned websites
are included herein for informational purposes only. The Authority and the City make no representations
concerning, and do not take any responsibility for, the accuracy or timeliness of information posted on
such websites or the continued maintenance of such websites by the respective entities.
Loss of Tax Exemption
As discussed under the caption"TAX MATTERS," in order to maintain the exclusion from gross
income for federal income tax purposes of the interest on the Series 2011A Bonds, the City has
covenanted in the Lease Agreement not to 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 the
Series 2011A Bonds under Section 103 of the Internal Revenue Code of 1986, as amended.Interest on the
Series 2011A Bonds could become includable in gross income for purposes of Federal income taxation
retroactive to the date the Series 2011A Bonds were issued, as a result of acts or omissions of the City in
violation of the Code. Should such an event of taxability occur, the Series 2011A Bonds are not subject to
early redemption and will remain outstanding to maturity or until prepaid under the optional redemption
provisions of the Indenture.
Limited Secondary Market
As stated herein, investment in the Series 2011A Bonds poses certain economic risks which may
not be appropriate for certain investors, and only persons with substantial financial resources who
understand the risk of investment in the Series 2011A Bonds should consider such investment. There can
be no guarantee that there will be a secondary market for purchase or sale of the Series 2011A Bonds or,
if a secondary market exists, that the Series 2011A Bonds can or could be sold for any particular price.
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Changes in Law
There can be no assurance that the electorate of the State will not at some future time adopt
additional initiatives or that the Legislature will not enact legislation that will amend the laws or the
Constitution of the State resulting in a reduction of the General Fund revenues of the City and
consequently, having an adverse effect on the security for the Series 2011A Bonds. See
"CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS."
TAX MATTERS
In the opinion of Orrick, Herrington & Sutcliffe LLP, Bond Counsel to the Authority ("Bond
Counsel"), based upon an analysis of existing laws, regulations, rulings and court decisions, and
assuming, among other matters, the accuracy of certain representations and compliance with certain
covenants, interest on the Series 2011A Bonds is excluded from gross income for federal income tax
purposes under Section 103 of the Internal Revenue Code of 1986 (the"Code") and is exempt from State
of California personal income taxes. Bond Counsel is of the further opinion that interest on the Series
2011A Bonds is not a specific preference item for purposes of the federal individual or corporate
alternative minimum taxes, although Bond Counsel observes that such interest is included in adjusted
current earnings when calculating corporate alternative minimum taxable income. A complete copy of
the proposed form of opinion of Bond Counsel is set forth in Appendix E hereto.
To the extent the issue price of any maturity of the Series 2011A Bonds is less than the amount to
be paid at maturity of such Series 2011A Bonds (excluding amounts stated to be interest and payable at
least annually over the term of such Series 2011A Bonds), the difference constitutes `original issue
discount," the accrual of which, to the extent properly allocable to each Beneficial Owner thereof, is
treated as interest on the Series 2011A Bonds which is excluded from gross income for federal income tax
purposes and State of California personal income taxes. For this purpose, the issue price of a particular
maturity of the Series 2011A Bonds is the first price at which a substantial amount of such maturity of the
Series 2011A Bonds is sold to the public (excluding bond houses, brokers, or similar persons or
organizations acting in the capacity of underwriters, placement agents or wholesalers). The original issue
discount with respect to any maturity of the Series 2011A Bonds accrues daily over the term to maturity
of such Series 2011A Bonds on the basis of a constant interest rate compounded semiannually (with
straight-line interpolations between compounding dates). The accruing original issue discount is added to
the adjusted basis of such Series 2011A Bonds to determine taxable gain or loss upon disposition
(including sale, redemption, or payment on maturity) of such Series 2011A Bonds. Beneficial Owners of
the Series 2011A Bonds should consult their own tax advisors with respect to the tax consequences of
ownership of Series 2011A Bonds with original issue discount, including the treatment of Beneficial
Owners who do not purchase such Series 2011A Bonds in the original offering to the public at the first
price at which a substantial amount of such Series 2011A Bonds is sold to the public.
Series 2011A Bonds purchased, whether at original issuance or otherwise, for an amount higher
than their principal amount payable at maturity (or, in some cases, at their earlier call date) ("Premium
Bonds") will be treated as having amortizable bond premium. No deduction is allowable for the
amortizable bond premium in the case of bonds, like the Premium Bonds, the interest on which is
excluded from gross income for federal income tax purposes. However, the amount of tax-exempt
interest received, and a Beneficial Owner's basis in a Premium Bond, will be reduced by the amount of
amortizable bond premium properly allocable to such Beneficial Owner. Beneficial Owners of Premium
Bonds should consult their own tax advisors with respect to the proper treatment of amortizable bond
premium in their particular circumstances.
62
The Code imposes various restrictions, conditions and requirements relating to the exclusion from
gross income for federal income tax purposes of interest on obligations such as the Series 2011A Bonds.
The Authority and the City have made certain representations and covenanted to comply with certain
restrictions, conditions and requirements designed to ensure that interest on the Series 2011A Bonds will
not be included in federal gross income. Inaccuracy of these representations or failure to comply with
these covenants may result in interest on the Series 2011A Bonds being included in gross income for
federal income tax purposes, possibly from the date of original issuance of the Series 2011A Bonds. The
opinion of Bond Counsel assumes the accuracy of these representations and compliance with these
covenants. Bond Counsel has not undertaken to determine(or to inform any person) whether any actions
taken (or not taken), or events occurring (or not occurring), or any other matters coming to Bond
Counsel's attention after the date of issuance of the Series 2011A Bonds may adversely affect the value
of, or the tax status of interest on, the Series 2011A Bonds. Accordingly, the opinion of Bond Counsel is
not intended to, and may not, be relied upon in connection with any such actions, events or matters.
Although Bond Counsel is of the opinion that interest on the Series 2011A Bonds is excluded
from gross income for federal income tax purposes and is exempt from State of California personal
income taxes, the ownership or disposition of, or the accrual or receipt of interest on, the Series 2011A
Bonds may otherwise affect a Beneficial Owner's federal, state or local tax liability. The nature and
extent of these other tax consequences depends upon the particular tax status of the Beneficial Owner or
the Beneficial Owner's other items of income or deduction. Bond Counsel expresses no opinion
regarding any such other tax consequences.
Future legislative proposals, if enacted into law, clarification of the Code or court decisions may
cause interest on the Series 2011A Bonds to be subject, directly or indirectly, to federal income taxation
or to be subject to or exempted from state income taxation, or otherwise prevent Beneficial Owners from
realizing the full current benefit of the tax status of such interest. The introduction or enactment of any
such future legislative proposals, clarification of the Code or court decisions may also affect the market
price for, or marketability of, the Series 2011A Bonds. Prospective purchasers of the Series 2011A
Bonds should consult their own tax advisors regarding any pending or proposed federal or state tax
legislation,regulations or litigation, as to which Bond Counsel expresses no opinion.
The opinion of Bond Counsel is based on current legal authority, covers certain matters not
directly addressed by such authorities, and represents Bond Counsel's judgment as to the proper treatment
of the Series 2011A Bonds for federal income tax purposes. It is not binding on the Internal Revenue
Service ("IRS") or the courts. Furthermore, Bond Counsel cannot give and has not given any opinion or
assurance about the future activities of the Authority or the City, or about the effect of future changes in
the Code, the applicable regulations, the interpretation thereof or the enforcement thereof by the IRS. The
Authority and the City have covenanted,however, to comply with the requirements of the Code.
Bond Counsel's engagement with respect to the Series 2011A Bonds ends with the issuance of
the Series 2011A Bonds, and, unless separately engaged, Bond Counsel is not obligated to defend the
Authority, the City or the Beneficial Owners regarding the tax-exempt status of the Series 2011A Bonds
in the event of an audit examination by the IRS. Under current procedures, parties other than the
Authority, the City and their appointed counsel, including the Beneficial Owners, would have little, if
any, right to participate in the audit examination process. Moreover, because achieving judicial review in
connection with an audit examination of tax-exempt bonds is difficult, obtaining an independent review
of IRS positions with which the Authority and the City legitimately disagrees, may not be practicable.
Any action of the IRS, including but not limited to selection of the Series 2011A Bonds for audit, or the
course or result of such audit, or an audit of bonds presenting similar tax issues may affect the market
price for, or the marketability of, the Series 2011A Bonds, and may cause the Authority, the City or the
Beneficial Owners to incur significant expense.
63
CERTAIN LEGAL MATTERS
Legal matters incident to the authorization, issuance, sale and delivery by the Authority of the
Series 2011A Bonds are subject to the approval as to their validity of Orrick, Herrington&Sutcliffe LLP,
as Bond Counsel to the Authority. Bond Counsel, as such, undertakes no responsibility for the accuracy,
completeness or fairness of this Official Statement. Certain legal matters will be passed upon for the City
and the Authority by the City Attorney, and by Orrick, Herrington & Sutcliffe LLP, as Disclosure
Counsel. Certain legal matters will be passed on for the Underwriters by Stradling Yocca Carlson &
Rauth, a Professional Corporation, Newport Beach, California. Certain compensation of Bond Counsel
and Disclosure Counsel is contingent upon the issuance and delivery of the Series 2011A Bonds.
FINANCIAL STATEMENTS
The City's financial statements for the fiscal year ended September 30, 2010, included in
APPENDIX B — "COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE CITY FOR THE
FISCAL YEAR ENDED SEPTEMBER 30, 2010,"have been audited by Macias Gini &O'Connell, LLP,
Certified Public Accountants & Consultants, Newport Beach, California, as stated in their reports
appearing in such appendix. Macias Gini &O'Connell, LLP has not undertaken to update its reports 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 Macias Gini &
O'Connell, LLP with respect to any event subsequent to its report.
LITIGATION
To the best knowledge of the Authority and the City, except as otherwise disclosed in this
Official Statement, there is no pending or threatened litigation concerning the validity of the Series 2011A
Bonds or the pledge of the Lease Revenues or challenging any action taken by the Authority or the City in
connection with the authorization of the Indenture or the Lease Agreement, or any other document
relating to the Series 2011A Bonds or the defeasance and redemption of the Series 2011A Bonds to which
the Authority or the City is or is to be become a party or the performance by the Authority or the City of
any of their obligations under any of the foregoing. Further, to the best knowledge of the City, except as
otherwise disclosed in this Official Statement, there is no litigation, proceeding, action, suit, or
investigation pending, with service of process having been accomplished, or threatened in writing against
the City, which in any manner, questions the right of the City to pay the Base Rental Payments under the
Lease Agreement.
RATINGS
Moody's Investors Service("Moody's") and Standard and Poor's Ratings Services, a Standard &
Poor's Financial Services LLC business ("S&P) have assigned their ratings of "Aa3" and "AA,"
respectively, to the Series 2011A Bonds. Such ratings reflect only the views of such organizations and
any desired explanation of the significance of such ratings should be obtained from the rating agency
furnishing the same, at the following addresses: Moody's Investors Service, Inc., 7 World Trade Center,
250 Greenwich Street, New York, New York 10007, and Standard &Poor's Ratings Services, 55 Water
Street, New York, New York 10041. Generally, a rating agency bases its rating on the information and
materials furnished to it and on investigations, studies and assumptions of its own. There is no assurance
such ratings will continue for any given period of time or that such ratings will not be revised downward
or withdrawn entirely by the rating agencies, if in the judgment of the rating agencies, circumstances so
64
warrant. Any such downward revision or withdrawal of such ratings may have an adverse effect on the
market price of the Series 2011A Bonds.
UNDERWRITING
The Series 2011A Bonds are being purchased by Merrill Lynch, Pierce, Fenner & Smith
Incorporated, as representative of itself and E. J. De La Rosa & Co., Inc. (the "Underwriters"). The
Underwriters have agreed to purchase the Series 2011A Bonds at a price of $38,077,176.76, which
amount represents the principal amount of the Series 2011A Bonds of$36,275,000.00, less $81,490.34,
representing the Underwriters' discount, plus $1,883,667.10, representing original issue premium. The
contract of purchase pursuant to which the Series 2011A Bonds are being purchased by the Underwriters
provides that the Underwriters will purchase all of the Series 2011A Bonds if any are purchased. The
obligation of the Underwriters to make such purchase is subject to certain terms and conditions set forth
in such contract of purchase. The Underwriters may offer and sell the Series 2011A Bonds to certain
dealers and others at prices different from the prices stated on the inside cover page of this Official
Statement. The offering prices may be changed from time to time by the Underwriters.
E.J. De La Rosa&Co., Inc. ("De La Rosa&Co."), one of the Underwriters of the Series 2011A
Bonds, has entered into separate agreements with Credit Suisse Securities USA LLC, UnionBanc
Investment Services LLC and City National Securities, Inc. for retail distribution of certain municipal
securities offerings, at the original issue prices. Pursuant to said agreements, if applicable to the Series
2011A Bonds, De La Rosa & Co. will share a portion of its underwriting compensation with respect to
the Series 2011A Bonds, with Credit Suisse Securities USA LLC, UnionBanc Investment Services LLC
or City National Securities, Inc.
VERIFICATION OF MATHEMATICAL COMPUTATIONS
The Verification Agent will verify, from the information provided to it, the mathematical
accuracy as of the date of the closing of the Series 2011A Bonds of computations relating to the adequacy
of the amounts deposited in the 2001A Escrow Fund for the defeasance of the 2001A Bonds and the
adequacy of the amounts deposited in the 2001B Bonds Escrow Fund for the defeasance of the 2001B
Bonds. The Verification Agent will restrict its procedures to examining the arithmetical accuracy of
certain computations and will not make a study or evaluation of the information and assumptions on
which such computations are based and, accordingly, will not express an opinion on the data used, the
reasonableness of the assumptions or the achievability of the forecasted outcome.
FINANCIAL ADVISOR
Public Financial Management, Inc., Los Angeles, California, has served as Financial Advisor in
connection with the authorization and delivery of the Series 2011A Bonds. The Financial Advisor is not
obligated to undertake, and has not undertaken to make, an independent verification or to assume
responsibility for the accuracy, completeness or fairness of the information contained in the Official
Statement. Public Financial Management, Inc. is an independent advisory firm and is not engaged in the
business of underwriting, trading or distributing municipal or other public securities.
65
CONTINUING DISCLOSURE
The ultimate security for the payments of principal and interest on the Series 2011A Bonds comes
from the Base Rental Payments to be made by the City and, therefore, the City, as an obligated person
within the meaning of the Rule, has agreed to undertake the disclosure responsibilities required by the
Rule. The Authority has not undertaken to provide any continuing disclosure required by the Rule.
The City has covenanted to provide, or cause to be provided, to the Municipal Securities
Rulemaking Board's EMMA System, for purposes of the Rule, certain annual financial information and
operating data of the type set forth herein including, but not limited to, its audited financial statements
and, in a timely manner, notice of certain enumerated events. These covenants have been made in order
to assist the Underwriters in complying with the Rule. The City will execute a continuing disclosure
certificate (the "Continuing Disclosure Certificate") for the benefit of the owners of the Series 2011A
Bonds. See APPENDIX F — "FORM OF CONTINUING DISCLOSURE CERTIFICATE" for a
description of the Continuing Disclosure Certificate. A failure by the City to provide any information
required thereunder will not constitute an Event of Default under the Indenture or the Lease Agreement.
The City has not failed in the previous five years to comply in all material respects with any previous
undertakings with regard to the Rule to provide annual reports or notices of certain events.
66
ADDITIONAL INFORMATION
Summaries and explanations of the Series 2011 A Bonds and documents contained in this Official
Statement do not purport to be complete, and reference is made to such documents for full and complete
statements of their provisions.
The preparation and distribution of this Official Statement have been authorized by the Authority
and the City.
HUNTINGT BEACH PUBLIC
FIN AUTHO Y
By /s/Joe Carchio
C r of the Board of Directors
CITY OF HUNTINGTON BEACH
IC4W(/
By /s/Lori Farrell
Director of Finance
67
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68
APPENDIX A
GENERAL,ECONOMIC AND DEMOGRAPHIC INFORMATION
RELATING TO THE CITY
General Information
Founded in the late 1880's, Huntington Beach(the"City") was incorporated as a chartered city in
1909 and became a charter city in 1937. The City encompasses 31.6 square miles (26.4 square miles is
land, 5.2 square miles is water) in the coastal area of Orange County, California(the"County"), adjacent
to the Cities of Costa Mesa, Fountain Valley, Newport Beach, Seal Beach and Westminster. The City is
approximately 40 miles southeast of Los Angeles and 90 miles northwest of San Diego. As January 1,
2011, the population was estimated at 190,377, according to the State of California's Department of
Finance.
The City is a full service city. Its major departments include the City Manager's office, Finance,
Building and Planning, Library Services, Public Works, Community Services, Economic Development,
Information Services and Police and Fire. The City has approximately 906 employees and a total budget
of approximately$312,000,000.
Internationally known as Surf City, the City boasts eight miles of scenic, accessible beachfront,
the largest stretch of uninterrupted beachfront on the West Coast. Tourism remains a vital part of the
economy, as over 11 million visitors flock to the City during the summer, on weekends and for special
events. The City's parks and recreation features one of the largest recreational piers in the world, public
parks, riding stables and equestrian trails, a marina, and a wildlife preserve, and an eight-mile biking,
inline skating,jogging, and walking trail along the ocean. The crown jewel of the City's recreation system
is the wide expanse of beautiful and spacious beaches, where large crowds gather to watch professional
sporting events as the U.S. Open of Surfing, AVP Pro Beach Volleyball and Van's World Championship
of Skateboarding.
The Huntington Beach Art Center and the Huntington Beach Playhouse provide a wide variety of
fine arts, and the excellent library system and numerous museums provide a strong cultural foundation.
The educational system, with five city high schools and 35 elementary schools, is excellent. The City is
home to Golden West Community College and nearby UC Irvine and Cal State Long Beach and
Fullerton.
Government Organization
The City has a council/manager form of government. The City Council is comprised of seven
members elected bi-annually at large to four-year terms and the Mayor is selected by the Council
Members to a one-year term. The City Council appoints the City Manager who is responsible for the day-
to-day administration of City business and the coordination of all departments of the City. As of July 31,
2011, the City had 906 full-time employees.
The members of the City Council, the expiration dates of their terms and key administrative
personnel are set forth in the charts below.
A-1
CITY COUNCIL
Council Member Term Expires
Joe Carchio,Mayor November 2014
Don Hansen,Mayor Pro Tent November 2012
Connie Boardman,Member November 2014
Keith Bohr,Member November 2012
Devin Dwyer,Member November 2012
Matthew Harper,Member November 2014
Joe Shaw,Member November 2014
KEY ADMINISTRATIVE PERSONNEL
Fred Wilson City Manager
Paul Emery Deputy City Manager
Robert Hall Deputy City Manager
Alisa Cutchen City Treasurer
Joyce Zacks Deputy City Treasurer
Lori Ann Farrell Director of Finance
Dahle Bulosan Acting Budget Manager
Sunny Han Senior Accountant
Joan L.Flynn City Clerk
Jennifer McGrath,Esq. City Attorney
Governmental Services
Public Safety and Welfare - Law enforcement and fire protection services are provided by the
City. The Huntington Beach Police Department currently employs 193 sworn officers. The Huntington
Beach Fire Department employs 129 sworn fire fighters operating out of eight fire stations and maintains
a Hazardous Materials Response Unit operating as a part of a county wide response team. Other services
provided by the City include emergency medical aid, traffic safety maintenance, and building safety
regulation and inspection.
Public Services - Water service is provided to City residents through the City's municipal water
department.
Public Works/Planning - Additional services include parkway and median maintenance and
improvements, refuse management, sewer and storm drain maintenance, zoning and development
administration, environmental review, code enforcement and street tree maintenance.
Leisure and Community Services - The City operates the Huntington Beach Library which
includes the central library and four branches. The City's Community Services Department provides
citizens with a variety of park and recreational and marine safety (lifeguard) services on a year round
basis. Facilities include the Huntington Beach Art Center, fifty-six park sites, 8.5 miles of public beach, a
public golf course, an Equestrian Center and two senior centers.
Community Information
Public school education is available through four elementary school districts and one high school
district. There are 26 elementary schools, 4 middle schools and 5 high schools. Students are also served
A-2
by 10 parochial and private schools. Area colleges and universities include Orange Coast College,
Goldenwest College, Long Beach State University and the University of California at Irvine.
Health Care services available within the immediate area are provided by Huntington Beach
Hospital in Huntington Beach, Hoag Memorial Hospital in Newport Beach and Fountain Valley Regional
Hospital.
Area attractions include Disneyland, Knott's Berry Farm, the Aquarium of the Pacific and Wild
Rivers Aquatic Park. Locally, the City's public beaches routinely serve as the site of the Men's and
Women's Professional Beach Volleyball Tour and the International Surfing and World Cup event. Other
attractions include the Bolsa Chica Ecological Reserve, a restored wetlands area known for winter bird
watching, and the International Surf Museum.
Transportation
The City is 12 miles from the John Wayne/Orange County Airport (SNA), 18 miles from the
Long Beach Airport (LGB), 38 miles from Los Angeles International (LAX) and 48 miles from the
Ontario International Airport(ONT).
Greyhound Lines serves the City with stops in Santa Ana and Irvine. In Orange County, the
Orange County Transportation Authority (OCTA) provides convenient service and connections to bus
lines serving the greater Los Angeles(Metropolitan Transit Authority) and San Diego areas.
The City is accessible by train. The nearest train depots are in Santa Ana,Anaheim and Irvine.
Population
The following table provides a comparison of population growth for the City and the County between
2002 and 2011.
Population(')
City of Huntington Beach and Orange County
2002-2011
City of Orange
Year Huntington Beach County
2002 194,060 2,928,793
2003 196,875 2,973,732
2004 199,025 3,021,203
2005 200,023 3,045,682
2006 201,346 3,071,222
2007 201,315 3,088,594
2008 201,127 3,106,872
2009 202,230 3,134,276
2010 189,977 3,008,356
2011 190,377 3,029,408
The population estimates provided for 2002-2009 incorporate:2000 Census numbers as benchmarks. Population estimates for 2010 and
2011 incorporate 2010 Census numbers as benchmarks. The City is not otherwise aware of any diminution in its population or that of the
County.
Source: State of California Department of Finance,Population Research Unit,`Population Estimates for Cities,Counties and the State."
A-3
Personal Income
"Effective Buying Income" is defined as personal income less personal tax and nontax payments,
a number often referred to as "disposable" or "after-tax" income. Personal income is the aggregate of
wages and salaries, other labor-related income (such as employer contributions to private pension funds),
proprietor's income, rental income (which includes imputed rental income of owner-occupants of non-
farm dwellings), dividends paid by corporations, interest income from all sources, and transfer payments
(such as pensions and welfare assistance). Deducted from this total are personal taxes (federal, state and
local), nontax payments (fines, fees, penalties, etc.) and personal contributions to social insurance.
According to U.S. government definitions, the resultant figure is commonly known as "disposable
personal income."
CITY OF HUNTINGTON BEACH,STATE OF CALIFORNIA AND UNITED STATES
MEDIAN HOUSEHOLD EFFECTIVE BUYING INCOME
City of
Huntington State of
Year Beach orange County California United States
2007 $59,662 $55,370 $46,275 $41,255
2008 63,846 58,727 48,203 41,792
2009 64,254 58,979 48,952 42,303
2010 66,201 61,470 49,736 43,252
2011 62,406 57,849 47,177 41,368
Source: "Effective Buying Income Report,"Nielsen Claritas,Inc.
A-4
Employment and Industry
The following table sets forth labor force, employment and unemployment for the period from
2006 to 2010,in the City, the County, the State and the United States:
CITY OF HUNTINGTON BEACH LABOR MARKET
Labor Force,Employment and Unemployment
Annual Average(in thousands)
Civilian Labor Civilian Unemployment
Year and Area Force Employment Unemployment Rate (%)
2006
City of Huntington Beach 123 120 3.4 2.7%
Orange County 1,602 1,547 54 3.4
California 17,687 16,821 865 4.9
United States 151,428 144,427 7,001 4.6
2007
City of Huntington Beach 123 120 3.9 3.1%
Orange County 1,609 1,547 62 3.9
California 17,929 16,970 959 5.3
United States 153,124 146,047 7,078 4.6
2008
City of Huntington Beach 124 118 5.3 4.3
Orange County 1,617 1,532 85 5.3
California 18,191 16,883 1,308 7.2
United States 154,287 145,362 8,924 5.8
2009
City of Huntington Beach 121 112 8.8 7.3
Orange County 1,589 1,448 141 8.9
California 18,204 16,142 2,063 11.3
United States 154,142 139,877 14,265 9.3
2010
City of Huntington Beach 120 110 9.3 7.8
Orange County 1,581 1,430 151 9.6
California 18,176 15,916 2,260 12.4
United States 153,889 139,064 14,825 9.6
Source: California Employment Development Department,United States Department of Labor Bureau of Labor Statistics.
A-5
The major employers operating within the City and their respective number of employees as of
September 30, 2010, are as follows:
CITY OF HUNTINGTON BEACH
Largest Employers
Number of
Name of Employer Employees
Boeing 4,478
Cambro Manufacturing 951
Quicksilver 705
Hyatt Regency Huntington Beach 641
C&D Aerospace 555
Huntington Beach Hospital 503
Rainbow Disposal 408
Verizon 290
Walmatt 255
Westec Intelligent Surveillance, Inc. 230
Total of top 10 9,016
All others 103,084
Total employment(public and private) 112,100
Source:City of Huntington Beach.
Commercial Activity
The following charts summarize the volume of retail sales and taxable transactions for the City
for 2005 through 2009.
CITY OF HUNTINGTON BEACH
Total Taxable Transactions
(in Thousands)
2005-2009
Total Taxable Issued
Retail Sales Retail Sales Transactions Sales
Year ($000's) Permits ($000's) Permits
2005 $2,021,550 2,842 $2,479,780 7,381
2006 2,122,983 2,934 2,594,565 7,365
2007 2,096,249 2,985 2,631,199 7,177
2008 1,916,823 3,105 2,563,546 7,127
2009 1,673,149 4,274 2,247,735 6,582
Source: State Board of Equalization,"Taxable Sales in California."
A-6
Taxable transactions by type of business for the City for 2005 through 2009 are summarized in
the table below.
CITY OF HUNTINGTON BEACH
Taxable Transactions by Type of Business
(in Thousands)
2005-2009
Retail Stores 2005 2006 2007 2008 2009
Apparel Stores $ 99,076 $ 110,818 $ 110,443 $ 97,593 $ 95,231
General Merchandise Stores 181,694 213,964 214,686 216,311 163,612
Food Stores 11,881 115,689 122,625 121,443 143,136
Eating/DrinkingPlaces 275,806 302,294 320,143 320,626 308,763
Home Furnishings/Appliances 112,035 107,385 102,428 90,650 77,385
Building Materials 275,580 266,383 218,725 158,741 126,341
Motor vehicles and parts 454,408 439,957 456,067 368,764 330,708
Service Stations 170,941 207,894 213,160 243,676 188,793
Other Retail Stores 333,198 358,599 337,972 299,018 239,179
Total Retail Stores $2,021,550 $2,122,983 $2,096,249 $1,916,823 $1,673,149
All Other Outlets 458,230 471,582 534,950 646,723 574,586
Total All Outlets $2,479,780 $2,594,565 $2,631,199 $2,563,546 $2,247,735
Source: Sate Board of Equalization,"Taxable Sales in California."
A-7
Construction Activity
The following charts summarize building activity valuations for the City for the five-year period
from 2006 through 2010.
CITY OF HUNTINGTON BEACH
Building Activity and Valuation
(Valuation in Thousands of Dollars)
2006 2007 2008 2009 2010
Residential:
New Single-Family $28,746 $55,353 $ 7,149 $ 3,572 $ 2,443
New Multi-Family0 16,803 0 0 5,097
Additions, alterations 51,381 33,277 31,966 25,770 29,830
Total Residential $ 80,128 $105,434 $39,114 $29,342 $37,370
Commercial:
New Commercial 51,808 25,725 32,963 4,708 8,964
New Industrial 2,304 8,000 0 0 0
Other 22,392 21,836 12,152 19,174 21,840
Additions, alterations 26,469 26,011 21,362 18,285 24,567
Total Nonresidential 102,973 81,572 66,477 42,167 55,371
Total Valuation $183,100 $187,006 $105,591 $71,509 $92,741
No. of New Dwelling Units:
Single-Dwelling 106 191 20 4 4
Multi-Dwelling 0 85 0 0 5
Total New Units 106 276 20 4 9
Source: Construction Industry Research Board,"Building Permit Summary"
A-8
APPENDIX B
COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE CITY
FOR THE FISCAL YEAR ENDED SEPTEMBER 30,2010
B-1
(THIS PAGE IS INTENTIONALLY LEFT BLANK)
; 1p T 4t It T 4t I. 4 a sit T -.
CITY OF HUNTINGTON BEACH,
CALIFORNIA
COMPREHENSIVE ANNUAL
FINANCIAL REPORT
Elm
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OK _
' e
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FOR FISCAL YEAR ENDED SEPTEMBER 30, 2010
CITY OF HUNTINGTON BEACH, CALIFORNIA
I
FHB' 77, Ig '
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE YEAR ENDED SEPTEMBER 30, 2010
Prepared by the Finance Department
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INTRODUCTORY SECTION
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City of Huntington Beach
Comprehensive Annual Financial Report
Year Ended September 30, 2010
TABLE OF CONTENTS
INTRODUCTORY SECTION
Tableof Contents...................................................................................................................................... i-ii
Letterof Transmittal ................................................................................................................................. iii-vi
CityOfficials ................................................................................................................................................ vii
Organizationalart ................................................................................................................................... vui
Certificate of Achievement in Excellence in Financial Reporting................................................................. ix
FINANCIAL SECTION
IndependentAuditor's Report...................................................................................................................... 1-2
Management's Discussion and Analysis (Required Supplementary Information) ....................................... 3-16
Basic Financial Statements:
Government-wide Financial Statements:
Statementof Net Assets .................................................................................................................... 18
Statementof Activities ....................................................................................................................... 19
Fund Financial Statements:
Balance Sheet—Governmental Funds .............................................................................................. 20
Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Assets........... 21
Statement of Revenues, Expenditures and Changes in Fund Balances — Governmental Funds ...... 22-23
Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances
of Governmental Funds to the Statement of Activities .................................................................... 24
Statement of Net Assets — Proprietary Funds.................................................................................... 25
Statement of Revenues, Expenses and Changes in Fund Net Assets — Proprietary Funds.............. 26
Statement of Cash Flows — Proprietary Funds................................................................................... 27
Statement of Fiduciary Fund Net Assets............................................................................................ 28
Statement of Changes in Fiduciary Fund Net Assets —Trust Funds.................................................. 28
Notes to Financial Statements .............................................................................................................. 29-90
Required Supplemental Information:
BudgetaryInformation........................................................................................................................ 93
Schedule of Revenues, Expenditures and Changes in Fund Balance— Budget
AndActual —General Fund............................................................................................................. 94
Schedule of Revenues, Expenditures and Changes in Fund Balance— Budget
AndActual — Grants Fund............................................................................................................... 95
Schedule of Funding Progress (Normal Retirement Plan, Supplemental Retirement Plan,
And Other Postemployment Benefits)............................................................................................. 96-97
Schedule of Employer Contributions (Supplemental Retirement Plan) .............................................. 97
i
FINANCIAL SECTION (Continued)
Supplementary Information:
Combining and Individual Fund Statements and Schedules:
Combining Balance Sheet— Other Governmental Funds .................................................................. 102-105
Combining Statement of Revenues, Expenditures, and Changes in Fund Balances
Other Governmental Funds ............................................................................................................ 106-109
Schedule of Revenues, Expenditures, and Changes in Fund Balances —
Budget and Actual —Other Governmental Funds ........................................................................... 110-117
Schedule of Revenues, Expenditures and Changes in Fund Balances — Budget
And Actual — Redevelopment Agency Capital Projects and Debt Service ...................................... 118
Schedule of Revenues, Expenditures and Changes in Fund Balances — Budget
And Actual — Low Income Housing Fund ........................................................................................ 119
Combining Statement of Fiduciary Fund Net Assets.......................................................................... 123
Combining Statement of Changes in Fiduciary Assets and Liabilities................................................ 124-125
STATISTICAL SECTION
Net Assets by Component— Last Nine Fiscal Years................................................................................... 128-129
Changes in Net Assets- Last Nine Fiscal Years.......................................................................................... 130-131
Fund Balances —Governmental Funds — Last Ten Fiscal Years ................................................................ 132
Changes in Fund Balances — Last Ten Fiscal Years................................................................................... 134-135
Assessed and Actual Valuation of All Taxable Property (Excluding Redevelopment Agency) -
LastTen Fiscal Years .............................................................................................................................. 136
Property Tax Rates— All Direct and Overlapping Government Tax Rate 04-001
Largest Area in City— Last Ten Fiscal Years........................................................................................... 136
Property Tax Levies and Collections — Last Ten Fiscal Years .................................................................... 137
Ratios of Outstanding Debt by Type— Last Ten Fiscal Years..................................................................... 138
Top Ten Property Tax Payers —Current Year and Nine Years Ago............................................................ 139
Legal Debt Margin — Last Ten Fiscal Years ................................................................................................ 140
Principal and Private Employers —Current Year and Four Years Ago........................................................ 140
Full-Time Actual City Employees by Program/Function — Last Nine Fiscal Years....................................... 141
Operating Indicators by Function/Activity— Last Six Fiscal Years............................................................... 142
Capital Assets Statistics by Function/Activity.............................................................................................. 142
Statement of Direct and Overlapping Bonded Debt .................................................................................... 143
ii
0CITY OF HUNTINGTON BEACH
March 31 , 2011
To the Honorable Mayor and City Council:
In accordance with the requirements of the City Charter, and the City of Huntington
Beach's ongoing commitment to transparent financial reporting, I am pleased to present
the Comprehensive Annual Financial Report (CAFR). This report outlines in detail the
financial condition of all City funds through September 30, 2010.
As required by the City Charter, and to ensure the reliability of the information contained
within this report, the City of Huntington Beach contracted with the independent auditing
firm Macias Gini & O'Connell LLP. The goal of the audit was to provide reasonable
assurance that the City's financial statements are free from material misstatement. After
examining, on a test basis assessing the accounting principles used, as well as
significant estimates made by management, Macias Gini & O'Connell LLP granted the
City an unqualified (clean) opinion for the fiscal year ended September 30, 2010. The
auditor's opinion can be found in the Financial Section of this report. Management
assumes full responsibility for the completeness and accuracy of the information
presented in this document. This transmittal letter is designed to complement and
should be read in conjunction with the Management's Discussion and Analysis.
In addition to the City's financial information, this report includes financial statements for
those separate legal entities whose activities the City controls. These entities are:
■ The Redevelopment Agency of the City of Huntington Beach
■ The Huntington Beach Public Financing Authority
■ Various Community Facilities Districts
Additional Financial information for the Redevelopment Agency can be found in the
Agency's component unit (stand-alone) report.
CITY PROFILE
The City of Huntington Beach is located on the coast of Orange County, 35 miles south
of Los Angeles and 90 miles north of San Diego. With a population of just over 200,000
residents, it is known as Surf City due to its abundance of beaches, sunny, warm
Mediterranean climate, and casual lifestyle. With over eight miles of coastline to boast
of, Huntington Beach plays host to over eight million visitors annually. Listed among the
nation's safest cities for decades, Huntington Beach has often been ranked among the
Top Ten Safest Cities by City Crime Rankings.
Founded in the late 1880's, Huntington Beach was incorporated as a Charter City in
1909. Huntington Beach has a City Council/ City Administrator form of government
wherein seven City Council members are elected to four-year terms, and the Mayor is
iii
filled on a rotating basis from the incumbent Council members. Please be advised that
as of March 31, 2011 , the voters of Huntington Beach elected to officially change the City
Administrator's title to City Manager.
The City of Huntington Beach is one of the leading commercial and industrial centers in
Southern California. As the fourth largest city in Orange County, more than 112,100
people are currently employed by over 5,800 businesses and governmental entities in
the City. Huntington Beach businesses include aerospace and high technology,
petroleum and petroleum support, manufacturing, computer hardware and software,
financial and business services, automobile services, machine shop services, precision
instruments, retailers and surf apparel, just to name a few.
FINANCIAL POLICIES AND PRACTICES
The City operates on a fiscal year basis, beginning October 12t and ending September
30th. The budget is prepared under the supervision of the City Manager and transmitted
to the City Council for deliberation thirty days prior to the end of the fiscal year. Pursuant
to the City's Charter, the City Council must adopt the annual budget by September 30th
and may amend it or revise it at any time at a properly noticed meeting. Budgetary
control is at the department level within each fund and a Department Head, with the
Director of Finance's approval, may transfer funds within like categories (operating and
capital expenditures) of the same department. Transfer of funds for salaries and benefits
require additional approval of the City Manager or his designee.
Surplus cash is invested by the elected City Treasurer, in investments allowed by the
City's investment policy. The investment policy is adopted annually by the City Council
after approval by the Investment Advisory Board. It outlines guidelines to meet the daily
cash flow needs of the City, maximize the efficiency of the City's cash management
system, and identifies prudent investment vehicles for the City's cash balances.
The rate of return earned for the fiscal year ended September 30, 2010 was 1.54%. The
City Treasurer, as required by California Government Code 53601 , has prepared an
annual statement of investment policy which allows for the City to meet current
obligations while earning a market rate of return. Further information regarding the City's
cash and investments can be found in Note 2 of the financial statements.
LONG-TERM FINANCIAL PLANNING
In 2010, the City Council updated its Strategic Plan, which outlines five goals:
• Maintain financial viability and our reserves;
• Maintain, improve and obtain funding for infrastructure and equipment;
• Maintain public safety;
• Enhance economic development; and,
• Improve internal and external communication.
As part of the strategic goal to maintain our financial reserves the City of Huntington
Beach completed and implemented a Long-Term Financial Plan. This plan enables the
City to forecast cause and effect relationships for large financial decisions such as
employee labor contracts, capital projects, service enhancements, as well as revenue
fluctuations due to the weakening economy or state takeaways.
iv
The City's Strategic Plan drives budgetary decisions and the day-to-day operations of the
City by ensuring that the City is consistently working to achieve the goals outlined by the
City Council.
MAJOR INITIATIVES
We are pleased to report that in November 2009, the City was awarded $1 ,768,000 by
the Department of Energy to develop and implement energy efficiency projects funded by
the Energy Efficiency and Conservation Block Grant (EECBG), a program supported by
the American Recovery and Investment Act. Once completed, the project will reduce the
City's overall electricity consumption through the use of renewable energy sources and
energy efficient retrofit improvements. It is anticipated that the projects will be completed
in 2013.
The State of California (State) continues to face a fiscal crisis that directly impacts local
governments and the communities it serves. During Fiscal Year 2009-2010, the State
declared a fiscal emergency and suspended Proposition 1A which enabled it to borrow
eight percent of the amount of property tax revenue apportioned to cities, counties, and
special districts. During this time the Proposition 1A Securitization Program was passed
by State legislators to allow local agencies to sell their respective Proposition 1A
receivable to California Communities. California Communities then purchased the
receivable and issued bonds simultaneously to provide each agency with the cash
proceeds in two equal installments on January 15, 2010 and May 3, 2010. As a
participant in this program, the City experienced no net reduction in revenues from the
property tax reduction borrowing by the State.
In May 2010, the City issued the Huntington Beach Public Finance Authority 2010-A
Lease Revenue Bonds to refund the 1997 and 2000 Public Finance Authority Lease
Revenue Bonds. The bond refunding will result in a net present value savings of
$937,000 over 21 years. Also in May, the City Council approved a retirement incentive
program through the Public Agency Retirement System (PARS) to eligible employees to
institute long term structural changes that would help the City remain financially sound
through the sluggish local economy and the recent national recession. Further
information on the PARS program can be found in Note 11d(6) of the financial
statements.
AWARDS AND ACKNOWLEDGEMENTS
Last year, the City of Huntington Beach was once again the honored recipient of the
"Certificate of Achievement for Excellence in Financial Reporting" award bestowed by the
Governmental Finance Officers Association (GFOA) of the United States and Canada.
This was the 24th consecutive year the City has received this prestigious award. Receipt
of the award requires government entities to publish an easily readable and efficiently
organized Comprehensive Annual Financial Report, conforming to program, accounting,
and legal standards.
The Certificate of Achievement earned for the fiscal year ended September 30, 2009, is
valid for one year only. The City believes that this Comprehensive Annual Financial
Report continues to conform to the Certificate of Achievement Program requirements
and will be submitted to GFOA for their consideration for another award.
v
I wish to thank the City Council, City Manager, and City Departments for their continued
diligence in their role as fiscal stewards for the City of Huntington Beach. Specifically, I
would also like to thank Dahle Bulosan, Sunny Han, Janet Lockhart, and Carrie
Gonzales for their efforts in preparing this report.
Lori Ann Farrell
Director of Finance
vi
City of Huntington Beach
City Council
Joe Carchio, Mayor
Don Hansen, Mayor Pro Tem
Connie Boardman, Councilmember
Keith Bohr, Councilmember
Devin Dwyer, Councilmember
Matthew Harper, Councilmember
Joe Shaw, Councilmember
Executive Team
Fred A. Wilson, City Manager
Paul Emery, Deputy City Manager
Robert Hall, Deputy City Manager
Laurie E. Payne, Community Relations Officer
City Treasurer
Alisa Cutchen
Elected Department Heads
Joan L. Flynn, City Clerk
Jennifer M. McGrath, City Attorney
Department Directors
Stephanie Beverage, Library Services
Michele Carr, Human Resources
Paul Emery, Community Services
Lori Ann Farrell, Finance
Scott Hess, Building & Planning
Travis Hopkins, Public Works
Jack Marshall, Information Services
Chief Patrick McIntosh, Fire
Stanley Smalewitz, Economic Development
Chief Kenneth W. Small, Police
vii
City of Huntington Beach
THE PEOPLE
CITY CLERK CITY COUNCIL CITY CITY
Mayor TREASURER ATTORNEY
Administration, Mayor Pro-Tem
Public Support, City COUrCII Members Investments Litigation
8 Elections
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Management Atl�fisory
CITY
MANAGER
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Fire Uniform
Admmistration Division
Fire Investigatim
Pftverrticn Division
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Response Operations
DEPUTY CITY DEPUTY CITY
MANAGER MANAGER
ECONOMIC PLANNING& PUBLIC COMMUNITY FINANCE HUMAN INFORMATION LIBRARY
DEVELOPMENT I BUILDING `. WORKS SERVICES (:RESOURCES I SERVICES SERVICES
Economic Children'%
Beach Finanual Risk Infrastructure
Developmera8 Planning Engineering Branch,
Operations Managemeid Maragemenl Systems
Retl¢v¢bpmen[ Media Services
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Services & Porvernrhoed ILileies Salary Services Labor Support Services
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Certificate of
Achievement
for Excellence
in Financial
Reporting
Presented to
City of Huntington Beach
California
For its Comprehensive Annual
Financial Report
for the Fiscal Year Ended
September 30, 2009
A Certificate of Achievement for Excellence in Financial
Reporting is presented by the Government Finance Officers
Association of the United States and Canada to
government units and public employee retirement
systems whose comprehensive annual financial
reports(CAFRs)achieve the highest
standards in government accounting
and financial reporting,
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ix
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FINANCIAL SECTION
= CertM"Public Account.
Sac+amento•walnut Creek•Oakland•Los Angeles•Century Otp•Newport Beach.San 01e9o. mgocpa.com
The Honorable Mayor and
Members of City Council
City of Huntington Beach, California
Independent Auditor's Report
We have audited the accompanying financial statements of the governmental activities, the business-type
activities, each major fund, and the aggregate remaining fund information of the City of Huntington
Beach, California (City), as of and for the year ended September 30, 2010, which collectively comprise
the City's basic financial statements as listed in the table of contents. These financial statements are the
responsibility of the City's management. Our responsibility is to express opinions on these financial
statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States of
America and the standards applicable to financial audits contained in Government Auditing Standards
issued by the Comptroller General of the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing
an opinion on the effectiveness of the City's internal control over financial reporting. Accordingly, we
express no such opinion. An audit also includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements, assessing the accounting principles used and the
significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our opinions.
In our opinion, the financial statements referred to above present fairly, in all material respects, the
respective financial position of the governmental activities, the business-type activities, each major fund,
and the aggregate remaining fund information of City of Huntington Beach, California, as of September
30, 2010, and the respective changes in financial position and cash flows, where applicable, thereof for
the year then ended in conformity with accounting principles generally accepted in the United States of
America.
In accordance with Government Auditing Standards, we have also issued our report dated March 31,
2011, on our consideration of the City's internal control over financial reporting and on our tests of its
compliance with certain provisions of laws, regulations, contracts, and grant agreements and other
matters. The purpose of that report is to describe the scope of our testing of internal control over financial
reporting and compliance and the results of that testing, and not to provide an opinion on internal control
over financial reporting or on compliance. That report is an integral part of an audit performed in
accordance with Government Auditing Standards and should be considered in assessing the results of our
audit.
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CA 95416 CA 954% CA 94612 CA 90071 CA 90067 C4 92660 CA 92101
1
The management's discussion and analysis, budgetary comparison schedules, schedules of funding
progress, and schedule of employer contributions identified in the accompanying table of contents are not
a required part of the basic financial statements but are supplementary information required by accounting
principles generally accepted in the United States of America. We have applied certain limited
procedures, which consisted principally of inquiries of management regarding the methods of
measurement and presentation of the supplementary information. However, we did not audit the
information and express no opinion on it.
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively
comprise the City's basic financial statements. The introductory section, combining and individual fund
statements and schedules, and statistical section are presented for additional analysis and are not a
required part of the basic financial statements. The combining and individual fund statements and
schedules have been subjected to the auditing procedures applied in the audit of the basic financial
statements and, in our opinion, are fairly stated in all material respects in relation to the basic financial
statements taken as a whole. The introductory and statistical sections have not been subjected to the
auditing procedures applied in the audit of the basic financial statements and, accordingly, we express no
opinion on them. 0 & /+f/Jn
Certified Public Accountants
Newport Beach, California
March 31, 2011
2
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City of Huntington Beach
Management's Discussion and Analysis
For the Year Ended September 30, 2010
As management of the City of Huntington Beach, we offer readers of the City's financial
statements this narrative overview and analysis of the financial activities of the City of
Huntington Beach for the fiscal year ended September 30, 2010. We encourage readers
to consider the information presented here in conjunction with additional information that
we have furnished in our Letter of Transmittal, which can be found on pages iii-vi of this
report.
Financial Highlights
Below is a summary of the City's government-wide financial information (in thousands):
Total Governmental and Business Activities
Amount Percent
September 30, September 30, Increase Increase
2010 2009 (Decrease) (Decrease)
Assets $ 1,043,111 $ 1,068,545 $ (25,434) -2.4%
Liabilities 179,714 216,306 (36,592) -16.9%
Total Net Assets 863,397 852,239 11,158 1.3%
Unrestricted Net Assets 94,578 96,129 (1,551) -1.6%
Long Term Obligations 155,809 157,136 (1,327) -0.8%
Program Revenues 116,384 131,388 (15,004) -11.4%
Taxes 140,584 138,138 2,446 1.8%
Other General Revenues 19,995 24,702 (4,707) -19.1%
Expenses 265,805 277,424 (11,619) 4.2%
• The total assets of the City of Huntington Beach exceeded its liabilities at the
close of the most recent fiscal year by $863,397,000. Of this amount,
$94,578,000 may be used to meet the City's ongoing obligations to citizens and
creditors. Net assets increased $11 ,158,000 or 1 .3%. This increase is due in
large part to additions made to capital assets for residential street improvements
and infrastructure improvements to the City's water and sewer systems.
Unrestricted net assets decreased by $1 ,551 ,000 or 1.6%.
• Long-term obligations decreased by $1 ,327,000 or 0.8%. This decrease is
primarily due to debt service payments and a new bond issue used to refund two
existing bonds held by the City.
• Program revenues decreased by $15,004,000 or 11.4%. This decrease is
primarily due to the one-time contribution of a parking structure from a private
developer made in the prior year. Taxes increased $2,446,000 or 1.8% due in
large part to slight increases in sales tax revenue.
• Expenses decreased by $11,619,000 or 4.2% due to ongoing efforts to cut costs
given the sluggish economy.
Overview of the Financial Statements
This discussion and analysis serve as an introduction to the City of Huntington Beach
basic financial statements. The City of Huntington Beach's basic financial statements
comprise three components: 1) government-wide financial statements, 2) fund financial
statements, and 3) notes to the financial statements. This report also contains certain
other supplementary information in addition to the basic financial statements themselves.
3
City of Huntington Beach
Management's Discussion and Analysis
For the Year Ended September 30, 2010
Government-wide Financial Statements
The government-wide financial statements are designed to provide readers with a broad
overview of the City's financial condition and are prepared similarly to those in the private
sector.
The statement of net assets presents information on all of the City's assets and liabilities,
with the difference between the two reported as net assets. Over time, continued
increases or decreases in net assets may indicate whether the City's financial condition
is improving or deteriorating.
The statement of activities presents information on how the City's net assets changed
during the most recent fiscal year. These changes are reported on the full accrual basis
(when the economic event occurs), not when the cash is received or paid.
The government-wide financial statements separate functions that are primarily
supported by taxes and intergovernmental revenues (governmental activities) from
functions that are supported by user fees (business activities). Governmental activities
include City Council, City Administrator, City Treasurer, City Attorney, City Clerk,
Finance, Human Resources, Planning, Building, Fire, Information Systems, Police,
Economic Development, Community Services, Library Services, Public Works, and Non-
Departmental. Business activities include Water, Sewer, Refuse, and Hazmat Service.
The government-wide financial statements include the City and all of its component units
that are legally separate but whose activities entirely support the City of Huntington
Beach. These entities are, the Redevelopment Agency of the City of Huntington Beach,
the Huntington Beach Public Financing Authority, and various assessment districts
described in Note 1 to the financial statements.
The government-wide financial statements can be found on pages 18-19 of this report.
Fund Financial Statements
The City separates financial activities into funds to maintain control over resources that
have been legally separated. All of the funds of the City can be divided into three
categories: governmental funds, proprietary funds, and fiduciary funds.
Governmental Funds
Governmental funds are used to account for the same functions reported in
governmental activities in the government-wide financial statements. However, the focus
in the governmental fund section of these financial statements is on near-term resource
inflows and outflows available for spending, as well as balances of resources available
for spending at the end of the fiscal year.
It is useful to compare information presented for the governmental funds to information
presented for governmental activities in the government-wide financial statements. The
reconciliation indicates to the reader the differences in financial reporting between the
governmental activities section and the governmental funds section.
4
City of Huntington Beach
Management's Discussion and Analysis
For the Year Ended September 30, 2010
The City maintains 21 individual governmental funds. Information is presented
separately in the governmental funds balance sheet and in the governmental funds
statement of revenue, expenditures, and changes in fund balances for the General Fund,
Grants Special Revenue Fund, Redevelopment Agency Debt Service Fund,
Redevelopment Agency Capital Projects Fund, and Low-Income Housing Capital
Projects Fund all of which are considered to be major funds. Data from the other 16
smaller funds are combined into a single, aggregated presentation. Individual fund data
for each of these other governmental funds is provided in a combining statement
elsewhere in this report.
The City provides an annual appropriated budget for its governmental funds. Budgetary
comparison schedules for the General Fund and the major special revenue funds
(Grants) are required to be presented and are included on pages 94-95 and 110-119 of
this report and demonstrate compliance with the budget.
The basic governmental fund financial statements can be found on pages 20-23 of this
report.
Proprietary Funds
Proprietary funds or enterprise funds are used to account for the same activities as the
business-type activities in the government-wide financial statements. The City uses
enterprise funds to account for its Water, Sewer, Refuse, and Hazmat Service activities.
Proprietary funds provide the same type of information as the government-wide financial
statements, only in more detail. The proprietary fund financial statement provides
information for Water, Sewer Service, Refuse, and Hazmat Service Funds, all of which
are considered to be major funds of the City.
The basic proprietary fund financial statements can be found on pages 25-27 of this
report.
Fiduciary Funds
Fiduciary funds are used to account for resources held for the benefit of parties outside
the government. Fiduciary funds are not reflected in the government-wide financial
statement because the resources of those funds are not available to support the City of
Huntington Beach's own programs. The accounting used for fiduciary funds is much like
that used for proprietary funds.
The basic fiduciary fund financial statements can be found on page 28 of this report.
Notes to the financial statements
The notes provide additional information that is essential to a full understanding of the
data provided in the government-wide and fund financial statements. The notes to the
financial statements can be found on pages 29-89 of this report.
5
City of Huntington Beach
Management's Discussion and Analysis
For the Year Ended September 30, 2010
Other information
In addition to the basic financial statements and accompanying notes, this report also
presents certain required supplementary information concerning the City's progress in
funding its obligation to provide pension benefits to its employees and General Fund
budget-to-actual comparisons. Required supplementary information can be found on
pages 93-97 of this report.
The combining statements and schedules referred to earlier in connection with other
governmental funds is presented immediately following the required supplementary
information on pensions. Combining and individual fund statements and schedules can
be found on pages 102-109 of this report.
Government-wide Financial Analysis
As noted earlier, net assets may serve, over time, as a useful indicator of a government's
financial position. At the end of the current fiscal year, the City reported positive net
asset balances for both governmental and business-type activities, with total assets
exceeding liabilities by $863,397,000.
Below is a summary schedule of the City's net assets at September 30, 2010 (in
thousands):
AmountPercent
September 30, September 30, Increase Increase
Governmental Activities 2010 2009 (Decrease) (Decrease)
Current and Other Assets $ 142,600 $ 173,718 $ (31,118) -17.9%
Capital Assets 678,791 677,494 1,297 0.2%
Total Assets 821,391 851,212 (29,821) -3.5%
Current and Other Liabilities 16,927 51,600 (34,673) -67.2%
Long-Term Obligations 154,878 156,036 (1,158) -0.7%
Total Liabilities 171,805 207,636 (35,831) -17.3%
Net Assets:
Invested in Capital Assets, Net of Related Debt 567,631 559,059 8,572 1.5
Restricted 49,100 48,198 902 1.9%
Unrestricted 32,855 36,319 (3,464) -9.5%
Total Net Assets $ 649,586 $ 643,576 $ 6,010 0.9
Amount Percent
September 30, September 30, Increase Increase
Business Activities 2010 2009 (Decrease) (Decrease)
Current and Other Assets $ 100,141 $ 99,268 $ 873 0.9%
Capital Assets 121,579 118,065 3,514 3.0%
Total Assets 221,720 217,333 4,387 2.0%
Current and Other Liabilities 6,978 7,570 (592) -7.8%
Long-Term Obligations 931 1,100 (169) -15.4%
Total Liabilities 7,909 8,670 (761) -8.8%
Net Assets:
Invested in Capital Assets, Net of Related Debt 121,576 118,059 3,517 3.0%
Restricted 30,512 30,794 (282) -0.9%
Unrestricted 61,723 59,810 1,913 3.2%
Total Net Assets $ 213,811 $ 208,663 $ 5,148 2.5
6
City of Huntington Beach
Management's Discussion and Analysis
For the Year Ended September 30, 2010
Analysis of the City's Net Assets
Current and Other Assets: The decrease in current and other asset of $31,118,000 is
primarily due to recognition of an allowance for the developer loans receivable for
affordable housing projects and this was netted on the Statement of Net Assets.
Current and Other Liabilities: The decrease in current and other liabilities of
$34,673,000 is primarily due to recognition of an allowance for the developer loans
receivable for affordable housing projects and this was netted on the Statement of Net
Assets.
Invested in Capital Assets, Net of Related Debt: The largest portion of the City's net
assets reflects investment in capital assets (e.g., land, buildings, machinery, equipment,
and infrastructure); less any related debt used to acquire those assets that is still
outstanding. The City uses capital assets to provide services to citizens; consequently,
these assets are not available for future spending. Although the City's investment in its
capital assets is reported net of related debt, the resources needed to repay this debt
must be provided from other sources, since capital assets themselves cannot be used to
liquidate these liabilities. Net assets invested in capital assets net of related debt from
governmental activities increased $8,572,000 or 1 .5%. This increase was primarily due
to improvements made to the City's buildings and road infrastructure. Net assets
invested in capital assets net of related debt from business activities increased
$3,517,000 or 3.0% due to improvements made to the City's water and sewer systems.
Restricted Net Assets: An additional portion of the City's net assets is subject to
external (legally imposed or statutory) restrictions ($49,100,000 for governmental
activities, and $30,512,000 for business activities). These amounts represent 7.6% and
14.3% of net assets for governmental activities and business activities respectively.
Restricted net assets from governmental activities increased $902,000 or 1 .9%. The
increase is primarily due to more funds available for capital projects. Restricted net
assets from business activities decreased slightly by $282,000 or 0.9%.
Unrestricted Net Assets: The unrestricted assets ($32,855,000 for governmental
activities and $61 ,723,000 for business activities) represent 5.2% and 28.9% of net
assets for governmental activities and business activities respectively. Unrestricted net
assets for governmental activities decreased $3,464,000 or 9.5% primarily due to overall
decreases in general and program revenues. Unrestricted net assets for business
activities increased $1,913,000 or 3.2%. This increase was primarily due to a reduction
in net transfers made from business activities in the prior year.
7
City of Huntington Beach
Management's Discussion and Analysis
For the Year Ended September 30, 2010
A condensed summary of governmental activities (in thousands) follows:
Governmental Activities
Amount Percent
September30, September30, Increase Increase
Revenues: 2010 2009 Decrease Decrease
Program Revenues:
Charges for Current Services $ 46,234 $ 45,414 $ 820 1.8%
Operating Grants and Contributions 7,069 4,181 2,888 69.1%
Capital Grants and Contributions 7,418 25,625 (18,207) -71.1%
Total Program Revenues 60,721 75,220 (14,499) -19.3%
General Revenues:
Property Taxes 85,552 84,010 1,542 1.8%
Sales Taxes 23,646 21,427 2,219 10.4%
Utility Taxes 19,757 20,616 (859) -4.2%
Other Taxes 11,629 12,085 (456) -3.8%
Use of Money and Property 4,043 5,002 (959) -19.2%
From Other Agencies- Unrestricted 4,184 8,500 (4,316) -50.8%
Other 9,944 7,849 2,095 26.7%
Total General Revenues 158,755 159,489 (734) -0.5%
Total Revenues 219,476 234,709 (15,233) -6.5%
Expenses:
City Council 301 295 6 2.0%
City Administrator 1,674 1,861 (187) -10.0%
City Treasurer 1,532 1,308 224 17.1%
City Attorney 2,772 2,877 (105) -3.6%
City Clerk 883 1,099 (216) -19.7%
Finance 4,309 4,479 (170) -3.8%
Human Resources 5,284 4,749 535 11.3%
Planning 3,170 3,232 (62) -1.9%
Building 4,608 9,549 (4,941) -51.7%
Fire 33,545 33,942 (397) -1.2%
Information Systems 6,812 7,377 (565) -7.7%
Police 59,049 60,551 (1,502) -2.5%
Economic Development 11,891 15,758 (3,867) -24.5%
Community Services 16,147 17,110 (963) -5.6%
Library Services 4,519 4,574 (55) -1.2%
Public Works 26,483 29,514 (3,031) -10.3%
Non-Departmental 24,303 21,196 3,107 14.7%
Interest on Long-Term Debt 6,146 5,232 914 17.5%
Total Expenses 213,428 224,703 (11,275) -5.0%
Change in Net Assets Before Transfers 6,048 10,006
Transfers (38) 7,175
Change in Net Assets After Transfers 6,010 17,181
Net Assets- Beginning of Year 643,576 626,395
Net Assets- End of Year $ 649,586 $ 643,576
The cost of all governmental activities this year was $213,428,000. However, as shown
in the Statement of Activities, the amount that the taxpayers ultimately financed for these
activities was $152,707,000, because costs of $46,234,000 were paid by those who
directly benefited from the programs, or by other governments and organizations that
subsidized certain programs with operating grants and contributions of $7,069,000, and
capital grants and contributions of $7,418,000. Overall, the City's governmental program
revenues were $60,721 ,000. The City paid for the remaining "public benefit" portion of
governmental activities with $158,755,000 in taxes and general revenue (some of which
could only be used for certain programs) and with other revenues, such as interest and
8
City of Huntington Beach
Management's Discussion and Analysis
For the Year Ended September 30, 2010
general entitlements. Operating Grants and Contributions have increased by $2,888,000
or 69.1% due to Proposition 1 B Local Street and Road Improvement funds received from
the state. Capital Grants and Contributions have decreased by $18,207,000 or 71.1%
primarily due to a one-time capital asset contributed from a private developer in the prior
year.
Total program expenses decreased by $11 ,275,000 due to the following:
• Building expenses decreased by $4,941 ,000 primarily due to the seismic
rehabilitation work on city hall that ended in the prior fiscal year.
• Economic development and public works expenses decreased by $3,867,000 and
$3,031 ,000, respectively, due to a reduction in staff and construction contracts
due to the sluggish economy.
Total resources available during the year to finance governmental operations were
$863,052,000 consisting of net assets at October 1, 2009, of $643,576,000, program
revenues of $60,721,000, general revenues of $158,755,000, less transfers of $38,000.
Total expenses for governmental activities during the year were $213,428,000, thus, net
assets were increased by $6,010,000, to $649,586,000.
A condensed summary of business activities (in thousands) follows:
Business Activities
Amount Percent
September 30, September 30, Increase Increase
2010 2009 (Decrease) (Decrease)
Program Revenues:
Charges for Current Services $ 55,525 $ 56,014 $ (489) -0.9%
Capital Grants and Contributions 138 154 (16) -10.4%
Total Program Revenues 555663 565168 (505) -0.9%
Use of Money and Property 1,824 3,351 (1,527) -45.6%
Total Revenues 575487 595519 (25032) -3.4%
Expenses:
Water Utility 34,902 34,290 612 1.8%
Emerald Cove Housing - 306 (306) -100.0%
Refuse Collection 10,585 10,623 (38) -0.4%
Sewer Service 6,575 7,306 (731) -10.0%
Haz mat Service 315 196 119 60.7%
Total Expenses 525377 525721 (344) -0.7%
Increase in Net Assets Before Transfers 55110 65798
Transfers 38 (7,175)
Total Change In Net Assets 5,148 (377)
Net Assets-Beginning of Year 208,663 209,040
Net Assets-End of Year $ 2135811 $ 2085663
The City's net assets from business activities increased by $5,110,000 before transfers.
Contributing to this increase were operating income of $3,194,000 and interest income of
$1,824,000. Use of money and property decreased by $1,527,000 due to a decrease in
the rate of return of the City's cash and investments.
The cost of all Business Type activities this year was $52,377,000. As shown in the
9
City of Huntington Beach
Management's Discussion and Analysis
For the Year Ended September 30, 2010
Statement of Activities, the amount paid by users of the systems was $55,525,000,
capital grants and contributions were $138,000, other revenue was $1 ,824,000, and
transfers were $38,000. Beginning net assets were $208,663,000 and ending net assets
were $213,811 ,000. Of the ending net asset amount, $121,576,000, or 56.9%, was
invested in capital assets, $30,512,000 or 14.3% was restricted for expenditures for the
Water Master Plan, and $61,723,000, or 28.9% was unrestricted.
The transfers for Business Type activities changed from a net transfer out of $7,175,000
in the prior year to a net transfer in of $38,000 in the current year. In the prior year, the
Emerald Cove Housing enterprise fund was closed and the capital assets were
transferred to the Low-Income Housing Capital Projects Fund and the remaining fund
balance was transferred to the General Fund.
A listing of each program's revenues and expenses for the current year is presented
below (in thousands):
2009-2010 2008-2009
Funded by Funded by
Taxesand Taxesand
Less Program Other General Other General
Governmental Activities: Expenses Revenues Revenues Revenues
City Council $ 301 $ (62) $ 239 $ 201
City Administrator 1,674 (126) 1,548 1,491
City Treasurer 1,532 (566) 966 543
City Attorney 2,772 (456) 2,316 2,827
City Clerk 883 (106) 777 991
Finance 4,309 (1,234) 3,075 3,215
Human Resources 5,284 (1,103) 4,181 3,495
Planning 3,170 (682) 2,488 2,431
Building 4,608 (4,126) 482 5,884
Fire 33,545 (8,580) 24,965 25,701
Information Systems 6,812 (731) 6,081 6,703
Police 59,049 (5,366) 53,683 54,527
Economic DeNelopment 11,891 (6,247) 5,644 (9,661)
Community Services 16,147 (15,896) 251 1,313
Library Services 4,519 (480) 4,039 4,074
Public Works 26,483 (14,691) 11,792 19,536
Non-Departmental 24,303 (269) 24,034 20,980
Interest on Long Term Debt 6,146 - 6,146 5,232
Total Governmental Activities $ 213,428 $ (60,721) $ 152,707 $ 149,483
Business Activities
Water Utility $ 34,902 $ (34,394) $ 508 $ 90
Emerald Cogs Housing - - - (537)
Refuse Collection 10,585 (10,506) 79 237
Sewer Service 6,575 (10,565) (3,990) (3,229)
Hazmat Service 315 (198) 117 (8)
Total Business Activities $ 52,377 $ (55,663) $ (3,286) $ (3,447)
10
City of Huntington Beach
Management's Discussion and Analysis
For the Year Ended September 30, 2010
Financial Analysis of the City's Major Governmental Funds
Below is an analysis of the City's major governmental fund activities for the year (in
thousands):
GOVERNMENTALFUNDS
Amount Percent
September 30, September 30, Increase Increase
2010 2009 (Decrease) (Decrease)
Total Fund Equity:
General Fund $ 41,352 $ 39,088 $ 2,264 5.8%
Grants Special Revenue Fund 923 2,404 (1,481) -61.6%
Redevelopment Agency Debt Service (152) 4,489 (4,641) -103.4%
Redevelopment Agency Capital Projects 7,809 11,073 (3,264) -29.5%
Low-Income Housing Fund 11,409 12,017 (608) -5.1%
Total Fund Equity $ 615341 $ 695071 $ (75730) -11.2%
The General Fund Balance increased by $2,264,000 primarily due to slight revenue
growth combined with overall cost cutting measures implemented by all departments.
The Grant Special Revenue Fund Balance decreased by $1 ,481 ,000 primarily due to
decreased grant revenue.
The Redevelopment Agency Debt Service Fund Balance decreased by $4,641,000. This
decrease was primarily due to the State-mandated Supplemental Education Revenue
Augmentation Fund (SERAF) contribution required by AB 26 4x.
The Redevelopment Agency Capital Projects Fund Balance decreased by $3,264,000.
This decrease was the result of planned spending of fund balance on capital projects.
The Low-Income Housing Fund decreased $608,000. This decrease was primarily due
affordable housing project expenditures exceeding revenues. The revenue from the
housing set-aside portion of property tax increment received was less than anticipated
due to the sluggish economy.
11
City of Huntington Beach
Management's Discussion and Analysis
For the Year Ended September 30, 2010
Financial Analysis of the City's Major Proprietary Funds
Below is an analysis of the fund equity of the City's proprietary funds (in thousands):
Enterprise Funds
Amount Percent
September 30, September 30, Increase Increase
2010 2009 (Decrease) (Decrease)
Net Assets:
Water Fund $ 160,410 $ 159,353 $ 1,057 0.7%
Sewer Fund 53,263 49,016 4,247 8.7%
Refuse Fund 39 65 (26) -40.0%
Hazmat SerNce Fund 99 229 (130) -56.8%
Total Net Assets $ 213,811 $ 208,663 $ 5,148 2.5%
Unrestricted Net Assets:
Water Fund $ 45,117 $ 47,652 $ (2,535) -5.3%
Sewer Fund 16,468 11,864 4,604 38.8%
Refuse Fund 39 65 (26) -40.0%
Hazmat SerNce Fund 99 229 (130) -56.8%
Total Unrestricted Net Assets $ 61,723 $ 59,810 $ 1,913 3.2%
The Water Fund net assets increased by $1 ,057,000 and unrestricted net assets
decreased by $2,534,000. This increase is due in large part to interest income.
The Sewer Fund net assets increased by $4,247,000 and unrestricted net assets
increased by $4,604,000. This increase is due to a reduction in repairs and maintenance
costs in the current year.
Debt Administration
Below is a schedule of the changes to the City's long-term obligations (in thousands):
Balance
Balance September 30,
Governmental Activities: October 1, 2009 Additions Retirements 2010
Revenue Bonds $ 59,815 $ 14,745 $ (19,175) $ 55,385
Tax Allocation Bonds 22,400 - (1,320) 21,080
Judgement Obigation Bonds 6,774 - (785) 5,989
Claims 12,500 6,254 (4,827) 13,927
Compensated Absences 12,015 3,259 (4,997) 10,277
Pension Obligation 4,312 3,832 (3,968) 4,176
Loans 35,059 19 (1,240) 33,838
Leases Payable 1,161 - (304) 857
Pollution Remediation 2,000 200 - 2,200
PARS Payable - 7,231 (82) 7,149
Total Long-Term Obligations-Governmental
Activities 156,036 35,540 (36,698) 154,878
Business Activities:
Compensated Absences 1,094 300 (466) 928
Leases 6 - (3) 3
Business Activities 1,100 300 (469) 931
Total Long-Term Obligations $ 157,136 $ 35,840 $ (37,167) $ 155,809
Additional information on the City's long-term debt is shown in Note 11 to the financial
statements. The City of Huntington Beach is legally restricted to issuing general
obligation bonds to 12% of its assessed valuation. Since the City has no general
12
City of Huntington Beach
Management's Discussion and Analysis
For the Year Ended September 30, 2010
obligation bonds outstanding, the limit does not apply. This is shown on page 143 of the
financial statements. The City's total debt decreased $1 ,326,000 or 0.8% from the prior
fiscal year. This decrease was due in large part to the following:
• Issuance of $14,745,000 of new Lease Revenue Bonds used to refund
outstanding amounts for the 1997 Series A Public Financing Authority Lease
Revenue Bonds and the 2000 Series A Public Financing Bonds totaling
$2,770,000 and $12,785,000 respectively.
• Addition of the $7,231 ,000 Public Agency Retirement System (PARS)
Supplementary Retirement Plan program obligation. The City is funding the cost
of the annuity installments over a five year period.
The City continues to maintain excellent credit ratings on all of its debt issues. The
following are the latest ratings as determined by Moody's Investors Service and Standard
and Poor's.
Debt Instrument Moody's s & P
1999 Tax Allocation Refunding Bonds Baal A
2001 Lease Revenue Bonds, Series A Aa3 AA
2001 Lease Revenue Bonds, Series B Aa3 AA
2002 Tax Allocation Refunding Bonds Baal A
2004 Judgment Obligation Bonds Aa2 AA
2010 Lease Revenue Bonds, Series A Aa3 AA
Capital Assets
The capital assets of the City are those assets which are used in the performance of the
City's functions including infrastructure assets. The City has elected to use the "Basic
Approach" as defined by GASB statement 34 for infrastructure reporting. The following
infrastructure networks are recorded as capital assets in the government-wide financial
statements:
• Storm drain system including pump stations, drainage system and manholes.
• Streets (including land underneath streets), traffic signals, curbs, gutters, and
sidewalks.
13
City of Huntington Beach
Management's Discussion and Analysis
For the Year Ended September 30, 2010
Below is a schedule of the City's capital assets, net of accumulated depreciation (in
thousands):
Amount Percent
September 30, September 30, Increase Increase
Governmental Activities: 2010 2009 (Decrease) (Decrease)
Land $ 367,323 $ 366,342 $ 981 0.3%
Buildings 128,662 129,502 (840) -0.6%
Machinery and Equipment 11,274 14,297 (3,023) -21.1%
Construction in Progress 10,242 7,992 2,250 28.2%
Joint Venture 2,094 2,012 82 4.1%
Infrastructure 159,196 157,349 1,847 1.2%
Total Governmental Activities 6785791 6775494 15297 0.2%
Business Activities:
Land $ 3,907 $ 3,907 $ - 0.0%
Buildings 40,820 39,658 1,162 2.9%
Machinery and Equipment 2,700 3,576 (876) -24.5%
Construction in Progress 12,375 8,209 4,166 50.7%
Infrastructure 61,777 62,715 (938) -1.5%
Total Business Activities 1215579 1185065 35514 3.0%
Total Capital Assets $ 8005370 $ 7955559 $ 45811 0.6%
Capital assets from governmental activities increased $1,297,000 or 0.2%. This increase
is largely due to improvements made to the City's buildings currently in Construction in
Progress and road infrastructure. Capital assets from business activities increased
$3,514,000 or 3.0%. This increase was largely due to ongoing improvement and
rehabilitation of the City's sewer system and water facilities and off-set by annual
depreciation. Further information on the City's capital assets can be found in Note 12 of
the financial statements.
General Fund Budgetary Highlights
Chances to Orioinal Budaet
Final budgeted revenues for the General Fund increased $1,906,000 or 1 .1% from the
original (adopted) budget for the fiscal year ending September 30, 2010. The change
from original to final budget occurred primarily as a result of adjustments made to
budgeted reimbursement revenue from grants.
Comparing the fiscal year 2009/2010 original budget (or adopted) General Fund
expenditures amount of $174,552,000 to the final budgeted amount of $177,636,000
shows a net increase of $3,084,000 (1.8%). This overall increase was the result of
budget carryovers from the previous year.
Variance with Final Budaet
General Fund actual revenues were less than final budget by $3,770,000 for the fiscal
year ending September 30, 2010. The national recession was the primary factor
contributing to this shortfall. The impact of the recession on major categories of revenue
is listed below:
14
City of Huntington Beach
Management's Discussion and Analysis
For the Year Ended September 30, 2010
• Utility Tax: The net $1,968,000 negative variance in actual vs. final budgeted
revenue in this category was primarily due to a decline in utility usage due to
recessionary pressures and low prices for natural gas.
• Other Taxes: The net $1,756,000 negative variance in actual vs. final budgeted
revenue in this category was primarily due to lower transient occupancy tax as
hotels lowered room prices and occupancy rates declined. Also, receipts from the
City's utility franchises declined as recessionary pressures lowered natural gas
usage and natural gas prices also declined.
• Licenses and Permits: The net $876,000 negative variance in actual vs. final
budgeted revenue in this category was primarily due to decreased development
activity citywide.
• Use of Money and Property: The net $1,089,000 negative variance in actual vs.
final budgeted revenue in this category was primarily due to declines in interest
rates.
General Fund expenditures were $6,921,000 less than the final budget. The favorable
budget variance is due in large part to the following:
• Budget reductions, including concessions from various bargaining groups,
implemented during the year saved $4,000,000
• Prudent fiscal management in addition to the formal budget reductions resulted in
an additional $2,900,000 in savings
Economic Factors and Next Year's Budgets and Rates
The key assumptions in the General Fund forecast for fiscal year 2010/2011 are:
• Property tax revenue will remain relatively flat due to the continuation of the weak
housing market.
• Modest increases in sales tax revenue due to slight improvements in retail
spending.
• Utility taxes will remain relatively flat with little to no growth as economic pressures
continue to hold down demand and prices.
• Modest growth in transient occupancy tax (TOT) as occupancy and room rates
experience a slight improvement compared to prior year.
• Increases in the annually required contributions to the City's pension due to
declines in CaIPERS investment values.
15
City of Huntington Beach
Management's Discussion and Analysis
For the Year Ended September 30, 2010
Contacting the City's Financial Management Team
This financial report is designed to provide our citizens, taxpayers, customers, and
investors and creditors with a general overview of the City's finances and to show the
City's accountability for the money it receives. If you have questions about this report,
separate reports of the City's component units or need any additional financial
information, contact the Finance Department at 2000 Main Street, Huntington Beach,
California, 92648-2702, phone (714) 536-5630 or e-mail cgonzales@surfcity-hb.org.
16
BASIC FINANCIAL STATEMENTS
CITY OF HUNTINGTON BEACH
STATEMENT OF NET ASSETS
SEPTEMBER 30, 2010
(In Thousands)
Governmental Business-Type
ASSETS Activities Activities Total
Cash and Investments $ 28,155 $ 62,856 $ 91,011
Receivables, Net 30,036 5,541 35,577
Inventories - 1,232 1,232
Prepaids 12,502 - 12,502
Other Assets 1,266 - 1,266
Land Held for Resale 6,158 - 6,158
Other Postemployment Benefits Asset 8,661 - 8,661
Subtotal 86,778 69,629 156,407
Restricted Assets:
Cash and Investments 28,936 30,512 59,448
Cash and Investments with Fiscal Agent 8,313 - 8,313
Receivables, Net 18,573 - 18,573
Total Restricted Assets 55,822 30,512 86,334
Capital Assets :
Non-Depreciable 379,659 16,282 395,941
Depreciable 299,132 105,297 404,429
Total Capital Assets 678,791 121,579 800,370
Total Assets 821,391 221,720 1,043,111
LIABILITIES
Accounts Payable 4,150 5,099 9,249
Accrued Payroll 4,861 378 5,239
Deposits 1,194 1,501 2,695
Subtotal 10,205 6,978 17,183
Liabilities Payable from Restricted Assets:
Accounts Payable 2,436 - 2,436
Accrued Interest Payable 569 - 569
Unearned Revenue 739 - 739
Deposits 2,978 - 2,978
Total Liabilities Payable from Restricted Assets 6,722 - 6,722
Long-Term Obligations:
Long-Term Obligations Due Within One Year 16,712 252 16,964
Long-Term Obligations Due in More than One Year 138,166 679 138,845
Total Long-Term Obligations 154,878 931 155,809
Total Liabilities 171,805 7,909 179,714
NET ASSETS
Investment in Capital Assets, Net of Related Debt 567,631 121,576 689,207
Restricted for:
Debt Service 8,352 - 8,352
Capital Projects 17,039 30,512 47,551
Specific Projects and Programs 23,709 - 23,709
Total Restricted Net Assets 49,100 30,512 79,612
Unrestricted 32,855 61,723 94,578
Total Net Assets $ 649,586 $ 213,811 $ 863,397
See Notes to the Financial Statements
18
CITY OF HUNTINGTON BEACH
STATEMENT OF ACTIVITIES AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED SEPTEMBER 30, 2010
(In Thousands)
Net(Expense)Revenue and Changes in
Program Revenues Net Assets
Chargesfor I Operating juaprialurams Business-
Current Grants and and Governmental Type
Functions/Programs Expenses Services Contributions Contributions Activities Activities Total
Governmental Activities:
City Council $ 301 $ 62 $ - $ - $ (239) $ - $ (239)
City Administrator 1,674 126 - - (1,548) - (1,548)
City Treasurer 1,532 566 - - (966) - (966)
City Attorney 2,772 456 - - (2,316) - (2,316)
City Clerk 883 106 - - (777) - (777)
Finance 4,309 1,234 - - (3,075) - (3,075)
Human Resources 5,284 1,103 - - (4,181) - (4,181)
Planning 3,170 682 - - (2,488) - (2,488)
Building 4,608 4,126 - - (482) - (482)
Fire 33,545 8,504 76 - (24,965) - (24,965)
Information Systems 6,812 731 - - (6,081) - (6,081)
Police 59,049 4,849 517 - (53,683) - (53,683)
Economic Development 11,891 2,685 668 2,894 (5,644) - (5,644)
Community Services 16,147 15,470 223 203 (251) - (251)
Library Services 4,519 415 65 - (4,039) - (4,039)
Public Works 26,483 4,850 5,520 4,321 (11,792) - (11,792)
Non-Departmental 24,303 269 - - (24,034) - (24,034)
Interest on Long-Term Debt 6,146 - - - (6,146) - (6,146)
Total Governmental Activities 213,428 46,234 7,069 7,418 (152,707) (152,707)
Business-type Activities:
Water Utility 34,902 34,256 - 138 - (508) (508)
Sewer Service 6,575 10,565 - - - 3,990 3,990
Refuse Collection 10,585 10,506 - - - (79) (79)
Hazmat Service 315 198 (117) (117)
Total Business-Type Activities 52,377 55,525 138 3,286 3,286
Total Business and Governmental
Type Activities $ 265,805 $ 101,759 $ 7,069 $ 7,556 (152,707) 3,286 (149,421)
General Revenues:
Taxes:
Property Taxes 85,552 - 85,552
Sales Taxes 23,646 - 23,646
Utility Taxes 19,757 - 19,757
Other Taxes 11,629 11,629
Total Taxes 140,584 - 140,584
Other:
Use of Money and Property 4,043 1,824 5,867
From Other Agencies-Unrestricted 4,184 - 4,184
Gain on Sale of Property 4,496 - 4,496
Other 5,448 5,448
Total General Revenues 158,755 1,824 160,579
Transfers (38) 38
Total General Revenues and Transfers 158,717 1,862 160,579
Change in Net Assets 6,010 5,148 11,158
Net Assets-Beginning of Year 643,576 208,663 852,239
Net Assets-End of Year $ 649,586 $ 213,811 $ 863,397
See Notes to the Financial Statements
19
CITY OF HUNTINGTON BEACH
BALANCE SHEET
GOVERNMENTAL FUNDS
SEPTEMBER 30,2010
(In Thousands)
Other Major Governmental Funds
ow-ncome
Redevelopment Redevelopment Housing Total Major Other
Grants Special Agency Debt Agency Capital Capital Governmental Governmental
ASSETS General Fund Revenue Service Pro acts Pro acts As Funds Total
Cash and Investments $ 28,155 $ 609 $ - $ 2,626 $ 8,549 $ 39,939 $ 17,152 $ 57,091
Cash and Investmentswith FiscalAgent - - 2,402 - - 2,402 5,911 8,313
Taxes Receivable 25,758 - 4,510 - - 30,268 553 30,821
Other Receivables,Net 4,278 3,861 136 10 8,715 17,000 788 1],]88
Due from Other Funds - - - 199 - 199 967 1,166
Advances to Other Funds 675 - - 302 4,591 5,568 - 5,568
Land Hell for Resale - - - 6,158 - 6,158 - 6,158
Other Assets - - - - - - 1,266 1,266
Prepaids 12,502 - - - - 12,502 - 12,502
TOTAL ASSETS $ 71,368 $ 4,470 $ 7,048 $ 9,295 $ 21,855 $ 114,036 $ 26,637 $ 140,673
LIABILITIES AND FUND BALANCES
Liabilities:
Accounts Payable $ 4,150 $ 403 $ - $ 92 $ 79 $ 4,724 $ 1,862 $ 6,586
Accrued Payroll 4,709 45 - 31 14 4,799 62 4,861
Due to Other Funds - - 199 - - 199 967 1,166
Advances from Other Funds - - 3,530 1,363 - 4,893 675 5,568
Deposits Payable 1,194 13 - - 1,665 2,872 1,300 4,172
Deferred Revenue 14,285 3,086 3,471 - 8,688 29,530 515 30,045
Claims Payable 5,678 - - - - 5,678 - 5,678
Total Liabilities 30,016 3,54] 7,200 1,486 10,446 52,695 5,381 58,076
Fund Balances:
Nonspendable
Long Term Receivables - - 116 - - 116 - 116
Land Held for Resale - - - 6,158 - 6,158 - 6,158
Prepaid Insurance 3,930 - - - - 3,930 - 3,930
Advances to Other Fund 675 - - 302 - 977 - 977
Restricted
Underground Utilities 364 - - _ - 364 - 364
Restitution 244 - - - - 244 - 244
Pollution Remediation - - - - - - 489 489
Debt Service - - 2,402 - 2,402 5,946 8,348
Highways,Streets and Transportation - - - - - ],614 ],614
Low Income Housing - - - - 6,818 6,818 - 6,818
Air Quality - - - - - - 803 803
Parks - - - - - - 2,787 2,787
Advances to Other Fund - - - - 4,591 4,591 - 4,591
Other Capital Projects - - - 322 - 322 1,098 1,420
Other Purposes 844 449 - - - 1,293 - 1,293
Committed
Economic Uncertainties 19,710 - - - 19,710 - 19,710
Litigation Reserves 900 - - - 900 - 900
Capital Projects Reserve 2,970 - - - - 2,970 - 2,970
Redevelopment Capital Projects - - - 1,256 - 1,256 - 1,256
Equipment Replacement 6,913 - - - - 6,913 - 6,913
Other Capital Projects - - - - - - 30 30
Other Purposes - 465 - - - 465 4 469
Assigned
Capital Projects - - - - - - 2,924 2,924
PARS Obligation 3,549 - - - - 3,549 - 3,549
Other Purposes 1,253 9 - - - 1,262 981 2,243
Unassigned - - (2,670) (229) - (2,899) H 420) (4,319)
TOTAL FUND BALANCES 41,352 923 (152) 7,809 11,409 61,341 21,256 82,597
TOTAL LIABILITIES AND FUND BALANCES $ 71,368 $ 4,470 $ 7,048 $ 9,295 $ 21,855 $ 114,036 $ 26,637 $ 140,673
See Notes to the Financial Statements
20
CITY OF HUNTINGTON BEACH
RECONCILIATION OF THE BALANCE SHEET OF GOVERNMENTAL FUNDS
TO THE STATEMENT OF NET ASSETS
SEPTEMBER 30, 2010
(In Thousands)
Amounts reported for governmental activities in the statement of net assets are
different because:
Total Fund Balances Governmental Funds $ 82,597
Net capital assets used in governmental activities are not current financial resources and,
therefore, are not reported in the governmental funds
Capital Assets 928,203
Accumulated Depreciation (249,412)
Long-term receivable are not available to pay for current-period expenditures and
accordingly are deferred in the governmental funds. 11,704
Other long-term assets are not available to pay for current-period expenditures and,
therefore, are deferred in the governmental funds
Accrued Taxes Receivable 17,602
Other Postemployment Benefit Asset 8,661
Other long-term liabilities are not due in the current period and, therefore, are not recorded
in the governmental funds.
Accrued Interest Payable (569)
Long-term Liabilities, including bonds and certificates of participation payable, are not due
and payable in the current period and therefore are not reported in the governmental funds.
Long-Term Obligations Due in One Year (11,034)
Long-Term Obligations Due in More than One Year (138,166)
Net Assets of Governmental Activities $ 649,586
See Notes to the Financial Statements
21
CITY OF HUNTINGTON BEACH
STATEMENT OF REVENUES,EXPENDITURES,AND
CHANGES IN FUND BALANCES
GOVERNMENTAL FUNDS
FOR THE YEAR ENDED SEPTEMBER 30,2010
(In Thousands)
Other Major Governmental Funds
Redevelopment Redevelopment Low-Income
Grants Special Agency Debt Agency Capital Housing Capital
REVENUES General Fund Revenue Service Projects Projects
Property Taxes $ 66,886 $ - $ 18,186 $ - $ -
Sales Taxes 20,795 - - - -
Utility Taxes 19,757 - - -Other Taxes 11,629 - - - -
Licenses and Permits 6,109 - - - -
Fines and Forfeitures 3,965 - - - -
From Use of Money and Property 13,826 236 168 719 967
Intergovernmental 4,219 4,326 - - 1,222
Charges for Current Services 22,724 - - - -
Other 2,433 68 - 181 439
Total Revenues 172,343 4,630 18,354 900 2,628
EXPENDITURES
Current:
City Council 301 - - - -
City Administrator 1,652 - - - -
City Treasurer 1,532 - - - -
City Attorney 2,657 - - 115 -
City Clerk 868 - - - -
Finance 4,286 - - - -
Human Resources 5,209 - - -
Planning 2,954 216 - - -
Building 3,376 73 - - -
Fire 32,398 418 - - -
Iniormation SeMces 6,782 - - - -
Police 57,521 947 - - -
Economic Development 1,520 1,144 8,298 1,388 2,354
Community Services 13,328 247 - 90 -
Library Services 4,066 92 - - -
Public Works 17,388 845 - 93 -
Non-Departmental 14,443 - - - -
CapitalOutlay - 2,367 - 3,144 4,166
Debt Service:
Principal 386 125 2,435 - -
Interest 48 173 3,318 - -
Total Expenditures 170,715 6,647 14,051 4,830 6,520
Excess(Deficiency)Ot Revenues Over
(Under)Expenditures 1,628 (2,017) 4,303 (3,930) (3,892)
OTHER FINANCING SOURCES(USES)
Tmnsiers In 8,452 588 - 882 3,689
Issuance of Long Term Debt - - - - -
Issuance Premium - - - - -
Payments to Escrow - - - - -
Tmnsiers Out (7,816) (52) (8,944) (216) (405)
Total Other Financing Sources(Uses) 636 536 (8,944) 666 3,284
Net Change In Fund Balances 2,264 (1,481) (4,641) (3,264) (608)
Fund Balances Beginning Ot Year 39,088 2,404 4,489 11,073 12,017
Fund Balances End Ot Year $ 41,352 $ 923 $ (152) $ 75809 $ 115409
See Notes to the Financial Statements
22
CITY OF HUNTINGTON BEACH
STATEMENT OF REVENUES, EXPENDITURES,AND
CHANGES IN FUND BALANCES
GOVERNMENTALFUNDS
FOR THE YEAR ENDED SEPTEMBER 30,2010
(In Thousands)
(continued)
Total Major Other
Governmental Governmental
Funds Funds Total
$ 85,072 $ - $ 85,072
20,795 1,787 22,582
19,757 - 19,757
11,629 - 11,629
6,109 95 6,204
3,965 - 3,965
15,916 414 16,330
9,767 10,126 19,893
22,724 463 23,187
3,121 93 3,214
198,855 12,978 211,833
301 301
1,652 - 1,652
1,532 - 1,532
2,772 - 2,772
868 868
4,286 - 4,286
5,209 75 5,284
3,170 - 3,170
3,449 - 3,449
32,816 - 32,816
6,782 - 6,782
58,468 98 58,566
14,704 - 14,704
13,665 836 14,501
4,158 - 4,158
18,326 2,140 20,466
14,443 389 14,832
9,677 7,498 17,175
2,946 4,405 7,351
3,539 2,829 6,368
202,763 18,270 221,033
(3,908) (5,292) (9,200)
13,611 7,239 20,850
- 14,745 14,745
707 707
(15,967) (15,967)
(17,433) (3,455) (20,888)
(3,822) 3,269 (553)
(7,730) (2,023) (9,753)
69,071 23,279 92,350
$ 61,341 $ 215256 $ 825597
See Notes to the Financial Statements
23
CITY OF HUNTINGTON BEACH
RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES,
AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE
STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED SEPTEMBER 30, 2010
(In Thousands)
Amounts reported for governmental activities in the Statement of
Activities are different because:
Net Changes in Fund Balances-Total Governmental funds $ (9,753)
Capital Expenditures- Governmental funds report capital outlays as
expenditures. However, in the Statement of Activities,the cost of these assets
is allocated over their estimated useful lives and reported as depreciation
expense.
Depreciable Assets Purchased 11,090
Non-Depreciable Assets Purchased 3,313
Captial Asset Depreciation (13,106)
Accrual of Revenues -Certain revenues in the Statement of Activities do not
meet the"availability' criteria for revenue recognition in the governmental funds
and are not reported in the governmental funds as revenue.
Current Year Property Tax Accrual 17,602
Prior Year Property Tax Accrual (16,058)
Repayments on long-term receivables provide current financial resources to
governmental funds,while loans provided consume the current financial
resources of governmental funds. These transactions, however, have no effect
on net assets. 7,208
Governmental funds report only proceeds from the sale of capital assets. The
Statement of Activities reports a gain or loss on disposal based
on the net book value at the time of disposal. This amount represents the gain
on sale of land held for resale. 4,496
Other Postemployment Benefits Payments- Expenses reported in the
Statement of Activities do not require the use of current financial resources and
therefore are not reported as expenditures in governmental funds. 283
Liabilities not Liquidated with Current Resources-Some expenses reported in
the Statement of Activities do not require the use of current financial resources
and,therefore,are not reported as expenditures in governmental funds.
Current Year Interest Accrual (569)
Prior Year Interest Accrual 791
Repayments of long-term debt are expenditures in the governmental funds, but
22,906
Some expenses reported in the Statement of Activities do not require the use of
current resources, and therefore are not reported as expenditures in the
governmental funds. This amount also includes the amount of debt proceeds
during the year. (22,193)
Change in Net Assets of Governmental Activities $ 6,010
See Notes to the Financial Statements
24
CITY OF HUNTINGTON BEACH
STATEMENT OF NET ASSETS
PROPRIETARY FUNDS
SEPTEMBER 30,2010
(In Thousands)
Hazmat
Sewer Service Service
Water Fund Fund Refuse Fund Fund Total
ASSETS
Current Assets:
Cash and Investments $ 46,399 $ 16,324 $ - $ 133 $ 62,856
Restricted Cash and Investments 30,512 - - - 30,512
Other Receivables, Net 2,115 592 462 2 3,171
Inventories 1,232 - - - 1,232
Unbilled Receivables 1,508 429 433 - 2,370
Due from Other Funds 19 - - - 19
Total Current Assets 81,785 17,345 895 135 100,160
Capital Assets:
Land 3,907 - - - 3,907
Buildings and Improvements 40,004 13,505 - - 53,509
Machinery and Equipment 8,567 829 - - 9,396
Infrastructure 82,185 40,160 - - 122,345
Construction in Progress 6,713 5,662 - - 12,375
Less Accumulated Depreciation (56,592) (23,361) - - (79,953)
Total Capital Assets 84,784 36,795 - - 121,579
Total Assets 166,569 54,140 895 135 221,739
LIABILITIES
Current Liabilities:
Accounts Payable $ 3,711 $ 571 $ 816 $ 1 $ 5,099
Accrued Payroll 279 81 10 8 378
Due to Other Funds - - 19 - 19
Deposits Payable 1,501 - - - 1,501
Current Portion of Compensated
Absenses and Capital Leases 181 61 3 7 252
Total Current Liabilities 5,672 713 848 16 7,249
Non-Current Liabilities:
Compensated Absences 487 164 8 20 679
Total Liabilities 6,159 877 856 36 7,928
NET ASSETS
Invested in Capital Assets, Net of Related Debt 84,781 36,795 - - 121,576
Restricted for:
Capital Projects 30,512 - - 30,512
Unrestricted 45,117 16,468 39 99 61,723
Total Net Assets $ 160,410 $ 53,263 $ 39 $ 99 $ 213,811
See Notes to the Financial Statements
25
CITY OF HUNTINGTON BEACH
STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETS
PROPRIETARY FUNDS
FOR THE YEAR ENDED SEPTEMBER 30, 2010
(In Thousands)
Hazmat
Sewer Service Service
Water Fund Fund Refuse Fund Fund Total
OPERATING REVENUES
Sales $ 33,700 $ - $ - $ - $ 33,700
Fees for Service - 10,390 10,405 198 20,993
Other 556 175 101 - 832
Total Operating Revenues 34,256 10,565 10,506 198 55,525
OPERATING EXPENSES
Water Purchases 12,867 - - - 12,867
Supplies and Operations 5,954 5,358 10,544 313 22,169
Engineering 1,535 - - - 1,535
Production and Distribution 6,583 - - - 6,583
Maintenance 1,906 - - - 1,906
Water Meters 1,790 - - - 1,790
Water Quality 550 - - - 550
Water Use Efficiency 311 - - - 311
Depreciation 3,406 1,217 - - 4,623
Total Operating Expenses 34,902 6,575 10,544 313 52,334
Operating Income (Loss) (646) 3,990 (38) (115) 3,191
NON-OPERATING REVENUES (EXPENSES)
Interest Income 1,565 257 2 - 1,824
Interest Expense - - (41) (2) (43)
Total Non-Operating Revenues (Expenses) 1,565 257 (39) (2) 1,781
Change In Net Assets Before Capital
Contributions and Transfers 919 4,247 (77) (117) 4,972
CAPITAL CONTRIBUTIONS 138 - - - 138
TRANSFERS
Transfers In - - 51 - 51
Transfers Out - - - (13) (13)
Total Transfers - - 51 (13) 38
Total Change In Net Assets 1,057 4,247 (26) (130) 5,148
Net Assets-Beginning Of Year 159,353 49,016 65 229 208,663
Net Assets- End Of Year $ 160,410 $ 53,263 $ 39 $ 99 $ 213,811
See Notes to the Financial Statements
26
CITY OF HUNTINGTON BEACH
STATEMENT OF CASH FLOWS
PROPRIETARY FUNDS
FOR THE YEAR ENDED SEPTEMBER 30, 2010
(In Thousands)
Sewer Service Hazmat
Water Fund Fund Refuse Fund Service Fund Total
CASH FLOWS FROM OPERATING ACTIVITIES
Cash Received from Customers and Users $ 34,331 $ 10,578 $ 10,501 $ 215 $ 55,625
Cash Paid to Employees for Services (7,795) (2,421) (223) (226) (10,665)
Cash Paid to Suppliers of Goods and Services (23,708) (3,723) (10,317) (82) (37,830)
Net Cash Provided(Used)by
Operating Items 2,828 4,434 (39) (93) 7,130
CASH FLOWS FROM NONCAPITAL
FINANCING ACTIVITIES
Transfers In - - 51 - 51
Cash Received (Paid)to Other Funds (19) - 19 -Net Cash Provided(Used)by Non Capital
Financing Activities (19) - 70 - 51
CASH FLOWS FROM CAPITAL AND RELATED
FINANCING ACTIVITIES
Purchase of Capital Assets (7,393) (885) (42) (16) (8,336)
Net Cash Provided(Used)by Capital
and Related Financing Activities (7,393) (885) (42) (16) (8,336)
CASH FLOWS FROM INVESTING ACTIVITIES
Interest Received 1,813 282 3 1 2,099
Net Increase (Decrease) in Cash
and Cash Equivalents (2,771) 3,831 (8) (108) 944
Cash and Cash Equivalents-
Beginning of Year 79,682 12,493 8 241 92,424
Cash and Cash Equivalents-End of Year $ 76,911 $ 16,324 $ - $ 133 $ 93,368
RECONCILIATION OF OPERATING
INCOME(LOSS)TO NET CASH PROVIDED
(USED)BY OPERATING ACTIVITIES
Operating Income(Loss) $ (646) $ 3,990 $ (38) $ (115) $ 3,191
Adjustments to Reconcile Operating
income to Net Cash Provided(Used)
by Operating Activities
Depreciation 3,406 1,217 - - 4,623
Decrease (Increase) in Other Receivables, Net 90 11 (1) 17 117
Decrease (Increase) in Unbilled Receivables (15) 4 (4) - (15)
Increase in Inventory (31) - - - (31)
Increase (Decrease) in Accounts Payable 84 (723) 1 - (638)
Increase in Accrued Payroll 46 17 4 2 69
Decrease in Deposits (20) (2) (1) - (23)
Increase (Decrease) in Compensated Absences (86) (80) - 3 (163)
Net Cash Provided(Used)by
Operating Activities $ 2,828 $ 4,434 $ (39) $ (93) $ 7,130
See Notes to the Financial Statements
27
CITY OF HUNTINGTON BEACH
STATEMENT OF FIDUCIARY FUND NET ASSETS
FIDUCIARY FUNDS
SEPTEMBER 30,2010
(In Thousands)
Trust Fund-
Pension
Retirement
Total Agency Supplemental
ASSETS Funds Fund
Cash and Investments $ 3,805 $
Cash and Investments with Fiscal Agent 4,139
Mutual Funds - 26,628
Money Market Funds - 1,537
Accounts Receivable, Net 98 5
Total Assets $ 8,042 28,170
LIABILITIES
Accounts Payable $ 419 2
Due to Bondholders 5,401 -
Held for Others 2,222 -
Benefits Due to Plan Members and Beneficiaries - 4,176
Total Liabilities $ 8,042 4,178
NET ASSETS
Held in Trust For Pension Benefits and Other Purposes $ 23,992
CITY OF HUNTINGTON BEACH
STATEMENT OF CHANGES IN FIDUCIARY FUND NET ASSETS
PENSION TRUST FUND
FOR THE YEAR ENDED SEPTEMBER 30,2010
(In Thousands)
Trust Fund-
Pension
Retirement
Supplemental
ADDITIONS Fund
Employer Contributions $ 3,968
Other Income 153
Investment Income, Net 1,852
Total Additions 5,973
DEDUCTIONS
Benefits 2,389
Administrative Costs 185
Total Deductions 2,574
Change in Net Assets 3,399
Net Assets- Beginning of Year 20,593
Net Assets-End of Year $ 23,992
See Notes to the Financial Statements
28
0 City of Huntington Beach
Notes to Financial Statements
For the Year Ended September 30, 2010
Footnote
Number Description Page
1. Summary of Significant Accounting Policies................30-43
2. Cash and Investments .....................................................44-49
3. Other Receivables ............................................................49-50
4. Deferred Compensation...................................................50-51
5. Deferred Revenue.............................................................51
6. Retirement Plan — Normal ...............................................51-54
7. Retirement Plan — Supplemental ...................................54-56
8. Postemployment Medical Insurance ............................56-59
9. Risk Management ..................................................... 60-61
10. Interfund Transactions............................................................62-64
11. Long-Term Obligations.....................................................64-80
12. Capital Assets....................................................................81-82
13. Commitments and Contingencies..................................83-85
14. Other Information ..............................................................85-86
15. Subsequent Events...........................................................86-90
29
City of Huntington Beach
-- Notes to Financial Statements
For the Year Ended September 30, 2010
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Reporting Entity
The City of Huntington Beach is the primary government. It was incorporated in
1909 as a charter, full-service city. The form of government is Council-
Administrator. Component units are legally separate organizations for which the
City Council is financially accountable, or organizations that if excluded from the
accompanying financial statements, would make them misleading. The
component units described below are blended (presented as if they are part of the
primary government) with the primary government for financial reporting purposes
because either the component units have governing bodies identical to the City's
(the City Council) or provide services exclusively to the City. Financial
accountability means the appointment of a voting majority of the component unit's
board and either the ability to impose will by the City or the possibility that the
component unit will provide a financial benefit or impose a financial burden on the
City.
Redevelopment Aaency of the City of Huntington Beach (the Redevelopment
Agency) — This entity was formed in 1967 to renovate older areas in the City. The
City Council serves as its governing body and adopts its annual budget. The
Redevelopment Agency is financially dependent on the City for all of its
operations. Separately prepared financial statements are available for the
Redevelopment Agency from the Finance Department.
Huntington Beach Public Financing Authority (Public Financing Authority) —
This Corporation was formed in March 1988 to issue debt to finance public
improvements and other capital purchases for the City and Redevelopment
Agency. The Public Financing Authority's governing body is the City Council,
which also adopts the annual budget. The Public Financing Authority is financially
dependent on the City. There are no separately issued financial statements
available for the Public Financing Authority.
The City of Huntington Beach Community Facilities Districts 1990-1, 2000-1,
2002-1, and 2003-1 (Community Facilities Districts) — were formed to construct
public improvements within the City boundaries. The governing board of these
districts is the City Council. The proceeds of debt issued and the expenditures for
the public improvements are recorded in capital projects funds. The Community
Facilities Districts' debt is not an obligation of the City. There are no separate
financial statements prepared for these entities.
30
City of Huntington Beach
0) Notes to Financial Statements
For the Year Ended September 30, 2010
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
The City of Huntington Beach Supplemental Retirement Plan and Trust
(Supplemental Retirement Plan and Trust) — The Trust was formed to provide a
supplemental retirement plan for all employees hired prior to 1997 (exact dates
differed for various associations). The governing board of the Supplemental
Retirement Plan consists of the City Treasurer, Director of Finance, and the City
Administrator (or designee). The Retirement Board is responsible for supervising
all investments, resolving benefit disputes, and ensuring that contributions are
made in order to pay the required benefits. There are no separate financial
statements for this plan and trust.
b. Government-wide Financial Statements
The government-wide financial statements include a Statement of Net Assets and
a Statement of Activities. These statements present summaries of Governmental
and Business-Type Activities for the City accompanied by a total column.
Fiduciary activities of the City are not included in these statements. These
statements are presented on an "economic resources" measurement focus and
the accrual basis of accounting. Accordingly, all of the City's assets and liabilities,
including capital assets, as well as infrastructure assets, and long-term liabilities,
are included in the accompanying Statement of Net Assets. The Statement of
Activities presents changes in net assets. Under the accrual basis of accounting,
revenues are recognized in the period in which they are earned while expenses
are recognized in the period in which the liability is incurred.
The Statement of Activities demonstrates the degree to which the direct expenses
of a given function or segment is offset by program revenues. Direct expenses
are those that are clearly identifiable with a specific function or segment. Indirect
expenses are allocated to the various functions based on a proportionate use of
services. The types of transactions reported as program revenues for the City are
reported in three categories: 1) charges for current services; 2) operating grants
and contributions; and, 3) capital grants and contributions. Taxes and other items
not properly included among program revenues are reported as general revenues.
When both restricted and unrestricted resources are available for use, it is the
government's policy to use restricted resources first, then unrestricted resources
as they are needed.
Government-wide financial statements do not provide information by fund. They
simply distinguish between governmental and business-type activities. The City's
Statement of Net Assets includes both current and non-current assets and
liabilities.
31
City of Huntington Beach
0 Notes to Financial Statements
For the Year Ended September 30, 2010
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Financial Statement Classification
In the government-wide financial statements, net assets are classified in the
following categories:
Invested In Capital Assets, Net of Related Debt — This category groups all
capital assets, including infrastructure, into one component of net assets.
Accumulated depreciation and the outstanding balances of debt that are
attributable to the acquisition, construction, or improvement of these assets
reduce this category.
Restricted Net Assets — This category presents restrictions imposed by
creditors, grantors, contributors or laws or regulations of other governments and
restrictions imposed by law through constitutional provisions or enabling
legislation. This category presents restrictions placed on the categories of Capital
Projects, Debt Service, and Specific Projects and Programs.
Unrestricted Net Assets — This category represents the net assets of the City,
not restricted for any project or other purpose.
c. Fund Financial Statements
Separate fund financial statements are prepared for governmental funds,
proprietary funds, and fiduciary funds. Major individual governmental and
enterprise funds are reported as separate columns in the fund financial
statements.
The City applies all applicable Governmental Accounting Standards Board
(GASB) pronouncements (including all National Council on Governmental
Accounting NCGA Statements and Interpretations currently in effect) as well as
the following pronouncements issued on or before November 30, 1989, to the
governmental activities, business-type activities, and proprietary funds, unless
those pronouncements conflict with or contradict GASB pronouncements,
Financial Accounting Standards Board (FASB) Statements and Interpretations,
Accounting Principles Board (APB) Opinions, and Accounting Research Bulletins
(ARB) of the Committee on Accounting Procedure. The City has elected not to
follow applicable FASB Statements and Interpretations issued after November
30, 1989.
32
City of Huntington Beach
Notes to Financial Statements
M, For the Year Ended September 30, 2010
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Measurement Focus. Basis of Accounting, and Financial Statement
Presentation
All governmental funds are accounted for on a spending or "current financial
resources" measurement focus and the modified accrual basis of accounting. Only
current assets and current liabilities are included on the Balance Sheets. The
Statement of Revenues, Expenditures, and Changes in Fund Balances present
increases (revenues and other financing sources) and decreases (expenditures
and other financing uses) in net current assets. Under the modified accrual basis
of accounting, revenues are recognized in the accounting period in which they
become both measurable and available to finance expenditures of the current
period.
Revenues are recorded when received in cash, except that revenues subject to
accrual (generally 60 days after year-end) are recognized when due. The primary
revenue sources, which have been treated as susceptible to accrual by the City,
are property tax, sales tax, use of money and property, intergovernmental
revenues, charges for current services, and other taxes. Expenditures are
recorded in the accounting period in which the related fund liability is incurred.
However, debt service expenditures as well as expenditures related to
compensated absences and claims are recorded only when payment is due.
Governmental Funds Financial Statements
Governmental Funds Financial Statements include a Balance Sheet and a
Statement of Revenues, Expenditures, and Changes in Fund Balances for all
major governmental funds and non-major funds aggregated. An accompanying
schedule is presented to reconcile and explain the differences in fund balances as
presented in these statements to the net assets presented in the government-wide
financial statements. The City presents all major funds that meet those
qualifications.
The City's Governmental Fund Balances are comprised of the following
components:
• Nonspendable fund balance typically includes inventories, prepaid items, and
other items that by definition are not in spendable form.
• The restricted fund balance category includes amounts that can be spent only
for the specific purposes stipulated by constitution, external resource
providers, or through enabling legislation.
• The committed fund balance classification includes amounts that can be used
only for the specific purposes determined by a formal action of the City
Council. The City Council has authority to establish, modify, or rescind a fund
balance commitment.
33
City of Huntington Beach
Notes to Financial Statements
For the Year Ended September 30, 2010
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
• Amounts in the assigned fund balance classification are intended to be used
by the City for specific purposes but do not meet the criteria to be classified as
restricted or committed. The City Administrator or designee has the authority
to establish, modify, or rescind a fund balance assignment.
• Unassigned fund balance is the residual classification for the City's General
Fund and includes all spendable amounts not contained in the other
classifications. Unassigned fund balance in other governmental funds is
limited to any negative residual fund balance after fund balance has been
classified as restricted, committed, or assigned.
In the government-wide statements, the City considers restricted funds to be
spent first then unrestricted amounts when expenditures are incurred for purposes
for which both restricted and unrestricted fund balance is available. In the
governmental fund statements, when expenditures are incurred, the City's uses
the most restrictive funds first. The City would use the appropriate funds in the
following order: committed, assigned, and lastly unassigned amounts.
Economic Uncertainties Reserve Commitment
The City Council established an Economic Uncertainty Reserve in the General
Fund with a goal to commit the value of two months of the General Fund
expenditure adopted budget amount. Appropriations from the Economic
Uncertainties Reserve commitments can only be made by formal City Council
action. Generally, appropriations and access to these funds will be reserved for
emergency situations. Examples of such emergencies include, but are not limited
to:
• An unplanned, major event such as catastrophic disaster requiring
expenditures over 5% of the General Fund adopted budget
• Budgeted revenue taken by another government entity
• Drop in projected/actual revenue of more than 5% of the General Fund
adopted revenue budget
Should the Economic Uncertainties Reserve commitment be used, and its level
falls below the minimum amount of two months of General Fund expenditures
adopted budget, the goal is to replenish the fund within three fiscal years.
Proprietary Fund Financial Statements
Proprietary Fund Financial Statements include a Statement of Net Assets, a
Statement of Revenues, Expenses, and Changes in Fund Net Assets, and a
Statement of Cash Flows for each major proprietary fund.
34
City of Huntington Beach
Notes to Financial Statements
For the Year Ended September 30, 2010
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Proprietary funds are accounted for using the "economic resources" measurement
focus and the accrual basis of accounting. Accordingly, all assets and liabilities
(whether current or non-current) are included on the Statement of Net Assets.
The Statement of Revenues, Expenses, and Changes in Fund Net Assets present
increases (revenues) and decreases (expenses) in total net assets. Under the
accrual basis of accounting, revenues are recognized in the period in which they
are earned while expenses are recognized in the period in which the liability is
incurred.
Operating revenues in the proprietary funds are those revenues that are
generated from the primary operations of the fund. All other revenues are
reported as non-operating revenues. Operating expenses are those expenses
that are essential to the primary operations of the fund. All other expenses are
reported as non-operating expenses.
Fiduciary Funds Financial Statements
Fiduciary Funds Financial Statements include a Statement of Net Assets and a
Statement of Changes in Net Assets for Trust Funds. The City's fiduciary funds
include Agency Funds, which are custodial in nature (assets equal liabilities) and
do not involve measurement of results of operations. The agency funds are
accounted for on the accrual basis of accounting. The Retirement Trust Fund
accounts for the activities of the supplemental retirement plan for all employees
hired prior to 1997, which accumulates resources for pension benefits to qualified
employees. Contributions made are funded by a percentage of the Retirement
Trust payroll and are recognized when the payroll is incurred. Fiduciary funds are
not presented in the government-wide financial statements because these funds
do not represent net assets available to the City.
35
0 City of Huntington Beach
Notes to Financial Statements
For the Year Ended September 30, 2010
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
The City reports the following major funds:
Governmental Funds
General Fund - accounts for activity not required to be accounted for in another
fund.
Grant Special Revenue - accounts for revenues and expenditures of grant
related activity.
Redevelopment Agency Debt Service - accounts for the related debt service
activity for certain projects in the City's Redevelopment project areas.
Redevelopment Agency Capital Projects - accounts for acquisition and
construction of capital assets for certain projects in the City's Redevelopment
project areas.
Low Income Housing Capital Projects - accounts for the activity related to the
development of affordable housing.
Proprietary Funds
Water Fund - used to account for water sales to customers.
Sewer Service Fund - accounts for user fees charged to residents and
businesses for sewer service.
Refuse Fund - used to account for activities related to refuse collection and
disposal.
Hazmat Service Fund — accounts for user fees charged for the City's hazardous
waste material program.
The City's fund structure also includes the following fund types:
Special Revenue Funds are used to account for and report the proceeds of
specific revenue sources that are restricted or committed to expenditure for
specified purposes other than debt service or capital projects.
Debt Service Funds are used to account for the receipts for and payment of
general long-term debt.
Capital Projects Funds are used to account for and report financial resources
that are restricted, committed, or assigned to expenditure for capital outlays,
including the acquisition or construction of capital facilities and other capital
assets.
36
City of Huntington Beach
Notes to Financial Statements
For the Year Ended September 30, 2010
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Fiduciary Funds
General Deposit Fund - accounts for the deposit of general monies held by the
City for private individuals and businesses.
Community Facilities Districts Funds - accounts for the debt service activity of
the City's community facilities districts where the City is not obligated in any
manner for the outstanding debt.
Huntington Beach Business Improvement Districts Fund - accounts for the
activities of the City's business improvement districts.
Central Net Operations Authority Fund - accounts for the activity of the Central
Net Operations Authority.
Parking Structures Fund - accounts for the activities of the Bella Terra Parking
Structure and Strand Parking Structure.
West Orange County Water Board - accounts for the West Orange County
Water Board.
Supplemental Retirement Plan and Trust - accounts for the City's supplemental
retirement plan.
Reconciliations of Financial Statements
Reconciliation of the Governmental Funds financial statements to the government-
wide financial statements is provided to explain the differences created by the
integrated approach of GASB Statement No. 34.
37
City of Huntington Beach
Notes to Financial Statements
For the Year Ended September 30, 2010
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
d. Cash and Investments
The City records investments at fair value except for guaranteed investment
contracts (GICs), which are reported at cost, because the investments are not
transferable and the fair values are not affected by changes in interest rates. The
City pools cash resources of its various funds to facilitate cash management.
Cash in excess of daily needs is invested and reported as investments. It is the
City's intent to hold investments until maturity. However, the City may, in
response to market conditions, sell investments prior to maturity in order to
improve the quality, liquidity, or yield of the portfolio. Interest earnings are
apportioned among funds based on month-end cash and investment balances.
The City's cash and cash equivalents are considered to be cash on hand, demand
deposits, and highly liquid investments, such as money market funds, and any
investment with a maturity of 90 days or less at the time of purchase.
In accordance with GASB Statement No. 31 , Accounting and Financial Reporting
for Certain Investments and for External Investment Pools, highly liquid market
investments with maturities of one year or less at time of purchase are stated at
amortized cost. All other investments are stated at fair value. Market value is
used as fair value for those securities for which market quotations are readily
available.
The City participates in the Local Agency Investment Fund (LAIF), an investment
pool managed by the State Treasurer of the State of California. LAIF has invested
a portion of the pool funds in structured notes and asset-backed securities. LAIF's
investments are subject to credit risk. In addition, these structured notes and
asset-backed securities are subject to market risk as a result of changes in
interest rates. The City's investment policy is further discussed in Note 2 on page
44.
The City pools all non-restricted cash for investment purchases and allocates
interest income to the funds based on month-end cash balances. Funds that have
restricted cash record interest income in the respective fund.
38
City of Huntington Beach
- Notes to Financial Statements
For the Year Ended September 30, 2010
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
e. Capital Assets
Capital assets, which include property, plant, equipment, and infrastructure, are
reported in the applicable governmental or business-type activities columns in the
government-wide financial statements and in the proprietary funds financial
statements. Capital assets have an acquisition cost of $50,000 or greater
($100,000 for infrastructure) and a useful life of one year or more.
The City records all purchased capital assets at historical cost (where historical
records are available) and at estimated historical cost where no historical records
exist. Capital assets acquired from gifts or contributions are recorded at fair value
at the time received, or in the case of infrastructure assets, at City Council
acceptance date.
In the government-wide and proprietary funds financial statements, depreciation is
recorded on the straight-line method over the estimated useful life of the assets as
shown below and charged to the respective activity or fund. No depreciation is
recorded in the governmental funds of the fund financial statements.
Production, pumping transmission, and distribution plant 10 to 15 years
General Plant 20 to 50 years
Transportation equipment 5 to 30 years
Infrastructure 50 Years
Interest is capitalized on proprietary fund assets acquired with taxable and tax-
exempt debt. The amount of interest to be capitalized is calculated by offsetting
interest expense incurred from the date of borrowing until completion of the
project, and for tax-exempt debt, offset with interest earned on the invested
proceeds over the same period. There was no capitalized interest for the year
ended September 30, 2010.
39
City of Huntington Beach
Notes to Financial Statements
For the Year Ended September 30, 2010
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
f. Inventories
Proprietary fund inventories are valued at weighted-average cost. There are no
inventories in governmental funds.
g. Interfund Transactions
As a general rule, interfund transactions have been eliminated from the
government-wide financial statements. Exceptions to this rule are payments in-
lieu or charges for current service between the City's enterprise activities and the
City's General Fund. Elimination of these transactions would distort the direct
costs and program revenues for the various functions. Certain eliminations have
been made regarding interfund activities, payables, and receivables. All internal
balances in the Statement of Net Assets have been eliminated except those
representing balances between the governmental activities and the business-type
activities, which are presented as internal balances and eliminated in the total
primary government column.
Numerous transactions occur between funds of the City resulting in transfers and
amounts due to or from other funds. Amounts due to or from are the current (due
within one year) portion of moneys that are to be paid or to be received from other
funds.
h. Long-Term Obligations
In the government-wide and proprietary funds financial statements, long-term
obligations are recorded as liabilities in the applicable governmental activities,
business-type activities, or proprietary fund-type statement of net assets. Bond
premiums and discounts, as well as issuance costs, are deferred and amortized
over the life of the debt. In the governmental fund financial statements, bond
discounts and premiums are recognized as an other financing source or use.
Issuance costs are recorded as a current year debt service expenditure.
i. Employee Compensated Absences
The City records the cost of all accumulated and unused leave time (vacation,
sick, and comp) as a liability when earned in the government-wide and proprietary
funds financial statements. In the governmental funds financial statements these
amounts are recorded as expenditures when due and payable.
40
City of Huntington Beach
Notes to Financial Statements
For the Year Ended September 30, 2010
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
j. Property Tax Revenue
Property tax in California is levied according to Article 13-A of the California
Constitution. The basic levy is a countywide-levy of one percent of total assessed
valuation and is allocated to county governments, school districts, cities and
special districts. Additional levies require two-thirds approval by voters and are
allocated directly to the specific government.
In the government-wide financial statements, property tax is recorded when
earned, regardless of when levied, due, or received. In the fund financial
statements, property tax revenue is recognized in the fiscal year levied provided
that revenue is collected in time to pay current year liabilities. Deferred property
tax revenue represents property taxes related to the current fiscal year that are
collected more than 60 days after the fiscal year-end. Since the City's fiscal year
differs from the County's property tax year, there is a difference between the
property tax revenue recorded on the fund financial statements and the
government-wide financial statements, which is noted as a reconciling item in both
the Reconciliation of the Statements of Revenues, Expenditures, and Changes in
Fund Balances of Governmental Funds to the Statement of Activities and the
Reconciliation of the Balance Sheet of Governmental Funds to the Statement of
Net Assets.
The County acts as a collection agent for property tax for all of the local
governmental units. Property taxes are normally collected twice per year. The
property tax calendar is as follows:
• Lien Date, January 1 - Prior Fiscal Year
• Levy Date, 4th Monday in September - Levy Fiscal Year
• Due Date, First Installment - November 1
• Due Date, Second Installment - February 1
• Delinquent Date, First Installment - December 10
• Delinquent Date, Second Installment - April 10
The taxes are paid to the local governments periodically during the year. Below
are the dates of the payments from the County:
• Payments of First Installment November to December
• Balance of First Installment February 1
• Payments of Second Installment March to April
• Balance of Second Installment July 26
41
City of Huntington Beach
Notes to Financial Statements
For the Year Ended September 30, 2010
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
k. Cash Flow Statements
For purposes of the Statement of Cash Flows, the Proprietary Funds consider all
cash and investments to be cash equivalents, as these funds participate in the
citywide cash and investment pool. Restricted Cash and Investments are also
included resource. They are either deposits or investments with original maturities
of less than 90 days.
I. Estimates
The accompanying financial statements require management to make estimates
and assumptions that effect certain reported amounts and disclosures. Actual
results could differ from those estimates.
m. Implementation of New Accounting Pronouncements
During the year, the City implemented Governmental Accounting Standards Board
(GASB) Statement 51 , Accounting and Financial Reporting for Intangible Assets.
This Statement requires the City to report intangible assets as part of the capital
assets. Implementation of this Statement had no material effect on amounts
reported in the City's financial statements for the fiscal year ended September 30,
2010.
The City is currently analyzing its accounting practices to determine the potential
impact on the financial statements for the following GASB Statements:
In June 2010, GASB issued Statement No. 59, Financial Instruments Omnibus.
This Statement updates and improves existing standards regarding financial
reporting of certain financial instruments and external investment pools.
Application of this Statement is effective for the City's fiscal year ending
September 30, 2011.
In December 2010, GASB issued Statement No. 60, Accounting and Financial
Reporting for Service Concession Arrangements. This Statement addresses how
to account for and report service concession arrangements (SCAs), a type of
public-private or public-public partnership that state and local governments are
increasingly entering into. Common examples of SCAs include long-term
arrangements between a transferor (a government) and an operator
(governmental or nongovernmental entity) in which the transferor conveys to an
operator the right and related obligation to provide services through the use of
infrastructure or another public asset in exchange for significant consideration and
the operator collects and is compensated by fees from third parties. Application of
this Statement is effective for the City's fiscal year ending September 30, 2013.
42
City of Huntington Beach
Notes to Financial Statements
For the Year Ended September 30, 2010
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
In November 2010, GASB issued Statement No. 61 , The Financial Reporting
Entity: Omnibus. GASB Statement No. 61 is designed to improve financial
reporting for governmental entities by amending the requirements of GASB
Statement No. 14, The Financial Reporting Entity, and GASB Statement No. 34,
Basic Financial Statements-and Management's Discussion and Analysis-for State
and Local Governments, to better meet the needs of users and address reporting
entity issues that have come to light since these statements were issued in 1991
and 1999, respectively. GASB Statement No. 61 improves the information
presented about the financial reporting entity, which is comprised of a primary
government and related entities (component units) and amends the criteria for
blended — reporting component units as if they were part of the primary
government — in certain circumstances. Application of this Statement is effective
for the City's fiscal year ending September 30, 2013.
In December 2010, GASB issued Statement No. 62, Codification of Accounting
and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB
and AICPA Pronouncements. The objective of this Statement is to incorporate into
the GASB's authoritative literature certain accounting and financial reporting
guidance that is included in the FASB and predecessor pronouncements issued
on or before November 30, 1989, which does not conflict with or contradict GASB
pronouncements. This Statement also supersedes Statement No. 20, Accounting
and Financial Reporting for Proprietary Funds and Other Governmental Entities
That Use Proprietary Fund Accounting. The requirements of this Statement are
effective for the City's fiscal year ending September 30, 2013.
43
City of Huntington Beach
Notes to Financial Statements
For the Year Ended September 30, 2010
2. CASH AND INVESTMENTS
Investments Authorized by the California Government Code and the City's
Investment Policy
The table below identifies the investment types that are authorized for the City by the
California Government Code (or the City's investment policy, where more restrictive).
The table also identifies certain provisions of the California Government Code 53601
(or the City's investment policy, where more restrictive) that address interest rate risk
and concentration of credit risk.
Maximum Maximum
Maximum Percentage Investment
Authorized Investment Type' Maturity of Portfolio in One Issuer
United States (U.S.) Treasury Obligations 5 years No Limit No Limit
U.S. Government Sponsored
Enterprise Securities 5 years No Limit No Limit
Banker's Acceptances 180 days 25%/40%" (c) 10%
Time Certificate of Deposits 3 years (a) 50% (d) 10%
Negotiable Certificates of Deposit 3/5 years"' 30% 10%
Repurchase Agreements 3 months (b) 20% (d) 10%
Reverse-Repurchase Agreements ""' 92 days 20% 10%
Local Agency Investment Fund (LAIF) N/A No Limit $30 million City/
$30 million RDA (h)
Commercial Paper 270 days 25% (e) 10%
Municipal Bonds from Any State 5 years 50% (d) 10%
Money Market Funds"" 60 Day Wgt Avg 15% (f) 10%
Medium Term Notes 5 years 20%/30%"" (g) 10%
Notes: California Government Code:
"The following investment types are authorized for the City by the Califomia Government Code; (a)5 years
however,they are not considered pennissable investments by the City's Investment Policy: (b)1 year
mortgage pass-through securities,CD placement service,and collateralized bank deposits. (c)40%
40%only with City Council approval (d)20%
" -5 years only with City Council approval (e)25//40%
30%with City Council approval (f)20%
Only with City Council approval (g)30%
N/A-Not Applicable (h)$50,000,000 per Entity
44
City of Huntington Beach
Notes to Financial Statements
For the Year Ended September 30, 2010
2. CASH AND INVESTMENTS (Continued)
Investments Authorized by Debt Agreements
Investments of debt proceeds held by bond trustee are governed by provisions of the
debt agreements, rather than the general provisions of the California Government
Code or the City's investment policy. The table below identifies the investment types
that are authorized for investments held by a bond trustee, but bond indentures do
allow for other forms of investments if approved in writing by the bond insurer that are
not identified below. The table also identifies certain provisions of these debt
agreements that address interest rate risk and concentration of credit risk.
Maximum Maximum
Maximum Percentage Investment
Authorized Investment Type Maturity of Portfolio in One Issuer
United States (U.S.) Treasury Obligations Life of Bond No Limit No Limit
U.S. Government Sponsored
Agency Securities Life of Bond No Limit No Limit
Banker's Acceptances 180 days No Limit No Limit
Time Certificate of Deposits 360 days No Limit No Limit
Negotiable Certificates of Deposit 360 days No Limit No Limit
LAIF N/A No Limit No Limit
Commercial Paper 270 days No Limit No Limit
Municipal Bonds from Any State Life of Bond No Limit No Limit
Money Market Funds N/A No Limit No Limit
Investment Agreements Life of bond No Limit No Limit
Forward Purchase/Delivery Agreements Life of bond No Limit No Limit
N/A- Not Applicable
45
City of Huntington Beach
Notes to Financial Statements
For the Year Ended September 30, 2010
2. CASH AND INVESTMENTS (Continued)
Investment of the Supplemental Pension Retirement Trust
The Investment Policy Statement of the Huntington Beach Supplemental Pension
Trust is established in accordance with the assignment of fiduciary duties by the State
of California Constitution, Government Code, and those outlined by the Employee
Retirement Income Security Act of 1974 "ERISA." The objective of the Investment
Policy is to set guidelines for a prudent investment-making process, recognizing that
the factors to be considered are not limited to those of the "policy." The policy was
established with the assumption that the longer-term nature of the portfolio provides
for higher risk tolerance and short-term volatility but more potential for capital growth.
The manager has the authority to determine the appropriate asset allocation to meet
the goals of an agreed- upon risk/return profile, and in accordance with the mix of
parameters outlined below:
Maximum
Maturity/ Strategic
Authorized Investment Type Credit Quality Allocation
Fixed Income 30%
Money Market & Cash Equivalents 13 months/A-1
P-1/AAA
Investment Grade BBB or higher 16%
High Yield N/A 3%
Inflation Protected Securities N/A 2%
Foreign Sovereign N/A 8%
Equity N/A 59%
Real Estate N/A 7%
Commodities N/A 4%
N/A - Not Applicable
46
City of Huntington Beach
0 Notes to Financial Statements
For the Year Ended September 30, 2010
2. CASH AND INVESTMENTS (Continued)
At year-end the City had the following deposits and investments (amounts in
thousands):
Statement of Net Assets:
Cash and Investments $ 91,011
Restricted Assets (Cash and Cash
Equivalents) 59,448
Cash and Investments with Fiscal Agent-Restricted 8,313
Total Per Statement of Net Assets 158,772
Fiduciary Funds:
Cash and Investments 3,805
Cash and Investments with Fiscal Agent-Restricted 32,304
Total Fiduciary Funds 36,109
Total Deposits and Investments $ 194,881
Interest Rate Risk- As a means of limiting exposure to fair value losses arising from
interest rates, the City's investment policy limits investments over three years to be
30% or less.
Investments maturities are as follows in thousands):
Investment Maturities(In Years)
INVESTMENTS: Fair Value Less than 1 1 to 3 3 to 5 more than 5 Total
US Agencies $ 61,507 $ 4,037 $ 41,394 $ 16,076 $ - '$ 61,507
Guaranteed Investment Contracts 3,637 - - - 3,637 3,637
Mutual Funds 26,628 26,628 - - - 26,628
Money Market Funds 10,247 10,247 - - - 10,247
Medium Term Notes 27,635 8,085 19,550 - - 27,635
Local Agency Investment Fund 65,106 65,106 - - - 65,106
Total Investments $ 194,760 $ 114,103 $ 60,944 $ 16,076 $ 3,637 194,760
Total Deposits 121
Total Deposits and Investments $ 194,881
47
City of Huntington Beach
0 Notes to Financial Statements
For the Year Ended September 30, 2010
2. CASH AND INVESTMENTS (Continued)
Credit Risk - State law allows investment in United States Government Sponsored
Enterprise (GSE) obligations noted above as US Agencies. As of year-end, the
Standard and Poor's and Moody's ratings of the GSE's were AAA. The investments
in the Guaranteed Investment Contracts (GIC) are backed by collateral of either
104% or 107% depending on the type of collateral and GIC provider. The GIC
providers are rated by Standard and Poor's and Moody's at A+ and A- or Aa3 and A3,
respectively. State law limits investments in commercial paper and medium term
notes to have at least an A-1 or P-1 or an "A" rating, respectively, issued by a
nationally recognized statistical rating organization. It is the City's policy to limit its
investments in these investment types to the top two ratings issued by these rating
organizations. As of year-end, the City had no commercial paper holdings.
The City's investment policy for operating funds limits investments in Money Market
Funds to 15% of the portfolio. Both Standard and Poor's and Moody's have rated the
Money Market Funds in our operating funds and in our bond investment portfolio as
AAA. Standard and Poor's rated the City's investments in medium-term notes as AAA
and AA while Moody's rated them as Aaa and Aa.
Concentration of Credit Risk— The City's investment policy limits investments in any
one issuer, except for U.S. Treasury Securities, U.S. Government Agencies, and
Local Agency Investment Fund to no more than 10% of the investments. In addition,
no more than 50% can be invested in a single security type or with single financial
institution and every security type has a specific limit. This is in addition to the limits
placed on investments by State law. Investments in any one issuer (other than US
Treasury Securities, external investment pools, or mutual funds) that represent 5% or
more of total City's investments are as follows:
Fair Value
Issuer Investment Type Amount
Federal Home Loan Mortgage Corporation U.S. Government Sponsored
Enterprise Securities $16,078,000
Federal Home Loan Bank U.S. Government Sponsored
Enterprise Securities $15,291,000
Federal National Mortgage Association U.S. Government Sponsored
Enterprise Securities $25,106,000
Custodial Credit Risk— For an investment, custodial credit risk is the risk that, in the
event of the failure of the counterparty, the City will not be able to recover the value of
its investments or collateral securities that are in the possession of an outside party.
None of the City's investments were subject to custodial credit risk.
48
City of Huntington Beach
Notes to Financial Statements
For the Year Ended September 30, 2010
2. CASH AND INVESTMENTS (Continued)
Local Agency Investment Fund — The City is a voluntary participant in the Local
Agency Investment Fund (LAIF) that is regulated by California Government Code
Section 16429 under the oversight of the Treasurer of the State of California. The fair
value of the City's investment in this pool is reported in the accompanying financial
statements at amounts based upon the City's pro-rata share of the fair value provided
by LAIF for the entire LAIF portfolio (in relation to the amortized cost of that portfolio).
The balance available for withdrawal is based on the accounting records maintained
by LAIF, which are recorded on an amortized cost basis. LAIF had invested 4.71% of
the pooled investments funds in Structured Notes and Asset-Backed Securities. This
external investment pool is not rated.
Guaranteed Investment Contracts (GIC) — The City has recorded the GICs at cost
versus fair value due to the lack of readily available market pricing for these types of
instruments. All GICs held by the City are either collateralized with government
securities that under the GIC agreement are required to have a higher market value
than cost and no losses are expected.
As of September 30, 2010, the City held $57,470,000 in callable securities, which
amounted to approximately 38% of investments.
3. OTHER RECEIVABLES
a. Developer Loans
Loans made to developers to construct or rehabilitate certain facilities under
deferred loan agreements total $37,937,000 at year-end. These loans are
deferred until a future event occurs. Loans made by the Agency total $26,404,000
and loans made under the Home Program total $11 ,534,000. Interest rates on
these loans range from 0% to 6.5%. Allowance for uncollectible developer loans
is $37,937,000.
b. Emerald Cove Loan
On June 15, 2010, the Agency loaned Emerald Cove, LP $8,000,000 to acquire
and rehabilitate Emerald Cove Senior Apartments. The loan has an interest rate
of 3% and is to be repaid annually from residual receipts over 60 years. The loan
balance as of September 30, 2010 is $8,070,000.
49
City of Huntington Beach
Notes to Financial Statements
For the Year Ended September 30, 2010
3. OTHER RECEIVABLES (Continued)
c. Housing Rehabilitation Loans
Loans made to qualified homeowners and landlords in the City of Huntington
Beach to rehabilitate certain single-family homes or multifamily rental housing
under deferred loan agreements total $3,154,000 at year-end. These loans are
deferred until a future event occurs. The interest rates on these loans range from
0% to 6%.
d. Deferred Loans — First Time Homebuyers
Loans made for down payment assistance of qualified first time homebuyers
under deferred loan agreements total $618,000 at year-end. These loans are
deferred until a future event occurs.
e. Other Receivables
A summary of Other Receivable as of September 30, 2010 is as follows (in
thousands):
Descri pto n Amount
Developer Loans Receivable $ 37,937
Emerald Cove Loan Receivable 8,070
Housing Rehabilitation Loans Receivable 3,154
Emergency Medical Fee Receivable 1,244
Franchise Fee Receivable 1,050
First Time Homebuyers Receivable 618
Other Receivables 3,652
Total Other Receivables 55,725
Allowance for Uncollectible Developer Loans (37,937)
Net Other Receivables $ 17,788
4. DEFERRED COMPENSATION
Permanent City employees may defer a portion of their salary under tax-deferred
plans as permitted under the Internal Revenue Code. These plans permit employees
to defer a portion of their salary until future years. The compensation is not available
to the employees until termination, retirement, or unforeseen emergency.
50
City of Huntington Beach
Notes to Financial Statements
For the Year Ended September 30, 2010
4. DEFERRED COMPENSATION (Continued)
The City has established a trust for the assets of the plans held by third parties. All
property and rights purchased with these assets, as well as all income attributable to
them are held in trust for the exclusive benefit of the participant and their beneficiary.
The amounts are no longer the property of the City and are not subject to the claims
of the City's general creditors. Amounts administered by outside organizations in a
trustee capacity are not reported as assets of the City. The City does not have
fiduciary responsibility for these assets.
5. DEFERRED REVENUE
Certain revenues in governmental funds are deferred until received. The property
and sales tax amounts are recognized in the year as revenue in the government-wide
financial statements, but are recorded as deferred revenue in the fund financial
statements to the extent they are not collected within 60 days after year-end. The
other amounts are unearned revenue in both the funds and government-wide
financial statements. The amounts are as follows (in thousands):
Redevelopment Low-Income
Grants Special Agency Debt Housing Capital
General Fund Revenue Service Projects Traffic Impact Total
Property Taxes $ 10,476 $ - $ 3,471 $ - $ - $ 13,947
Sales Tax 3,655 - - - - 3,655
Deferred Loans:
Emerald Cove - - - 8,070 - 8,070
Housing Rehabilitation - 3,086 - - - 3,086
First Time Homebuyers - - - 618 - 618
Other Deferred Revenue 154 - - - 515 669
Total $ 14,285 $ 3,086 $ 3,471 $ 8,688 $ 515 $ 30,045
Deferred Loans to developers and qualified individuals for housing rehabilitation and
to first time homebuyers are discussed in Note 3.
6. RETIREMENT PLAN — NORMAL
a. Plan Description
The City contributes to the California Public Employees' Retirement System
(CalPERS), an agent, which is a multiple-employer public employee defined
benefit pension plan. CalPERS provides retirement and disability benefits, annual
cost-of-living adjustments, and death benefits to plan members and beneficiaries.
CalPERS acts as a common investment and administrative agent for participating
public entities within California. Benefit provisions and all other requirements are
established by state statute and City ordinance. Copies of CalPERS annual
financial report may be obtained from their executive office: 400 P Street,
Sacramento, CA, 95814 or on their website: www.calpers.ca.gov.
51
City of Huntington Beach
Notes to Financial Statements
For the Year Ended September 30, 2010
6. RETIREMENT PLAN — NORMAL (Continued)
b. Employer and Employee Contribution Obligations
The City makes two types of contributions for covered employees. The first
contribution represents the amount the City is required to make (the employer
rate). The second represents an amount, which is made by the employee, but is
reimbursed to the employee by the City (the member rate). The member rate is
set by contract and normally remains unchanged.
The employer rate is an actuarially established rate, is set by CalPERS, and
changes from year to year. The employer rates for the fiscal year ended
September 30, 2010 are:
10/1/2009 - 7/1/2010 -
6/30/2010 9/30/2010
Local Miscellaneous 9.783% 10.222%
Local Safety 27.969% 29.203%
The member rates are as follows:
Rate
Local Miscellaneous 18.000%
Local Safety 19.000%
c. Annual Pension Cost
The City's annual pension cost of $17,206,000 was equal to the City's required
and actual contributions. The required contribution was determined as part of the
June 30, 2008 and 2009 actuarial valuation using the entry age normal actuarial
cost method. The actuarial assumptions used to determine the required
contribution for fiscal year ended September 30, 2010 were:
• Average amortization remaining period -18 years as of the Valuation Date —
closed end
• Asset valuation method - 15 years smoothed market
• Investment Rate of Return - 7.75%
• Projected salary increases - 3.25% to 13.15% (safety) and 3.25% to 14.45%
(miscellaneous) depending on age, service, and type of employment
• Inflation - 3.00%
• Payroll growth - 3.25%
52
City of Huntington Beach
Notes to Financial Statements
For the Year Ended September 30, 2010
6. RETIREMENT PLAN — NORMAL (Continued)
Individual salary growth - A merit scale varying by duration of employment
coupled with an assumed annual inflation component of 3.0% and an annual
production growth of 0.25%.
CalPERS conducted an actuarial valuation using the entry-age actuarial cost
method using a level percent of payroll to determine the City's funded status as of
June 30, 2009. Significant assumptions are the same as the June 30, 2008
valuation except for the following:
Projected salary increases - 3.55% to 13.15% (safety) and 3.55% to 14.45%
(miscellaneous) depending on age, service, and type of employment
Initial unfunded liabilities are amortized over a closed period that depends on the
plan's date of entry into CaIPERS. Subsequent plan amendments are amortized
as a level percent of pay over a closed 20-year period. Gains and losses that
occur in the operation of the plan are amortized over a rolling 30 year period with
the exception of special gains and losses in fiscal years 2008-2009, 2009-2010
and 2010-2011 . Each of these years special gains or losses will be isolated and
amortized over fixed and declining 30 year periods (as opposed to the current
rolling 30 year amortization). If the plan's accrued liability exceeds the actuarial
value of the assets, then the amortization payment on the total unfunded liability
may not be lower than the payment calculated over a 30-year amortization period.
d. Trend Information
Local Miscellaneous Local Safety
Annual Pension Annual Pension
Cost (in Percentage of Net Pension Cost (in Percentage of Net Pension
Fiscal Year thousands) APC Funded Obligation thousands) APC Funded I Obligation
9/30/2008 $ 3,745 100% $ - $ 9,959 100% $ -
9/30/2009 $ 4,765 100% $ - $ 10,763 100% $ -
9/30/2010 $ 5,380 100% $ - $ 11,826 100%1$ -
e. Funded Status and Funding Progress
Below is the funding progress based on the June 30, 2009 actuarial valuation for
the miscellaneous and safety plans (in thousands):
Entry Age
Normal UL as a
Actuarial Percentage
Accrued Actuarial Value Unfunded Funded Covered of Covered
Plan Liability(AAL) of Assets Liability(UL) Ratio Payroll Payroll
Safety $ 478,818 $ 370,250 $ (108,568) 77.3% $ 40,384 -268.8%
Miscellaneous 363,638 321,435 (42,203) 88.4% 48,439 -87.1
Total $ 842,456 $ 691,685 $ (150,771) 82.1% $ 88,823 -169.7%
53
City of Huntington Beach
0 Notes to Financial Statements
For the Year Ended September 30, 2010
6. RETIREMENT PLAN — NORMAL (Continued)
The schedule of funding progress presented as Required Supplementary
Information (RSI) following the notes to the basic financial statements, presents
multiyear trend information about whether the actuarial value of plan assets is
increasing or decreasing over time relative to the actuarial accrued liability for
benefits.
7. RETIREMENT PLAN — SUPPLEMENTAL
a. Plan Description
The City provides a supplemental retirement plan for all employees hired prior to
1997 (exact dates are different for various associations). It is a single-employer
defined benefit plan. It is a defined benefit plan and will pay the retiree an additional
amount to his or her CalPERS amount for life. The City contracts with employee
bargaining associations, which establish the plan. These associations must agree to
any changes to the plan. The amount will cease upon the employee's death. The
amount that is computed as a factor of an employee's normal retirement allowance is
computed at retirement and remains constant for his or her life. Of the 1,059 active
employees reported on the September 30, 2009 data, only 477 were eligible for plan
benefits. No separately prepared financial statements are prepared for this plan and
it is not included in the financial report of any other pension plan. Prior to fiscal year
2008-09, the City had prefunded these benefits and recorded the amounts in a
fiduciary fund. In fiscal year 2008-09, the City established the Supplemental
Employee Retirement Plan and Trust, and transferred $24,918,000 to an irrevocable
trust from the prefunded amounts. The plan and trust are still reported as a fiduciary
fund pension trust.
Below is the plan participant data as of September 30, 2010:
Retirees and beneficiaries receiving benefits 557
Active Plan Members 470
Total Plan Participants 1 ,027
Effective in 1998 (exact dates are different for various associations), new City
employees are ineligible to participate in the Supplemental Employee Retirement
Plan.
b. Employer Obligations and Funding Status and Progress
The City annually transfers amounts from the various City funds to the pension
trust fund. The City is required to contribute the actuarially determined rate of
4.46% of total payroll for all permanent employees for the year ended September
30, 2010. Administrative costs of this plan are financed through investment
earnings.
54
City of Huntington Beach
Notes to Financial Statements
For the Year Ended September 30, 2010
7. RETIREMENT PLAN — SUPPLEMENTAL (Continued)
c. Annual Pension Cost and Net Pension Obligation
The City's annual pension cost and net pension obligation for this plan fiscal year
2009/10 were (in thousands):
Annual required contribution $ 3,967
Interest on net pension obligation 237
Adjustment to annual required contribution (373)
Annual pension cost 3,831
Contributions made (3,967)
Decrease in net pension obligation (136)
Net Pension Obligation— Beginning of Year 4,312
Net Pension Obligation — End of Year $ 45176
The annual required contribution was determined as part of an independent
actuarial valuation as of September 30, 2009 using the Entry Age Normal
Actuarial Cost Method, which is a projected benefit full-cost method which takes
into account those benefits that are expected to be earned in the future as well as
those already accrued. The actuarial assumptions used were:
• Rate of return on present and future assets - 5.5% per annum
• Projected salary increases for covered employees due to inflation - 3.0% to
15.0% per annum depending on years of service
• Projected salary increases due to merit - 0%
• Inflation rate - 3.0%
• Postemployment benefit increases - 0%
• Amortization of unfunded liability - level percentage of pay ending in 2027
(closed)
• Actuarial value of assets - market value
d. Trend Information
Below is the required three-year trend information (dollar amounts in thousands):
Annual Pension Percentage Net Pension
Cost of APC Obligation
Fiscal Year Funded
9/30/08 $3,292 110% $4,440
9/30/09 $3,348 104% $4,312
9/30/10 $3,831 104% $4,176
55
0 City of Huntington Beach
Notes to Financial Statements
For the Year Ended September 30, 2010
7. RETIREMENT PLAN — SUPPLEMENTAL (Continued)
e. Funded Status and Funding Progress
Below is the funding progress based on the September 30, 2010 actuarial
valuation update (dollar amounts in thousands):
Entry Age
Normal Actuarial UAAL as %
Accrued Value of Unfunded AAL Covered of Covered
Liability Assets (UAAL) Funded Ratio Payroll Payroll
$ 61,448 $ 28,467 $ (32,981) 46.3% $ 87,617 -37.6%
The September 30, 2010 actuarial valuation for funding progress uses the same
assumptions as the September 30, 2009 actuarial valuation to determine the
annual pension costs and net pension obligation as listed in note 7c. The
schedule of funding progress presented as Required Supplementary Information
following the notes to the basic financial statements, presents multiyear trend
information about whether the actuarial value of plan assets is increasing or
decreasing over time relative to the actuarial accrued liability for benefits.
f. Accounting for Plan
Since the City is required to adopt GASB Statement 27 for the supplemental
pension plan, the difference between the ARC and the amount of pension cost
funded for the years must be recorded as a liability in the government-wide
financial statements. The amount of this liability is $4,176,000 (see Note 11).
Contributions are recognized when due and payable. Benefits are recognized
when due and payable under plan provisions.
8. POSTEMPLOYMENT MEDICAL INSURANCE
a. Plan Description
The City agreed, via contract, with each employee association to provide
postemployment medical insurance to retirees. These Other Postemployment
Benefits (OPEB) are based on years of service and are available to all retirees
who meet all three of the following criteria:
• At the time of retirement, the employee is employed by the City.
• At the time of retirement, the employee has a minimum of ten years of service
credit or is granted a service connected disability retirement.
• Following official separation from the City, CalPERS grants a retirement
allowance.
• If employee is terminated prior to retirement from the City, no postemployment
benefits are provided.
56
City of Huntington Beach
Notes to Financial Statements
For the Year Ended September 30, 2010
8. POSTEMPLOYMENT MEDICAL INSURANCE (Continued)
The City's obligation to provide the benefits to a retiree ceases when either of the
following occurs:
• During any period the retiree is eligible to receive health insurance at the
expense of another employer
• The retiree becomes eligible to enroll automatically or voluntarily in Medicare
The maximum subsidy a retiree is entitled to is $344 per month after 25 years of
service. If a retiree dies, the benefits that would be payable for his or her
insurance are provided to the spouse or family for 18 months. Benefits for
insurance premiums are payable based on the years of service credit for the
retiree. The retiree may use the subsidy for any of the medical insurance plans
that the City's active employees may enroll.
b. Accounting and Funding
The City utilizes the California Employers' Retiree Benefit Trust (CERBT), an
agent multiple-employer plan, for the postemployment medical insurance benefit.
Benefits paid from the CERBT were $741,000. The assets of the CERBT are
excluded from the accompanying financial statements since they are in an
irrevocable trust administered by CaIPERS. Copies of CalPERS annual financial
report may be obtained from their executive office: 400 P Street, Sacramento, CA,
95814 or on their website: www.calpers.ca.gov. The City's policy is to make 100%
of each year's ARC. Actuarial assumptions for the September 30, 2010 valuation
were:
• Entry age normal — 30 year amortization of unfunded liabilities
• Discount rate — 7.75%
• All other retirement assumptions equivalent to CalPERS assumptions used for
the City's normal retirement plan
• The medical trend rate represents the long-term expected growth of medical
benefits paid by the plan, due to non-age-related factors such as general
medical inflation, utilization, new technology, and the like. The following table
sets forth the trend assumption used for the valuation:
Year Annual Rate
2010/11 10.0%
2011/12 9.0%
2012/13 8.0%
2013/14 7.0%
2014/15 6.0%
2015/16 5.5%
2016/17 5.0%
57
City of Huntington Beach
Notes to Financial Statements
For the Year Ended September 30, 2010
8. POSTEMPLOYMENT MEDICAL INSURANCE (Continued)
The City's actual contributions, annually required contribution (ARC), Net OPEB
asset NOA, and Annual OPEB Cost (AOC) were computed as follows (in
thousands):
Employer Contribution
Direct Contributions - City health plan contributions $ 1 ,060
Indirect Contributions —Administrative Overhead 138
Implicit subsidy 405
Total Employer Contributions $ 1 ,603
Development of Annual OPEB Cost(AOC)
Amortization of Actuarially Accrued Liability $ 647
Normal Cost 818
Total Annual Required Contribution (ARC) 1 ,465
Interest on Net OPEB Assets (NOA) (649)
Adjustment to the Annual Required Contribution (ARC) 504
Total Annual OPEB Cost (AOC) $ 1 ,320
Development of Net OPEB Asset (NOA)
Net OPEB Asset (NOA), beginning of year $ (8,378)
Annual OPEB Cost (AOC) 1 ,320
Employer Contribution (1 ,603)
Net OPEB Asset (NOA), end of year $ (8,661)
The City's actual contributions of $1,603,000 are greater than the annual required
contribution. The Annual OPEB Cost is reported as expenses in the non-
departmental governmental activities program.
c. Other Disclosures
Three ear trend information is disclosed below in thousands
Annual OPEB Actual Percentage of
Fiscal Year Cost AOC Contribution I AOC Contributed Net OPEB Asset
9/30/2008 $2,114 $10,341 489.20% $8,227
9/30/2009 $1,564 $1,7151 109.70% $8,378
9/30/2010 1 $1,320 1 $1,6031 121.40% $8,661
58
City of Huntington Beach
Notes to Financial Statements
For the Year Ended September 30, 2010
8. POSTEMPLOYMENT MEDICAL INSURANCE (Continued)
d. Funding Status and Funding Progress
As of September 30, 2010, the most recent actuarial valuation date, the plan was
44.4% funded. The actuarial accrued liability for benefits was $20.6 million, and
the actuarial value of assets was $9.2 million, resulting in an unfunded accrued
liability (UAAL) of $11 .4 million. The covered payroll (annual payroll of active
employees covered by the plan) was $90.4 million, and the ratio of the UAAL to
the covered payroll was 12.7%.
The annual required contribution was determined as part of an independent
actuarial valuation as of September 30, 2009 using same assumptions in the
September 30, 2010 valuation in Note 8b.
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 annual required contributions of the City 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
financial statements, presents multiyear trend information about whether the
actuarial value of plan assets is increasing or decreasing over time relative to the
actuarial accrued liability for benefits.
Projections of benefits for financial reporting purposes are based on the
substantive plan (the plan as understood by the City and plan members) and
include the types of benefits provided at the time of each valuation. 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.
59
City of Huntington Beach
Notes to Financial Statements
For the Year Ended September 30, 2010
9. RISK MANAGEMENT
The City is exposed to various risks of losses related to torts; theft of, damage to and
destruction of assets; errors and omissions; injuries to employees, and natural
disasters. The City records all of these claims as expenditures in the General Fund.
The liability for these claims is recorded as part of long-term obligations in the
government-wide financial statements. The City records the amount of claims
payable at year-end that is due and payable at year-end in the fund financial
statements. The full amount of claims is reported as a liability in the government-
wide financial statements. Liabilities include amounts incurred, but not reported.
Liability Claims
Claims of up to $1 ,000,000 are paid from the General Fund. The City is also a
participant in the Big Independent Cities Excess Pool Joint Powers Authority (BICEP),
which shares payments for claims between $1,000,000 and $2,000,000. It also
provides general liability insurance of $25,000,000 above the City's retention of
$1,000,000. BICEP was created by a joint powers agreement between the City of
Huntington Beach and four other local entities for the purpose of providing joint
insurance coverage and related risk management services for member cities. BICEP
allows member entities to finance a claims payment pool for certain liability claims in
excess of $1,000,000 million to a limit of $27,000,000. BICEP's governing board has
one representative from each city (either a member of the City Council or designate).
Current members must approve any changes to the board. Each participating City
pays an insurance premium to BICEP that is used to fund the operating and debt
service requirements. Payments for claims beyond what is covered by BICEP, from
$27,000,000 to $37,000,000, are paid by excess insurance coverage. There were no
liability claims in the last three years that exceeded the coverage limit.
Workers' Compensation Claims
Workers' compensation claims of up to $1,000,000 per claim are paid from the
General Fund. The BICEP is a member of CSAC-Excess Insurance Authority for
excess workers' compensation coverage. Payments for claims from $1 ,000,000 to
$5,000,000 are shared. Payments for claims between $5,000,000 and $200,000,000
are paid by excess insurance coverage. All funds of the City participate in the
program and make payments to these funds based on estimated cost information.
60
City of Huntington Beach
Notes to Financial Statements
For the Year Ended September 30, 2010
9. RISK MANAGEMENT (Continued)
Claims activity and liabilities relating to the current and prior year are (in thousands):
Workers' is i ity
Compensation Insurance Total
Balance September 30, 2008 $ 6,504 $ 5,328 $ 11,832
Additions 6,381 2,655 9,036
Reductions (5,604) (2,764) (8,368)
Net Increase (Decrease) 777 (109) 668
Balance September 30, 2009 7,281 5,219 12,500
Additions 5,590 664 6,254
Reductions (4,086) (741) (4,827)
Net Increase (Decrease) 1,504 (77) 1,427
Balance September 30, 2010 $ 8,785 $ 5,142 $ 13,927
61
0 City of Huntington Beach
Notes to Financial Statements
For the Year Ended September 30, 2010
10.INTERFUND TRANSACTIONS
a. Due To/From Other Funds
The amounts at year-end were (in thousands):
Due from Other Due to Other
Funds Funds
Major Governmental Funds
Redevelopment Agency Debt Service $ - $ 199
Redevelopment Agency Capital Projects 199 0
Other Governmental Funds
Drainage - 492
Transportation 967 -
Traffic Impact Fund - 475
Total Due to/from Governmental Funds $ 1,166 $ 1,166
Proprietary Funds
Water 19 -
Refuse - 19
Total all Funds $ 1,185 $ 1,185
These outstanding balances result mainly from year-end accruals for payments for
goods and services.
b. Advances to/from Other Funds
The amounts at year-end were (in thousands):
Advancesto Advancesfrom
Other Funds Other Funds
Major Governmental Funds
General Fund $ 675 $ -
Redevelopment Agency Capital Projects 302 1,363
Redevelopment Agency Debt Service - 3,530
Low-Income Housing Capital Projects 4,591 -
Other Governmental Funds
Park Acquisition and Development - 675
Total Due to/from Governmental Funds $ 5,568 $ 5,568
There is a $675,000 advance from the General Fund to the Park Acquisition and
Development Fund (a non-major governmental fund) for closed school site
purchases. The amount will be repaid by fiscal year ending September 30, 2012.
There is a $1,363,000 advance from the Low-Income Housing Fund to the
Redevelopment Agency Capital Projects Fund for Main Pier property acquisitions.
The amount will be repaid by fiscal year ending September 30, 2014.
62
City of Huntington Beach
Notes to Financial Statements
For the Year Ended September 30, 2010
10.INTERFUND TRANSACTIONS (Continued)
There is a $3,228,000 advance from the Low-Income Housing fund to the
Redevelopment Agency Debt Service Fund for Supplemental Education Revenue
Augmentation Fund (SERAF) contributions. See Note 13e for additional
information.
There is a $302,000 advance from the Redevelopment Agency Capital Projects
Fund to the Redevelopment Agency Debt Service Fund for the Southeast Coastal
Project Area. The amount will be repaid by fiscal year ending September 30,
2014.
c. Transfers In/Out
The amounts at year-end were (in thousands):
Translers Out
Total Major
Grant Special RDA Debt RDA Capital Low Income Governmental
Translers In General Fund Revenue Service Funtl Projects Fund Housing Fund Funds
General Fund $ - $ - $ 5,307 $ 216 $ - $ 5,523
Grants Special Revenue 49 - - - - 49
RDA Capital Projects Fund 882 - - - - 882
Low Income Housing Fund - 52 3,637 - - 3,689
Other Governmental Funds 6,834 - - - 405 7,239
Total Governmental Funds 7,765 52 8,944 216 405 17,382
Refuse Enterprise Funds 51 - - - - 51
Total Translers Out $ 7,816 $ 52 $ 8,944 $ 216 $ 405 $ 17,433
Transler Out
Hazmat
Total Major Other Total Service
Governmental Governmental Governmental Enterprise Total
Transfers In Funds
Funds Funds Funds Transfers In
General Fund $ 5,523 $ 2,916 $ 8,439 $ 13 $ 8,452
Grants Special Revenue 49 539 588 - 588
RDA Capital Projects Fund 882 - 882 - 882
Low Income Housing Fund 3,689 - 3,689 - 3,689
Other Governmental Funds 7,239 - 7,239 - 7,239
Total Governmental Funds 17,382 3,455 20,837 13 20,850
Refuse Enterprise Funds 51 - 51 - 51
Total Translers Out $ 17,433 $ 3,455 $ 20,888 $7 13 $ 20,901
The following is a summary of the significant transfers:
• $6,834,000 was transferred from the General Fund to Other Governmental
Funds primarily for debt service payments
• $5,307,000 was transferred from the Redevelopment Agency Debt Service
Fund to the General Fund to repay the General Fund Loan to the
Redevelopment Agency
• $3,637,000 was transferred from the Redevelopment Agency Debt Service
Fund to the Low Income Housing Fund to comply with the twenty percent set-
aside to Low Income Housing
63
City of Huntington Beach
Notes to Financial Statements
For the Year Ended September 30, 2010
10.INTERFUND TRANSACTIONS (Continued)
$2,916,000 was transferred from Other Governmental Funds to the General
Fund. Excess debt service reserves of $1 ,722,000 were transferred from the
Property Tax Refund Fund to the General Fund. The remaining amount
transferred is primarily for General Fund expenditures of Gas Tax Fund related
projects.
11. LONG-TERM OBLIGATIONS
Below is a schedule of changes in long-term governmental obligations for the year
(in thousands):
October 1, September 30, Accrued
Governmental Activities: 2009 Additions Retirements 2010 Interest Due Within One Year
Judgment Obligation Bonds $ 6,774 $ - $ (785) $ 5,989 $ 145 $ 810
Public Financing Authority:
1997 Leasehold Revenue Bonds 2,860 - (2,860) - - -
2000 Lease Revenue Bonds 12,785 - (12,785) - - -
2001-a Lease Revenue Bonds 26,375 - (725) 25,650 103 750
2001-b Lease Revenue Bonds 17,795 - (1,880) 15,915 83 1,955
2010-a Lease Revenue Bonds - 14,745 (925) 13,820 52 620
Total Public Financing Authority 59,815 14,745 (19,175) 55,385 238 3,325
Redevelopment Agency:
1999 Tax Allocation
Refunding Bonds 7,020 - (410) 6,610 53 430
2002 Tax Allocation
Refunding Bonds 15,380 - (910) 14,470 113 945
Mayer DDA 6,503 - (350) 6,153 - -
BellaTerraOPA(Parking) 14,227 - (151) 14,076 - -
CIM DDA(Parking&Infrastructure) 7,768 - (324) 7,444 - 157
CIM DDA(Additional Parking) 421 19 - 440 - 6
Section 108 Loan/Bowen Court 6,140 - (415) 5,725 20 445
Pollution Remediation - 200 - 200 - 200
Total Redevelopment Agency 57,459 219 (2,560) 55,118 186 2,183
Other Long-Term Obligations:
Leases Payable 1,161 - (304) 857 - 285
Compensated Absences 12,015 3,259 (4,997) 10,277 - 3,150
Net Pension Obligation 4,312 3,832 (3,968) 4,176 - -
Claims Payable 12,500 6,254 (4,827) 13,927 - 5,678
Pollution Remediation 2,000 - - 2,000 - -
PARS Payable - 7,231 (82) 7,149 - 1,281
Total Other Long-Term Obligations 31,988 20,576 (14,178) 38,386 10,394
Total Long-Term Obligations-
Governmental Activities $ 156,036 $ 35,540 $ (36,698) $ 154,878 $ 569 $ 16,712
64
City of Huntington Beach
AnddlL 0 Notes to Financial Statements
For the Year Ended September 30, 2010
11. LONG-TERM OBLIGATIONS (Continued)
Below are reconciliations from amounts in the above table to amounts in the
accompanying governmental fund financial statements (in thousands):
Issuance of Long-Term Debt in Governmental Fund Financial Statements $ 14,745
Increase in CIM DDA (Additional Parking) 19
Decrease in Net Pension Obligation (136)
Decrease in Compensated Absences (1,738)
Increase in Claims Payable 1,427
Increase in Pollution Remediation 200
Increase in PARS Payable 7,231
Increases in Above Schedule 21,748
Increase in Current Portion of Claims Payable reported in the Governmental
Fund Financial Statement 445
Changes in Long-term Obligations reported in the Reconciliation to the
Government-wide Financial Statements $ 22,193
Principal Paid in Governmental Fund Financial Statements $ 7,351
Refunding of 1997 and 2000 Lease Revenue Bonds 15,555
Decreases in Above Schedule* 22,906
a. Judgment Obligation Bonds
Year of Issuance 2004
Type of Debt Judgment Obligation Bonds
Original Principal Amount $12,500,000
Security Council Appropriations
Interest Rates 2.00% to 4.20%
Interest Payment Dates February 1st and August 1st
Principal Payment Dates February 1st
Purpose of Debt I Pay claims on court judgment
65
City of Huntington Beach
Notes to Financial Statements
For the Year Ended September 30, 2010
11. LONG-TERM OBLIGATIONS (Continued)
Debt service requirements to maturity are (in thousands):
Year Ending Principal Interest Total
September 30
2011 $ 810 $ 217 $ 1,027
2012 840 188 1,028
2013 865 156 1,021
2014 900 121 1,021
2015 940 84 1,024
2016-2017 1,634 59 1,693
Total $ 5,989 $ 825 $ 6,814
b. Public Financing Authority
(1) 1997 Public Financing Authority Revenue Bonds
Year of Issuance 1997
Type of Debt Lease Revenue Bonds
Original Principal Amount $8,070,000
Security Lease Agreement with City for
Central Library
Interest Rates 5.00% to 5.50%
Interest Payment Dates June 15 and December 15
Principal Payment Dates I December 15
Purpose of Debt Construct Pier Plaza and
Purchase 800 MHZ System
Bonds were refunded by the 2010(a) Lease Revenue Bonds on May 13, 2010.
(2) 2000 Public Financing Authority Lease Revenue Bonds
Year of Issuance 2000
Type of Debt Lease Revenue Bonds
Original Principal Amount $18,310,000
Security Lease with City
Interest Rates 4.0% to 5.0%
Interest Payment Dates September 1" and March 1S
Principal Payment Dates September 1S
Purpose of Debt Capital improvements and
defeasance of Emerald Cove
Certificates of Participation
66
City of Huntington Beach
Notes to Financial Statements
For the Year Ended September 30, 2010
11. LONG-TERM OBLIGATIONS (Continued)
Bonds were refunded by the 2010(a) Lease Revenue Bonds on May 13, 2010.
(3) 2001(a) Public Financing Authority Lease Revenue Bonds
Year of Issuance 2001
Type of Debt Lease Revenue Bonds
Original Principal Amount $31,360,000
Security Lease Agreement with City for
Public Buildings
Interest Rates 2.45% to 5.0%
Interest Payment Dates March 1" and September 1"
Principal Payment Dates September 1st
Purpose of Debt Construct Sports Complex and
South Beach Phase II
Improvements
Debt service requirements to maturity are (in thousands):
Year Ending principal Interest Total
September 30
2011 $ 750 $ 1,234 $ 1,984
2012 785 1,204 1,989
2013 815 1,170 1,985
2014 850 1,136 1,986
2015 1 885 1,098 1,983
2016-2020 5,075 4,848 9,923
2021-2025 6,420 3,510 9,930
2026-2030 8,180 1,740 9,920
2031 1,890 94 1,984
Total $ 25,650 $ 16,034 $ 41,684
(4) 2001(b) Public Financing Authority Lease Revenue Bonds
Year of Issuance 2001
Type of Debt Lease Revenue Bonds
Original Principal Amount $31,095,000
Security Lease on Civic Center Buildings
Interest Rates 4.0% to 5.0%
Interest Payment Dates August 1 , February 1
Principal Payment Dates Au ust 1
Purpose of Debt Defease Civic Improvement
Corporation Certificates
67
City of Huntington Beach
Notes to Financial Statements
For the Year Ended September 30, 2010
11. LONG-TERM OBLIGATIONS (Continued)
Debt service requirements to maturity are (in thousands):
Year Ending Principal Interest Total
September 30
2011 $ 1,955 $ 662 $ 2,617
2012 2,030 589 2,619
2013 2,110 510 2,620
2014 2,190 426 2,616
2015 2,280 336 2,616
2016-2019 5,350 525 5,875
Total 1 $ 15,915 1 $ 3,048 $ 18,963
(5) 2010(a) Public Financing Authority Lease Revenue Bonds
On June 2, 2010, the Public Financing Authority issued $14,745,000 of
2010 Series A Lease Revenue Bonds on behalf of the City. The bond
proceeds including premiums of $736,000 were used to advance refund the
outstanding 1997 and 2000 Series A Lease Revenue Bonds. The 2010
Series A bonds bear fixed interest rates ranging from 2.0% to 5.0% and
have a final maturity date of September 1, 2030. The 2010 Series A bonds
net proceeds and amounts available from the refunded bonds were used to
establish a refunding escrow. The 1997 bonds in the amount of
$2,860,000, were redeemed on June 15, 2010, while the 2000 Series A
bonds in the amount of $12,785,000 were redeemed on September 1 ,
2010. The Public Financing Authority in effect reduced its aggregate debt
service payments by approximately $907,000 over the next 21 years and
obtained a net economic gain (difference between the present values of the
old and new debt service payments) of $937,000.
Year of Issuance 2010
Type of Debt Lease Revenue Bonds
Original Principal Amount $14,745,000
Security Lease with City
Interest Rates 2.0% to 5.0%
Interest Payment Dates March 1 , September 1
Principal Payment Dates September 1
Purpose of Debt Defease 1997 Leasehold Revenue Bonds
(Construct Pier Plaza and Purchase 800
MHz System) and 2000 Lease Revenue
Bonds (Capital Improvements and
defeasance of Emerald Cove Certificates of
Participation)
68
0 City of Huntington Beach
Notes to Financial Statements
For the Year Ended September 30, 2010
11. LONG-TERM OBLIGATIONS (Continued)
Debt service requirements to maturity are (in thousands):
Year Ending principal Interest Total
September 30
2011 $ 620 $ 623 $ 1,243
2012 635 604 1,239
2013 655 585 1,240
2014 680 559 1,239
2015 705 532 1 ,237
2016-2020 3,980 2,204 6,184
2021-2025 3,275 1,285 4,560
2026-2030 3,270 478 3,748
Total $ 13,820 $ 6,870 $ 12,382
c. Redevelopment Agency
(1) 1999 Redevelopment Agency Tax Allocation Refunding Bonds
Year of Issuance 1999
Type of Debt Tax Allocation Refunding Bonds
Original Principal Amount $10,835,000
Security Tax Increment
Interest Rates 3.00% to 5.05%
Interest Payment Dates February 1s and-August 1s'
Principal Payment Dates August 1"
Purpose of Debt Prepay Agency's 1992 Loans to
Public Financing Authority
Debt service requirements to maturity are (in thousands):
Year Ending principal Interest Total
September 30
2011 $ 430 $ 317 $ 747
2012 450 298 748
2013 465 278 743
2014 490 257 747
2015 515 234 749
2016-2020 2,690 778 3,468
2021-2024 1,570 195 1,765
Total $ 6,610 $ 2,357 $ 8,967
69
0 City of Huntington Beach
Notes to Financial Statements
For the Year Ended September 30, 2010
11. LONG-TERM OBLIGATIONS (Continued)
(2) 2002 Redevelopment Agency Tax Allocation Refunding Bonds
Year of Issuance 2002
Type of Debt Tax Allocation Refunding Bonds
Original Principal Amount $20,900,000
Security Tax Increment
Interest Rates 2.00% to 5.00%
Interest Payment Dates February 12 and August 12
Princi al Payment Dates August 12
Purpose of Debt Prepay Agency's 1992 Loans to
Public Financing Authority and
fully defease 1992 Public
Financing Authority bonds
Debt service requirements to maturity are (in thousands):
Year Ending principal Interest Total
September 30
2011 $ 945 $ 677 $ 1,622
2012 995 641 1,636
2013 1,040 601 1,641
2014 1,080 558 1,638
2015 1 1,115 1 512 1,627
2016-2020 5,880 1,703 7,583
2021-2024 3,415 424 3,839
Total $ 14,470 $ 5,116 $ 19,586
Pledged Revenues
The 1999 and 2002 Tax Allocation Refunding Bonds are secured by tax
increment revenues excluding the 20% total tax increment dedicated to the
Low Income Housing fund. As of September 30, 2010, the total principal and
interest remaining for both bonds is $28,553,000. Pledged tax increment
revenue recognized during the fiscal year was $14,549,000 against the total
debt service payment of $2,366,000. Although the incremental property taxes
were projected to produce sufficient revenues to meet the debt service
requirements over the life of the bonds, certain conditions could have a
material adverse impact on revenues allocated to the Agency. These include
future decreases in the assessed valuation of the project areas, decreases in
the applicable tax rates or collection rates, general decline in the economic
condition of the project areas, or a change in law reducing the tax increment
received by the Agency.
70
City of Huntington Beach
0) Notes to Financial Statements
For the Year Ended September 30, 2010
11. LONG-TERM OBLIGATIONS (Continued)
(3) Mayer Disposition and Development Agreement
In fiscal year 1996-97, the Agency entered into a disposition and
development agreement with Robert Mayer Corporation (Corporation)
concerning additional development adjacent to the Waterfront Hotel. Under
the agreement, the Corporation would advance payments for the project
costs with the Agency reimbursing up to $16,750,000 of the costs. As of
year-end, the Agency obligation under the agreement amounted to
$6,153,000. Project-generated revenues as available will repay these
amounts over the time needed to fully amortize the advance. The interest
rate of this obligation is 6.32%.
(4) Bella Terra Parking Structure
In fiscal year 2005-06, the agency entered into an owner participation
agreement with Bella Terra Associates, LLC (formerly Huntington Center
Associates, LLC). Under the agreement, the Corporation would construct
various public improvements, including a parking structure, which would
then be deeded to the City. The Agency would reimburse $15,000,000 of
the costs of the public improvements. As of year-end, the Agency
obligation under the agreement amounted to $14,076,000. Project-
generated revenues as available will repay these amounts over the time
needed to fully amortize the advance. The interest rate of this obligation is
6.94%.
71
0 City of Huntington Beach
Notes to Financial Statements
For the Year Ended September 30, 2010
11. LONG-TERM OBLIGATIONS (Continued)
(5) CIM/Huntington Disposition and Development Agreement — Strand
Parking Structure and Infrastructure
Year of Issuance 2009
Type of Debt Loan from CIM Group, LLC
Original Principal Amount $7,900,000
Security Tax Increment
Interest Rates 7.0%
Interest Payment Dates Se tember 30
77
Principal Payment Dates I September 30
Purpose of Debt Strand Parking Structure and
Infrastructure
As of year-end, the Agency obligation under the agreement amounted to
$7,444,000. Repayment shall be made solely from net tax increment
generated by the Merged Redevelopment Project Area by 2034.
(6) CIM/Huntington Disposition and Development Agreement — Additional
Strand Parking
Year of Issuance 2009
Type of Debt Loan from CIM Group, LLC
Original Principal Amount $950,000
Security Tax Increment
Interest Rates 10.0%
Interest Payment Dates Se tember 30
Principal Payment Dates September 30
TI
Purpose of Debt Additional Strand Parking
Structure and Infrastructure
The loan repayment shall be made solely from net tax increment generated
by the Merged Redevelopment Project Area by 2034. As of year-end, the
Agency obligation under the agreement amounted to $440,000.
72
City of Huntington Beach
Notes to Financial Statements
For the Year Ended September 30, 2010
11. LONG-TERM OBLIGATIONS (Continued)
(7) Section 108 Loan
Year of Issuance and Refinance Original 2000
Refinanced 2010
Type of Debt Loan from Federal Government
Principal Amount Original $8,570,000
Refinanced $5,725,000
Security Loan Agreement with Federal
Government
Interest Rates Original 7.7%
Refinanced 2.3% to 3.3%
Interest Payment Dates February 12 and August 12
Principal Payment Dates August 1"
Purpose of Debt Capital Improvements. Section
108 Loan was made to both the
Agency and the City.
Debt service requirements to maturity are (in thousands):
Year Ending Principal Interest Total
September 30
2011 $ 445 $ 120 $ 565
2012 970 114 1,084
2013 500 110 610
2014 535 104 639
2015 570 94 664
2016-2019 2,705 217 2,922
Total $ 5,725 1 $ 759 $ 6,484
(8) Pollution Remediation — Redevelopment Agency
The Redevelopment Agency purchased property on Edinger Avenue to
consolidate land for redevelopment on January 28, 2009. The Agency
plans on remediating hazardous materials on this site. The estimated cost
of cleanup is $200,000 and is reported as a long-term liability in the
government-wide statements. The cleanup cost will not exceed the
estimated amount as an environmental insurance policy taken by the
Agency will indemnify itself against further liability.
73
City of Huntington Beach
Notes to Financial Statements
For the Year Ended September 30, 2010
11. LONG-TERM OBLIGATIONS (Continued)
d. Other Long-Term Obligations
(1) Leases Payable
The City entered into capital leases for various items:
Years of Issuance 2001 through 2007
Type of Debt Capital Leases
Original Principal Amount Various $10,000 to $1 ,800,000
Security Asset
Interest Rates 4.2% to 6.9%
Interest Payment Dates Monthly, Quarterly, Semi-Annuall
Princi al Payment Dates IMonthl , Quarterly, Semi-Annuall
Pur ose of Debt Equipment Financing
Future minimum lease payments to maturity are (in thousands):
Year Ending Principal Interest Total
September 30
2011 285 34 319
2012 282 21 303
2013 290 8 298
Total $ 857 $ 63 $ 920
(2) Compensated Absences
There is no repayment schedule to pay the compensated absences amount
of $10,277,000 relating to governmental operations. The General Fund
typically liquidates the vacation and sick leave liability.
(3) Net Pension Obligation
There is no fixed repayment schedule to fund the liability for the unfunded
net pension obligation totaling $4,176,000 for the City's Retirement
Supplement Plan described in Note 7. The amount will be funded through
a contribution rate determined by an independent actuarial study (see note
7).
74
0 City of Huntington Beach
Notes to Financial Statements
For the Year Ended September 30, 2010
11. LONG-TERM OBLIGATIONS (Continued)
(4) Claims Payable
There is no repayment schedule for the claims payable of $13,927,000
described in Note 9. The City pays the claims upon final settlement.
(5) Pollution Remediation
The City plans to remediate hazardous materials contamination of land
located within Huntington Central Park used as a gun range facility prior to
its close in 1997. The City is voluntarily planning to remediate the site in
order to use the area for park purposes. The cost of the gun range
remediation is estimated to be $2 million and is reported as a long-term
liability in the government-wide financial statements. The liability was
measured by estimating a reasonable range of potential outlays and
multiplying those outlays by their probability of occurring.
(6) Public Agency Retirement Systems (PARS) Notes Payable
In May 2010, the City Council approved a retirement incentive program to
eligible employees, under the condition the program meets the fiscal,
managerial, and operational goals of the City to help mitigate declining
General Fund revenues and institute long-term structural changes to avert
future budget shortfalls and ensure that the City remains financially sound.
The following were the eligibility requirements for the program:
• City miscellaneous (non-safety) and marine safety employees only
• Employed by the City as of May 3, 2010
• 50 years of age or older as of September 30, 2010
• Have at least five years of City service as of September 30, 2010
• Resign from City employment no later than September 30, 2010
• Retire under PERS no later than October 1 , 2010
A total of 103 people participated and were approved by the Council for the
retirement incentive program through the Public Agency Retirement
Systems (PARS) Supplemental Retirement Program (SRP). The SRP
offered through PARS allowed the City to map its own strategy with respect
to payment for the program, backfilling of positions — both number and
timing, and program cost. The participants of this program selected from a
number of benefit options, the basic program in which one twelfth of 7% of
the individual employee's base annual salary as of July 1 , 2010 would be
paid monthly over the lifetime of the participant commencing on October 1 ,
75
City of Huntington Beach
Notes to Financial Statements
For the Year Ended September 30, 2010
11. LONG-TERM OBLIGATIONS (Continued)
2010. Alternative payments are present value equivalents to the basic
program and include the following:
• Joint-and-survivor payments
• Payments made for the life of the participant subject to a ten year
minimum
• Fixed term payments from five to fifteen years. These payments are
guaranteed to the participant for the full term selected
The City is funding the cost of this program through an annuity that requires
a one-time payment of $82,000 in September 2010 and $1,587,000 fixed
annual payments over five years due in October of each year starting in
2010. In accordance with GASB 47, a liability of the accrual cost for this
benefit has been recognized in the amount of $ 7,231 ,000 and the balance
as of September 30, 2010 is $7,149,000. The cash flows associated with
the five year funding was discounted at a rate of 5.5% in the table below (in
thousands):
Year Ending Principal Interest Annual
September 30 Payments
2011 $ 1,281 $ 306 $ 1,587
2012 1,351 236 1,587
2013 1,426 161 1,587
2014 1,504 83 1,587
2015 1,587 - 1,587
Total $ 7,149 $ 786 $ 7,935
e. Long-Term Obligations — Business Activities
Below is a schedule of the long-term obligations of business activities (in
thousands):
Long-Term Obligations-Business October 1, September Accrued Due Within One
Activities: 2009 Additions Retirements 30,2010 Interest Year
Compensated Absences $ 1,094 $ 300 $ (466) $ 928 $ - $ 249
Leases Payable 6 - (3) 3 - 3
Total Long-Term Obligations-
Business Activities $ 1,100 $ 300 $ (469) $ 931 $ - $ 252
(1) Compensated Absences
There is no repayment schedule for the compensated absences amount of
$928,000 relating to business-type activities.
76
0 City of Huntington Beach
Notes to Financial Statements
For the Year Ended September 30, 2010
11. LONG-TERM OBLIGATIONS (Continued)
(2) Leases Payable
The City entered into capital leases for various items:
Year of Issuance 2005
Type of Debt Capital Lease
Original Principal Amount $15,268
Security Asset
Interest Rates 6.9%
Interest Payment Dates Monthly
Principal Payment Dates I Monthly
Purpose of Debt I Equipment Financing
Future minimum lease payments to maturity are (in thousands):
Year Ending Principal Interest Total
September 30
2011 3 3
Total $ 3 1 $ - $ 3
f. Long-Term Obligations for which City is not Liable in any Manner
Obligations Not Recorded in Financial Statements:
Community Facilities Districts: October 1, September
(in thousands) 2009 Additions Retirements 3052010
Community Facilities Dlstrlct No. 1990-1
Special Tax Refunding Bonds $ 1,460 $ - $ (100) $ 1,360
Community Facilities Dlstrlct 2000-1
Special Assessment Tax Bonds 14,355 - (325) 14,030
Community Facilities Dlstrlct NO. 2002-1
Special Assessment Tax Bonds 4,815 - (40) 4,775
Community Facilities Dlstrlct NO. 2003-1
Special Assessment Tax Bonds 23,160 - (500) 22,660
Total Community Facilities Districts 435790 - (965) 425825
Residential Redevelopment Bonds 9,500 - 9,500
Total Obligations Not Recorded in
Financial Statements $ 535290 $ - $ (965) $ 525325
77
0 City of Huntington Beach
Notes to Financial Statements
For the Year Ended September 30, 2010
11. LONG-TERM OBLIGATIONS (Continued)
(1) Community Facilities District 1990-1 2001 Special Tax Refunding
Bonds
Year of Issuance 2001
Type of Debt Community Facilities District
Assessment Bonds
Original Principal Amount $2,155,000
Security Special Tax Levies
Interest Rates 4.00% to 5.40%
Interest Payment Dates I Aril 1st and October 1st
Principal Payment Dates I October 1S
Debt service requirements to maturity are (in thousands):
Year Ending principal Interest Total
September 30
2011 $ 110 $ 70 $ 180
2012 110 65 175
2013 120 59 179
2014 120 52 172
2015 130 45 175
2016-2020 770 109 1 879
Total $ 1,360 $ 400 1 $ 1,760
(2) Community Facilities District 2000-1 2001 Special Tax Bonds
Year of Issuance 2001
Type of Debt Community Facilities District
Assessment Bonds
Original Principal Amount $16,000,000
Security Special Tax Levies
Interest Rates 3.80% to 6.40%
Interest Payment Dates September 1" and March 12
Principal Payment Dates September 1st
Purpose of Debt Public Improvements for Grand
Coast Resort
78
City of Huntington Beach
Notes to Financial Statements
For the Year Ended September 30, 2010
11. LONG-TERM OBLIGATIONS (Continued)
Debt service requirements to maturity are (in thousands):
Year Ending principal Interest Total
September 30
2011 $ 340 $ 895 $ 1,235
2012 360 876 1,236
2013 380 855 1,235
2014 405 832 1,237
2015 1 430 807 1,237
2016-2020 2,590 3,592 6,182
2021-2025 3,535 2,644 6,179
2026-2030 4,830 1,347 6,177
2031 1,160 75 1,235
Total $ 14,030 $ 11,923 $ 25,953
(3) Community Facilities District 2002-1 Special Tax Bonds
Year of Issuance 2002
Type of Debt Community Facilities District
Assessment Bonds
Original Principal Amount $4,900,000
Security Special Tax Levies
Interest Rates 3.80% to 6.20%
Interest Payment Dates March 1S and September 1S
Principal Payment Dates Se tember 1S
Debt service requirements to maturity are (in thousands):
Year Ending principal Interest Total
September 30
2011 $ 50 $ 293 $ 343
2012 55 290 345
2013 65 288 353
2014 80 284 364
2015 1 90 280 370
2016-2020 650 1,309 1,959
2021-2025 1,105 1,062 2,167
2026-2030 1,745 642 2,387
2031-2032 935 89 1,024
Total $ 4,775 $ 4,537 $ 9,312
79
City of Huntington Beach
Notes to Financial Statements
For the Year Ended September 30, 2010
11. LONG-TERM OBLIGATIONS (Continued)
(4) Community Facilities District 2003-1 Special Tax Bonds
Year of Issuance 2003
Type of Debt Community Facilities District
Assessment Bonds
Original Principal Amount $25,000,000
Security Special Tax Levies
Interest Rates 2.65% to 5.85%
Interest Payment Dates March 1" and Se tember 1S
Principal Payment Dates I September 1S
Debt service requirements to maturity are (in thousands):
Year Ending principal Interest Total
September 30
2011 $ 520 $ 1,284 $ 1,804
2012 545 1,263 1,808
2013 570 1,236 1,806
2014 595 1,209 1,804
2015 1 625 1,180 1,805
2016-2020 3,670 5,363 9,033
2021-2025 4,850 4,180 9,030
2026-2030 6,445 2,589 9,034
2031-2033 4,840 577 5,417
Total $ 22,660 $ 18,881 $ 41,541
(5) Residential Development Bonds
The City is involved in various bond issues where the City or
Redevelopment Agency issued bonds to assist in the financing of
residential developments. A trustee holds all funds and payment cannot be
made from any other source than the mortgages received.
These bond issues are (in thousands):
Outstanding Original Issue
Bond Issue Year-end Amount
Five Points Senior Project Multi-Family Housing $9,500 $9,500
Revenue Bonds—Series A— 1991
80
0 City of Huntington Beach
Notes to Financial Statements
For the Year Ended September 30, 2010
12. CAPITAL ASSETS
a. Changes in Capital Assets
Capital asset activity for the year was (in thousands):
October 1, September 30,
Governmental Activitites 2009 Additions Dispositions 2010
Capital Assets, Not Depreciated:
Land $ 366,342 981 - $ 367,323
Construction in Progress 7,992 2,250 10,242
Joint Ventures 2,012 82 2,094
Total Capital Assets-Not Depreciated 3765346 35313 - 3795659
Capital Assets Being Depreciated
Buildings 168,669 2,677 171,346
Machinery and Equipment 47,701 47,701
Infrastructure 322,351 8,413 (1,267) 329,497
Total Capital Assets Being Depeciated 5385721 115090 (15267) 5485544
Less Accumulated Depreciation:
Buildings (39,167) (3,517) (42,684)
Machinery and Equipment (33,404) (3,023) (36,427)
Infrastructure (165,002) (6,566) 1,267 (170,301)
Total Accumulated Depreciation (2375573) (135106) 15267 (2495412)
Total Depreciated- Net 301,148 (2,016) - 299,132
Total Capital Assets 9155067 145403 (15267) 9285203
Total Accumulated Depreciation (237,573) (13,106) 1,267 (249,412)
Capital Assets of Governmental Activitites- Net $ 6775494 $ 15297 $ - $ 6785791
October 1, September 30,
Business Activities: 2009 Additions Dispositions 2010
Capital Assets, Not Depreciated:
Land $ 3,907 $ 3,907
Construction in Progress 8,209 5,644 (1,478) 12,375
Total Capital Assets-Not Depreciated 12,116 5,644 (1,478) 16,282
Capital Assets Being Depreciated
Buildings 50,986 2,523 53,509
Machinery and Equipment 9,263 133 9,396
Infrastructure 121,041 1,315 (11) 122,345
Total Capital Assets Being Depeciated 181,290 3,971 (11) 185,250
Less Accumulated Depreciation:
Buildings (11,328) (1,361) (12,689)
Machinery and Equipment (5,687) (1,009) (6,696)
Infrastructure (58,326) (2,253) 11 (60,568)
Total Accumulated Depreciation (75,341) (4,623) 11 (79,953)
Total Depreciated- Net 105,949 (652) - 105,297
Total Capital Assets 193,406 9,615 (1,489) 201,532
Total Accumulated Depreciation (75,341) (4,623) 11 (79,953)
Capital Assets of Business Activitites- Net $ 118,065 $ 4,992 $ (1,478) $ 121,579
81
City of Huntington Beach
Notes to Financial Statements
For the Year Ended September 30, 2010
12. CAPITAL ASSETS (Continued)
b. Depreciation Expense
Depreciation in governmental activities was charged to the following
functions/programs in the Statement of Activities (in thousands):
Department:
City Administrator $ 22
City Clerk 15
Finance 23
Building and Safety 205
Fire 703
Information Services 30
Police 422
Economic Development 20
Community Services 1,546
Library Services 347
Public Works 8,693
Non-Departmental 1,080
Total $ 13,106
Depreciation in business activities was charged to the following
functions/programs in the Statement of Activities (in thousands):
Fund:
Water $ 3,406
Sewer Service 1,217
Total $ 4,623
c. Capital Assets Acquired via Capital Leases
At year-end, the City's assets acquired through outstanding capital leases (see
Note 11) were (in thousands):
Governmental
Activities
Machinery and Equipment $ 1,869
Buildings 3,449
Less: Accumulated Depreciation (1,234)
Total $ 4,084
82
City of Huntington Beach
0) Notes to Financial Statements
For the Year Ended September 30, 2010
13. COMMITMENTS AND CONTINGENCIES
a. Legal Actions
There are legal actions pending against the City resulting from normal operations.
In the opinion of management and the City Attorney, the financial resolution of
these actions should not have a significant impact on these financial statements.
b. Sales Tax Sharing Agreements
City Council agreed to provide sales tax rebates to various companies. The sales
tax rebates serve to attract and retain various companies in the City of Huntington
Beach. The City of Huntington Beach has sales tax agreements that extend until
2020. Sales tax rebates total $424,000 in fiscal year ending September 30, 2010.
c. Cooperation and Owner Participation Agreements
On September 2, 2003, the Redevelopment Agency Approved a Cooperation
Agreement Regarding Capital Improvements in the Southeast Coastal
Redevelopment Project with the City. This agreement commits the
Redevelopment Agency to reimburse the City for a number of capital improvement
projects to be undertaken as part of the Five Year Capital Improvement Program
in the Southeast Redevelopment project area starting in FY 2003/04 as they are
undertaken.
On October 16, 2006, the Redevelopment Agency approved an Owner
Participation Agreement with Makallon Atlanta Huntington Beach, LLC (also
known as Makar) to develop a 31-acre site in the Main-Pier sub-area of the
Huntington Beach Redevelopment Project (Pacific City). Makar will advance
$5,500,000 to the Redevelopment Agency to fund the Agency's obligation for the
Regional Urban Runoff Treatment System and the Pacific View Drive Extension.
The advance will be repaid over 20 years from tax increment generated from the
site. Current development of the site is on hold and will proceed in the future as
economic conditions permit.
As of September 30, 2010, the City has no outstanding obligations related to the
cooperation and owner participation agreements discussed above.
83
City of Huntington Beach
Notes to Financial Statements
For the Year Ended September 30, 2010
13. COMMITMENTS AND CONTINGENCIES (Continued)
d. Redevelopment Agency Debt to City
The City has advanced money to the Redevelopment Agency for capital
improvements and operations. There is no fixed repayment schedule for these
advances and the Council/Agency has no requirement for the timing of any
repayment. Accordingly, the City has not recorded the advances in the
accompanying financial statements. These advances have been made since
1984 and include direct advances of cash, overhead charges, deferred
development fees, deferred land sales, and interest. Below is a schedule of the
activity for the year (in thousands):
Amount @ Amount @
10/1/09 Additions Reductions 9/30/10
General Fund
Direct Advances $ 4,235 $ 90 $ (2,013) $ 2,312
Indirect Advances 6,567 157 (157) 6,567
Land Sales 32,833 - - 32,833
Interest 29,482 1,501 (2,472) 28,511
Total General Fund 73,117 1,748 (4,642) 70,223
Sewer Fund
Direct Advances 259 6 265
Deferred Development Fees 161 4 - 165
Total Sewer Fund 420 10 - 430
Drainage Fund
Direct Advances 625 15 640
Deferred Development Fees 172 4 - 176
Total Drainage Fund 797 19 - 816
Park Acquisition and Development Fund
Direct Advances 5,144 123 - 5,267
Deferred Development Fees 382 9 - 391
Total Park Acquisition and Development Fund 5,526 132 5,658
Water Fund
Direct Advances 3,871 93 3,964
Total Water Fund 3,871 93 3,964
Total All Funds $ 83,731 $ 2,002 $ (4,642) $ 81,091
The cash repayments are recorded as transfers from the Redevelopment Agency
to the fund receiving the repayment.
84
City of Huntington Beach
Notes to Financial Statements
For the Year Ended September 30, 2010
13. COMMITMENTS AND CONTINGENCIES (Continued)
e. SERAF Commitment
Pursuant to AB 26 4x, a budget trailer bill, California redevelopment agencies
were required to make Supplemental Education Revenue Augmentation Fund
(SERAF) contributions totaling $1.7 billion for the fiscal year 2009-2010 and $350
million for the fiscal year 2010-2011. Under this bill, the Agency's SERAF
contribution for fiscal year 2010-11 is $1,107,000. On October 20, 2009, the
California Redevelopment Association filed a class action lawsuit on behalf of all
California redevelopment agencies, again challenging the SERAF obligations as
unconstitutional. On May 13, 2010, the Superior Court found in favor of the State
relative to the class action suit.
14. OTHER INFORMATION
a. Expenditures Exceeding Appropriations
Expenditures exceeded appropriations at the departmental level in the funds
shown (in thousands):
Major Funds
Redevelopment Agency Capital Projects - Public Works $ 92
Other Governmental Funds
Gas Tax - Public Works 130
Gas Tax - Non-Departmental 34
Traffic Impact Fee - Public Works 235
Traffic Impact Fee - Non-Departmental 162
Highway Safety & Traffic Reduction - Public Works 123
Sewer Development - Public Works 73
Infrastructure - Public Works 31
85
0 City of Huntington Beach
Notes to Financial Statements
For the Year Ended September 30, 2010
14. OTHER INFORMATION (Continued)
b. Fund and Accumulated Deficits
The following funds have total fund deficits at year-end (in thousands):
Special Revenue Fund
Drainage $ 492
Traffic Impact Fee 533
Debt Service Fund
Property Tax Refund 34
We have established plans to reduce and eliminate deficits in these Funds. This
will be accomplished in the Traffic Impact Fee Fund by minimizing expenditures
over the next two fiscal years. Expenditures are not authorized in the Drainage
Fund until annual revenues eliminate the negative fund balance. Additional
transfers will be made to the Property Tax Refund Fund over the next two fiscal
years to eliminate the deficit in this Fund.
15. SUBSEQUENT EVENTS
a. Bella Terra Phase II
On October 4, 2010, the Agency approved the affordable housing agreement with
BTDJM Phase II Associates (DJM). The agreement will facilitate the construction
of a 467 mixed-use unit project, including 43 moderate units and 28 very low units.
This agreement will reimburse DJM for construction of the affordable units only up
to $17 million plus 4% interest. The agreement also includes payment to DJM of
up to $250,000 for the pedestrian access crossing between the Levitz site and the
Village at Bella Terra if construction is within 10 years of the affordable housing
agreement. The reimbursement of the affordable units will be based upon the
site-generated tax increment for the mixed use project as well as the 20% housing
fund from Bella Terra I.
86
City of Huntington Beach
0 Notes to Financial Statements
For the Year Ended September 30, 2010
15. SUBSEQUENT EVENTS (Continued)
b. Governor's Proposed 2011-12 Budget: Disestablishment of Redevelopment
Agencies
On January 10, 2011, the Governor released the proposed fiscal year 2011-12
State budget, which proposes the elimination of redevelopment. The proposed
budget calls for prohibiting redevelopment agencies from creating new contracts
or obligations or modifying existing contracts on or after the date urgency
legislation is adopted. The proposed budget also calls for disestablishing existing
agencies by July 1 , 2011, and establishing successor local agencies which would
be required to use the property tax that the agencies would otherwise have
received to retire pre-existing agency debts and contractual obligations in
accordance with existing payment schedules. In this regard, the Governor's
Budget Summary for the proposed 2011-12 State budget states, "No existing
obligations will be impaired." This is a reference to provisions in the federal and
state constitutions that, subject to certain exceptions, generally prohibit states
from passing a law that impairs the obligations of contracts.
Under the Governor's proposal, the amount remaining in fiscal year 2011-12 after
the payment of pre-existing agency obligations would be distributed on a one-time
basis in various ways, including to the affected local taxing entities (including
cities) and to the State General Fund to offset the costs for Medi-Cal and trial
courts. Beginning in fiscal year 2012-13, the amount remaining after the payment
of pre-existing agency obligations generally would be distributed to cities,
counties, special districts, and K-14 schools in amounts proportionate to their
share of the countywide property tax. Amounts in Low and Moderate Income
Housing Funds would be shifted to local housing authorities for low and moderate
income housing (however, under the Proposed Legislation (defined and described
below), the amounts in the Low and Moderate Income Housing Fund, along with
all the rights, powers, assets, liabilities, duties and obligations associated with the
housing activities of the redevelopment agency may instead be shifted to the city
or county that created the redevelopment agency). The budget also proposes that
the Constitution be amended to provide for 55 percent voter approval for limited
tax increases and bonding against local revenues for development projects such
as those projects currently undertaken by redevelopment agencies.
87
City of Huntington Beach
Notes to Financial Statements
For the Year Ended September 30, 2010
15. SUBSEQUENT EVENTS (Continued)
On February 18, 2011 , the California Senate and Assembly budget committees
voted in favor of the proposed budget. The Assembly budget committee qualified
its support by stating that the State general fund savings could be accomplished
by legislation that would reform rather than eliminate redevelopment. On
February 23, 2011, the California Department of Finance released language of
proposed legislation that would implement the Governor's proposed budget with
respect to the dissolution of redevelopment agencies (the "Proposed Legislation").
The Proposed Legislation has not been formally introduced as of the date of the
audit report, but the Agency expects it will be introduced and taken up by the
budget conference committee in the near future. It appears that the normal
process of hearings in policy committees and the attendant opportunity for
amendment and refinement of the Proposed Legislation may not be followed,
although the budget conference committee would have wide latitude to amend the
Proposed Legislation. Accordingly, no assurance can be given regarding whether
or not the Proposed Legislation will be enacted in its present form, or at all.
The Proposed Legislation is styled as an urgency measure, which requires a two-
thirds vote of each house of the Legislature for passage, and which would become
effective immediately upon the signature of the Governor.
Under the Proposed Legislation, the Agency would be prohibited from entering
into any new contracts with, or incurring obligations or making commitments to,
any entity, individual or groups of individuals upon the effectiveness of the
Proposed Legislation. The Agency would be dissolved and, unless the City elects
otherwise, the City would become the successor entity to the Agency (the
"Successor Agency"), to settle the affairs of the Agency. The Successor Agency
would be subject to the direction of an oversight board (the "Oversight Board"), to
be composed of seven members, with only one member selected by the City
Council. The remaining members would be selected by the County Board of
Supervisors, the County Superintendent of Education and the largest non-
enterprise special district (by property tax share) with territory within the territorial
jurisdiction of the former Agency. All assets, properties, contracts, leases, books
and records, buildings and equipment of the former Agency would be transferred
to the control of the Successor Agency on July 1 , 2011. The Successor Agency
would be charged with preparing "Recognized Obligation Payment Schedules"
which document the minimum payments and due dates of payments required by
"enforceable obligations" for each half-year fiscal period. The establishment of the
Recognized Obligation Payment Schedules would be subject to the Oversight
Board's approval. "Enforceable obligations" include, among other things, bonds
issued pursuant to the Redevelopment Law (including the required debt service,
reserve set-asides and any other payments required under the indenture or similar
documents governing the issuance of outstanding bonds of the former Agency).
88
City of Huntington Beach
Notes to Financial Statements
For the Year Ended September 30, 2010
15. SUBSEQUENT EVENTS (Continued)
For the 2011-12 fiscal year, the draft of the Recognized Obligation Payment
Schedule must be reviewed and certified, as to its accuracy, by an external
auditor. The Proposed Legislation provides that payments due before January 1 ,
2012 will be made from revenues received in the spring of 2011 property tax
distribution. Commencing January 1 , 2012, only those payments listed in the
Recognized Obligation Payment Schedule may be made by the Successor
Agency from funds specified in the Recognized Obligation Payment Schedule.
Under the Proposed Legislation, the Oversight Board will be required to direct the
Successor Agency to dispose of, generally, all assets and properties of the former
Agency, except for assets and properties deemed part of approved development
projects, and cease performance in connection with and terminate all existing
agreements that do not qualify as enforceable obligations. An "approved
development project' is defined as a project (excluding an agreement for any of
the following: planning, financing services, site search, or other staff or consulting
activities in preparation for redevelopment work) where construction, site
remediation, design, or environmental assessment work or property acquisition is
required by the former Agency pursuant to an enforceable obligation between the
former Agency and a party other than the entity that created the Agency (i.e., the
City) and either (1) substantial performance under the applicable agreements had
taken place prior to the effective date of the Proposed Legislation in its final form,
or (2) the Oversight Board determines that it would be beneficial for the taxing
entities or the communities to continue the project even though there had not
been substantial performance under the applicable agreements. The potential
impact of the Proposed Legislation, if adopted as proposed, would be material to
the Agency and the ability of the Agency or any Successor Agency to conduct, or
continue to completion, redevelopment activities currently being undertaken or
proposed to be undertaken by the Agency with respect to the Project Area.
Although the Agency cannot predict what the final language of the Proposed
Legislation will be, the Proposed Legislation, in its current form, states that the
intent of the Legislature is to do the following:
(1) Bar existing redevelopment agencies from incurring new obligations that would
divert any more money from core functions and dissolve all existing
redevelopment. It is the intent of the Legislature that the greatest amount of
funding be realized from these actions to fund core governmental services.
89
City of Huntington Beach
Notes to Financial Statements
For the Year Ended September 30, 2010
15. SUBSEQUENT EVENTS (Continued)
(2) Beginning with 2012-13 fiscal year, allocate these funds according to the
existing property tax allocation, except for enterprise special districts, to make the
funds available for cities, counties, special districts, school and community college
districts to provide core governmental services. As a result of these actions, it is
estimated that, by fiscal year 2012-13, these local entities will receive $1.9 billion
per year in new resources to use for their core priorities.
(3) Require a successor entity to settle the affairs of the redevelopment agencies.
(4) Require the protection of contractual rights by successor agencies, which will
be required to retire redevelopment agency debts in accord with existing payment
schedules. No existing contractual obligations will be impaired.
The Proposed Legislation implements the above-described intent of the
Legislature through a complex series of provisions, and appears to contain
several inconsistencies and drafting problems which will likely require revision.
The Agency cannot predict what the final language of the Proposed Legislation
will be or whether the Proposed Legislation in any form will be adopted.
90
REQUIRED SUPPLEMENTARY INFORMATION
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City of Huntington Beach
Required Supplementary Information
For the Year Ended September 30, 2010
Budaetary Information
The City Council must annually adopt a budget by September 30 of the prior fiscal year. The
budgeted expenditures become the appropriations to the various departments. The budget
includes estimates for revenue that, along with the appropriations, compute the budgetary fund
balance. The appropriated budget covers substantially all governmental fund expenditures with
the exception of capital improvement projects (capital projects funds) carried forward from prior
years, which constitute a legally authorized non-appropriated budget. The City Council may
amend the budget at any time. The City Administrator may transfer funds from between object
purposes (personal services, operating expenditures, or capital outlay expenditures) within the
same department without changing the total departmental budget. Department heads may
transfer funds from like object categories of the same department. The City Council must approve
any changes to departmental budgets. Expenditures may not exceed appropriations at the
departmental level. All unused appropriations lapse at year-end. During the year the City Council
made several supplemental appropriations with included carryovers of prior year encumbrances
all of which were within available fund balance and estimated revenue amounts.
The City Council adopts governmental fund budgets consistent with generally accepted principles
as legally required. There are no significant non-budgeted financial activities. Revenues for
special revenue funds are budgeted by entitlements, grants and estimates of future development
and economic growth. Expenditures and transfers are budgeted based upon available financial
resources.
On or before May 31 of each year, each department submits data to the City Administrator for
budget preparation. Staff prepares the budget by fund, function, and activity. The budget includes
information on past years, current year estimates and requested appropriations for the next fiscal
year. Before August 1, the City Council receives the proposed budget. The City Council holds
public hearings and may amend the budget by a majority vote. Changes to the budget must be
within the available revenues and reserves.
These financial schedules show budgetary data for the General, Special Revenue, Capital
Projects and Debt Service Funds. The original budget, revised budget, actual expenditures, and
variance amounts are shown.
The City uses an encumbrance system as an aid in controlling expenditures. When the City
issues a purchase order for goods or services, it records an encumbrance until the vendor
delivers the goods or performs the service. At year-end, the City reports all outstanding
encumbrances as restricted, committed, or assigned fund balance in governmental fund types.
The City reappropriates these encumbrances into the new fiscal year.
Below is a schedule of a budget to actual comparison of the General and Grant Fund's
Revenues, and Expenditures and Changes in Fund Balance (in thousands):
93
CITYOF HUNTINGTON BEACH
SCHEDULE OF REVENUES, EXPENDITURES AND
CHANGES IN FUND BALANCES-BUDGET AND ACTUAL
FOR THE YEAR ENDED SEPTEMBER 30,2010
(In Thousands)
General Fund
Variance with
Final Budget
Positive
REVENUES Original Budget Final Budget Actual (Negative)
Property Taxes $ 66,402 $ 66,402 $ 66,886 $ 484
Sales Taxes 19,575 19,575 20,795 1,220
Utility Taxes 21,725 21,725 19,757 (1,968)
Other Taxes 13,385 13,385 11,629 (1,756)
Licenses and Permits 6,982 6,984 6,109 (875)
Fines, Forfeitures and Penalties 4,260 4,260 3,965 (295)
From Use of Money and Property 14,915 14,915 13,826 (1,089)
Intergovernmental 2,544 3,841 4,219 378
Charges ter Current SeMce 23,169 23,369 22,724 (645)
Other 1,251 1,657 2,433 776
Total Revenues 174,208 176,113 172,343 (3,770)
EXPENDITURES
Current:
City Council 296 302 301 1
City Administrator 1,774 1,756 1,652 104
City Treasurer 1,493 1,537 1,532 5
City Attorney 2,636 2,657 2,657 -
City Clerk 956 972 868 104
Finance 4,362 4,354 4,286 68
Human Resources 6,470 6,231 5,209 1,022
Planning 3,334 3,819 2,954 865
Building 3,696 3,592 3,376 216
Fire 32,184 32,522 32,398 124
Information SeMces 7,029 7,062 6,782 280
Police 60,024 58,946 57,521 1,425
Economic Development 1,584 1,664 1,520 144
Community SeMces 13,604 13,956 13,328 628
Library SeMces 4,208 4,529 4,066 463
Public Works 19,312 19,524 17,388 2,136
Non-Departmental 11,098 13,639 14,443 (804)
Debt Service:
Principal 492 526 386 140
Interest - 48 48 -
Total Expenditures 174,552 177,636 170,715 6,921
Excess(Deficiency)Of Revenues
Over(Under) Expenditures (344) (1,523) 1,628 3,151
OTHER FINANCING SOURCES(USES)
Tmnsters In 7,380 8,528 8,452 (76)
Tmnsters Out (6,988) (7,918) (7,816) 102
Total Other Financing Sources(Uses) 392 610 636 26
Excess Of Revenues And Other Souces
Over(Under) Expenditures And Other Uses 48 (913) 2,264 3,177
Fund Balance -Beginning Ot Year 39,098 39,098 39,098
Fund Balance -End Ot Year $ 39,136 $ 385175 $ 415352 $ 35177
94
CITY OF HUNTINGTON BEACH
SCHEDULE OF REVENUES, EXPENDITURES AND
CHANGES IN FUND BALANCES- BUDGET AND ACTUAL
FOR THE YEAR ENDED SEPTEMBER 30,2010
(In Thousands)
Grants Special Revenue
Variance with
Final Budget
Positive
REVENUES Original Budget Final Budget Actual (Negative)
From Use of Money and Property $ 263 $ 265 $ 236 $ (29)
Intergovernmental 2,284 8,257 4,326 (3,931)
Other 5 5 68 63
Total Revenues Z552 8,527 4,630 (3,897)
EXPENDITURES
Current,
Planning - 217 216 1
Building - 111 73 38
Fl re - 734 418 316
Police 164 1,349 947 402
Economic Development 776 3,095 1,144 1,951
Community SerNces - 381 247 134
Library SenAces - 150 92 58
Public Works - 1,544 845 699
Capital Outlay 120 8,970 2,367 6,603
Debt SenAce,
Principal 754 144 125 19
Interest - 173 173 -
Total Expenditures 1,814 16,868 6,647 10,221
Excess Of Revenues Over(Under)
Expenditures 738 (8,341) (2,017) 6,324
OTHER FINANCING SOURCES(USES)
Transfers In - 729 588 (141)
Transfers Out - (52) (52) -
Total Other Financing Sources (Uses) - 677 536 (141)
Excess Of Revenues And Other Sources
Over(Under) Expenditures And Other Uses 738 (7,664) (1,481) 6,183
Fund Balance-Beginning of Year 2,404 2,404 2,404 -
Fund Balance-End Of Year $ 3,142 $ (5,260) $ 923 $ 6,183
95
CITY OF HUNTINGTON BEACH
REQUIRED SUPPLEMENTARY INFORMATION
FOR THE YEAR ENDED SEPTEMBER 30,2010
SCHEDULE OF FUNDING PROGRESS
RETIREMENT PLAN- NORMAL
(In Thousands)
Entry Age Normal Excess Assets Excess Assets as a
Actuarial Actuarial Accrued Actuarial Value of (Unfunded Percentage of
Valuation Date Ulalility(AAL) Assets liability) lnndedRatio Covered Payroll Covered Payroll
2007
Safety $ 409,859 $ 338,305 $ (71,554) 82.5% $ 34,961 -204.7%
Non Safety 295,078 287,302 (7,776) 97.41/, 44,249 -17.6%
Total $ 704,937 $ 625,607 $ (79,330) 88.7% $ 79,210 -1002%
2008
Safety $ 439,687 $ 357,782 $ (81,905) 81.4% $ 36,791 -222.6%
Non Safety 320,209 307,549 (12,660) 96.01/, 47,817 -26.5%
Total $ 759,896 $ 665,331 $ (94,565) 87.6% $ 84,608 -111.8%
2009
Safety $ 478,818 $ 370,250 $ (108,568) 77.3% $ 40,384 -268.8%
Non Safety 363,638 321,435 (42,203) 88.41/, 48,439 -87.1%
Total $ 842,456 $ 691,685 $ (150,771) 82.1% $ 88,823 -169.7%
96
CITY OF HUNTINGTON BEACH
REQUIRED SUPPLEMENTARY INFORMATION
FOR THE YEAR ENDED SEPTEMBER 30,2010
(Continued)
SCHEDULE OF FUNDING PROGRESS
RETIREMENT PLAN-SUPPLEMENTAL
(In Thousands)
Actuarial Entry Age Normal Actuarial Value of Unfunded AAL UAAL as a% of
Valuation Date Accrued Li ability Assets (UAAL) FundedRatio CoveredPa roll CoveredPa oll
6/30/2005 Actual 40,873 14,227 (26,646) 34.8%% 65,843 40.5%%
9/30/2006 Update 43,066 16,821 (26,245) 39.1% 72,186 -36.4%
9/30/2007 Actual 51,028 20,452 (30,576) 40.1%% 73,380 41.7%%
9/30/2008 Update 52,777 22,722 (30,055) 43.1% 78,777 -38.2%
9/30/2009 Actual* 59,576 24,980 (34,596) 41.9%% 85,667 40.4%%
9/30/2010 Update* 61,448 28,467 (32,981) 46.3%% 87,617 -37.6%%
SCHEDULE OF EMPLOYER CONTRIBUTIONS
RETIREMENT PLAN-SUPPLEMENTAL
(In Thousands)
Annual Required Percentage
Year Ended Contribution Contributed
9/30/2005 $ 3,074 119.55%%
9/30/2006 3,022 130.48%%
9/30/2007 2,850 156.63%%
9/30/2008 3,419 106.08%%
9/30/2009 3,476 100.00%%
9/30/2010 3,967 100.00%%
OTHER POST EMPLOYMENT BENEFITS- MEDICAL RETIREMENT
SCHEDULE OF FUNDING PROGRESS
(In Thousands)
Unfunded
Actuarial Actuarial Value of Actuarial Accrued Actuarial Accrued UAAL as a% of
Valuation Date Assets Ualiflity Liability Funded Ratio Covered Pa roll CoveredP roll
9/30/2008 Update $ 8,730 $ 23,470 $ (14,740) 37.2%% $ 78,777 -18.7%%
9/30/2009 Actual* 8,727 19,474 (10,747)1 44.8%% 88,923 -12.1%%
9/30/2010 Update* 9,157 20,608 (11,451) 44.4°/% 90,465 -12.7%%
*Actuarial valuation for each fiscal year coding September 30th was performed as of March 31 st of the same y ear using actual values at March 31 st
projected forward to fiscal year end
97
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98
SUPPLEMENTARY INFORMATION
99
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100
City of Huntington Beach
Other Governmental Funds
Special Revenue Funds account for revenues and expenditures legally restricted to a specific purpose.
• The Gas Tax Fund accounts for moneys allocated under the Streets and Highways Code of California.
Expenditures may be made for any street related purpose allowed under the code.
• The Drainage Fund accounts for fees received from developers to construct and maintain the City's
drainage system.
• The Narcotics Forfeiture Fund accounts for moneys received from the State of California for special law
enforcement expenditures.
• The Transportation Fund accounts for moneys received from the countywide '/2 cent sales tax and other
specific sources to be spent on transportation related expenditures.
• The Air Quality Fund accounts for revenues from the local agencies used to improve local air quality.
• The Traffic Impact Fee Fund accounts for moneys received from the traffic impact fee levied on new
developments in the City.
• The Fourth of July Parade Fund accounts for the activities of the City's annual parade.
• The Special Library Fund accounts for revenues and expenditures related to the expanded Central Library
including some construction. This fund has been closed in the current fiscal year.
• The Park Acquisition and Development Fund accounts for fees received from developers to develop and
maintain the City's park system.
• The Highwav Safety & Traffic Reduction Fund accounts for moneys used to fund transportation projects,
improve the movement of goods, improve air quality, and enhance the safety and security of the
transportation system under the Highway Safety, Traffic Reduction, Air Quality, and Port Security Bond Act of
2006.
• The Traffic Congestion Relief Fund accounts for moneys allocated for roadway maintenance as
established by Assembly Bill 2928.
Debt Service Funds account for the receipts for and payment of general long-term debt.
• The Property Tax Refund Fund records the payment of claims for repayment of the Judgment Obligation
Bonds.
• The Public Financing Authority accounts for the activity of the Huntington Beach Public Financing
Authority.
Capital Projects Funds account for the acquisition and construction of capital assets other than those financed
by proprietary fund types.
• The Parking in-lieu Fund records construction activity from developers who pay fees in-lieu of directly
providing parking facilities to the City.
• The Sewer Development Fund accounts for fees received from developers to construct and maintain sewer
facilities.
• The Infrastructure Fund records activity for certain designate infrastructure related expenditures.
101
CITY OF HUNTINGTON BEACH
COMBINING BALANCE SHEET
OTHER GOVERNMENTAL FUNDS
SEPTEMBER 30,2010
(In Thousands)
SPECIAL REVENUE FUNDS
Narcotics
ASSETS Gas Tax Drainage Forfeiture Transportation Air Quality
Cash and Investments $ 545 $ - $ 921 $ 383 $ 831
Cash and Investments with Fiscal Agent - -
Taxes Receivable 383 - - 170
Other Receivables 78 - 3 3 3
Due from Other Funds - - 967
Other Assets - - - - -
Total Assets $ 1,00E $ - $ 924 $ 1,523 $ 834
LIABILITIES
Accounts Payable $ - $ - $ - $ 4 $ 25
Accrued Payroll 5 - - 29 6
Due to Other Funds - 492 - - -
Advances from Other Funds - - - - -
Deposits Payable - - 1 - -
Deferred Revenue - - - - -
Total Liabilities 5 492 1 33 31
FUND BALANCES
Restricted
Pollution Remedlation - - - - -
Debt Service - - - - -
Highways, Streets and Transportation 1,001 - - 1,490 -
Air Quality - - - - 803
Parks - - - - -
Other Capital Projects - - - - -
Committed
Other Capital Projects - - - - -
Other Purposes - - - - -
Assigned
Capital Projects - - - - -
Other Purposes - - 923 - -
Unassigned - (492) - - -
Total Fund Balances 1,001 (492) 923 1,490 803
Total Liabilites and Fund Balances $ 1,006 $ - $ 924 $ 1,523 $ 834
102
CITY OF HUNTINGTON BEACH
COMBINING BALANCE SHEET
OTHER GOVERNMENTAL FUNDS
SEPTEMBER30,2010
(In Thousands)
(continued)
SPECIAL REVENUE FUNDS
Park Highway Safety Traffic
Traffic Impact Fourth of July Acquisition and &Traffic Congestion Total Special
Fee Parade Special Library Development Reduction Relief Revenue Funds
$ - $ 61 $ - $ 3,729 $ 3,669 $ 2,932 $ 13,071
553
463 12 12 194 768
967
- - - 1,266 - - 1,266
$ 463 $ 61 $ - $ 5,007 $ 3,681 $ 3,126 $ 16,625
$ - $ 2 $ - $ 18 $ 1,603 $ 199 $ 1,851
6 1 3 9 3 62
475 - - - - 967
- - - 675 - - 675
1,266 - - 1,267
515 - - - - - 515
996 3 - 1,962 1,612 202 5,337
- - - 489 - - 489
130 - - - 2,069 2,924 7,614
- - - - 803
2,787 - - 2,787
(663) - - (231) - - (1,386)
(533) 58 - 3,045 2,069 2,924 11,288
$ 463 $ 61 $ - $ 5,007 $ 3,681 $ 3,126 $ 16,625
103
CITY OF HUNTINGTON BEACH
COMBINING BALANCE SHEET
OTHER GOVERNMENTAL FUNDS
SEPTEMBER30,2010
(In Thousands)
(continued)
Debt Service Fund Capital Projects Funds
Public
Property Tax Financing Total Debt Sewer
ASSETS Refund Authority Service Fund Parking in-lieu Development
Cash and Investments $ - $ 35 $ 35 $ 765 $ 1,081
Cash and Investments with Fiscal Agent 1 5,910 5,911 - -
Taxes Receivable - - - - -
Other Receivables - 9 9 2 3
Due from Other Funds - - - - -
Other Assets - - - - -
Total Assets $ 1 $ 5,954 $ 5,955 $ 767 $ 1,084
LIABILITIES
Accounts Payable $ 2 $ 4 $ 6 $ - $ 5
Accrued Payroll - - - - -
Due to Other Funds - - - - -
Advances from Other Funds - - - - -
Deposits Payable 33 - 33 - -
Deferred Revenue - - - - -
Total Liabilities 35 4 39 - 5
FUND BALANCES
Restricted
Pollution Remedlation - - - - -
Debt Service - 5,946 5,946 - -
Highways, Streets and Transportation - - - - -
Air Quality - - - - -
Parks - - - - -
Other Capital Projects - - - - 1,079
Committed
Other Capital Projects - - - 30 -
Other Purposes - 4 4 - -
Assigned
Capital Projects - - - 737 -
Other Purposes - - - - -
Unassigned (34) - (34) - -
Total Fund Balances (34) 5,950 5,916 767 1,079
Total Liabilitesand Fund Balances $ 1 $ 5,954 $ 5,955 $ 767 $ 1,084
104
CITY OF HUNTINGTON BEACH
COMBINING BALANCE SHEET
OTHER GOVERNMENTAL FUNDS
SEPTEMBER 30,2010
(In Thousands)
(continued)
Capital Projects Funds
Total Other
Total Capital Governmental
Infrastructure Projects Funds Funds
$ 2,200 $ 4,046 $ 17,152
5,911
- - 553
6 11 788
- - 967
1,266
$ 2,206 $ 4,057 $ 26,637
$ - $ 5 $ 1,862
- 62
967
675
1,300
515
5 5,381
- 489
5,946
7,614
803
- - 2,787
19 1,098 1,098
- 30 30
4
2,187 2,924 2,924
981
- (1,420)
2,206 4,052 21,256
$ 2,206 $ 4,057 $ 26,637
105
CITY OF HUNTINGTON BEACH
COMBINING STATEMENT OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCES
OTHER GOVERNMENTAL FUNDS
FOR THE YEAR ENDED SEPTEMBER 30,2010
(In Thousands)
Special Revenue Funds
Narcotics
REVENUES Gas Tax Drainage Forfeiture Transportation Air Quality
Sales Taxes $ - $ - $ - $ 1,787 $ -
Licenses and Permits - - - -From Use of Money and Property - - 12 18 13
Intergovernmental 4,038 - 47 - 230
Charges for Current Service - 50 - - -
Other - - - 1 -
Total Revenues 4,038 50 59 1,806 243
EXPENDITURES
Current:
Human Resources - - - - 75
Police - - 98 - -
Community Services - - - - -
Public Works 176 - - 953 211
Non-Departmental 34 - - -Capital Outlay 1,182 - - 2,454 99
Debt Service:
Principal - - - - -
Interest - - - - -
Total Expenditures 1,392 - 98 3,407 385
Excess Of Revenues Over
(Under)Expenditures 2,646 50 (39) (1,601) (142)
Other Financing Sources(Uses):
Transfers In - - - - -
Issuance of Long Term Debt - - - - -
Issuance Premium - - - - -
Payments to Escrow - - - - -
Transfers Out (900) - - - (230)
Total Other Financing Sources
Sources(Uses) (900) - - - (230)
Net Change in Fund Balances 1,746 50 (39) (1,601) (372)
Fund Balance - Beginning Of Year (745) (542) 962 3,091 1,175
Fund Balance - End Of Year $ 1,001 $ (492) $ 923 $ 1,490 $ 803
106
CITY OF HUNTINGTON BEACH
COMBINING STATEMENT OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCES
OTHER GOVERNMENTAL FUNDS
FOR THE YEAR ENDED SEPTEMBER 30,2010
(In Thousands)
(continued)
Special Revenue Funds
Park Highway
Acquisiton Safety& Traffic Total Special
Traffic Fourth of Special and Traffic Congestion Revenue
Impact Fee July Parade Library Development Reduction Relief Funds
$ - $ - $ - $ - $ - $ - $ 1,787
35 35
- 28 - 52 58 37 218
15 84 - 203 3,007 2,490 10,114
77 127 - 169 - - 423
82 - 83
92 321 - 424 3,100 2,527 12,660
75
98
- 377 - 459 - - 836
432 - - - 123 136 2,031
162 - - - - - 196
657 - - 5 2,460 354 7,211
1,251 377 - 464 2,583 490 10,447
(1,159) (56) - (40) 517 2,037 2,213
- - 119 - - - 119
(294) - - (1,424)
119 (294) - - (1,305)
(1,159) (56) 119 (334) 517 2,037 908
626 114 (119) 3,379 1,552 887 10,380
$ (533) $ 58 $ - $ 3,045 $ 2,069 $ 2,924 $ 11,288
107
CITY OF HUNTINGTON BEACH
COMBINING STATEMENT OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCES
OTHER GOVERNMENTAL FUNDS
FOR THE YEAR ENDED SEPTEMBER 30,2010
(In Thousands)
(continued)
Debt Service Fund Capital Projects Fund
Public
Property Tax Financing Total Debt Sewer
REVENUES Refund Authority Service Fund Parking In-Lieu Development
Sales Taxes $ - $ - $ - $ - $ -
Licenses and Permits - - - 51 9
From Use of Money and Property 5 134 139 10 15
Intergovernmental - - - - 12
Charges for Current Service - - - - 40
Other - - - - -
Total Revenues 5 134 139 61 76
EXPENDITURES
Current:
Human Resources - - - - -
Police - - - - -
Community Services - - - - -
Public Works - - - - 78
Non-Departmental 2 191 193 -Capital Outlay - - - - 53
Debt Service:
Principal 785 3,620 4,405 - -
Interest 254 2,575 2,829 - -
Total Expenditures 1,041 6,386 7,427 - 131
Excess Of Revenues Over
(Under)Expenditures (1,036) (6,252) (7,288) 61 (55)
Other Financing Sources(Uses):
Transfers In 1,037 6,083 7,120 - -
Issuance of Long Term Debt - 14,745 14,745 - -
Issuance Premium - 707 707 - -
Payments to Escrow - (15,967) (15,967) - -
Transfers Out (1,722) - (1,722) - -
Total Other Financing Sources
Sources(Uses) (685) 5,568 4,883 -Net Change in Fund Balances (1,721) (684) (2,405) 61 (55)
Fund Balance -Beginning Of Year 1,687 6,634 8,321 706 1,134
Fund Balance -End Of Year $ (34) $ 5,950 $ 5,916 $ 767 $ 1,079
108
CITY OF HUNTINGTON BEACH
COMBINING STATEMENT OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCES
OTHER GOVERNMENTAL FUNDS
FOR THE YEAR ENDED SEPTEMBER 30, 2010
(In Thousands)
(continued)
Capital Projects Fund
Total Other
Total Capital Governmental
Infrastructure Projects Funds Funds
$ - $ - $ 1,787
60 95
32 57 414
12 10,126
40 463
10 10 93
42 179 12,978
75
98
836
31 109 2,140
389
234 287 7,498
- 4,405
2,829
265 396 18,270
(223) (217) (5,292)
- 7,239
- 14,745
- - 707
- (15,967)
(309) (309) (3,455)
(309) (309) 3,269
(532) (526) (2,023)
2,738 4,578 23,279
$ 2,206 $ 4,052 $ 21,256
109
CITY OF HUNTINGTON BEACH
SCHEDULE OF REVENUES, EXPENDITURES, AND
CHANGES IN FUND BALANCES -BUDGET AND ACTUAL
OTHER GOVERNMENTAL FUNDS
FOR THE YEAR ENDED SEPTEMBER 30, 2010
(In Thousands)
Gas Tax
Variance with
Final Budget
Original Positive
REVENUES: Budget Final Budget Actual (Negative)
Intergovernmental $ 900 $ 4,474 $ 4,038 $ (436)
EXPENDITURES:
Current:
Public Works - 46 176 (130)
Non-Departmental - - 34 (34)
Capital Outlay - 2,215 1,182 1,033
TOTAL EXPENDITURES - 2,261 1,392 869
EXCESS OF REVENUES OVER
(UNDER)EXPENDITURES 900 2,213 2,646 433
OTHER FINANCING SOURCES (USES):
Transfers Out (900) (1,022) (900) 122
NET CHANGE IN FUND BALANCE - 1,191 1,746 555
FUND BALANCE-BEGINNING OF YEAR (745) (745) (745) -
FUND BALANCE-END OF YEAR $ (745) $ 446 $ 1,001 $ 555
Drainage
Variance with
Final Budget
Original Positive
REVENUES: Budget Final Budget Actual (Negative)
Charges for Current Service $ 50 $ 50 $ 50 $ -
FUND BALANCE-BEGINNING OF YEAR (542) (542) (542) -
FUND BALANCE-END OF YEAR $ (492) $ (492) $ (492) $ -
110
CITY OF HUNTINGTON BEACH
SCHEDULE OF REVENUES, EXPENDITURES, AND
CHANGES IN FUND BALANCES -BUDGET AND ACTUAL
OTHER GOVERNMENTAL FUNDS
FOR THE YEAR ENDED SEPTEMBER 30, 2010
(In Thousands)
(continued)
Narcotics Forfeiture
Variance with
Final Budget
Original Positive
REVENUES: Budget Final Budget Actual (Negative)
From Use of Money and Property $ 10 $ 10 $ 12 $ 2
Intergovernmental 25 25 47 22
TOTAL REVENUES 35 35 59 24
EXPENDITURES:
Current:
Police 117 517 98 419
Capital Outlay 200 310 - 310
TOTAL EXPENDITURES 317 827 98 729
NET CHANGE IN FUND BALANCE (282) (792) (39) 753
FUND BALANCE-BEGINNING OF YEAR 962 962 962 -
FUND BALANCE-END OF YEAR $ 680 $ 170 $ 923 $ 753
Transportation
Variance with
Final Budget
Original Positive
REVENUES: Budget Final Budget Actual (Negative)
Sales Taxes $ 2,000 $ 2,000 $ 1,787 $ (213)
From Use of Money and Property 170 170 18 (152)
Other 1 1
TOTAL REVENUES 2,170 2,170 1,806 (364)
EXPENDITURES:
Current:
Public Works 1,174 1,445 953 492
Capital Outlay 1,150 3,955 2,454 1,501
TOTAL EXPENDITURES 2,324 5,400 3,407 1,993
EXCESS OF REVENUES OVER
(UNDER) EXPENDITURES (154) (3,230) (1,601) 1,629
OTHER FINANCING SOURCES (USES):
Transfers Out (287) (321) - 321
NET CHANGE IN FUND BALANCE (441) (3,551) (1,601) 1,950
FUND BALANCE-BEGINNING OF YEAR 3,091 3,091 3,091 -
FUND BALANCE-END OF YEAR $ 2,650 $ (460) $ 1,490 $ 1,950
111
CITY OF HUNTINGTON BEACH
SCHEDULE OF REVENUES, EXPENDITURES, AND
CHANGES IN FUND BALANCES -BUDGET AND ACTUAL
OTHER GOVERNMENTAL FUNDS
FOR THE YEAR ENDED SEPTEMBER 30, 2010
(In Thousands)
(continued)
Air Quality
Variance with
Final Budget
Original Positive
REVENUES: Budget Final Budget Actual (Negative)
From Use of Money and Property $ 30 $ 30 $ 13 $ (17)
Intergovernmental 240 240 230 (10)
TOTAL REVENUES 270 270 243 (27)
EXPENDITURES:
Current:
Human Resources 117 122 75 47
Public Works 100 233 211 22
Capital Outlay 200 303 99 204
TOTAL EXPENDITURES 417 658 385 273
EXCESS OF REVENUES OVER
(UNDER)EXPENDITURES (147) (388) (142) 246
OTHER FINANCING SOURCES (USES):
Transfers Out - (250) (230) 20
NET CHANGE IN FUND BALANCE (147) (638) (372) 266
FUND BALANCE-BEGINNING OF YEAR 1,175 1,175 1,175 -
FUND BALANCE-END OF YEAR $ 1,028 $ 537 $ 803 $ 266
Traffic Impact Fee
Variance with
Final Budget
Original Positive
REVENUES: Budget Final Budget Actual (Negative)
From Use of Money and Property $ 75 $ 75 $ - $ (75)
Intergovernmental - - 15 15
Charges for Current Service 75 75 77 2
TOTAL REVENUES 150 150 92 (58)
EXPENDITURES:
Current:
Public Works 19 197 432 (235)
Non-Departmental - - 162 (162)
Capital Outlay - 1,238 657 581
TOTAL EXPENDITURES 19 1,435 1,251 184
NET CHANGE IN FUND BALANCE 131 (1,285) (1,159) 126
FUND BALANCE-BEGINNING OF YEAR 626 626 626 -
FUND BALANCE-END OF YEAR $ 757 $ (659) $ (533) $ 126
112
CITY OF HUNTINGTON BEACH
SCHEDULE OF REVENUES, EXPENDITURES, AND
CHANGES IN FUND BALANCES -BUDGET AND ACTUAL
OTHER GOVERNMENTAL FUNDS
FOR THE YEAR ENDED SEPTEMBER 30, 2010
(In Thousands)
(continued)
Fourth of July Parade
Variance with
Final Budget
Positive
REVENUES: Original Budget Final Budget Actual (Negative)
From Use of Money and Property $ 3 $ 3 $ 28 $ 25
Intergovernmental - - 84 84
Charges for Current Service - - 127 127
Other 400 400 82 (318)
TOTAL REVENUES 403 403 321 (82)
EXPENDITURES:
Current:
Community Services 400 409 377 32
NET CHANGE IN FUND BALANCE 3 (6) (56) (50)
FUND BALANCE-BEGINNING OF YEAR 114 114 114 -
FUND BALANCE-END OF YEAR $ 117 $ 108 $ 58 $ (50)
Special Library
Variance with
Final Budget
Original Positive
Budget Final Budget Actual (Negative)
OTHER FINANCING SOURCES (USES):
Transfers In $ - $ - $ 119 $ 119
FUND BALANCE-BEGINNING OF YEAR (119) (119) (119) -
FUND BALANCE-END OF YEAR $ (119) $ (119) $ - $ 119
113
CITY OF HUNTINGTON BEACH
SCHEDULE OF REVENUES, EXPENDITURES, AND
CHANGES IN FUND BALANCES -BUDGET AND ACTUAL
OTHER GOVERNMENTAL FUNDS
FOR THE YEAR ENDED SEPTEMBER 30, 2010
(In Thousands)
(continued)
Park Acquisition and Development
Variance with
Final Budget
Original Positive
REVENUES: Budget Final Budget Actual (Negative)
From Use of Money and Property $ 150 $ 150 $ 52 $ (98)
Intergovernmental - - 203 203
Charges for Current Service 40 40 169 129
TOTAL REVENUES 190 190 424 234
EXPENDITURES:
Current:
Community Services 1,458 2,901 459 2,442
Capital Outlay - 146 5 141
TOTAL EXPENDITURES 1,458 3,047 464 2,583
EXCESS OF REVENUES OVER
(UNDER)EXPENDITURES (1,268) (2,857) (40) 2,817
OTHER FINANCING SOURCES (USES):
Transfers Out (375) (375) (294) 81
NET CHANGE IN FUND BALANCE (1,643) (3,232) (334) 2,898
FUND BALANCE-BEGINNING OF YEAR 3,379 3,379 3,379 -
FUND BALANCE-END OF YEAR $ 1,736 $ 147 $ 3,045 $ 2,898
Highway Safety &Traffic Reduction
Variance with
Final Budget
Original Positive
REVENUES: Budget Final Budget Actual (Negative)
Licenses and Permits $ - $ - $ 35 $ 35
From Use of Money and Property 80 80 58 (22)
Intergovernmental - 2,400 3,007 607
TOTAL REVENUES 80 2,480 3,100 620
EXPENDITURES:
Current:
Public Works - - 123 (123)
Capital Outlay - 3,882 2,460 1,422
TOTAL EXPENDITURES - 3,882 2,583 1,299
NET CHANGE IN FUND BALANCE 80 (1,402) 517 1,919
FUND BALANCE-BEGINNING OF YEAR 1,552 1,552 1,552 -
FUND BALANCE-END OF YEAR $ 1,632 $ 150 $ 2,069 $ 1,919
114
CITY OF HUNTINGTON BEACH
SCHEDULE OF REVENUES, EXPENDITURES, AND
CHANGES IN FUND BALANCES - BUDGET AND ACTUAL
OTHER GOVERNMENTAL FUNDS
FOR THE YEAR ENDED SEPTEMBER 30,2010
(In Thousands)
(continued)
Traffic Congestion Relief
Variance with
Final Budget
Original Positive
REVENUES: Budget Final Budget Actual (Negative)
From Use of Money and Property $ 75 $ 75 $ 37 $ (38)
Intergovernmental 1,910 1,910 2,490 580
TOTAL REVENUES 1,985 1,985 2,527 542
EXPENDITURES:
Current:
Public Works 500 500 136 364
Capital Outlay 850 1,466 354 1,112
TOTAL EXPENDITURES 1,350 1,966 490 1,476
NET CHANGE IN FUND BALANCE 635 19 2,037 2,018
FUND BALANCE-BEGINNING OF YEAR 887 887 887 -
FUND BALANCE-END OF YEAR $ 1,522 $ 906 $ 2,924 $ 2,018
Property Tax Refund
Variance with
Final Budget
Original Positive
REVENUES: Budget Final Budget Actual (Negative)
From Use of Money and Property $ - $ - $ 5 $ 5
EXPENDITURES:
Current:
Non-Departmental 6 6 2 4
Debt Service:
Principal 785 785 785 -
Interest 346 346 254 92
TOTAL EXPENDITURES 1,137 1,137 1,041 96
EXCESS OF REVENUES OVER
(UNDER)EXPENDITURES (1,137) (1,137) (1,036) 101
OTHER FINANCING SOURCES (USES):
Transfers In 1,091 1,091 1,037 (54)
Transfers Out - (1,700) (1,722) (22)
TOTAL OTHER FINANCING SOURCES(USES) 1,091 (609) (685) (76)
NET CHANGE IN FUND BALANCE (46) (1,746) (1,721) 25
FUND BALANCE-BEGINNING OF YEAR 1,687 1,687 1,687 -
FUND BALANCE-END OF YEAR $ 1,641 $ (59) $ (34) $ 25
115
CITY OF HUNTINGTON BEACH
SCHEDULE OF REVENUES, EXPENDITURES,AND
CHANGES IN FUND BALANCES - BUDGET AND ACTUAL
OTHER GOVERNMENTAL FUNDS
FOR THE YEAR ENDED SEPTEMBER 30,2010
(In Thousands)
(continued)
Public Financing Authority
Variance with
Final Budget
Original Positive
REVENUES: Budget Final Budget Actual (Negative)
From Use of Money and Property $ - $ - $ 134 $ 134
EXPENDITURES:
Current:
Non-Departmental 24 209 191 18
Debt Service:
Principal 4,192 4,380 3,620 760
Interest 2,096 2,991 2,575 416
TOTAL EXPENDITURES 6,312 7,580 6,386 1,194
EXCESS OF REVENUES OVER
(UNDER) EXPENDITURES (6,312) (7,580) (6,252) 1,328
OTHER FINANCING SOURCES(USES):
Transfers In 6,251 6,251 6,083 (168)
Issuance of Long Term Debt - 14,745 14,745 -
Issuance Premium - 707 707 -
Payments to Escrow - (15,967) (15,967) -
TOTAL OTHER FINANCING SOURCES (USES) 6,251 5,736 5,568 (168)
NET CHANGE IN FUND BALANCE (61) (1,844) (684) 1,160
FUND BALANCE- BEGINNING OF YEAR 6,634 6,634 6,634 -
FUND BALANCE- END OF YEAR $ 6,573 $ 4,790 $ 5,950 $ 1,160
Parking in-Lieu
Variance with
Final Budget
Original Positive
REVENUES: Budget Final Budget Actual (Negative)
Licenses and Permits $ 50 $ 50 $ 51 $ 1
From Use of Money and Property 50 50 10 (40)
TOTAL REVENUES 100 100 61 (39)
EXPENDITURES:
Current:
Capital Outlay 625 625 - 625
NET CHANGE IN FUND BALANCE (525) (525) 61 586
FUND BALANCE- BEGINNING OF YEAR 706 706 706 -
FUND BALANCE- END OF YEAR $ 181 $ 181 $ 767 $ 586
116
CITY OF HUNTINGTON BEACH
SCHEDULE OF REVENUES, EXPENDITURES, AND
CHANGES IN FUND BALANCES - BUDGET AND ACTUAL
OTHER GOVERNMENTAL FUNDS
FOR THE YEAR ENDED SEPTEMBER 30,2010
(In Thousands)
(continued)
Sewer Development
Variance with
Final Budget
Original Positive
REVENUES: Budget Budget Actual (Negative)
Licenses and Permits $ - $ - $ 9 $ 9
From Use of Money and Property 30 30 15 (15)
Intergovernmental - - 12 12
Charges for Current Service 150 150 40 (110)
TOTAL REVENUES 180 180 76 (104)
EXPENDITURES:
Current:
Public Works 5 5 78 (73)
Capital Outlay 945 945 53 892
TOTAL EXPENDITURES 950 950 131 819
NET CHANGE IN FUND BALANCE (770) (770) (55) 715
FUND BALANCE-BEGINNING OF YEAR 1,134 1,134 1,134 -
FUND BALANCE-END OF YEAR $ 364 $ 364 $ 1,079 $ 715
Infrastructure
Variance with
Final Budget
Original Positive
REVENUES: Budget Budget Actual (Negative)
From Use of Money and Property $ - $ - $ 32 $ 32
Other - - 10 10
TOTAL REVENUES - - 42 42
EXPENDITURES:
Current:
Public Works - - 31 (31)
Capital Outlay - 2,172 234 1,938
TOTAL EXPENDITURES - 2,172 265 1,907
EXCESS OF REVENUES OVER
(UNDER)EXPENDITURES - (2,172) (223) 1,949
OTHER FINANCING SOURCES (USES):
Transfers Out (150) (459) (309) 150
NET CHANGE IN FUND BALANCE (150) (2,631) (532) 2,099
FUND BALANCE-BEGINNING OF YEAR 2,738 2,738 2,738 -
FUND BALANCE-END OF YEAR $ 2,588 $ 107 $ 2,206 $ 2,099
117
CITY OF HUNTINGTON BEACH
SCHEDULE OF REVENUES, EXPENDITURES, AND
CHANGES IN FUND BALANCES - BUDGET AND ACTUAL
MAJOR GOVERNMENTAL FUNDS
FOR THE YEAR ENDED SEPTEMBER 30, 2010
(In Thousands)
Redevelopment Agency Debt Service
Variance with
Final Budget
Original Positive
REVENUES Budget Final Budget Actual (Negative)
Property Taxes $ 19,355 $ 19,355 $ 18,186 $ (1,169)
From Use of Money and Property 250 250 168 (82)
Total Revenues 19,605 19,605 18,354 (1,251)
EXPENDITURES
Current:
Economic Demlopment 4,309 8,359 8,298 61
Debt Service:
Principal 4,790 2,437 2,435 2
Interest 1,376 3,318 3,318 -
Total Expenditures 10,475 14,114 14,051 63
Excess Of Revenues Over(Under)Expenditures 9,130 5,491 4,303 (1,188)
OTHER FINANCING SOURCES(USES):
Transfers Out (8,296) (9,158) (8,944) 214
Net Change in Fund Balance 834 (3,667) (4,641) (974)
Fund Balance -Beginning Of Year 4,489 4,489 4,489 -
Fund Balance -End Of Year $ 5,323 $ 822 $ (152) $ (974)
Redevelopment Agency Capital Projects
Variance with
Final Budget
Original Positive
REVENUES Budget Final Budget Actual (Negative)
From Use of Money and Property $ 1,150 $ 1,150 $ 719 $ (431)
Other - - 181 181
Total Revenues 1,150 1,150 900 (250)
EXPENDITURES
Current:
City Attorney 150 161 115 46
Economic Demlopment 1,560 2,395 1,388 1,007
Community Services 90 107 90 17
Public Works - 1 93 (92)
Capital Outlay 2,068 4,685 3,144 1,541
Total Expenditures 3,868 7,349 4,830 2,519
Excess Of Revenues Over(Under)Expenditures (2,718) (6,199) (3,930) 2,269
OTHER FINANCING SOURCES(USES):
Transfers In - 882 882 -
Transfers Out - (216) (216) -
Total Other Financing Sources (Uses) - 666 666 -
Net Change in Fund Balance (2,718) (5,533) (3,264) 2,269
Fund Balance -Beginning Of Year 11,073 11,073 11,073 -
Fund Balance -End Of Year $ 8,355 $ 5,540 $ 7,809 $ 2,269
CITY OF HUNTINGTON BEACH
SCHEDULE OF REVENUES, EXPENDITURES,AND
CHANGES IN FUND BALANCES -BUDGET AND ACTUAL
MAJOR GOVERNMENTAL FUNDS
FOR THE YEAR ENDED SEPTEMBER 30, 2010
(In Thousands)
(continued)
Low Income Housing Fund
Variance with
Final Budget
Original Positive
REVENUES Budget Final Budget Actual (Negative)
From Use of Money and Property $ - $ - $ 967 $ 967
Intergovernmental - 1,000 1,222 222
Other - - 439 439
Total Revenues - 1,000 2,628 1,628
EXPENDITURES
Current:
Economic Development 3,593 5,203 2,354 2,849
Capital Outlay - 4,511 4,166 345
Total Expenditures 3,593 9,714 6,520 3,194
Excess Of Revenues Over(Under)Expenditures (3,593) (8,714) (3,892) 4,822
OTHER FINANCING SOURCES(USES):
Transfers In 3,871 3,924 3,689 (235)
Transfers Out (405) (405) (405) -
Total Other Financing Sources (Uses) 3,466 3,519 3,284 (235)
Net Change in Fund Balance (127) (5,195) (608) 4,587
Fund Balance -Beginning Of Year 12,017 12,017 12,017 -
Fund Balance -End Of Year $ 11,890 $ 6,822 $ 11,409 $ 4,587
119
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120
1
City of Huntington Beach
Fiduciary Funds
Fiduciary Funds account for assets held by the City as an agent for other organizations or individuals.
. The General Deposit Fund accounts for the deposit of general monies held by the City for private
individuals and businesses.
. The Community Facilities Districts Funds accounts for the debt service activity of the City's community
facilities district.
• The Huntington Beach Business Improvement District Fund accounts for the activities of the City's
business improvement district.
The Central Net Fund accounts for the activity of the Central Net Operations Authority.
The Parking Structures Fund accounts for the activities of the Bella Terra Parking Structure and Strand
Parking Structure.
The West Orange County Water Board Fund accounts for the activities of the West Orange County
Water Board.
121
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122
CITY OF HUNTINGTON BEACH
COMBINING STATEMENT OF FIDUCIARY FUND NET ASSETS
FIDUCIARY FUNDS
SEPTEMBER 30,2010
Agency Funds
Community Business Central Net West Orange
Facilities Improvement Operations Parking County Water Total Agency
Assets: General Deposit Districts Districts Authority Structures Board Funds
Cash and Investments $ 226 $ 1,190 $ 145 $ 1,338 $ 669 $ 237 $ 3,805
Cash with Fiscal Agent - 4,139 - - - - 4,139
Accounts Receivable,Net 78 18 2 98
Total Assets $ 226 $ 5,407 $ 163 $ 1,338 $ 671 $ 237 $ 8,042
Liabilities:
Accounts Payable $ 49 $ fi $ 90 $ 15 $ 259 $ - $ 419
Due to Bondholders - 5,401 - - - - 5,401
Held for others 177 73 1,323 412 237 2,222
Total Liabilities $ 22fi $ 5,407 $ 163 $ 1,338 $ fi71 $ 237 $ 8,042
123
CITY OF HUNTINGTON BEACH
COMBINING STATEMENT OF CHANGES IN FIDUCIARY ASSETS AND LIABILITIES
ALL AGENCY FUNDS
FOR FISCAL YEAR ENDED SEPTEMBER 30, 2010
Balance Balance
October 1,2009 Additions Deletions SeptemberM,2010
General Deposit
Assets:
Cash and Investments $ 355 $ 774 $ (903) $ 226
Total Assets $ 355 $ 774 $ (903) $ 226
Liabilities:
Accounts Payable $ - $ 49 $ - $ 49
Held for others 355 - (178) 177
Total Liabilities $ 355 $ 49 $ (178) $ 226
Community Facilities Districts
Assets:
Cash and Investments $ 1,268 $ 7,013 $ (7,091) $ 1,190
Cash with Fiscal Agent 4,142 22 (25) 4,139
Accounts Receivable, Net 39 79 (40) 78
Total Assets $ 5,449 $ 7,114 $ (7,156) $ 5,407
Liabilities:
Accounts Payable $ 2 $ 4,716 $ (4,712) $ 6
Due to Bondholders 5,447 - (46) 5,401
Total Liabilities $ 5,449 $ 4,716 $ (4,758) $ 5,407
Business Improvement Districts
Assets:
Cash and Investments $ 20 $ 1,010 $ (885) $ 145
Accounts Receivable, Net 26 277 (285) 18
Total Assets $ 46 $ 1,287 $ (1,170) $ 163
Liabilities:
Accounts Payable $ 46 $ 458 $ (414) $ 90
Held for others - 73 - 73
Total Liabilities $ 46 $ 531 $ (414) $ 163
Central Net Operations Authority
Assets:
Cash and Investments $ 1,479 $ 2,714 $ (2,855) $ 1,338
Accounts Receivable, Net - 64 (64) -
Total Assets $ 1,479 $ 2,778 $ (2,919) $ 1,338
Liabilities:
Accounts Payable $ 11 $ 287 $ (283) $ 15
Held for others 1,468 - (145) 1,323
Total Liabilities $ 1,479 $ 287 $ (428) $ 1,338
124
CITY OF HUNTINGTON BEACH
COMBINING STATEMENT OF CHANGES IN FIDUCIARY ASSETS AND LIABILITIES
ALL AGENCY FUNDS
FOR FISCAL YEAR ENDED SEPTEMBER 30,2010
(CONTINUED)
Balance Balance
October 1,2009 Additions Deletions SepteruberM,2010
Parking Structures
Assets:
Cash and Investments $ 593 $ 1,662 $ (1,586) $ 669
Accounts Receivable, Net - 73 (71) 2
Total Assets $ 593 $ 1,735 $ (1,657) $ 671
Liabilities:
Accounts Payable $ 528 $ 1,702 $ (1,971) $ 259
Held for others 65 347 - 412
Total Liabilities $ 593 $ 2,049 $ (1,971) $ 671
West Orange County Water Board
Assets:
Cash and Investments $ 212 $ 246 $ (221) $ 237
Accounts Receivable, Net - 40 (40) -
Total Assets $ 212 $ 286 $ (261) $ 237
Liabilities:
Accounts Payable $ 1 $ 34 $ (35) $ -
Held for others 211 26 - 237
Total Liabilities $ 212 $ 60 $ (35) $ 237
Total -All Agency Funds
Assets:
Cash and Investments $ 3,927 $ 13,419 $ (13,541) $ 3,805
Cash with Fiscal Agent 4,142 22 (25) 4,139
Accounts Receivable, Net 65 533 (500) 98
Total Assets $ 8,134 $ 13,974 $ (14,066) $ 8,042
Liabilities:
Accounts Payable $ 588 $ 7,246 $ (7,415) $ 419
Due to Bondholders 5,447 - (46) 5,401
Held for others 2,099 446 (323) 2,222
Total Liabilities $ 8,134 $ 7,692 $ (7,784) $ 8,042
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126
City of Huntington Beach
Statistical Section
This part of the City of Huntington Beach's Comprehensive Annual Report presents detailed
information as a context for understanding what the information in the financial statements, note
disclosures, and required supplementary information say about the City's overall financial health.
Financial Trends- contain trend information to aid the reader understand how the City's
financial performance has changed over time.
Revenue Capacity — contain information to help the reader assess the City's most significant
local revenue source, the property tax.
Debt Capacity - present information to assess the affordability of the City's current levels of
outstanding debt and the City's ability to issue additional debt in the future.
Demographic and Economic Information — offers information to help the reader
understand the environment within which the City's financial activities take place.
Operating Information — contains service and infrastructure data to help the reader
understand how the City's financial report relates to the services the City provides and the
activities it performs.
Unless otherwise noted, the information in these schedules is derived from the comprehensive
annual financial reports for the relevant year. The City implemented GASB 34 in the 2002 fiscal
year; schedules presenting government-wide information include information beginning in that
year.
127
CITY OF HUNTINGTON BEACH
NET ASSETS BY COMPONENT- LAST NINE FISCAL YEARS
(In Thousands)
Fiscal Year Ended September 30,
Governmental Activities 2010 2009 2008 2007 2006
Investment in Capital Assets, Net of Related Debt $ 567,631 $ 559,059 $ 521,654 $ 486,552 $ 472,372
Restricted 49,100 48,198 69,126 73,541 68,381
Unrestricted 32,855 36,319 35,615 59,182 34,269
Total Governmental Activities Net Assets $ 649,586 $ 643,576 $ 626,395 $ 619,275 $ 575,022
Business-Type Activities
Investment in Capital Assets, Net of Related Debt $ 121,576 $ 118,059 $ 118,671 $ 119,874 $ 111,651
Restricted 30,512 30,794 32,665 33,546 31,109
Unrestricted 61,723 59,810 57,704 54,822 53,020
Total Business-Type Activities Net Assets $ 213,811 $ 208,663 $ 209,040 $ 208,242 $ 195,780
Primary Government
Investment in Capital Assets, Net of Related Debt $ 689,207 $ 677,118 $ 640,325 $ 606,426 $ 584,023
Restricted 79,612 78,992 101,791 107,087 99,490
Unrestricted 94,578 96,129 93,319 114,004 87,289
Total Primary Government Net Assets $ 863,397 $ 852,239 $ 835,435 $ 827,517 $ 770,802
CITY OF HUNTINGTON BEACH
CHANGES IN NET ASSETS- LAST NINE FISCAL YEARS
(In Thousands)
Expenses: Fiscal Year Ended September 30,
Governmental Activities: 2010 2009 2008 2007 2006
City Council $ 301 $ 295 $ 295 $ 287 $ 271
City Administrator 1,674 1,861 1,652 1,442 5,540
City Treasurer 1,532 1,308 1,408 1,088 1,479
City Attorney 2,772 2,877 2,914 2,534 2,317
City Clerk 883 1,099 1,020 950 756
Administrative Services - - - - -
Finance 4,309 4,479 4,944 4,454 3,306
Human Resources 5,284 4,749 4,725 4,202 -
Planning 3,170 3,232 3,881 3,098 2,813
Building 4,608 9,549 5,747 4,899 3,930
Fire 33,545 33,942 27,299 27,247 24,787
Information Systems 6,812 7,377 7,311 6,591 7,361
Police 59,049 60,551 58,378 56,988 50,877
Economic Development 11,891 15,758 18,031 9,209 4,977
Community Services 16,147 17,110 18,565 16,482 15,777
Library Services 4,519 4,574 5,607 5,586 4,829
Public Works 26,483 29,514 31,246 34,581 49,654
Non-Departmental 24,303 21,196 30,814 15,131 11,263
Interest on Long-Term Debt 6,146 5,232 5,291 5,875 5,575
Total Governmental Activities 213,428 224,703 229,128 200,644 195,512
Business-type Activities:
Water Utility 34,902 34,290 32,701 32,606 28,117
Sewer Service 6,575 7,306 7,120 5,766 3,855
Refuse Collection 10,585 10,623 10,561 10,542 10,289
Emerald Cove Housing - 306 893 936 551
Emergency Fire Medical - - 6,933 5,347 5,637
Cultural Affairs - - - - -
Hazmat Service 315 196 249 194 163
Ocean View Estates - - 117 84 120
Total Business Type Activities 52,377 52,721 58,574 55,475 48,732
Total Business and Government Type Activities $ 265,805 $ 277,424 $ 287,702 $ 256,119 $ 244,244
128
CITY OF HUNTINGTON BEACH
NET ASSET ASSETS BY COMPONENT-LAST NINE FISCAL YEARS
(In Thousands)
(continued)
Fiscal Year Ended September 30,
Governmental Activities 2005 2004 2003 2002
Investment in Capital Assets, Net of Related Debt $ 479,897 $ 448,217 $ 446,061 $ 425,967
Restricted 39,227 61,051 51,261 42,417
Unrestricted 40,226 (9,278) (12,924) (10,745)
Total Governmental Activities Net Assets $ 559,350 $ 499,990 $ 484,398 $ 457,639
Business-Type Activities
Investment in Capital Assets, Net of Related Debt $ 102,068 $ 92,890 $ 88,884 $ 79,781
Restricted 34,085 32,968 30,946 31,043
Unrestricted 41,563 33,664 25,671 23,236
Total Business-Type Activities Net Assets $ 177,716 $ 159,522 $ 145,501 $ 134,060
Primary Government
Investment in Capital Assets, Net of Related Debt $ 581,965 $ 541,107 $ 534,945 $ 505,748
Restricted 73,312 94,019 82,207 73,460
Unrestricted 81,789 24,386 12,747 12,491
Total Primary Government Net Assets $ 737,066 $ 659,512 $ 629,899 $ 591,699
CITY OF HUNTINGTON BEACH
CHANGES IN NET ASSETS-LAST NINE FISCAL YEARS
(In Thousands)
(continued)
Expenses: Fiscal Year Ended September 30,
Governmental Activities: 2005 2004 2003 2002
City Council $ 254 $ 280 $ 267 $ 262
City Administrator 1,990 1,188 1,587 2,214
City Treasurer 1,568 1,541 1,341 1,160
City Attorney 2,852 2,775 2,899 3,634
City Oerk 685 717 559 698
Administrative Services 5,554 6,348 8,357 7,230
Finance 2,501 - - -
Human Resources - - - -
Planning 2,559 2,396 3,633 2,658
Building 3,321 2,858 3,045 3,101
Fire 23,365 20,000 19,490 19,361
Information Systems 6,806 6,423 4,401 4,464
Police 47,029 40,686 41,104 42,187
Economic Development 4,199 19,372 3,830 3,080
Community Services 13,693 15,735 9,989 12,440
Library Services 4,394 4,138 6,721 4,801
Public Works 33,018 30,277 25,386 28,237
Non-Departmental 12,024 4,054 25,604 19,725
Interest on Long-Term Debt 6,810 6,001 6,199 9,438
Total Governmental Activities 172,622 164,789 164,412 164,690
Business-type Activities:
Water Utility 22,349 24,643 24,943 27,250
Sewer Service 5,924 4,042 3,775 2,419
Refuse Collection 9,826 9,806 9,681 9,178
Emerald Cove Housing 399 409 401 405
Emergency Fire Medical 5,497 5,605 3,765 3,172
Cultural Affairs - - - 317
Hazmat Service 141 204 150 143
Ocean View Estates 118 62 58 11
Total Business Type Activities 44,254 44,771 42,773 42,895
Total Business and Government Type Activities $ 216,876 $ 209,560 $ 207,185 $ 207,585
129
CITY OF HUNTINGTON BEACH
CHANGES IN NET ASSETS-LAST NINE FISCAL YEARS
(In Thousands)
(continued)
Revenues: Fiscal Year Ended September 30,
Governmental Activities: 2010 2009 2008 2007 2006
Charges ter Services
City Council $ 62 $ 94 $ 103 $ 99 $ 90
City Administrator 126 370 404 392 1,612
City Treasurer 566 765 720 698 1,332
City Attorney 456 50 47 46 43
City Clerk 106 108 168 210 95
Finance 1,234 1,264 1,354 1,312 325
Human Resources 1,103 1,254 1,391 1,347 -
Planning 682 801 1,987 4,223 825
Building 4,126 3,665 4,582 5,450 4,859
Fire 8,504 7,978 1,423 1,267 1,086
Inionnation Systems 731 674 697 675 641
Police 4,849 5,083 5,159 4,890 5,355
Economic Development 2,685 3,049 3,001 2,944 505
Community Services 15,470 15,278 15,383 15,036 14,644
Library SeMces 415 437 851 835 714
Public Works 4,850 4,328 6,000 5,016 4,784
Non-Departmental 269 216 239 232 229
Total Charges ter SeMces 46,234 45,414 43,509 44,672 37,139
Operating Grants 7,069 4,181 7,684 1,996 917
Capital Grants 7,418 25,625 14,284 5,154 6,893
Tmnsters (38) 7,175 9,594 491 464
Total Governmental Activities Program Revenue 60,683 82,395 75,071 52,313 45,413
Business-Type Activities Program Revenue
Water Utility 34,394 34,200 35,751 37,962 37,946
Sewer Service 10,565 10,535 9,906 7,242 7,873
Refuse Collection 10,506 10,386 10,521 10,550 10,292
Emerald Cove Housing - 843 1,180 1,037 960
Emergency Fire Medical - - 6,762 6,068 6,145
Cultural Attains - - - - -
Hazmat Service 198 204 185 210 182
Ocean View Estates - - 337 324 273
Total Business Type Actitities 55,663 56,168 64,642 63,393 63,671
Total Pnmary Government Program Revenue 116,346 138,563 139,713 115,706 109,084
Net(Expense)Revenue:
Governmental Activities: (152,745) (142,308) (154,057) (148,331) (150,099)
Business-Type Activities 3,286 3,447 6,068 7,918 14,939
Total Net(Expense)Revenue (149,459) (138,861) (147,989) (140,413) (135,160)
General Revenue and Other Changes in Net Assets
Governmental Activities:
Property Taxes 85,552 84,010 84,016 79,369 66,598
Sales Taxes 23,646 21,427 25,560 30,608 26,448
Utility Taxes 19,757 20,616 21,591 21,479 21,170
Other Taxes 11,629 12,085 15,065 13,776 13,226
Use of Money and Property 4,043 5,002 5,714 7,895 4,310
From Other Agencies 4,184 8,500 6,899 12,689 10,390
Participation Payments 4,496 - - 1,564 6,221
Other 5,448 7,849 2,332 2,696 9,278
Total Governmental General Revenue 158,755 159,489 161,177 170,076 157,641
Business-Type Activities:
Tmnsters 38 (7,175) (9,594) (491) (464)
Use of Money and Property 1,824 3,351 4,324 5,035 3,589
Total Business-Type Activities General Revenue 1,862 (3,824) (5,270) 4,544 3,125
Total General Revenue and Transfers 160,617 155,665 155,907 174,620 160,766
Changesin Net Assets-Governmental Activities 6,010 17,181 7,120 21,745 7,542
Changesin Net Assets-Business Activities 5,148 (377) 798 12,462 18,064
Net Assets-Beginning of Year 852,239 835,435 827,517 793,310 745,196
Net Assets-End of Year $ 863,397 $ 8525239 $ 8355435 $ 8275517 $ 7705802
130
City of Huntington Beach
CHANGES IN NET ASSETS-LAST NINE FISCAL YEARS
(In Thousands)
(continued)
Revenues: Fiscal Year Ended September 30,
Governmental Activities: 2005 2004 2003 2002
Charges for Services
City Council $ - $ - $ - $ -
City Administrator - - - 33
City Treasurer - - - -
City Attorney - - - -
City Clerk 111 - 82 46
Finance - - - -
Human Resources - - - -
Planning 1,024 1,403 752 580
Building 5,068 4,513 3,067 3,940
Fire 1,095 1,183 1,157 500
Inionnation Systems - - - -
Police 5,254 1,605 4,176 4,433
Economic Development 385 5 257 -
Community Services 13,376 12,611 9,433 8,510
Library Services 714 4,290 673 -
Public Works 1,781 4,220 3,356 1,103
Non-Departmental - 589 5 4,411
Total Charges for Services 28,808 30,419 22,958 23,556
Operating Grants 1,657 6,343 1,736 5,063
Capital Grants 43,341 7,384 6,955 13,039
Tmnsters 4,884 - - (244)
Total Governmental Activities Program Revenue 78,690 44,146 31,649 41,414
Business-Type Activities Program Revenue
Water Utility 40,371 40,172 37,943 59,103
SewerSeMce 8,512 6,373 5,876 4,540
Refuse Collection 9,985 10,412 9,123 9,182
Emerald Cove Housing 866 781 746 707
Emergency Fire Medical 5,725 5,650 4,103 4,103
Cultural Attains - - - 189
Hazmat Service 110 187 233 145
Ocean View Estates 263 258 245 192
Total Business Type Activities 65,832 63,833 58,269 78,161
Total Pnmary Government Program Revenue 144,522 107,979 89,918 119,575
Net(Expense)Revenue:
Governmental Activities: (93,932) (120,643) (132,763) (123,276)
Business-Type Activities 21,578 19,062 15,496 35,266
Total Net(Expense)Revenue (72,354) (101,581) (117,267) (88,010)
General Revenue and Other Changes in Net Assets
Governmental Activities:
Property Taxes 61,466 47,405 40,633 38,106
Sales Taxes 24,340 28,273 28,011 -
Utility Taxes 20,004 19,424 18,310 -
Other Taxes 14,952 11,365 13,337 55,084
Use of Money and Property 3,137 3,528 9,923 13,895
From Other Agencies 8,186 14,406 16,414 20,359
Participation Payments 12,697 - - -
Other 8,510 7,328 5,491 2,604
Total Governmental General Revenue 153,292 131,729 132,119 130,048
Business-Type Activities:
Tmnsters (4,884) - - 244
Use of Money and Property 1,500 1,085 1,482 2,240
Total Business-Type Activities General Revenue (3,384) 1,085 1,482 2,484
Total General Revenue and Transfers 149,908 132,814 133,601 132,532
Changes in Net Assets-Governmental Activities 59,360 11,086 (644) 6,772
Changes in Net Assets-Business Activities 18,194 20,147 16,978 37,750
Net Assets-Beginning of Year 659,512 628,279 613,565 563,111
Net Assets-End of Year $ 737,066 $ 659,512 $ 6295899 $ 6075633
131
CITY OF HUNTINGTON BEACH
FUND BALANCES - GOVERNMENTAL FUNDS- LAST TEN FISCAL YEARS
(In Thousands)
(Modified Accrual Basis of Accounting)
Fiscal Year Ended September 30,
2010 2009(c) 2008 2007
General Fund: General Fund:
Nonspendable $ 4,605 $ 4,834 Reserved $ 10,967 $ 10,679
Restricted 1,452 1,921 Unreserved 33,476 33,017
Committed 30,493 20,600 Total General Fund $ 44,443 $ 43,696
Assigned 4,802 11,733
Total General Fund $ 41,352 $ 39,088
Other Governmental Funds: Other Governmental Funds:
Nonspendable $ 6,576 $ 11,328 Reserved $ 35,445 $ 42,013
Restricted 33,319 11,509 Unreserved, Reported In:
Committed 1,755 7,545 Special Revenue Funds 11,307 13,500
Assigned 3,914 24,437 Debt Service Funds 5,467 5,484
Unassigned (4,319) (1,557) Capital Projects Funds 15,316 18,286
Total Other Governmental Funds $ 41,245 $ 53,262 Total Other Governmental Funds $ 675535 $ 795283
Fiscal Year Ended September 30,
2006 2005 2004 2003(b) 2002(a) 2001
General Fund:
Reserved $ 7,382 $ 5,915 $ 2,113 $ 2,757 $ 25,773 $ 23,677
Unreserved 33,204 32,371 24,219 12,217 15,972 11,741
Total General Fund $ 405586 $ 385286 $ 265332 $ 145974 $ 415745 $ 355418
Other Governmental Funds:
Reserved $ 25,472 $ 35,458 $ 30,143 $ 35,470 $ 45,259 $ 81,465
Unreserved, Reported In:
Special Revenue Funds 20,631 17,833 11,810 10,399 7,967 21,698
Debt Service Funds 4,022 3,916 4,434 10,992 (33,364) 12,969
Capital Projects Funds 27,096 16,820 10,242 8,553 8,637 7,898
Total Other Governmental Funds $ 775221 $ 745027 $ 565629 $ 655414 $ 285499 $ 1245030
Notes:
(a) Beginning with fiscal year 2001/2002,the City Implemented the new reporting model which changed the way In which Interfund
advances were reported and resulted In a larger negative fund balance In the Redevelopment Agency Debt Service fund
(b) In fiscal year 2002-2003 the City changed accounting for Interfund advances and eliminated the advances to/from In each fund.
This results In a smaller reserved fund balance In the General Fund and eliminates the deficit In the Redevelopment Agency Debt Service Fund
(c)The City implemented GASB statement No. 54 in the fiscal year ended September 30, 2009.
132
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133
CITY OF HUNTINGTON BEACH
CHANGES IN FUND BALANCES
GOVERNMENTAL FUNDS- LASTTEN FISCAL YEARS
(In Thousands)
(Modified Accrual Basis of Accounting)
Fiscal Year Ended September 30,
2010 2009 2008 2007 2006
REVENUES:
Property Taxes $ 85,072 $ 85,612 $ 82,138 $ 75,916 $ 69,065
Sales Taxes 22,582 22,356 26,377 26,271 26,448
Utility Taxes 19,757 20,616 21,591 21,479 21,170
Other Taxes 11,629 12,085 15,065 13,776 13,226
Licenses and Permits 6,204 5,879 7,924 10,131 7,432
Fines and Forfeitures 3,965 4,144 4,060 4,165 4,288
From Use of Money and Property 16,330 17,285 18,221 19,796 16,461
From Other Agencies 19,893 21,152 19,231 19,304 16,611
Charges for Current SerNce/Other Revenue 26,401 24,894 20,645 23,270 27,237
TOTAL REVENUES 211,833 214,023 215,252 214,108 201,938
EXPENDITURES
Current:
City Council 301 295 295 287 271
City Administrator 1,652 1,839 1,588 1,490 5,508
City Treasurer 1,532 1,308 1,357 1,060 1,446
City Attorney 2,772 2,877 2,881 2,526 2,313
City Clerk 868 1,084 992 932 828
Administrative SerNces - - - - -
Flnance 4,286 4,456 4,792 4,400 3,283
Human Resources 5,284 4,749 4,725 4,202 -
Planning 3,170 3,232 3,859 3,092 2,800
Building 3,449 4,176 3,957 4,670 3,729
Fire 32,816 33,596 27,146 26,438 24,334
Information Systems 6,782 7,339 6,741 6,437 6,540
Police 58,566 59,686 56,535 55,461 50,151
Economic Development 14,704 11,086 16,228 8,292 4,172
Community SerNces 14,501 15,407 15,666 14,744 14,382
Library SenAces 4,158 4,336 4,962 5,097 4,359
Public Works 20,466 22,143 23,528 25,248 28,448
Non-Departmental 14,832 16,710 21,519 12,977 13,831
Capital Outlay 17,175 38,494 21,525 16,142 30,174
Debt SenAce:
Principal 7,351 11,480 8,234 10,453 9,406
Interest 6,368 5,383 5,345 5,514 6,512
TOTAL EXPENDITURES 221,033 249,676 231,875 209,462 212,487
EXCESS(DEFICIENCY)OF
REVENUES OVER(UNDER)
EXPENDITURES (9,200) (35,653) (16,623) 4,646 (10,549)
OTHER FINANCING SOURCES(USES):
Transfers In 20,850 27,125 24,278 16,313 21,531
Reclasslf cation of Interfund Advances - - - - -
Proceeds of Long-Term Debt 14,745 8,850 - 35 15,579
Issuance Premium 707 - - - -
Capital Assets Reclasslcation for Changes In - - - - -
Payments to Escrow (15,967) - - - -
Transfers Out (20,888) (19,950) (18,656) (15,822) (20,075)
TOTAL OTHER FINANCING SOURCES(USES (553) 16,025 5,622 526 17,035
INCREASE(DECREASE)IN FUND BALANCES $ (9,753) $ (19,628) $ (11,001) $ 5,172 $ 6,486
DEBT SERVICE AS A PERCENTAGE OF
NON-CAPITAL EXPENDITURES 6.6% 8.7% 6.9% 9.0% 9.6%
(a) Finance was originally Included with Administrative SerNces
134
Fiscal Year Ended September 30,
2005(a) 2004 2003 2002 2001
$ 59,716 $ 43,501 $ 38,983 $ 33,204 $ 36,860
24,340 28,273 28,011 23,449 28,082
20,004 19,424 18,310 18,014 17,045
13,068 11,365 13,337 13,621 15,096
7,457 7,736 8,045 7,162 6,902
4,365 4,342 3,815 3,797 4,092
12,733 11,856 9,923 13,895 15,812
20,179 26,321 25,103 28,426 31,634
33,950 17,553 14,140 15,201 12,150
195,812 170,371 159,667 156,769 167,673
254 280 269 237 231
1,917 1,165 1,559 2,109 1,776
1,547 1,519 1,377 1,108 916
2,848 2,771 2,836 3,570 2,943
679 712 555 676 559
5,731 6,295 8,323 7,095 3,874
2,501 - - - -
2,548 2,382 2,544 2,585 2,329
3,291 2,938 3,043 2,991 2,589
22,365 19,018 19,021 18,024 18,142
5,726. 5,315 3,619 3,500 2,814
45,778 39,414 41,184 37,990 39,081
2,866 5,132 3,616 3,073 2,816
12,321 11,718 10,182 11,065 11,395
3,969 3,745 4,215 4,350 4,265
21,535 16,756 19,832 21,565 24,870
13,039 23,809 31,236 13,407 15,298
9,065 29,484 24,217 54,356 33,687
8,474 8,718 7,427 5,541 11,884
5,999 5,987 6,273 7,152 16,204
172,453 187,158 191,328 200,394 195,673
23,359 (16,787) (31,661) (43,625) (28,000)
20,890 30,274 54,463 58,948 21,267
- - 16,018 - -
1,102 13,236 24,582 61,514 37,947
(1,743)
(52,673)
(16,006) (24,148) (57,096) (59,818) (21,908)
5,986 19,362 36,224 7,971 37,306
$ 29,345 $ 2,575 $ 4,563 $ (35,654) $ 9,306
9.7% 10.3% 8.9% 9.5% 21.0%
135
CITY OF HUNTINGTON BEACH
ASSESSED AND ACTUAL VALUATION
OF ALL TAXABLE PROPERTY(EXCLUDING REDEVELOPMENT AGENCY)
LAST TEN FISCAL YEARS
(In Thousands)
Common Total Assessed I Total Direct Tax
Fiscal Year Property Public Utilities Total Secured Unsecured Valuation Rate
2000-2001 $ 15,796,157 2,745 $ 15,798,902 $ 674,719 $ 16,473,621 1.00770
2001-2002 16,081,760 2,449 16,084,209 699,307 16,783,516 1.01902
2002-2003 17,949,445 2,428 17,951,873 820,219 18,772,092 1.02571
2003-2004 17,987,861 2,876 17,990,737 911,027 18,901,764 1.06575
2004-2005 19,532,238 3,524 19,535,762 877,078 20,412,840 1.06575
2005-2006 20,925,190 1,522 20,926,712 790,513 21,717,225 1.06487
2006-2007 22,817,616 1,458 22,819,074 962,198 23,781,272 1.06487
2007-2008 24,294,404 305 24,294,709 1,066,668 25,361,377 1.07024
2008-2009 25,062,579 263 25,062,842 1,039,636 26,102,478 1.06855
2009-2010 25,324,857 263 25,325,120 1,086,770 26,411,890 1.08082
Source: County of Orange Auditor Controller
PROPERTY TAX RATES
ALL DIRECT AND
OVERLAPPING GOVERNMENTS
TAX RATE 04-001
LARGEST AREA IN CITY
LAST TEN FISCAL YEARS
Metro Water
Fiscal Year Basic Levy City School Districts District Others Total
2000-2001 1.00000 0.04930 - 0.00880 - 1.05810
2001-2002 1.00000 - - 0.00770 - 1.00770
2002-2003 1.00000 - 0.01 0.00670 - 1.01902
2003-2004 1.00000 0.01 0.01214 0.00610 0.00 1.02571
2004-2005 1.00000 0.00696 0.02850 0.00520 0.02509 1.06575
2005-2006 1.00000 0.00696 0.03814 0.00520 0.01545 1.06575
2006-2007 1.00000 0.00700 0.03718 0.00470 0.01599 1.06487
2007-2008 1.00000 0.00800 0.04273 0.00450 0.01501 1.07024
2008-2009 1.00000 0.00900 0.04053 0.00430 0.01472 1.06855
2009-2010 1.00000 0.01500 0.04479 0.00430 0.01673 1.08082
Note: Rates are per$100 of assessed valuation
Source: County of Orange Auditor Controller
136
CITY OF HUNTINGTON BEACH
PROPERTYTAX LEVIES AND COLLECTIONS
LAST TEN FISCAL YEARS
(In Thousands)
Collected within the Fiscal
Year of the Levy Total Collections
Delinquent Delinquent
Percentage Tax Percentage Taxes Delinquency
Fiscal Year Total Levy Amount of Levy Collections* Amount of Levy Receivable Percent
Secured Taxes
2000-2001 $ 22,724 $ 22,035 97.0% $ - $ 22,035 97.0% $ 629 2.8%
2001-2002 24,581 24,238 98.61/. - 24,238 98.6% 343 1.4%
2002-2003 27,634 26,765 96.9% - 26,765 96.9% 507 1.8%
2003-2004 31,024 30,033 96.8% - 30,033 96.8% 441 1.4%
2004-2005 34,403 33,423 97.2% 434 33,857 98.4% 570 1.7%
2005-2006 36,556 35,318 96.6% 498 35,816 98.0% 795 2.2%
2006-2007 39,174 37,194 94.9% 622 37,816 96.5% 1,278 3.3%
2007-2008 42,269 40,001 94.61/. 1,113 41,114 97.3% 1,734 4.1%
2008-2009 42,569 40,298 94.7% 1,789 42,087 98.9% 1,582 3.7%
2009-2010 43,892 36,992 84.3% 1,880 38,872 88.6% 1,038 2.4%
Unsecured Taxes
2000-2001 1,348 1,267 94.0% - 1,267 94.0% 33 2.4%
2001-2002 1,419 1,366 96.3% - 1,366 96.3% 53 3.7%
2002-2003 1,467 1,343 91.5% - 1,343 91.5% 42 2.9%
2003-2004 1,507 1,382 91.7% - 1,382 91.7% 34 2.3%
2004-2005 1,606 1,474 91.8% 24 1,498 93.3% 40 2.5%
2005-2006 1,590 1,434 90.2% 23 1,457 91.6% 42 2.6%
2006-2007 1,842 1,600 86.9% 37 1,637 88.9% 150 8.1%
2007-2008 1,718 1,618 94.2% 60 1,678 97.7% 34 2.0%
2008-2009 1,783 1,606 90.1% 90 1,696 95.1% 49 2.7%
2009-2010 1,882 1,677 89.1% 44 1,721 91.4% 65 3.5%
Reservoir Hill
2000-2001 184 180 97.8% - 180 97.8% 4 2.2
2001-2002 188 184 97.9% - 184 97.9% 4 2.1
2002-2003 192 189 98.4% - 189 98.4% 3 1.6
2003-2004 191 190 99.5% - 190 99.5% 1 0.5
2004-2005 - - 0.0% - - 0.0% 0.0
2005-2006 - - 0.0% - - 0.0% - 0.0
2006-2007 - - 0.0% - - 0.0% - 0.0
2007-2008 - - 0.0% - - 0.0% - 0.0
2008-2009 - - 0.0% - - 0.0% - 0.0
2009-2010 - - 0.0% - - 0.0% - 0.0
Community Facilities Districts
2000-2001 264 258 97.7% - 258 97.7% 5 1.9
2001-2002 264 258 97.7% - 258 97.7% 6 2.3
2002-2003 538 534 99.3% - 534 99.3% 1 0.2
2003-2004 1,797 1,789 99.6% - 1,789 99.6% 2 0.1%
2004-2005 1,731 1,719 99.3% 4 1,723 99.5% 7 0.4%
2005-2006 4,085 4,069 99.6% 12 4,081 99.9% 11 0.3%
2006-2007 4,061 4,041 99.5% 22 4,063 100.0% 7 0.2%
2007-2008 4,106 4,085 99.5% 21 4,106 100.0% 9 0.2
2008-2009 4,053 4,034 99.5% 12 4,046 99.8% 7 0.2%
2009-2010 3,937 3,925 99.71/. 11 3,936 100.0% - 0.0%
Source: County of Orange Auditor Controller's Office
` Delinquency tax collections information not available prior to fiscal year 2004-2005
Note:The levy and tax year is for July 1st through June 30th and does not include the Redevslopment Agency
137
CITY OF HUNTINGTON BEACH
RATIOS OF OUTSTANDING DEBT BYTYPE
LAST TEN FISCAL YEARS
(In Thousands)
Fiscal Year Ended September 30,
Lang-Term Indebtedness 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001
Governmental Activities:
Judgement Obligation Bands $ 5,989 $ 6,T4 $ 10,050 $ 10,795 $ 11,525 $ 12,245 $ 12,500 $ - $ - $
Public Financing Authority:
1992 Revenue Bands - - - - - - - - - 20,400
1997 Leasehold Revenue Bond - 2,860 2,945 3,025 3,690 4,330 4,940 5,515 6,070 6,580
2000 Lease Revenue Bond - 12,785 13,515 14,215 14,885 15,525 16,140 16,]30 17,295 17,840
2001-a Lease Revenue Bond 25,650 26,375 2],0]5 2],]50 28,400 29,030 29,635 30,220 30,780 31,360
2001-b Lease Revenue Bond 15,915 1],]95 19,595 21,340 23,030 24,670 26,265 27,800 29,275 -
2010-a Lease Revenue Band 13,820
Total Public Financing Authority 55385 59815 63130 66330 70005 73555 76980 811265 83420 76240
Civic Improvement Corporation:
Refunding Certificates of Participation(Cimc Center 1993) - - - - - - - - - 16,655
Refunding Certificates of Participation(Police Admin Bldg 1993) - - - - - - - - 13,095
Reservoir Hill Assessment Bands 360 415 605
Total Civic Improvement Corporation 360 415 30,355
Redevelopment Agency:
1999 Tax Allocation Refunding Bonds 6,610 7,020 7,410 ],]90 8,155 8,505 8,840 9,160 9,470 9,]]0
2002 Tax Allocation Refunding Bonds 14,470 15,380 16,250 17,095 17,910 18,700 19,465 20,215 20,900 -
MayerDispositionandDevelopmentAgreement 6,153 6,503 6,810 7,101 8,197 10,083 10,730 10,549 11,280 4,756
Bella Terra OPA(P arki ng) 14,076 14,227 14,532 14,855 15,000 - - - - -
CIM DDA(Parking&Infrastructure) 7,444 ],]68
CIM DDA(Additional Parking) 440 421
Section 108 Loan/Bowen Court 5,725 6,140 6,530 6,895 7,235 7,550 7,%0 7,630 7,890 8,130
Total Redevelopment Agency 54,918 57,459 51,02 53,736 56,497 44,838 46,885 47,554 49,540 22,15%
Other Lang-Term Obligations:
Notes Payable - - - - - 116 337 545 293 345
Energy Financing Loan - - - - - - - - 742 927
Advances from Other Funds - - - - - - - - - 5],50]
Captal Leases Payable 857 1,161 1,681 2,281 2,975 3,461 4,885 6,420 4,107 123
Property Tax Claims 22,138
Total Other Long-Term Obligations 857 1,161 1,01 2,281 2,975 3,5T 5,222 29,103 5,142 58,902
Total Lang-Term Obligations.Governmental Activities $ 117,149 $ 125,209 $ 126,393 $ 133,142 $ 141,002 $ 134,215 $ 141,5W $ 157,282 $138,517 $181
Lang-Term Obligations-Business Activities:
Leases Payable $ 3 $ 6 $ 9 $ 12 $ 40 $ 112 $ 183 $ 250 $ 595 $ 431
Total Lang Term Obligations.Governmental Activities
and Business Activities $ 117152 $ 125215 $ 126402 $ 133154 $ 141042 $ 134327 $ 141M $ 15702 $139112 $181
Miff 2009 2008 2007 2006 2005 2004 2003 2002 2001
Population' 203,484 202,480 201,993 202,250 201,000 200,023 198,996 197,,263 194,889 192,446
Debt Per Capita $ 576 $ 578 $ 712 $ 619 $ 623 $ 705 $ 675 $ 719 $ 695 $ 723
Total Personal Income(In Thousands)" $8,440,720 $8,207,324 $8,000,943 $7,626,443 $7,436,799 $7,284,238 $],246,83] $7,456,541
Per Capita Personal Income" $ 41,481 $ 40,534 $ 39,610 $ 3],]08 $ 36,999 $ 36,417 $ 36,417 $ 37,800
Unemployment Rate"' 7.80% 7.90% 4.70% 3.40% 2.70% 3.00% 3.20% 3.80% 4.00% 3.40%
Total Employment"' 112,100 114,100 119,300 121,100 121,400 119,600 117,,200 114,400 112,600 111,800
Source:
'State of California Department of Finance
"Claritas,Inc.
"'State of California Employee Development Department
NOTE:
Information on personal income is nor readily available for year 2002 and earlier. Until Data is readily available,only available years will be presented.
138
CITY OF HUNTINGTON BEACH
TOP TEN PROPERTY TAXPAYERS
CURRENT YEAR AND TEN YEARS AGO
2009-2010
Revenue Percent
(In Thousands) of Total
Mayer Financial Limited Partnership $ 1,945 2.27%
Bella Terra Associates LLC 1,925 2.25%
Bella Terra Office JV LLC 1,285 1.50%
AES Huntington Beach LLC 876 1.02%
CIM Huntington LLC 824 0.96%
NF Huntington Plaza 568 0.66%
Mc Donnel Douglas Corp/Boeing Corp 561 0.66%
Waterfront Construction 435 0.51%
Essex Huntington Breakers 323 0.38%
Atlanta Huntington Beach LLC 299 0.35%
Total Top Ten 9,041 10.57%
All Other Properties 76,511 89.43%
City Total $ 85,552 100.00%
2000-2001
Revenue Percent
(In Thousands) of Total
Mc Donnel Douglas Corp/Boeing Corp $ 764 2.10%
Huntington Center 357 0.98%
Waterfront Construction 1 A California 335 0.92%
Essex Huntington Breakers 259 0.71%
Kyray LLC 214 0.59%
Atlanta Huntington Beach LLC 211 0.58%
AES Huntington Beach LLC 205 0.56%
Liu Corporation 172 0.47%
Bentall US Partners 158 0.43%
JT Dexelopment Company 112 0.31%
Total Top Ten 2,787 7.66%
All Other Properties 33,609 92.34%
City Total $ 36,396 100.00%
Source: HdL Caren&Cone
Note:Information provided if for the period from July 1st through June 30th
139
CITY OF HUNTINGTON BEACH
LEGAL DEBT MARGIN
LAST TEN FISCAL YEARS
(In Thousands)
Debt Limit- 12
Assessed of Assessed Debt Applicable Legal Debt
Valuation Valuation to Limit Margin
2000-2001 $ 16,473,621 $ 1,976,835 $ - $ 1,976,835
2001-2002 16,783,516 2,014,022 - 2,014,022
2002-2003 18,772,092 2,252,651 - 2,252,651
2003-2004 18,901,764 2,268,212 - 2,268,212
2004-2005 20,412,840 2,449,541 - 2,449,541
2005-2006 21,717,225 2,606,067 - 2,606,067
2006-2007 23,781,272 2,853,753 - 2,853,753
2007-2008 25,361,377 3,043,365 - 3,043,365
2008-2009 26,102,478 3,132,297 - 3,132,297
2009-2010 26,411,890 3,169,427 3,169,427
PRINCIPAL PRIVATE EMPLOYERS
CURRENT YEAR AND FIVE YEARS AGO
2010 %of total
Boeing 4,478 3.99%
Cambro Manufacturing 951 0.85%
Quiksilver 705 0.63%
Hyatt Regency Huntington Beach 641 0.57%
C& D Aerospace 555 0.50
Huntington Beach Hospital 503 0.45%
Rainbow Disposal 408 0.36%
Verizon 290 0.26%
Walmart 255 0.23%
Westec Intelligent Surveillance, Inc. 230 0.21
Total of top 10 9,016 8.04%
all others 103,084 91.96%
Total employment(public and private) 112,100 100.00%
2005 %of total
Boeing 4,282 3.58%
Quiksilver 1,550 1.30%
Cambro Manufacturing 886 0.74%
Dynamic Cooking Systems 706 0.59%
Triad Financial 637 0.53%
Verizon 556 0.46%
E-Trade Mortgage 554 0.46%
C& D Aerospace 554 0.46
Huntington Beach Hospital 513 0.43%
Rainbow Disposal 408 0.34%
Total of top 10 10,646 8.90%
all others 108,954 91.10%
Total employment(public and private) 119,600 100.00%
Source-Economic Development Department, City of Huntington Beach
Note: Information on the principal private employers in not readily available forfiscal year
ending September 2004 and earlier. Until data is readily available, only the available
years will be presented.
140
CITY OF HUNTINGTON BEACH
FULL-TIME ACTUAL AND BUDGETED CITY EMPLOYEES BY FUNCTION/PROGRAM
LAST NINE FISCAL YEARS
Actual Budgeted
General Government: 2010 2009 2008 2007 2006 2005 2004 2003 2002
City Council 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00
City Administrator 6.00 9.00 9.00 8.00 7.00 8.00 8.00 34.00 35.00
City Treasurer 10.00 10.00 10.00 10.00 10.00 16.00 16.00 16.00 16.00
City Attorney 17.00 18.00 18.00 18.00 17.00 17.00 15.00 15.00 15.00
City Clerk 8.00 8.00 8.00 7.50 7.50 7.50 7.50 7.50 7.50
Finance 32.00 33.00 33.00 33.00 31.00 22.00 18.00 20.00 20.00
Human Resources 20.50 20.50 20.50 20.00 22.00 21.00 22.00 - -
Planning 26.00 28.00 28.00 28.00 28.00 26.50 25.00 26.00 26.00
Building 25.75 30.50 31.50 31.50 31.50 29.50 27.50 27.50 27.50
Information Systems 39.00 40.00 39.00 38.00 37.00 36.00 37.00 18.50 17.25
Economic Development 14.00 14.00 14.00 13.00 13.00 14.00 14.00 15.00 15.00
Library Services 32.25 37.25 37.25 37.25 37.25 37.25 37.25 37.25 37.25
Fire 176.00 185.00 185.00 184.00 157.00 156.00 155.00 156.00 156.00
Police 355.00 381.00 381.00 376.00 371.50 371.00 367.00 369.00 369.00
Community Services 65.75 69.75 69.75 69.75 66.50 62.25 63.25 63.25 63.25
Public Works 227.00 258.00 258.00 255.00 247.00 239.00 235.00 231.00 231.00
1,055.2; 1,143.00 1,143.00 1,130.00 1,084.25 1,064.00 1,048.50 1,037.00 1,036.75
Source: Finance Department,City of Huntington Beach
Note: Actual full-time city employees by function/program data available only for fiscal year ended September 30,2010.
Budgeted full-time employees provided for remaining years.
141
CITY OF HUNTINGTON BEACH
OPERATING INDICATORS BY FUNCTION/ACTIVITY
LAST SIX FISCAL YEARS
Function/Program 2010 2009 2008 2007 2006 2005
Finance:
Water Bills Processed 640,351 641,602 642,883 630,228 626,903 586,000
Business Licenses Issued 21,045 20,841 21,129 20,670 19,746 20,184
Accounts Receivable Billings Processed 37,146 31,894 26,263 21,352 22,453 22,768
City Clerk:
Passports Issued 3,251 3,186 4,386 5,687 3,416 3,672
Planning:
Entitlements Processed 353 465 674 504 566 523
Plan Reviews 2,216 1,447 1,941 1,456 2,105 2,296
Field Inspection Complaints 8,187 9,345 7,932 5,273 5,926 5,550
Code Violation Cases 3,315 3,876 3,385 2,231 3,580 3,906
Building:
#of Permits Issued 8,037 8,114 9,254 4,355 11,210 12,082
#of Inspections Completed 29,792 33,734 40,510 42,181 43,905 49,737
Value of Construction Permits (Thousands of Dollars) 91,049 72,727 123,843 141,277 196,453 169,570
Processed#of Certificate of Occupancies 796 484 540 590 307 683
Automated Information Requests n/a n/a n/a 78,243 77,006 78,868
Counter Vists 20,272 19,149 18,775 n/a n/a n/a
Fire:
Inspections 7,450 6,375 6,203 4,900 4,300 4,100
Responses 15,629 14,130 13,879 12,400 12,100 12,100
Police:
Physical Arrests 5,695 6,380 6,930 5,576 6,368 5,282
Parking Violations 74,115 55,840 67,270 123,096 68,712 112,698
Tmtfic Violations 22,660 19,433 18,882 19,859 22,755 25,902
Community Services:
Acreage of Parks 1,003 999 1,001 999 999 998
Estimated Beach Visitors 8,208,477 9,922,165 10,452,461 10,363,719 10,085,358 8,727,369
Enrollment in Recreation Classes 31,743 32,906 35,537 34,932 25,447 22,346
Ocean Recues 2,822 6,047 n/a n/a n/a n/a
Public Works:
Water Sold (Acre Feet) 27,268 30,537 30,518 31,128 29,246 29,730
Gallons of Sewage Pumped Per Day 22 million 23 million 23 million 23 million 23 million 23 million
Library:
Items in Collection 437,603 440,578 438,467 431,304 437,472 441,523
Items Borrowed 1,009,634 944,492 879,225 826,921 823,116 931,347
Source: Various departments of the City of Huntington Beach
CAPITAL ASSET STATISTICS BY FUNCTION/ACTIVITY
SEPTEMBER 30,2010
Library Services One Main Library and Four Branches
Fire:
Fire Stations 8
Police:
Stations One Main Station and Three Substations
Community Services:
Acreage of Parks 1003
Community Centers 6
Miles of Beach Maintained 3.5
Public Works:
Centerline Square Miles of Streets Maintained 444
Miles of Ste" Drains Maintained 117
Miles of Sewer Maintained 360
Source: Various departments of the City of Huntington Beach
142
CITY OF HUNTINGTON BEACH
STATEMENT OF DIRECT AND
OVERLAPPING BONDED DEBT
SEPTEMBER 30, 2010
2009-10 Assessed Valuation$26,496,261,166 (after deducting$1,753,218,093)of incremental redevelopment valuation
Debt Repaid with Property Taxes(Tax and Assessment Debt):
Percent Debt Applicable
Tax Debt: Applicable to City
Metropolitan Water District 1.4610% $ 3,860,254
Coast Community College District 30.2000% 98,684,198
Huntington Beach Union High School District 77.9610% 178,359,174
Huntington Beach City School District 97.1640% 25,703,728
Westminster School District 41.2820% 14,155,879
Los Alamitos Unified School District School Facilities District No. 1 1.3600% 367,200
Los Alamitos Unified School District Comm Facilities Dist. 1990-1 1.2090% 93,516
City of Huntington Beach Community Facilities Districts 100.0000% 42,930,000
Tax and Assessment Debt 364,153,949
Other Debt
Other Entities:
Orange County General Fund Obligations 24,019,977
Orange County Pension Obligations 3,869,333
Orange County Board of Education Certifictes of Participation 1,360,715
MWDOC Facilities Corporation 1,178,455
North Orange County Regional Occupation Program Certificates of Participation 12,928
Huntington Beach Union High School District Certificates of Participation 46,602,038
Los Alamitos Unified School District Certificates of Participation 244,463
Fountain Valley School Districts Certificates of Participation 3,443,637
Huntington Beach City School District Certificates of Participation 9,279,162
Ocean View School District Certificates of Participation 6,595,188
Westminster School District Certificates of Participation 10,132,667
City of Huntington Judgement Obligation Bonds 5,989,000
City of Huntington Reporting Entity Beach General Fund Obligations: 55,385,000
Total Gross and Overlapping Bonded Debt Not Repaid by Property Taxes 168,112,563
Less Self Supporting Debt of MWDOC Water Facilities Corporation (1,178,455)
Total Net Direct and Overlapping General Fund Obligation Debt 166,934,108
Gross Combined Total Debt $ 532,266,512
Ratios to 2009-2010 Assessed Valuation
Total Overlapping Debt and Assessment Debt 1.29%
Ratios to Adjusted Assessed Valuations
Combined Direct Debt ($61,374,000) 0.23%
Gross Combined Total Debt 2.01%
Net Combined Total Debt 2.00%
State School Building Aid Repayable $ -
Source: California Municipal Statistics and City of Huntington Beach Finance Department
143
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144
APPENDIX C
CITY INVESTMENT POLICY
CITY OF HUNTINGTON BEACH
STATEMENT OF INVESTMENT POLICY
FISCAL YEAR 2010-2011
TABLE OF CONTENTS
SECTION
1.0 Purpose.....................................................................................................................................................2
2.0 Policy.......................................................................................................................................................2
3.0 Scope........................................................................................................................................................2
4.0 Prudence...................................................................................................................................................3
5.0 Objective..................................................................................................................................................3
6.0 Investment Advisory Board.....................................................................................................................4
7.0 Delegation of Authority...........................................................................................................................4
8.0 Ethics and Conflicts of Interest................................................................................................................5
9.0 Authorized Financial Dealers&Institutions............................................................................................5
10.0 Authorized&Suitable Investments.........................................................................................................6
11.0 Portfolio Adjustment..............................................................................................................................10
12.0 Collateralization.....................................................................................................................................10
13.0 Safekeeping and Custody.......................................................................................................................10
14.0 Diversification........................................................................................................................................11
15.0 Maximum Maturities..............................................................................................................................12
16.0 Internal Control......................................................................................................................................12
17.0 Performance Standards...........................................................................................................................12
18.0 Reporting................................................................................................................................................13
19.0 Investment Policy Adoption...................................................................................................................14
Glossary.................................................................................................................................................15
Appendix A Investment Guidelines.....................................................................................................i
C-1
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CITY OF HUNTINGTON BEACH
Statement of Investment Policy
1.0 Purpose:
This policy is intended to provide guidelines for the prudent investment of the city's cash balances, and
outline the policies to assist maximizing the efficiency of the city's cash management system while meeting
the daily cash flow demands of the city.
2.0 Policy:
The investment practices and policies of the City of Huntington Beach are based upon state law and
prudent money management.The primary goals of these practices are:
A. To assure compliance with all Federal, State, and local laws governing the investment of public
funds under the control of the City Treasurer.
i. Government Code Section 53646 previously mandated that annual investment policies
and quarterly reports be rendered to the legislative body. AB2853 amended the Government Code
to remove the requirements and the rendering of these documents is permissive rather than
mandated.
B. To protect the principal moneys entrusted to this office.
C. Achieve a reasonable rate of return within the parameters of prudent risk management while
minimizing the potential for capital losses arising from market changes or issuer default.
3.0 Scope:
This investment policy applies to all financial assets as indicated in 3.1 below of the City of Huntington
Beach.These funds are accounted for in the city's Comprehensive Annual Financial Report and include:
3.1 Funds:
The City Treasurer is responsible for investing the unexpended cash in the City Treasury for all funds,
except for the employee's pension funds, which are invested separately by CALPERS, those funds which
are invested separately by the City Treasurer under bond indenture agreements, and funds which are
invested separately by the City Treasurer or trustees under other agreements approved by Council such as
the Retiree Medical Trust and the Supplemental Pension Trust. The City Treasurer will strive to maintain
the level of investment of this cash as close as possible to 100%. These funds are described in the city's
annual financial report and include:
3.1.1 General Fund
3.1.2 Special Revenue Funds
3.1.3 Capital Project Funds
3.1.4 Enterprise Funds
3.1.5 Trust and Agency Funds
3.1.6 Debt Service Funds
C-3
3.1.7 Infrastructure Funds
3.1.5 Capital Improvement Reserve Funds
3.1.9 Any new fund created by the legislative body,unless specifically exempted
This investment policy applies to all transactions involving the financial assets and related activity of the
foregoing funds. It is the City's policy to pool funds for investment purposes to provide efficiencies and
economies of scale. Investing through a pooled account will provide for greater use of funds by allowing
for a more efficient cash flow, a reduction in transaction costs and a greater access to the market.
4.0 Prudence:
The standard of prudence to be used by the City Treasurer shall be the "prudent investor" standard. This
shall be applied in the context of managing an overall portfolio.
The "Prudent Investor Rule" provides, pursuant to California Government Code Section 53600.3, that
investments shall be made with judgment and careunder circumstances then prevailing—which persons
of prudence, discretion and intelligence exercise in the management of their own affairs, not for
speculation, but for investment, considering the probable safety of their capital as well as the probable
income to be derived.
4.1 The City Treasurer and the Deputy City Treasurer, as investment officers acting in accordance with written
procedures and the investment policy and exercising due diligence, shall be relieved of personal
responsibility for an individual security's credit risk or market price changes, provided deviations from
expectations are reported to the City Council in a timely fashion and appropriate action is taken to control
adverse developments.
5.0 Objective:
Consistent with this aim, investments are made under the terms and conditions of California Government
Code Section 53600, et seq. Criteria for selecting investments and the absolute order of priority are:
5.1 Safety:
Safety of principal is the foremost objective of the investment program. Investments of the City of
Huntington Beach shall be undertaken in a manner that seeks to ensure the preservation of capital in the
overall portfolio. To attain this objective, diversification is required in order that potential losses on
individual securities do not exceed the income generated from the remainder of the portfolio.
5.2 Liquidity:
The City of Huntington's Beach's investment portfolio will remain sufficiently liquid to enable the City of
Huntington Beach to meet all operating requirements which might be reasonably anticipated and to
maintain compliance with any indenture agreement, as applicable. Liquidity is essential to the safety of
principal. Furthermore, since all possible cash demands cannot be anticipated, the portfolio will invest
primarily in securities with active secondary and resale markets.
5.3 Return on Investments:
The City of Huntington Beach's investment portfolio shall be designed with the objective of attaining a
market-average rate of return throughout budgetary and economic cycles (market interest rates), within the
City of Huntington Beach's investment policy's risk parameters and the cash flow needs of the City. See
also Section 17.0.
C-4
6.0 Investment Advisory Board:
By City Charter, the City Treasurer is the custodian of all public funds of the City of Huntington Beach.
The City Council may appoint Huntington Beach residents, professional, and non professional people, to
serve on an Investment Advisory Board for the purpose of advising the City Treasurer on the City's
investment program and at least quarterly,review the investment portfolio for compliance with the adopted
investment policy. Exceptions: Items in the Investment Policy that require City Council approval will first
be reviewed by the Investment Advisory Board.
7.0 Delegation of Authority:
In accordance with the State of California Government Code § 53607, the City Council delegates
investment authority to the City Treasurer for a period of one year and such investment authority must be
renewed annually. Adoption of this policy constitutes delegation of investment authority to the City
Treasurer for the following year unless revoked in writing. Within the City Treasurer's office, the
responsibility for the day to day investment of the City funds will be the City Treasurer and is delegated to
the Deputy City Treasurer in the absence of the City Treasurer.The City Treasurer shall be responsible for
all transactions undertaken and shall establish a system of controls to regulate the activities of subordinate
officials.
8.0 Ethics and Conflicts of Interest:
In addition to state and local statutes relating to conflicts of interest, all persons involved in the investment
process shall refrain from personal business activity that could conflict with proper execution of the
investment program, or which could impair their ability to make impartial investment decisions.Employees
and investment officers are required to file annual disclosure statements as required for "public officials
who manage public investments" (as defined and required by the Political Reform Act and related
regulations,being Government Code Sections 81000 and the Fair Political Practices Commission(FFPC)).
9.0 Authorized Financial Dealers and Institutions:
The City Treasurer will maintain a list of the financial institutions and broker/dealers authorized to provide
investment and depository services and will perform an annual review of the financial condition and
registrations of qualified bidders and require annual audited financial statements to be on file for each
company.The City will utilize Moody's Securities, Sheshunoff bank and savings and loan ratings, or other
such services to determine financially sound institutions with which to do business.The City shall annually
send a copy of the current investment policy to all financial institutions and broker/dealers approved to do
business with the City.
As far as possible, all money belonging to, or in the custody of, a local agency, including money paid to the
City Treasurer or other official to pay the principal, interest, or penalties of bonds, shall be deposited for
safekeeping in state or national banks, savings associations, federal associations, credit unions, or federally
insured industrial loan companies in this state selected by the City Treasurer that are qualified public
depositories; or may be invested in the investments set forth in Section 10.0.To be eligible to receive local
agency money, a bank, savings association, federal association, or federally insured industrial loan
company shall have received an overall rating of not less than "satisfactory" in its most recent evaluation
by the appropriate federal financial supervisory agency of its record of meeting the credit needs of
California's communities, including low-and moderate-income neighborhoods.
To provide for the optimum yield in the investment of city funds, the city's investment procedures shall
encourage competitive bidding on transactions from approved brokers/dealers. In order to be approved by
the city, the dealer must be a "primary" dealer or regional dealer that qualifies under Securities and
Exchange Commission Rule 15C3-1 (Uniform Net Capitol Rule). The institution must have an office in
California.The dealer must be experienced in institutional trading practices and familiar with the California
Government Code as related to investments appropriate for the city; and, other criteria as may be
C-5
established in the investment procedures.All broker/dealers and financial institutions who desire to become
qualified bidders for investment transactions must submit a `Broker/Dealer Application" and related
documents relative to eligibility including a current audited annual financial statement, U4 form for the
broker, proof of state registration, proof of National Association of Securities Dealers certification and a
certification of having read and understood the City's investment policy and agreeing to comply with the
policy. The City Treasurer shall determine if they are adequately capitalized (i.e. minimum capital
requirements of$10,000,000 and five years of operation).
10.0 Authorized &Suitable Investments: The City is authorized by California Government Code
Section 53600,et. seq.to invest in specific types of securities.Investments not specifically listed below
are deemed inappropriate and prohibited:
A. BANKERS ACCEPTANCES, maximum 25% of portfolio (up to 40% with Council
approval).Maximum term 180 days.
Banks must have a short term rating of at least Al/Pl and a long-term rating of A or higher as
provided by Moody's Investors Service or Standard and Poor's Corp. No more than 30 percent of
the agency's money may be invested in the bankers acceptances of any one commercial bank
pursuant to this section.
B. NEGOTIABLE CERTIFICATES OF DEPOSIT, maximum 30% of portfolio. Maximum
term three(3)years,(Up to five(5)years with Council approval).
Banks must have a short term rating of Al/Pl and a long term rating of at least a single A from a
nationally recognized authority on ratings.
C. COMMERCIAL PAPER,maximum 25% of portfolio.Maximum term 270 days.
Commercial paper of"prime" quality of the highest ranking or of the highest letter and number
rating as provided for by a nationally recognized statistical-rating organization (NRSRO). The
entity that :issues the commercial paper shall meet all of the following conditions in either
paragraph(1) or paragraph(2):
(1) The entity meets the following criteria:
(A) Is organized and operating in the United States as a general corporation.
(B) Has total assets in excess of five hundred million dollars($500,000,000).
(C) Has debt other than commercial paper, if any, that is rated "A" or higher by a
nationally recognized statistical-rating organization(NRSRO).
(2) The entity meets the following criteria:
(A) Is organized within the United States as a special purpose corporation, trust, or
limited liability company.
(B) Has programwide credit enhancements including, but not limited to,
overcollateralization, letters of credit, or surety bond.
(C) Has commercial paper that is rated "A-l" or higher, or the equivalent, by a
nationally recognized statistical-rating organization(NRSRO).
Split ratings (i.e. A2/Pl) are not allowable. No more than 10 percent of the outstanding
commercial paper of any single corporate issue may be purchased.
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D. BONDS ISSUED BY THE CITY OR ANY LOCAL AGENCY WITHIN THE STATE OF
CALIFORNIA OR ANY OF THE OTHER 49 UNITED STATES.
Bonds must have an"A"rating or better
E. OBLIGATIONS OF THE UNITED STATES TREASURY
United States Treasury Notes, bonds, bills or certificates of indebtedness, or those for which the
faith and credit of the United States are pledged for the payment of principal and interest.There is
no limit on the percentage of the portfolio that can be invested in this category.
F. FEDERAL AGENCIES
Debt instruments issued by agencies of the Federal government.Though not general obligations of
the U.S. Treasury, such securities are sponsored by the government or related to the government
and, therefore, have high safety ratings. The following are authorized Federal Intermediate Credit
Bank (FICB's), Federal Land Bank (FLB's), Federal Home Loan Bank (FHLB's), Federal
National Mortgage Association (FNMA's), Federal Home Loan Mortgage Corporation
(FHLMC's), Government National Mortgage Association (GNMA's), Tennessee Valley
Authorities (TVA's), Student Loan Association Notes (SLMA's) and Small Business
Administration(SBA's).There is no limit on the percentage of the portfolio that can be invested in
this category.
G. REPURCHASE AGREEMENT,maximum term 3 months.
Investments in repurchase agreements may be made, on any investment authorized in this section,
when the term of the agreement does not exceed 3 months.
A Master Repurchase Agreement must be signed with the bank or broker/dealer who is selling the
securities to the City.
H. REVERSE-REPURCHASE AGREEMENTS (Requires City Council approval for each
transaction)
Reverse repurchase agreements or securities lending agreements may be utilized only when all of
the following conditions are met:
(A) The security to be sold on reverse repurchase agreement or securities lending agreement
has been owned and fully paid for by the local agency for a minimum of 30 days prior to sale.
(B) The total of all reverse repurchase agreements and securities lending agreements on
investments owned by the local agency does not exceed 20 percent of the base value of the
portfolio.
(C) The agreement does not exceed a term of 92 days, unless the agreement includes a
written codicil guaranteeing a minimum earning or spread for the entire period between the sale of
a security using a reverse repurchase agreement or securities lending agreement and the final
maturity date of the same security.
(D) Funds obtained or funds within the pool of an equivalent amount to that obtained from
selling a security to a counterparty by way of a reverse repurchase agreement or securities lending
agreement, shall not be used to purchase another security with a maturity longer than 92 days from
the initial settlement date of the reverse repurchase agreement or securities lending agreement,
unless the reverse repurchase agreement or securities lending agreement includes a written codicil
guaranteeing a minimum earning or spread for the entire period between the sale of a security
using a reverse repurchase agreement or securities lending agreement and the final maturity date
of the same security.
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Investments in reverse repurchase agreements, securities lending agreements, or similar
investments in which the local agency sells securities prior to purchase with a simultaneous
agreement to repurchase the security shall only he made with primary dealers of the Federal
Reserve Bank of New York or with a nationally or state-chartered bank that has or has had a
significant banking relationship with a local agency.
(A) For purposes of this chapter, "significant banking relationship" means any of the following
activities of a bank:
0) Involvement in the creation, sale, purchase, or retirement of a local agency's
bonds, warrants, notes, or other evidence of indebtedness.
(ii) Financing of a local agency's activities.
(iii) Acceptance of a local agency's securities or funds as deposits.
I. MEDIUM-TERM CORPORATE NOTES, maximum 20% of portfolio (30% with Council
approval),with a maximum remaining maturity of five years or less.
Notes eligible for investment shall be "A" rated or its equivalent or better as determined by a
nationally recognized rating service.
J• TIME DEPOSITS-CERTIFICATES OF DEPOSIT (non-negotiable certificates of deposit.)
(maximum of 3 years)
Deposits must be made with banks or savings & loan that have a short term rating of Al/Pl or a
long term rating of at least a single A from a generally recognized authority on ratings.
K. OBLIGATIONS OF THE STATE OF CALIFORNIA
Obligations must be "A"rated or better from a nationally recognized authority on ratings.
L. MONEY MARKET FUNDS,maximum 15% of portfolio.
No more than 10 percent of the agency's surplus funds may be invested in shares of beneficial
interest of any one Money Market fund. Local agencies may invest in "shares of beneficial
interest" issued by diversified management companies which invest only in direct obligations in
US Treasury bills, notes and bonds, U. S. Government Agencies and repurchase agreements with a
weighted average of 60 days or less. They must have the highest rating from two nationally
recognized statistical-rating organization (NRSRO), must maintain a daily principal per share
value of $1.00 per share and distribute interest monthly, and must have a minimum of $500
million in assets under management. The purchase price of the shares may not include
commission.
M. THE LOCAL AGENCY INVESTMENT FUND(LAIF)
Is a special fund of the California State Treasury through which any local government may pool
investments. The city may invest up to $60,000,000 in this fund. Currently, the city has
established two (2) agency funds through which the Treasurer may invest the unexpended cash for
all funds: The City of Huntington Beach City Fund, and the Huntington Beach Redevelopment
Agency Funds. Investments in LAIF are highly liquid and may be converted to cash within 24
hours.
10.1 Investment Pools/Money Market funds:
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The City Treasurer or designee shall be required to investigate all local government investment pools and
money market mutual funds prior to investing and performing at least a quarterly review thereafter while
the City is invested in the pool or the money market fund. LAIF is authorized under provisions in Section
16429.1 of the California Government Code as an allowable investment for local agencies even though
some of the individual investments of the pool are not allowed as a direct investment by a local agency.
11.0 Portfolio Adjustments:
Should any investment listed in section 10.0 exceed a percentage-of-portfolio limitation due to an incident
such as fluctuation in portfolio size, the affected securities may be held to maturity to avoid losses. When
no loss is indicated, the Treasurer shall consider reconstructing the portfolio basing his/her decision on the
expected length of time the portfolio will be unbalanced. If this occurs, the City Council shall be notified.
12.0 Collateralization:
Under provisions of the California Government Code, California banks, and savings and loan associations
are required to secure the city's deposits by pledging government securities with a value of 110 % of
principal and accrued interest. California law also allows financial institutions to secure city deposits by
pledging first trust deed mortgage notes having a value of 150% of city's total deposits. Collateral will
always be held by an independent third party. A clearly marked evidence of ownership (safekeeping
receipt) must be supplied to the city and retained.The market value of securities that underlay a repurchase
agreement shall be valued at 102 percent or greater of the funds borrowed against those securities and the
value shall be adjusted no less than quarterly. Since the market value of the underlying securities is subject
to daily market fluctuations, the investments in repurchase agreements shall be in compliance if the value
of the underlying securities is brought back up to 102 percent no later than the next business day.The City
Treasurer, at his/her discretion, may waive the collateral requirement for deposits that are fully insured
(current limit is $250,000) by the Federal Deposit Insurance Corporation. The right of collateral
substitution is granted.The City Treasurer or designee shall ensure that all demand deposits that exceed the
FDIC limit(currently $250,000) shall be fully collateralized with securities authorized under state law and
this Investment Policy.
13.0 Safekeeping and Custody:
All city investments shall have the City of Huntington Beach as its registered owner, and all interest and
principal payments and withdrawals shall indicate the City of Huntington Beach as the payee. All securities
will be held with a qualified financial institution, contracted by the city as a third party custodian with a
separate custodial agreement(does not apply to insured Certificates of Deposit, money market funds, or the
Local Agency Investment Fund). All agreements and statements will be subject to review annually by
external auditors in conjunction with their audit. All securities shall be acquired by the safekeeping
institution on a "Delivery-Vs-Payment" (DVP) basis. For Repurchase Agreements, the purchase may be
delivered by book entry, physical delivery or by third-party custodial agreement consistent with the
Government Code. The transfer of securities to the counterparty bank's customer book entry account may
be used for book entry delivery. The City Treasurer or designee shall require a Broker Trade confirmation
for all trades.
14.0 Diversification:
The city's investment portfolio will be diversified to avoid incurring unreasonable and avoidable risks
associated with concentrating investments in specific security types, maturity segment, or in individual
financial institutions. With the exception of U.S.Treasury securities, Government Sponsored Agencies and
authorized pools no more than 50% of the investment portfolio will be invested in a single security type or
with a single financial institution. In addition, no more than 10% of the investment portfolio shall be in
securities of any one issuer except for U.S. Treasuries and US Government Agency issues. Investments
maybe further limited by specific language relating to each type as state in Section 10.0 of the Policy.
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A. Credit risk, defined as the risk of loss due to failure of the insurer of a security, shall be
mitigated by investing in those securities with an "A" or above rating and approved in the
investment policy and by diversifying the investment portfolio so that the failure of any one issuer
would not unduly harm the city's cash flow.
B. Market risk, defined as the risk of market value fluctuations due to overall changes in the general
level of interest rates, shall be mitigated by structuring the portfolio so that securities mature at the
same time that major cash outflows occur, thus eliminating the need to sell securities prior to their
maturity. It is explicitly recognized herein, however, that in a diversified portfolio, occasional
measured losses are inevitable and must be considered within the context of overall investment
return.The city's investment portfolio will remain sufficiently liquid to enable the city to meet all
operating requirements which might be reasonably anticipated.
15.0 Maximum Maturities:
To the extent possible, the City of Huntington Beach will attempt to match its investments with anticipated
cash flow requirements. Unless matched to a specific cash flow, the city will not directly invest in securities
maturing more than five (5) years from the date of purchase, unless, the legislative body has granted
express authority to make that investment either specifically, or as a part of an investment program
approved by the City Council. The City of Huntington Beach shall not permit more than 30% of its
investment portfolio to be invested in securities with maturities over three years.
16.0 Internal Control:
The City Treasurer shall establish a system of internal controls designed to prevent loss of public funds due
to fraud, employee error, misrepresentation by third parties, or unanticipated market changes. No
investment personnel may engage in an investment transaction except as provided for under the terms of
this policy and the procedure established by the City Treasurer.
The external auditors shall annually review the investments with respect to the investment policy. This
review will provide internal control by assuring compliance with policies and procedures for the
investments that are selected for testing. Additionally, account reconciliation and verification of general
ledger balances relating to the purchasing or maturing of investments and allocation of interest on
investments to fund balances shall be performed by the Finance Department and approved by the City
Treasurer. To provide further protection of city funds, written procedures prohibit the wiring of any city
funds without the authorization of at least two of the four designated city officials:
1. City Treasurer
2. Deputy City Treasurer
3. Director of Finance
4. Budget Manager
17.0 Performance Standards:
This investment policy shall be reviewed at least annually by the Investment Advisory Board and the City
Council to ensure its consistency with the overall objective of preservation of principal, liquidity, and
return, and its relevance to current law and financial and economic trends. All financial assets of all other
funds shall be administered in accordance with the provisions of this policy.
The moneys entrusted to the City Treasurer will be a passively managed portfolio. However, the City
Treasurer will make best efforts to observe, review, and react to changing conditions that affect the
portfolio.
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17.1 Market Yield(Benchmark):
The investment portfolio shall be managed to attain a market-average rate of return throughout budgetary
and economic cycles, taking into account the city's investment risk constraints and cash flow. Investment
return becomes a consideration only after the basic requirements of investment safety and liquidity have
been met. Because the investment portfolio is designed to operate on a `hold-to-maturity' premise (or
passive investment style) and because of the safety, liquidity, and yield priorities, the performance
benchmark that will be used by the Treasurer to determine whether market yields are being achieved shall
be the average of the monthly LAIF rate and the 12-month rolling average 2-Year Constant Maturity
Treasury (CMT) rate. However, since return on investment is the least important objective of the
Investment Portfolio, the benchmark will be used only as a reference tool. The reporting of a benchmark
does not imply that the City Treasurer will add additional risk to the Investment Portfolio in order to attain
or exceed the benchmark. While the city will not make investments for the propose of trading or
speculation as the dominant criterion, the City Treasurer shall seek to enhance total portfolio return by
means of ongoing portfolio and cash management. The prohibition of highly speculative investments
precludes pursuit of gain or profit through unusual risk and precludes investments primarily directed at
gains or profits from conjectural fluctuations in market prices.The City Treasurer will not directly pursue
any investments that are leveraged or deemed derivative in nature. However, as long as the original
investments can be justified by their ordinary earning power, trading in response to changes in market value
can be used as part of ongoing portfolio management.
15.0 Reporting:
The City Treasurer shall submit a monthly investment report and a quarterly report to the City Council,
City Administrator, and Director of Finance and the Investment Advisory Board within 30 days following
the end of the quarter. This report will include the following elements pursuant to State law and
Government Accounting Standard Board(GASH)#40:
15.1 Type of investment
15.2. Institution/Issuer
15.3 Purchase Date
15.4 Date of maturity
15.5 Amount of deposit or cost of the investment
15.6 Face value of the investment
15.7 Current market value of securities and source of valuation
18.8 Rate of interest
15.9 Interest earnings
15.10 Statement relating the report to its compliance with the Statement of Investment Policy or the
manner in which the portfolio is not in compliance
15.11 Statement on availability of funds to meet the next six month's obligations
15.12 Monthly and Year to date City Treasurer Budget Amounts for Interest Income
15.13 Percentage of Portfolio by Investment Type
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15.14 Annually disclose the amount of individual securities if they exceed 5% of the Investment
Portfolio, except for U. S. Treasuries, U.S. Government Agencies, Money Market funds and
external investment pools.
15.15 Days to Maturity for all Investments
15.16 Comparative report on Monthly Investment Balances&Interest Yields
15.17 Monthly transactions
This monthly/quarterly report shall be placed on the City Council Agenda for Council and public
review. In addition, a commentary on capital markets and economic conditions may be included
with the report.
19.0 Investment Policy Adoption:
By virtue of a resolution of the City Council of the City of Huntington Beach, the Council shall
acknowledge the receipt and filing of this annual statement of investment policy for the respective fiscal
year.
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GLOSSARY
AGENCIES: Federal agency securities.
ASKED:The price at which securities are offered. (The price at which a firm will sell a security to an investor.)
BANKERS' ACCEPTANCE (BA): A draft or bill or exchange accepted by a bank or trust company. The
accepting institution guarantees payment of the bill, as well as the issuer. The drafts are drawn on a bank by an
exporter or importer to obtain funds to pay for specific merchandise. An acceptance is a high grade negotiable
instrument.
BASIS POINT: One one-hundredth of a percent(i.e. 0.01%)
BENCHMARK: A comparative base for measuring the performance or risk tolerance of the investment portfolio. A
benchmark should represent a close correlation to the level of risk and the average duration of the portfolio's
investments.
BID:The price offered by a buyer of securities. (When you are selling securities, you ask for a bid.)
BROKER: A broker brings buyers and sellers together for a commission. He does not take a position.
CERTIFICATE OF DEPOSIT (CD): A time deposit with a specific maturity evidenced by a certificate. Large-
denomination CD's are typically negotiable.
COLLATERAL: Securities, evidence of deposit or other property, which a borrower pledges to secure repayment
of a loan.Also refers to securities pledged by a bank to secure deposits of public monies.
COMMERCIAL PAPER: Short term unsecured promissory note issued by a corporation (including limited
liability companies) to raise working capital.These negotiable instruments are purchased at a discount to par value
or at par value with interest bearing. Commercial paper is issued by corporations such as General Motors
Acceptance Corporation, IBM,Bank of America, etc.
COMPREHENSIVE ANNUAL FINANCIAL REPORT (CAFR): The official annual report for the City. It
includes combined statements for each individual fund and account group prepared in conformity with GAAP. It
also includes supporting schedules necessary to demonstrate compliance with finance-related legal and contractual
provisions, extensive introductory material and a detailed Statistical section.
COUPON: a). The annual rate of interest that a bond's issuer promises to pay the bondholder on the bond's face
value.b)A certificate attached to a bond evidencing interest due on a payment date.
DEALER: A dealer, as opposed to a broker, acts as a principal in all transactions, buying and selling for his own
account.
DEBENTURE: A bond secured only by the general credit of the issuer.
DELIVERY VERSUS PAYMENT: There are two methods of delivery of securities: delivery versus payment and
delivery versus receipt. Delivery versus payment is delivery of securities with an exchange of money for the
securities.Delivery versus receipt is delivery of securities with an exchange of a signed receipt for the securities.
DERIVATIVES: (1)Financial instruments whose return profile is linked to, or derived from, the movement of one
or more underlying index or security, and may include a leveraging factor, or (2) financial contracts based upon
notional amounts whose value is derived from an underlying index or security(interest rates, foreign exchange rates,
equities or commodities).
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DISCOUNT: The difference between the cost price of a security and its maturity when quoted at lower than face
value.A security selling below original offering price shortly after sale also is considered to be at a discount.
DISCOUNT SECURITIES: Non-interest bearing money market instruments that are issued at a discount and
redeemed at maturity for full face value (e.g. US Treasury Bills).
DIVERSIFICATION: Dividing investment funds among a variety of securities offering independent returns.
FEDERAL CREDIT AGENCIES: Agencies of the Federal government set up to supply credit to various classes
of institutions(e.g. S&L's, Small business firms, students, farmers, farm cooperatives, and exporters).
FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC): A Federal agency that insures bank deposits,
currently up to$250,000 per deposit.
FEDERAL FUNDS RATE:The rate of interest at which Fed funds are traded.This rate is currently pegged by the
Federal Reserve though open-market operations.
FEDERAL HOME LOAN BANKS (FHLB): The institutions that regulate and lend to savings and loan
associations. The Federal Home Loan Banks play a role analogous to that played by the Federal Reserve Banks vis-
a-vis member commercial banks.
FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC): Created to promote the development of
a nationwide secondary market in mortgages. It does this by purchasing residential mortgages from financial
institutions insured by an agency of the federal government and selling its interest in them through mortgage backed
securities. The interest and principal payments from the mortgages pass through to the investors either monthly,
semiannually or annually.
FEDERAL INTERMEDIATE CREDIT BANK (FICB): Loans to lending institutions used to finance the short
term and intermediate needs of farmers, such as seasonal production.
FEDERAL LAND BANK (FLB): Long term mortgage credit provided to farmers by Federal Land Banks. These
bonds are issued at irregular times for various maturities ranging from a few months to ten years.
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA): FNMA, like GNMA was chartered under the
Federal National Mortgage Association Act in 1938. FNMA is a Federal corporation working under the auspices of
the Department of Housing and Urban Development(HUD). It is the largest single provider of residential mortgage
funds in the United States.Fannie Mae, as the corporation is called, is a private stockholder-owned corporation.The
corporation's purchases include a variety of adjustable mortgages and second loans, in addition to fixed-rate
mortgages. FNMA's securities are highly liquid and are widely accepted. FNMA assumes and guarantees that all
security holders will receive timely payment of principal and interest.
FEDERAL OPEN MARKET COMMITTEE(FOMC): Consists of seven members of the Federal Reserve Board
and five of the twelve Federal Reserve Bank Presidents. The President of the New York Federal Reserve Bank is a
permanent member, while the other presidents serve on a rotating basis. The committee periodically meets to set
Federal Reserve guidelines regarding purchases and sales of Government Securities in the open market as a means
of influencing the volume of bank credit and money.
FEDERAL RESERVE SYSTEM: The central bank of the United States created by congress and consisting of a
seven-member Board of Governors in Washington, D.C.; 12 regional banks and about 5700 commercial banks are
member of the system.
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA OR GINNIE MAE): Securities
influencing the volume of bank credit guaranteed by GNMA and issued by mortgage bankers, commercial banks,
savings and loan associations and other institutions. Security holder is protected by full faith and credit of the US
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Government. Ginnie Mae securities are backed by the FHA, VA or FMHM mortgages.The term"pass-through" is
often used to describe Ginnie Maes.
LIQUIDITY: A liquid asset is one that can be converted easily and rapidly into cash without a substantial loss of
value. In the money market, a security is said to be liquid if the spread between bid and asked prices is narrow and
reasonable size can be done at those quotes.
LOCAL GOVERNMENT INVESTMENT POOL (LOP): The aggregate of all funds from political subdivisions
that are placed in the custody of the State Treasurer for investment and reinvestment.
MARKET VALUE: The price at which a security is trading and could presumable be purchased or sold.
MASTER REPURCHASE AGREEMENT: A written contract covering all future transactions between the parties
to repurchase-reverse agreements that establish each party's rights in the transactions. A master agreement will often
specify, among other things, the right of the buyer-lender to liquidate the underlying securities in the event of default
by the seller-borrower.
MATURITY: The date upon which the principal or stated value of an investment becomes due and payable.
MONEY MARKET: The market in which short-term debt instruments (bills, commercial paper, bankers'
acceptances, etc.)are issued and traded.
NEGOTIABLE CERTIFICATES OF DEPOSIT: Unsecured obligations of the financial institution, bank or
savings and loan, bought at par value with the promise to pay face value plus accrued interest at maturity. They are
high-grade negotiable instruments,paying a higher interest rate than regular certificates of deposit.
OFFER: The price asked by a seller of securities. (When you are buying securities, you ask for an offer.) See
"Asked"and"Bid".
OPEN MARKET OPERATIONS: Purchases and sales of government and certain other securities in the open
market by the New York Federal Reserve Bank as directed by the FOMC in order to influence the volume of money
and credit in the economy. Purchases inject reserves into the bank system and stimulate growth of money and credit:
Sales have the opposite effect. Open market operations are the Federal Reserve's most important and most flexible
monetary policy tool.
PORTFOLIO: Collection of securities held by an investor.
PRIMARY DEALER: A group of government securities dealers who submit daily reports of market activity and
positions and monthly financial statements to the Federal Reserve Bank of New York and are subject to its informal
oversight. Primary dealers include Securities and Exchange Commission(SEC)-registered securities broker/dealers,
banks and a few unregulated firms.
PRUDENT PERSON RULE: An investment standard. In some states, the law requires that a fiduciary, such as a
trustee, may invest money only in a list of securities selected by the custody state—the so-called"legal list". In other
states, the trustee may invest in a security if it is one that would be bought by a prudent person of discretion and
intelligence who is seeking a reasonable income and preservation of capital.
QUALIFIED PUBLIC DEPOSITORIES: A financial institution which does not claim exemption from the
payment of any sales or compensating use or ad valorem taxes under the laws of this state, which has segregated for
the benefit of the commission eligible collateral having a value of not less than its maximum liability and which has
been approved by the Public Deposit Protection Commission to hold public deposits.
RATE OF RETURN: The yield obtainable on a security based on its purchase price or its current market price.
This may be the amortized yield to maturity; on a bond, the current income return.
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REPURCHASE AGREEMENT (RP OR REPO): A holder of securities sells these securities to an investor with
an agreement to repurchase them at a fixed date. The security "buyer" in effect lends the "seller" money for the
period of the agreement, and the terms of the agreement are structured to compensate him for this. Dealers use RP
extensively to finance their position. Exception: When the Fed is said to be doing RP, it is lending money that is,
increasing bank reserves.
SAFEKEEPING: A service to customers rendered by banks for a fee whereby securities and valuables of all types
and descriptions are held in the bank's vaults for protection.
STRUCTURED NOTES: Notes issued by Government Sponsored Enterprises(FHLB, FNMA, FHLMC, etc.) and
Corporations, which have imbedded option (e.g. call features, step-up coupons, floating rate coupons, derivative-
based returns)into their debt structure.Their market performance is impacted by the fluctuation of interest rates, the
volatility of the imbedded options and shifts in the shape of the yield curve.
SECONDARY MARKET: A market made for the purchase and sale of outstanding issues following the initial
distribution.
SECURITIES & EXCHANGE COMMISSION: Agency created by Congress to protect investors in securities
transactions by administering securities legislation.
SEC RULE 15C3-1: See"Uniform Net Capital Rule".
SMALL BUSINESS ADMINISTRATION (SBA): The portion of these securities which are guaranteed by
Federal government to provide financial assistance through direct loans and loan guarantees to small businesses.
Cash flows from these instruments may not be in equal installments because of prepayments.
STUDENT LOAN ASSOCIATION NOTES (SALLIE MAE): A US Corporation and instrumentality of the US
Government. Through its borrowings, funds are targeted for loans to students in higher education institutions.
SLMA' s securities are highly liquid and are widely accepted.
TENNESSEE VALLEY AUTHORITIES (TVA): A US Corporation created in the 1930's to electrify the
Tennessee Valley area; currently a major utility headquartered in Knoxville,Tennessee.TVA's securities are highly
liquid and are widely accepted.
TREASURY BILLS: A non-interest bearing discount security issued by the US Treasury to finance the national
debt.Most bills are issued to mature in three months, six months, or one year.
TREASURY BOND: Long-term US Treasury securities having initial maturities of more than 10 years.
TREASURY NOTES: Intermediate-term coupon bearing US Treasury having initial maturities of from one year to
ten years.
UNIFORM NET CAPITAL RULE: Securities and Exchange Commission requirement that member firms as well
as nonmember broker/dealers in securities maintain a maximum ratio of indebtedness to liquid capital of 15 to 1;
also called net capital rule and net capital ratio. Indebtedness covers all money owed to a firm, including margin
loans and commitments to purchase securities, one reason new public issues are spread among members of
underwriting syndicates.Liquid capital includes cash and assets easily converted into cash.
YIELD:The rate of annual income return on an investment, expressed as a percentage. (a) Income Yield is obtained
by dividing the current dollar income by the current market price for the security. (b)Net Yield or Yield to Maturity
is the current income yield minus any premium above par or plus any discount from par in purchase price, with the
adjustment spread over the period from the date of purchase to the date of maturity of the bond.
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APPENDIX D
SUMMARY OF CERTAIN PROVISIONS OF THE PRINCIPAL LEGAL DOCUMENTS
The following summary discussion of selected provisions of the Site Lease, the Lease Agreement
and the Indenture are made subject to all of the provisions of such documents. This summary discussion
does not purport to be a complete statement of said provisions and prospective purchasers of the Series
201IA Bonds are referred to the complete texts of said documents, copies of which are available upon
request sent to the City.
DEFINITIONS
The following sets forth the definitions of certain words and terms used in this Summary of
Principal Legal Documents.
"Act" means the Marks-Roos Local Bond Pooling Act of 1985, constituting Section 6584 et seq.
of the California Government Code.
"Additional Bonds" means Bonds other than Series 2011A Bonds issued under the Indenture in
accordance with the provisions of the Indenture.
"Additional Rental Payments" means all amounts payable by the City as Additional Rental
Payments pursuant to the Lease Agreement.
"Annual Debt Service" means, for each Bond Year, the sum of (a) the interest due on the
Outstanding Bonds in such Bond Year, assuming that the Outstanding Bonds are retired as scheduled
(including by reason of mandatory sinking fund redemptions), and (b) the scheduled principal amount of
the Outstanding Bonds due in such Bond Year(including any mandatory sinking fund redemptions due in
such Bond Year).
"Authority" means the Huntington Beach Public Financing Authority, a joint powers authority
organized and existing under the laws of the State of California.
"Authority Event of Default" means an event described as such in the Lease Agreement.
"Authorized Authority Representative" means any member of the Board of Directors of the
Authority, the Executive Director of the Authority or the Treasurer of the Authority, and any other Person
authorized by the Board of Directors of the Authority or the Executive Director of the Authority to act on
behalf of the Authority under or with respect to the Indenture.
"Authorized City Representative" means the City Manager of the City or any authorized
deputy or designee thereof or the Director of Finance of the City, and any other Person authorized by the
City Council of the City or the City Manager of the City to act on behalf of the City under or with respect
to the Indenture.
"Authorized Denominations" means, with respect to the Bonds, $5,000 and any integral
multiple thereof.
"Average Annual Debt Service" means the average of the Annual Debt Service for all Bond
Years, including the Bond Year in which the calculation is made.
"Base Rental Deposit Date" means the fifth Business Day next preceding each Interest Payment
Date.
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"Base Rental Payments" means all amounts payable to the Authority by the City as Base Rental
Payments pursuant to the Lease Agreement.
`Beneficial Owners" means those individuals, partnerships, corporations or other entities for
whom the Participants have caused the Depository to hold Book-Entry Bonds.
"Bond Year" means each twelve-month period beginning on September 2 in each year and
extending to the next succeeding September 1, both dates inclusive, except that the first Bond Year shall
begin on the Closing Date and end on September 1, 2012.
"Bonds" means the Huntington Beach Public Financing Authority (Orange County, California)
Lease Revenue Bonds issued under the Indenture, and includes the Series 2011A Bonds and any
Additional Bonds.
"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 the Indenture.
"Business Day" means a day other than (a) Saturday or Sunday, (b) a day on which banking
institutions in the city or cities in which the Office of the Trustee is located are authorized or required by
law to be closed, and (c) a day on which the New York Stock Exchange is authorized or obligated by law
or executive order to be closed.
"Cede & Co." means Cede & Co., the nominee of DTC, and any successor nominee of DTC
with respect to Book-Entry Bonds.
"City" means the City of Huntington Beach, a municipal corporation and chartered city
organized and existing under and by virtue of the laws of the State of California.
"Closing Date" means the date upon which the Series 2011A Bonds are delivered to the Original
Purchaser,being September 28, 2011.
"Code" means the Internal Revenue Code of 1986.
"Continuing Disclosure Certificate" means the Continuing Disclosure Certificate, dated the
Closing Date, of 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 the Indenture, the Lease
Agreement, the Site Lease, 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, financial
advisory fees, legal fees and expenses of counsel with respect to the refinancing of the Projects, the initial
fees and expenses of the Trustee and its counsel, any premium for a municipal bond insurance policy
insuring payments of debt service on Additional Bonds, 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 pursuant to the Indenture.
"Defeasance Securities" means (a) non-callable direct obligations of the United States of
America("United States Treasury Obligations"), (b) evidences of ownership of proportionate interests in
future interest and principal payments on United States Treasury Obligations held by a bank or trust
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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 United States Treasury
Obligations are not available to any person claiming through the custodian or to whom the custodian may
be obligated, (c) pre-refunded municipal obligations rated "AAA" and "Aaa" by S&P and Moody's,
respectively, or (d) securities eligible for "AAA" defeasance under then existing criteria of S&P or
Moody's, or any combination thereof.
"Depository" means the securities depository acting as Depository pursuant to the Indenture.
"DTC" means The Depository Trust Company,New York,New York and its successors.
"Escrow Agreements" means the 2001A Escrow Agreement and the 2001B Escrow Agreement.
"Escrow Bank" means The Bank of New York Mellon Trust Company, N.A., as trustee and
escrow bank under the Escrow Agreements, and any successor thereto.
"Event of Default" means an event described as such in the Indenture.
"Fitch" means Fitch, Inc., 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"Fitch" shall be deemed
to refer to any other nationally recognized securities rating agency selected by the Authority.
"Indenture" means the Indenture, dated as of September 1 2011, 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.
"Independent Insurance Consultant" means a nationally recognized independent actuary,
insurance company or broker that has actuarial personnel experienced in the area of insurance for which
the City is to be self-insured, as may from time to time be designated by the City.
"Interest Account" means the account by that name within the Payment Fund established
pursuant to the Indenture.
"Interest Payment Date" means each March 1 and September 1, commencing March 1, 2012, so
long as any Bonds remain Outstanding.
"Laws and Regulations" means, with respect to the Property, any applicable law, regulation,
code, order, rule,judgment or consent agreement, including, without limitation, those relating to zoning,
building, use and occupancy, fire safety, health, sanitation, air pollution, ecological matters,
environmental protection, hazardous or toxic materials, substances or wastes, conservation, parking,
architectural barriers to the handicapped, or restrictive covenants or other agreements affecting title to the
Property.
"Lease Agreement" means the Lease Agreement, dated as of September, 1, 2011, 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.
"Lease Default Event" means an event of default pursuant to and as described in the Lease
Agreement.
"Lease Revenues" means all Base Rental Payments payable by the City pursuant to the Lease
Agreement, including any prepayments thereof, any Net Proceeds and any amounts received by the
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Trustee as a result of or in connection with the Trustee's pursuit of remedies under the Lease Agreement
upon a Lease Default Event.
"Letter of Representations" means the letter of the Authority delivered to and accepted by the
Depository on or prior to the delivery of the Bonds as Book-Entry Bonds setting forth the basis on which
the Depository serves as depository for such Book-Entry Bonds, as originally executed or as it may be
supplemented or revised or replaced by a letter to a substitute Depository.
"Maximum Annual Debt Service" means the largest Annual Debt Service for any Bond Year,
including the Bond Year the calculation is made.
"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.
"Net Proceeds" means any insurance proceeds or condemnation award paid with respect to any
of the Property, which proceeds or award, after payment therefrom of all reasonable expenses incurred in
the collection thereof, are in an amount greater than$50,000.
"Nominee" means the nominee of the Depository, which may be the Depository, as determined
from time to time pursuant to the Indenture.
"Office of the Trustee" means the principal corporate trust office of the Trustee in Los Angeles,
California, or such other office as may be specified to the Authority and the City in writing; provided,
however, that with respect to presentation of Bonds for payment or for registration of transfer and
exchange, such term shall mean the office or agency of the Trustee at which, at any particular time, its
corporate trust agency business shall be conducted, which other office or agency shall be 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.
"Original Purchaser" means Merrill Lynch, Pierce, Fenner & Smith Incorporated, on behalf of
itself and on behalf of E. J. De La Rosa & Co., Inc., the original purchasers of the Series 2011A Bonds
from the Authority.
"Outstanding" means, when used as of any particular time with reference to Bonds, subject to
the provisions of the Indenture summarized under the subcaption "INDENTURE — Miscellaneous —
Disqualified Bonds," all Bonds theretofore, or thereupon being, authenticated and delivered by the
Trustee under the Indenture except (a) Bonds previously canceled by the Trustee or delivered to the
Trustee for cancellation, (b) Bonds paid or deemed to have been paid within the meaning of the Indenture
summarized under the subcaption "INDENTURE — Defeasance — Bonds Deemed To Have Been Paid,"
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 the Indenture.
"Owner" means, with respect to a Bond, the Person in whose name such Bond is registered on
the Registration Books.
"Participating Underwriter" has the meaning ascribed thereto in the Continuing Disclosure
Certificate.
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"Participants" means those broker-dealers, banks and other financial institutions from time to
time for which the Depository holds Book-Entry Bonds as securities depository.
"Payment Fund" means the fund by that name established in accordance with the Indenture.
"Permitted Encumbrances" means, with respect to the Property, (a) liens for general ad
valorem taxes and assessments, if any, not then delinquent, or which the City may, pursuant to provisions
of the Lease Agreement summarized under the subcaption "LEASE AGREEMENT — Representations
and Warranties; Covenants and Agreements—Taxes,"permit to remain unpaid, (b) the Lease Agreement,
(c) the Site Lease, (d) any right or claim of any mechanic, laborer, materialman, supplier or vendor not
filed or perfected in the manner prescribed by law, (e) easements, rights of way, mineral rights, drilling
rights and other rights, reservations, covenants, conditions or restrictions which exist of record as of the
Closing Date, and (f) easements, rights of way, mineral rights, drilling rights and other rights,
reservations, covenants, conditions or restrictions established following the Closing 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 to which the Authority consents
in writing.
"Permitted Investments" means any of the following to the extent then permitted by the general
laws of the State of California applicable to investments by cities:
(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
- 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
(2) Obligations of instrumentalities or agencies of the United States of America limited to the
following: (a) the Federal Home Loan Bank Board ("FHLB"); (b) the Federal Home Loan Mortgage
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Corporation ("FHLMC"); (c) the Federal National Mortgage Association (FNMA); (d) Federal Farm
Credit Bank("FFCB"); and(e) guaranteed portions of Small Business Administration("SBA")notes.
(3) Commercial Paper having a maximum maturity of not more than 270 days, payable in the
United States of America and issued by corporations that are organized and operating in the United States
with total assets in excess of$500 million and having "A" or better rating for the issuer's long-term debt
as provided by Moody's, S&P, or Fitch and "P-1", "A-1", "Fl" or better rating for the issuer's short-term
debt as provided by Moody's, S&P, or Fitch,respectively.
(4) Bills of exchange or time drafts drawn on and accepted by a commercial bank, otherwise
known as "bankers' acceptances," having original maturities of not more than 180 days. The institution
must have a minimum short-term debt rating of "A-1", "P-1", or "Fl" by S&P, Moody's, or Fitch,
respectively, and a long-term debt rating of no less than"A" by S&P, Moody's, or Fitch.
(5) Shares of beneficial interest issued by diversified management companies, known as
money market funds, registered with the U.S. Securities and Exchange Commission under the Investment
Company Act of 1940 (15 U.S.C. Sec. 80a-1 et seq.) and whose fund has received the highest possible
rating from S&P, including funds for which the Trustee, its parent holding company, if any, or any
affiliates or subsidiaries of the Trustee provide in investment advisory or other management services.
(6) Shares in a California common law trust established pursuant to Title 1, Division 7,
Chapter 5 of the Government Code of the State of California which invests exclusively in investments
permitted by Section 53601 of Title 5, Division 2, Chapter 4 of the Government Code of California, as it
may be amended.
(7) Certificates of deposit issued by a nationally- or state-chartered bank or a state or federal
association(as defined by Section 5102 of the California Financial Code) or by a state-licensed branch of
a foreign bank, in each case which has, or which is a subsidiary of a parent company which has,
obligations outstanding having a rating in the"A" category or better from S&P,Moody's, or Fitch.
(8) Pre-refunded municipal obligations 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;
(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
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(f) the cash or United States Treasury Obligations are not available to satisfy any
other claims, including those by or against the trustee or escrow agent.
(9) Registered state warrants or treasury notes or bonds of the State of California, including
bonds payable solely out of the revenues from a revenue-producing property owned, controlled, or
operated by the State of California or by the state, department, board, agency, or authority of the other 49
United States, having a long-term debt rating of at least "AA-" or "Aa3" by S&P or Moody's,
respectively
(10) California public municipal obligations including bonds payable solely out of the
revenues from a revenue-producing property owned, controlled, or operated by a California municipal
entity having a long-term debt rating of at least"AA-" or"Aa3"by S&P or Moody's,respectively
(11) Repurchase agreements which have a maximum maturity of 30 days and are fully secured
at or greater than 102% of the market value plus accrued interest by obligations of the United States
Government, its agencies and instrumentalities, in accordance with number(ii) above.
(12) Investment agreements and guaranteed investment contracts with issuers having a long-
term debt rating of at least"AA-" or"Aa3"by S&P or Moody's,respectively.
(13) Deposits with the Local Agency Investment Fund(LAIF) of the State.
(14) Corporate obligations issued by corporations organized and operating within the United
States or by depository institutions licensed by the United States or any state and operating within the
United States having a long-term debt rating of at least "AA-" or "Aa3" by S&P or Moody's,
respectively.
"Person" means an individual, corporation, limited liability company, firm, association,
partnership, trust, or other legal entity or group of entities, including a governmental entity or any agency
or political subdivision thereof.
"Principal Account" means the account by that name within the Payment Fund established
pursuant to the Indenture.
"Principal Payment Date" means a date on which the principal of the Bonds becomes due and
payable, either as a result of the maturity thereof or by mandatory sinking fund redemption.
"Projects" means the capital improvement projects described in recital clauses to the Indenture.
"Property" means the real property described as such in the Lease Agreement, and any
improvements thereto.
"Rebate Fund" means the fund by that name established pursuant to the Indenture.
"Rebate Requirement"has the meaning ascribed thereto in the Tax Certificate.
"Record Date" means the 15th calendar day of the month preceding each Interest Payment Date,
whether or not such day is a Business Day.
"Redemption Fund" means the fund by that name established pursuant to the Indenture.
"Registration Books" means the records maintained by the Trustee for the registration of
ownership and registration of transfer of the Bonds pursuant to the Indenture.
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"Rental Payments" means, collectively, the Base Rental Payments and the Additional Rental
Payments.
"Rental Period" means the period from the Closing Date through September 30, 2012 and,
thereafter, the twelve-month period commencing on October 1 of each year during the term of the Lease
Agreement.
"Reserve Facility" means any line of credit, letter of credit, insurance policy, surety bond or
similar instrument, in form reasonably satisfactory to the Trustee, that (a) names the Trustee as
beneficiary thereof, (b)provides for payment on demand, (c) cannot be terminated by the issuer thereof so
long as any of the Bonds remain Outstanding, (d) is issued by an obligor, the obligations of which under
the Reserve Facility are, at the time such Reserve Facility is substituted for all or part of the moneys on
deposit in the Reserve Fund, rated at"AAA" by S&P or"Add" by Moody's, and(e) is deposited with the
Trustee pursuant to the provisions of the Indenture summarized under the subcaption "INDENTURE —
Pledge and Assignment; Funds and Accounts—Reserve Fund."
"Reserve Fund" means the fund by that name established pursuant to the Indenture.
"Reserve Requirement" means, as of the date of any calculation, the least of (a) 10% of the
original aggregate principal amount of the Bonds (excluding Bonds refunded with the proceeds of
subsequently issued Bonds), (b) Maximum Annual Debt Service, and (c) 125% of Average Annual Debt
Service.
"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.
"Scheduled Termination Date" means September 1, 2031.
"Series" means the initial series of Bonds executed, authenticated and delivered on the date of
initial issuance of such Bonds and identified pursuant to the Indenture as the Series 2011A Bonds, and
any Additional Bonds issued pursuant to a Supplemental Indenture and identified as a separate Series of
Bonds.
"Series 2011A Bonds" means the Huntington Beach Public Financing Authority (Orange
County, California) Lease Revenue Refunding Bonds, 2011 Series A (Capital Improvement Refinancing
Project), issued under the Indenture.
"Site Lease" means the Site Lease, dated as of September 1, 2011, 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.
"Supplemental Indenture" means any supplemental indenture amendatory of or supplemental to
the Indenture, but only if and to the extent that such Supplemental Indenture is specifically authorized
under the Indenture.
"Tax Certificate" means the Tax Certificate executed by the Authority at the time of issuance of
the Series 2011A Bonds, relating to the requirements of Section 148 of the Code, as originally executed
and as it may from time to time be amended in accordance with the provisions thereof.
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"Tax-Exempt" means, with respect to interest on any obligations of a state or local government,
including interest on the Series 2011A Bonds, that such interest is excluded from the gross income of the
holders thereof for federal income tax purposes, whether or not such interest is includable as an item of
tax preference or otherwise includable directly or indirectly for purposes of calculating other tax
liabilities, including any alternative minimum tax or environmental tax under the Code.
"Trustee" means The Bank of New York Mellon Trust Company, N.A., a national banking
association organized and existing under the laws of the United States of America, or any successor
thereto as Trustee under the Indenture substituted in its place as provided in the Indenture.
"2001A Escrow Agreement" means the Escrow Agreement, dated as of September 1,2011, by
and between the Authority and the Escrow Bank, relating to the Prior 2001A Bonds, as originally
executed and as it may be amended from time to time in accordance with the terms thereof.
"2001B Escrow Agreement" means the Escrow Agreement, dated as of September 1, 2011, by
and between the Authority and the Escrow Bank, relating to the Prior 2001B Bonds, as originally
executed and as it may be amended from time to time in accordance with the terms thereof.
"Verification Report" means, with respect to the deemed payment of Bonds pursuant to the
provisions of the Indenture summarized under clause (ii)(B) of paragraph (a) under the subcaption
"INDENTURE —Defeasance— Bonds Deemed To Have Been Paid," a report of a nationally recognized
certified public accountant, or firm of such accountants, verifying that the Defeasance Securities and cash,
if any, deposited in connection with such deemed payment satisfy the requirements of such provisions of
the Indenture.
"Written Certificate of the Authority" means a written certificate signed in the name of the
Authority by an Authorized Representative of the Authority. Any such certificate 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" means a written certificate signed in the name of the City by
an Authorized Representative of the City.Any such certificate 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 Request of the Authority" means a written request signed in the name of the
Authority by an Authorized Representative of the Authority. Any such 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 Request of the City" means a written request signed in the name of the City by an
Authorized Representative of the City. Any such 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.
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SITE LEASE
Lease of the Property; Rental
Lease of Property. Pursuant to the Site Lease, the City leases to the Authority, and the Authority
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 the Site Lease.
Rental. The Authority shall pay to the City as and for rental of the Property under the Site Lease,
the sum set forth in the Site Lease(the"Site Lease Payment"). The Site Lease Payment shall be paid from
the proceeds of the Series 2011A Bonds; provided, however, that in the event the available proceeds of
the Series 2011A Bonds are not sufficient to enable the Authority to pay such amount in full, the
remaining amount of the Site Lease Payment shall be reduced to an amount equal to the amount of such
available proceeds.
The City shall deposit the Site Lease Payment in one or more separate funds or accounts to be
held and administered for the purpose of refunding the Prior Bonds. The Authority and the City find and
determine that the amount of the Site Lease Payment does not exceed the fair market value of the
leasehold interest in the Property which is conveyed under the Site Lease by the City to the Authority. No
other amounts of rental shall be due and payable by the Authority for the use and occupancy of the
Property under the Site Lease.
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 in the Site Lease 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 the Site 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) refer 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 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 of the Site Lease
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 Authority asserts its right to such possession and enjoyment.
Special Covenants and Provisions
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.
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 to the Site Lease and such further instruments as may reasonably be required
for correcting any inadequate or incorrect description of the Property leased by the Site Lease or intended
so to be or for carrying out the expressed intention of the Site Lease, the Indenture and the Lease
Agreement.
Waiver of Personal Liability. All liabilities under the Site Lease on the part of the Authority shall
be solely liabilities of the Authority as a joint powers authority, and the City releases each and every
director, officer and employee of the Authority of and from any personal or individual liability under the
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Site Lease. No director, officer or employee of the Authority shall at any time or under any
circumstances be individually or personally liable under the Site Lease to the City or to any other party
whomsoever for anything done or omitted to be done by the Authority under the Site Lease.
All liabilities under the Site Lease on the part of the City shall be solely liabilities of the City as a
governmental entity, and the Authority releases each and every council member, officer and employee of
the City of and from any personal or individual liability under the Site Lease. No council member, officer
or employee of the City shall at any time or under any circumstances be individually or personally liable
under the Site Lease to the Authority or to any other party whomsoever for anything done or omitted to be
done by the City under the Site Lease.
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.
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.
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 the Site
Lease, and to perform all of its duties and obligations under the Site Lease, and has duly authorized the
execution of the Site 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.
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 the Site
Lease, and to perform all of its duties and obligations under the Site Lease, and has duly authorized the
execution and delivery of the Site Lease.
Assignment,Selling and Subleasing
Assignment, Selling and Subleasing. The Site Lease may be assigned or sold, and the Property
may be 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, sublease or sale, as the case may be.
The Authority shall assign all of its rights under the Site Lease to the Trustee appointed pursuant
to the Indenture.
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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 the Site Lease.
Improvements
Title to all improvements made on the Property during the term of the Site Lease shall vest in the
City.
Term; Termination
Term. The term of the Site 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 the
Scheduled Termination Date,unless such term is extended or sooner terminated as hereinafter provided.
Extension; Early Termination. If, on the Scheduled Termination Date, the Bonds shall not be
fully paid, or provision therefor made in accordance with the provisions of the Indenture summarized
under the caption"INDENTURE —Defeasance," 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 the Site Lease shall be automatically extended until the date upon which all Bonds shall be fully
paid, or provision therefor made in accordance with the provisions of the Indenture summarized under the
caption "INDENTURE—Defeasance," and the Indenture shall be discharged by its terms, except that the
term of the Site Lease shall in no event be extended more than ten years. If, prior to the Scheduled
Termination Date, all Bonds shall be fully paid, or provisions therefor made in accordance with the
provisions of the Indenture summarized under the caption "INDENTURE — Defeasance," and the
Indenture shall be discharged by its terms, the term of the Site Lease shall end simultaneously therewith.
Action on Default. In each and every case upon the occurrence and during the continuance of a
default by the Authority under the Site Lease, the City shall have all the rights and remedies permitted by
law, except the City, to the extent permitted by law, waives any and all rights to terminate the Site Lease.
Miscellaneous
Amendments; Substitution and Release. The Site Lease may be amended, changed, modified,
altered or terminated only in accordance with the provisions of the Lease Agreement. The City shall have
the right to substitute alternate real property for the Property or to release portions of the Property as
provided in the Lease Agreement.
Assignment. The Authority and City acknowledge that the Authority has assigned its right, title
and interest in and to the Site Lease to the Trustee pursuant to the Indenture. The City consents to such
assignment. The City consents to the Indenture and acknowledges and agrees to the rights of the Trustee
as set forth therein.
Applicable Law. The Site Lease shall be governed by and construed in accordance with the laws
of the State of California.
THE LEASE AGREEMENT
Lease of Property; Term
Lease of Property. (a) Pursuant to the Lease Agreement, the Authority leases to the City and the
City leases from the Authority the Property, on the terms and conditions set forth in the Lease Agreement,
subject to all Permitted Encumbrances.
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(b) The leasing of the Property by the City to the Authority pursuant to the Site Lease shall
not effect or result in a merger of the City's leasehold estate in the Property as lessee under the Lease
Agreement and its fee estate in the Property as lessor under the Site Lease, and the Authority shall
continue to have a leasehold estate in the Property pursuant to the Site Lease throughout the term thereof
and of the Lease Agreement. The Lease Agreement shall constitute a sublease with respect to the
Property. The leasehold interest in the Property granted by the City to the Authority pursuant to the Site
Lease is and shall be independent of the Lease Agreement and the Lease Agreement shall not be an
assignment or surrender of the leasehold interest in the Property granted to the Authority under the Site
Lease.
Term; Occupancy. (a) The term of the Lease Agreement shall commence on the Closing Date
and shall end on the Scheduled Termination Date, unless such term is extended or sooner terminated as
hereinafter provided. If, on the Scheduled Termination Date, all of the Bonds shall not be fully paid or
deemed to have been paid in accordance with the provisions of the Indenture summarized under the
caption "INDENTURE — Defeasance," or any Rental Payments shall remain due and payable or shall
have been abated at any time, then the term of the Lease Agreement shall be extended until the date upon
which all of the Bonds shall be fully paid or deemed to have been paid in accordance with the provisions
of the Indenture summarized under the caption "INDENTURE — Defeasance," and all Rental Payments
due and payable shall have been paid in full; provided, however, that the term of the Lease Agreement
shall in no event be extended more than ten years beyond the Scheduled Termination Date.If, prior to the
Scheduled Termination Date, all of the Bonds shall be fully paid or deemed to have been paid in
accordance with the provisions of the Indenture summarized under the caption "INDENTURE —
Defeasance," and all Rental Payments due and payable shall have been paid in full, the term of the Lease
Agreement shall end simultaneously therewith.
(b) The City shall take possession of the Property on the Closing Date.
Rental Payments
Base Rental Payments. (a) General. The Rental Payments, including Base Rental Payments, for
each Rental Period 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 such Rental Period. The obligation of the City to pay the Base Rental Payments does not
constitute a debt of the City or of the State of California or of any political subdivision thereof in
contravention 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) Base Rental Payments. Subject to the provisions of the Lease Agreement summarized
under the subcaption "— Rental Abatement," the City shall, on each Base Rental Deposit Date, pay to the
Authority a Base Rental Payment in an amount equal to the principal of, and interest on, the Bonds due
and payable on the next succeeding Principal Payment Date or Interest Payment Date, as applicable,
including any such principal due and payable by reason of mandatory sinking fund redemption of the
Bonds; provided, however, that the amount of such Base Rental Payment shall be reduced by the amount,
if any, available in the Payment Fund, the Principal Account or the Interest Account on such Base Rental
Deposit Date to pay such principal of, or interest on, the Bonds.
(c) Payments other than Regularly Scheduled Payments. If the term of the Lease Agreement
shall have been extended pursuant to the terms thereof, 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 the
Lease Agreement (as so extended pursuant to the terms thereof). Upon such extension, the Base Rental
Payments payable during such extended term shall be established so that such Base Rental Payments will
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in the aggregate be sufficient to pay the unpaid principal of, and interest accrued and to accrue on, the
Bonds; provided, however, that the Rental Payments payable in any Rental Period shall not exceed the
annual fair rental value of the Property.
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 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;
(c) insurance premiums for all insurance required pursuant to the Lease Agreement;
(d) any amounts with respect to 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 the Lease
Agreement or the Indenture.
Amounts constituting Additional Rental Payments payable under the Lease Agreement 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.
Fair Rental Value. The parties to the Lease Agreement have agreed and determined that the
Rental Payments are not in excess of the fair rental value of the Property.
Payment Provisions. Each installment of Base Rental Payments payable under the Lease
Agreement 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, or such other place or entity as the Authority shall
designate.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. hi 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 under the Lease Agreement or refunded at the
time of such determination.
Appropriations Covenant. The City covenants to take such action as may be necessary to include
all Rental Payments due under the Lease Agreement in its annual budgets and to make necessary annual
appropriations for all such Rental Payments. The covenants on the part of the City summarized in this
paragraph 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
such covenants.
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Rental Abatement. Except as otherwise specifically provided under this subcaption, "— Rental
Abatement," 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 California Civil Code Sections 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. The City and the Authority shall provide the Trustee with a certificate setting forth the
amount of such abatement 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 the Lease Agreement shall be extended as provided therein; provided,
however, that such term shall in no event be extended more than ten years beyond the Scheduled
Termination Date.
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 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.
Representations and Warranties; Covenants and Agreements
Net-Net-Net Lease. The Lease Agreement shall be, and shall be deemed and construed to be, a
"net-net-net lease" and 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.
Disclaimer of Warranties. The Authority makes no agreement, warranty or representation, either
express or implied, as to the value, design, condition, merchantability or fitness for a particular purpose or
fitness for use of the Property, or warranty with respect thereto. The City acknowledges that the Authority
is not a manufacturer of any portion of the Property or a dealer therein, that the City leases the Property as
is, it being agreed that all of the aforementioned risks are to be borne by the City.
Quiet Enjoyment. So long as no Lease Default Event shall have occurred and be continuing, the
City shall at all times during the term of the Lease Agreement peaceably and quietly have, hold and enjoy
the Property without suit, trouble or hindrance from the Authority.
Right of Entry. The Authority 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 the Lease Agreement, and for all other lawful purposes.
Use of the Property. The City shall not use, operate or maintain the Property improperly,
carelessly, in violation of any applicable law or in a manner contrary to that contemplated by the 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 the Lease Agreement.
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Maintenance and Utilities. 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. In exchange for the Rental Payments, the Authority agrees to provide only the
Property.
Additions to Property. Subject to the provisions of the Lease Agreement summarized under the
subcaption "— Liens", 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 under the provisions of state and federal law, and the Property, upon completion of any
addition, modification or improvement made pursuant to this paragraph, shall be of a value which is at
least equal to the value of the Property immediately prior to the making of such addition, modification or
improvement.
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, and the Property, upon completion of any installation,
modification or removal made pursuant to this paragraph, shall be of a value which is at least equal to the
value of the Property immediately prior to the making of such installation, modification or removal.
Nothing in the Lease Agreement shall prevent the City or any sublessee from purchasing items to be
installed pursuant to this paragraph 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.
Taxes. The City shall pay or cause to be paid 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 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 and when the same become due.
Upon notice to the Authority and the Trustee, 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.
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Liens. In the event the City shall at any time during the term of the 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 shall
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 contest 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.
Compliance with Law, Regulations,Etc. The City represents and warrants that, after due inquiry,
it has no knowledge and has not given or received any written notice indicating that the Property or the
use thereof or any practice, procedure or policy employed by it in the conduct of its business with respect
to the Property materially violates any Laws and Regulations.
No Condemnation. The City shall not exercise the power of condemnation with respect to the
Property. If for any reason the foregoing covenant shall be held by a court of competent jurisdiction to be
unenforceable and the City condemns the Property or if the City breaches such covenant, the City agrees
that the value of the City's leasehold estate under the Lease Agreement in the Property shall be not less
than the greater of(a) the amount sufficient to redeem the Bonds pursuant to the Indenture if the Bonds
are then subject to redemption, or (b) the amount sufficient to defease the Bonds to the first available
redemption date in accordance with the Indenture if the Bonds are not then subject to redemption.
Authority's Purpose. So long as any Bonds are Outstanding, the Authority shall not engage in
any activities inconsistent with the purposes for which the Authority is organized, as set forth in the
agreement pursuant to which the Authority was created.
Insurance
Public Liability and Property Damage Insurance; Workers' Compensation Insurance. (a) The
City shall maintain reasonable and customary liability insurance. The City's obligations under this
paragraph (a) may be satisfied by self-insurance, provided that such self-insurance complies with the
provisions of the Lease Agreement summarized under the subcaption"—Self-Insurance."
(b) The City shall maintain or cause to be maintained casualty insurance insuring the
Property against fire, lightning and all other risks covered by an extended coverage endorsement
(excluding earthquake) to the full insurable value of the Property, subject to a $100,000 loss deductible
provision. Full insurable value shall not be less than the aggregate principal amount of the Outstanding
Bonds. The insurance required under this paragraph(b) may be maintained in whole or in part in the form
of self-insurance, provided that such self-insurance complies with the provisions of the Lease Agreement
summarized under the subcaption"—Self-Insurance."
(c) 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 paragraph (b) above in an
amount not less than an amount equal to two times Maximum Annual Debt Service. The insurance
required under this paragraph(c) may not be maintained in whole or in part in the form of self-insurance.
(d) The insurance required by paragraphs (a), (b) and(c) above shall be provided by insurers
rated"A" or better by Fitch,A.M. Best Company or S&P.
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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 the Lease Agreement. All such policies shall
provide that the Trustee shall be given 30 days notice of the expiration thereof, any intended cancellation
thereof or any reduction in the coverage provided thereby. 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 October 15 of each year,
commencing October 15, 2012, a schedule of the insurance policies being maintained in accordance with
the Lease Agreement and a Written 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 the provisions of the Lease
Agreement summarized under the caption "— Insurance." The Trustee shall be entitled to rely upon said
Written Certificate of the City as to the City's compliance with such provisions of the Lease Agreement.
The Trustee shall not be responsible for the sufficiency of the coverage or the amounts of such policies.
Self-hisurance. 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 of the Lease Agreement.Any self-insurance maintained by the City pursuant to the provisions of
the Lease Agreement summarized under the caption "— Insurance," shall comply with the following
terms:
(a) the self-insurance program shall be approved in writing 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 the Independent Insurance Consultant and any deficiencies in any self-insured claims
reserve fund shall be remedied in accordance with the recommendation of such Independent Insurance
Consultant;
(c) the self-insured claims reserve fund shall be held in a separate trust fund by an
independent trustee, which may be the Trustee serving as such under the Indenture, and
(d) in the event the self-insurance program shall be discontinued, the actuarial soundness of
its claims reserve fund, as determined by an Independent Insurance Consultant, shall be maintained.
Title Insurance. The City shall provide, at its own expense, one or more ALTA title insurance
policies for the Property, in the aggregate amount of not less than the aggregate principal amount of the
Bonds. Said policy or policies shall insure (a) the fee interest of the City in the Property, (b) the
Authority's ground leasehold estate in the Property under the Site Lease, and (c) the City's leasehold
estate under the Lease Agreement in the Property, subject only to Permitted Encumbrances; provided,
however, that one or more of said estates may be insured through an endorsement to such policy or
policies. All Net Proceeds received under said policy or policies shall be deposited with the Trustee and
applied as provided in the Indenture. So long as any of the Bonds remain Outstanding, each policy of title
insurance obtained pursuant to the Lease Agreement or required by the Lease Agreement shall provide
that all proceeds thereunder shall be payable to the Trustee for the benefit of the Owners.
Eminent Domain; Right to Redeem
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 of the Lease
Agreement shall cease as of the day that possession shall be so taken. If less than all of the Property shall
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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 the Lease Agreement
summarized under the subcaption "— Rental Payments — Rental Abatement" 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 the
Indenture. Any such award made after all of the Bonds, and all other amounts due under the Indenture and
under the Lease Agreement, have been fully paid, shall be paid to the City.
Right to Redeem Bonds. (a) The City shall have the right to cause the Bonds to be redeemed
pursuant to, and in accordance with the provisions of, the Indenture by providing the Trustee with funds
sufficient for such purpose (which funds may be derived by the City from any source) and giving notice
of the City's exercise of such right as provided in paragraph(b)below.
(b) In order to exercise its right to cause Bonds to be redeemed pursuant to paragraph (a)
above, the City shall give written notice to the Trustee of its intention to exercise such right, specifying
the date on which such redemption shall be made, which date shall be not less than 45 days from the date
such notice is given (unless otherwise agreed by the Trustee), and specifying the Series, maturities and
amounts of Bonds to be redeemed.
(c) The City shall have the right to cause Bonds to be deemed to have been paid pursuant to,
and in accordance with the provisions of, the Indenture summarized under the subcaption "INDENTURE
— Defeasance — Bonds Deemed To Have Been Paid" by providing the Trustee with funds sufficient for
such purpose(which funds may be derived by the City from any source) and providing and delivering, or
causing to be provided and delivered the other items required pursuant to said provisions of the Indenture
to be provided or delivered in connection with such deemed payment.
Assignment and Subletting; Substitution or Release; Title
Assignment and Subleasing. Neither the Lease Agreement nor any interest of the City under the
Lease Agreement shall be sold, mortgaged, pledged, assigned, or transferred by the City by voluntary act
or by operation of law or otherwise, provided, however, that the Property may be subleased in whole or in
part by the City, but only subject to the following conditions, which are, pursuant to the Lease
Agreement, made conditions precedent to any such sublease:
(a) the Lease Agreement and the obligation of the City to make all Rental Payments under
the Lease Agreement 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
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(e) the City shall have filed or caused to be filed with the Authority and the Trustee an
Opinion of Counsel to the effect that such sublease will not, in and of itself, cause the interest on Tax-
Exempt Bonds to be included in gross income for federal income tax purposes.
Substitution or Release of the Property. Subject to the provisions of the Lease Agreement
summarized under this subcaption, "— 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 the Lease Agreement. All costs and expenses incurred in connection with any such
substitution or release shall be borne by the City. Notwithstanding any substitution or release pursuant to
the provisions of the Lease Agreement summarized under this subcaption, "— Substitution or Release of
the Property," there shall be no reduction in or abatement of the Base Rental Payments due from the City
under the Lease Agreement 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 conditions, which are, pursuant to the Lease
Agreement, made conditions precedent to such substitution or release:
(a) an independent certified real estate appraiser selected by the City shall have found (and
shall have delivered a certificate to the Trustee setting forth its findings) that (i) the sum of Base Rental
Payments plus Additional Rental Payments due under the Lease Agreement in any Rental Period is not in
excess of the annual fair rental value of the Property, as constituted after such substitution or release, and
(ii) the Property, as constituted after such substitution or release, has a useful life equal to or greater than
the maximum remaining term of the Lease Agreement (including extensions thereof under the terms
thereof);
(b) the City shall have obtained or caused to be obtained an ALTA title insurance policy or
policies with respect to any substituted property in the amount of the fair market value of such substituted
property (which fair market value shall have been determined by an independent certified real estate
appraiser), of the type and with the endorsements described in the provisions of the Lease Agreement
summarized under the subcaption"—Insurance—Additional Insurance Provision;Form of Policies";
(c) the City shall have filed or caused to be filed with the Trustee an Opinion of Counsel to
the effect that such substitution or release will not, in and of itself, cause the interest on Tax-Exempt
Bonds to be included in gross income for federal income tax purposes;
(d) the City shall have given, or shall have made arrangements for the giving of, any notice
of the occurrence of such substitution or release required to be given pursuant to paragraph 4 of
subsection (b) of Section 5 of the Continuing Disclosure Certificate (See APPENDIX F — FORM OF
CONTINUING DISCLOSURE CERTIFICATE");
(e) the City, the Authority and the Trustee shall have executed, and the City shall have
caused to be recorded with the county recorder of the county in which the Property is located, any
document necessary to reconvey to the City the portion of the Property being substituted or released and
to include any substituted real property in the description of the Property contained in the Lease
Agreement and in the Site Lease, and
(f) the City shall have certified to the Trustee that the substituted real property is essential
for performing the City's governmental functions.
Title to Property. Upon the termination or expiration of the Lease Agreement (other than as
provided in the provisions of the Lease Agreement summarized under the subcaption"—Events of Default
and Remedies—Action on Default"), and the first date upon which no Bonds are any longer Outstanding,
all right, title and interest in and to the Property shall vest in the City. Upon any such termination or
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expiration, the Authority shall execute such conveyances, deeds and other documents as may be necessary
to effect such vesting of record.
Events of Default and Remedies
Events of Default. The occurrence, from time to time, of any one or more of the following events
shall constitute a Lease Default Event under the Lease Agreement:
(a) the failure of the City to pay any Rental Payment payable under the Lease Agreement
when the same becomes due and payable, time being expressly declared to be of the essence in the Lease
Agreement;
(b) the failure by the City to observe and perform any of the other covenants, agreements or
conditions on its part in the Lease Agreement contained, if such failure shall have continued for a period
of 30 days after written notice thereof, specifying such failure and requiring the same to be remedied,
shall have been given to the City by the Trustee, the Authority or the Owners of not less than 5% in
aggregate principal amount of the Bonds at the time Outstanding; provided, however, that if, in the
reasonable opinion of the City, the failure stated in the notice can be corrected, but not within such 30 day
period, such failure shall not constitute a Lease Default Event if corrective action is instituted by the City
within such 30 day period and the City shall thereafter diligently and in good faith cure such failure in a
reasonable period of time, provided, further, however, that the period of time for such cure shall not
exceed 90 days without the prior written consent of the Authority;
(c) except as otherwise expressly permitted by the Lease Agreement, the assignment or
transfer, either voluntarily or by operation of law or otherwise, of the City's interest in the Lease
Agreement or any part thereof without the written consent of the Authority;
(d) the abandonment of the Property by the City; or
(e) the commencement by the City of a voluntary case under Title 11 of the United States
Code or any substitute or successor statute.
Action on Default. (a) In each and every case during the continuance of a.Lease Default Event
under the Lease Agreement, the Authority, in addition to all other rights and remedies it may have at law,
shall have the option either to exercise the rights provided for in paragraph (b) below or to exercise the
rights provided for in paragraph(c)below.
(b) In each and every case during the continuance of a Lease Default Event under the Lease
Agreement, the Authority shall have the right to terminate the Lease Agreement in the manner hereinafter
provided, notwithstanding any re-entry or re-letting of the Property as provided in paragraph (c) below,
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 contained in the Lease
Agreement. 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
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interest under the Lease Agreement shall of itself operate to terminate the Lease Agreement, and no
termination of the Lease Agreement on account of default by the City shall be or become effective by
operation of law or acts of the parties to the Lease Agreement, 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 the
Lease Agreement. The City covenants and agrees that no surrender of the Property or of the remainder of
the term of the Lease Agreement or any termination of the Lease Agreement shall be valid in any manner
or for any purpose whatsoever unless stated by the Authority by such written notice.
(c) In each and every case during the continuance of a Lease Default Event under the Lease
Agreement, the Authority shall have the right, without terminating the Lease Agreement (i) to collect
each installment of Rental Payments as the same become due and enforce any other terms or provisions of
the Lease Agreement to be kept or performed by the City, regardless of whether or not the City has
abandoned the Property, or (ii) to exercise any and all rights of entry and re-entry upon the Property. In
the event the Authority does not elect to terminate the Lease Agreement in the manner provided for in
paragraph (b) above, the City shall remain liable and agrees to keep or perform all covenants and
conditions in the Lease Agreement 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 the 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 provided above for the payment of Rental Payments under the Lease
Agreement, 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 specified in the
Lease Agreement, 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 provided in the Lease Agreement, the City
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 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 contained in the Lease Agreement. The City agrees that the
terms of the 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 the Lease Agreement, and further
agrees that no acts of the Authority in effecting such re-letting shall constitute a surrender or termination
of the 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 the Lease Agreement shall vest in the Authority to be effected in the sole
and exclusive manner provided for in paragraph (b) above. 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 term "re-let" or "re-letting" as used under this subcaption, "— Action on Default," shall
include, but not be limited to,re-letting by means of the operation by the Authority of the Property.
(d) The City 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 provided in the Lease Agreement 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.
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(e) Notwithstanding anything in the Lease Agreement to the contrary, the termination of the
Lease Agreement by the Authority on account of a Lease Default Event under the Lease Agreement shall
not effect or result in a termination of the lease of the Property by the City to the Authority pursuant to the
Site Lease.
Other Remedies. In addition to the other remedies provided for in the provisions of the Lease
Agreement summarized under the subcaption "— Action on Default," during the continuance of a Lease
Default Event under the Lease Agreement, the Authority shall be entitled to proceed to protect and
enforce the rights vested in the Authority by the Lease Agreement or by law. The provisions of the Lease
Agreement and the duties of the City and of its board, officers or employees shall be enforceable by the
Authority by mandamus or other appropriate suit, action or proceeding in any court of competent
jurisdiction. Without limiting the generality of the foregoing, the Authority shall have the right to bring
the following actions:
(a) by mandamus or other action or proceeding or suit at law or in equity to enforce its rights
against the City or any board member, officer or employee thereof, and to compel the City or any such
board member, 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 in the Lease Agreement;
(b) by suit in equity to enjoin any acts or things which are unlawful or violate the rights of
the Authority; or
(c) by suit, action or proceeding in any court of competent jurisdiction, to require the City
and its board, officers and employees to account as if it or they were the trustee or trustees of an express
trust.
No Acceleration. Notwithstanding anything to the contrary contained in the Lease Agreement,
the Authority shall have no right to accelerate Rental Payments upon the occurrence or continuance of a
default or a Lease Default Event under the Lease Agreement.
Remedies Not Exclusive. Subject to the provisions of the Lease Agreement summarized under
the subcaption "—Action on Default," no remedy in the Lease Agreement conferred upon or reserved to
the Authority 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 under the Lease Agreement 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. If any statute or rule of law validly shall limit
the remedies given to the Authority under the Lease Agreement, the Authority nevertheless shall be
entitled to whatever remedies are allowable under any statute or rule of law.
Waiver. No delay or omission of the Authority to exercise any right or power arising from the
occurrence of any default or Lease Default Event shall impair any such right or power or shall be
construed to be a waiver of any such default or Lease Default Event or an acquiescence therein, and every
power and remedy given by the Lease Agreement to the Authority may be exercised from time to time
and as often as may be deemed expedient. A waiver of a particular default or Lease Default Event shall
not be deemed to be a waiver of any other default or Lease Default Event or of the same default or Lease
Default Event subsequently occurring. The acceptance of Rental Payments under the Lease Agreement
shall not be, or be construed to be, a waiver of any term, covenant or condition of the Lease Agreement.
Attorney's Fees. In the event the Authority shall prevail in any action brought to enforce any of
the terms and provisions of the 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 under the Lease Agreement.
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Authority Event of Default; Action on Authority Event of Default. The failure by the Authority
to observe and perform any covenants, agreements or conditions on its part in the Lease Agreement
contained, if such failure shall have continued for a period of 60 days after written notice thereof,
specifying such failure and requiring the same to be remedied, shall have been given to the Authority and
the Trustee, by the City, shall constitute an Authority Event of Default under the Lease Agreement;
provided, however, that if, in the reasonable opinion of the Authority the failure stated in the notice can
be corrected, but not within such 60 day period, such failure shall not constitute an Authority Event of
Default if corrective action is instituted by the Authority within such 60 day period and the Authority
shall thereafter diligently and in good faith cure such failure in a reasonable period of time. hi each and
every case upon the occurrence and during the continuance of an Authority Event of Default by the
Authority under the Lease Agreement, the City shall have all the rights and remedies permitted by law.
Amendments
(a) The Lease Agreement and the Site Lease, and the rights and obligations of the City and
the Authority thereunder, may be amended at any time by an amendment thereto, which shall become
binding upon execution by the City and the Authority, but only with the prior written consent of the
Owners of a majority of the aggregate principal amount of Bonds then Outstanding, exclusive of Bonds
disqualified as provided in the Indenture. No such amendment shall (i) extend the payment date of any
Base Rental Payment or reduce the amount of any Base Rental Payment without the prior written consent
of the Owner of each Bond so affected, (ii)reduce the aforesaid percentage of Bonds the consent of the
Owners of which is required for any amendment of the Lease Agreement or the Site Lease to become
binding without the prior written consent of the Owners of all the Bonds then Outstanding, or (iii) amend
the provisions of the Lease Agreement summarized under this caption, "— Amendments," without the
prior written consent of the Owners of all the Bonds then Outstanding.
(b) The Lease Agreement and the Site Lease, and the rights and obligations of the City and
the Authority thereunder, may also be amended at any time by an amendment thereto, which shall become
binding upon execution by the City and the Authority, without the written consents of any Owners, for
any one or more of the following purposes:
(i) to add to the covenants and agreements of the City or the Authority in the Lease
Agreement or in the Site Lease contained other covenants and agreements thereafter to be observed, or to
surrender any right or power in the Lease Agreement or in the Site Lease reserved to or conferred upon
the City or the Authority;
(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 the Lease Agreement or in the
Site Lease or in regard to questions arising under the Lease Agreement or under the Site Lease which the
City or the Authority may deem desirable or necessary and not inconsistent with the Lease Agreement;
(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 the Indenture,
(iv) to provide for the substitution or release of a portion of the Property in
accordance with the provisions of the Lease Agreement summarized under the subcaption "—Assignment
and Subletting; Substitution or Release, Title—Substitution or Release of the Property";
(v) to make such additions, deletions or modifications as may be necessary or
appropriate to assure the exclusion from gross income for federal income tax purposes of interest on Tax-
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Exempt Bonds or maintain any federal interest subsidies expected to be received with respect to any
Bonds; or
(vi) to make such other changes in the Lease Agreement or in the Site Lease as the
City or the Authority may deem desirable or necessary, and which shall not materially adversely affect
the interests of the Owners.
Miscellaneous
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 Property. To the extent
permitted by law, the City shall, at its expense, indemnify and hold the Authority and its directors,
officers, agents and employees harmless against and from any and all claims by or on behalf of any
Person arising from the acquisition, construction, occupation, use, operation, maintenance, possession,
conduct or management of 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. hi no event shall the Authority be liable for any
incidental, indirect, special or consequential damage in connection with or arising out of the Lease
Agreement or the City's use of the Property.
Assignment to Trustee; Effect. The parties to the Lease Agreement understand and agree that,
upon the execution and delivery of the Indenture (which is occurring simultaneously with the execution
and delivery of the Lease Agreement), all right, title and interest of the Authority in and to the Lease
Agreement will be sold, assigned and transferred to the Trustee for the benefit of the Owners of the
Bonds. The City consents to such sale, assignment and transfer. Upon the execution and delivery of the
Indenture, references in the operative provisions of the Lease Agreement to the Authority shall be deemed
to be references to the Trustee, as assignee of the Authority.
California Law. The Lease Agreement shall be construed and governed in accordance with the
laws of the State of California.
INDENTURE
The Bonds
Authorization of Bonds. The Authority authorizes the issuance of the Bonds under and subject to
the terms of the Indenture, the Act and other applicable laws of the State of California. The Bonds may
consist of one or more Series of varying denominations, dates, maturities, interest rates and other
provisions, subject to the provisions and conditions contained in the Inenture. The Bonds shall be
designated generally as the "Huntington Beach Public Financing Authority (Orange County, California)
Lease Revenue Bonds," each Series thereof to bear such additional designation as may be necessary or
appropriate to distinguish such Series from every other Series of Bonds.
The Bonds shall be special obligations of the Authority, payable solely from the Lease Revenues
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.
Notwithstanding anything to the contrary contained herein, if, as a result of the limitations
contained in the Lease Agreement, Base Rental Payments cannot be paid by the City in an amount
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sufficient to pay the principal of, or interest on, the Bonds otherwise payable on any date, such principal
or interest shall be deemed not to be payable on such date, the nonpayment thereof on such date shall not
constitute a default or an Event of Default under the Indenture and such principal or interest shall become
payable on the date on which such Base Rental Payments becomes payable under and pursuant to the
Lease Agreement.
Terms of Series 2011A Bonds. (a) The Series 2011A Bonds shall be designated "Huntington
Beach Public Financing Authority (Orange County, California) Lease Revenue Refunding Bonds, 2011
Series A(Capital Improvement Refinancing Project)"
(b) The Series 2011A Bonds shall be issued in fully registered form without coupons in
Authorized Denominations. The Series 2011A Bonds shall be dated as of the Closing Date, shall be in the
aggregate principal amount set forth in the Indenture, shall mature on September 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 set forth in the Indenture.
(c) Interest on the Series 2011A Bonds shall be payable from the Interest Payment Date next
preceding the date of authentication thereof unless (i) a Series 2011A 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 2011A Bond is authenticated on or
before the first Record Date, in which event interest thereon shall be payable from the Closing Date, or
(iii) interest on any Series 2011A 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 previously been paid or duly
provided for. Interest shall be paid in lawful money of the United States on each Interest Payment Date.
Except as otherwise provided in the Letter of Representations, interest shall be paid by check of the
Trustee mailed by first class mail, postage prepaid, on each Interest Payment Date to the Owners of the
Series 2011A Bonds at their respective addresses shown on the Registration Books as of the close of
business on the preceding Record Date, provided,however, that, in the case of an Owner of$1,000,000 or
more in aggregate principal amount of Series 2011A Bonds, upon the written request of such Owner to
the Trustee, received at least ten days prior to a Record Date, specifying the account or accounts to which
such payment shall be made, payment of interest shall be made by wire transfer of immediately available
funds on the following Interest Payment Date. Any such request shall remain in effect until revoked or
revised by such Owner by an instrument in writing delivered to the Trustee.
(d) The principal of and premium, if any, on the Series 2011A 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.
(e) The Series 2011A Bonds shall be in substantially the form set forth in the Indenture, with
appropriate or necessary insertions, omissions and variations as permitted or required hereby.
Issuance of Series 2011A Bonds; Application of Proceeds. The Authority may, at any time,
execute the Series 2011A Bonds and deliver the same to the Trustee. The Trustee shall authenticate the
Series 2011A Bonds and deliver the Series 2011A Bonds to the Original Purchaser upon receipt of a
Written Request of the Authority and upon receipt of the purchase price therefor.
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 2011A Bonds) payable from Lease Revenues
as provided in the Indenture on a parity with all other Bonds theretofore issued under the Indenture, but
only subject to the following conditions, which are made conditions precedent to the issuance of such
Additional Bonds:
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(a) neither the Authority nor the City shall be in default under the Indenture, the Lease
Agreement or the Site Lease,
(b) the issuance of such Additional Bonds shall have been authorized under and pursuant to
the Act and under and pursuant to the Indenture and shall have been provided for by a Supplemental
Indenture which shall specify the following:
(i) the purposes for which such Additional Bonds are to be issued;provided, that the
proceeds of the sale of such Additional Bonds shall be applied only for one or more of the
following purposes: (A) providing funds to pay costs of City facilities (including capitalized
interest), (B)providing funds to refund any Bonds issued under the Indenture or other obligations
of the City, (C)providing funds to pay Costs of Issuance incurred in connection with the issuance
of such Additional Bonds, and (D) providing funds to make any deposit to the Reserve Fund
required pursuant to paragraph(c)below;
(ii) the principal amount and designation of such Series of Additional Bonds and the
denomination or denominations of the Additional Bonds, which shall be Authorized
Denominations;
(iii) that such Additional Bonds shall be payable as to interest on the Interest Payment
Dates, except that the first installment of interest may be payable on either March 1 or September
1;
(iv) the date, the maturity date or dates and the dates on which mandatory sinking
fund redemptions, if any, are to be made for such Additional Bonds; provided, that (A) the serial
Bonds of such Series of Additional Bonds shall be payable as to principal annually on September
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 September 1, (B) all Additional
Bonds of a Series of like maturity shall be identical in all respects, except as to number or
denomination, and (C) 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;
(v) the redemption premiums and terms, if any, for such Additional Bonds;
(vi) the form of such Additional Bonds; and
(vii) such other provisions that are appropriate or necessary and are not inconsistent
with the provisions hereof,
(c) upon the issuance of such Additional Bonds, the amount on deposit in the Reserve Fund
shall be at least equal to the Reserve Requirement; and
(d) upon the issuance of such Additional Bonds, the sum of Base Rental Payments, including
any increase in the Base Rental Payments as a result of the issuance of such Additional Bonds, plus
Additional Rental Payments, in any Rental Period shall not be in excess of the annual fair rental value of
the Property after taking into account the use of the proceeds of such Additional Bonds (evidence of the
satisfaction of such condition shall be made by a Written Certificate of the City).
Procedure for the Issuance of Additional Bonds. Whenever the Authority and the City shall
determine to authorize the issuance of any Additional Bonds, the Authority, the City and the Trustee shall
enter into a Supplemental Indenture satisfying the conditions summarized under the subcaption "—
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Conditions for the Issuance of Additional Bonds" above. Before such Additional Bonds shall be issued,
the Authority and the City shall file or cause to be filed with the Trustee the following:
(a) an Opinion of Counsel setting forth(i) that counsel rendering such opinion has examined
the Supplemental Indenture, the amendment to the Lease Agreement, if any, and the amendment to the
Site Lease, if any, (ii) that the issuance of the Additional Bonds has been duly authorized by the
Authority, (iii) that the execution and delivery of the Supplemental Indenture and, if any, the amendments
to the Lease Agreement and the Site Lease have been duly authorized, executed and delivered by the
Authority and the City, (iv) that upon execution and delivery of such Supplemental Indenture and any
such amendments to the Lease Agreement and the Site Lease, the Indenture, as amended and
supplemented by such Supplemental Indenture, and, if so amended, the Lease Agreement and the Site
Lease, as amended by such amendments, will be valid and binding obligations of the Authority and the
City, and (v) that the execution and delivery of the Supplemental Indenture and, if any, the amendments
to the Lease Agreement and the Site Lease, in and of themselves, do not adversely affect the exclusion
from gross income for federal income tax purposes of interest on Outstanding Tax-Exempt Bonds;
(b) a Written Certificate of the Authority that the requirements summarized under the
subcaption"—Conditions for the Issuance of Additional Bonds" above have been met;
(c) a Written Certificate of the City that the requirements summarized under the subcaption
— Conditions for the Issuance of Additional Bonds" above have been met, which shall include a
certification as to the fair rental value of the Property, after giving effect to any amendments to the Lease
Agreement and the Site Lease entered into in connection with the issuance of the Additional Bonds and
taking into account the use of proceeds of such Additional Bonds;
(d) certified copies of the resolutions of the Board of Directors of the Authority and the City
Council of the City authorizing the execution and delivery of the Supplemental Indenture and, if any, the
amendments to the Lease Agreement and the Site Lease,
(e) executed counterparts or duly authenticated copies of the Supplemental Indenture and, if
any, the amendments to the Lease Agreement and the Site Lease, with satisfactory evidence that any such
amendments to the Lease Agreement and the Site Lease have been duly recorded in the appropriate
records of the county in which the Property is located;
(f) certified copies of the policies of insurance required by the Lease Agreement or
certificates thereof, which shall evidence that the amounts of the rental interruption insurance required
under the Lease Agreement have been increased, if applicable, to cover the amount of such Additional
Bonds; and
(g) an ALTA title insurance policy or other appropriate form of policy in the amount of the
Additional Bonds of the type and with the endorsements described in the Lease Agreement.
Upon the delivery to the Trustee of the foregoing instruments and upon the Trustee's being
satisfied from an examination of said instruments that all of the documents required by the provisions
summarized above have been delivered, the Trustee shall authenticate such Additional Bonds, and shall
deliver such Additional Bonds to, or upon the request of, the Authority.
Registration Books. The Trustee shall 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 available for
inspection and copying by the Authority and the City upon reasonable notice, and, upon presentation for
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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 herein provided.
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 and maturity in a like aggregate principal amount, in any
Authorized Denomination. The Trustee shall require the 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 and maturity of other Authorized Denominations. The Trustee shall require the
payment by the 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 commencing on the date five days before the date of selection of Bonds
of such Series for redemption and ending on the date of mailing notice of such redemption, or with
respect to any Bonds of such Series selected for redemption.
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 the same Series and maturity in a like aggregate principal amount 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 upon 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 the same Series and maturity in a like aggregate principal amount
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 the Indenture with all other Bonds of such Series secured by the Indenture.
Pledge and Assignment;Funds and Accounts
Pledge and Assignment. 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
Lease Revenues and all amounts on deposit from time to time in the funds and accounts established under
the Indenture(other than the Rebate Fund) are pledged to the payment of the principal of and interest on
the Bonds as provided in the Indenture, and the Lease Revenues shall not be used for any other purpose
while any of the Bonds remain Outstanding. Said pledge shall constitute a first lien on such assets.
In order to secure such pledge of the Lease Revenues, the Authority sells, assigns and transfers to
the Trustee, irrevocably and absolutely, without recourse, for the benefit of the Owners, all of its right,
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title and interest in and to the Site Lease and the Lease Agreement, including, without limitation, the right
to receive Base Rental Payments and the right to exercise any remedies provided in the Lease Agreement
in the event of a default by the City thereunder; provided, however, that the Authority shall retain the
rights to indemnification and to payment or reimbursement of its reasonable costs and expenses under the
Lease Agreement. The Trustee accepts said assignment for the benefit of the Owners, subject to the
provisions of the Indenture.
The Trustee shall be entitled to and shall receive all of the Base Rental Payments, and any Base
Rental Payments collected or received by the Authority shall be deemed to be held, and to have been
collected or received, by the Authority as agent of the Trustee and shall forthwith be paid by the
Authority to the Trustee.
Costs of Issuance Fund. (a) The Trustee shall establish and maintain a separate fund designated
the "Costs of Issuance Fund." On the Closing Date, the Trustee shall deposit in the Costs of Issuance
Fund the amount required to be deposited therein pursuant to the Indenture.
(b) The moneys in the Costs of Issuance Fund shall be used and withdrawn by the Trustee
from time to time to pay Costs of Issuance upon submission to the Trustee of a Written Request of the
City substantially in the form attached to the Indenture. Upon receipt of each such Written Request of the
City, the Trustee shall pay the amount set forth in such Written Request as directed by the terms thereof.
Each such Written Request of the City shall be sufficient evidence to the Trustee of the facts stated
therein and the Trustee shall have no duty to confirm the accuracy of such facts.
(c) On the date that is six months after the Closing Date, the Trustee shall transfer any
amounts then remaining in the Costs of Issuance Fund to the Payment Fund, and upon such transfer the
Costs of Issuance Fund shall be closed.
(d) If the Costs of Issuance Fund has been closed in accordance with the provisions of the
Indenture, the Costs of Issuance Fund shall be reopened and reestablished by the Trustee in connection
with the issuance of any Additional Bonds, if so provided in the Supplemental Indenture pursuant to
which such Additional Bonds are issued. There shall be deposited in the Costs 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.
Payment Fund. (a) The Trustee shall establish and maintain a separate fund designated the
"Payment Fund." Within the Payment Fund, the Trustee shall establish and maintain a separate account
designated the"Interest Account' and a separate account designated the"Principal Account."
(b) All Lease Revenues received by the Trustee shall be deposited by the Trustee in the
Payment Fund; provided, however, that Net Proceeds, other than those constituting proceeds of rental
interruption insurance received with respect to the Property, shall not be deposited in the Payment Fund
but, rather, shall be applied as provided in the provisions of the Indenture summarized under the
subcaptions "— Net Proceeds and Title Insurance; Covenants — Application of Net Proceeds" and "— Net
Proceeds and Title Insurance; Covenants — Title Insurance," as applicable. There shall additionally be
deposited in the Payment Fund amounts transferred from the Reserve Fund pursuant to paragraph (c)
summarized under the subcaption"—Pledge and Assignment;Funds and Accounts—Reserve Fund"
(c) The Trustee, on each Interest Payment Date, shall transfer from the Payment Fund to the
Interest Account an amount equal to the interest on the Bonds coming due on such Interest Payment Date.
Moneys in the Interest Account shall be withdrawn and used by the Trustee for the purpose of paying
interest on the Bonds as and when due and payable.
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(d) The Trustee, on each Principal Payment Date, shall transfer from the Payment Fund to
the Principal Account an amount equal to the principal of the Bonds, including principal due and payable
by reason of mandatory sinking fund redemption, coming due on such date. Moneys in the Principal
Account shall be withdrawn and used by the Trustee for the purpose of paying principal of the Bonds,
including principal due and payable by reason of mandatory sinking fund redemption, as and when due
and payable.
Redemption Fund. The Trustee shall establish and maintain a special fund designated the
"Redemption Fund." The Trustee shall deposit in the Redemption Fund any amounts received from the
City in connection with the City's exercise of its right pursuant to the provisions of the Lease Agreement
summarized under the subcaption "— Eminent Domain; Right to Redeem — Right to Redeem Bonds" to
cause Bonds to be optionally redeemed. Additionally, the Trustee shall deposit in the Redemption Fund
any amounts required to be deposited therein pursuant to the provisions of the Indenture summarized
under the subcaptions "— Net Proceeds and Title Insurance; Covenants — Application of Net Proceeds"
and"—Net Proceeds and Title Insurance, Covenants—Title Insurance."Amounts in the Redemption Fund
shall be disbursed therefrom by the Trustee for the payment of the redemption price of, and accrued
interest on, Bonds redeemed pursuant to the Indenture.
Reserve Fund. (a) The Trustee shall establish and maintain a special fund designated the
"Reserve Fund." On the Closing Date, the Trustee shall deposit in the Reserve Fund the amount required
to be deposited therein pursuant to the Indenture. There shall additionally be deposited in the Reserve
Fund, in connection with the issuance of Additional Bonds, the amount required to be deposited therein
under the Supplemental Indenture pursuant to which such Additional Bonds are issued.
(b) The City may substitute a Reserve Facility for all or part of the moneys on deposit in the
Reserve Fund by depositing such Reserve Facility with the Trustee, provided that, at the time of such
substitution, the amount on deposit in the Reserve Fund, together with the amount available under all
Reserve Facilities, shall be at least equal to the Reserve Requirement. Moneys for which a Reserve
Facility has been substituted as provided in the Indenture shall be transferred, at the election of the City,
to the Redemption Fund or, upon receipt of an Opinion of Counsel that such transfer will not, in and of
itself, adversely affect the exclusion of interest on Outstanding Tax-Exempt Bonds from gross income for
federal income tax purposes, to the City and applied to the payment of capital costs of the City. Amounts
on deposit in the Reserve Fund which were not derived from payments under any Reserve Facility
credited to the Reserve Fund to satisfy a portion of the Reserve Requirement shall be used and withdrawn
by the Trustee prior to using and withdrawing any amounts derived from payments under such Reserve
Facility. In order to accomplish such use and withdrawal of such amounts not derived from payments
under any such Reserve Facility, the Trustee shall, as and to the extent necessary, liquidate any
investments purchased with such amounts.
(c) In the event that, on the second Business Day prior to a date on which the Trustee is to
transfer money from the Payment Fund to the Interest Account pursuant to paragraph (c) under the
subcaption "—Payment Fund" or to the Principal Account pursuant to paragraph (d) under the subcaption
"— Payment Fund," amounts in the Payment Fund are insufficient for such purpose, the Trustee shall
withdraw from the Reserve Fund, to the extent of any funds therein, the amount of such insufficiency, and
shall transfer any amounts so withdrawn to the Payment Fund. If the amount on deposit in the Reserve
Fund is not sufficient to make such transfer, the Trustee shall make a claim under any available Reserve
Facility, in accordance with the provisions thereof, in order to obtain an amount sufficient to allow the
Trustee to make such transfer as and when required.
(d) In the event of any transfer from the Reserve Fund or the making of any claim under a
Reserve Facility, the Trustee shall, within two Business Days thereafter, provide written notice to the
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Authority and the City of the amount and the date of such transfer or claim; provided,however, that such
notice need not be provided if such transfer is made pursuant to paragraph(f) or paragraph(g)below.
(e) If the sum of the amount on deposit in the Reserve Fund, plus the amount available under
all available Reserve Facilities, is less than the Reserve Fund Requirement, the first of Base Rental
Payments thereafter received from the City under the Lease Agreement and not needed to pay the
principal of and interest on the Bonds on the next Interest Payment Date or Principal Payment Date shall
be used, first, to reinstate the amounts available under any Reserve Facilities that have been drawn upon
and, second, to increase the amount on deposit in the Reserve Fund, so that the amount available under all
available Reserve Facilities, when added to the amount on deposit in the Reserve Fund, shall equal the
Reserve Requirement.
(f) If, as a result of the payment of principal of or interest on the Bonds, the Reserve
Requirement is reduced, amounts on deposit in the Reserve Fund in excess of such reduced Reserve
Requirement shall be transferred to the Payment Fund.
(g) On any date on which Bonds are defeased in accordance with the Indenture, the Trustee
shall, if so directed in a Written Request of the City, transfer any moneys in the Reserve Fund in excess of
the Reserve Requirement resulting from such defeasance to the entity or fund so specified in such Written
Request of the City, to be applied to such defeasance.
(h) Moneys, if any, on deposit in the Reserve Fund shall be withdrawn and applied by the
Trustee for the final payments of principal of and interest on the Bonds.
Rebate Fund. 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 or a Written Request of
the City. 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 the Indenture or anything to the contrary contained
in the Indenture, all amounts required to be deposited into or on deposit in the Rebate Fund shall be
governed exclusively by this paragraph and by the Tax Certificate(which is incorporated in the Indenture
by reference). The Trustee shall be deemed conclusively to have complied with such provisions if it
follows the written directions of the Authority or the City, and shall have no liability or responsibility to
enforce compliance by the Authority or the City with the terms of the Tax Certificate. The Trustee may
conclusively rely upon the determinations, calculations and certifications of the Authority or the City
required by the Tax Certificate. The Trustee shall have no responsibility to independently make any
calculation or determination or to review the calculations of the Authority or the City. 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 paragraph, shall, upon receipt by the Trustee of a Written Request of the City, be
withdrawn by the Trustee and remitted to the City.
Investments. (a) Except as otherwise provided in the Indenture, any moneys held by the Trustee
in the funds and accounts established under the Indenture shall be invested by the Trustee upon the
Written Request of the City, received at least two Business Days prior to the investment date, only in
Permitted Investments, and in the absence of such direction shall be invested by the Trustee in Permitted
Investments described in clause(5) of the definition thereof; provided,however, that any such investment
shall be made by the Trustee only if, prior to the date on which such investment is to be made, the Trustee
shall have received a Written Request of the City specifying a specific money market fund that satisfies
the requirements of said paragraph in which such investment is to be made and, if no such Written
Request is so received, the Trustee shall hold such moneys uninvested. The Trustee may act as principal
or agent in the acquisition or disposition of any such investment. The Trustee shall not be liable or
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responsible for any loss suffered in connection with any such investment made by it under the terms of
and in accordance with the Indenture. The Trustee shall sell or present for redemption any obligations so
purchased whenever it shall be necessary in order to provide moneys to meet any payment of the funds so
invested, and the Trustee shall not be liable or responsible for any losses resulting from any such
investment sold or presented for redemption. Permitted Investments that are registerable securities shall
be registered in the name of the Trustee. The Trustee shall be entitled to rely upon any investment
directions from the City as conclusive certification to the Trustee that the investments described therein
are permitted by the general laws of the State of California applicable to investments by cities.
(b) Investments purchased with funds on deposit in the Payment Fund shall mature not later
than the payment date immediately succeeding the investment. Investments purchased with funds on
deposit in the Redemption Fund shall be invested in Permitted Investments described in clause (1)(a) of
the definition thereof that mature on or prior to the redemption date on which such funds are to be applied
to the redemption of Bonds. Notwithstanding anything to the contrary contained in the Indenture,
investments purchased with funds on deposit in the Reserve Fund shall have an average aggregate
weighted term to maturity of not greater than five years;provided, however, that if such investments may
be redeemed at par so as to be available on each Interest Payment Date, any amount in the Reserve Fund
may be invested in such redeemable Permitted Investments maturing on any date on or prior to the final
maturity date of the Bonds.
(c) Investments (except investment agreements) in any fund or account established under the
Indenture shall be valued, exclusive of accrued interest (i) not less often than annually nor more often
than monthly, and (ii) upon any draw upon the Reserve Fund. All investments of amounts deposited in
any fund or account established under the Indenture shall be valued at the market value thereof.
(d) Any interest or profits received with respect to investments held in any of the funds or
accounts established under the Indenture (other than the Reserve Fund) shall be retained therein. Any
interest or profits received with respect to investments held in the Reserve Fund shall be transferred to the
Interest Account. Notwithstanding the foregoing, any such transfer or disbursement shall be made from
the Reserve Fund only if and to the extent that, after such transfer, the amount on deposit in the Reserve
Fund, together with amounts available to be drawn on all Reserve Facilities, if any, is at least equal to the
Reserve Requirement.
(e) The Authority and the City acknowledges that to the extent that regulations of the
Comptroller of the Currency grant the Authority or the City the right to receive brokerage confirmations
of security transactions as they occur, at no additional cost, to the extent permitted by law, the Authority
and the City specifically waives receipt of such confirmations. The Trustee shall furnish the Authority and
the City periodic transaction statements that include detail for all investment transactions made by the
Trustee under the Indenture.
Net Proceeds and Title Insurance; Covenants
Application of Net Proceeds. If the Property or any portion thereof shall be damaged or
destroyed, subject to the further requirements of the Indenture summarized under this subcaption, "—
Application of Net Proceeds," 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 of the Indenture.
The Net Proceeds of any insurance (other than Net 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
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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,
pursuant to a Written Request of the City,be invested by the Trustee in Permitted Investments that mature
not later than such times as 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 referred to above.
If such 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 in whole or in part of Rental
Payments results from such damage or destruction pursuant to the provisions of the Lease Agreement
summarized under the subcaption"LEASE AGREEMENT—Rental Payments— Rental Abatement," 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, pursuant to the
provisions of the Indenture relating to extraordinary redemption, (i) of all of the Outstanding Bonds, or
(ii) of such portion of the Outstanding Bonds as shall result in the remaining, non-abated Base Rental
Payments being sufficient to pay, as and when due, the principal of and interest on the Bonds that will
remain Outstanding after such redemption. If the City is required to apply funds from the insurance
proceeds and other legally available funds to the redemption of Bonds in accordance with clause (b)
above, the City shall direct the Trustee, in a Written Request of the City, to transfer the funds to be
applied to such redemption to the Redemption Fund and the Trustee shall transfer such funds to the
Redemption Fund. Any proceeds of any insurance, including the proceeds of any self-insurance
remaining after the portion of the Property which was damaged or destroyed is restored to and made
available to the City in substantially the same condition and annual fair rental value as that which existed
prior to the damage or destruction as required by clause(a) above, or the redemption of Bonds as required
by clause(b) above, in each case as evidenced by a Written Certificate of the City to such effect, shall be
deposited in the Reserve Fund to the extent that the amount therein is less than the Reserve Requirement.
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 be deposited in the Reserve Fund to the extent that the amount therein is less than the
Reserve Requirement.Any amounts not required to be so deposited into the Reserve Fund 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 sum of the then unpaid principal components of Base Rental Payments, be paid to the City to be used
for any lawful purpose.
The proceeds of any award in eminent domain shall be deposited by the Trustee in the
Redemption Fund and applied to the redemption of Bonds pursuant to the provisions of the Indenture
relating to extraordinary redemption.
Title Insurance. Net 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:
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(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, upon Written
Request of the City,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 in whole or in part of
Rental Payments payable by the City under the Lease Agreement, then the City shall, in a Written
Request of the City, direct the Trustee to, and 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 the provisions of the Indenture relating to extraordinary redemption.
Punctual Payment. The Authority shall punctually pay or cause to be paid the principal of, and
premium, if any, and interest on the Bonds, in strict conformity with the terms of the Bonds and of the
Indenture, according to the true intent and meaning thereof,but only out of the Base Rental Payments and
other assets pledged for such payment as provided in the Indenture and received by the Authority or the
Trustee.
Compliance with Indenture. The Authority and the City shall faithfully comply with, keep,
observe and perform all the agreements, conditions, covenants and terms contained in the Indenture
required to be complied with,kept, observed and performed by them.
Compliance with Site Lease and Lease Agreement. The Authority and the City shall faithfully
comply with, keep, observe and perform all the agreements, conditions, covenants and terms contained in
the Site Lease and the Lease Agreement required to be complied with, kept, observed and performed by
them and, together with the Trustee, shall enforce the Site Lease and the Lease Agreement against the
other party thereto in accordance with their respective terms.
Observance of Laws and Regulations. The Authority, the City and the Trustee shall 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.
Other Liens. The City shall 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
thirty days' written notice to comply therewith and failure of the City to so comply within such thirty-day
period) may 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 in the Indenture, or from its obligation under the Indenture to
perform such agreements and covenants. The Trustee shall have no liability with respect to any
determination made in good faith to proceed or decline to defend, pay or compromise any such claim or
demand.
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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 on the amounts on deposit in any of the funds or accounts
created under the Indenture, other than the pledge and lien of the Indenture.
The Authority and the Trustee shall not encumber the Property other than in accordance with the
Site Lease, the Lease Agreement and the Indenture.
Prosecution and Defense of Suits. The City shall promptly, upon request of the Trustee or any
Owner, 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, shall prosecute all actions, suits or other proceedings as may be appropriate for such purpose
and shall indemnify and save the Trustee and every Owner harmless from all cost, damage, expense or
loss, including attorneys' fees, which they or any of them may incur by reason of any such cloud, defect,
action, suit or other proceeding.
Accounting Records and Statements. The Trustee shall keep proper accounting records in which
complete and correct entries shall be made of all transactions of the Trustee relating to the receipt, deposit
and disbursement of the Lease Revenues, and such accounting records shall be available for inspection by
the Authority and the City at reasonable hours and under reasonable conditions. The Trustee shall, upon
written request, make copies of the foregoing available, at the Owner's expense, to any Owner or its agent
duly authorized in writing.
Recordation. The City shall record, or cause to be recorded, with the appropriate county recorder,
the Lease Agreement and the Site Lease, or memoranda thereof, and a memorandum of the assignment of
the Authority's right, title and interest in and to the Site Lease and the Lease Agreement pursuant to the
Indenture.
Tax Covenants. (a) Neither the Authority nor the City shall 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 the Series 2011A Bonds under Section 103 of the Code. Without limiting the
generality of the foregoing, each of the Authority and the City shall comply with the requirements of the
Tax Certificate, which is incorporated in the Indenture as if fully set forth in the Indenture. This covenant
shall survive payment in full or defeasance of the Series 2011A Bonds.
(b) In the event that at any time the Authority or the City is of the opinion that for purposes
of this subcaption, "— Tax Covenants," 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 under the
Indenture, the Authority or the City 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 the Indenture summarized under this subcaption, "—
Tax Covenants," if the Authority or the City shall provide to the Trustee an Opinion of Counsel to the
effect that any specified action required under this subcaption 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 Series
2011A Bonds, the Trustee may conclusively rely on such opinion in complying with the requirements of
this subcaption and of the Tax Certificate, and the covenants under the Indenture shall be deemed to be
modified to that extent.
Continuing Disclosure. The City shall comply with and carry out all of the provisions of the
Continuing Disclosure Certificate. Notwithstanding any other provision of the Indenture, failure of the
City to comply with the Continuing Disclosure Certificate shall not constitute an Event of Default under
the Indenture, provided, however, that the Trustee, at the written direction of any Participating
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Underwriter or the holders of at least 25% of the aggregate principal amount of Outstanding Series 2011A
Bonds, shall, upon receipt of indemnification reasonably satisfactory to the Trustee, or any holder or
Beneficial Owner of the Series 2011A Bonds may, take such actions as may be necessary and appropriate
to compel performance, including seeking mandate or specific performance by court order.
Notifications Required by the Act. If at any time the Trustee fails to pay principal or interest due
on any scheduled payment date for the Bonds or withdraws funds from the Reserve Fund to pay principal
and interest on the Bonds, the Trustee shall notify the Authority in writing of such failure or withdrawal,
as applicable, and, in accordance with Section 6599.1(c) of the Act, the Authority shall notify the
California Debt and Investment Advisory Commission of such failure or withdrawal, as applicable, within
10 days of the failure or withdrawal, as applicable.
Further Assurances. Whenever and so often as reasonably requested to do so by the Trustee or
any Owner, the Authority and the City shall 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 and the Owners all advantages, benefits, interests, powers, privileges and
rights conferred or intended to be conferred upon them by the Indenture or by the Site Lease or the Lease
Agreement.
Events of Default and Remedies
Events of Default. The occurrence, from time to time, of any one or more of the following events
shall constitute an Event of Default under the Indenture:
(a) failure to pay any installment of principal of any Bond as and when the same shall
become due and payable, whether at maturity as therein expressed, by proceedings for redemption or
otherwise,
(b) failure to pay any installment of interest on any Bond as and when the same shall become
due and payable;
(c) a Lease Default Event shall have occurred and be continuing;
(d) failure by the Authority to observe and perform any of the other covenants, agreements or
conditions on its part in the Indenture or in the Bonds contained, if such failure shall have continued for a
period of 30 days after written notice thereof, specifying such failure and requiring the same to be
remedied, shall have been given to the Authority by the Trustee, the City or the Owners of not less than
5% in aggregate principal amount of the Bonds at the time Outstanding; provided, however, that if, in the
reasonable opinion of the Authority, the failure stated in the notice can be corrected, but not within such
30 day period, such failure shall not constitute an Event of Default if corrective action is instituted by the
Authority within such 30 day period and the Authority shall thereafter diligently and in good faith cure
such failure in a reasonable period of time,
(e) failure by the City to observe and perform any of the covenants, agreements or conditions
on its part in the Indenture contained, if such failure shall have continued for a period of 30 days after
written notice thereof, specifying such failure and requiring the same to be remedied, shall have been
given to the City by the Trustee, the Authority or the Owners of not less than 5% in aggregate principal
amount of the Bonds at the time Outstanding; provided, however, that if, in the reasonable opinion of the
City, the failure stated in the notice can be corrected, but not within such 30 day period, such failure shall
not constitute an Event of Default if corrective action is instituted by the City within such 30 day period
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and the City shall thereafter diligently and in good faith cure such failure in a reasonable period of time,
or
(f) the Authority or the City shall commence a voluntary case under Title 11 of the United
States Code or any substitute or successor statute.
Action on Default. hi 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 of Bonds then Outstanding (and upon indemnification of the Trustee to its reasonable satisfaction
as provided in the Indenture), shall, upon notice in writing to the Authority and the City, 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 protect and enforce any of the rights vested in the
Trustee or the Owners by the 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 the provisions of
the Indenture summarized under the subcaption"—Other Remedies of the Trustee."
Other Remedies of the Trustee. During the continuance of an Event of Default, 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
Authority or 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 in the Indenture or in the Bonds;
(b) by suit in equity to enjoin any acts or things which are unlawful or violate the rights of
the Trustee or the Owners; or
(c) by suit, action or proceeding in any court of competent jurisdiction, to require the
Authority or the City, or both, to account as if it or they were the trustee or trustees of an express trust.
Remedies Not Exclusive. No remedy in the Indenture 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 under the Indenture 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 under the Indenture,
or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or
remedy.
Application of Amounts After Default. If an Event of Default shall occur and be continuing, all
Lease Revenues and any other funds thereafter received by the Trustee under any of the provisions of the
Indenture shall be applied by the Trustee as follows and in the following order:
(a) to the payment of any expenses necessary in the opinion of the Trustee to protect the
interests of the Owners and payment of reasonable fees, charges and expenses of the Trustee (including
reasonable fees and disbursements of its counsel) incurred in and about the performance of its powers and
duties under the Indenture,
(b) to the payment of all amounts then due for interest on the Bonds, ratably without
preference or priority of any kind, according to the amounts of interest on such Bonds due and payable,
with interest on the overdue interest at the rate borne by the respective Bonds; and
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(c) to the payment of all amounts then due for principal of the Bonds, ratably without
preference or priority of any kind, according to the amounts of principal of the Bonds due and payable,
with interest on the overdue principal at the rate borne by the respective Bonds.
Power of Trustee to Enforce. All rights of action under the Indenture or the Bonds or otherwise
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 suit, action or proceeding instituted by
the Trustee shall be brought in the name of the Trustee for the benefit and protection of the Owners of
such Bonds, subject to the provisions of the Indenture.
Bond Owners Direction of Proceedings. Anything in the Indenture to the contrary
notwithstanding, the Owners of a majority in aggregate principal amount of the Bonds then Outstanding
shall have the right, by an instrument or concurrent instruments in writing executed and delivered to the
Trustee, and upon indemnification of the Trustee to its reasonable satisfaction, to direct the method of
conducting all remedial proceedings taken by the Trustee under the Indenture, provided, however, that
such direction shall not be otherwise than in accordance with law and the provisions of the Indenture, and,
provided, further, that the Trustee shall have the right to decline to follow any such direction which in the
opinion of the Trustee would be unjustly prejudicial to Owners not parties to such direction.
Limitation on Bond Owners' Right to Sue. No Owner of any Bond shall have the right to
institute any suit, action or proceeding at law or in equity, for the protection or enforcement of any right
or remedy under the Indenture, the Act or any other applicable law with respect to such Bonds, unless (a)
such Owner shall have given to the Trustee written notice of the occurrence of an Event of Default, (b)
the Owners of a majority in aggregate principal amount of the Bonds then Outstanding shall have made
written request upon the Trustee to exercise the powers granted in the Indenture or to institute such suit,
action or proceeding in its own name, (c) such Owner or said Owners shall have tendered to the Trustee
indemnity against the costs, expenses and liabilities to be incurred in compliance with such request, and
(d) the Trustee shall have refused or omitted to comply with such request for a period of 60 days after
such written request shall have been received by, and said tender of indemnity shall have been made to,
the Trustee.
Such notification, request, tender of indemnity and refusal or omission are declared, in every
case, to be conditions precedent to the exercise by any Owner of any remedy under the Indenture or under
law; it being understood and intended that no one or more Owners shall have any right in any manner
whatever by his or their action to affect, disturb or prejudice the security of the Indenture or the rights of
any other Owners, or to enforce any right under the Bonds, the Indenture, the Act or other applicable law
with respect to the Bonds, except in the manner provided in the Indenture, and that all proceedings at law
or in equity to enforce any such right shall be instituted,had and maintained in the manner provided in the
Indenture and for the benefit and protection of all Owners, subject to the provisions of the Indenture.
Termination of Proceedings. 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 such
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.
In case any proceedings taken by the Trustee or any one or more Owners on account of any Event of
Default shall have been discontinued or abandoned for any reason or shall have been determined
adversely to the Trustee or any Owner, then in every such case the Trustee, such Owner, the Authority
and the City, subject to any determination in such proceedings, shall be restored to their former positions
and rights under the Indenture, severally and respectively, and all rights, remedies, powers and duties of
the Trustee, the Owners, the Authority and the City shall continue as though no such proceedings had
been taken.
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No Waiver of Default. No delay or omission of the Trustee or of any Owner to exercise any right
or power arising upon the occurrence of any default or Event of Default shall impair any such right or
power or shall be construed to be a waiver of any such default or Event of Default or an acquiescence
therein, and every power and remedy given by the Indenture to the Trustee or to the Owners may be
exercised from time to time and as often as may be deemed expedient.
The Trustee
Duties and Liabilities of Trustee. The Trustee shall, prior to an Event of Default, and after the
curing or waiver of all Events of Default which may have occurred, perform such duties and only such
duties as are expressly and specifically set forth in the Indenture. The Trustee shall, during the existence
of any Event of Default which has not been cured or waived, exercise such of the rights and powers
vested in it by the Indenture, and use the same degree of care and skill in their exercise, as a prudent
person would exercise or use under the circumstances in the conduct of such person's own affairs.
Removal and Resignation of the Trustee. The Authority and the City may by an instrument in
writing, remove the Trustee initially a party to the Indenture and any successor thereto unless an Event of
Default shall have occurred and then be continuing, and shall remove the Trustee initially a party to the
Indenture 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 the 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 national banking association, trust company or commercial bank with
trust powers having a combined capital (exclusive of borrowed capital) and surplus of at least
$50,000,000 (or be part of a bank holding company with a combined capital and surplus of at least
$50,000,000) and subject to supervision or examination by federal or state authorities. If such national
banking association, trust company or commercial bank 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 paragraph the combined capital and surplus of such national banking association,
trust company or commercial bank 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 and the City shall promptly appoint a successor Trustee by an instrument in writing; provided,
however, that in the event the Authority and the City do not appoint a successor Trustee within 30 days
following receipt of such notice of resignation, the resigning Trustee may, at the expense of the City,
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 successor Trustee appointed under the Indenture shall
signify its acceptance of such appointment by executing and delivering to the Authority and the City and
to its predecessor Trustee a written acceptance thereof,and thereupon such successor Trustee, without any
further act, deed or conveyance, shall become vested with all the moneys, estates, properties, rights,
powers, trusts, duties and obligations of such predecessor Trustee, with like effect as if originally named
Trustee in the Indenture, but, nevertheless, at the written request of the Authority, the City or of the
successor Trustee, such predecessor Trustee shall execute and deliver any and all instruments of
conveyance or further assurance and do such other things as may reasonably be required for more fully
and certainly vesting in and confirming to such successor Trustee all the right, title and interest of such
predecessor Trustee in and to any property held by it under the Indenture and shall pay over, transfer,
assign and deliver to the successor Trustee any money or other property subject to the trusts and
conditions set forth in the Indenture.
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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 the Indenture, ipso facto, shall be and become successor
trustee under the 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 to the Indenture, anything in the Indenture to the
contrary notwithstanding.
Compensation and Indemnification 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 under the Indenture 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
component of the Trustee's stated annual fees) under the Indenture, 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 under the
Indenture, provided, however, that the Trustee shall not have any lien for such compensation or
reimbursement against any moneys held by it in any of the funds or accounts established under the
Indenture.
The City shall, to the extent permitted by law, indemnify and 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 under the Indenture and under any related documents,
including the enforcement of any remedies and the defense of any suit, and which are not due to its
negligence or its willful misconduct. The duty of the City to indemnify the Trustee shall survive the
termination and discharge of the Indenture and the resignation or removal of the Trustee.
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 of the Indenture, 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 the Indenture at the request
or direction of any of the Owners pursuant to the 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. Under
no circumstances shall the Trustee request or be entitled to indemnification from the City for taking
actions required by and in accordance with the Indenture, including, but not limited to, causing payments
of principal of and interest on the Bonds to be made to the Owners thereof and carrying out redemptions
of the Bonds in accordance with the terms of the Indenture. 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 under the Indenture in good faith in accordance therewith.
The Trustee shall not be responsible for the sufficiency of the Bonds or the Lease Agreement, for
the recital of facts herein or for statements made in the preliminary or final official statement relating to
the Bonds, or of the title to the Property.
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No provision of the 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 under the Indenture or in the
exercise of any of its rights or powers under the Indenture.
The Trustee shall not be deemed to have knowledge of an Event of Default under the Indenture
unless it has actual knowledge thereof.
The Trustee shall not be concerned with or accountable to anyone for the subsequent use or
application of any moneys which shall be released or withdrawn in accordance with the provisions of the
Indenture.
The permissive right of the Trustee to do things enumerated in the Indenture shall not be
construed as a duty and the Trustee shall not be answerable for other than its negligence or willful default.
Whenever in the administration of its rights and obligations under the Indenture the Trustee shall
deem it necessary or desirable that a matter be proved or established prior to taking or suffering any
action under the Indenture, such matter(unless other evidence in respect thereof be specifically prescribed
in the Indenture) may be deemed to be conclusively proved and established by a Written Certificate of the
Authority or a Written Certificate of the City, and such certificate shall be full warrant to the Trustee for
any action taken or suffered under the provisions of the Indenture 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 to the
Indenture. The Trustee, either as principal or agent, may also engage in or be interested in any financial or
other transaction with the Authority or 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 under the Indenture.
The Trustee may, to the extent reasonably necessary, execute any of the trusts or powers of the
Indenture and perform any rights and obligations required of it under the Indenture 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 under the Indenture, 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
diligently 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 under the Indenture
or for anything whatsoever in connection with the funds established under the Indenture, except only for
its own willful misconduct,negligence or breach of an obligation under the Indenture.
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.
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The Trustee agrees to accept and act upon instructions or directions pursuant to the 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 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 agrees 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.
Appointment of Co-Trustee. It is the purpose of the Indenture that there shall be no violation of
any law of any jurisdiction (including particularly the laws of the State of California) denying or
restricting the right of banking corporations or associations to transact business as Trustee in such
jurisdiction. It is recognized that in the case of litigation under the Indenture, and in particular in case of
the enforcement of the rights of the Trustee on default, or in the case the Trustee deems that by reason of
any present or future law of any jurisdiction it may not exercise any of the powers, rights or remedies
granted in the Indenture to the Trustee or hold title to the properties, in trust, as granted in the Indenture,
or take any other action which may be desirable or necessary in connection therewith, it may be necessary
that the Trustee appoint an additional institution as a separate or co-trustee. The following provisions of
the Indenture summarized under this subcaption, "— Appointment of Co-Trustee," are adopted to these
ends.
In the event that the Trustee appoints an additional institution as a separate or co-trustee, each and
every remedy, power, right, claim, demand, cause of action, immunity, estate, title, interest and lien
expressed or intended by the Indenture to be exercised by or vested in or conveyed to the Trustee with
respect thereto shall be exercisable by and vest in such separate or co-trustee but only to the extent
necessary to enable such separate or co-trustee to exercise such powers, rights and remedies, and every
covenant and obligation necessary to the exercise thereof by such separate or co-trustee shall run to and
be enforceable by either of them. Any co-trustee shall be bound by the standards of care, duties and
obligations of the Trustee under the Indenture as if such co-trustee were the Trustee. Any co-trustee shall
be a national banking association, trust company or commercial bank doing business in the State of
California and at all times shall have 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
national banking association, trust company or commercial bank 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 paragraph the combined capital and surplus of such national banking
association, trust company or commercial bank shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so published.
Should any instrument in writing from the Authority or the City be required by the separate
trustee or co-trustee so appointed by the Trustee for more fully and certainly vesting in and confirming to
it such properties, rights, powers, trusts, duties and obligations, any and all such instruments in writing
shall, on request, be executed, acknowledged and delivered by the Authority or the City. In case any
separate trustee or co-trustee, or a successor to either, shall become incapable of acting, resign or be
removed, all the estates, properties, rights, powers, trusts, duties and obligations of such separate trustee
or co-trustee, so far as permitted by law, shall vest in and be exercised by the Trustee until the
appointment of a new Trustee or successor to such separate trustee or co-trustee.
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Supplemental Indentures
Supplemental Indentures. (a) The Indenture and the rights and obligations of the Authority, the
City, the Trustee and the Owners under the Indenture may be modified or amended at any time by a
Supplemental Indenture, which the Authority, the City and the Trustee may enter into when the prior
written consents of the Owners of a majority of the aggregate principal amount of the Bonds then
Outstanding, exclusive of Bonds disqualified as provided in the Indenture, are filed with the Trustee. No
such modification or amendment shall (i) extend the fixed maturity of any Bond, reduce the amount of
principal thereof or the rate of interest thereon or alter the redemption provisions with respect thereto,
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,
without the consent of the Owners of all of the Bonds then Outstanding, or (iii) permit the creation of any
lien on the Lease Revenues 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 Lease Revenues and other assets(except as expressly provided in the Indenture), without the consent
of the Owners of all Bonds then Outstanding, or (iv) amend the provisions of the Indenture summarized
under this subcaption without the prior written consent of the Owners of all Bonds then Outstanding.
(b) The Indenture and the rights and obligations of the Authority, the City, the Trustee and
the Owners under the Indenture 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 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 the
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 reserved in
the Indenture 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 the Indenture or in regard to
questions arising under the Indenture which the Authority or the City may deem desirable or necessary
and not inconsistent with the 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 the Indenture,
(iv) 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 interest on Tax-
Exempt Bonds or maintain any federal interest subsidies expected to be received with respect to any
Bonds; and
(v) for any other reason, provided such amendment or supplement does not adversely
affect the rights or interests of the Owners; provided, however, that the Authority, the City and the
Trustee may rely in entering into any such amendment or supplement upon an Opinion of Counsel stating
that the requirements of this paragraph have been met with respect to such amendment or supplement.
(c) The Trustee may in its discretion, but shall not be obligated to, enter into a Supplemental
Indenture that materially adversely affects the Trustee's rights, duties or immunities under the Indenture
or otherwise.
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(d) 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 or the City), 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.
Effect of Supplemental Indenture. Upon the execution and delivery of any Supplemental
Indenture entered into pursuant to the provisions of the Indenture summarized in paragraphs (a) or (b)
under the subcaption "— Supplemental Indentures" above, the Indenture shall be deemed to be modified
and amended in accordance therewith, and the respective rights, duties and obligations under the
Indenture of the Authority, the City, the Trustee and the Owners shall thereafter be determined, exercised
and enforced under the Indenture 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 the Indenture for any and all purposes.
Endorsement of Bonds; Preparation of New Bonds. Bonds delivered after the effective date of
any Supplemental Indenture pursuant to the Indenture may and, if the Authority or the City so determines,
shall bear a notation by endorsement or otherwise in form approved by the Authority, the City 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 Bond Outstanding at the time of such effective date, and
presentation of such Bond for such 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, the City 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, in that case, upon demand of the Owner of any Bond Outstanding at the time of such
effective date, and presentation of such Bond for such purpose at the Office of the Trustee, such a new
Bond in equal principal amount of the same Series, interest rate and maturity shall be exchanged for such
Owner's Bond so surrendered.
Amendment of Particular Bonds. The provisions of the Indenture summarized under the caption
"—Supplemental Indentures" shall not prevent any Owner from accepting any amendment or modification
as to any particular Bond owned by it,provided that due notation thereof is made on such Bond.
Defeasance
Discharge of Indenture. (a) If (i) 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 in the Indenture and in the Outstanding
Bonds, and (ii) all other amounts due and payable under the Indenture and under the Lease Agreement
shall have been paid, then the Owners shall cease to be entitled to the pledge of the Lease Revenues and
the other assets as provided in the Indenture, and all agreements, covenants and other obligations of the
Authority and the City under the Indenture 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 to the Indenture
which are not required for the payment of the principal of and interest and premium, if any, on the Bonds.
(b) Subject to the provisions of paragraph (a) above, when any Bond shall have been paid
and if, at the time of such payment, each of the Authority and the City shall have kept, performed and
observed all of the covenants and promises in such Bonds and in the Indenture required or contemplated
to be kept, performed and observed by it or on its part on or prior to that time, then the Indenture shall be
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considered to have been discharged in respect of such Bond and such Bond shall cease to be entitled to
the pledge of the Lease Revenues and the other assets as provided in the Indenture, and all agreements,
covenants and other obligations of the Authority and the City under the Indenture shall cease, terminate,
become void and be completely discharged and satisfied as to such Bond.
(c) Notwithstanding the discharge and satisfaction of the Indenture or the discharge and
satisfaction of the Indenture in respect of any Bond, those provisions of the Indenture relating to the
maturity of the 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 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 the Bonds the funds so held by the Trustee as
and when such payment becomes due. Notwithstanding the discharge and satisfaction of the Indenture,
the provisions of the Indenture relating to the compensation of the Trustee shall remain in effect and shall
be binding upon the Authority, the City and the Trustee.
Bonds Deemed To Have Been Paid. (a) If moneys shall have been set aside and held by the
Trustee for the payment or redemption of any Bond and the payment of the interest thereon to the
maturity or redemption date thereof, such Bond shall be deemed to have been paid within the meaning
and with the effect provided in the provisions of the Indenture summarized above under the subcaption"—
Discharge of Indenture." Any Outstanding Bond 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 such
provisions of the Indenture if(i) 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 the Indenture,notice of redemption of
such Bond on said redemption date, said notice to be given in accordance with the Indenture, (ii) there
shall have been deposited with the Trustee either (A) money in an amount which shall be sufficient, or
(B) Defeasance Securities, the principal of and the interest on which when due, and without any
reinvestment thereof, will provide moneys which shall be sufficient to pay when due the interest to
become due on such Bond 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 Bond, and (iii) in the event such Bond is not by its
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 Bond that the deposit required by clause (ii) above has been made with the Trustee and
that such Bond is deemed to have been paid in accordance with the provisions of the Indenture
summarized under this subcaption, "— Bonds Deemed To Have Been Paid," 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 Bond. Neither the money nor the Defeasance Securities deposited with the Trustee
pursuant to the provisions of the Indenture summarized under this subcaption in connection with the
deemed payment of Bonds,nor principal or interest payments on any such Defeasance Securities, shall be
withdrawn or used for any purpose other than, and shall be held in trust for and pledged to, the payment
of the principal of and,premium, if any, and interest on such Bonds.
(b) No Bond shall be deemed to have been paid pursuant to clause (ii)(B) of paragraph (a)
above unless the Authority or the City shall cause to be delivered (A) an executed copy of a Verification
Report with respect to such deemed payment, addressed to the Authority, the City and the Trustee, (B) a
copy of the escrow agreement entered into in connection with the deposit pursuant to clause (ii)(B) of
paragraph (a) above resulting in such deemed payment, which escrow agreement shall provide that no
substitution of Defeasance Securities shall be permitted except with other Defeasance Securities and upon
delivery of a new Verification Report and no reinvestment of Defeasance Securities shall be permitted
except as contemplated by the original Verification Report or upon delivery of a new Verification Report,
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and (C) a copy of an Opinion of Counsel, dated the date of such deemed payment and addressed to the
Authority, the City and the Trustee, to the effect that such Bond has been paid within the meaning and
with the effect expressed in the Indenture, and all agreements, covenants and other obligations of the
Authority and the City under the Indenture as to such Bond have ceased, terminated, become void and
been completely discharged and satisfied.
(c) The Trustee may seek and is entitled to rely upon (i) an Opinion of Counsel reasonably
satisfactory to the Trustee to the effect that the conditions precedent to a deemed payment pursuant to
clause (ii) of paragraph (a) above have been satisfied, and (ii) such other opinions, certifications and
computations, as the Trustee may reasonably request, of accountants or other financial consultants
concerning the matters described in paragraph(b) above.
Unclaimed Moneys. Any moneys held by the Trustee in trust for the payment and discharge of
the principal of, or premium or interest on, any Bonds which remain unclaimed for two years after the
date when such principal, premium or interest has become payable, if such moneys were held by the
Trustee at such date, or for two years after the date of deposit of such moneys if deposited with the
Trustee after the date when such principal, premium or interest become payable, shall, at the Written
Request of the Authority, be repaid by the Trustee to the City as its absolute property free from trust, and
the Trustee shall thereupon be released and discharged with respect thereto and the Owners of such Bonds
shall look only to the City for the payment of such principal,premium or interest.
Miscellaneous
Benefits of Indenture Limited to Parties. Nothing contained in the Indenture, 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 to the Indenture, and any agreement, condition, covenant or
term required in the Indenture 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.
Execution of Documents by Owners. Any declaration, request or other instrument which is
permitted or required in the Indenture 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 its 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 such
notary public or other officer purports to act that the Person signing such declaration, request or other
instrument or writing acknowledged to such notary public or other officer 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 Bond 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.
Waiver of Personal Liability. Notwithstanding anything contained in the Indenture 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 in the Indenture shall relieve any member, officer or employee of the
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Authority or the City from the performance of any official duty provided by any applicable provisions of
law, by the Lease Agreement or by the Indenture.
Acquisition of Bonds by Authority or City. All Bonds acquired by the Authority or the City,
whether by purchase or gift or otherwise, shall be surrendered to the Trustee for cancellation.
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 the
Indenture, Bonds which are 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. Bonds so owned which have been pledged in
good faith may be regarded as Outstanding for the purposes of this paragraph if the pledgee 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. Upon the request of the Trustee, the Authority
and the City shall specify to the Trustee in a Written Certificate of the Authority and a Written Certificate
of the City, as applicable, those Bonds disqualified pursuant to this paragraph and the Trustee may
conclusively rely on such Written Certificates.
Money Held for Particular Bonds. The money held by the Trustee for the payment of the
principal of or premium or interest on particular Bonds due on any date(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 the Indenture summarized under the subcaption, "—Defeasance— Unclaimed Moneys," but
without any liability for interest thereon.
Funds and Accounts. Any fund or account required to be established and maintained pursuant to
the Indenture by the Trustee may be established and maintained in the accounting records of the 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 all 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 establish such funds and accounts as it deems necessary to perform
its obligations under the Indenture. The Trustee may commingle any of the moneys held by it under the
Indenture for investment purposes only; provided, however, that the Trustee shall account separately for
the moneys in each fund or account established pursuant to the Indenture.
California Law. The Indenture and the Bonds shall be construed and governed in accordance
with the laws of the State of California.
Business Days. If the date for making any payment or the last date for performance of any act or
the exercising of any right, as provided in the Indenture shall not be a Business Day, such payment may
be made or act performed or right exercised on the next succeeding Business Day, with the same force
and effect as if done on the nominal date provided in the Indenture and, unless otherwise specifically
provided in the Indenture,no interest shall accrue for the period from and after such nominal date.
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APPENDIX E
PROPOSED FORM OF BOND COUNSEL OPINION
Upon delivery of the Series 2011A Bonds, Orrick, Herrington & Sutcliffe LLP, Los Angeles,
California, Bond Counsel to the Authority, proposes to render its final approving opinion with respect to
the Series 2011A Bonds in substantially the following form:
Huntington Beach Public Financing Authority
Huntington Beach,California
Huntington Beach Public Financing Authority
(Orange County, California)
Lease Revenue Refunding Bonds, 2011 Series A
(Capital Improvement Refinancing Project)
(Final Opinion)
Ladies and Gentlemen:
We have acted as bond counsel to the Huntington Beach Public Financing Authority (the
"Authority") in connection with the issuance of its Huntington Beach Public Financing Authority(Orange
County, California) Lease Revenue Refunding Bonds, 2011 Series A (Capital Improvement Refinancing
Project) (the "Series 2011A Bonds"), in the aggregate principal amount of $36,275,000. Capitalized
terms not otherwise defined herein shall have the meanings ascribed thereto in the Indenture.
In such connection, we have reviewed the Indenture, dated as of September 1, 2011 (the
"Indenture"), by and among the Authority, the City of Huntington Beach (the "City") and The Bank of
New York Mellon Trust Company, N.A., as trustee(the"Trustee"), the Site Lease, dated as of September
1, 2011 (the"Site Lease"), by and between the City and the Authority, the Lease Agreement, dated as of
September 1, 2011 (the "Lease Agreement'), by and between the City and the Authority, the Tax
Certificate, dated the date hereof (the "Tax Certificate"), opinions of counsel to the Authority, the City,
the Trustee and others, certificates of the Authority, the City, the Trustee and others and such other
documents, opinions and matters to the extent we deemed necessary to render the opinions set forth
herein.
The opinions expressed herein are based on an analysis of existing laws, regulations, rulings and
court decisions and cover certain matters not directly addressed by such authorities. Such opinions may
be affected by actions taken or omitted or events occurring after the date hereof. We have not undertaken
to determine, or to inform any person, whether any such actions are taken or omitted or events do occur or
any other matters come to our attention after the date hereof. Accordingly, this opinion speaks only as of
its date and is not intended to, and may not, be relied upon in connection with any such actions, events or
matters. Our engagement with respect to the Series 2011A Bonds has concluded with their issuance, and
we disclaim any obligation to update this letter. We have assumed the genuineness of all documents and
signatures presented to us (whether as originals or as copies) and the due and legal execution and delivery
thereof by, and validity against, any parties other than the Authority and the City. We have assumed,
without undertaking to verify, the accuracy of the factual matters represented, warranted or certified in the
documents, and of the legal conclusions contained in the opinions, referred to in the second paragraph
hereof. Furthermore, we have assumed compliance with all covenants and agreements contained in the
Indenture, the Site Lease, the Lease Agreement and the Tax Certificate, including (without limitation)
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covenants and agreements compliance with which is necessary to assure that future actions, omissions or
events will not cause interest on the Series 2011A Bonds to be included in gross income for federal
income tax purposes.
We call attention to the fact that the rights and obligations under the Series 2011A Bonds, the
Indenture, the Site Lease, the Lease Agreement and the Tax Certificate and their enforceability may be
subject to bankruptcy, insolvency, reorganization, arrangement, fraudulent conveyance, moratorium and
other laws relating to or affecting creditors' rights, to the application of equitable principles, to the
exercise of judicial discretion in appropriate cases, and to the limitations on legal remedies against joint
powers authorities and cities in the State of California. We express no opinion with respect to any
indemnification, contribution, penalty, choice of law, choice of forum, choice of venue, waiver or
severability provisions contained in the foregoing documents nor do we express any opinion with respect
to the state or quality of title to or interest in any of the real or personal property described in the Site
Lease or the Lease Agreement or the accuracy or sufficiency of the description contained therein of, or
the remedies available to enforce liens on, any such property. Finally, we undertake no responsibility for
the accuracy, completeness or fairness of the Official Statement or other offering material relating to the
Series 2011A Bonds and express no opinion with respect thereto.
Based on and subject to the foregoing, and in reliance thereon, as of the date hereof, we are of the
following opinions:
1. The Series 2011A Bonds constitute the valid and binding special obligations of the
Authority, payable solely from the Lease Revenues and the other assets pledged therefor under the
Indenture.
2. The Indenture has been duly executed and delivered by, and constitutes a valid and
binding obligation of, the Authority.
3. The Indenture, the Site Lease and the Lease Agreement have been duly executed and
delivered by, and constitute valid and binding obligations of, the City.
4. Interest on the Series 2011A Bonds is excluded from gross income for federal income tax
purposes under Section 103 of the Internal Revenue Code of 1986 and is exempt from State of California
personal income taxes. Interest on the Series 2011A Bonds is not a specific preference item for purposes
of the federal individual or corporate alternative minimum taxes, although we observe that such interest is
included in adjusted current earnings when calculating corporate alternative minimum taxable income.
We express no opinion regarding any other tax consequences related to the ownership or disposition of, or
the accrual or receipt of interest on, the Series 2011A Bonds.
Faithfully yours,
ORRICK, HERRINGTON &SUTCLIFFE LLP
per
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APPENDIX F
FORM OF CONTINUING DISCLOSURE CERTIFICATE
City of Huntington Beach
relating to
Huntington Beach Public Financing Authority
(Orange County, California)
Lease Revenue Refunding Bonds, 2011 Series A
(Capital Improvement Refinancing Project)
This Continuing Disclosure Certificate(the"Disclosure Certificate") is executed and delivered by
the City of Huntington Beach (the"City") in connection with the issuance of the above-named bonds (the
"Bonds"). The Bonds are being issued by the Huntington Beach Public Financing Authority (the
"Authority") pursuant to Article 4, Chapter 5, Division 7, Title 1 (commencing with section 6584) of the
California Government Code, an indenture, dated as of September 1, 2011 (the "Indenture"), by and
among the City, the Authority and The Bank of New York Mellon Trust Company, N.A., as trustee (the
"Trustee") and a resolution (the "Resolution") adopted by the City Council of the City on September 6,
2011. The City covenants and agrees as follows:
SECTION 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed
and delivered by the City for the benefit of the Holders and Beneficial Owners of the Bonds and in order
to assist the Participating Underwriters in complying with Securities and Exchange Commission
("S.E.C.") Rule 15c2-12(b)(5).
SECTION 2. Definitions. In addition to the definitions set forth in the Indenture, which apply to
any capitalized term used in this Disclosure Certificate unless otherwise defined in this Section, the
following capitalized terms shall have the following meanings:
"Annual Report" shall mean any Annual Report provided by the City pursuant to, and as
described in, Sections 3 and 4 of this Disclosure Certificate.
"Beneficial Owner" shall mean any person which has or shares the power, directly or indirectly,
to make investment decisions concerning ownership of any Bonds (including persons holding Bonds
through nominees, depositories or other intermediaries).
"Dissemination Agent" shall mean The Bank of New York Mellon Trust Company, N.A., or any
successor Dissemination Agent designated in writing by the City and which has filed with the City a
written acceptance of such designation.
"Holder" shall mean the person in whose name any Bond shall be registered.
"Listed Events" shall mean any of the events listed in Section 5(a) or (b) of this Disclosure
Certificate.
"MSRB" shall mean the Municipal Securities Rulemaking Board or any other entity designated
or authorized by the Securities and Exchange Commission to receive reports pursuant to the Rule. Until
otherwise designated by the MSRB or the Securities and Exchange Commission, filings with the MSRB
are to be made through the Electronic Municipal Market Access (EMMA) website of the MSRB,
currently located at http://emma.msrb.org.
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"Participating Underwriters" shall mean the original underwriters of the Bonds required to
comply with the Rule in connection with offering of the Bonds.
"Rule" shall mean Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission
under the Securities Exchange Act of 1934, as the same may be amended from time to time.
SECTION 3. Provision of Annual Reports.
(a) The City shall, or shall cause the Dissemination Agent to,not later than nine months after
the end of the City's fiscal year (which shall be July 1 of each year, so long as the City's fiscal year ends
on September 30), commencing with the report for the 2010-11 fiscal year (which is due not later than
July 1, 2012), provide to the MSRB an Annual Report which is consistent with the requirements of
Section 4 of this Disclosure Certificate. The Annual Report may cross-reference other information as
provided in Section 4 of this Disclosure Certificate, provided, that the audited financial statements of the
City may be submitted separately from the balance of the Annual Report and later than the date required
above for the filing of the Annual Report if they are not available by that date. If the City's fiscal year
changes, it shall give notice of such change in a filing with the MSRB. The Annual Report shall be
submitted on a standard form in use by industry participants or other appropriate form and shall identify
the Bonds by name and CUSIP number.
(b) Not later than 15 business days prior to said date, the City shall provide the Annual
Report to the Dissemination Agent (if other than the City). If the City is unable to provide to the MSRB
an Annual Report by the date required in subsection (a), the City shall, in a timely manner, send or cause
to be sent to the MSRB a notice in substantially the form attached as Exhibit A.
(c) The Dissemination Agent shall (if the Dissemination Agent is other than the City) file a
report with the City certifying that the Annual Report has been provided pursuant to this Disclosure
Certificate, stating the date it was provided to the MSRB.
SECTION 4. Content of Annual Reports. The City's Annual Report shall contain or include by
reference the following:
(a) Audited financial statements of the City for the preceding fiscal year, prepared in
accordance with generally accepted accounting principles as promulgated to apply to governmental
entities from time to time by the Governmental Accounting Standards Board (GASB) and the laws of the
State of California and including all statements and information prescribed for inclusion therein by the
Controller of the State of California. If the City's audited financial statements are not available by the
time the Annual Report is required to be provided to the MSRB pursuant to Section 3(a), the Annual
Report shall contain unaudited financial statements in a format similar to the financial statements
contained in the final Official Statement, and the audited financial statements shall be provided to the
MSRB in the same manner as the Annual Report when they become available.
To the extent not included in the audited financial statement of the City, the Annual Report shall
also include the following:
(i) Summary of Long and Intermediate Term Obligations;
(ii) Tax Revenues by Source, and
(iii) Gross Assessed Value of All Taxable Property;
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(iv) General Fund Property Tax Levies and Collections(Secured Taxes);
(v) General Fund Balance Sheet;
(vi) General Fund Statement of Revenues, Expenditures and Changes in Fund Balance;
(vii) Principal Secured Property Taxpayers; and
(viii) Investment Portfolio.
An update of the financial and operating data contained in the Official Statement under the
caption"CITY FINANCIAL INFORMATION—Current Investments."
An update of the financial and operating data contained in the Official Statement under the
captions "OTHER FINANCIAL INFORMATION — Risk Management," "— Employee Retirement
Plans," "— Post-Employment Medical Insurance" and "— Public Agency Retirement Systems (PARS)
Notes Payable."
Any or all of the items listed above may be set forth in one or a set of documents or may be
included by specific reference to other documents, including official statements of debt issues of the City
or related public entities, which have been made available to the public on the MSRB's website. The City
shall clearly identify each such other document so included by reference.
SECTION 5. Reporting of Significant Events.
(a) The City shall give, or cause to be given, notice of the occurrence of any of the following
events with respect to the Bonds in a timely manner not later than ten business days after the occurrence
of the event:
1. Principal and interest payment delinquencies;
2. Unscheduled draws on debt service reserves reflecting financial difficulties;
3. Unscheduled draws on credit enhancements reflecting financial difficulties;
4. Substitution of credit or liquidity providers, or their failure to perform;
5. Issuance by the Internal Revenue Service of proposed or final determination of taxability
or of a Notice of Proposed Issue(IRS Form 5701 TEB);
6. Tender offers;
7. Defeasances;
8. Rating changes; or
9. Bankruptcy,insolvency,receivership or similar event of the obligated person.
Note: for the purposes of the event identified in subparagraph(9), the event is considered to occur
when any of the following occur: the appointment of a receiver, fiscal agent or similar officer for an
obligated person in a proceeding under the U.S. Bankruptcy Code or in any other proceeding under state
or federal law in which a court or governmental authority has assumed jurisdiction over substantially all
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of the assets or business of the obligated person, or if such jurisdiction has been assumed by leaving the
existing governmental body and officials or officers in possession but subject to the supervision and
orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization,
arrangement or liquidation by a court or governmental authority having supervision or jurisdiction over
substantially all of the assets or business of the obligated person.
(b) The City shall give, or cause to be given, notice of the occurrence of any of the following
events with respect to the Bonds, if material, in a timely manner not later than ten business days after the
occurrence of the event:
1. Unless described in paragraph 5(a)(5), adverse tax opinions or other material notices or
determinations by the Internal Revenue Service with respect to the tax status of the Bonds or other
material events affecting the tax status of the Bonds;
2. Modifications to rights of Bond holders;
3. Optional,unscheduled or contingent Bond calls;
4. Release, substitution, or sale of property securing repayment of the Bonds;
5. Non-payment related defaults;
6. The consummation of a merger, consolidation, or acquisition involving an obligated
person or the sale of all or substantially all of the assets of the obligated person, other than in the ordinary
course of business, the entry into a definitive agreement to undertake such an action or the termination of
a definitive agreement relating to any such actions, other than pursuant to its terms; or
7. Appointment of a successor or additional trustee or the change of name of a trustee.
(c) Whenever the City obtains knowledge of the occurrence of a Listed Event described in
Section 5(b), the City shall determine if such event would be material under applicable federal securities
laws.
(d) If the City learns of the occurrence of a Listed Event described in Section 5(a), or
determines that knowledge of a Listed Event described in Section 5(b) would be material under applicable
federal securities laws, the City shall within ten business days of occurrence file a notice of such
occurrence with the MSRB. Notwithstanding the foregoing, notice of the Listed Event described in
subsections (a)(7) or (b)(3) need not be given under this subsection any earlier than the notice (if any) of
the underlying event is given to Holders of affected Bonds pursuant to the Indenture.
SECTION 6. Format for Filings with MSRB. Any report or filing with the MSRB pursuant to
this Disclosure Certificate must be submitted in electronic format, accompanied by such identifying
information as is prescribed by the MSRB.
SECTION 7. Termination of Reporting Obligation. The City's obligations under this Disclosure
Certificate shall terminate upon the legal defeasance, prior redemption or payment in full of all of the
Bonds. If such termination occurs prior to the final maturity of the Bonds, the City shall give notice of
such termination in a filing with the MSRB.
SECTION 8. Dissemination Agent. The City may, from time to time, appoint or engage a
Dissemination Agent to assist it in carrying out its obligations under this Disclosure Certificate, and may
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discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent.
The Dissemination Agent shall not be responsible in any manner for the content of any notice or report
prepared by the City pursuant to this Disclosure Certificate. The initial Dissemination Agent shall be The
Bank of New York Mellon Trust Company, N.A..
SECTION 9. Amendment; Waiver. Notwithstanding any other provision of this Disclosure
Certificate, the City may amend this Disclosure Certificate, and any provision of this Disclosure
Certificate may be waived, provided that the following conditions are satisfied:
(a) If the amendment or waiver relates to the provisions of Sections 3(a), 4, or 5(a) or (b), it
may only be made in connection with a change in circumstances that arises from a change in legal
requirements, change in law, or change in the identity, nature or status of an obligated person with respect
to the Bonds, or the type of business conducted;
(b) The undertaking, as amended or taking into account such waiver, would, in the opinion of
nationally recognized bond counsel, have complied with the requirements of the Rule at the time of the
original issuance of the Bonds, after taking into account any amendments or interpretations of the Rule, as
well as any change in circumstances; and
(c) The amendment or waiver does not, in the opinion of nationally recognized bond counsel,
materially impair the interests of the Holders or Beneficial Owners of the Bonds.
In the event of any amendment or waiver of a provision of this Disclosure Certificate, the City
shall describe such amendment in the next Annual Report, and shall include, as applicable, a narrative
explanation of the reason for the amendment or waiver and its impact on the type (or in the case of a
change of accounting principles, on the presentation) of financial information or operating data being
presented by the City. hi addition, if the amendment relates to the accounting principles to be followed in
preparing financial statements, (i)notice of such change shall be given in a filing with the MSRB, and(ii)
the Annual Report for the year in which the change is made should present a comparison (in narrative
form and also, if feasible, in quantitative form) between the financial statements as prepared on the basis
of the new accounting principles and those prepared on the basis of the former accounting principles.
SECTION 10. Additional Information. Nothing in this Disclosure Certificate shall be deemed to
prevent the City from disseminating any other information, using the means of dissemination set forth in
this Disclosure Certificate or any other means of communication, or including any other information in
any Annual Report or notice required to be filed pursuant to this Disclosure Certificate, in addition to that
which is required by this Disclosure Certificate. If the City chooses to include any information in any
Annual Report or notice in addition to that which is specifically required by this Disclosure Certificate,
the City shall have no obligation under this Disclosure Certificate to update such information or include it
in any future Annual Report or notice of occurrence of a Listed Event or any other event required to be
reported.
SECTION 11. Default. hi the event of a failure of the City to comply with any provision of this
Disclosure Certificate, any Holder or Beneficial Owner of the Bonds may take such actions as may be
necessary and appropriate, including seeking mandate or specific performance by court order, to cause the
City to comply with its obligations under this Disclosure Certificate, provided, that any such action may
be instituted only in the Superior Court of the State of California in and for the County of Orange or in
U.S. District Court for the Central District of California in or nearest to the County. The sole remedy
under this Disclosure Certificate in the event of any failure of the City to comply with this Disclosure
Certificate shall be an action to compel performance.
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SECTION 12. Duties, Immunities and Liabilities of Trustee and Dissemination Agent. Article
VII of the Indenture is hereby made applicable to this Disclosure Certificate as if this Disclosure
Certificate were (solely for this purpose) contained in the Indenture. The Dissemination Agent shall be
entitled to the protections and limitations from liability afforded to the Trustee thereunder. The
Dissemination Agent(if other than the Trustee or the Trustee in its capacity as Dissemination Agent) shall
have only such duties as are specifically set forth in this Disclosure Certificate, and the City agrees to
indemnify and save the Dissemination Agent, the Trustee, their officers, directors, employees and agents,
harmless against any loss, expense and liabilities which it may incur arising out of the disclosure of
information pursuant to this Disclosure Certificate or arising out of or in the exercise or performance of
its powers and duties hereunder, including the costs and expenses (including attorneys fees) of defending
against any claim of liability, but excluding liabilities due to the Dissemination Agent's negligence or
willful misconduct.
The Dissemination Agent shall be paid compensation by the City for its services provided
hereunder in accordance with its schedule of fees as agreed to between the Dissemination Agent and the
City from time to time and all expenses, legal fees and advances made or incurred by the Dissemination
Agent in the performance of its duties hereunder. The Dissemination Agent may rely and shall be
protected in acting or refraining from acting upon and directions from the City or an opinion of nationally
recognized bond counsel. Neither the Trustee nor the Dissemination Agent shall have any liability to any
party for any monetary damages or other financial liability of any kind whatsoever related to or arising
from any breach of this Disclosure Certificate. No person shall have any right to commence any action
against the Trustee or Dissemination Agent seeking any remedy other than to compel specific
performance of this Disclosure Certificate. Any company succeeding to all or substantially all of the
Dissemination Agent's corporate trust business shall be the successor to the Dissemination Agent
hereunder without the execution or filing of any paper or any further act. The obligations of the City
under this Section shall survive resignation or removal of the Dissemination Agent and payment of the
Bonds.
SECTION 13. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the
City, the Dissemination Agent, the Participating Underwriters and Holders and Beneficial Owners from
time to time of the Bonds, and shall create no rights in any other person or entity.
Date: September 28, 2011
CITY OF HUNTINGTON BEACH
By
City Manager
AGREED AND ACKNOWLEDGED:
THE BANK OF NEW YORK MELLON
TRUST COMPANY,N.A., as Dissemination Agent
By
Authorized Officer
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EXHIBIT A
FORM OF NOTICE TO THE MUNICIPAL SECURITIES RULEMAKING BOARD
OF FAILURE TO FILE ANNUAL REPORT
Name of Obligated Person: City of Huntington Beach
Name of Issuer: Huntington Beach Public Financing Authority
Name of Bond Issue: Huntington Beach Public Financing Authority
(Orange County, California)
Lease Revenue Refunding Bonds, 2011 Series A
(Capital Improvement Refinancing Project)
Date of Issuance: September 28, 2011
NOTICE IS HEREBY GIVEN that the City of Huntington Beach (the "City") has not provided
an Annual Report with respect to the above-named Bonds as required by Section 4 of the City's
Continuing Disclosure Certificate, dated the Date of Issuance. [The City anticipates that the Annual
Report will be filed by ]
Dated:
CITY OF HUNTINGTON BEACH
By
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(THIS PAGE IS INTENTIONALLY LEFT BLANK)
APPENDIX G
BOOK-ENTRY ONLY SYSTEM
The description that follows of the procedures and recordkeeping with respect to beneficial
ownership interests in the Series 2011A Bonds, payment of principal of and interest on the Series 2011A
Bonds to Participants or Beneficial Owners, confirmation and transfer of beneficial ownership interests
in the Series 2011A Bonds, and other bond-related transactions by and between DTC, Participants and
Beneficial Owners, is based on information furnished by DTC which the City and the Authority each
believes to be reliable, but the City and the Authority take no responsibility for the completeness or
accuracy thereof.
The Depository Trust Company("DTC"), New York, NY, will act as securities depository for the
securities (the "Series 2011A Bonds"). The Series 2011A Bonds will be issued as fully-registered
securities registered in the name of Cede&Co. (DTC's partnership nominee) or such other name as may
be requested by an authorized representative of DTC. One fully-registered security certificate will be
issued for the Series 2011A Bonds, in the aggregate principal amount of such issue, 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"). 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; provided that nothing contained in such websites
is incorporated into this Official Statement.
Purchases of Series 2011A Bonds under the DTC system must be made by or through Direct
Participants, which will receive a credit for the Series 2011A Bonds on DTC's records. The ownership
interest of each actual purchaser of each Series 2011A 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 2011A Bonds are to be accomplished by entries made on
the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners
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will not receive certificates representing their ownership interests in Series 2011A Bonds, except in the
event that use of the book-entry system for the Series 2011A Bonds is discontinued.
To facilitate subsequent transfers, all Series 2011A 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 representative of DTC. The deposit of Series 2011A 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 2011A
Bonds; DTC's records reflect only the identity of the Direct Participants to whose accounts such Series
2011A 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 Series 2011A Bonds may wish
to take certain steps to augment the transmission to them of notices of significant events with respect to
the Series 2011A Bonds, such as redemptions, tenders, defaults, and proposed amendments to the Lease
Agreement and the Indenture, among other security documents. For example, Beneficial Owners of
Series 2011A Bonds may wish to ascertain that the nominee holding the Series 2011A Bonds for their
benefit has agreed to obtain and transmit notices to Beneficial Owners. hi 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 2011A Bonds are being
prepaid,DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such
issue to be prepaid.
Neither DTC nor Cede &Co. (nor any other DTC nominee) will consent or vote with respect to
Series 2011A 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 Series 2011A 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 2011A 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.
DTC may discontinue providing its services as depository with respect to the Series 2011A Bonds
at any time by giving reasonable notice to the Authority or the Trustee. Under such circumstances, in the
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event that a successor depository is not obtained, Series 2011A 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, Series 2011A Bonds will be printed and
delivered to DTC.
The City, the Authority and the Underwriters cannot and do not give any assurances that DTC,
the Participants or others will distribute payments of principal, interest or premium, if any, with respect to
the securities paid to DTC or its nominee as the registered owner, or will distribute any redemption
notices or other notices, to the Beneficial Owners, or that they will do so on a timely basis or will serve
and act in the manner described in this Official Statement. The City, the Authority and the Underwriters
are not responsible or liable for the failure of DTC or any Participant to make any payment or give any
notice to a Beneficial Owner with respect to the securities or an error or delay relating thereto.
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RECORDING REQUESTED BY This Document was electronically recorded by
FIRST AMERICAN TITLE COMPANY
NATIONAUCOMMERCIAL SERVICES First American National Commercial
CQMMERCIAUINDUSTRIAL DIVISION
}
Recorded in Official Records, Orange County
TO BE RECORDED AND WHEN RECORDLff" Daly, Clerk-Recorder
RETURN TO: IIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIII Orrick,Herrington&Sutcliffe LLP NO FEE
2050 Main Street,Suite 1100 2011000479933 12:12pm 09/28/11
Irvine,CA 92614-2558 66 406 L02 14
Attention: Donald S.Field,Esq. 0.00 0.00 0.00 0.00 39.00 0.00 0.00 0.00 j
THIS TRANSACTION IS EXEMPT FROM CALIFORNIA DOCUMENTARY
TRANSFER TAX PURSUANT TO SECTION 11929 OF THE CALIFORNIA REVENUE
AND TAXATION CODE. THIS DOCUMENT IS EXEMPT FROM RECORDING FEES
PURSUANT TO SECTION 27383 OF THE CALIFORNIA GOVERNMENT CODE.
SITE LEASE
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by and between
CITY OF HUNTINGTON BEACH
and
HUNTINGTON BEACH PUBLIC FINANCING AUTHORITY
Dated as of September 1, 2011
I.
OHS WEST:261251809.6
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SITE LEASE
THIS SITE LEASE (this "Site Lease"), executed and entered into as of September 1,
2011, is by and between the CITY OF HUNTINGTON BEACH (the "City"), a municipal
corporation and chartered city organized and existing under and by virtue of the laws of the State
of California, as lessor, and the HUNTINGTON BEACH PUBLIC FINANCING AUTHORITY
the "Authority"),
( y ), a joint powers authority organized and existing under the laws of the State of
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California, as lessee.
RECITALS
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WHEREAS, in order to finance certain capital improvements, including the Huntington
Central Park Sports Complex and certain beach improvements along Pacific Coast Highway
from First Street and Pacific Coast Highway to Huntington Street and Pacific Coast Highway
(the "2001 Project"), the Authority issued its Huntington Beach Public Financing Authority
(Orange County, California) Lease Revenue Bonds, 2001 Series A (Capital Improvement
Financing Project) (the "Prior 2001A Bonds"), payable from certain lease payments to be made
by the City; and `
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WHEREAS, in order to refinance certain capital improvements, including certain :
improvements to the Civic Center, including the Police Administration Building (the "1993 t
Project" and together with the 2001 Project, the "Projects"), the Authority issued its Huntington
Beach Public Financing Authority (Orange County, California) Lease Revenue Bonds, 2001
Series B (Capital Improvement Refinancing Project) (the"Prior 2001B Bonds" and together with
the Prior 2001A Bonds, the "Prior Bonds"), payable from certain lease payments to be made by
the City; and
WHEREAS, in order to achieve certain savings, the City and the Authority desire to
refinance the Projects by refunding the Prior Bonds; and
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WHEREAS, in order to refund the Prior Bonds, the City will lease certain real property,
and the improvements thereto (the "Property"), to the Authority pursuant to this Site Lease, and
the City will sublease the Property back from the Authority pursuant to a Lease Agreement, I
dated the date hereof(the"Lease Agreement"); and
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WHEREAS,the Property is more particularly described in Exhibit A hereto; and j
WHEREAS, in order to provide the funds necessary to refund the Prior Bonds, the
Authority and the City desire to provide for the issuance of Huntington Beach Public Financing
Authority(Orange County, California) Lease Revenue Refunding Bonds, 2011 Series A (Capital
Improvement Refinancing Project) (the "Series 2011A Bonds"), in the aggregate principal
amount of$36,275,000, pursuant to an Indenture (the"Indenture"), by and among the Authority,
the City and The Bank of New York Mellon Trust Company, N.A., as trustee (the "Trustee"),
payable from the base rental payments to be made by the City pursuant to the Lease Agreement
and the other assets pledged therefor under the Indenture; and j
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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 Site Lease do exist, have happened and have been performed in regular and due time,
OHS WEST:261251809.6
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form and manner as required by law, and the parties hereto are now duly authorized to execute
and enter into this Site Lease;
NOW, THEREFORE, in consideration of the premises and of the mutual agreements
and covenants contained herein and for other valuable consideration, the parties hereto do hereby
agree as follows:
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 meanings in
this Site 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 Site Lease.
Section 2.02. Rental. The Authority shall pay to the City as and for rental of the
Property hereunder, the sum of not to exceed $38,077,176.76 (the "Site Lease Payment"). The
Site Lease Payment shall be paid from the proceeds of the Series 2011A Bonds; provided,
however, that in the event the available proceeds of the Series 2011A Bonds are not sufficient to
enable the Authority to pay such amount in full, the remaining amount of the Site Lease Payment
shall be reduced to an amount equal to the amount of such available proceeds.
The City shall deposit the Site Lease Payment in one or more separate funds or accounts
to be held and administered for the purpose of refunding the Prior Bonds. The Authority and the
City hereby find and determine that the amount of the Site Lease Payment does not exceed the
fair market value of the leasehold interest in the Property which is conveyed hereunder by the
City to the Authority. No other amounts of rental shall be due and payable by the Authority for
the use and occupancy of the Property under this Site Lease.
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 Site 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
OHS WEST:261251809.6 2
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
Authority asserts 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 be 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 Site
Lease,the Indenture and the Lease Agreement.
Section 4.03. Waiver of Personal Liability. All liabilities under this Site Lease on the
part of the Authority shall be solely liabilities of the Authority as a joint powers authority, 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 Site Lease. No director, officer or employee
of the Authority shall at any time or under any circumstances be individually or personally liable
under this Site 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 Site Lease on the part of the City shall be solely liabilities of the
City as a governmental entity, and the Authority hereby releases each and every council member,
officer and employee of the City of and from any personal or individual liability under this Site
Lease. No council member, officer or employee of the City shall at any time or under any
circumstances be individually or personally liable under this Site 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 Site Lease, and to perform all of its duties and obligations hereunder, and has
duly authorized the execution of this Site Lease;
OHS WEST:261251809.6 3
(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 Site Lease, and to perform all of its duties and obligations
hereunder, and has duly authorized the execution and delivery of this Site Lease.
ARTICLE V
ASSIGNMENT, SELLING AND SUBLEASING
Section 5.01. Assignment, Selling and Subleasing. This Site Lease may be assigned or
sold, and the Property may be 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, sublease
or sale, as the case may be.
The Authority shall assign all of its rights hereunder to the Trustee appointed pursuant to
the Indenture.
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 Site Lease.
ARTICLE VI
IMPROVEMENTS
Title to all improvements made on the Property during the term hereof shall vest in the
City.
ARTICLE VII
TERM; TERMINATION
Section 7.01. Term. The term of this Site 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 September 1, 2031, unless such term is extended or sooner
terminated as hereinafter provided.
OHS WEST:261251809.6 4
Section 7.02. Extension; Early Termination. If, on September 1, 2031, the Bonds
shall not be fully paid, or provision therefor made in accordance with Article IX 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 Site Lease shall be
automatically extended until the date upon which all Bonds shall be fully paid, or provision
therefor made in accordance with Article IX of the Indenture, and the Indenture shall be
discharged by its terms, except that the term of this Site Lease shall in no event be extended
more than ten years. If, prior to September 1, 2031, all Bonds shall be fully paid, or provisions
therefor made in accordance with Article IX of the Indenture, and the Indenture shall be
discharged by its terms, the term of this Site Lease shall end simultaneously therewith.
Section 7.03. Action on Default. In each and every case upon the occurrence and
during the continuance of a default by the Authority hereunder, the City shall have all the rights
and remedies permitted by law, except the City, to the extent permitted by law, waives any and
all rights to terminate this Site Lease.
ARTICLE VIII
MISCELLANEOUS
Section 8.01. Binding Effect. This Site Lease shall inure to the benefit of and shall be
binding upon the City, the Authority and their respective successors and assigns.
Section 8.02. Severability. In the event any provision of this Site 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 8.03. Amendments; Substitution and Release. This Site Lease may be
amended, changed, modified, altered or terminated only in accordance with the provisions of the
Lease Agreement. The City shall have the right to substitute alternate real property for the
Property or to release portions of the Property as provided in the Lease Agreement.
Section 8.04. Assignment. The Authority and City acknowledge that the Authority has
assigned its right, title and interest in and to this Site Lease to the Trustee pursuant to the
Indenture. The City consents to such assignment. The City consents to the Indenture and
acknowledges and agrees to the rights of the Trustee as set forth therein.
Section 8.05. Execution in Counterparts. This Site 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 8.06. Applicable Law. This Site Lease shall be governed by and construed in
accordance with the laws of the State of California.
Section 8.07. Captions. The captions or headings in this Site Lease are for convenience
only and in no way define or limit the scope or intent of any provision of this Site Lease.
OHS WEST:261251809.6 5
IN WITNESS WHEREOF, the parties hereto have caused this Site Lease to be executed
by their respective officers thereunto duly authorized, all as of the day and year first written
above.
CITY OF HUNTINGTON BEACH
By:
Lori Ann Farrell,
Director of Finance
HUNTIN ON BE PUBLIC
FINANC G AU ORITY
a
By.
Joe Carchio,
Chair f the Board of Directors
OHS WEST:261251809.6 6
STATE OF CALIFORNIA )
ss
COUNTY OF ORANGE )
On �, 2o// before me, Notary Public,
personally appeared Lori Ann Farrell, who proved to me on the basis of satisfactory evidence to
be the personK whose name(g)6af-e subscribed to the within instrument and acknowledged to
me that h executed the same in bl er lair authorized capacity(4e4 and that by
hiAer it signatureo on the instrument the person($), or the entity upon behalf of which the
person 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.
P. L. ESPARZA
WITNESS my hand and official seal. commission# 1857021
Notary Public-California z
Z Orange County
My Comm.Expires Aug 4,2013
Signature [SEAL]
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STATE OF CALIFORNIA )
ss
COUNTY OF ORANGE )
On �i[�L./ // before me, � 2,allotary Public
personally appeared Joe Carchio, who proved to me on the basis of satisfactory evidence to be
the person whose name is' ubscribed to the within instrument and acknowledged to me
that SAS executed the same in is authorized capacity(iGs) and that by
is erlfiiretr signature( on the instrument t e person, or the entity upon behalf of which the
person 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.
r►r�6
WITNESS my hand and official seal. P. L. ESPARZA
Commission# 1857021
z.�+► Notary Public-California Z
Z Orange County
Comm, Expires Aug 4, 2013
Signature [SEAL]
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EXHIBIT A
DESCRIPTION OF THE PROPERTY j
All that real property situated in the County of Orange, State of California, described as
follows, and any improvements thereto:
PARCEL 1:
THOSE PORTIONS OF BLOCKS 1901, 1903, 2001 AND 2002 OF TRACT NO. 12, IN THE CITY OF
HUNTINGTON BEACH, COUNTY OF ORANGE, STATE OF CALIFORNIA, AS SHOWN ON A MAP RECORDED
IN BOOK 9, PAGE 13 OF MISCELLANEOUS MAPS, RECORDS OF ORANGE COUNTY, CALIFORNIA,
TOGETHER WITH PARK STREET, UNION AVENUE, AND THE ALLEYS IN SAID BLOCKS, AS SHOWN ON
SAID MAP AND AS VACATED BY RESOLUTION NO. 3415 OF THE CITY COUNCIL OF THE CITY OF
HUNTINGTON BEACH, A CERTIFIED COPY OF WHICH WAS RECORDED JANUARY 6, 1972 IN BOOK 9956,
PAGE 849 OF OFFICIAL RECORDS OF SAID ORANGE COUNTY,AND TOGETHER WITH PORTIONS OF
PINE STREET AND SEVENTEENTH STREET,AS SHOWN SAID MAP AND AS VACATED BY RESOLUTION
NO. 5989 OF THE CITY COUNCIL OF THE CITY OF HUNTINGTON BEACH,A CERTIFIED COPY OF WHICH
WAS RECORDED MARCH 16, 1989 AS INSTRUMENT NO. 89-137620 OF SAID OFFICIAL RECORDS,
DESCRIBED AS FOLLOWS:
BEGINNING AT THE INTERSECTION OF THE CENTERLINE OF UTICA STREET, 60.00 FEET IN WIDTH,
AND A LINE PARALLEL WITH AND 840.00 FEET WESTERLY OF THE CENTERLINE OF LAKE AVENUE,
90.00 FEET IN WIDTH, BOTH AS SHOWN ON SAID MAP OF TRACT NO. 12; THENCE NORTH 000 19' 06"
EAST 358.00 FEET ALONG SAID PARALLEL LINE; THENCE NORTH 450 19' 06" EAST 24.04 FEET; THENCE
SOUTH 890 40' 54" EAST 166.03 FEET TO THE CENTERLINE OF SEVENTEENTH STREET, 70.00 FEET IN
WIDTH, AS SHOWN ON SAID MAP; THENCE NORTH 410 38' 23" EAST 427.42 FEET ALONG SAID
CENTERLINE OF SEVENTEENTH STREET; THENCE SOUTH 890 40' 54" EAST 137.05 FEET; THENCE
NORTH 000 19' 06" EAST 155.89 FEET ALONG A LINE PARALLEL TO THE CENTERLINE OF SAID LAKE
AVENUE,TO THE CENTERLINE OF SAID SEVENTEENTH STREET; THENCE NORTH 410 38' 23" EAST
134.38 FEET ALONG SAID CENTERLINE OF SAID SEVENTEENTH STREET AND ITS NORTHEASTERLY
PROLONGATION TO A POINT ON THE NORTHERLY LINE OF SAID TRACT NO. 12; THENCE NORTH 480
21' 17" WEST 474.37 FEET ALONG SAID NORTHERLY TRACT LINE OF TRACT NO. 12; THENCE NORTH
890 40' 01" WEST 535.29 FEET CONTINUING ALONG SAID NORTHERLY TRACT LINE TO THE EASTERLY
RIGHT OF WAY LINE OF MAIN STREET, 120.00 FEET IN WIDTH, AS SHOWN ON SAID MAP OF TRACT i.
NO. 12; THENCE SOUTH 000 20' 13"WEST 1266.12 FEET ALONG SAID EASTERLY LINE TO THE
CENTERLINE OF SAID UTICA STREET; THENCE SOUTH 890 39' 33" EAST 200.89 FEET ALONG SAID
CENTERLINE TO THE POINT OF BEGINNING.
EXCEPTING THEREFROM THAT PORTION DESCRIBED AS FOLLOWS:
BEGINNING AT THE INTERSECTION OF THE CENTERLINE OF UTICA STREET, 60.00 FEET IN WIDTH,
AND A LINE PARALLEL WITH AND 840.00 FEET WESTERLY OF THE CENTERLINE OF LAKE AVENUE,
90.00 FEET IN WIDTH, BOTH AS SHOWN ON SAID MAP OF TRACT NO. 12; THENCE NORTH 000 19' 06"
EAST 358.00 FEET ALONG SAID PARALLEL LINE;THENCE NORTH 450 19' 06" EAST 24.04 FEET;THENCE
SOUTH 890 40' 54" EAST 27.23 FEET TO A LINE PARALLEL WITH AND 245.00 FEET EASTERLY OF THE
EASTERLY RIGHT OF WAY LINE OF MAIN STREET, 120.00 FEET IN WIDTH,AS SHOWN ON SAID MAP
OF TRACT NO. 12; THENCE NORTH 001 20' 13" EAST 683.13 FEET ALONG SAID LAST MENTIONED
PARALLEL LINE TO A LINE PARALLEL WITH AND 208.00 FEET SOUTHERLY OF THE NORTHERLY LINE OF
BLOCK 2002 OF SAID TRACT NO. 12; THENCE NORTH 890 40' 01" WEST 245.00 FEET ALONG SAID LAST
MENTIONED PARALLEL LINE TO SAID EASTERLY RIGHT OF WAY LINE OF MAIN STREET; THENCE
SOUTH 000 20' 13" WEST 1058.12 FEET ALONG SAID EASTERLY LINE OF MAIN STREET TO THE
CENTERLINE OF SAID UTICA STREET; THENCE SOUTH 890 39' 33" EAST 200.89 FEET ALONG SAID
CENTERLINE TO THE POINT OF BEGINNING.
OHS WEST:261251809.6 A-1
I-
f
i
ALSO EXCEPTING THEREFROM THAT PORTION INCLUDED WITHIN TRACT NO. 13569,AS SHOWN ON A
MAP RECORDED IN BOOK 652, PAGES 28 THROUGH 33, OF SAID MISCELLANEOUS MAPS.
ALSO EXCEPTING THEREFROM OVER A PORTION OF SAID LAND ALL OIL, GAS,ASPHALT AND
ASPHALTUM AND OTHER HYDROCARBONS, AND ALL OTHER MINERALS, WHETHER SIMILAR OR
DISSIMILAR TO THOSE HEREIN SPECIFIED, LYING BELOW FIVE HUNDRED (500) FEET UNDER THE
SURFACE OF SUCH REAL PROPERTY WITHIN OR THAT MAY BE PRODUCED FROM SAID PROPERTY,
PROVIDED, HOWEVER,THAT THERE SHALL NOT BE THE RIGHT TO USE THE SURFACE OF SAID
PROPERTY OR FIVE HUNDRED (500) FEET UNDER THE SURFACE FOR ANY PURPOSE WHATSOEVER, AS
RESERVED BY HUNTINGTON BEACH COMPANY,A CORPORATION IN A DEED RECORDED DECEMBER 17,
1969 IN BOOK 9166, PAGE 715 OF OFFICIAL RECORDS.
ALSO EXCEPTING THEREFROM OVER A PORTION OF SAID LAND ALL OF THE OIL, GAS AND OTHER
MINERALS IN AND UNDER AND THAT MAY BE PRODUCED BELOW A DEPTH OF FIVE HUNDRED (500)
FEET BENEATH THE SURFACE OF SAID LAND, EXCEPT THE USE OF THE SURFACE OF THE LAND OR
THAT PORTION OF SAID LAND FROM THE SURFACE TO FIVE HUNDRED (500) FEET BELOW THE C
SURFACE FOR ANY PURPOSE WHATSOEVER, AS GRANTED TO ANGUS PETROLEUM CORPORATION,A
DELAWARE CORPORATION IN A DEED RECORDED JULY 5, 1988 AS INSTRUMENT NO. 88-319698 OF
OFFICIAL RECORDS.
i
APN: 023-041-03, 023-041-04 AND A PORTION OF 023-031-14
I
PARCEL 2:
THOSE PORTIONS OF BLOCKS 1902, 1903 AND 2002 INCLUDING A PORTION OF UTICA STREET,ALL OF
TRACT NO. 12, IN THE CITY OF HUNTINGTON BEACH, COUNTY OF ORANGE, STATE OF CALIFORNIA,
AS SHOWN ON A MAP RECORDED IN BOOK 9, PAGE 13 OF MISCELLANEOUS MAPS, RECORDS OF
ORANGE COUNTY, CALIFORNIA,TOGETHER WITH THOSE PORTIONS OF UNION AVENUE AND THE
ALLEYS IN SAID BLOCKS AS SHOWN ON SAID MAP AS VACATED BY RESOLUTION NO. 3415 OF THE
CITY COUNCIL OF THE CITY OF HUNTINGTON BEACH,A CERTIFIED COPY OF WHICH WAS RECORDED
JANUARY 6, 1972 IN BOOK 9956, PAGE 849 OF OFFICIAL RECORDS OF SAID ORANGE COUNTY,
TOGETHER WITH THAT PORTION OF SEVENTEENTH STREET AS VACATED BY RESOLUTION NO. 5989
OF SAID CITY COUNCIL,A CERTIFIED COPY OF WHICH WAS RECORDED MARCH 16, 1989 AS
INSTRUMENT NO. 89-137620 OF SAID OFFICIAL RECORDS, MORE PARTICULARLY DESCRIBED AS
FOLLOWS:
i
BEGINNING AT THE INTERSECTION OF THE CENTERLINE OF UTICA STREET 60.00 FEET IN WIDTH AND
A LINE PARALLEL WITH AND 840.00 FEET WESTERLY OF THE CENTERLINE OF LAKE AVENUE 90.00
FEET IN WIDTH, BOTH AS SHOWN ON SAID MAP OF TRACT NO. 12; THENCE NORTH 00 DEG. 19' 06"
EAST 358.00 FEET ALONG SAID PARALLEL LINE; THENCE NORTH 45 DEG. 19' 06" EAST 24.04 FEET;
THENCE SOUTH 89 DEG. 40' 54" EAST 27.23 FEET TO A LINE PARALLEL WITH AND 245.00 FEET !`
EASTERLY OF THE EASTERLY RIGHT OF WAY LINE OF MAIN STREET, 120.00 FEET IN WIDTH AS
SHOWN ON SAID MAP OF TRACT NO. 12; THENCE NORTH 00 DEG. 20' 13" EAST 683.13 FEET ALONG
SAID LAST MENTIONED PARALLEL LINE TO A LINE PARALLEL WITH AND 208.00 FEET SOUTHERLY OF
THE NORTHERLY LINE OF BLOCK 2002 OF SAID MAP OF TRACT NO. 12; THENCE NORTH 89 DEG. 40'
01" WEST 245.00 FEET ALONG SAID LAST MENTIONED PARALLEL LINE TO SAID EASTERLY RIGHT OF
WAY LINE OF MAIN STREET; THENCE SOUTH 00 DEG. 20' 13" WEST 1058.12 FEET ALONG SAID
EASTERLY LINE OF MAIN STREET TO THE CENTERLINE OF SAID UTICA STREET; THENCE SOUTH 89
DEG. 39' 33" EAST 200.89 FEET ALONG SAID CENTERLINE TO THE POINT OF BEGINNING.
i
EXCEPTING THEREFROM OVER A PORTION OF SAID LAND ALL OIL, GAS,ASPHALT AND ASPHALTUM
AND OTHER HYDROCARBONS,AND ALL OTHER MINERALS, WHETHER SIMILAR OR DISSIMILAR TO K
THOSE HEREIN SPECIFIED, LYING BELOW FIVE HUNDRED (500) FEET UNDER THE SURFACE OF SUCH
REAL PROPERTY WITHIN OR THAT MAY BE PRODUCED FROM SAID PROPERTY, PROVIDED, HOWEVER,
THAT THERE SHALL NOT BE THE RIGHT TO USE THE SURFACE OF SAID PROPERTY OR FIVE HUNDRED
(500) FEET UNDER THE SURFACE FOR ANY PURPOSE WHATSOEVER,AS RESERVED BY HUNTINGTON j
OHS WEST:261251809.6 A-2
BEACH COMPANY, A CORPORATION IN A DEED RECORDED DECEMBER 17, 1969 IN BOOK 9166, PAGE
715 OF OFFICIAL RECORDS.
ALSO EXCEPTING THEREFROM OVER A PORTION OF SAID LAND ALL OF THE OIL, GAS AND OTHER
MINERALS IN AND UNDER AND THAT MAY BE PRODUCED BELOW A DEPTH OF FIVE HUNDRED (500)
FEET BENEATH THE SURFACE OF SAID LAND, EXCEPT THE USE OF THE SURFACE OF THE LAND OR
THAT PORTION OF SAID LAND FROM THE SURFACE TO FIVE HUNDRED (500) FEET BELOW THE
SURFACE FOR ANY PURPOSE WHATSOEVER, AS GRANTED TO ANGUS PETROLEUM CORPORATION, A
DELAWARE CORPORATION IN A DEED RECORDED JULY 5, 1988 AS INSTRUMENT NO. 88-319698 OF
OFFICIAL RECORDS.
APN: 023-031-10, 023-031-13 AND A PORTION OF 023-031-14
PARCEL 3:
THOSE PORTIONS OF LOTS 13 AND 14 OF BLOCK 1901 OF TRACT NO. 12, IN THE CITY OF
HUNTINGTON BEACH, COUNTY OF ORANGE, STATE OF CALIFORNIA, AS SHOWN ON THE MAP
RECORDED IN BOOK 9, PAGE 13 OF MISCELLANEOUS MAPS, IN THE OFFICE OF THE COUNTY
RECORDER OF ORANGE COUNTY, CALIFORNIA,TOGETHER WITH THOSE PORTIONS OF SEVENTEENTH
STREET,AS SHOWN ON SAID MAP AND AS VACATED IN THAT CERTAIN RESOLUTION NO. 5989 OF THE
CITY COUNCIL OF THE CITY OF HUNTINGTON BEACH, A CERTIFIED COPY OF WHICH RECORDED
MARCH 16, 1989 AS INSTRUMENT NO. 89-137620 OF OFFICIAL RECORDS OF ORANGE COUNTY AND
PORTIONS OF LAKE AVENUE AND PARK STREET,AS SHOWN ON THE MAP OF TRACT NO. 13569,
RECORDED IN BOOK 652, PAGES 28 THROUGH 33 OF MISCELLANEOUS MAPS, RECORDS OF SAID
ORANGE COUNTY, MORE PARTICULARLY DESCRIBED AS FOLLOWS:
BEGINNING AT THE CENTERLINE INTERSECTION OF LAKE AVENUE 90.00 FEET IN WIDTH, AND
SEVENTEENTH STREET 70.00 FEET IN WIDTH, AS SHOWN ON SAID MAP OF TRACT NO. 13569; THENCE
SOUTH 000 19' 06" WEST 207.32 FEET ALONG SAID CENTERLINE OF LAKE AVENUE TO THE
CENTERLINE INTERSECTION OF PARK STREET, 52.00 FEET IN WIDTH,AS SHOWN ON THE MAP OF
SAID TRACT NO. 13569; THENCE NORTH 890 40' 54" WEST 237.70 FEET ALONG SAID CENTERLINE OF
PARK STREET;THENCE NORTH 00° 19' 06" EAST 155.89 FEET TO THE CENTERLINE OF SAID
SEVENTEENTH STREET; THENCE NORTH 41° 38' 23" EAST 68.48 FEET ALONG SAID CENTERLINE TO AN
ANGLE POINT IN SAID SEVENTEENTH STREET; THENCE CONTINUING ALONG SAID CENTERLINE OF
SEVENTEENTH STREET SOUTH 890 40' 54" EAST 192.48 FEET TO THE POINT OF BEGINNING.
EXCEPTING THEREFROM ANY PORTION LYING WITHIN THE AFOREMENTIONED PARCEL 1.
i
EXCEPTING THEREFROM SAID LAND ALL OF THE OIL, GAS AND OTHER MINERALS IN AND UNDER AND
THAT MAY BE PRODUCED BELOW A DEPTH OF FIVE HUNDRED (500) FEET BENEATH THE SURFACE OF
SAID LAND, EXCEPT THE USE OF THE SURFACE OF THE LAND OR THAT PORTION OF SAID LAND FROM
THE SURFACE TO FIVE HUNDRED (500) FEET BELOW THE SURFACE FOR ANY PURPOSE WHATSOEVER,
AS GRANTED TO ANGUS PETROLEUM CORPORATION,A DELAWARE CORPORATION IN A DEED
RECORDED JULY 5, 1988 AS INSTRUMENT NO. 88-319698 OF OFFICIAL RECORDS.
APN: 023-041-06
PARCEL 4:
!
THOSE LANDS IN THE CITY OF HUNTINGTON BEACH, COUNTY OF ORANGE, STATE OF CALIFORNIA
BEING A PORTION OF SEVENTEENTH STREET AS SHOWN ON TRACT NO. 12, FILED IN BOOK 9, PAGE
13 OF MISCELLANEOUS MAPS,TOGETHER WITH A PORTION OF MANSION AVENUE AS DESCRIBED IN
THE DEEDS TO THE CITY OF HUNTINGTON BEACH RECORDED SEPTEMBER 23, 1916, IN BOOK 294,
PAGE 390 OF DEEDS, AND THE DEED RECORDED JULY 21, 1950, IN BOOK 2045, PAGE 79 OF OFFICIAL
RECORDS WHICH WERE VACATED, AS A PORTION OF PARCEL 1 BY CITY OF HUNTINGTON BEACH
RESOLUTION NO. 5989, ON JANUARY 17, 1989 RECORDED MARCH 16, 1989 AS INSTRUMENT NO. 89-
OHS WEST:261251809.6 A-3
137620 OF OFFICIAL RECORDS, ALL OF WHICH ARE LOCATED IN RECORDS OF SAID COUNTY, MORE
PARTICULARLY DESCRIBED AS FOLLOWS:
COMMENCING AT THE MOST EASTERLY CORNER OF LOT 3, BLOCK 2001, AS SHOWN ON SAID TRACT
NO. 12,THENCE NORTH 41019'00"EAST, 54.43 FEET,ALONG THE NORTHEAST PROLONGATION OF
THE SOUTHEAST LINE OF SAID LOT 3,TO AN INTERSECTION WITH THE SOUTHWESTERLY LINE OF
YORKTOWN AVENUE (FORMERLY MANSION AVENUE), SAID INTERSECTION BEING THE BEGINNING OF
A NON-TANGENT CURVE CONCAVE NORTHEASTERLY HAVING A RADIUS OF 850.00 FEET, A RADIAL
LINE TO SAID POINT OF CURVATURE BEARS SOUTH 27011'59"WEST;
THENCE SOUTHEASTERLY 36.30 FEET, ALONG SAID CURVE,THROUGH A CENTRAL ANGLE OF 202648"1
TO THE INTERSECTION OF SAID CURVE AND THE NORTHEASTERLY PROLONGATION OF THE
CENTERLINE OF SEVENTEENTH STREET SAID INTERSECTION BEING THE TRUE POINT OF BEGINNING
OF THIS DESCRIPTION, A RADIAL LINE TO SAID TRUE POINT OF BEGINNING BEARS SOUTH 24045'11"
WEST;
THENCE CONTINUING SOUTHEASTERLY 44.96 FEET, ALONG SAID CURVE,THROUGH A CENTRAL ANGLE
OF 3001'51",TO THE BEGINNING OF A REVERSE CURVE CONCAVE SOUTHWESTERLY, HAVING A
RADIUS OF 32.00 FEET;
THENCE SOUTHEASTERLY 38.13 FEET ALONG SAID CURVE,THROUGH A CENTRAL ANGLE OF 68016'40",
TO THE NORTHERLY PROLONGATION OF THE WESTERLY LINE OF LAKE STREET(FORMERLY LAKE
AVENUE), 90.00 FEET IN WIDTH, AS SHOWN ON SAID TRACT NO. 12;
THENCE SOUTH 00000'00"WEST, 49.93 FEET ALONG SAID PROLONGATION OF THE WESTERLY LINE
OF LAKE STREET TO THE CENTERLINE OF SEVENTEENTH STREET(70.00 FEET IN WIDTH)AS SHOWN
ON SAID TRACT NO. 12;
THENCE WESTERLY ALONG THE CENTERLINE OF SAID SEVENTEENTH STREET, AS SHOWN ON SAID
TRACT NO. 12, NORTH 90000'00"WEST, 147.08 FEET,TO AN ANGLE POINT IN SAID CENTERLINE OF
SEVENTEENTH STREET AS SHOWN ON SAID TRACT NO. 12;
THENCE NORTHEASTERLY, LEAVING SAID CENTERLINE OF SEVENTEENTH STREET ALONG THE
NORTHEASTERLY PROLONGATION OF THE CENTERLINE OF SEVENTEENTH STREET AS SHOWN ON
SAID TRACT NO. 12, NORTH 41019'00"EAST, 129.68 FEET TO THE TRUE POINT OF BEGINNING OF
THIS DESCRIPTION.
EXCEPTING THEREFROM OVER A PORTION OF SAID LAND ALL MINERALS, PETROLEUM,ASPHALTUM,
BREA, OIL, GAS AND OTHER HYDROCARBON SUBSTANCES IN, UPON OR UNDER, OR THAT MAY BE
PRODUCED FROM THE LAND,TOGETHER WITH THE SOLE AND EXCLUSIVE RIGHT TO DRILL SLANTED
WELLS FROM ADJACENT LANDS INTO AND THROUGH THE SUBSURFACE OF THE LAND; PROVIDED,
HOWEVER,THAT GRANTORS SHALL NOT USE THE SURFACE OF THE LAND FOR THE EXPLORATTION,
DEVELOPMENT, EXTRACTION OR REMOVAL OF SAID MINERALS OR SUBSTANCES, AS RESERVED BY
HUNTINGTON BEACH COMPANY,A CORPORATION AND STANDARD OIL COMPANY OF CALIFORNIA, A
CORPORATION IN A DEED RECORDED JULY 21, 1950 IN BOOK 2045, PAGE 79 OF OFFICIAL RECORDS.
APN: 023-041-07
APN: 023-031-10, 023-041-03, 023-041-04, 023-031-13, 023-031-14, 023-041-06 and 023-041-07
I
OHS WEST:261251809.6 A-4
CERTIFICATE OF ACCEPTANCE
In accordance with Section 27281 of the California Government Code, this is to certify
that the interest in the real property conveyed by the Site Lease, dated as of September 1, 2011,
by and between the City of Huntington Beach, a municipal corporation and chartered city
organized and existing under and by virtue of the laws of the State of California(the "City") and
the Huntington Beach Public Financing Authority, a joint powers authority organized and
existing under the laws of the State of California (the "Authority"), from the City to the
Authority, is hereby accepted by the undersigned on behalf of the Authority pursuant to authority
conferred by resolution of the Board of Directors of the Authority adopted on September 6,
2011, and the Authority consents to recordation thereof by its duly authorized officer.
Dated: September 28, 2011
HUNTING ON BEAC BLIC
FINAN UT TY
By:
oe Carchio,
Chair of e Board of Directors
OHS WEST:261251809.6
LEASE AGREEMENT
by and between
CITY OF HUNTINGTON BEACH
and
HUNTINGTON BEACH PUBLIC FINANCING AUTHORITY
Dated as of September 1, 2011
OHS WEST2612518107
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS.................................................................................................3
Section 1.01. Definitions............................................................................................3
ARTICLE II LEASE OF PROPERTY; TERM....................................................................5
Section 2.01. Lease of Property.................................................................................5
Section 2.02. Term; Occupancy.................................................................................5
ARTICLE III RENTAL PAYMENTS ...................................................................................6
Section 3.01. Base Rental Payments..........................................................................6
Section 3.02. Additional Rental Payments ................................................................6
Section 3.03. Fair Rental Value.................................................................................7
Section 3.04. Payment Provisions........................ ....................... ....................... .....7
Section 3.05. Appropriations Covenant.....................................................................7
Section 3.06. Rental Abatement.................................................................................7
ARTICLE IV REPRESENTATIONS AND WARRANTIES; COVENANTS AND
AGREEMENTS...............................................................................................9
Section 4.01. Power and Authority of the City..........................................................9
Section 4.02. Power and Authority of the Authority.................................................9
Section 4.03. Net-Net-Net Lease................................................. ....................... .....9
Section 4.04. Disclaimer of Warranties.....................................................................9
Section4.05. Quiet Enjoyment..................................................................................9
Section 4.06. Right of Entry ......................................................................................9
Section 4.07. Use of the Property..............................................................................9
Section 4.08. Maintenance and Utilities.................................................................. 10
Section 4.09. Additions to Property..................... .................................................. 10
Section 4.10. Installation of City's Equipment........................................................ 10
Section4.11. Taxes.................................................................................................. 10
Section4.12. Liens................................................................................................... 11
Section 4.13. Compliance with Law, Regulations, Etc............................................ 11
Section 4.14. No Condemnation.............................................................................. 11
Section 4.15. Authority's Purpose........................................................................... 11
ARTICLE V INSURANCE................................................................................................. 12
Section 5.01. Public Liability and Property Damage Insurance; Workers'
Compensation Insurance.................................................................... 12
OHS WEST261251810.7 i
TABLE OF CONTENTS
(continued)
Page
Section 5.02. Additional Insurance Provision; Form of Policies............................. 12
Section5.03. Self-Insurance.................................................................................... 12
Section 5.04. Title Insurance ................................................................................... 13
ARTICLE VI EMINENT DOMAIN; RIGHT TO REDEEM.............................................. 14
Section 6.01. Eminent Domain................................................................................ 14
Section 6.02. Right to Redeem Bonds..................................................................... 14
ARTICLE VII ASSIGNMENT AND SUBLETTING; SUBSTITUTION OR
RELEASE; TITLE......................................................................................... 15
Section 7.01. Assignment and Subleasing............................................................... 15
Section 7.02. Substitution or Release of the Property ............................................. 15
Section 7.03. Title to Property................................................................................. 16
ARTICLE VIII EVENTS OF DEFAULT AND REMEDIES................................................ 17
Section 8.01. Events of Default............................................................................... 17
Section 8.02. Action on Default............................................................................... 17
Section 8.03. Other Remedies.................................................................................. 19
Section 8.04. No Acceleration................................................................................. 19
Section 8.05. Remedies Not Exclusive.................................................................... 19
Section8.06. Waiver................................................................................................20
Section 8.07. Attorney's Fees..................................................................................20
Section 8.08. Authority Event of Default; Action on Authority Event of
Default................................................................................................20
ARTICLE IX AMENDMENTS ...........................................................................................21
Section 9.01. Amendments......................................................................................21
ARTICLE X MISCELLANEOUS......................................................................................23
Section 10.01. Authority Not Liable..........................................................................23
Section 10.02. Assignment to Trustee; Effect ...........................................................23
Section 10.03. Gender and References; Article and Section Headings.....................23
Section 10.04. Validity and Severability.................. ....................... ........................23
Section 10.05. California Law...................................................................................24
Section10.06. Notices...............................................................................................24
Section 10.07. Execution in Counterparts.................................................................. 24
EXHIBIT A - DESCRIPTION OF THE PROPERTY .............................................................. A-1
OHS WEST261251810.7 ii
LEASE AGREEMENT
THIS LEASE AGREEMENT (this "Lease Agreement"), dated as of September 1,
2011, is by and between the CITY OF HUNTINGTON BEACH, a municipal corporation and
chartered city organized and existing under and by virtue of the laws of the State of California
(the "City"), as lessee, and the HUNTINGTON BEACH PUBLIC FINANCING AUTHORITY,
a joint powers authority organized and existing under the laws of the State of California (the
"Authority"), as lessor.
RECITALS
WHEREAS, in order to finance certain capital improvements, including the Huntington
Central Park Sports Complex and certain beach improvements along Pacific Coast Highway
from First Street and Pacific Coast Highway to Huntington Street and Pacific Coast Highway
(the "2001 Project'), the Authority issued its Huntington Beach Public Financing Authority
(Orange County, California) Lease Revenue Bonds, 2001 Series A (Capital Improvement
Financing Project) (the "Prior 2001A Bonds"), payable from certain lease payments to be made
by the City; and
WHEREAS, in order to refinance certain capital improvements, including certain
improvements to the Civic Center, including the Police Administration Building (the "1993
Project" and together with the 2001 Project, the "Projects"), the Authority issued its Huntington
Beach Public Financing Authority (Orange County, California) Lease Revenue Bonds, 2001
Series B (Capital Improvement Refinancing Project) (the"Prior 2001B Bonds" and together with
the Prior 2001A Bonds, the "Prior Bonds"), payable from certain lease payments to be made by
the City; and
WHEREAS, in order to achieve certain savings, the City and the Authority desire to
refinance the Projects by refunding the Prior Bonds; and
WHEREAS, in order to refund the Prior Bonds, the City is leasing certain real property,
and the improvements thereto (the "Property"), to the Authority pursuant to a Site Lease, dated
as of the date hereof (the "Site Lease"), and the City is subleasing the Property back from the
Authority pursuant to this Lease Agreement; and
WHEREAS, in order to provide the funds necessary to refund the Prior Bonds, the
Authority and the City desire to provide for the issuance of Huntington Beach Public Financing
Authority (Orange County, California) Lease Revenue Refunding Bonds, 2011 Series A (Capital
Improvement Refinancing Project) (the "Series 2011A Bonds"), in the aggregate principal
amount of$36,275,000, pursuant to an Indenture (the "Indenture"), by and among the Authority,
the City and The Bank of New York Mellon Trust Company, N.A., as trustee (the "Trustee"),
which bonds are payable from the base rental payments to be made by the City pursuant to this
Lease Agreement; 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
OHS WEST2612518107
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 premises and of the mutual agreements
and covenants contained herein and for other valuable consideration, the parties hereto do hereby
agree as follows:
OHS WEST2612518107 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 and of any certificate, opinion or
other document herein mentioned, have the meanings herein specified. Capitalized terms not
otherwise defined herein shall have the meanings assigned to such terms in the Indenture.
"Additional Rental Payments" means all amounts payable by the City as Additional
Rental Payments pursuant to Section 3.02 hereof.
"Authority" means the Huntington Beach Public Financing Authority, a joint powers
authority organized and existing under the laws of the State of California.
"Authority Event of Default" means an event described as such in Section 8.08.
"Base Rental Deposit Date" means the fifth Business Day next preceding each Interest
Payment Date.
"Base Rental Payments" means all amounts payable to the Authority by the City as
Base Rental Payments pursuant to Section 3.01 hereof.
"City" means the City of Huntington Beach, a municipal corporation and chartered city
organized and existing under and by virtue of the laws of the State of California.
"Closing Date" means September 28, 2011.
"Event of Default" means an event described as such in Section 8.01.
"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.
"Independent Insurance Consultant" means a nationally recognized independent
actuary, insurance company or broker that has actuarial personnel experienced in the area of
insurance for which the City is to be self-insured, as may from time to time be designated by the
City.
"Laws and Regulations" means, with respect to the Property, any applicable law,
regulation, code, order, rule, judgment or consent agreement, including, without limitation, those
relating to zoning, building, use and occupancy, fire safety, health, sanitation, air pollution,
ecological matters, environmental protection, hazardous or toxic materials, substances or wastes,
conservation, parking, architectural barriers to the handicapped, or restrictive covenants or other
agreements affecting title to the Property.
"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.
OHS WEST2612518107 3
"Net Proceeds" means any insurance proceeds or condemnation award paid with respect
to any of the Property, which proceeds or award, after payment therefrom of all reasonable
expenses incurred in the collection thereof, are in an amount greater than $50,000.
"Permitted Encumbrances" means, with respect to the Property (a) liens for general ad
valorem taxes and assessments, if any, not then delinquent, or which the City may, pursuant to
provisions of Section 4.11 hereof, permit to remain unpaid, (b) this Lease Agreement, (c) the Site
Lease, (d) any right or claim of any mechanic, laborer, materialman, supplier or vendor not filed
or perfected in the manner prescribed by law, (e) easements, rights of way, mineral rights,
drilling rights and other rights, reservations, covenants, conditions or restrictions which exist of
record as of the Closing Date, and (f) easements, rights of way, mineral rights, drilling rights and
other rights, reservations, covenants, conditions or restrictions established following the Closing
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 to which the Authority consents in writing.
"Property" means the real property described in Exhibit A hereto, and any
improvements thereto.
"Rental Payments" means, collectively, the Base Rental Payments and the Additional
Rental Payments.
"Rental Period" means the period from the Closing Date through September 30, 2012
and, thereafter, the twelve-month period commencing on October 1 of each year during the term
of this Lease Agreement.
"Scheduled Termination Date" means September 1, 2031.
"Site Lease" means the Site 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 hereof.
"Trustee" means The Bank of New York Mellon Trust Company, N.A., a national
banking association organized and existing under the laws of the United States of America, or
any successor thereto as Trustee under the Indenture substituted in its place as provided therein.
OHS WEST2612518107 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 Site Lease
shall not effect or result in a merger of the City's leasehold estate in the Property as lessee under
this Lease Agreement and its fee estate in the Property as lessor under the Site Lease, and the
Authority shall continue to have a leasehold estate in the Property pursuant to the Site Lease
throughout the term thereof and hereof. This Lease Agreement shall constitute a sublease with
respect to the Property. The leasehold interest in the Property granted by the City to the
Authority pursuant to the Site Lease is and shall be independent of this Lease Agreement and this
Lease Agreement shall not be an assignment or surrender of the leasehold interest in the Property
granted to the Authority under the Site Lease.
Section 2.02. Term; Occupancy. (a) The term of this Lease Agreement shall
commence on the Closing Date and shall end on the Scheduled Termination Date, unless such
term is extended or sooner terminated as hereinafter provided. If, on the Scheduled Termination
Date, all of the Bonds shall not be fully paid or deemed to have been paid in accordance with
Article IX of the Indenture, or any Rental Payments shall remain due and payable or shall have
been abated at any time, then the term of this Lease Agreement shall be extended until the date
upon which all of the Bonds shall be fully paid or deemed to have been paid in accordance with
Article IX of the Indenture, and all Rental Payments due and payable shall have been paid in full;
provided, however, that the term of this Lease Agreement shall in no event be extended more
than ten years beyond the Scheduled Termination Date. If, prior to the Scheduled Termination
Date, all of the Bonds shall be fully paid or deemed to have been paid in accordance with Article
IX of the Indenture, and all Rental Payments due and payable shall have been paid in full, the
term of this Lease Agreement shall end simultaneously therewith.
(b) The City shall take possession of the Property on the Closing Date.
OHS WEST2612518107 5
ARTICLE III
RENTAL PAYMENTS
Section 3.01. Base Rental Payments. (a) General. The Rental Payments, including
Base Rental Payments, for each Rental Period 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 such Rental Period.
The obligation of the City to pay the Base Rental Payments does not constitute a debt of
the City or of the State of California or of any political subdivision thereof in contravention 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) Base Rental Payments. Subject to the provisions of Section 3.06 hereof, the City
shall, on each Base Rental Deposit Date, pay to the Authority a Base Rental Payment in an
amount equal to the principal of, and interest on, the Bonds due and payable on the next
succeeding Principal Payment Date or Interest Payment Date, as applicable, including any such
principal due and payable by reason of mandatory sinking fund redemption of the Bonds;
provided, however, that the amount of such Base Rental Payment shall be reduced by the
amount, if any, available in the Payment Fund, the Principal Account or the Interest Account on
such Base Rental Deposit Date to pay such principal of, or interest on, the Bonds.
(c) Payments other than Regularly Scheduled Payments. 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 payable during such extended term shall be
established so that such Base Rental Payments will in the aggregate be sufficient to pay the
unpaid principal of, and interest accrued and to accrue on, the Bonds; 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 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
OHS WEST2612518107 6
comply with the terms of the Indenture or this 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 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 Rental Payments are not in excess of the fair rental value of the Property.
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, or such other place or entity as the Authority
shall designate. 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.
Section 3.05. Appropriations Covenant. The City covenants to take such action as
may be necessary to include all Rental Payments due hereunder in its annual budgets and to
make necessary annual appropriations for all such Rental Payments. The covenants on the part of
the City contained in this Section 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 such covenants.
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 California Civil Code
Sections 1932(2) and 1933(4) and any and all other rights to terminate this Lease Agreement by
virtue of any such interference, and this Lease Agreement shall continue in full force and effect.
The amount of such abatement shall be agreed upon by the City and the Authority. The City and
the Authority shall provide the Trustee with a certificate setting forth the amount of such
OHS WEST2612518107 7
abatement 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; provided, however, that such term shall in no event be extended more than
ten years beyond the Scheduled Termination Date.
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 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.
OHS WEST2612518107 8
ARTICLE IV
REPRESENTATIONS AND WARRANTIES; COVENANTS AND AGREEMENTS
Section 4.01. Power and Authority 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, the Site Lease 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 Site Lease and the Indenture, and (b) the Property is zoned for use for
governmental related facilities.
Section 4.02. Power and Authority 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 Site Lease 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 Site Lease and the Indenture.
Section 4.03. Net-Net-Net Lease. This Lease Agreement shall be, and shall be deemed
and construed to be, a"net-net-net lease" and 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 4.04. Disclaimer of Warranties. THE AUTHORITY MAKES NO
AGREEMENT, WARRANTY OR REPRESENTATION, EITHER EXPRESS OR IMPLIED,
AS TO THE VALUE, DESIGN, CONDITION, MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE OR FITNESS FOR USE OF THE PROPERTY, OR WARRANTY
WITH RESPECT THERETO. THE CITY ACKNOWLEDGES THAT THE AUTHORITY IS
NOT A MANUFACTURER OF ANY PORTION OF THE PROPERTY OR A DEALER
THEREIN, THAT THE CITY LEASES THE PROPERTY AS IS, IT BEING AGREED THAT
ALL OF THE AFOREMENTIONED RISKS ARE TO BE BORNE BY THE CITY.
Section 4.05. Quiet Enioyment. So long as no Event of Default shall have occurred
and be continuing, the City 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 4.06. RiEht of Entry. The Authority 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 4.07. Use of the Property. The City shall 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
OHS WEST2612518107 9
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 4.08. Maintenance and Utilities. 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. In
exchange for the Rental Payments, the Authority agrees to provide only the Property.
Section 4.09. Additions to Property. Subject to Section 4.12 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 under the provisions of state and federal law, and the Property, upon
completion of any addition, modification or improvement 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 addition, modification or improvement.
Section 4.10. 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, and the Property, upon completion of any installation, modification
or removal 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 installation, modification or removal.
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.
Section 4.11. Taxes. The City shall pay or cause to be paid 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 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 and when the same become due.
OHS WEST2612518107 10
Upon notice to the Authority and the Trustee, 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 4.12. 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 shall 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 contest 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 4.13. Compliance with Law, Regulations, Etc. The City represents and
warrants that, after due inquiry, it has no knowledge and has not given or received any written
notice indicating that the Property or the use thereof or any practice, procedure or policy
employed by it in the conduct of its business with respect to the Property materially violates any
Laws and Regulations.
Section 4.14. No Condemnation. The City shall not exercise the power of
condemnation with respect to the Property. If for any reason the foregoing covenant shall be
held by a court of competent jurisdiction to be unenforceable and the City condemns the
Property or if the City breaches such covenant, the City agrees that the value of the City's
leasehold estate hereunder in the Property shall be not less than the greater of (a) the amount
sufficient to redeem the Bonds pursuant to the Indenture if the Bonds are then subject to
redemption, or (b) the amount sufficient to defease the Bonds to the first available redemption
date in accordance with the Indenture if the Bonds are not then subject to redemption.
Section 4.15. Authority's Purpose. So long as any Bonds are Outstanding, the
Authority shall not engage in any activities inconsistent with the purposes for which the
Authority is organized, as set forth in the agreement pursuant to which the Authority was
created.
OHS WEST261251810.7 I I
ARTICLE V
INSURANCE
Section 5.01. Public Liability and Property Damase Insurance; Workers'
Compensation Insurance. (a) The City shall maintain reasonable and customary liability
insurance. The City's obligations under this subsection may be satisfied by self-insurance,
provided that such self-insurance complies with the provisions of Section 5.03 hereof.
(b) The City shall maintain or cause to be maintained casualty insurance insuring the
Property against fire, lightning and all other risks covered by an extended coverage endorsement
(excluding earthquake) to the full insurable value of the Property, subject to a $100,000 loss
deductible provision. Full insurable value shall not be less than the aggregate principal amount of
the Outstanding Bonds. The insurance required under this subsection may be maintained in
whole or in part in the form of self-insurance, provided that such self-insurance complies with
the provisions of Section 5.03 hereof.
(c) 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 (b) of this Section in an amount not less than an amount equal to two times Maximum
Annual Debt Service. The insurance required under this subsection may not be maintained in
whole or in part in the form of self-insurance.
(d) The insurance required by this Section shall be provided by insurers rated "A" or
better by Fitch, A.M. Best Company or S&P.
Section 5.02. 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. All such policies shall provide that the Trustee shall be given 30 days notice of the
expiration thereof, any intended cancellation thereof or any reduction in the coverage provided
thereby. 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 October 15 of each year,
commencing October 15, 2012, a schedule of the insurance policies being maintained in
accordance herewith and a Written 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 Written Certificate of the City as to the City's
compliance with this Article. The Trustee shall not be responsible for the sufficiency of the
coverage or the amounts of such policies.
Section 5.03. 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:
OHS WEST2612518107 12
(a) the self-insurance program shall be approved in writing 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 the Independent Insurance Consultant
and any deficiencies in any self-insured claims reserve fund shall be remedied in
accordance with the recommendation of such Independent Insurance Consultant;
(c) the self-insured claims reserve fund shall be held in a separate trust fund
by an independent trustee, which may be the Trustee serving as such under the Indenture;
and
(d) in the event the self-insurance program shall be discontinued, the actuarial
soundness of its claims reserve fund, as determined by an Independent Insurance
Consultant, shall be maintained.
Section 5.04. Title Insurance. The City shall provide, at its own expense, one or more
ALTA title insurance policies for the Property, in the aggregate amount of not less than the
aggregate principal amount of the Bonds. Said policy or policies shall insure (a) the fee interest
of the City in the Property, (b) the Authority's ground leasehold estate in the Property under the
Site Lease, and (c) the City's leasehold estate hereunder in the Property, subject only to
Permitted Encumbrances; provided, however, that one or more of said estates may be insured
through an endorsement to such policy or policies. All Net Proceeds received under said policy
or policies shall be deposited with the Trustee and applied as provided in Section 5.02 of the
Indenture. So long as any of the Bonds remain Outstanding, each policy of title insurance
obtained pursuant hereto or required hereby shall provide that all proceeds thereunder shall be
payable to the Trustee for the benefit of the Owners.
OHS WEST261251810.7 13
ARTICLE VI
EMINENT DOMAIN; RIGHT TO REDEEM
Section 6.01. 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 this 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 Sections 3.01 and 5.02 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 City.
Section 6.02. RiEht to Redeem Bonds. (a) The City shall have the right to cause the
Bonds to be redeemed pursuant to, and in accordance with the provisions of, Section 3.02 of the
Indenture by providing the Trustee with funds sufficient for such purpose (which funds may be
derived by the City from any source) and giving notice of the City's exercise of such right as
provided in subsection (b) of this Section.
(b) In order to exercise its right to cause Bonds to be redeemed pursuant to subsection
(a) of this Section, the City shall give written notice to the Trustee of its intention to exercise
such right, specifying the date on which such redemption shall be made, which date shall be not
less than 45 days from the date such notice is given (unless otherwise agreed by the Trustee), and
specifying the Series, maturities and amounts of Bonds to be redeemed.
(c) The City shall have the right to cause Bonds to be deemed to have been paid
pursuant to, and in accordance with the provisions of, Section 9.02 of the Indenture by providing
the Trustee with funds sufficient for such purpose (which funds may be derived by the City from
any source) and providing and delivering, or causing to be provided and delivered the other items
required pursuant to said Section 9.02 to be provided or delivered in connection with such
deemed payment.
OHS WEST2612518107 14
ARTICLE VII
ASSIGNMENT AND SUBLETTING; SUBSTITUTION OR RELEASE; TITLE
Section 7.01. 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 of law or otherwise; provided, however, that the Property
may be subleased in whole or in part by the City, but only subject to the following conditions,
which are hereby made conditions precedent to any such sublease:
(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 this Lease Agreement, including,
the right to re-enter and re-let the Property or terminate this Lease Agreement upon a
default by the City; and
(e) the City shall have filed or caused to be filed with the Authority and the
Trustee an Opinion of Counsel to the effect that such sublease will not, in and of itself,
cause the interest on Tax-Exempt Bonds to be included in gross income for federal
income tax purposes.
Section 7.02. Substitution or Release of the Property. Subject to the provisions of this
Section, 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 any such substitution or release shall be borne by the City.
Notwithstanding any substitution or release pursuant to this Section, 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 conditions, which are hereby made conditions precedent to such
substitution or release:
(a) an independent certified real estate appraiser selected by the City shall
have found (and shall have delivered a certificate to the Trustee setting forth its findings)
that (i) the sum of Base Rental Payments plus Additional Rental Payments due under the
Lease Agreement in any Rental Period is not in excess of the annual fair rental value of
the Property, as constituted after such substitution or release, and (ii) the Property, as
constituted after such substitution or release, has a useful life equal to or greater than the
maximum remaining term of this Lease Agreement (including extensions thereof under
Section 2.02 hereof);
OHS WEST2612518107 15
(b) the City shall have obtained or caused to be obtained an ALTA title
insurance policy or policies with respect to any substituted property in the amount of the
fair market value of such substituted property (which fair market value shall have been
determined by an independent certified real estate appraiser), of the type and with the
endorsements described in Section 5.04 hereof;
(c) the City shall have filed or caused to be filed with the Trustee an Opinion
of Counsel to the effect that such substitution or release will not, in and of itself, cause
the interest on Tax-Exempt Bonds to be included in gross income for federal income tax
purposes;
(d) the City shall have given, or shall have made arrangements for the giving
of, any notice of the occurrence of such substitution or release required to be given
pursuant to paragraph 4 of subsection (b) of Section 5 of the Continuing Disclosure
Certificate;
(e) the City, the Authority and the Trustee shall have executed, and the City
shall have caused to be recorded with the county recorder of the county in which the
Property is located, any document necessary to reconvey to the City the portion of the
Property being substituted or released and to include any substituted real property in the
description of the Property contained herein and in the Site Lease; and
(f) the City shall have certified to the Trustee that the substituted real property
is essential for performing the City's governmental functions.
Section 7.03. Title to Property. Upon the termination or expiration of this Lease
Agreement (other than as provided in Section 8.02 hereof), and the first date upon which no
Bonds are any 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.
OHS WEST2612518107 16
ARTICLE VIII
EVENTS OF DEFAULT AND REMEDIES
Section 8.01. Events of Default. The occurrence, from time to time, of any one or more
of the following events shall constitute an Event of Default under this Lease Agreement:
(a) the failure of the City 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;
(b) the failure by the City to observe and perform any of the other covenants,
agreements or conditions on its part in this Lease Agreement contained, if such failure
shall have continued for a period of 30 days after written notice thereof, specifying such
failure and requiring the same to be remedied, shall have been given to the City by the
Trustee, the Authority or the Owners of not less than 5% in aggregate principal amount of
the Bonds at the time Outstanding; provided, however, that if, in the reasonable opinion
of the City, the failure stated in the notice can be corrected, but not within such 30 day
period, such failure shall not constitute an Event of Default if corrective action is
instituted by the City within such 30 day period and the City shall thereafter diligently
and in good faith cure such failure in a reasonable period of time, provided, further,
however, that the period of time for such cure shall not exceed 90 days without the prior
written consent of the Authority;
(c) except as otherwise expressly permitted by this Lease Agreement, the
assignment or transfer, either voluntarily or by operation of law or otherwise, of the
City's interest in this Lease Agreement or any part thereof without the written consent of
the Authority;
(d) the abandonment of the Property by the City; or
(e) the commencement by the City of a voluntary case under Title 11 of the
United States Code or any substitute or successor statute.
Section 8.02. Action on Default. (a) In each and every case during the continuance of
an Event of Default hereunder, the Authority, in addition to all other rights and remedies it may
have at law, shall have the option either to exercise the rights provided for in subsection (b) of
this Section or to exercise the rights provided for in subsection (c) of this Section.
(b) In each and every case during the continuance of an Event of Default hereunder,
the Authority shall have the right to terminate this Lease Agreement in the manner hereinafter
provided, notwithstanding any re-entry or re-letting of the Property as provided in subsection (c)
of this Section, 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,
OHS WEST2612518107 17
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.
(c) In each and every case during the continuance of an Event of Default hereunder,
the Authority shall have the right, without terminating this Lease Agreement (i) 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 (ii) to exercise any and all rights of entry and re-entry upon the
Property. In the event the Authority does not elect to terminate this Lease Agreement in the
manner provided for in subsection (b) of this Section, 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
OHS WEST2612518107 is
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 subsection (b) of this Section. 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 term "re-let" or `Ye-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.
(d) 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.
(e) Notwithstanding anything herein to the contrary, the termination of this Lease
Agreement by the Authority on account of an Event of Default hereunder shall not effect or
result in a termination of the lease of the Property by the City to the Authority pursuant to the
Ground Lease.
Section 8.03. Other Remedies. In addition to the other remedies provided for in
Section 8.02 hereof, during the continuance of an Event of Default hereunder, the Authority shall
be entitled to proceed to protect and enforce the rights vested in the Authority by this Lease
Agreement or by law. The provisions of this Lease Agreement and the duties of the City and of
its board, officers or employees shall be enforceable by the Authority by mandamus or other
appropriate suit, action or proceeding in any court of competent jurisdiction. Without limiting the
generality of the foregoing, the Authority shall have the right to bring the following actions:
(a) by mandamus or other action or proceeding or suit at law or in equity to
enforce its rights against the City or any board member, officer or employee thereof, and
to compel the City or any such board member, 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 Authority; or
(c) by suit, action or proceeding in any court of competent jurisdiction, to
require the City and its board, officers and employees to account as if it or they were the
trustee or trustees of an express trust.
Section 8.04. No Acceleration. Notwithstanding anything to the contrary contained in
this Lease Agreement, the Authority shall have no right to accelerate Rental Payments upon the
occurrence or continuance of a default or an Event of Default hereunder.
Section 8.05. Remedies Not Exclusive. Subject to the provisions of Section 8.02
hereof, no remedy herein conferred upon or reserved to the Authority is intended to be exclusive
OHS WEST2612518107 19
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. If any statute or rule of law validly shall limit the remedies given to the
Authority hereunder, the Authority nevertheless shall be entitled to whatever remedies are
allowable under any statute or rule of law.
Section 8.06. Waiver. No delay or omission of the Authority to exercise any right or
power arising from the occurrence of any default or Event of Default shall impair any such right
or power or shall be construed to be a waiver of any such default or Event of Default or an
acquiescence therein, and every power and remedy given by this Lease Agreement to the
Authority may be exercised from time to time and as often as may be deemed expedient. A
waiver of a particular default or Event of Default shall not be deemed to be a waiver of any other
default or Event of Default or of the same default or Event of 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.
Section 8.07. Attorney's Fees. In the event the Authority shall 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.
Section 8.08. Authority Event of Default; Action on Authority Event of Default.
The failure by the Authority to observe and perform any covenants, agreements or conditions on
its part in this Lease Agreement contained, including under Section 4.05 and Section 4.15, if
such failure shall have continued for a period of 60 days after written notice thereof, specifying
such failure and requiring the same to be remedied, shall have been given to the Authority and
the Trustee, by the City, shall constitute an Authority Event of Default under this Lease
Agreement; provided, however, that if, in the reasonable opinion of the Authority the failure
stated in the notice can be corrected, but not within such 60 day period, such failure shall not
constitute an Authority Event of Default if corrective action is instituted by the Authority within
such 60 day period and the Authority shall thereafter diligently and in good faith cure such
failure in a reasonable period of time. In each and every case upon the occurrence and during the
continuance of an Authority Event of Default by the Authority hereunder, the City shall have all
the rights and remedies permitted by law.
OHS WEST2612518107 20
ARTICLE IX
AMENDMENTS
Section 9.01. Amendments. (a) This Lease Agreement and the Site Lease, and the
rights and obligations of the City and the Authority hereunder and thereunder, may be amended
at any time by an amendment hereto or thereto, which shall become binding upon execution by
the City and the Authority, but only with the prior written consent of the Owners of a majority of
the aggregate principal amount of Bonds then Outstanding, exclusive of Bonds disqualified as
provided in Section 10.06 of the Indenture. No such amendment shall (i) extend the payment
date of any Base Rental Payment or reduce the amount of any Base Rental Payment without the
prior written consent of the Owner of each Bond so affected, (ii)reduce the aforesaid percentage
of Bonds the consent of the Owners of which is required for any amendment of this Lease
Agreement or the Site Lease to become binding without the prior written consent of the Owners
of all the Bonds then Outstanding, or (iii) amend this Section without the prior written consent of
the Owners of all the Bonds then Outstanding.
(b) This Lease Agreement and the Site Lease, and the rights and obligations of the
City and the Authority hereunder and thereunder, may also be amended at any time by an
amendment hereto or thereto, which shall become binding upon execution by the City and the
Authority, without the written consents of any Owners, for any one or more of the following
purposes:
(i) to add to the covenants and agreements of the City or the Authority herein
or therein contained other covenants and agreements thereafter to be observed, or to
surrender any right or power herein or therein reserved to or conferred upon the City or
the Authority;
(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
herein or therein or in regard to questions arising hereunder or thereunder which the City
or the Authority may deem desirable or necessary and not inconsistent herewith;
(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 Section 2.04 and Section 2.05
of the Indenture;
(iv) to provide for the substitution or release of a portion of the Property in
accordance with the provisions of Section 7.02 hereof;
(v) to make such additions, deletions or modifications as may be necessary or
appropriate to assure the exclusion from gross income for federal income tax purposes of
interest on Tax-Exempt Bonds or maintain any federal interest subsidies expected to be
received with respect to any Bonds; or
OHS WEST2612518107 21
(vi) to make such other changes herein or therein as the City or the Authority
may deem desirable or necessary, and which shall not materially adversely affect the
interests of the Owners.
OHS WEST2612518107 22
ARTICLE X
MISCELLANEOUS
Section 10.01. 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 Property. To the extent permitted by law, the City shall, at its expense, indemnify
and hold the Authority and its directors, officers, agents and employees harmless against and
from any and all claims by or on behalf of any Person arising from the acquisition, construction,
occupation, use, operation, maintenance, possession, conduct or management of 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. In no event shall the Authority 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 10.02. Assignment to Trustee; Effect. The parties hereto understand and agree
that, upon the execution and delivery of the Indenture (which is occurring simultaneously with
the execution and delivery hereof), all right, title and interest of the Authority in and to this
Lease Agreement will be sold, assigned and transferred to the Trustee for the benefit of the
Owners of the Bonds. The City hereby consents to such sale, assignment and transfer. Upon the
execution and delivery of the Indenture, references in the operative provisions hereof to the
Authority shall be deemed to be references to the Trustee, as assignee of the Authority.
Section 10.03. Gender and References; Article and Section Headings. 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. Unless
the context otherwise clearly requires, 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 Lease Agreement as a whole and not to any particular Article,
Section, subsection or clause hereof.
Section 10.04. Validity and Severability. If for any reason any one or more of the
agreements, covenants or terms of this Lease Agreement shall be held by a court of competent
jurisdiction to be void, voidable or unenforceable by the City or by the Authority, all of the
remaining agreements, covenants and terms hereof shall nonetheless continue in full force and
effect. If for any reason it is held by such a court that any agreement, covenant or term of this
Lease Agreement required to be observed or performed by the City, 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 from year to year under which the Rental
Payments are to be paid by the City annually in consideration of the right of the City to possess,
OHS WEST2612518107 23
occupy and use the Property, and all of the other agreements, covenants and terms of this Lease
Agreement, except to the extent that such agreements, covenants and terms are contrary to or
inconsistent with such holding, shall remain in full force and effect.
Section 10.05. California Law. THIS LEASE AGREEMENT SHALL BE
CONSTRUED AND GOVERNED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF CALIFORNIA.
Section 10.06. 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 Huntington Beach
2000 Main Street
Huntington Beach, California 92648
Attention: Director of Finance
If to the Authority: Huntington Beach Public Financing Authority
c/o City of Huntington Beach
2000 Main Street
Huntington Beach, California 92648
Attention: Director of Finance
If to the Trustee: The Bank of New York Mellon Trust Company, N.A.
700 South Flower Street, Suite 500
Los Angeles, California 90017
Attention: Corporate Trust Services
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 given by courier or delivery service or if personally served or delivered, upon
delivery, (b) if given by 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, or (d) if given by any other means, upon delivery at the
address specified in this Section.
Section 10.07. Execution in Counterparts. This Lease Agreement may be
simultaneously executed in several counterparts, each of which shall be deemed an original, and
all of which shall constitute but one and the same instrument.
OHS WEST261251810.7 24
IN WITNESS WHEREOF, the parties hereto have caused this Lease Agreement to be
executed by their respective officers thereunto duly authorized, all as of the day and year first
written above.
CITY OF HUNTINGTON BEACH
By: 0` a,4,�
Lori Ann Farrell,
Director of Finance
HUNTINGT N BEACH BLIC
FINANCI TH TY
By:
J Carchio,
Chair of t e Board of Directors
OHS WEST:261251810.7 25
EXHIBIT A
DESCRIPTION OF THE PROPERTY
All that real property situated in the County of Orange, State of California, described as
follows, and any improvements thereto:
PARCEL I:
THOSE PORTIONS OF BLOCKS 1901, 1903, 2001 AND 2002 OF TRACT NO. 12, IN THE CITY OF
HUNTI NGTON BEACH, COUNTY OF ORANGE, STATE OF CALI FORNI A, AS SHOWN ON A MAP RECORDED
IN BOOK 9, PAGE 13 OF MISCELLANEOUS MAPS, RECORDS OF ORANGE COUNTY, CALI FORNI A,
TOGETHER WITH PARK STREET, UNION AVENUE, AND THE ALLEYS IN SAID BLOCKS, AS SHOWN ON
SAID MAP AND AS VACATED BY RESOLUTION NO. 3415 OF THE CITY COUNCIL OF THE CITY OF
HUNTI NGTON BEACH, A CERTIFIED COPY OF WHICH WAS RECORDED JANUARY 6, 1972 IN BOOK 9956,
PAGE 849 OF OFFICIAL RECORDS OF SAID ORANGE COUNTY, AND TOGETHER WITH PORTIONS OF
PINE STREET AND SEVENTEENTH STREET, AS SHOWN SAID MAP AND AS VACATED BY RESOLUTION
NO. 5989 OF THE CITY COUNCIL OF THE CITY OF HUNTI NGTON BEACH, A CERTIFIED COPY OF WHICH
WAS RECORDED MARCH 16, 1989 AS INSTRUMENT NO. 89-137620 OF SAID OFFICIAL RECORDS,
DESCRIBED AS FOLLOWS:
BEGINNING AT THE I NTERSECTI ON OF THE CENTERLINE OF UTI CA STREET, 60.00 FEET IN WIDTH,
AND ALINE PARALLEL WITH AND 840.00 FEET WESTERLY OF THE CENTERLINE OF LAKE AVENUE,
90.00 FEET IN WIDTH, BOTH AS SHOWN ON SAID MAP OF TRACT NO. 12; THENCE NORTH 00' 19' 06"
EAST 358.00 FEET ALONG SAID PARALLEL LINE; THENCE NORTH 45' 19' 06" EAST 24.04 FEET; THENCE
SOUTH 89' 40' 54" EAST 166.03 FEET TO THE CENTERLINE OF SEVENTEENTH STREET, 70.00 FEET IN
WIDTH, AS SHOWN ON SAID MAP; THENCE NORTH 41' 38' 23" EAST 427.42 FEET ALONG SAID
CENTERLI NE OF SEVENTEENTH STREET; THENCE SOUTH 89' 40' 54" EAST 137.05 FEET; THENCE
NORTH 00' 19' 06" EAST 155.89 FEET ALONG ALINE PARALLEL TO THE CENTERLINE OF SAID LAKE
AVENUE, TO THE CENTERLI NE OF SAID SEVENTEENTH STREET; THENCE NORTH 41° 38' 23" EAST
134.38 FEET ALONG SAID CENTERLINE OF SAID SEVENTEENTH STREET AND ITS NORTHEASTERLY
PROLONGATION TO A POINT ON THE NORTHERLY LINE OF SAID TRACT NO. 12; THENCE NORTH 48'
21' 17" WEST 474.37 FEET ALONG SAID NORTHERLY TRACT LINE OF TRACT NO. 12; THENCE NORTH
89' 40' 01" WEST 535.29 FEET CONTINUING ALONG SAID NORTHERLY TRACT LINE TO THE EASTERLY
RIGHT OF WAY LINE OF MAIN STREET, 120.00 FEET IN WIDTH, AS SHOWN ON SAID MAP OF TRACT
NO. 12; THENCE SOUTH 00' 20' 13" WEST 1266.12 FEET ALONG SAID EASTERLY LINE TO THE
CENTERLINE OF SAID UTI CA STREET; THENCE SOUTH 89' 39' 33" EAST 200.89 FEET ALONG SAID
CENTERLI NE TO THE POI NT OF BEGI NNI NG.
EXCEPTING THEREFROM THAT PORTION DESCRIBED AS FOLLOWS:
BEGI NNI NG AT THE I NTERSECTI ON OF THE CENTERLI NE OF UTI CA STREET, 60.00 FEET I N WI DTH,
AND A LINE PARALLEL WITH AND 840.00 FEET WESTERLY OF THE CENTERLINE OF LAKE AVENUE,
90.00 FEET I N WI DTH, BOTH AS SHOWN ON SAI D MAP OF TRACT NO. 12; THENCE NORTH 00' 19' 06"
EAST 358.00 FEET ALONG SAID PARALLEL LINE; THENCE NORTH 45' 19' 06" EAST 24.04 FEET; THENCE
SOUTH 89' 40' 54" EAST 27.23 FEET TO A LINE PARALLEL WITH AND 245.00 FEET EASTERLY OF THE
EASTERLY RIGHT OF WAY LI NE OF MAI N STREET, 120.00 FEET I N WI DTH, AS SHOWN ON SAI D MAP
OF TRACT NO. 12; THENCE NORTH 00' 20' 13" EAST 683.13 FEET ALONG SAID LAST MENTIONED
PARALLEL LI NE TO A LI NE PARALLEL WI TH AND 208.00 FEET SOUTHERLY OF THE NORTHERLY LI NE OF
BLOCK 2002 OF SAI D TRACT NO. 12; THENCE NORTH 89' 40' 01" WEST 245.00 FEET ALONG SAI D LAST
MENTIONED PARALLEL LI NE TO SAID EASTERLY RIGHT OF WAY LI NE OF MAI N STREET; THENCE
SOUTH 00' 20' 13" WEST 1058.12 FEET ALONG SAI D EASTERLY LI NE OF MAI N STREET TO THE
CENTERLI NE OF SAI D UTI CA STREET; THENCE SOUTH 89' 39' 33" EAST 200.89 FEET ALONG SAI D
CENTERLI NE TO THE POI NT OF BEGI NNI NG.
OHS WEST261251810.7 A-1
ALSO EXCEPTING THEREFROM THAT PORTION INCLUDED WITHIN TRACT NO. 13569, AS SHOWN ON A
MAP RECORDED IN BOOK 652, PAGES 28 THROUGH 33, OF SAID MISCELLANEOUS MAPS.
ALSO EXCEPTING THEREFROM OVER A PORTION OF SAID LAND ALL OIL, GAS, ASPHALT AND
ASPHALTUM AND OTHER HYDROCARBONS, AND ALL OTHER MINERALS, WHETHER SIMILAR OR
DISSIMILAR TO THOSE HEREIN SPECIFIED, LYING BELOW FIVE HUNDRED (500) FEET UNDER THE
SURFACE OF SUCH REAL PROPERTY WITHI N OR THAT MAY BE PRODUCED FROM SAI D PROPERTY,
PROVI DED, HOWEVER, THAT THERE SHALL NOT BE THE RIGHT TO USE THE SURFACE OF SAI D
PROPERTY OR A VE HUNDRED (500) FEET UNDER THE SURFACE FOR ANY PURPOSE WHATSOEVER, AS
RESERVED BY HUNTI NGTON BEACH COMPANY, A CORPORATION IN A DEED RECORDED DECEMBER 17,
1969 IN BOOK 9166, PAGE 715 OF OFFICIAL RECORDS.
ALSO EXCEPTI NG THEREFROM OVER A PORTI ON OF SAI D LAND ALL OF THE OI L, GAS AND OTHER
MI NERALS IN AND UNDER AND THAT MAY BE PRODUCED BELOW A DEPTH OF A VE HUNDRED (500)
FEET BENEATH THE SURFACE OF SAID LAND, EXCEPT THE USE OF THE SURFACE OF THE LAND OR
THAT PORTION OF SAID LAND FROM THE SURFACE TO FIVE HUNDRED (500) FEET BELOW THE
SURFACE FOR ANY PURPOSE WHATSOEVER, AS GRANTED TO ANGUS PETROLEUM CORPORATION, A
DELAWARE CORPORATION IN A DEED RECORDED JULY 5, 1988 AS INSTRUMENT NO. 88-319698 OF
OFFICIAL RECORDS.
APN: 023-041-03, 023-041-04 AND A PORTION OF 023-031-14
PARCEL 2:
THOSE PORTIONS OF BLOCKS 1902, 1903 AND 2002 INCLUDING A PORTION OF UTICA STREET, ALL OF
TRACT NO. 12, 1 N THE CI TY OF HUNTI NGTON BEACH, COUNTY OF ORANGE, STATE OF CALI FORNI A,
AS SHOWN ON A MAP RECORDED IN BOOK 9, PAGE 13 OF MISCELLANEOUS MAPS, RECORDS OF
ORANGE COUNTY, CALIFORNIA, TOGETHER WITH THOSE PORTIONS OF UNION AVENUE AND THE
ALLEYS I N SAI D BLOCKS AS SHOWN ON SAI D MAP AS VACATED BY RESOLUTION NO. 3415 OF THE
CITY COUNCIL OF THE CITY OF HUNTI NGTON BEACH, A CERTI A ED COPY OF WHICH WAS RECORDED
JANUARY 6, 1972 IN BOOK 9956, PAGE 849 OF OFFICIAL RECORDS OF SAI D ORANGE COUNTY,
TOGETHER WITH THAT PORTION OF SEVENTEENTH STREET AS VACATED BY RESOLUTION NO. 5989
OF SAI D Cl TY COUNCI L, A CERTI A ED COPY OF WHI CH WAS RECORDED MARCH 16, 1989 AS
INSTRUMENT NO. 89-137620 OF SAID OFFICIAL RECORDS, MORE PARTICULARLY DESCRIBED AS
FOLLOWS:
BEGI NNI NG AT THE I NTERSECTI ON OF THE CENTERLI NE OF UTI CA STREET 60.00 FEET I N WI DTH AND
A LI NE PARALLEL WITH AND 840.00 FEET WESTERLY OF THE CENTERLINE OF LAKE AVENUE 90.00
FEET I N WI DTH, BOTH AS SHOWN ON SAI D MAP OF TRACT NO. 12; THENCE NORTH 00 DEG. 19' 06"
EAST 358.00 FEET ALONG SAID PARALLEL LINE; THENCE NORTH 45 DEG. 19' 06" EAST 24.04 FEET;
THENCE SOUTH 89 DEG. 40' 54" EAST 27.23 FEET TO A LINE PARALLEL WITH AND 245.00 FEET
EASTERLY OF THE EASTERLY RIGHT OF WAY LI NE OF MAI N STREET, 120.00 FEET I N WI DTH AS
SHOWN ON SAID MAP OF TRACT NO. 12; THENCE NORTH 00 DEG. 20' 13" EAST 683.13 FEET ALONG
SAI D LAST MENTI ONED PARALLEL LI NE TO A LI NE PARALLEL WI TH AND 208.00 FEET SOUTHERLY OF
THE NORTHERLY LI NE OF BLOCK 2002 OF SAI D MAP OF TRACT NO. 12; THENCE NORTH 89 DEG. 40'
01" WEST 245.00 FEET ALONG SAID LAST MENTIONED PARALLEL LINE TO SAID EASTERLY RIGHT OF
WAY LINE OF MAIN STREET; THENCE SOUTH 00 DEG. 20' 13" WEST 1058.12 FEET ALONG SAID
EASTERLY LI NE OF MAI N STREET TO THE CENTERLI NE OF SAI D UTI CA STREET; THENCE SOUTH 89
DEG. 39' 33" EAST 200.89 FEET ALONG SAID CENTERLINE TO THE POINT OF BEGINNING.
EXCEPTING THEREFROM OVER A PORTION OF SAI D LAND ALL OIL, GAS, ASPHALT AND ASPHALTUM
AND OTHER HYDROCARBONS, AND ALL OTHER MINERALS, WHETHER SIMILAR OR DISSIMILAR TO
THOSE HEREIN SPECIFIED, LYING BELOW FIVE HUNDRED (500) FEET UNDER THE SURFACE OF SUCH
REAL PROPERTY WITHIN OR THAT MAY BE PRODUCED FROM SAID PROPERTY, PROVIDED, HOWEVER,
THAT THERE SHALL NOT BE THE RIGHT TO USE THE SURFACE OF SAID PROPERTY OR FIVE HUNDRED
(500) FEET UNDER THE SURFACE FOR ANY PURPOSE WHATSOEVER, AS RESERVED BY HUNTI NGTON
OHS WEST261251810.7 A_2
BEACH COMPANY, A CORPORATION IN A DEED RECORDED DECEMBER 17, 1969 IN BOOK 9166, PAGE
715 OF OFFICIAL RECORDS.
ALSO EXCEPTING THEREFROM OVER A PORTION OF SAID LAND ALL OF THE OIL, GAS AND OTHER
MINERALS IN AND UNDER AND THAT MAYBE PRODUCED BELOW A DEPTH OF FIVE HUNDRED (500)
FEET BENEATH THE SURFACE OF SAID LAND, EXCEPT THE USE OF THE SURFACE OF THE LAND OR
THAT PORTION OF SAID LAND FROM THE SURFACE TO FIVE HUNDRED (500) FEET BELOW THE
SURFACE FOR ANY PURPOSE WHATSOEVER, AS GRANTED TO ANGUS PETROLEUM CORPORATION, A
DELAWARE CORPORATION IN A DEED RECORDED JULY 5, 1988 AS INSTRUMENT NO. 88-319698 OF
OFFICIAL RECORDS.
APN: 023-031-10, 023-031-13 AND A PORTION OF 023-031-14
PARCEL 3:
THOSE PORTIONS OF LOTS 13 AND 14 OF BLOCK 1901 OF TRACT NO. 12, I N THE Cl TY OF
HUNTI NGTON BEACH, COUNTY OF ORANGE, STATE OF CALI FORM A, AS SHOWN ON THE MAP
RECORDED IN BOOK 9, PAGE 13 OF MISCELLANEOUS MAPS, IN THE OFFICE OF THE COUNTY
RECORDER OF ORANGE COUNTY, CALI FORNI A, TOGETHER WITH THOSE PORTIONS OF SEVENTEENTH
STREET, AS SHOWN ON SAI D MAP AND AS VACATED I N THAT CERTAI N RESOLUTION NO. 5989 OF THE
CITY COUNCIL OF THE CITY OF HUNTI NGTON BEACH, A CERTI A ED COPY OF WHICH RECORDED
MARCH 16, 1989 AS I NSTRUMENT NO. 89-137620 OF OFFICIAL RECORDS OF ORANGE COUNTY AND
PORTIONS OF LAKE AVENUE AND PARK STREET, AS SHOWN ON THE MAP OF TRACT NO. 13569,
RECORDED IN BOOK 652, PAGES 28 THROUGH 33 OF MISCELLANEOUS MAPS, RECORDS OF SAID
ORANGE COUNTY, MORE PARTICULARLY DESCRIBED AS FOLLOWS:
BEGI NNI NG AT THE CENTERLI NE I NTERSECTI ON OF LAKE AVENUE 90.00 FEET I N WI DTH, AND
SEVENTEENTH STREET 70.00 FEET I N WI DTH, AS SHOWN ON SAI D MAP OF TRACT NO. 13569; THENCE
SOUTH 00' 19' 06" WEST 207.32 FEET ALONG SAID CENTERLINE OF LAKE AVENUE TO THE
CENTERLI NE I NTERSECTI ON OF PARK STREET, 52.00 FEET I N WI DTH, AS SHOWN ON THE MAP OF
SAID TRACT NO. 13569; THENCE NORTH 89' 40' 54" WEST 237.70 FEET ALONG SAID CENTERLINE OF
PARK STREET; THENCE NORTH 00' 19' 06" EAST 155.89 FEET TO THE CENTERLI NE OF SAI D
SEVENTEENTH STREET; THENCE NORTH 41° 38' 23" EAST 68.48 FEET ALONG SAI D CENTERLI NE TO AN
ANGLE POI NT I N SAI D SEVENTEENTH STREET; THENCE CONTI NUI NG ALONG SAI D CENTERLI NE OF
SEVENTEENTH STREET SOUTH 89' 40' 54" EAST 192.48 FEET TO THE POINT OF BEGINNING.
EXCEPTING THEREFROM ANY PORTION LYING WITHIN THE AFOREMENTIONED PARCEL 1.
EXCEPTING THEREFROM SAI D LAND ALL OF THE OIL, GAS AND OTHER MI NERALS IN AND UNDER AND
THAT MAY BE PRODUCED BELOW A DEPTH OF FIVE HUNDRED (500) FEET BENEATH THE SURFACE OF
SAI D LAND, EXCEPT THE USE OF THE SURFACE OF THE LAND OR THAT PORTION OF SAID LAND FROM
THE SURFACE TO FIVE HUNDRED (500) FEET BELOW THE SURFACE FOR ANY PURPOSE WHATSOEVER,
AS GRANTED TO ANGUS PETROLEUM CORPORATION, A DELAWARE CORPORATION I N A DEED
RECORDED JULY 5, 1988 AS INSTRUMENT NO. 88-319698 OF OFFICIAL RECORDS.
APN: 023-041-06
PARCEL 4:
THOSE LANDS I N THE Cl TY OF HUNTI NGTON BEACH, COUNTY OF ORANGE, STATE OF CALI FORNI A
BEI NG A PORTION OF SEVENTEENTH STREET AS SHOWN ON TRACT NO. 12, FI LED I N BOOK 9, PAGE
13 OF MISCELLANEOUS MAPS, TOGETHER WITH A PORTION OF MANSION AVENUE AS DESCRIBED IN
THE DEEDS TO THE CITY OF HUNTINGTON BEACH RECORDED SEPTEMBER 23, 1916, I N BOOK 294,
PAGE 390 OF DEEDS, AND THE DEED RECORDED JULY 21, 1950, IN BOOK 2045, PAGE 79 OF OFFICIAL
RECORDS WHICH WERE VACATED, AS A PORTION OF PARCEL 1 BY CITY OF HUNTI NGTON BEACH
RESOLUTION NO. 5989, ON JANUARY 17, 1989 RECORDED MARCH 16, 1989 AS INSTRUMENT NO. 89-
OHS WEST261251810.7 A-3
137620 OF OFFICIAL RECORDS, ALL OF WHICH ARE LOCATED IN RECORDS OF SAID COUNTY, MORE
PARTICULARLY DESCRIBED AS FOLLOWS:
COMMENCING AT THE MOST EASTERLY CORNER OF LOT 3, BLOCK 2001, AS SHOWN ON SAID TRACT
NO. 12, THENCE NORTH 41°19'00" EAST, 54.43 FEET, ALONG THE NORTHEAST PROLONGATION OF
THE SOUTHEAST LINE OF SAID LOT 3, TO AN INTERSECTION WITH THE SOUTHWESTERLY LINE OF
YORKTOWN AVENUE (FORMERLY MANSION AVENUE), SAID INTERSECTION BEING THE BEGINNING OF
A NON-TANGENT CURVE CONCAVE NORTHEASTERLY HAVING A RADIUS OF 850.00 FEET, A RADIAL
LINE TO SAID POINT OF CURVATURE BEARS SOUTH 27211'59" WEST;
THENCE SOUTHEASTERLY 36.30 FEET, ALONG SAID CURVE, THROUGH A CENTRAL ANGLE OF 22 26,48",
TO THE INTERSECTION OF SAID CURVE AND THE NORTHEASTERLY PROLONGATION OF THE
CENTERLINE OF SEVENTEENTH STREET SAID INTERSECTION BEING THE TRUE POINT OF BEGINNING
OF THIS DESCRIPTION, A RADIAL LINE TO SAID TRUE POINT OF BEGINNING BEARS SOUTH 24245'11"
WEST;
THENCE CONTINUING SOUTHEASTERLY 44.96 FEET, ALONG SAID CURVE, THROUGH A CENTRAL ANGLE
OF 3201'51", TO THE BEGINNING OF A REVERSE CURVE CONCAVE SOUTHWESTERLY, HAVING A
RADIUS OF 32.00 FEET;
THENCE SOUTHEASTERLY 38.13 FEET ALONG SAID CURVE, THROUGH A CENTRAL ANGLE OF 682 16'40",
TO THE NORTHERLY PROLONGATION OF THE WESTERLY LINE OF LAKE STREET (FORMERLY LAKE
AVENUE), 90.00 FEET IN WIDTH, AS SHOWN ON SAID TRACT NO. 12;
THENCE SOUTH 00200'00" WEST, 49.93 FEET ALONG SAID PROLONGATION OF THE WESTERLY LINE
OF LAKE STREET TO THE CENTERLINE OF SEVENTEENTH STREET (70.00 FEET IN WIDTH) AS SHOWN
ON SAID TRACT NO. 12;
THENCE WESTERLY ALONG THE CENTERLINE OF SAID SEVENTEENTH STREET, AS SHOWN ON SAID
TRACT NO. 12, NORTH 902 00'00" WEST, 147.08 FEET, TO AN ANGLE POINT IN SAID CENTERLINE OF
SEVENTEENTH STREET AS SHOWN ON SAI D TRACT NO. 12;
THENCE NORTHEASTERLY, LEAVING SAID CENTERLI NE OF SEVENTEENTH STREET ALONG THE
NORTHEASTERLY PROLONGATION OF THE CENTERLI NE OF SEVENTEENTH STREET AS SHOWN ON
SAI D TRACT NO. 12, NORTH 41°19'00" EAST, 129.68 FEET TO THE TRUE POI NT OF BEGI NNI NG OF
THIS DESCRIPTION.
EXCEPTING THEREFROM OVER A PORTION OF SAID LAND ALL MINERALS, PETROLEUM, ASPHALTUM,
BREA, 01 L, GAS AND OTHER HYDROCARBON SUBSTANCES IN, UPON OR UNDER, OR THAT MAY BE
PRODUCED FROM THE LAND, TOGETHER WITH THE SOLE AND EXCLUSIVE RIGHT TO DRILL SLANTED
WELLS FROM ADJACENT LANDS INTO AND THROUGH THE SUBSURFACE OF THE LAND; PROVIDED,
HOWEVER, THAT GRANTORS SHALL NOT USE THE SURFACE OF THE LAND FOR THE EXPLORATTI ON,
DEVELOPMENT, EXTRACTI ON OR REMOVAL OF SAI D MI NERALS OR SUBSTANCES, AS RESERVED BY
HUNTI NGTON BEACH COMPANY, A CORPORATION AND STANDARD 01 L COMPANY OF CALI FORNIA, A
CORPORATION I N A DEED RECORDED JULY 21, 1950 1 N BOOK 2045, PAGE 79 OF OFFI Cl AL RECORDS.
APN: 023-041-07
APN: 023-031-10, 023-041-03, 023-041-04, 023-031-13, 023-031-14, 023-041-06 and 023-041-07
OHS WEST261251810.7 A-4
RECORDING REQUESTED BY This Document was electronically recorded by
FIRST AMERICAN TITLE COMPANY
COMME D
CIALSRVICES First American National Commercial
COMMERC
SION
Recorded in Official Records,Orange County
TO BE RECORDED AND WHEN RECORD" Daly, Clerk-Recorder
RETURN TO: IIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIII Orrick,Herrington&Sutcliffe LLP NO FEE
2050 Main Street,Suite 1100 2011000479934 12:12pm 09/28/11
Irvine,CA 92614-2558 66 406 MI 12
Attention: Donald S.Field,Esq. 0.00 0.00 0.00 0.00 33.00 0.00 0.00 0.00
THIS TRANSACTION IS EXEMPT FROM CALIFORNIA DOCUMENTARY
TRANSFER TAX PURSUANT TO SECTION 11929 OF THE CALIFORNIA REVENUE
AND TAXATION CODE. THIS DOCUMENT IS EXEMPT FROM RECORDING FEES
PURSUANT TO SECTION 27383 OF THE CALIFORNIA GOVERNMENT CODE.
k I-f
j
MEMORANDUM OF LEASE AGREEMENT
i
AND ASSIGNMENT
by and among
CITY OF HUNTINGTON BEACH,
HUNTINGTON BEACH PUBLIC FINANCING AUTHORITY
and
THE BANK OF NEW YORK MELLON TRUST
COMPANY, N.A., AS TRUSTEE.
Dated as of September 1,2011
1
i
i
OHS WEST:261251811.5
THIS MEMORANDUM OF LEASE AGREEMENT AND ASSIGNMENT (this
"Memorandum of Lease Agreement and Assignment") executed and entered into as of
September 1, 2011, is by and among the CITY OF HUNTINGTON BEACH (the "City"), a
municipal corporation and chartered city organized and existing under and by virtue of the laws
of the State of California, as lessee, the HUNTINGTON BEACH PUBLIC FINANCING
AUTHORITY (the "Authority"), a joint powers authority organized and existing under the laws
of the State of California, as lessor, and THE BANK OF NEW YORK MELLON TRUST
COMPANY, N.A., a national banking association organized and existing under the laws of the
United States of America, as trustee(the"Trustee"), who agree as follows:
Section 1.01. The Lease Agreement. The City leases from the Authority and the
Authority leases to the City, certain real property described in Section 2.01 hereof, upon the
terms and conditions, and for the term, more fully set forth in the Lease Agreement, dated as of
September 1, 2011 (the "Lease Agreement"), by and between the Authority, as lessor, and the
City, as lessee, all of the provisions of which are hereby incorporated into this Memorandum of
Lease Agreement and Assignment by reference.
Section 2.01. Property: Term. The Authority leases to the City and the City leases
from the Authority, certain real property (the "Property"), which is located in the County of
Orange, State of California, and is described more fully in Exhibit A attached hereto and by this
reference incorporated herein. The Lease Agreement is for a term commencing on September
28, 2011, and ending on September 1, 2031, unless such term is extended or sooner terminated as
provided therein.
Section 3.01. Assignment. The Authority sells, assigns and transfers to the Trustee
certain of its rights under the Lease Agreement and under the Site Lease, dated as of September
1, 2011, by and between the City, as lessor, and the Authority, as lessee, upon the terms and
conditions more fully set forth in the Indenture, dated as of September 1, 2011 (the "Indenture"),
by and among the Authority, the City and the Trustee, all of the provisions of which are hereby
incorporated into this Memorandum of Lease Agreement and Assignment by reference.
Pursuant to the Indenture, the Authority and the City have provided for the issuance of
Huntington Beach Public Financing Authority (Orange County, California) Lease Revenue
Refunding Bonds, 2011 Series A (Capital Improvement Refinancing Project), in the aggregate
principal amount of $36,275,000, which are payable from Lease Revenues (as defined in the
Indenture). The Lease Revenues include the Base Rental Payments (as defined in the Lease
Agreement)to be paid by the City under the Lease Agreement.
Section 4.01. Provisions Binding on Successors and Assigns. Subject to the
provisions of the Lease Agreement relating to assignment and subletting, the Lease Agreement
shall inure to the benefit of and shall be binding upon the Authority and the City and their
respective successors and assigns. The Indenture shall inure to the benefit of and shall be
binding upon the Authority, the City and the Trustee and their respective successors and assigns.
Section 5.01 Purpose of Memorandum. This Memorandum of Lease Agreement and
_Assignment is prepared for the purpose of recordation, and it in no way modifies the provisions
of the Lease Agreement or the Indenture.
OHS WEST:261251811.5
Section 6.01 Execution. This Memorandum of Lease Agreement and Assignment may
be executed in several counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument.
IN WITNESS WHEREOF,the parties hereto have executed this Memorandum of Lease
Agreement and Assignment by their officers thereunto duly authorized as of the day and year
first written above.
HUNTIN TON BEA PUBLIC
FINANC G AUT ORITY,
as lesso
By:
J Carchio,
hair of the oard of Directors
CITY O HUNT GTON BEACH,
as lessee
By:
Lori Ann Farrell,
Director of Finance
THE BANK OF NEW YORK MELLON
TRUST COMPANY,N.A.,
as Trustee
By:
Authorized Officer
OHS WEST:261251811.5 2
STATE OF CALIFORNIA )
ss
COUNTY OF ORANGE )
On before me, r �Zg,/V-10 , Notary Public,
personally appeared Joe Carchio who proved to me on the basis of satisfactory evidence to be
the person whose name"tea subscribed to the within instrument and acknowledged to me
that he ley execute t e same in is r authorized capacity(-ies-} and that by
i /he r signature on the instrument t�o, or the entity upon behalf of which the
person( acted, executed the instrument.
Y
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. `. P L. ES" PA'
Q Commission # 1857021
z Notary Public -California z
Or
County p
M Comm. Expires Aug 4,2013
Signature [SEAL
STATE OF CALIFORNIA )
ss
COUNTY OF ORANGE )
On / 201 before me, Es"O"U, Notary Public,
personally appeared Lori Ann Farrell, who proved to me on the basis of satisfactory evidence to
be the person whose nameo) 'ate subscribed to the within instrument and acknowledged to
me that l�y executed the same in er 'r authorized capacity iw, and that by
er it signature on the instrument the personn, or the entity upon behalf of which the
person 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.
P. L. ESPARZA
a Commission# 1857021
WITNESS my hand and official seal. Z `� Not
Public-California z
Orange County
My Comm. Ex ires Au 4,2013
Signature [SEAL]
Section 6.01 Execution. This Memorandum of Lease Agreement and Assignment may
be executed in several counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument.
IN WITNESS WHEREOF,the parties hereto have executed this Memorandum of Lease
Agreement and Assignment by their officers thereunto duly authorized as of the day and year
first written above.
HUNTINGTON BEACH PUBLIC
FINANCING AUTHORITY,
as lessor
By:
Joe Carchio,
Chair of the Board of Directors
CITY OF HUNTINGTON BEACH,
as lessee
By:
Lori Ann Farrell,
Director of Finance
THE BANK OF NEW YORK MELLON
TRUST COMPANY,N.A.,
as Trustee
By:
Authorized Officer
VPrL(Ce -16ncs- Sh�1�
OHS WEST:261251811.5 2
STATE OF CALIFORNIA )
ss
COUNTY OF LOS ANGELES )
On Afd before me,Aaaa Notary Public,
personally appeaAd Vffa who proved to e on the basis of satisfactory
evidence to be the person whose name is are subscrib -to the within instrument and
acknowledged t e that he/;he/,hey execu d t e same in his er heir authorized capacity(' s),
and that by hi er heir signaev) on the instrument the perso (,s�, or the entity upon behalf of
which the perso 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. Q-----P
Q. 080 !MI
CWffl ssW#1812Mi
WITNESS my hand and official seal. Le WN+ -Ceton*
Las Ang&s Chi
Comm.Ex Tres Nov 12.2014
Signatures 1�"`� SEAL]
EXHIBIT A
LEGAL DESCRIPTION
All that real property situated in the County of Orange, State of California, described as
follows:
PARCEL 1:
THOSE PORTIONS OF BLOCKS 1901, 1903, 2001 AND 2002 OF TRACT NO. 12, IN THE CITY OF
HUNTINGTON BEACH, COUNTY OF ORANGE, STATE OF CALIFORNIA, AS SHOWN ON A MAP RECORDED
IN BOOK 9, PAGE 13 OF MISCELLANEOUS MAPS, RECORDS OF ORANGE COUNTY, CALIFORNIA,
TOGETHER WITH PARK STREET, UNION AVENUE, AND THE ALLEYS IN SAID BLOCKS, AS SHOWN ON
SAID MAP AND AS VACATED BY RESOLUTION NO. 3415 OF THE CITY COUNCIL OF THE CITY OF
HUNTINGTON BEACH, A CERTIFIED COPY OF WHICH WAS RECORDED JANUARY 6, 1972 IN BOOK 9956,
PAGE 849 OF OFFICIAL RECORDS OF SAID ORANGE COUNTY, AND TOGETHER WITH PORTIONS OF
PINE STREET AND SEVENTEENTH STREET, AS SHOWN SAID MAP AND AS VACATED BY RESOLUTION
NO. 5989 OF THE CITY COUNCIL OF THE CITY OF HUNTINGTON BEACH, A CERTIFIED COPY OF WHICH
WAS RECORDED MARCH 16, 1989 AS INSTRUMENT NO. 89-137620 OF SAID OFFICIAL RECORDS,
DESCRIBED AS FOLLOWS:
BEGINNING AT THE INTERSECTION OF THE CENTERLINE OF UTICA STREET, 60.00 FEET IN WIDTH,
AND A LINE PARALLEL WITH AND 840.00 FEET WESTERLY OF THE CENTERLINE OF LAKE AVENUE,
90.00 FEET IN WIDTH, BOTH AS SHOWN ON SAID MAP OF TRACT NO. 12; THENCE NORTH 000 19' 06"
EAST 358.00 FEET ALONG SAID PARALLEL LINE; THENCE NORTH 45° 19' 66" EAST 24.04 FEET; THENCE
SOUTH 890 40' 54" EAST 166.03 FEET TO THE CENTERLINE OF SEVENTEENTH STREET, 70.00 FEET IN
WIDTH, AS SHOWN ON SAID MAP;THENCE NORTH 411 38' 23" EAST 427.42 FEET ALONG SAID
CENTERLINE OF SEVENTEENTH STREET; THENCE SOUTH 890 40' 54" EAST 137.05 FEET; THENCE
NORTH 000 19' 06" EAST 155.89 FEET ALONG A LINE PARALLEL TO THE CENTERLINE OF SAID LAKE
AVENUE,TO THE CENTERLINE OF SAID SEVENTEENTH STREET; THENCE NORTH 410 38' 23" EAST
134.38 FEET ALONG SAID CENTERLINE OF SAID SEVENTEENTH STREET AND ITS NORTHEASTERLY
PROLONGATION TO A POINT ON THE NORTHERLY LINE OF SAID TRACT NO. 12; THENCE NORTH 480
21' 17" WEST 474.37 FEET ALONG SAID NORTHERLY TRACT LINE OF TRACT NO. 12; THENCE NORTH
890 40' 01" WEST 535.29 FEET CONTINUING ALONG SAID NORTHERLY TRACT LINE TO THE EASTERLY
RIGHT OF WAY LINE OF MAIN STREET, 120.00 FEET IN WIDTH, AS SHOWN ON SAID MAP OF TRACT
NO. 12; THENCE SOUTH 00" 20' 13" WEST 1266.12 FEET ALONG SAID EASTERLY LINE TO THE
CENTERLINE OF SAID UTICA STREET; THENCE SOUTH 890 39' 33" EAST 200.89 FEET ALONG SAID
CENTERLINE TO THE POINT OF BEGINNING.
EXCEPTING THEREFROM THAT PORTION DESCRIBED AS FOLLOWS:
BEGINNING AT THE INTERSECTION OF THE CENTERLINE OF UTICA STREET, 60.00 FEET IN WIDTH,
AND A LINE PARALLEL WITH AND 840.00 FEET WESTERLY OF THE CENTERLINE OF LAKE AVENUE,
90.00 FEET IN WIDTH, BOTH AS SHOWN ON SAID MAP OF TRACT NO. 12; THENCE NORTH 000 19' 06"
EAST 358.00 FEET ALONG SAID PARALLEL LINE; THENCE NORTH 450 19' 06" EAST 24.04 FEET; THENCE
SOUTH 890 40' 54" EAST 27.23 FEET TO A LINE PARALLEL WITH AND 245.00 FEET EASTERLY OF THE
EASTERLY RIGHT OF WAY LINE OF MAIN STREET, 120.00 FEET IN WIDTH, AS SHOWN ON SAID MAP
OF TRACT NO. 12; THENCE NORTH 001 20' 13" EAST 683.13 FEET ALONG SAID LAST MENTIONED
PARALLEL LINE TO A LINE PARALLEL WITH AND 208.00 FEET SOUTHERLY OF THE NORTHERLY LINE OF
BLOCK 2002 OF SAID TRACT NO. 12; THENCE NORTH 890 40' 01" WEST 245.00 FEET ALONG SAID LAST
MENTIONED PARALLEL LINE TO SAID EASTERLY RIGHT OF WAY LINE OF MAIN STREET; THENCE
SOUTH 000 20' 13" WEST 1058.12 FEET ALONG SAID EASTERLY LINE OF MAIN STREET TO THE
CENTERLINE OF SAID UTICA STREET; THENCE SOUTH 890 39' 33" EAST 200.89 FEET ALONG SAID
CENTERLINE TO THE POINT OF BEGINNING.
OHS WEST:261251811.5 A-1
ALSO EXCEPTING THEREFROM THAT PORTION INCLUDED WITHIN TRACT NO. 13569, AS SHOWN ON A
MAP RECORDED IN BOOK 652, PAGES 28 THROUGH 33, OF SAID MISCELLANEOUS MAPS.
ALSO EXCEPTING THEREFROM OVER A PORTION OF SAID LAND ALL OIL, GAS, ASPHALT AND
ASPHALTUM AND OTHER HYDROCARBONS, AND ALL OTHER MINERALS, WHETHER SIMILAR OR
DISSIMILAR TO THOSE HEREIN SPECIFIED, LYING BELOW FIVE HUNDRED (500) FEET UNDER THE
SURFACE OF SUCH REAL PROPERTY WITHIN OR THAT MAY BE PRODUCED FROM SAID PROPERTY,
PROVIDED, HOWEVER,THAT THERE SHALL NOT BE THE RIGHT TO USE THE SURFACE OF SAID
PROPERTY OR FIVE HUNDRED (500) FEET UNDER THE SURFACE FOR ANY PURPOSE WHATSOEVER, AS
RESERVED BY HUNTINGTON BEACH COMPANY, A CORPORATION IN A DEED RECORDED DECEMBER 17,
1969 IN BOOK 9166, PAGE 715 OF OFFICIAL RECORDS.
ALSO EXCEPTING THEREFROM OVER A PORTION OF SAID LAND ALL OF THE OIL, GAS AND OTHER
MINERALS IN AND UNDER AND THAT MAY BE PRODUCED BELOW A DEPTH OF FIVE HUNDRED (500)
FEET BENEATH THE SURFACE OF SAID LAND, EXCEPT THE USE OF THE SURFACE OF THE LAND OR
THAT PORTION OF SAID LAND FROM THE SURFACE TO FIVE HUNDRED (500) FEET BELOW THE
SURFACE FOR ANY PURPOSE WHATSOEVER, AS GRANTED TO ANGUS PETROLEUM CORPORATION, A
DELAWARE CORPORATION IN A DEED RECORDED JULY 5, 1988 AS INSTRUMENT NO. 88-319698 OF
OFFICIAL RECORDS.
APN: 023-041-03, 023-041-04 AND A PORTION OF 023-031-14
PARCEL 2:
THOSE PORTIONS OF BLOCKS 1902, 1903 AND 2002 INCLUDING A PORTION OF UTICA STREET, ALL OF
TRACT NO. 12, IN THE CITY OF HUNTINGTON BEACH, COUNTY OF ORANGE, STATE OF CALIFORNIA,
AS SHOWN ON A MAP RECORDED IN BOOK 9, PAGE 13 OF MISCELLANEOUS MAPS, RECORDS OF
ORANGE COUNTY, CALIFORNIA,TOGETHER WITH THOSE PORTIONS OF UNION AVENUE AND THE
ALLEYS IN SAID BLOCKS AS SHOWN ON SAID MAP AS VACATED BY RESOLUTION NO. 3415 OF THE
CITY COUNCIL OF THE CITY OF HUNTINGTON BEACH,A CERTIFIED COPY OF WHICH WAS RECORDED
JANUARY 6, 1972 IN BOOK 9956, PAGE 849 OF OFFICIAL RECORDS OF SAID ORANGE COUNTY,
TOGETHER WITH THAT PORTION OF SEVENTEENTH STREET AS VACATED BY RESOLUTION NO. 5989
OF SAID CITY COUNCIL, A CERTIFIED COPY OF WHICH WAS RECORDED MARCH 16, 1989 AS
INSTRUMENT NO. 89-137620 OF SAID OFFICIAL RECORDS, MORE PARTICULARLY DESCRIBED AS
FOLLOWS:
BEGINNING AT THE INTERSECTION OF THE CENTERLINE OF UTICA STREET 60.00 FEET IN WIDTH AND
A LINE PARALLEL WITH AND 840.00 FEET WESTERLY OF THE CENTERLINE OF LAKE AVENUE 90.00
FEET IN WIDTH, BOTH AS SHOWN ON SAID MAP OF TRACT NO. 12; THENCE NORTH 00 DEG. 19' 06"
EAST 358.00 FEET ALONG SAID PARALLEL LINE; THENCE NORTH 45 DEG. 19' 06" EAST 24.04 FEET;
THENCE SOUTH 89 DEG. 40' 54" EAST 27.23 FEET TO A LINE PARALLEL WITH AND 245.00 FEET
EASTERLY OF THE EASTERLY RIGHT OF WAY LINE OF MAIN STREET, 120.00 FEET IN WIDTH AS
SHOWN ON SAID MAP OF TRACT NO. 12; THENCE NORTH 00 DEG. 20' 13" EAST 683.13 FEET ALONG
SAID LAST MENTIONED PARALLEL LINE TO A LINE PARALLEL WITH AND 208.00 FEET SOUTHERLY OF
THE NORTHERLY LINE OF BLOCK 2002 OF SAID MAP OF TRACT NO. 12; THENCE NORTH 89 DEG. 40'
01" WEST 245.00 FEET ALONG SAID LAST MENTIONED PARALLEL LINE TO SAID EASTERLY RIGHT OF
WAY LINE OF MAIN STREET;THENCE SOUTH 00 DEG. 20' 13" WEST 1058.12 FEET ALONG SAID
EASTERLY LINE OF MAIN STREET TO THE CENTERLINE OF SAID UTICA STREET; THENCE SOUTH 89
DEG. 39' 33" EAST 200.89 FEET ALONG SAID CENTERLINE TO THE POINT OF BEGINNING.
EXCEPTING THEREFROM OVER A PORTION OF SAID LAND ALL OIL, GAS, ASPHALT AND ASPHALTUM
AND OTHER HYDROCARBONS, AND ALL OTHER MINERALS, WHETHER SIMILAR OR DISSIMILAR TO
THOSE HEREIN SPECIFIED, LYING BELOW FIVE HUNDRED (500) FEET UNDER THE SURFACE OF SUCH
REAL PROPERTY WITHIN OR THAT MAY BE PRODUCED FROM SAID PROPERTY, PROVIDED, HOWEVER,
THAT THERE SHALL NOT BE THE RIGHT TO USE THE SURFACE OF SAID PROPERTY OR FIVE HUNDRED
(500) FEET UNDER THE SURFACE FOR ANY PURPOSE WHATSOEVER, AS RESERVED BY HUNTINGTON
OHS WEST:261251811.5 A-2
BEACH COMPANY, A CORPORATION IN A DEED RECORDED DECEMBER 17, 1969 IN BOOK 9166, PAGE
715 OF OFFICIAL RECORDS.
ALSO EXCEPTING THEREFROM OVER A PORTION OF SAID LAND ALL OF THE OIL, GAS AND OTHER
MINERALS IN AND UNDER AND THAT MAY BE PRODUCED BELOW A DEPTH OF FIVE HUNDRED (500)
FEET BENEATH THE SURFACE OF SAID LAND, EXCEPT THE USE OF THE SURFACE OF THE LAND OR
THAT PORTION OF SAID LAND FROM THE SURFACE TO FIVE HUNDRED(500) FEET BELOW THE
SURFACE FOR ANY PURPOSE WHATSOEVER, AS GRANTED TO ANGUS PETROLEUM CORPORATION, A
DELAWARE CORPORATION IN A DEED RECORDED JULY 5, 1988 AS INSTRUMENT NO. 88-319698 OF
OFFICIAL RECORDS.
APN: 023-031-10, 023-031-13 AND A PORTION OF 023-031-14
PARCEL 3:
THOSE PORTIONS OF LOTS 13 AND 14 OF BLOCK 1901 OF TRACT NO. 12, IN THE CITY OF
HUNTINGTON BEACH, COUNTY OF ORANGE, STATE OF CALIFORNIA, AS SHOWN ON THE MAP
RECORDED IN BOOK 9; PAGE 13 OF MISCELLANEOUS MAPS, IN THE OFFICE OF THE COUNTY
RECORDER OF ORANGE COUNTY, CALIFORNIA,TOGETHER WITH THOSE PORTIONS OF SEVENTEENTH
STREET,AS SHOWN ON SAID MAP AND AS VACATED IN THAT CERTAIN RESOLUTION NO. 5989 OF THE
CITY COUNCIL OF THE CITY OF HUNTINGTON BEACH, A CERTIFIED COPY OF WHICH RECORDED
MARCH 16, 1989 AS INSTRUMENT NO. 89-137620 OF OFFICIAL RECORDS OF ORANGE COUNTY AND
PORTIONS OF LAKE AVENUE AND PARK STREET, AS SHOWN ON THE MAP OF TRACT NO. 13569,
RECORDED IN BOOK 652, PAGES 28 THROUGH 33 OF MISCELLANEOUS MAPS, RECORDS OF SAID
ORANGE COUNTY, MORE PARTICULARLY DESCRIBED AS FOLLOWS:
BEGINNING AT THE CENTERLINE INTERSECTION OF LAKE AVENUE 90.00 FEET IN WIDTH, AND
SEVENTEENTH STREET 70.00 FEET IN WIDTH, AS SHOWN ON SAID MAP OF TRACT NO. 13569; THENCE
SOUTH 000 19' 06" WEST 207.32 FEET ALONG SAID CENTERLINE OF LAKE AVENUE TO THE
CENTERLINE INTERSECTION OF PARK STREET, 52.00 FEET IN WIDTH, AS SHOWN ON THE MAP OF
SAID TRACT NO. 13569; THENCE NORTH 890 40' 54" WEST 237.70 FEET ALONG SAID CENTERLINE OF
PARK STREET; THENCE NORTH 00° 19'.06" EAST 155.89 FEET TO THE CENTERLINE OF SAID
SEVENTEENTH STREET; THENCE NORTH 41° 38' 23" EAST 68.48 FEET ALONG SAID CENTERLINE TO AN
ANGLE POINT IN SAID SEVENTEENTH STREET; THENCE CONTINUING ALONG SAID CENTERLINE OF
SEVENTEENTH STREET SOUTH 890 40' 54" EAST 192.48 FEET TO THE POINT OF BEGINNING.
EXCEPTING THEREFROM ANY PORTION LYING WITHIN THE AFOREMENTIONED PARCEL 1.
EXCEPTING THEREFROM SAID LAND ALL OF THE OIL, GAS AND OTHER MINERALS IN AND UNDER AND
THAT MAY BE PRODUCED BELOW A DEPTH OF FIVE HUNDRED (500) FEET BENEATH THE SURFACE OF
SAID LAND, EXCEPT THE USE OF THE SURFACE OF THE LAND OR THAT PORTION OF SAID LAND FROM
THE SURFACE TO FIVE HUNDRED(500) FEET BELOW THE SURFACE FOR ANY PURPOSE WHATSOEVER,
AS GRANTED TO ANGUS PETROLEUM CORPORATION, A DELAWARE CORPORATION IN A DEED
RECORDED JULY 5, 1988 AS INSTRUMENT NO. 88-319698 OF OFFICIAL RECORDS.
APN: 023-041-06
PARCEL 4:
i
THOSE LANDS IN THE CITY OF HUNTINGTON BEACH, COUNTY OF ORANGE, STATE OF CALIFORNIA
BEING A PORTION OF SEVENTEENTH STREET AS SHOWN ON TRACT NO. 12, FILED IN BOOK 9, PAGE
13 OF MISCELLANEOUS MAPS,TOGETHER WITH A PORTION OF MANSION AVENUE AS DESCRIBED IN
THE DEEDS TO THE CITY OF HUNTINGTON BEACH RECORDED SEPTEMBER 23, 1916, IN BOOK 294,
PAGE 390 OF DEEDS, AND THE DEED RECORDED JULY 21, 1950, IN BOOK 2045, PAGE 79 OF OFFICIAL
RECORDS WHICH WERE VACATED, AS A PORTION OF PARCEL 1 BY CITY OF HUNTINGTON BEACH
RESOLUTION NO. 5989, ON JANUARY 17, 1989 RECORDED MARCH 16, 1989 AS INSTRUMENT NO. 89-
OHS WEST:261251811.5 A-3
i
137620 OF OFFICIAL RECORDS, ALL OF WHICH ARE LOCATED IN RECORDS OF SAID COUNTY, MORE
PARTICULARLY DESCRIBED AS FOLLOWS:
COMMENCING AT THE MOST EASTERLY CORNER OF LOT 3, BLOCK 2001, AS SHOWN ON SAID TRACT
NO. 12,THENCE NORTH 41019'00"EAST, 54.43 FEET, ALONG THE NORTHEAST PROLONGATION OF
THE SOUTHEAST LINE OF SAID LOT 3,TO AN INTERSECTION WITH THE SOUTHWESTERLY LINE OF
YORKTOWN AVENUE (FORMERLY MANSION AVENUE), SAID INTERSECTION BEING THE BEGINNING OF
A NON-TANGENT CURVE CONCAVE NORTHEASTERLY HAVING A RADIUS OF 850.00 FEET, A RADIAL
LINE TO SAID POINT OF CURVATURE BEARS SOUTH 27011'59"WEST;
THENCE SOUTHEASTERLY 36.30 FEET,ALONG SAID CURVE,THROUGH A CENTRAL ANGLE OF 202648",
TO THE INTERSECTION OF SAID CURVE AND THE NORTHEASTERLY PROLONGATION OF THE
CENTERLINE OF SEVENTEENTH STREET SAID INTERSECTION BEING THE TRUE POINT OF BEGINNING
OF THIS DESCRIPTION, A RADIAL LINE TO SAID TRUE POINT OF BEGINNING BEARS SOUTH 24045'11"
WEST;
THENCE CONTINUING SOUTHEASTERLY 44.96 FEET, ALONG SAID CURVE,THROUGH A CENTRAL ANGLE
OF 3001'51",TO THE BEGINNING OF A REVERSE CURVE CONCAVE SOUTHWESTERLY, HAVING A
RADIUS OF 32.00 FEET;
THENCE SOUTHEASTERLY 38.13 FEET ALONG SAID CURVE,THROUGH A CENTRAL ANGLE OF 68016'40",
TO THE NORTHERLY PROLONGATION OF THE WESTERLY LINE OF LAKE STREET(FORMERLY LAKE
AVENUE), 90.00 FEET IN WIDTH, AS SHOWN ON SAID TRACT NO. 12;
THENCE SOUTH 00000'00"WEST, 49.93 FEET ALONG SAID PROLONGATION OF THE WESTERLY LINE
OF LAKE STREET TO THE CENTERLINE OF SEVENTEENTH STREET(70.00 FEET IN WIDTH)AS SHOWN
ON SAID TRACT NO. 12;
THENCE WESTERLY ALONG THE CENTERLINE OF SAID SEVENTEENTH STREET, AS SHOWN ON SAID
TRACT NO. 12, NORTH 90000'00"WEST, 147.08 FEET,TO AN ANGLE POINT IN SAID CENTERLINE OF
SEVENTEENTH STREET AS SHOWN ON SAID TRACT NO. 12;
THENCE NORTHEASTERLY, LEAVING SAID CENTERLINE OF SEVENTEENTH STREET ALONG THE
NORTHEASTERLY PROLONGATION OF THE CENTERLINE OF SEVENTEENTH STREET AS SHOWN ON
SAID TRACT NO. 12, NORTH 41019'00"EAST, 129.68 FEET TO THE TRUE POINT OF BEGINNING OF
THIS DESCRIPTION.
EXCEPTING THEREFROM OVER A PORTION OF SAID LAND ALL MINERALS, PETROLEUM, ASPHALTUM,
BREA, OIL, GAS AND OTHER HYDROCARBON SUBSTANCES IN, UPON OR UNDER, OR THAT MAY BE
PRODUCED FROM THE LAND,TOGETHER WITH THE SOLE AND EXCLUSIVE RIGHT TO DRILL SLANTED
WELLS FROM ADJACENT LANDS INTO AND THROUGH THE SUBSURFACE OF THE LAND; PROVIDED,
HOWEVER,THAT GRANTORS SHALL NOT USE THE SURFACE OF THE LAND FOR THE EXPLORATTION,
DEVELOPMENT, EXTRACTION OR REMOVAL OF SAID MINERALS OR SUBSTANCES, AS RESERVED BY
HUNTINGTON BEACH COMPANY, A CORPORATION AND STANDARD OIL COMPANY OF CALIFORNIA, A
CORPORATION IN A DEED RECORDED JULY 21, 1950 IN BOOK 2045, PAGE 79 OF OFFICIAL RECORDS.
APN: 023-041-07
APN: 023-031-10, 023-041-03, 023-041-04, 023-031-13, 023-031-14, 023-041-06 and 023-041-07
OHS WEST:261251811.5 A-4
CERTIFICATE OF ACCEPTANCE
In accordance with Section 27281 of the California Government Code, this is to certify
that the interest in the real property conveyed by the Lease Agreement, dated as of September 1,
2011, by and between the City of Huntington Beach, a municipal corporation and chartered city
organized and existing under and by virtue of the laws of the State of California(the "City") and
the Huntington Beach Public Financing Authority, a joint powers authority organized and
existing under the laws of the State of California (the "Authority"), from the Authority to the
City, is hereby accepted by the undersigned on behalf of the City pursuant to authority conferred
by resolution of the City Council of the City adopted on September 6, 2011, and the City
consents to recordation thereof by its duly authorized officer.
Dated: September 28, 2011
a
CITY OF HUNTINGTON BEACH
By: r
Lori Ann Farrell,
Director of Finance
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OHS WEST:261251811.5
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INDENTURE
by and among
HUNTINGTON BEACH PUBLIC FINANCING AUTHORITY
and
CITY OF HUNTINGTON BEACH
and
THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A.,
AS TRUSTEE
Dated as of September 1, 2011
Relating to
Huntington Beach Public Financing Authority
(Orange County, California)
Lease Revenue Bonds
OHS WEST2612556087
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS; EQUAL SECURITY ............................................................3
Section 1.01. Definitions............................................................................................3
Section 1.02. Equal Security......................................................................................9
ARTICLE II THE BONDS ................................................................................................. 11
Section 2.01. Authorization of Bonds...................................................................... 11
Section 2.02. Terms of Series 2011A Bonds........................................................... 11
Section 2.03. Issuance of Series 2011A Bonds; Application of Proceeds............... 13
Section 2.04. Conditions for the Issuance of Additional Bonds.............................. 13
Section 2.05. Procedure for the Issuance of Additional Bonds ............................... 14
Section 2.06. Execution of Bonds............................................................................ 16
Section 2.07. Authentication of Bonds.................................................................... 16
Section 2.08. Registration Books............................................................................. 16
Section 2.09. Transfer and Exchange of Bonds....................................................... 16
Section 2.10. Book-Entry System............................................................................ 17
Section 2.11. Bonds Mutilated, Lost, Destroyed or Stolen...................................... 19
Section 2.12. Temporary Bonds............................................................................... 19
ARTICLE III REDEMPTION OF BONDS .........................................................................21
Section 3.01. Extraordinary Redemption.................................................................21
Section 3.02. Optional Redemption.........................................................................21
Section 3.03. Selection of Bonds for Redemption...................................................21
Section 3.04. Notice of Redemption........................................................................21
Section 3.05. Partial Redemption of Bonds.............................................................22
Section 3.06. Effect of Notice of Redemption.........................................................22
ARTICLE IV PLEDGE AND ASSIGNMENT; FUNDS AND ACCOUNTS ....................23
Section 4.01. Pledge and Assignment......................................................................23
Section 4.02. Costs of Issuance Fund ......................................................................23
Section 4.03. Payment Fund....................................................................................24
Section 4.04. Redemption Fund...............................................................................24
Section 4.05. Reserve Fund .....................................................................................24
Section 4.06. Rebate Fund.......................................................................................26
Section 4.07. Investments........................................................................................26
OHS WEST2612556087 i
TABLE OF CONTENTS
(continued)
Page
ARTICLE V NET PROCEEDS AND TITLE INSURANCE; COVENANTS ..................28
Section 5.01. Application of Net Proceeds..............................................................28
Section 5.02. Title Insurance ...................................................................................29
Section 5.03. Punctual Payment...............................................................................29
Section 5.04. Compliance with Indenture................................................................29
Section 5.05. Compliance with Site Lease and Lease Agreement...........................29
Section 5.06. Observance of Laws and Regulations................................................30
Section 5.07. Other Liens.........................................................................................30
Section 5.08. Prosecution and Defense of Suits ......................................................30
Section 5.09. Accounting Records and Statements .................................................30
Section 5.10. Recordation........................................................................................31
Section 5.11. Tax Covenants ...................................................................................31
Section 5.12. Continuing Disclosure .......................................................................31
Section 5.13. Notifications Required by the Act.....................................................31
Section 5.14. Further Assurances.............................................................................32
ARTICLE VI EVENTS OF DEFAULT AND REMEDIES................................................33
Section 6.01. Events of Default...............................................................................33
Section 6.02. Action on Default...............................................................................33
Section 6.03. Other Remedies of the Trustee ..........................................................34
Section 6.04. Remedies Not Exclusive....................................................................34
Section 6.05. Application of Amounts After Default..............................................34
Section 6.06. Power of Trustee to Enforce..............................................................35
Section 6.07. Bond Owners Direction of Proceedings ............................................35
Section 6.08. Limitation on Bond Owners' Right to Sue........................................35
Section 6.09. Termination of Proceedings...............................................................35
Section 6.10. No Waiver of Default.........................................................................36
ARTICLE VII THE TRUSTEE.............................................................................................37
Section 7.01. Duties and Liabilities of Trustee........................................................37
Section 7.02. Removal and Resignation of the Trustee...........................................37
Section 7.03. Compensation and Indemnification of the Trustee............................38
Section 7.04. Protection of the Trustee....................................................................38
Section 7.05. Appointment of Co-Trustee...............................................................40
OHS WEST2612556087 ii
TABLE OF CONTENTS
(continued)
Page
ARTICLE VIII SUPPLEMENTAL INDENTURES ..............................................................42
Section 8.01. Supplemental Indentures....................................................................42
Section 8.02. Effect of Supplemental Indenture......................................................43
Section 8.03. Endorsement of Bonds; Preparation of New Bonds..........................43
Section 8.04. Amendment of Particular Bonds........................................................43
ARTICLE IX DEFEASANCE..............................................................................................44
Section 9.01. Discharge of Indenture.......................................................................44
Section 9.02. Bonds Deemed To Have Been Paid...................................................44
Section 9.03. Unclaimed Moneys............................................................................45
ARTICLE X MISCELLANEOUS ......................................................................................47
Section 10.01. Benefits of Indenture Limited to Parties............................................47
Section 10.02. Successor Deemed Included in all References to Predecessor..........47
Section 10.03. Execution of Documents by Owners .................................................47
Section 10.04. Waiver of Personal Liability..............................................................47
Section 10.05. Acquisition of Bonds by Authority or City........................................47
Section 10.06. Disqualified Bonds.............................................................................48
Section 10.07. Money Held for Particular Bonds......................................................48
Section 10.08. Funds and Accounts...........................................................................48
Section 10.09. Gender and References; Article and Section Headings.....................48
Section 10.10. Partial Invalidity.................................................................................49
Section 10.11. California Law...................................................................................49
Section10.12. Notices...............................................................................................49
Section 10.13. Business Days....................................................................................50
Section 10.14. Execution in Counterparts.................................................................. 50
EXHIBIT A FORM OF SERIES 2011A BOND .............................................................A-1
EXHIBIT B PERMITTED INVESTMENTS ..................................................................B-1
EXHIBIT C FORM OF COSTS OF ISSUANCE FUND REQUISITION......................C-1
OHS WEST261255608.7 111
INDENTURE
THIS INDENTURE (this "Indenture"), dated as of September 1, 2011, is by and among
the HUNTINGTON BEACH PUBLIC FINANCING AUTHORITY, a joint powers authority
organized and existing under the laws of the State of California (the "Authority"), the CITY OF
HUNTINGTON BEACH, a municipal corporation and chartered city organized and existing
under and by virtue of the laws of the State of California (the"City"), and THE BANK OF NEW
YORK MELLON TRUST COMPANY, N.A., a national banking association organized and
existing under the laws of the United States of America, as Trustee (the"Trustee").
WITNESSETH:
WHEREAS, in order to finance certain capital improvements, including the Huntington
Central Park Sports Complex and certain beach improvements along Pacific Coast Highway
from First Street and Pacific Coast Highway to Huntington Street and Pacific Coast Highway
(the "2001 Project'), the Authority issued its Huntington Beach Public Financing Authority
(Orange County, California) Lease Revenue Bonds, 2001 Series A (Capital Improvement
Financing Project) (the "Prior 2001A Bonds"), payable from certain lease payments to be made
by the City; and
WHEREAS, in order to refinance certain capital improvements, including certain
improvements to the Civic Center, including the Police Administration Building (the "1993
Project' and together with the 2001 Project, the "Projects"), the Authority issued its Huntington
Beach Public Financing Authority (Orange County, California) Lease Revenue Bonds, 2001
Series B (Capital Improvement Refinancing Project) (the"Prior 2001B Bonds" and together with
the Prior 2001A Bonds, the "Prior Bonds"), payable from certain lease payments to be made by
the City; and
WHEREAS, in order to achieve certain savings, the City and the Authority desire to
refinance the Projects by refunding the Prior Bonds; and
WHEREAS, in order to refund the Prior Bonds, the City is leasing certain real property,
and the improvements thereto (the "Property"), to the Authority pursuant to a Site Lease, dated
as of the date hereof (the "Site Lease"), and the City is subleasing the Property back from the
Authority pursuant to a Lease Agreement, dated as of the date hereof (the "Lease Agreement');
and
WHEREAS, in order to provide the funds necessary to refund the Prior Bonds, the
Authority and the City desire to provide for the issuance of Huntington Beach Public Financing
Authority (Orange County, California) Lease Revenue Refunding Bonds, 2011 Series A (Capital
Improvement Refinancing Project) (the "Series 2011A Bonds"), in the aggregate principal
amount of$36,275,000, payable from the base rental payments (the"Base Rental Payments") to
be made by the City pursuant to the Lease Agreement; and
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 2011A Bonds (the Series 2011A Bonds and any such Additional Bonds being collectively
referred to as the`Bonds"); and
OHS WEST261255608.7 1
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,
each of the Authority and the City has authorized the execution and delivery of this Indenture;
and
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 and binding 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 this Indenture has been in all respects duly authorized; 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 Indenture 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 Indenture;
NOW, THEREFORE, THIS INDENTURE WITNESSETH, that in order to secure
the payment of the principal of, and premium, if any, and interest on all Bonds at any time issued
and outstanding under this Indenture, according to their tenor, and to secure the performance and
observance of all the covenants and conditions therein and herein set forth, and to declare the
terms and conditions upon and subject to which the Bonds are to be issued and received, and in
consideration of the premises and of the mutual covenants herein contained and of the purchase
and acceptance of the Bonds by the owners thereof, and for other valuable consideration, the
receipt whereof is hereby acknowledged, the Authority and the City do hereby covenant and
agree with the Trustee, for the benefit of the respective owners from time to time of the Bonds,
as follows:
OHS WEST2612556087 2
ARTICLE I
DEFINITIONS; EQUAL SECURITY
Section 1.01. Definitions. Unless the context otherwise requires, the terms defined in
this Section shall for all purposes of this Indenture and of any certificate, opinion or other
document herein mentioned, have the meanings herein specified. Capitalized terms not otherwise
defined herein shall have the meanings assigned to such terms in the Lease Agreement.
"Act" means the Marks-Roos Local Bond Pooling Act of 1985, constituting Section
6584 et seq. of the California Government Code.
"Additional Bonds" means Bonds other than Series 2011A Bonds issued hereunder in
accordance with the provisions of Sections 2.04 and 2.05 hereof.
"Additional Rental Payments" means all amounts payable by the City as Additional
Rental Payments pursuant to Section 3.02 of the Lease Agreement.
"Annual Debt Service" means, for each Bond Year, the sum of (a) the interest due on
the Outstanding Bonds in such Bond Year, assuming that the Outstanding Bonds are retired as
scheduled (including by reason of mandatory sinking fund redemptions), and (b) the scheduled
principal amount of the Outstanding Bonds due in such Bond Year (including any mandatory
sinking fund redemptions due in such Bond Year).
"Authority" means the Huntington Beach Public Financing Authority, a joint powers
authority organized and existing under the laws of the State of California.
"Authorized Authority Representative" means any member of the Board of Directors
of the Authority, the Executive Director of the Authority or the Treasurer of the Authority, and
any other Person authorized by the Board of Directors of the Authority or the Executive Director
of the Authority to act on behalf of the Authority under or with respect to this Indenture.
"Authorized City Representative" means the City Manager of the City or any
authorized deputy or designee thereof or the Director of Finance of the City, and any other
Person authorized by the City Council of the City or the City Manager of the City to act on
behalf of the City under or with respect to this Indenture.
"Authorized Denominations" means, with respect to the Bonds, $5,000 and any integral
multiple thereof.
"Average Annual Debt Service" means the average of the Annual Debt Service for all
Bond Years, including the Bond Year in which the calculation is made.
"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 Owners" means those individuals, partnerships, corporations or other
entities for whom the Participants have caused the Depository to hold Book-Entry Bonds.
OHS WEST261255608.7 3
"Bond Year" means each twelve-month period beginning on September 2 in each year
and extending to the next succeeding September 1, both dates inclusive, except that the first
Bond Year shall begin on the Closing Date and end on September 1, 2012.
"Bonds" means the Huntington Beach Public Financing Authority (Orange County,
California) Lease Revenue Bonds issued hereunder, and includes the Series 2011A Bonds and
any Additional Bonds.
"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 other than (a) Saturday or Sunday, (b) a day on which
banking institutions in the city or cities in which the Office of the Trustee is located are
authorized or required by law to be closed, and (c) a day on which the New York Stock
Exchange is authorized or obligated by law or executive order to be closed.
"Cede & Co." means Cede & Co., the nominee of DTC, and any successor nominee of
DTC with respect to Book-Entry Bonds.
"City" means the City of Huntington Beach, a municipal corporation and chartered city
organized and existing under and by virtue of the laws of the State of California.
"Closing Date" means the date upon which the Series 2011A Bonds are delivered to the
Original Purchaser, being September 28, 2011.
"Code" means the Internal Revenue Code of 1986.
"Continuing Disclosure Certificate" means the Continuing Disclosure Certificate,
dated the Closing Date, of 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 Site Lease, 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, financial advisory fees, legal fees and expenses of counsel with
respect to the refinancing of the Projects, the initial fees and expenses of the Trustee and its
counsel, any premium for a municipal bond insurance policy insuring payments of debt service
on Additional Bonds, 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 pursuant to Section
4.02 hereof.
"Defeasance Securities" means (a) non-callable direct obligations of the United States
of America ("United States Treasury Obligations"), (b) evidences of ownership of proportionate
interests in future interest and principal payments on United States Treasury Obligations held by
OHS WEST261255608.7 4
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 United States Treasury Obligations are not available to any person claiming through
the custodian or to whom the custodian may be obligated, (c) pre-refunded municipal obligations
rated "AAA" and "Aaa" by S&P and Moody's, respectively, or (d) securities eligible for "AAA"
defeasance under then existing criteria of S&P or Moody's, or any combination thereof.
"Depository" means the securities depository acting as Depository pursuant to Section
2.10 hereof.
"DTC" means The Depository Trust Company, New York, New York and its successors.
"Escrow Agreements" means the 2001A Escrow Agreement and the 2001B Escrow
Agreement.
"Escrow Bank" means The Bank of New York Mellon Trust Company, N.A., as trustee
and escrow bank under the Escrow Agreements, and any successor thereto.
"Event of Default" means an event described as such in Section 6.01.
"Fitch" means Fitch, Inc., 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 "Fitch" shall
be deemed to refer to any other nationally recognized securities rating agency selected by the
Authority.
"Indenture" means this Indenture, 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 hereof.
"Interest Account" means the account by that name within the Payment Fund
established pursuant to Section 4.03 hereof.
"Interest Payment Date" means each March 1 and September 1, commencing March 1,
2012, so long as any Bonds remain Outstanding.
"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 from time to time be
amended in accordance with the provisions thereof.
"Lease Default Event" means an event of default pursuant to and as described in Section
8.01 of the Lease Agreement.
"Lease Revenues" means all Base Rental Payments payable by the City pursuant to the
Lease Agreement, including any prepayments thereof, any Net Proceeds and any amounts
received by the Trustee as a result of or in connection with the Trustee's pursuit of remedies
under the Lease Agreement upon a Lease Default Event.
OHS WEST2612556087 5
"Letter of Representations" means the letter of the Authority delivered to and accepted
by the Depository on or prior to the delivery of the Bonds as Book-Entry Bonds setting forth the
basis on which the Depository serves as depository for such Book-Entry Bonds, as originally
executed or as it may be supplemented or revised or replaced by a letter to a substitute
Depository.
"Maximum Annual Debt Service" means the largest Annual Debt Service for any Bond
Year, including the Bond Year the calculation is made.
"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.
"Nominee" means the nominee of the Depository, which may be the Depository, as
determined from time to time pursuant to Section 2.10 hereof.
"Office of the Trustee" means the principal corporate trust office of the Trustee in Los
Angeles, California, or such other office as may be specified to the Authority and the City in
writing; provided, however, that with respect to presentation of Bonds for payment or for
registration of transfer and exchange, such term shall mean the office or agency of the Trustee at
which, at any particular time, its corporate trust agency business shall be conducted, which other
office or agency shall be 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.
"Original Purchaser" means Merrill Lynch, Pierce, Fenner & Smith Incorporated, on
behalf of itself and on behalf of E. J. De La Rosa & Co., Inc., the original purchasers of the
Series 2011A Bonds from the Authority.
"Outstanding" means, when used as of any particular time with reference to Bonds,
subject to the provisions of Section 10.06 hereof, all Bonds theretofore, or thereupon being,
authenticated and delivered by the Trustee under this Indenture except (a) Bonds previously
canceled by the Trustee or delivered to the Trustee for cancellation, (b) Bonds paid or deemed to
have been paid within the meaning of Section 9.02 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.
"Participating Underwriter" has the meaning ascribed thereto in the Continuing
Disclosure Certificate.
"Participants" means those broker-dealers, banks and other financial institutions from
time to time for which the Depository holds Book-Entry Bonds as securities depository.
OHS WEST2612556087 6
"Payment Fund" means the fund by that name established in accordance with Section
4.03 hereof.
"Permitted Investments" is defined in Exhibit B attached hereto.
"Person" means an individual, corporation, limited liability company, firm, association,
partnership, trust, or other legal entity or group of entities, including a governmental entity or
any agency or political subdivision thereof.
"Principal Account" means the account by that name within the Payment Fund
established pursuant to Section 4.03 hereof.
"Principal Payment Date" means a date on which the principal of the Bonds becomes
due and payable, either as a result of the maturity thereof or by mandatory sinking fund
redemption.
"Projects" means the capital improvement projects described in recital clauses hereto.
"Rebate Fund" means the fund by that name established pursuant to Section 4.06
hereof.
"Rebate Requirement"has the meaning ascribed thereto in the Tax Certificate.
"Record Date" means the 15th calendar day of the month preceding each Interest
Payment Date, whether or not such day is a Business Day.
"Redemption Fund" means the fund by that name established pursuant to Section 4.04
hereof.
"Registration Books" means the records maintained by the Trustee for the registration
of ownership and registration of transfer of the Bonds pursuant to Section 2.08 hereof.
"Rental Payments" means, collectively, the Base Rental Payments and the Additional
Rental Payments.
"Rental Period" means the period from the Closing Date through September 30, 2012
and, thereafter, the twelve-month period commencing on October 1 of each year during the term
of the Lease Agreement.
"Reserve Facility" means any line of credit, letter of credit, insurance policy, surety
bond or similar instrument, in form reasonably satisfactory to the Trustee, that (a) names the
Trustee as beneficiary thereof, (b) provides for payment on demand, (c) cannot be terminated by
the issuer thereof so long as any of the Bonds remain Outstanding, (d) is issued by an obligor, the
obligations of which under the Reserve Facility are, at the time such Reserve Facility is
substituted for all or part of the moneys on deposit in the Reserve Fund, rated at "AAA" by S&P
or"Aaa" by Moody's, and (e) is deposited with the Trustee pursuant to Section 4.05 hereof.
OHS WEST2612556087 7
"Reserve Fund" means the fund by that name established pursuant to Section 4.05
hereof.
"Reserve Requirement" means, as of the date of any calculation, the least of(a) 10% of
the original aggregate principal amount of the Bonds (excluding Bonds refunded with the
proceeds of subsequently issued Bonds), (b) Maximum Annual Debt Service, and (c) 125% of
Average Annual Debt Service.
"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 initial series of Bonds executed, authenticated and delivered on the
date of initial issuance of such Bonds and identified pursuant to this Indenture as the Series
2011A Bonds, and any Additional Bonds issued pursuant to a Supplemental Indenture and
identified as a separate Series of Bonds.
"Series 2011A Bonds" means the Huntington Beach Public Financing Authority (Orange
County, California) Lease Revenue Refunding Bonds, 2011 Series A (Capital Improvement
Refinancing Project), issued hereunder.
"Site Lease" means the Site 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.
"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 executed by the Authority at the time of
issuance of the Series 2011A Bonds, relating to the requirements of Section 148 of the Code, as
originally executed and as it may from time to time be amended in accordance with the
provisions thereof.
"Tax-Exempt" means, with respect to interest on any obligations of a state or local
government, including interest on the Series 2011A Bonds, that such interest is excluded from
the gross income of the holders thereof for federal income tax purposes, whether or not such
interest is includable as an item of tax preference or otherwise includable directly or indirectly
for purposes of calculating other tax liabilities, including any alternative minimum tax or
environmental tax under the Code.
"Trustee" means The Bank of New York Mellon Trust Company, N.A., a national
banking association organized and existing under the laws of the United States of America, or
any successor thereto as Trustee hereunder substituted in its place as provided herein.
OHS WEST2612556087 8
"2001A Escrow Agreement" means the Escrow Agreement, dated as of September 1,
2011, by and between the Authority and the Escrow Bank, relating to the Prior 2001A Bonds, as
originally executed and as it may be amended from time to time in accordance with the terms
thereof.
"2001B Escrow Agreement" means the Escrow Agreement, dated as of September 1,
2011, by and between the Authority and the Escrow Bank, relating to the Prior 2001B Bonds, as
originally executed and as it may be amended from time to time in accordance with the terms
thereof.
"Verification Report" means, with respect to the deemed payment of Bonds pursuant to
clause (ii)(B) of subsection (a) of Section 9.02 hereof, a report of a nationally recognized
certified public accountant, or firm of such accountants, verifying that the Defeasance Securities
and cash, if any, deposited in connection with such deemed payment satisfy the requirements of
clause (ii)(B) of subsection (a) of Section 9.02 hereof.
"Written Certificate of the Authority" means a written certificate signed in the name
of the Authority by an Authorized Representative of the Authority. Any such certificate 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" means a written certificate signed in the name of the
City by an Authorized Representative of the City. Any such certificate 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 Request of the Authority" means a written request signed in the name of the
Authority by an Authorized Representative of the Authority. Any such 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 Request of the City" means a written request signed in the name of the City
by an Authorized Representative of the City. Any such 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, and 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
OHS WEST261255608.7 9
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.
OHS WEST2612556087 10
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, the Act and other applicable laws of
the State of California. The Bonds may consist of one or more Series of varying denominations,
dates, maturities, interest rates and other provisions, subject to the provisions and conditions
contained herein. The Bonds shall be designated generally as the "Huntington Beach Public
Financing Authority (Orange County, California) Lease Revenue Bonds," each Series thereof to
bear such additional designation as may be necessary or appropriate to distinguish such Series
from every other Series of Bonds.
The Bonds shall be special obligations of the Authority, payable solely from the Lease
Revenues 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.
Notwithstanding anything to the contrary contained herein, if, as a result of the
limitations contained in Section 3.06 of the Lease Agreement, Base Rental Payments cannot be
paid by the City in an amount sufficient to pay the principal of, or interest on, the Bonds
otherwise payable on any date, such principal or interest shall be deemed not to be payable on
such date, the nonpayment thereof on such date shall not constitute a default or an Event of
Default under this Indenture and such principal or interest shall become payable on the date on
which such Base Rental Payments becomes payable under and pursuant to the Lease Agreement.
Section 2.02. Terms of Series 2011A Bonds. (a) The Series 2011A Bonds shall be
designated "Huntington Beach Public Financing Authority (Orange County, California) Lease
Revenue Refunding Bonds, 2011 Series A (Capital Improvement Refinancing Project)." The
aggregate principal amount of Series 2011A Bonds that may be issued and Outstanding under
this Indenture shall not exceed $36,275,000, except as may be otherwise provided in Section
2.11 hereof.
(b) The Series 2011A Bonds shall be issued in fully registered form without coupons
in Authorized Denominations. The Series 2011A Bonds shall be dated as of the Closing Date,
shall be in the aggregate principal amount of$36,275,000, shall mature on September 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:
OHS WEST261255608.7 11
Maturity Date Principal Interest
(September 1) Amount Rate
2012 $2,120,000 2.000%
2013 2,960,000 2.500
2014 3,030,000 5.000
2015 3,180,000 5.000
2016 3,335,000 3.000
2017 1,915,000 3.000
2018 1,965,000 4.000
2019 2,045,000 5.000
2020 1,060,000 3.000
2021 1,095,000 5.000
2022 1,150,000 3.000
2023 1,185,000 3.375
2024 1,225,000 3.625
2025 1,265,000 4.000
2026 1,315,000 4.000
2027 1,370,000 4.000
2028 1,425,000 4.125
2029 1,480,000 4.250
2030 1,545,000 4.250
2031 1,610,000 4.500
(c) Interest on the Series 2011A Bonds shall be payable from the Interest Payment
Date next preceding the date of authentication thereof unless (i) a Series 2011A 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 2011A Bond is authenticated on or before the first Record Date, in which event interest
thereon shall be payable from the Closing Date, or (iii) interest on any Series 2011A 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 previously been paid or duly provided for. Interest shall be
paid in lawful money of the United States on each Interest Payment Date. Except as otherwise
provided in the Letter of Representations, interest shall be paid by check of the Trustee mailed
by first class mail, postage prepaid, on each Interest Payment Date to the Owners of the Series
2011A Bonds at their respective addresses shown on the Registration Books as of the close of
business on the preceding Record Date; provided, however, that, in the case of an Owner of
$1,000,000 or more in aggregate principal amount of Series 2011A Bonds, upon the written
request of such Owner to the Trustee, received at least ten days prior to a Record Date,
specifying the account or accounts to which such payment shall be made, payment of interest
shall be made by wire transfer of immediately available funds on the following Interest Payment
Date. Any such request shall remain in effect until revoked or revised by such Owner by an
instrument in writing delivered to the Trustee.
(d) The principal of and premium, if any, on the Series 2011A 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.
OHS WEST261255608.7 12
(e) The Series 2011A 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 2.03. Issuance of Series 2011A Bonds; Application of Proceeds. (a) The
Authority may, at any time, execute the Series 2011A Bonds and deliver the same to the Trustee.
The Trustee shall authenticate the Series 2011A Bonds and deliver the Series 2011A Bonds to
the Original Purchaser upon receipt of a Written Request of the Authority and upon receipt of the
purchase price therefor.
(b) On the Closing Date, the proceeds of the sale of the Series 2011A Bonds received
by the Trustee, $38,077,176.76, shall be deposited by the Trustee as follows:
(i) the Trustee shall deposit the amount of $185,916.24 in the Costs of
Issuance Fund;
(ii) the Trustee shall deposit the amount of$3,082,659.23 in the Reserve
Fund, which amount shall constitute the Reserve Requirement as of the Closing
Date;
(iii) the Trustee shall transfer the amount of $23,065,580.37 to the
Escrow Bank, to be applied to the payment and redemption of the Prior 2001A
Bonds in accordance with the 2001A Escrow Agreement; and
(iv) the Trustee shall transfer the amount of $11,743,020.92 to the
Escrow Bank, to be applied to the payment and redemption of the Prior 2001B
Bonds in accordance with the 2001B Escrow Agreement.
Section 2.04. 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 2011A Bonds)
payable from Lease Revenues 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) neither the Authority nor the City shall be in default under this Indenture,
the Lease Agreement or the Site Lease;
(b) the issuance of such Additional Bonds shall have been authorized under
and pursuant to the Act and under and pursuant hereto and shall have been provided for
by a Supplemental Indenture which shall specify the following:
(i) the purposes for which such Additional Bonds are to be issued;
provided, that the proceeds of the sale of such Additional Bonds shall be applied
only for one or more of the following purposes: (A) providing funds to pay costs
of City facilities (including capitalized interest), (B) providing funds to refund any
Bonds issued hereunder or other obligations of the City, (C) providing funds to
pay Costs of Issuance incurred in connection with the issuance of such Additional
OHS WEST261255608.7 13
Bonds, and (D) providing funds to make any deposit to the Reserve Fund required
pursuant to paragraph (c) below;
(ii) the principal amount and designation of such Series of Additional
Bonds and the denomination or denominations of the Additional Bonds, which
shall be Authorized Denominations;
(iii) that such Additional Bonds shall be payable as to interest on the
Interest Payment Dates, except that the first installment of interest may be payable
on either March 1 or September 1;
(iv) the date, the maturity date or dates and the dates on which
mandatory sinking fund redemptions, if any, are to be made for such Additional
Bonds; provided, that (A) the serial Bonds of such Series of Additional Bonds
shall be payable as to principal annually on September 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 September 1, (B) all
Additional Bonds of a Series of like maturity shall be identical in all respects,
except as to number or denomination, and (C) 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;
(v) the redemption premiums and terms, if any, for such Additional
Bonds;
(vi) the form of such Additional Bonds; and
(vii) such other provisions that are appropriate or necessary and are not
inconsistent with the provisions hereof;
(c) upon the issuance of such Additional Bonds, the amount on deposit in the
Reserve Fund shall be at least equal to the Reserve Requirement; and
(d) upon the issuance of such Additional Bonds, the sum of Base Rental
Payments, including any increase in the Base Rental Payments as a result of the issuance
of such Additional Bonds, plus Additional Rental Payments, in any Rental Period shall
not be in excess of the annual fair rental value of the Property after taking into account
the use of the proceeds of such Additional Bonds (evidence of the satisfaction of such
condition shall be made by a Written Certificate of the City).
Section 2.05. Procedure for the Issuance of Additional Bonds. Whenever the
Authority and the City shall determine to authorize the issuance of any Additional Bonds, the
Authority, the City and the Trustee shall enter into a Supplemental Indenture satisfying the
conditions of Section 2.04 hereof. Before such Additional Bonds shall be issued, the Authority
and the City shall file or cause to be filed with the Trustee the following:
OHS WEST261255608.7 14
(a) an Opinion of Counsel setting forth (i) that counsel rendering such opinion
has examined the Supplemental Indenture, the amendment to the Lease Agreement, if
any, and the amendment to the Site Lease, if any, (ii) that the issuance of the Additional
Bonds has been duly authorized by the Authority, (iii) that the execution and delivery of
the Supplemental Indenture and, if any, the amendments to the Lease Agreement and the
Site Lease have been duly authorized, executed and delivered by the Authority and the
City, (iv) that upon execution and delivery of such Supplemental Indenture and any such
amendments to the Lease Agreement and the Site Lease, this Indenture, as amended and
supplemented by such Supplemental Indenture, and, if so amended, the Lease Agreement
and the Site Lease, as amended by such amendments, will be valid and binding
obligations of the Authority and the City, and (v) that the execution and delivery of the
Supplemental Indenture and, if any, the amendments to the Lease Agreement and the Site
Lease, in and of themselves, do not adversely affect the exclusion from gross income for
federal income tax purposes of interest on Outstanding Tax-Exempt Bonds;
(b) a Written Certificate of the Authority that the requirements of Section 2.04
hereof have been met;
(c) a Written Certificate of the City that the requirements of Section 2.04
hereof have been met, which shall include a certification as to the fair rental value of the
Property, after giving effect to any amendments to the Lease Agreement and the Site
Lease entered into in connection with the issuance of the Additional Bonds and taking
into account the use of proceeds of such Additional Bonds;
(d) certified copies of the resolutions of the Board of Directors of the
Authority and the City Council of the City authorizing the execution and delivery of the
Supplemental Indenture and, if any, the amendments to the Lease Agreement and the Site
Lease;
(e) executed counterparts or duly authenticated copies of the Supplemental
Indenture and, if any, the amendments to the Lease Agreement and the Site Lease, with
satisfactory evidence that any such amendments to the Lease Agreement and the Site
Lease have been duly recorded in the appropriate records of the county in which the
Property is located;
(f) certified copies of the policies of insurance required by Section 5.01 of the
Lease Agreement or certificates thereof, which shall evidence that the amounts of the
insurance required under subsections (b) and (c) of Section 5.01 of the Lease Agreement
have been increased, if applicable, to cover the amount of such Additional Bonds; and
(g) an ALTA title insurance policy or other appropriate form of policy in the
amount of the Additional Bonds of the type and with the endorsements described in
Section 5.04 of the Lease Agreement.
Upon the delivery to the Trustee of the foregoing instruments and upon the Trustee's
being satisfied from an examination of said instruments that all of the documents required by this
OHS WEST261255608.7 15
Section have been delivered, the Trustee shall authenticate such Additional Bonds, and shall
deliver such Additional Bonds to, or upon the request of, the Authority.
Section 2.06. Execution of Bonds. The Bonds shall be executed in the name and on
behalf of the Authority with the manual or facsimile signature of the Chair of the Board of
Directors 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 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, 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 for the
Series 2011A Bonds, 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.
Section 2.08. Registration Books. The Trustee shall 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 available for inspection and copying by the Authority and the City upon
reasonable notice; 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 herein provided.
Section 2.09. 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 and maturity in a like aggregate principal amount, in any Authorized
Denomination. The Trustee shall require the 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 and maturity of other Authorized Denominations. The Trustee
shall require the payment by the Owner requesting such exchange of any tax or other governmental
charge required to be paid with respect to such exchange.
OHS WEST261255608.7 16
The Trustee shall not be obligated to make any transfer or exchange of Bonds of a Series
pursuant to this Section during the period commencing on the date five days before the date of
selection of Bonds of such Series for redemption and ending on the date of mailing notice of such
redemption, or with respect to any Bonds of such Series selected for redemption.
Section 2.10. Book-Entry System. (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 date shall be in the form of a
separate single fully registered Bond (which may be typewritten); provided, however, that if
different CUSIP numbers are assigned to Bonds of a Series maturing in a single year or, if Bonds
of the same Series maturing in a single year are issued with different interest rates, additional
bond certificates shall be prepared for each such maturity. Upon initial issuance, the ownership
of each such Bond of such Series shall be registered in the Registration Books in the name of the
Nominee, as nominee of the Depository. The Series 2011A Bonds shall initially be issued as
Book-Entry Bonds.
Payment of principal of, and interest and premium, if any, on, any Book-Entry Bond
registered in the name of the Nominee shall be made on the applicable payment date by wire
transfer of New York clearing house or equivalent next day funds or by wire transfer of same
day funds to the account of the Nominee. Such payments shall be made to the Nominee at the
address which is, on the Record Date, shown for the Nominee in the Registration Books.
(b) With respect to Book-Entry Bonds, the Authority, the City and the Trustee shall
have no responsibility or obligation to any Participant or to any Person on behalf of which such a
Participant holds an interest in such Book-Entry Bonds. Without limiting the immediately
preceding sentence, the Authority, the City and the Trustee shall have no responsibility or
obligation with respect to (i) the accuracy of the records of the Depository, the Nominee or any
Participant with respect to any ownership interest in Book-Entry Bonds, (ii) the delivery to any
Participant or any other Person, other than an Owner as shown in the Registration Books, of any
notice with respect to Book-Entry Bonds, including any notice of redemption, (iii) the selection
by the Depository and its Participants of the beneficial interests in Book-Entry Bonds of a
maturity to be redeemed in the event such Book-Entry Bonds are redeemed in part, (iv) the
payment to any Participant or any other Person, other than an Owner as shown in the
Registration Books, of any amount with respect to principal of, or premium, if any, or interest on
Book-Entry Bonds, or (v) any consent given or other action taken by the Depository as Owner.
(c) The Authority, the City and the Trustee may treat and consider the Person in
whose name each Book-Entry Bond is registered in the Registration Books as the absolute
Owner of such Book-Entry Bond for the purpose of payment of principal of, and premium, if
any, and interest on such Bond, for the purpose of selecting any Bonds, or portions thereof, to be
redeemed, for the purpose of giving notices of redemption and other matters with respect to such
Book-Entry Bond, for the purpose of registering transfers with respect to such Book-Entry Bond,
for the purpose of obtaining any consent or other action to be taken by Owners and for all other
purposes whatsoever, and the Authority, the City and the Trustee shall not be affected by any
notice to the contrary.
OHS WEST261255608.7 17
(d) In the event of a redemption of all or a portion of a Book-Entry Bond, the
Depository, in its discretion, (i) may request the Trustee to authenticate and deliver a new Book-
Entry Bond, or (ii) if DTC is the sole Owner of such Book-Entry Bond, shall make an
appropriate notation on the Book-Entry Bond indicating the date and amounts of the reduction in
principal thereof resulting from such redemption, except in the case of final payment, in which
case such Book-Entry Bond must be presented to the Trustee prior to payment.
(e) The Trustee shall pay all principal of, and premium, if any, and interest on the
Book-Entry Bonds only to or "upon the order of (as that term is used in the Uniform
Commercial Code as adopted in the State of California) the respective Owner, as shown in the
Registration Books, or his respective attorney duly authorized in writing, and all such payments
shall be valid and effective to fully satisfy and discharge the obligations with respect to payment
of principal of, and premium, if any, and interest on the Book-Entry Bonds to the extent of the
sum or sums so paid. No Person other than an Owner, as shown in the Registration Books, shall
receive an authenticated Book-Entry Bond. Upon delivery by the Depository to the Owners, the
Authority, the City and the Trustee of written notice to the effect that the Depository has
determined to substitute a new nominee in place of the Nominee, and subject to the provisions
herein with respect to Record Dates, the word Nominee in this Indenture shall refer to such
nominee of the Depository.
(f) In order to qualify the Book-Entry Bonds for the Depository's book-entry system,
the Authority shall execute and deliver to the Depository a Letter of Representations. The
execution and delivery of a Letter of Representations shall not in any way impose upon the
Authority, the City or the Trustee any obligation whatsoever with respect to Persons having
interests in such Book-Entry Bonds other than the Owners, as shown on the Registration Books.
Such Letter of Representations may provide the time, form, content and manner of transmission,
of notices to the Depository. In addition to the execution and delivery of a Letter of
Representations by the Authority, the Authority, the City and the Trustee shall take such other
actions, not inconsistent with this Indenture, as are reasonably necessary to qualify Book-Entry
Bonds for the Depository's book-entry program.
(g) In the event the Authority determines that it is in the best interests of the
Beneficial Owners that they be able to obtain certificated Bonds and that such Bonds should
therefore be made available and notifies the Depository and the Trustee of such determination,
the Depository will notify the Participants of the availability through the Depository of
certificated Bonds. In such event, the Trustee shall transfer and exchange certificated Bonds as
requested by the Depository and any other Owners in appropriate amounts. In the event (i) the
Depository determines not to continue to act as securities depository for Book-Entry Bonds, or
(ii) the Depository shall no longer so act and gives notice to the Trustee of such determination,
then the Authority shall discontinue the Book-Entry system with the Depository. If the Authority
determines to replace the Depository with another qualified securities depository, the Authority
shall prepare or direct the preparation of a new single, separate, fully registered Bond of the
appropriate Series for each maturity date of such Book-Entry Bonds, registered in the name of
such successor or substitute qualified securities depository or its nominee. If the Authority fails
to identify another qualified securities depository to replace the Depository, then the Book-Entry
Bonds shall no longer be restricted to being registered in the Registration Books in the name of
the Nominee, but shall be registered in whatever name or names the Owners transferring or
OHS WEST2612556087 is
exchanging such Bonds shall designate, in accordance with the provisions of Sections 2.09 and
2.11 hereof. Whenever the Depository requests the Authority to do so, the Authority shall
cooperate with the Depository in taking appropriate action after reasonable notice (i) to make
available one or more separate certificates evidencing the Book-Entry Bonds to any Participant
having Book-Entry Bonds credited to its account with the Depository, and (ii) to arrange for
another securities depository to maintain custody of certificates evidencing the Book-Entry
Bonds.
(h) Notwithstanding any other provision of this Indenture to the contrary, if DTC is
the sole Owner of the Bonds of a Series, so long as any Book-Entry Bond of such Series is
registered in the name of the Nominee, all payments of principal of, and premium, if any, and
interest on such Book-Entry Bond and all notices with respect to such Book-Entry Bond shall be
made and given, respectively, as provided in the Letter of Representations or as otherwise
instructed by the Depository.
(i) In connection with any notice or other communication to be provided to Owners
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 of Book-Entry Bonds, the Trustee shall establish a record
date for such consent or other action and give the Depository notice of such record date not less
than 15 calendar days in advance of such record date to the extent possible. Notice to the
Depository shall be given only when DTC is the sole Owner of the Bonds of a Series.
Section 2.11. 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 the same Series and maturity in
a like aggregate principal amount 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 upon 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 the same Series and maturity in a like
aggregate principal amount 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 2.12. 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
OHS WEST261255608.7 19
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 shall 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 and maturities 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.
OHS WEST261255608.7 20
ARTICLE III
REDEMPTION OF BONDS
Section 3.01. Extraordinary Redemption. The 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
Proceeds (other than Net Proceeds of rental interruption insurance) received with respect to all or
a portion of the Property and deposited by the Trustee in the Redemption Fund in accordance
with the provisions hereof, at a redemption price equal to the principal amount thereof, plus
accrued interest thereon to the date fixed for redemption, without premium.
Section 3.02. Optional Redemption. The Series 2011A Bonds maturing on or before
September 1, 2021, are not subject to optional redemption prior to their respective stated
maturity dates. The Series 2011A Bonds maturing on or after September 1, 2022, are subject to
optional redemption prior to their respective stated maturity dates, on any date on or after
September 1, 2021, in whole or in part, in Authorized Denominations, from (i) amounts received
from the City in connection with the City's exercise of its right pursuant to Section 6.02 of the
Lease Agreement to cause Bonds to be optionally redeemed, or (ii) any other source of available
funds, at a redemption price equal to the principal amount thereof, plus accrued interest thereon
to the date fixed for redemption, without premium.
Section 3.03. 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
redemption pursuant to Section 3.01 hereof, among maturities of all Series of Bonds on a pro rata
basis as nearly as practicable, (b) with respect to any optional redemption of Series 2011A
Bonds, as directed in a Written Certificate of the City, and (c) with respect to any other
redemption of Additional Bonds, 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.
The Trustee shall promptly notify the Authority and the City in writing of the numbers of the
Bonds so selected for redemption on such date. For purposes of such selection, any Bond may be
redeemed in part in Authorized Denominations.
Section 3.04. Notice of Redemption. The Trustee on behalf 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 at least 30 but
not more than 60 days prior to the date fixed for redemption. Such notice shall state the date of
the 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 of the Bonds to
be redeemed (except in the event of redemption of all of the Bonds of such maturity or maturities
in whole), 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. 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. With respect to any notice of any optional redemption of Bonds of a Series,
OHS WEST261255608.7 21
unless at the time such notice is given the Bonds to be redeemed shall be deemed to have been
paid within the meaning of Section 9.02 hereof, such notice shall state that such redemption is
conditional upon receipt by the Trustee, on or prior to the date fixed for such redemption, of
moneys that, together with other available amounts held by the Trustee, are sufficient to pay the
redemption price of, and accrued interest on, the Bonds to be redeemed, and that if such moneys
shall not have been so received said notice shall be of no force and effect and the Authority shall
not be required to redeem such Bonds. In the event a notice of redemption of Bonds contains
such a condition and such moneys are not so received, the redemption of Bonds as described in
the conditional notice of redemption shall not be made and the Trustee shall, within a reasonable
time after the date on which such redemption was to occur, give notice to the Persons and in the
manner in which the notice of redemption was given, that such moneys were not so received and
that there shall be no redemption of Bonds pursuant to such notice of redemption.
Section 3.05. 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 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 3.06. 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, 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.
OHS WEST2612556087 22
ARTICLE IV
PLEDGE AND ASSIGNMENT; FUNDS AND ACCOUNTS
Section 4.01. Pledge and Assignment. 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 Lease Revenues and all amounts on deposit from time to time in the funds and
accounts established hereunder (other than the Rebate Fund) are hereby pledged to the payment
of the principal of and interest on the Bonds as provided herein, and the Lease Revenues shall
not be used for any other purpose while any of the Bonds remain Outstanding. Said pledge shall
constitute a first lien on such assets.
In order to secure the pledge of the Lease Revenues contained in this Section, the
Authority hereby sells, assigns and transfers to the Trustee, irrevocably and absolutely, without
recourse, for the benefit of the Owners, all of its right, title and interest in and to the Site Lease
and the Lease Agreement, including, without limitation, the right to receive Base Rental
Payments and the right to exercise any remedies provided in the Lease Agreement in the event of
a default by the City thereunder; provided, however, that the Authority shall retain the rights to
indemnification and to payment or reimbursement of its reasonable costs and expenses under the
Lease Agreement. The Trustee hereby accepts said assignment for the benefit of the Owners,
subject to the provisions of this Indenture.
The Trustee shall be entitled to and shall receive all of the Base Rental Payments, and
any Base Rental Payments collected or received by the Authority shall be deemed to be held, and
to have been collected or received, by the Authority as agent of the Trustee and shall forthwith
be paid by the Authority to the Trustee.
Section 4.02. Costs of Issuance Fund. (a) The Trustee shall establish and maintain a
separate fund designated the "Costs of Issuance Fund." On the Closing Date, the Trustee shall
deposit in the Costs of Issuance Fund the amount required to be deposited therein pursuant to
Section 2.03 hereof.
(b) The moneys in the Costs of Issuance Fund shall be used and withdrawn by the
Trustee from time to time to pay Costs of Issuance upon submission to the Trustee of a Written
Request of the City substantially in the form attached hereto as Exhibit C. Upon receipt of each
such Written Request of the City, the Trustee shall pay the amount set forth in such Written
Request as directed by the terms thereof. Each such Written Request of the City shall be
sufficient evidence to the Trustee of the facts stated therein and the Trustee shall have no duty to
confirm the accuracy of such facts.
(c) On the date that is six months after the Closing Date, the Trustee shall transfer
any amounts then remaining in the Costs of Issuance Fund to the Payment Fund, and upon such
transfer the Costs of Issuance Fund shall be closed.
(d) If the Costs of Issuance Fund has been closed in accordance with the provisions
hereof, the Costs of Issuance Fund shall be reopened and reestablished by the Trustee in
connection with the issuance of any Additional Bonds, if so provided in the Supplemental
OHS WEST261255608.7 23
Indenture pursuant to which such Additional Bonds are issued. There shall be deposited in the
Costs 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.
Section 4.03. Payment Fund. (a) The Trustee shall establish and maintain a separate
fund designated the "Payment Fund." Within the Payment Fund, the Trustee shall establish and
maintain a separate account designated the "Interest Account" and a separate account designated
the"Principal Account."
(b) All Lease Revenues received by the Trustee shall be deposited by the Trustee in
the Payment Fund; provided, however, that Net Proceeds, other than those constituting proceeds
of rental interruption insurance received with respect to the Property, shall not be deposited in
the Payment Fund but, rather, shall be applied as provided in Section 5.01 or Section 5.02 hereof,
as applicable. There shall additionally be deposited in the Payment Fund amounts transferred
from the Reserve Fund pursuant to subsection (c) of Section 4.05 hereof.
(c) The Trustee, on each Interest Payment Date, shall transfer from the Payment Fund
to the Interest Account an amount equal to the interest on the Bonds coming due on such Interest
Payment Date. Moneys in the Interest Account shall be withdrawn and used by the Trustee for
the purpose of paying interest on the Bonds as and when due and payable.
(d) The Trustee, on each Principal Payment Date, shall transfer from the Payment
Fund to the Principal Account an amount equal to the principal of the Bonds, including principal
due and payable by reason of mandatory sinking fund redemption, coming due on such date.
Moneys in the Principal Account shall be withdrawn and used by the Trustee for the purpose of
paying principal of the Bonds, including principal due and payable by reason of mandatory
sinking fund redemption, as and when due and payable.
Section 4.04. Redemption Fund. The Trustee shall establish and maintain a special
fund designated the "Redemption Fund." The Trustee shall deposit in the Redemption Fund any
amounts received from the City in connection with the City's exercise of its right pursuant to
Section 6.02 of the Lease Agreement to cause Bonds to be optionally redeemed. Additionally,
the Trustee shall deposit in the Redemption Fund any amounts required to be deposited therein
pursuant to Section 5.01 or Section 5.02 hereof. Amounts in the Redemption Fund shall be
disbursed therefrom by the Trustee for the payment of the redemption price of, and accrued
interest on, Bonds redeemed pursuant to Section 3.01 or Section 3.02 hereof.
Section 4.05. Reserve Fund. (a) The Trustee shall establish and maintain a special
fund designated the "Reserve Fund." On the Closing Date, the Trustee shall deposit in the
Reserve Fund the amount required to be deposited therein pursuant to Section 2.03 hereof. There
shall additionally be deposited in the Reserve Fund, in connection with the issuance of
Additional Bonds, the amount required to be deposited therein under the Supplemental Indenture
pursuant to which such Additional Bonds are issued.
(b) The City may substitute a Reserve Facility for all or part of the moneys on deposit
in the Reserve Fund by depositing such Reserve Facility with the Trustee, provided that, at the
OHS WEST2612556087 24
time of such substitution, the amount on deposit in the Reserve Fund, together with the amount
available under all Reserve Facilities, shall be at least equal to the Reserve Requirement. Moneys
for which a Reserve Facility has been substituted as provided herein shall be transferred, at the
election of the City, to the Redemption Fund or, upon receipt of an Opinion of Counsel that such
transfer will not, in and of itself, adversely affect the exclusion of interest on Outstanding Tax-
Exempt Bonds from gross income for federal income tax purposes, to the City and applied to the
payment of capital costs of the City. Amounts on deposit in the Reserve Fund which were not
derived from payments under any Reserve Facility credited to the Reserve Fund to satisfy a
portion of the Reserve Requirement shall be used and withdrawn by the Trustee prior to using
and withdrawing any amounts derived from payments under such Reserve Facility. In order to
accomplish such use and withdrawal of such amounts not derived from payments under any such
Reserve Facility, the Trustee shall, as and to the extent necessary, liquidate any investments
purchased with such amounts.
(c) In the event that, on the second Business Day prior to a date on which the Trustee
is to transfer money from the Payment Fund to the Interest Account pursuant to subsection (c) of
Section 4.03 hereof or to the Principal Account pursuant to subsection (d) of Section 4.03 hereof,
amounts in the Payment Fund are insufficient for such purpose, the Trustee shall withdraw from
the Reserve Fund, to the extent of any funds therein, the amount of such insufficiency, and shall
transfer any amounts so withdrawn to the Payment Fund. If the amount on deposit in the Reserve
Fund is not sufficient to make such transfer, the Trustee shall make a claim under any available
Reserve Facility, in accordance with the provisions thereof, in order to obtain an amount
sufficient to allow the Trustee to make such transfer as and when required.
(d) In the event of any transfer from the Reserve Fund or the making of any claim
under a Reserve Facility, the Trustee shall, within two Business Days thereafter, provide written
notice to the Authority and the City of the amount and the date of such transfer or claim;
provided, however, that such notice need not be provided if such transfer is made pursuant to
subsection (f) or subsection (g) of this Section.
(e) If the sum of the amount on deposit in the Reserve Fund, plus the amount
available under all available Reserve Facilities, is less than the Reserve Fund Requirement, the
first of Base Rental Payments thereafter received from the City under the Lease Agreement and
not needed to pay the principal of and interest on the Bonds on the next Interest Payment Date or
Principal Payment Date shall be used, first, to reinstate the amounts available under any Reserve
Facilities that have been drawn upon and, second, to increase the amount on deposit in the
Reserve Fund, so that the amount available under all available Reserve Facilities, when added to
the amount on deposit in the Reserve Fund, shall equal the Reserve Requirement.
(f) If, as a result of the payment of principal of or interest on the Bonds, the Reserve
Requirement is reduced, amounts on deposit in the Reserve Fund in excess of such reduced
Reserve Requirement shall be transferred to the Payment Fund.
(g) On any date on which Bonds are defeased in accordance with Section 9.02 hereof,
the Trustee shall, if so directed in a Written Request of the City, transfer any moneys in the
Reserve Fund in excess of the Reserve Requirement resulting from such defeasance to the entity
or fund so specified in such Written Request of the City, to be applied to such defeasance.
OHS WEST2612556087 25
(h) Moneys, if any, on deposit in the Reserve Fund shall be withdrawn and applied by
the Trustee for the final payments of principal of and interest on the Bonds.
Section 4.06. 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 or a Written Request of the City. 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 IX 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 or the City, and shall have no liability or responsibility to enforce
compliance by the Authority or the City with the terms of the Tax Certificate. The Trustee may
conclusively rely upon the determinations, calculations and certifications of the Authority or the
City required by the Tax Certificate. The Trustee shall have no responsibility to independently
make any calculation or determination or to review the calculations of the Authority or the City.
(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, upon receipt by the Trustee of
a Written Request of the City, be withdrawn by the Trustee and remitted to the City.
Section 4.07. Investments. (a) Except as otherwise provided herein, any moneys held
by the Trustee in the funds and accounts established hereunder shall be invested by the Trustee
upon the Written Request of the City, received at least two Business Days prior to the investment
date, only in Permitted Investments, and in the absence of such direction shall be invested by the
Trustee in Permitted Investments described in clause (5) of the definition thereof; provided,
however, that any such investment shall be made by the Trustee only if, prior to the date on
which such investment is to be made, the Trustee shall have received a Written Request of the
City specifying a specific money market fund that satisfies the requirements of said paragraph in
which such investment is to be made and, if no such Written Request is so received, the Trustee
shall hold such moneys uninvested. The Trustee may act as principal or agent in the acquisition
or disposition of any such investment. The Trustee shall not be liable or responsible for any loss
suffered in connection with any such investment made by it under the terms of and in accordance
with this Section. The Trustee shall sell or present for redemption any obligations so purchased
whenever it shall be necessary in order to provide moneys to meet any payment of the funds so
invested, and the Trustee shall not be liable or responsible for any losses resulting from any such
investment sold or presented for redemption. Permitted Investments that are registerable
securities shall be registered in the name of the Trustee. The Trustee shall be entitled to rely
upon any investment directions from the City as conclusive certification to the Trustee that the
investments described therein are permitted by the general laws of the State of California
applicable to investments by cities.
(b) Investments purchased with funds on deposit in the Payment Fund shall mature
not later than the payment date immediately succeeding the investment. Investments purchased
with funds on deposit in the Redemption Fund shall be invested in Permitted Investments
OHS WEST2612556087 26
described in clause (1)(a) of the definition thereof that mature on or prior to the redemption date
on which such funds are to be applied to the redemption of Bonds. Notwithstanding anything to
the contrary contained herein, investments purchased with funds on deposit in the Reserve Fund
shall have an average aggregate weighted term to maturity of not greater than five years;
provided, however, that if such investments may be redeemed at par so as to be available on each
Interest Payment Date, any amount in the Reserve Fund may be invested in such redeemable
Permitted Investments maturing on any date on or prior to the final maturity date of the Bonds.
(c) Investments (except investment agreements) in any fund or account established
hereunder shall be valued, exclusive of accrued interest (i) not less often than annually nor more
often than monthly, and (ii) upon any draw upon the Reserve Fund. All investments of amounts
deposited in any fund or account established hereunder shall be valued at the market value
thereof.
(d) Any interest or profits received with respect to investments held in any of the
funds or accounts established under this Indenture (other than the Reserve Fund) shall be
retained therein. Any interest or profits received with respect to investments held in the Reserve
Fund shall be transferred to the Interest Account. Notwithstanding the foregoing, any such
transfer or disbursement shall be made from the Reserve Fund only if and to the extent that, after
such transfer, the amount on deposit in the Reserve Fund, together with amounts available to be
drawn on all Reserve Facilities, if any, is at least equal to the Reserve Requirement.
(e) The Authority and the City acknowledges that to the extent that regulations of the
Comptroller of the Currency grant the Authority or the City the right to receive brokerage
confirmations of security transactions as they occur, at no additional cost, to the extent permitted
by law, the Authority and the City specifically waives receipt of such confirmations. The Trustee
shall furnish the Authority and the City periodic transaction statements that include detail for all
investment transactions made by the Trustee hereunder.
OHS WEST2612556087 27
ARTICLE V
NET PROCEEDS AND TITLE INSURANCE; COVENANTS
Section 5.01. Application of Net 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 Proceeds of any insurance (other than Net 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, pursuant to a Written Request of the City, be
invested by the Trustee in Permitted Investments that mature not later than such times as 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
referred to above.
If such 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 in whole or in part
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, pursuant to Section 3.01 hereof (i) of all of the
Outstanding Bonds, or (ii) of such portion of the Outstanding Bonds as shall result in the
remaining, non-abated Base Rental Payments being sufficient to pay, as and when due, the
principal of and interest on the Bonds that will remain Outstanding after such redemption. If the
City is required to apply funds from the insurance proceeds and other legally available funds to
the redemption of Bonds in accordance with clause (b) above, the City shall direct the Trustee, in
a Written Request of the City, to transfer the funds to be applied to such redemption to the
Redemption Fund and the Trustee shall transfer such funds to the Redemption Fund. Any
proceeds of any insurance, including the proceeds of any self-insurance remaining after the
portion of the Property which was damaged or destroyed is restored to and made available to the
City in substantially the same condition and annual fair rental value as that which existed prior to
the damage or destruction as required by clause (a) above, or the redemption of Bonds as
required by clause (b) above, in each case as evidenced by a Written Certificate of the City to
OHS WEST261255608.7 28
such effect, shall be deposited in the Reserve Fund to the extent that the amount therein is less
than the Reserve Requirement. 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 be deposited in the Reserve Fund to the
extent that the amount therein is less than the Reserve Requirement. Any amounts not required to
be so deposited into the Reserve Fund 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 sum of the then unpaid principal components of Base Rental Payments, be
paid to the City to be used for any lawful purpose.
The proceeds of any award in eminent domain shall be deposited by the Trustee in the
Redemption Fund and applied to the redemption of Bonds pursuant to Section 3.01 hereof.
Section 5.02. Title Insurance. Net 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, upon Written Request of the City, 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 in whole or in part of Rental Payments payable by the City under the Lease
Agreement, then the City shall, in a Written Request of the City, direct the Trustee to, and
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 Section
3.01 hereof.
Section 5.03. Punctual Payment. The Authority shall punctually pay or cause to be
paid the principal of, and premium, if any, and interest on the Bonds, in strict conformity with
the terms of the Bonds and of this Indenture, according to the true intent and meaning thereof,
but only out of the Base Rental Payments and other assets pledged for such payment as provided
in this Indenture and received by the Authority or the Trustee.
Section 5.04. Compliance with Indenture. The Authority and the City shall faithfully
comply with, keep, observe and perform all the agreements, conditions, covenants and terms
contained in this Indenture required to be complied with, kept, observed and performed by them.
Section 5.05. Compliance with Site Lease and Lease Agreement. The Authority and
the City shall faithfully comply with, keep, observe and perform all the agreements, conditions,
covenants and terms contained in the Site Lease and the Lease Agreement required to be
OHS WEST261255608.7 29
complied with, kept, observed and performed by them and, together with the Trustee, shall
enforce the Site Lease and the Lease Agreement against the other party thereto in accordance
with their respective terms.
Section 5.06. Observance of Laws and Regulations. The Authority, the City and the
Trustee shall 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 5.07. Other Liens. The City shall 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 thirty days' written notice to comply
therewith and failure of the City to so comply within such thirty-day period) may 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 obligation hereunder to
perform such agreements and covenants. The Trustee shall have no liability with respect to any
determination made in good faith to proceed or decline to defend, pay or compromise any such
claim or demand.
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 on the amounts on deposit in any of the
funds or accounts created hereunder, other than the pledge and lien hereof.
The Authority and the Trustee shall not encumber the Property other than in accordance
with the Site Lease, the Lease Agreement and this Indenture.
Section 5.08. Prosecution and Defense of Suits. The City shall promptly, upon request
of the Trustee or any Owner, 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, shall prosecute all actions, suits or other proceedings as
may be appropriate for such purpose and shall indemnify and save the Trustee and every Owner
harmless from all cost, damage, expense or loss, including attorneys' fees, which they or any of
them may incur by reason of any such cloud, defect, action, suit or other proceeding.
Section 5.09. Accounting Records and Statements. The Trustee shall keep proper
accounting records in which complete and correct entries shall be made of all transactions of the
Trustee relating to the receipt, deposit and disbursement of the Lease Revenues, and such
OHS WEST2612556087 30
accounting records shall be available for inspection by the Authority and the City at reasonable
hours and under reasonable conditions. The Trustee shall, upon written request, make copies of
the foregoing available, at the Owner's expense, to any Owner or its agent duly authorized in
writing.
Section 5.10. Recordation. The City shall record, or cause to be recorded, with the
appropriate county recorder, the Lease Agreement and the Site Lease, or memoranda thereof, and
a memorandum of the assignment of the Authority's right, title and interest in and to the Site
Lease and the Lease Agreement pursuant to Section 4.01 hereof.
Section 5.11. Tax Covenants. (a) Neither the Authority nor the City shall 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 the Series 2011A Bonds under Section 103
of the Code. Without limiting the generality of the foregoing, each of the Authority and the City
shall 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 Series 2011A
Bonds.
(b) In the event that at any time the Authority or the City 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 or the City 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 or the City 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 Series 2011A 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 5.12. Continuing Disclosure. The City shall 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, at the written
direction of any Participating Underwriter or the holders of at least 25% of the aggregate
principal amount of Outstanding Series 2011A Bonds, shall, upon receipt of indemnification
reasonably satisfactory to the Trustee, or any holder or Beneficial Owner of the Series 2011A
Bonds may, take such actions as may be necessary and appropriate to compel performance,
including seeking mandate or specific performance by court order.
Section 5.13. Notifications Required by the Act. If at any time the Trustee fails to pay
principal or interest due on any scheduled payment date for the Bonds or withdraws funds from
the Reserve Fund to pay principal and interest on the Bonds, the Trustee shall notify the
Authority in writing of such failure or withdrawal, as applicable, and, in accordance with Section
6599.1(c) of the Act, the Authority shall notify the California Debt and Investment Advisory
OHS WEST261255608.7 31
Commission of such failure or withdrawal, as applicable, within 10 days of the failure or
withdrawal, as applicable.
Section 5.14. Further Assurances. Whenever and so often as reasonably requested to
do so by the Trustee or any Owner, the Authority and the City shall 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 and the
Owners all advantages, benefits, interests, powers, privileges and rights conferred or intended to
be conferred upon them hereby or by the Site Lease or the Lease Agreement.
OHS WEST2612556087 32
ARTICLE VI
EVENTS OF DEFAULT AND REMEDIES
Section 6.01. Events of Default. The occurrence, from time to time, of any one or more
of the following events shall constitute an Event of Default under this Indenture:
(a) failure to pay any installment of principal of any Bond as and when the
same shall become due and payable, whether at maturity as therein expressed, by
proceedings for redemption or otherwise;
(b) failure to pay any installment of interest on any Bond as and when the
same shall become due and payable;
(c) a Lease Default Event shall have occurred and be continuing;
(d) failure by the Authority to observe and perform any of the other
covenants, agreements or conditions on its part in this Indenture or in the Bonds
contained, if such failure shall have continued for a period of 30 days after written notice
thereof, specifying such failure and requiring the same to be remedied, shall have been
given to the Authority by the Trustee, the City or the Owners of not less than 5% in
aggregate principal amount of the Bonds at the time Outstanding; provided, however, that
if, in the reasonable opinion of the Authority, the failure stated in the notice can be
corrected, but not within such 30 day period, such failure shall not constitute an Event of
Default if corrective action is instituted by the Authority within such 30 day period and
the Authority shall thereafter diligently and in good faith cure such failure in a reasonable
period of time;
(e) failure by the City to observe and perform any of the covenants,
agreements or conditions on its part in this Indenture contained, if such failure shall have
continued for a period of 30 days after written notice thereof, specifying such failure and
requiring the same to be remedied, shall have been given to the City by the Trustee, the
Authority or the Owners of not less than 5% in aggregate principal amount of the Bonds
at the time Outstanding; provided, however, that if, in the reasonable opinion of the City,
the failure stated in the notice can be corrected, but not within such 30 day period, such
failure shall not constitute an Event of Default if corrective action is instituted by the City
within such 30 day period and the City shall thereafter diligently and in good faith cure
such failure in a reasonable period of time; or
(f) the Authority or the City shall commence a voluntary case under Title 11
of the United States Code or any substitute or successor statute.
Section 6.02. Action on Default. 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 of Bonds then Outstanding (and upon indemnification of the
Trustee to its reasonable satisfaction as provided herein), shall, upon notice in writing to the
Authority and the City, 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
OHS WEST261255608.7 33
desirable 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 6.03 hereof.
Section 6.03. Other Remedies of the Trustee. During the continuance of an Event of
Default, 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 Authority or 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
or in the Bonds;
(b) by suit in equity to enjoin any acts or things which are unlawful or violate
the rights of the Trustee or the Owners; or
(c) by suit, action or proceeding in any court of competent jurisdiction, to
require the Authority or the City, or both, to account as if it or they were the trustee or
trustees of an express trust.
Section 6.04. Remedies Not Exclusive. 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 6.05. Application of Amounts After Default. If an Event of Default shall
occur and be continuing, all Lease Revenues and any other funds thereafter received by the
Trustee under any of the provisions of this Indenture shall be applied by the Trustee as follows
and in the following order:
(a) to the payment of any expenses necessary in the opinion of the Trustee to
protect the interests of the Owners and payment of reasonable fees, charges and expenses
of the Trustee (including reasonable fees and disbursements of its counsel) incurred in
and about the performance of its powers and duties under this Indenture;
(b) to the payment of all amounts then due for interest on the Bonds, ratably
without preference or priority of any kind, according to the amounts of interest on such
Bonds due and payable, with interest on the overdue interest at the rate borne by the
respective Bonds; and
(c) to the payment of all amounts then due for principal of the Bonds, ratably
without preference or priority of any kind, according to the amounts of principal of the
OHS WEST2612556087 34
Bonds due and payable, with interest on the overdue principal at the rate borne by the
respective Bonds.
Section 6.06. Power of Trustee to Enforce. All rights of action under this Indenture or
the Bonds or otherwise 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 suit,
action or proceeding instituted by the Trustee shall be brought in the name of the Trustee for the
benefit and protection of the Owners of such Bonds, subject to the provisions of this Indenture.
Section 6.07. Bond Owners Direction of Proceedings. Anything in this Indenture to
the contrary notwithstanding, the Owners of a majority in aggregate principal amount of the
Bonds then Outstanding shall have the right, by an instrument or concurrent instruments in
writing executed and delivered to the Trustee, and upon indemnification of the Trustee to its
reasonable satisfaction, to direct the method of conducting all remedial proceedings taken by the
Trustee hereunder; provided, however, that such direction shall not be otherwise than in
accordance with law and the provisions of this Indenture, and, provided, further, that the Trustee
shall have the right to decline to follow any such direction which in the opinion of the Trustee
would be unjustly prejudicial to Owners not parties to such direction.
Section 6.08. Limitation on Bond Owners' Right to Sue. No Owner of any Bond shall
have the right to institute any suit, action or proceeding at law or in equity, for the protection or
enforcement of any right or remedy under this Indenture, the Act or any other applicable law
with respect to such Bonds, unless (a) such Owner shall have given to the Trustee written notice
of the occurrence of an Event of Default, (b) the Owners of a majority in aggregate principal
amount of the Bonds then Outstanding shall have made written request upon the Trustee to
exercise the powers hereinbefore granted or to institute such suit, action or proceeding in its own
name, (c) such Owner or said Owners shall have tendered to the Trustee indemnity against the
costs, expenses and liabilities to be incurred in compliance with such request, and (d) the Trustee
shall have refused or omitted to comply with such request for a period of 60 days after such
written request shall have been received by, and said tender of indemnity shall have been made
to, the Trustee.
Such notification, request, tender of indemnity and refusal or omission are hereby
declared, in every case, to be conditions precedent to the exercise by any Owner of any remedy
hereunder or under law; it being understood and intended that no one or more Owners shall have
any right in any manner whatever by his or their action to affect, disturb or prejudice the security
of this Indenture or the rights of any other Owners, or to enforce any right under the Bonds, this
Indenture, the Act or other applicable law with respect to the Bonds, except in the manner herein
provided, and that all proceedings at law or in equity to enforce any such right shall be instituted,
had and maintained in the manner herein provided and for the benefit and protection of all
Owners, subject to the provisions of this Indenture.
Section 6.09. Termination of Proceedings. 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 such 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. In case any proceedings taken by the Trustee or
OHS WEST:261255608.7 35
any one or more Owners on account of any Event of Default shall have been discontinued or
abandoned for any reason or shall have been determined adversely to the Trustee or any Owner,
then in every such case the Trustee, such Owner, the Authority and the City, subject to any
determination in such proceedings, shall be restored to their former positions and rights
hereunder, severally and respectively, and all rights, remedies, powers and duties of the Trustee,
the Owners, the Authority and the City shall continue as though no such proceedings had been
taken.
Section 6.10. No Waiver of Default. No delay or omission of the Trustee or of any
Owner to exercise any right or power arising upon the occurrence of any default or Event of
Default shall impair any such right or power or shall be construed to be a waiver of any such
default or Event of Default or an acquiescence therein, and every power and remedy given by
this Indenture to the Trustee or to the Owners may be exercised from time to time and as often as
may be deemed expedient.
OHS WEST2612556087 36
ARTICLE VII
THE TRUSTEE
Section 7.01. Duties and Liabilities of Trustee. The Trustee shall, prior to an Event of
Default, and after the curing or waiver of all Events of Default which may have occurred,
perform such duties and only such duties as are expressly and specifically set forth in this
Indenture. The Trustee shall, during the existence of any Event of Default which has not been
cured or waived, 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 person would exercise or use under
the circumstances in the conduct of such person's own affairs.
Section 7.02. Removal and Resignation of the Trustee. The Authority and the City
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 the 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 national banking association, trust company or commercial bank with trust powers
having a combined capital (exclusive of borrowed capital) and surplus of at least $50,000,000 (or
be part of a bank holding company with a combined capital and surplus of at least $50,000,000)
and subject to supervision or examination by federal or state authorities. If such national banking
association, trust company or commercial bank 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 national
banking association, trust company or commercial bank 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 and the City shall promptly appoint a successor Trustee
by an instrument in writing; provided, however, that in the event the Authority and the City do
not appoint a successor Trustee within 30 days following receipt of such notice of resignation,
the resigning Trustee may, at the expense of the City, 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 successor Trustee appointed under this Indenture shall signify its
acceptance of such appointment by executing and delivering to the Authority and the City and to
its predecessor Trustee a written acceptance thereof, and thereupon such successor Trustee,
without any further act, deed or conveyance, shall become vested with all the moneys, estates,
properties, rights, powers, trusts, duties and obligations of such predecessor Trustee, with like
effect as if originally named Trustee herein; but, nevertheless, at the written request of the
Authority, the City or of the successor Trustee, such predecessor Trustee shall execute and
deliver any and all instruments of conveyance or further assurance and do such other things as
OHS WEST261255608.7 37
may reasonably be required for more fully and certainly vesting in and confirming to such
successor Trustee all the right, title and interest of such predecessor Trustee in and to any
property held by it under this Indenture and shall pay over, transfer, assign and deliver to the
successor Trustee any money or other property subject to the trusts and conditions herein set
forth.
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 7.03. Compensation and Indemnification 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 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; provided, however, that the
Trustee shall not have any lien for such compensation or reimbursement against any moneys held
by it in any of the funds or accounts established hereunder.
The City shall, to the extent permitted by law, indemnify and 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 and under any related
documents, including the enforcement of any remedies and the defense of any suit, and which
are not due to its negligence or its willful misconduct. The duty of the City to indemnify the
Trustee shall survive the termination and discharge of this Indenture and the resignation or
removal of the Trustee.
Section 7.04. 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 pursuant to this Indenture, unless such Owners shall have offered to the
Trustee security or indemnity, reasonably satisfactory to the Trustee, against the reasonable
OHS WEST2612556087 38
costs, expenses and liabilities which might be incurred by it in compliance with such request or
direction. Under no circumstances shall the Trustee request or be entitled to indemnification
from the City for taking actions required by and in accordance with this Indenture, including, but
not limited to, causing payments of principal of and interest on the Bonds to be made to the
Owners thereof and carrying out redemptions of the Bonds in accordance with the terms hereof.
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, for the recital of facts herein or for statements made in the preliminary or final
official statement relating to the Bonds, or of the title to the Property.
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.
The Trustee shall not be deemed to have knowledge of an Event of Default hereunder
unless it has actual knowledge thereof.
The Trustee shall not be concerned with or accountable to anyone for the subsequent use
or application of any moneys which shall be released or withdrawn in accordance with the
provisions hereof.
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.
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 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 Authority or a Written Certificate of the City, 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 Authority or 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
OHS WEST2612556087 39
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 diligently 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 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 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 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 agrees 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.
Section 7.05. Appointment of Co-Trustee. It is the purpose of this Indenture that there
shall be no violation of any law of any jurisdiction (including particularly the laws of the State of
California) denying or restricting the right of banking corporations or associations to transact
business as Trustee in such jurisdiction. It is recognized that in the case of litigation under this
Indenture, and in particular in case of the enforcement of the rights of the Trustee on default, or
in the case the Trustee deems that by reason of any present or future law of any jurisdiction it
may not exercise any of the powers, rights or remedies herein granted to the Trustee or hold title
to the properties, in trust, as herein granted, or take any other action which may be desirable or
necessary in connection therewith, it may be necessary that the Trustee appoint an additional
institution as a separate or co-trustee. The following provisions of this Section are adopted to
these ends.
OHS WEST:261255608.7 40
In the event that the Trustee appoints an additional institution as a separate or co-trustee,
each and every remedy, power, right, claim, demand, cause of action, immunity, estate, title,
interest and lien expressed or intended by this Indenture to be exercised by or vested in or
conveyed to the Trustee with respect thereto shall be exercisable by and vest in such separate or
co-trustee but only to the extent necessary to enable such separate or co-trustee to exercise such
powers, rights and remedies, and every covenant and obligation necessary to the exercise thereof
by such separate or co-trustee shall run to and be enforceable by either of them. Any co-trustee
shall be bound by the standards of care, duties and obligations of the Trustee under this Indenture
as if such co-trustee were the Trustee. Any co-trustee shall be a national banking association,
trust company or commercial bank doing business in the State of California and at all times shall
have 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 national banking
association, trust company or commercial bank 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 national
banking association, trust company or commercial bank shall be deemed to be its combined
capital and surplus as set forth in its most recent report of condition so published.
Should any instrument in writing from the Authority or the City be required by the
separate trustee or co-trustee so appointed by the Trustee for more fully and certainly vesting in
and confirming to it such properties, rights, powers, trusts, duties and obligations, any and all
such instruments in writing shall, on request, be executed, acknowledged and delivered by the
Authority or the City. In case any separate trustee or co-trustee, or a successor to either, shall
become incapable of acting, resign or be removed, all the estates, properties, rights, powers,
trusts, duties and obligations of such separate trustee or co-trustee, so far as permitted by law,
shall vest in and be exercised by the Trustee until the appointment of a new Trustee or successor
to such separate trustee or co-trustee.
OHS WEST:261255608.7 41
ARTICLE VIII
SUPPLEMENTAL INDENTURES
Section 8.01. Supplemental Indentures. (a) This Indenture and the rights and
obligations of the Authority, the City, the Trustee and the Owners hereunder may be modified or
amended at any time by a Supplemental Indenture, which the Authority, the City and the Trustee
may enter into when the prior written consents of the Owners of a majority of the aggregate
principal amount of the Bonds then Outstanding, exclusive of Bonds disqualified as provided in
Section 10.06 hereof, are filed with the Trustee. No such modification or amendment shall (i)
extend the fixed maturity of any Bond, reduce the amount of principal thereof or the rate of
interest thereon or alter the redemption provisions with respect thereto, 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, without the
consent of the Owners of all of the Bonds then Outstanding, or (iii) permit the creation of any
lien on the Lease Revenues 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 Lease Revenues and other assets (except as expressly provided in this
Indenture), without the consent of the Owners of all Bonds then Outstanding, or (iv) amend this
Section without the prior written consent of the Owners of all Bonds then Outstanding.
(b) This Indenture and the rights and obligations of the Authority, the City, the
Trustee and the Owners hereunder 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 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 or in regard to questions arising hereunder which the Authority or the City
may deem desirable or necessary and not inconsistent herewith;
(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 Section 2.04 and Section 2.05
hereof;
(iv) 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
interest on Tax-Exempt Bonds or maintain any federal interest subsidies expected to be
received with respect to any Bonds; and
OHS WEST261255608.7 42
(v) for any other reason, provided such amendment or supplement does not
adversely affect the rights or interests of the Owners; provided, however, that the
Authority, the City and the Trustee may rely in entering into any such amendment or
supplement upon an Opinion of Counsel stating that the requirements of this paragraph
have been met with respect to such amendment or supplement.
(c) The Trustee may in its discretion, but shall not be obligated to, enter into a
Supplemental Indenture that materially adversely affects the Trustee's rights, duties or
immunities under this Indenture or otherwise.
(d) 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 or the City), 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.
Section 8.02. Effect of Supplemental Indenture. Upon the execution and delivery of
any Supplemental Indenture entered into pursuant to subsection (a) or (b) of Section 8.01 hereof,
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 the Owners shall thereafter be determined, exercised and enforced hereunder subject
in all respects to such modification and amendment, and all the terms and conditions of any such
Supplemental Indenture shall be deemed to be part of the terms and conditions of this Indenture
for any and all purposes.
Section 8.03. Endorsement of Bonds; Preparation of New Bonds. Bonds delivered
after the effective date of any Supplemental Indenture pursuant to this Article may and, if the
Authority or the City so determines, shall bear a notation by endorsement or otherwise in form
approved by the Authority, the City 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
Bond Outstanding at the time of such effective date, and presentation of such Bond for such
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, the City 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, in that case, upon demand of the Owner of any Bond Outstanding at the time of
such effective date, and presentation of such Bond for such purpose at the Office of the Trustee,
such a new Bond in equal principal amount of the same Series, interest rate and maturity shall be
exchanged for such Owner's Bond so surrendered.
Section 8.04. Amendment of Particular Bonds. The provisions of this Article shall not
prevent any Owner from accepting any amendment or modification as to any particular Bond
owned by it, provided that due notation thereof is made on such Bond.
OHS WEST261255608.7 43
ARTICLE IX
DEFEASANCE
Section 9.01. Discharge of Indenture. (a) If (i) 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, and (ii) all other amounts due and payable hereunder and under the Lease Agreement
shall have been paid, then the Owners shall cease to be entitled to the pledge of the Lease
Revenues and the other assets as provided herein, and all agreements, covenants and other
obligations of the Authority and the City 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 the Bonds.
(b) Subject to the provisions of subsection (a) of this Section, when any Bond shall
have been paid and if, at the time of such payment, each of the Authority and 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 it or on its part on or
prior to that time, then this Indenture shall be considered to have been discharged in respect of
such Bond and such Bond shall cease to be entitled to the pledge of the Lease Revenues and the
other assets as provided herein, and all agreements, covenants and other obligations of the
Authority and the City hereunder shall cease, terminate, become void and be completely
discharged and satisfied as to such Bond.
(c) Notwithstanding the discharge and satisfaction of this Indenture or the discharge
and satisfaction of this Indenture in respect of any Bond, those provisions of this Indenture
relating to the maturity of the 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 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 the Bonds the funds so held by the Trustee as and when such
payment becomes due. Notwithstanding the discharge and satisfaction of this Indenture, the
provisions of Section 7.03 hereof relating to the compensation of the Trustee shall remain in
effect and shall be binding upon the Authority, the City and the Trustee.
Section 9.02. Bonds Deemed To Have Been Paid. (a) If moneys shall have been set
aside and held by the Trustee for the payment or redemption of any Bond and the payment of the
interest thereon to the maturity or redemption date thereof, such Bond shall be deemed to have
been paid within the meaning and with the effect provided in Section 9.01 hereof. Any
Outstanding Bond 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 9.01 hereof if(i) in case
any of such Bonds are to be redeemed on any date prior to their maturity date, the Authority shall
OHS WEST261255608.7 44
have given to the Trustee in form satisfactory to it irrevocable instructions to mail, on a date in
accordance with the provisions of Section 3.04 hereof, notice of redemption of such Bond on
said redemption date, said notice to be given in accordance with Section 3.04 hereof, (ii) there
shall have been deposited with the Trustee either (A) money in an amount which shall be
sufficient, or (B) Defeasance Securities, the principal of and the interest on which when due, and
without any reinvestment thereof, will provide moneys which shall be sufficient to pay when due
the interest to become due on such Bond 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 Bond, and (iii) in
the event such Bond is not by its 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 Bond that the deposit required by
clause (ii) above has been made with the Trustee and that such Bond is 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 Bond.
Neither the money nor the Defeasance Securities deposited with the Trustee pursuant to this
subsection in connection with the deemed payment of Bonds, nor principal or interest payments
on any such Defeasance Securities, shall be withdrawn or used for any purpose other than, and
shall be held in trust for and pledged to, the payment of the principal of and, premium, if any,
and interest on such Bonds.
(b) No Bond shall be deemed to have been paid pursuant to clause (ii)(B) of
subsection (a) of this Section unless the Authority or the City shall cause to be delivered (A) an
executed copy of a Verification Report with respect to such deemed payment, addressed to the
Authority, the City and the Trustee, (B) a copy of the escrow agreement entered into in
connection with the deposit pursuant to clause (ii)(B) of subsection (a) of this Section resulting
in such deemed payment, which escrow agreement shall provide that no substitution of
Defeasance Securities shall be permitted except with other Defeasance Securities and upon
delivery of a new Verification Report and no reinvestment of Defeasance Securities shall be
permitted except as contemplated by the original Verification Report or upon delivery of a new
Verification Report, and (C) a copy of an Opinion of Counsel, dated the date of such deemed
payment and addressed to the Authority, the City and the Trustee, to the effect that such Bond
has been paid within the meaning and with the effect expressed in this Indenture, and all
agreements, covenants and other obligations of the Authority and the City hereunder as to such
Bond have ceased, terminated, become void and been completely discharged and satisfied.
(c) The Trustee may seek and is entitled to rely upon (i) an Opinion of Counsel
reasonably satisfactory to the Trustee to the effect that the conditions precedent to a deemed
payment pursuant to clause (ii) of subsection (a) of this Section have been satisfied, and (ii) such
other opinions, certifications and computations, as the Trustee may reasonably request, of
accountants or other financial consultants concerning the matters described in subsection (b) of
this Section.
Section 9.03. Unclaimed Moneys. Any moneys held by the Trustee in trust for the
payment and discharge of the principal of, or premium or interest on, any Bonds which remain
unclaimed for two years after the date when such principal, premium or interest has become
payable, if such moneys were held by the Trustee at such date, or for two years after the date of
deposit of such moneys if deposited with the Trustee after the date when such principal, premium
OHS WEST:261255608.7 45
or interest become payable, shall, at the Written Request of the Authority, be repaid by the
Trustee to the City as its absolute property free from trust, and the Trustee shall thereupon be
released and discharged with respect thereto and the Owners of such Bonds shall look only to the
City for the payment of such principal, premium or interest.
OHS WEST2612556087 46
ARTICLE X
MISCELLANEOUS
Section 10.01. 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 10.02. 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 10.03. 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 its 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 such notary public or
other officer purports to act that the Person signing such declaration, request or other instrument
or writing acknowledged to such notary public or other officer 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 Bond 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 10.04. 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 Authority or the City from the performance of any official duty
provided by any applicable provisions of law, by the Lease Agreement or hereby.
Section 10.05. Acquisition of Bonds by Authority or City. All Bonds acquired by the
Authority or the City, whether by purchase or gift or otherwise, shall be surrendered to the
Trustee for cancellation.
OHS WEST2612556087 47
Section 10.06. 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 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. Bonds
so owned which have been pledged in good faith may be regarded as Outstanding for the
purposes of this Section if the pledgee 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. Upon the request of the Trustee, the Authority
and the City shall specify to the Trustee in a Written Certificate of the Authority and a Written
Certificate of the City, as applicable, those Bonds disqualified pursuant to this Section and the
Trustee may conclusively rely on such Written Certificates.
Section 10.07. Money Held for Particular Bonds. The money held by the Trustee for
the payment of the principal of or premium or interest on particular Bonds due on any date (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 9.03 hereof, but without
any liability for interest thereon.
Section 10.08. Funds and Accounts. Any fund or account required to be established
and maintained pursuant hereto by the Trustee may be established and maintained in the
accounting records of the 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 all 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 establish such funds and accounts as it deems necessary to perform its obligations
hereunder.
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.
Section 10.09. Gender and References; Article and Section Headings. 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. Unless
the context otherwise clearly requires, 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
OHS WEST2612556087 48
similar import refer to this Indenture as a whole and not to any particular Article, Section,
subsection or clause hereof.
Section 10.10. 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,
authentication, issuance 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 10.11. California Law. This Indenture and the Bonds shall be construed and
governed in accordance with the laws of the State of California.
Section 10.12. 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 Huntington Beach
2000 Main Street
Huntington Beach, California 92648
Attention: Director of Finance
If to the Authority: Huntington Beach Public Financing Authority
c/o City of Huntington Beach
2000 Main Street
Huntington Beach, California 92648
Attention: Director of Finance
If to the Trustee: The Bank of New York Mellon Trust Company, N.A.
700 South Flower Street, Suite 500
Los Angeles, California 90017
Attention: Corporate Trust Services
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 given by courier or delivery service or if personally served or
delivered, upon delivery, (b) if given by telecopier, upon the sender's receipt of an appropriate
answerback or other written acknowledgment, (c) if given by registered or certified mail, return
OHS WEST261255608.7 49
receipt requested, deposited with the United States mail postage prepaid, 72 hours after such
notice is deposited with the United States mail, or (d) if given by any other means, upon delivery
at the address specified in this Section.
Section 10.13. Business Daps. If the date for making any payment or the last date for
performance of any act or the exercising of any right, as provided in this Indenture shall not be a
Business Day, such payment may be made or act performed or right exercised on the next
succeeding Business Day, with the same force and effect as if done on the nominal date provided
in this Indenture and, unless otherwise specifically provided in this Indenture, no interest shall
accrue for the period from and after such nominal date.
Section 10.14. Execution in Counterparts. This Indenture may be simultaneously
executed in several counterparts, each of which shall be deemed an original, and all of which
shall constitute but one and the same instrument.
OHS WEST261255608.7 50
IN WITNESS WHEREOF, the Authority has caused this Indenture to be signed in its
name by its representative thereunto duly authorized, the City has caused this Indenture to be
signed in its name by its 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.
HUNTINGTO EACH PUBLIC
FINAN rBoard
By:
i
Chairirectors
CITY OF HUNTINGTON BEACH
By:
Lori Ann Farrell,
Director of Finance
THE BANK OF NEW YORK MELLON
TRUST COMPANY,N.A.
By:
Authorized Officer
OHS WEST:261255608.7 51
IN WITNESS WHEREOF, the Authority has caused this Indenture to be signed in its
name by its representative thereunto duly authorized, the City has caused this Indenture to be
signed in its name by its 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.
HUNTINGTON BEACH PUBLIC
FINANCING AUTHORITY
By:
Joe Carchio,
Chair of the Board of Directors
CITY OF HUNTINGTON BEACH
By:
Lori Ann Farrell,
Director of Finance
THE BANK OF NEW YORK MELLON
TRUST COMPANY, N.A.
By:
(juthorized Officer
OHS WEST:261255603.7 51
EXHIBIT A
FORM OF SERIES 2011A BOND
No. R- ***$***
HUNTINGTON BEACH PUBLIC FINANCING AUTHORITY
(ORANGE COUNTY, CALIFORNIA)
LEASE REVENUE REFUNDING BOND, 2011 SERIES A
(CAPITAL IMPROVEMENT REFINANCING PROJECT)
MATURITY DATE INTEREST RATE DATED DATE CUSIP NO.
September 1, 20 % September 28, 2011
REGISTERED OWNER: Cede&Co.
PRINCIPAL AMOUNT: DOLLARS
The Huntington Beach Public Financing Authority (the "Authority"), for value received,
hereby promises to pay to the Registered Owner identified above or registered assigns (the
"Registered Owner"), on the Maturity Date identified above, the Principal Amount identified
above in lawful money of the United States of America; and to pay interest thereon at the Interest
Rate identified above in like lawful money from the date hereof, payable semiannually on March
1 and September 1 in each year, commencing March 1, 2012 (the "Interest Payment Dates"),
until payment of such Principal Amount in full. This Bond is issued pursuant to the Indenture,
dated as of September 1, 2011 (the "Indenture"), by and among the Authority, the City of
Huntington Beach (the "City") and The Bank of New York Mellon Trust Company, N.A., as
trustee. Capitalized undefined terms used herein have the meanings ascribed thereto in the
Indenture.
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 fifteenth calendar day of the month 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 February 15, 2012, 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, this Bond shall bear
interest from the Interest Payment Date to which interest hereon has previously been paid or duly
provided for). The Principal Amount hereof is payable upon surrender hereof upon maturity at
the principal corporate trust office of The Bank of New York Mellon Trust Company, N.A., as
trustee, or any successor trustee under the Indenture (the "Trustee"), in Los Angeles, California,
or such other office as may be specified to the Authority and the City by the Trustee in writing
(the "Office of the Trustee"). Interest hereon is payable by check of the Trustee, mailed by first
OHS WEST261255608.7 A-1
class mail on each Interest Payment Date to the Registered Owner hereof at the address of the
Registered Owner as it appears on the Registration Books of the Trustee as of the close of
business on the fifteenth calendar day of the month preceding such Interest Payment Date.
This Bond is one of a series of a duly authorized issue of bonds designated "Huntington
Beach Public Financing Authority (Orange County, California) Lease Revenue Refunding
Bonds, 2011 Series A (Capital Improvement Refinancing Project)" (the "Series 2011A Bonds")
in the aggregate principal amount of$36,275,000. The Series 2011A Bonds are issued pursuant
to the Indenture, and this reference incorporates the Indenture herein. Pursuant to and as more
particularly provided in the Indenture, Additional Bonds may be issued by the Authority payable
from Lease Revenues as provided in the Indenture on a parity with the Series 2011A Bonds. The
Series 2011A 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, constituting Section 6584 et seq. of the California Government Code (the "Act") and the
laws of the State of California.
Reference is hereby made to the Indenture and to any and all amendments thereof and
supplements thereto for a description of the agreements, conditions, covenants and terms
securing the Bonds, for the nature, extent and manner of enforcement of such agreements,
conditions, covenants and terms, for the rights, duties and immunities of the Trustee, for the
rights and remedies of the Owners of the Bonds with respect thereto and for the other
agreements, conditions, covenants and terms upon which the Bonds are issued thereunder, to all
of which provisions the Registered Owner by acceptance hereof, assents and agrees.
The Bonds are special obligations of the Authority, payable solely from the Lease
Revenues 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. The Lease Revenues consist of all
Base Rental Payments payable by the City pursuant to the Lease Agreement, dated as of
September 1, 2011, by and between the City, as lessee, and the Authority, as lessor, (the "Lease
Agreement"), including any prepayments thereof, any Net Proceeds and any amounts received
by the Trustee as a result of or in connection with the Trustee's pursuit of remedies under the
Lease Agreement upon a Lease Default Event. 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 Lease Revenues and all amounts on deposit from time to time in the funds and
accounts established under the Indenture (other than the Rebate Fund) are pledged to the
payment of the principal of and interest on the Bonds as provided therein, and the Lease
Revenues shall not be used for any other purpose while any of the Bonds remain Outstanding.
Said pledge constitutes a first lien on such assets. In order to secure such pledge of the Lease
Revenues, the Authority has sold assigned and transferred to the Trustee, irrevocably and
absolutely, without recourse, for the benefit of the Owners, all of its right, title and interest in and
to the Site Lease and the Lease Agreement, including, without limitation, the right to receive
Base Rental Payments and the right to exercise any remedies provided in the Lease Agreement in
the event of a default by the City thereunder; provided, however, that the Authority has retained
the rights to indemnification and to payment or reimbursement of its reasonable costs and
expenses under the Lease Agreement.
OHS WEST261255608.7 A-2
The Bonds are issuable as fully registered Bonds without coupons in Authorized
Denominations ($5,000 or any integral multiple thereof).
The Series 2011A Bonds are subject to extraordinary and optional redemption at the
times, in the manner, at the redemption prices and upon notice as specified in the Indenture.
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 and maturity in a like aggregate principal
amount, in any Authorized Denomination. The Trustee shall require the 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 and maturity of other Authorized Denominations. The
Trustee shall require the payment by the Owner requesting such exchange of any tax or other
governmental charge required to be paid with respect to such exchange.
To the extent and in the manner permitted by the terms of the Indenture, the provisions of
the Indenture may be amended or supplemented by the parties thereto.
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.
This Bond shall not be entitled to any benefit, protection or security under the Indenture
or become valid or obligatory for any purpose until the certificate of authentication and
registration hereon endorsed shall have been executed and dated by an authorized signatory of
the Trustee.
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.
It is hereby certified that all acts, conditions and things required by law to exist, to have
happened and to have been performed precedent to and in the issuance of the Bonds do exist,
have happened and have been performed in due time, form and manner as required by law.
OHS WEST261255608.7 A-3
IN WITNESS WHEREOF, the Authority has caused this Bond to be signed in its name
and on its behalf by the manual or facsimile signature of the Chair of the Authority, attested by
the manual or facsimile signature of the Secretary of the Authority, all as of the Dated Date
identified above.
HUNTINGTON BEACH PUBLIC
FINANCING AUTHORITY
By:
Chair
ATTEST:
Secretary
OHS WEST2612556087 A-4
CERTIFICATE OF AUTHENTICATION
This is one of the Series 2011A Bonds described in the within-mentioned Indenture and
registered on the Registration Books.
Date:
THE BANK OF NEW YORK MELLON
TRUST COMPANY, N.A., AS TRUSTEE
By:
Authorized Signatory
OHS WEST261255608.7 A-5
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 guarantee shall be made by a guarantor Note: The signature(s) on this Assignment must
institution participating in the Securities Transfer correspond with the name(s) as written on the face of the
Agents Medallion Program or in such other guarantee within Bond in every particular without alteration or
program acceptable to the Trustee. enlargement or any change whatsoever.
OHS WEST:261255608.7 A-6
EXHIBIT B
PERMITTED INVESTMENTS
"Permitted Investments" means any of the following to the extent then permitted by the
general laws of the State of California applicable to investments by cities:
(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
- 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
(2) Obligations of instrumentalities or agencies of the United States of America
limited to the following: (a) the Federal Home Loan Bank Board ("FHLB"); (b) the Federal
Home Loan Mortgage Corporation ("FHLMC"); (c) the Federal National Mortgage Association
(FNMA); (d) Federal Farm Credit Bank ("FFCB"); and (e) guaranteed portions of Small
Business Administration ("SBA") notes.
(3) Commercial Paper having a maximum maturity of not more than 270 days,
payable in the United States of America and issued by corporations that are organized and
operating in the United States with total assets in excess of $500 million and having "A" or
OHS WEST261255608.7 B-1
better rating for the issuer's long-term debt as provided by Moody's, S&P, or Fitch and "P-1",
"A-1", "Fl" or better rating for the issuer's short-term debt as provided by Moody's, S&P, or
Fitch, respectively.
(4) Bills of exchange or time drafts drawn on and accepted by a commercial bank,
otherwise known as "bankers' acceptances," having original maturities of not more than 180
days. The institution must have a minimum short-term debt rating of "A-1", "P-11 , or "Fl" by
S&P, Moody's, or Fitch, respectively, and a long-term debt rating of no less than "A" by S&P,
Moody's, or Fitch.
(5) Shares of beneficial interest issued by diversified management companies, known
as money market funds, registered with the U.S. Securities and Exchange Commission under the
Investment Company Act of 1940 (15 U.S.C. Sec. 80a-1 et seq.) and whose fund has received
the highest possible rating from S&P, 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.
(6) Shares in a California common law trust established pursuant to Title 1, Division
7, Chapter 5 of the Government Code of the State of California which invests exclusively in
investments permitted by Section 53601 of Title 5, Division 2, Chapter 4 of the Government
Code of California, as it may be amended.
(7) Certificates of deposit issued by a nationally- or state-chartered bank or a state or
federal association (as defined by Section 5102 of the California Financial Code) or by a state-
licensed branch of a foreign bank, in each case which has, or which is a subsidiary of a parent
company which has, obligations outstanding having a rating in the "A" category or better from
S&P, Moody's, or Fitch.
(8) Pre-refunded municipal obligations rated 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;
OHS WEST261255608.7 B-2
(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 United States Treasury Obligations are not available to satisfy
any other claims, including those by or against the trustee or escrow agent.
(9) Registered state warrants or treasury notes or bonds of the State of California,
including bonds payable solely out of the revenues from a revenue-producing property owned,
controlled, or operated by the State of California or by the state, department, board, agency, or
authority of the other 49 United States, having a long-term debt rating of at least "AA-" or "Aa3"
by S&P or Moody's, respectively
(10) California public municipal obligations including bonds payable solely out of the
revenues from a revenue-producing property owned, controlled, or operated by a California
municipal entity having a long-term debt rating of at least "AA-" or "Aa3" by S&P or Moody's,
respectively
(11) Repurchase agreements which have a maximum maturity of 30 days and are fully
secured at or greater than 102% of the market value plus accrued interest by obligations of the
United States Government, its agencies and instrumentalities, in accordance with number (ii)
above.
(12) Investment agreements and guaranteed investment contracts with issuers having a
long-term debt rating of at least"AA-" or "Aa3" by S&P or Moody's,respectively.
(13) Deposits with the Local Agency Investment Fund (LAIF) of the State.
(14) Corporate obligations issued by corporations organized and operating within the
United States or by depository institutions licensed by the United States or any state and
operating within the United States having a long-term debt rating of at least "AA-" or "Aa3" by
S&P or Moody's,respectively.
OHS WEST261255608.7 B-3
EXHIBIT C
FORM OF COSTS OF ISSUANCE FUND REQUISITION
HUNTINGTON BEACH PUBLIC FINANCING AUTHORITY
(ORANGE COUNTY, CALIFORNIA)
LEASE REVENUE BONDS
WRITTEN REQUEST NO._FOR DISBURSEMENTS FROM COSTS OF ISSUANCE
The undersigned hereby states and certifies:
(a) that the undersigned is the duly appointed, qualified and acting of
the City of Huntington Beach, a municipal corporation and chartered city organized and existing
under and by virtue of the laws of the State of California (the "City"), and as such, is familiar
with the facts herein certified and is authorized and qualified to certify the same;
(a) that The Bank of New York Mellon Trust Company, N.A., as trustee (the
"Trustee"), is hereby requested to disburse from the Costs of Issuance Fund, established pursuant
to the Indenture, dated as of September 1, 2011 (the "Indenture"), by and among the Huntington
Beach Public Financing Authority, the City and the Trustee, to the payees set forth on
Attachment I attached hereto and by this reference incorporated herein, the amount set forth on
Attachment I opposite each such payee, for payment of such costs identified on said
Attachment I;
(c) that each item of cost identified on Attachment I has been properly incurred and
the amounts to be disbursed pursuant to this Written Request are for Costs of Issuance properly
chargeable to the Costs of Issuance Fund, and no amounts to be disbursed pursuant to this
Written Request have been the subject of a previous Written Request for disbursement from said
account; and
(d) that an invoice, for each item of cost identified on Attachment I is attached hereto.
Capitalized terms used herein and not otherwise defined shall have the meanings ascribed
thereto in the Indenture.
Dated:
CITY OF HUNTINGTON BEACH
By:
OHS WEST2612556087 C-1
ATTACHMENT
COST OF ISSUANCE FUND DISBURSEMENTS
Payee Name and Address Purpose of Oblisation Amount
OHS WEST2612556087 C-1
CONTINUING DISCLOSURE CERTIFICATE
City of Huntington Beach
relating to
Huntington Beach Public Financing Authority
(Orange County, California)
Lease Revenue Refunding Bonds, 2011 Series A
(Capital Improvement Refinancing Project)
This Continuing Disclosure Certificate (the "Disclosure Certificate") is executed and
delivered by the City of Huntington Beach (the "City") in connection with the issuance of the
above-named bonds (the "Bonds"). The Bonds are being issued by the Huntington Beach Public
Financing Authority (the "Authority") pursuant to Article 4, Chapter 5, Division 7, Title 1
(commencing with section 6584) of the California Government Code, an indenture, dated as of
September 1, 2011 (the "Indenture"), by and among the City, the Authority and The Bank of
New York Mellon Trust Company, N.A., as trustee (the "Trustee") and a resolution (the
"Resolution") adopted by the City Council of the City on September 6, 2011. The City
covenants and agrees as follows:
SECTION 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is
being executed and delivered by the City for the benefit of the Holders and Beneficial Owners of
the Bonds and in order to assist the Participating Underwriters in complying with Securities and
Exchange Commission ("S.E.C.") Rule 15c2-12(b)(5).
SECTION 2. Definitions. In addition to the definitions set forth in the Indenture, which
apply to any capitalized term used in this Disclosure Certificate unless otherwise defined in this
Section, the following capitalized terms shall have the following meanings:
"Annual Report" shall mean any Annual Report provided by the City pursuant to, and
as described in, Sections 3 and 4 of this Disclosure Certificate.
"Beneficial Owner" shall mean any person which has or shares the power, directly or
indirectly, to make investment decisions concerning ownership of any Bonds (including persons
holding Bonds through nominees, depositories or other intermediaries).
"Dissemination Agent" shall mean The Bank of New York Mellon Trust Company,
N.A., or any successor Dissemination Agent designated in writing by the City and which has
filed with the City a written acceptance of such designation.
"Holder" shall mean the person in whose name any Bond shall be registered.
"Listed Events" shall mean any of the events listed in Section 5(a) or (b) of this
Disclosure Certificate.
"MSRB" shall mean the Municipal Securities Rulemaking Board or any other entity
designated or authorized by the Securities and Exchange Commission to receive reports pursuant
OHS WEST261276585.3
to the Rule. Until otherwise designated by the MSRB or the Securities and Exchange
Commission, filings with the MSRB are to be made through the Electronic Municipal Market
Access (EMMA) website of the MSRB, currently located at http://emma.msrb.org.
"Participating Underwriters" shall mean the original underwriters of the Bonds
required to comply with the Rule in connection with offering of the Bonds.
"Rule" shall mean Rule 15c2-12(b)(5) adopted by the Securities and Exchange
Commission under the Securities Exchange Act of 1934, as the same may be amended from time
to time.
SECTION 3. Provision of Annual Reports.
(a) The City shall, or shall cause the Dissemination Agent to, not later than
nine months after the end of the City's fiscal year (which shall be July 1 of each year, so long as
the City's fiscal year ends on September 30), commencing with the report for the 2010-11 fiscal
year (which is due not later than July 1, 2012), provide to the MSRB an Annual Report which is
consistent with the requirements of Section 4 of this Disclosure Certificate. The Annual Report
may cross-reference other information as provided in Section 4 of this Disclosure Certificate;
provided, that the audited financial statements of the City may be submitted separately from the
balance of the Annual Report and later than the date required above for the filing of the Annual
Report if they are not available by that date. If the City's fiscal year changes, it shall give notice
of such change in a filing with the MSRB. The Annual Report shall be submitted on a standard
form in use by industry participants or other appropriate form and shall identify the Bonds by
name and CUSIP number.
(b) Not later than 15 business days prior to said date, the City shall provide
the Annual Report to the Dissemination Agent (if other than the City). If the City is unable to
provide to the MSRB an Annual Report by the date required in subsection (a), the City shall, in a
timely manner, send or cause to be sent to the MSRB a notice in substantially the form attached
as Exhibit A.
(c) The Dissemination Agent shall (if the Dissemination Agent is other than
the City) file a report with the City certifying that the Annual Report has been provided pursuant
to this Disclosure Certificate, stating the date it was provided to the MSRB.
SECTION 4. Content of Annual Reports. The City's Annual Report shall contain or
include by reference the following:
(a) Audited financial statements of the City for the preceding fiscal year,
prepared in accordance with generally accepted accounting principles as promulgated to apply to
governmental entities from time to time by the Governmental Accounting Standards Board
(GASB) and the laws of the State of California and including all statements and information
prescribed for inclusion therein by the Controller of the State of California. If the City's audited
financial statements are not available by the time the Annual Report is required to be provided to
the MSRB pursuant to Section 3(a), the Annual Report shall contain unaudited financial
statements in a format similar to the financial statements contained in the final Official
OHS WEST261276585.3 2
Statement, and the audited financial statements shall be provided to the MSRB in the same
manner as the Annual Report when they become available.
To the extent not included in the audited financial statement of the City, the Annual Report shall
also include the following:
(i) Summary of Long and Intermediate Term Obligations;
(ii) Tax Revenues by Source;
(iii) Gross Assessed Value of All Taxable Property;
(iv) General Fund Property Tax Levies and Collections (Secured Taxes);
(v) General Fund Balance Sheet;
(vi) General Fund Statement of Revenues, Expenditures and Changes in Fund
Balance;
(vii) Principal Secured Property Taxpayers; and
(viii) Investment Portfolio.
An update of the financial and operating data contained in the Official Statement under
the caption "CITY FINANCIAL INFORMATION - Current Investments."
An update of the financial and operating data contained in the Official Statement under
the captions "OTHER FINANCIAL INFORMATION - Risk Management," Employee
Retirement Plans," "- Post-Employment Medical Insurance" and "- Public Agency Retirement
Systems (PARS) Notes Payable."
Any or all of the items listed above may be set forth in one or a set of documents or may
be included by specific reference to other documents, including official statements of debt issues
of the City or related public entities, which have been made available to the public on the
MSRB's website. The City shall clearly identify each such other document so included by
reference.
SECTION 5. Reporting of Significant Events.
(a) The City shall give, or cause to be given, notice of the occurrence of any
of the following events with respect to the Bonds in a timely manner not later than ten business
days after the occurrence of the event:
1. Principal and interest payment delinquencies;
2. Unscheduled draws on debt service reserves reflecting financial
difficulties;
OHS WEST261276585.3 3
3. Unscheduled draws on credit enhancements reflecting financial
difficulties;
4. Substitution of credit or liquidity providers, or their failure to perform;
5. Issuance by the Internal Revenue Service of proposed or final
determination of taxability or of a Notice of Proposed Issue (IRS Form
5701 TEB);
6. Tender offers;
7. Defeasances;
8. Rating changes; or
9. Bankruptcy, insolvency, receivership or similar event of the obligated
person.
Note: for the purposes of the event identified in subparagraph (9), the event is considered
to occur when any of the following occur: the appointment of a receiver, fiscal agent or similar
officer for an obligated person in a proceeding under the U.S. Bankruptcy Code or in any other
proceeding under state or federal law in which a court or governmental authority has assumed
jurisdiction over substantially all of the assets or business of the obligated person, or if such
jurisdiction has been assumed by leaving the existing governmental body and officials or officers
in possession but subject to the supervision and orders of a court or governmental authority, or
the entry of an order confirming a plan of reorganization, arrangement or liquidation by a court
or governmental authority having supervision or jurisdiction over substantially all of the assets or
business of the obligated person.
(b) The City shall give, or cause to be given, notice of the occurrence of any
of the following events with respect to the Bonds, if material, in a timely manner not later than
ten business days after the occurrence of the event:
1. Unless described in paragraph 5(a)(5), adverse tax opinions or other
material notices or determinations by the Internal Revenue Service with
respect to the tax status of the Bonds or other material events affecting the
tax status of the Bonds;
2. Modifications to rights of Bond holders;
3. Optional, unscheduled or contingent Bond calls;
4. Release, substitution, or sale of property securing repayment of the Bonds;
5. Non-payment related defaults;
6. The consummation of a merger, consolidation, or acquisition involving an
obligated person or the sale of all or substantially all of the assets of the
OHS wEST261276585.3 4
obligated person, other than in the ordinary course of business, the entry
into a definitive agreement to undertake such an action or the termination
of a definitive agreement relating to any such actions, other than pursuant
to its terms; or
7. Appointment of a successor or additional trustee or the change of name of
a trustee.
(c) Whenever the City obtains knowledge of the occurrence of a Listed Event
described in Section 5(b), the City shall determine if such event would be material under
applicable federal securities laws.
(d) If the City learns of the occurrence of a Listed Event described in Section
5(a), or determines that knowledge of a Listed Event described in Section 5(b) would be material
under applicable federal securities laws, the City shall within ten business days of occurrence file
a notice of such occurrence with the MSRB. Notwithstanding the foregoing, notice of the Listed
Event described in subsections (a)(7) or (b)(3) need not be given under this subsection any
earlier than the notice (if any) of the underlying event is given to Holders of affected Bonds
pursuant to the Indenture.
SECTION 6. Format for Filings with MSRB. Any report or filing with the MSRB
pursuant to this Disclosure Certificate must be submitted in electronic format, accompanied by
such identifying information as is prescribed by the MSRB.
SECTION 7. Termination of Reporting Obligation. The City's obligations under this
Disclosure Certificate shall terminate upon the legal defeasance, prior redemption or payment in
full of all of the Bonds. If such termination occurs prior to the final maturity of the Bonds, the
City shall give notice of such termination in a filing with the MSRB.
SECTION 8. Dissemination Agent. The City may, from time to time, appoint or
engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure
Certificate, and may discharge any such Dissemination Agent, with or without appointing a
successor Dissemination Agent. The Dissemination Agent shall not be responsible in any manner
for the content of any notice or report prepared by the City pursuant to this Disclosure
Certificate. The initial Dissemination Agent shall be The Bank of New York Mellon Trust
Company, N.A.
SECTION 9. Amendment; Waiver. Notwithstanding any other provision of this
Disclosure Certificate, the City may amend this Disclosure Certificate, and any provision of this
Disclosure Certificate may be waived, provided that the following conditions are satisfied:
(a) If the amendment or waiver relates to the provisions of Sections 3(a), 4, or
5(a) or (b), it may only be made in connection with a change in circumstances that arises from a
change in legal requirements, change in law, or change in the identity, nature or status of an
obligated person with respect to the Bonds, or the type of business conducted;
(b) The undertaking, as amended or taking into account such waiver, would,
in the opinion of nationally recognized bond counsel, have complied with the requirements of the
OHS WEST261276585.3 5
Rule at the time of the original issuance of the Bonds, after taking into account any amendments
or interpretations of the Rule, as well as any change in circumstances; and
(c) The amendment or waiver does not, in the opinion of nationally
recognized bond counsel, materially impair the interests of the Holders or Beneficial Owners of
the Bonds.
In the event of any amendment or waiver of a provision of this Disclosure Certificate, the
City shall describe such amendment in the next Annual Report, and shall include, as applicable, a
narrative explanation of the reason for the amendment or waiver and its impact on the type (or in
the case of a change of accounting principles, on the presentation) of financial information or
operating data being presented by the City. In addition, if the amendment relates to the
accounting principles to be followed in preparing financial statements, (i) notice of such change
shall be given in a filing with the MSRB, and (ii) the Annual Report for the year in which the
change is made should present a comparison (in narrative form and also, if feasible, in
quantitative form) between the financial statements as prepared on the basis of the new
accounting principles and those prepared on the basis of the former accounting principles.
SECTION 10. Additional Information. Nothing in this Disclosure Certificate shall be
deemed to prevent the City from disseminating any other information, using the means of
dissemination set forth in this Disclosure Certificate or any other means of communication, or
including any other information in any Annual Report or notice required to be filed pursuant to
this Disclosure Certificate, in addition to that which is required by this Disclosure Certificate. If
the City chooses to include any information in any Annual Report or notice in addition to that
which is specifically required by this Disclosure Certificate, the City shall have no obligation
under this Disclosure Certificate to update such information or include it in any future Annual
Report or notice of occurrence of a Listed Event or any other event required to be reported.
SECTION 11. Default. In the event of a failure of the City to comply with any
provision of this Disclosure Certificate, any Holder or Beneficial Owner of the Bonds may take
such actions as may be necessary and appropriate, including seeking mandate or specific
performance by court order, to cause the City to comply with its obligations under this
Disclosure Certificate; provided, that any such action may be instituted only in the Superior
Court of the State of California in and for the County of Orange or in U.S. District Court for the
Central District of California in or nearest to the County. The sole remedy under this Disclosure
Certificate in the event of any failure of the City to comply with this Disclosure Certificate shall
be an action to compel performance.
OHS WEST261276585.3 6
SECTION 12. Duties, Immunities and Liabilities of Trustee and Dissemination
Agent. Article VII of the Indenture is hereby made applicable to this Disclosure Certificate as if
this Disclosure Certificate were (solely for this purpose) contained in the Indenture. The
Dissemination Agent shall be entitled to the protections and limitations from liability afforded to
the Trustee thereunder. The Dissemination Agent (if other than the Trustee or the Trustee in its
capacity as Dissemination Agent) shall have only such duties as are specifically set forth in this
Disclosure Certificate, and the City agrees to indemnify and save the Dissemination Agent, the
Trustee, their officers, directors, employees and agents, harmless against any loss, expense and
liabilities which it may incur arising out of the disclosure of information pursuant to this
Disclosure Certificate or arising out of or in the exercise or performance of its powers and duties
hereunder, including the costs and expenses (including attorneys fees) of defending against any
claim of liability, but excluding liabilities due to the Dissemination Agent's negligence or willful
misconduct.
The Dissemination Agent shall be paid compensation by the City for its services provided
hereunder in accordance with its schedule of fees as agreed to between the Dissemination Agent
and the City from time to time and all expenses, legal fees and advances made or incurred by the
Dissemination Agent in the performance of its duties hereunder. The Dissemination Agent may
rely and shall be protected in acting or refraining from acting upon and directions from the City
or an opinion of nationally recognized bond counsel. Neither the Trustee nor the Dissemination
Agent shall have any liability to any party for any monetary damages or other financial liability
of any kind whatsoever related to or arising from any breach of this Disclosure Certificate. No
person shall have any right to commence any action against the Trustee or Dissemination Agent
seeking any remedy other than to compel specific performance of this Disclosure Certificate.
Any company succeeding to all or substantially all of the Dissemination Agent's corporate trust
business shall be the successor to the Dissemination Agent hereunder without the execution or
filing of any paper or any further act. The obligations of the City under this Section shall survive
resignation or removal of the Dissemination Agent and payment of the Bonds.
OHS WEST261276585.3 7
SECTION 13. Beneficiaries. This Disclosure Certificate shall inure solely to the
benefit of the City, the Dissemination Agent, the Participating Underwriters and Holders and
Beneficial Owners from time to time of the Bonds, and shall create no rights in any other person
or entity.
Date: September 28, 2011
CITY OF HUNTINGTON BEACH
By: 611^-,
Lori Ann Farrell,
Director of Finance
AGREED AND ACKNOWLEDGED:
THE BANK OF NEW YORK MELLON
TRUST COMPANY,N.A.,as Dissemination Agent
By:
Authorized Officer
OHS WEST261276585.3
SECTION 13. Beneficiaries. This Disclosure Certificate shall inure solely to the
benefit of the City, the Dissemination Agent, the Participating Underwriters and Holders and
Beneficial Owners from time to time of the Bonds, and shall create no rights in any other person
or entity.
Date: September 28, 2011
CITY OF HUNTINGTON BEACH
By:
Lori Ann Farrell,
Director of Finance
AGREED AND ACKNOWLEDGED:
THE BANK OF NEW YORK MELLON
TRUST COMPANY, N.A., as Dissemination Agent
By:
Authorized Officer
011S WEST:2612765S5.3
EXHIBIT A
FORM OF NOTICE TO THE MUNICIPAL SECURITIES RULEMAKING BOARD
OF FAILURE TO FILE ANNUAL REPORT
Name of Obligated Person: City of Huntington Beach
Name of Issuer: Huntington Beach Public Financing Authority
Name of Bond Issue: Huntington Beach Public Financing Authority
(Orange County, California)
Lease Revenue Refunding Bonds, 2011 Series A
(Capital Improvement Refinancing Project)
Date of Issuance: September 28, 2011
NOTICE IS HEREBY GIVEN that the City of Huntington Beach (the "City") has not provided
an Annual Report with respect to the above-named Bonds as required by Section 4 of the City's
Continuing Disclosure Certificate, dated the Date of Issuance. [The City anticipates that the
Annual Report will be filed by ]
Dated:
CITY OF HUNTINGTON BEACH
By [to be signed only if filed]
OHS WEST261276585.3 A-1
$36,275,000
HUNTINGTON BEACH PUBLIC FINANCING AUTHORITY
(Orange County, California)
Lease Revenue Refunding Bonds, 2011 Series A
(Capital Improvement Refinancing Project)
CERTIFICATE OF MAILING REPORT OF FINAL SALE
I, Laura A. Gao, Project Manager, of Orrick, Herrington & Sutcliffe LLP, hereby state
and certify that for and on behalf of the Huntington Beach Public Financing Authority, on the
date hereof, I caused to be mailed the Report of Final Sale, pertaining to the above-captioned
financing, postage prepaid, to the California Debt and Investment Advisory Commission at 915
Capitol Mall, Room 400, Sacramento, California 95814, a true copy of which Report is hereto
attached.
Dated: September 30, 2011
L ura A. Gao, Proj t Manager
Orrick, Herrington & Sutcliffe LLP
0 11 S W E S T.2 6 133222575.2
REPORT OF FINAL SALE
California Debt and Investment Advisory Commission For Office Use Only
915 Capitol Mall,Room 400,Sacramento,CA 95814
P.O.Box 942809,Sacramento,CA 94209-0001
Tel.: (916)653-3269 FAX: (916)654-7440 -
Under California Government Code Section 8855(i), "The issuer of any new public debt issue shall,not
later than 45 days after the signing of the bond purchase contract in a negotiated or private financing,or
after the acceptance of a bid in a competitive offering,submit a report of final sale and official statement to
the Commission. The Commission may require information to be submitted in the report of final sale that
is considered appropriate." CDIAC NO#: 2011-1119
ISSUER NAME: Huntington Beach Public Financing Authority
(If pool bond,list participants)
ISSUE NAME: Huntington Beach Public Financing Authority(Orange County,California)Lease Revenue Refunding Bonds,2011
Series A(Capital Improvement Refinancing_Project)
IF THIS IS A POOLED FINANCING,WHICH ISSUANCE STATUTE IS IT AUTHORIZED UNDER?
®1)Marks-Roos Local Bond Pooling Act ❑2)JPA Law ❑3)Installment Sales Agreement,Lease ❑4)Housing Revenue Bond
Law&Industrial Development Bond Law ❑5)Other
WILL A VALIDATION ACTION BE PURSUED? ®No ❑Yes ❑Unknown
ACTUAL SALE DATE:September 14,2011 PRINCIPAL SOLD: $36275,000
IS ANY PORTION OF THE DEBT FOR REFUNDING?l
❑No ®Yes,refunding amount(including costs)$33,192,340.77
Issuer Contact:
Name: Lori Ann Farrell
Title: Director of Finance
Address: Ci!y of Huntington Beach 2000 Main Street,P.O.Box 190,Huntington Beach,California 92648
Phone: (714)536-5630 Email: loriann.farrell9surfcityhb.org Issuer Located in Orange County
Filing Contact:: Name of Individual (representing: ®Bond Counsel, ❑ Issuer, ❑ Financial Advisor, or ❑Lead Underwriter) who
completed this form and may be contacted for information:
Name: Laura A.Gao,Project Manager for Donald S.Field,Esq.
Firm/Agency: Orrick.Herrington&Sutcliffe LLP
Address: 777 South Figueroa Street,Suite 3200_Los Angeles,California 90017
Phone: (213)612-2131 F:mail: Ipolcorrick.com
Send acknowledgement/copies to: Laura A.Gao Email: lgaogt orrick.com
Name of individual to whom an invoice for the CDIAC issue fee should be sent:2
Name: Cody Press,Director
Firm: Merrill Lynch,Picrce.Fenner&Smith Incorporated
Address: 333 South Hope Street,Suite 2310,Los Angeles,California 90071
Phone: (213)345-9587
Section 53583(c)(2)(B)of the California Government Code requires that any local agency selling refunding boars at private.Tale or on a negotiated basis shall send a
written statement,within two Weeks after the bonds are sold,to the CDIAC explaining the reasons Why the local agency determined to sell the bonds atprzvate sale or
on a negotiated basis instead of at public sale.
2 This fee is authorized by Section 8856 of the California Government Code and is charger!to the lead underwriter or purchaser of the issue. The fee is administratively
set by the Commission. The current fee schedule may be obtained from CDIAC.
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CDIAC: Report of Final Sale Page 2
FINANCING PARTICIPANTS(Firm Name) OFFICE LOCATION(City/State)
FINANCIAL ADVISOR: Public Financial Management,Inc. Los Angcles,California
LEAD UNDERWRITER/PURCI LASER: Merrill Lynch Pierce Los Angeles,California
Fenner&Smith Incorkorated
BOND COUNSEL: Orrick,Herrington&Sutcliffe LLP Irvine California
TRUSTEE/PAYING AGENT: The Bank of New York Mellon Los Angeles,California
"Trust Company,N.A.
IS THE INTEREST ON THE DEBT TAXABLE?
MATURITY SCHEDULE
Under State Law: ®No(tax-exempt) El Yes(taxable)
❑ Attached ® Included in Official Statement Under Federal Law: ®No(tax-exempt) ❑Yes(taxable)
If the issue is federally tax-exempt,is interest a specific preference
MATURITY STRUCTURE item for the purpose of alternative minimum tax? ❑Yes ®No
®Serial(S) ❑Term(I) INTEREST TYPE: ❑NIC ®TIC ❑Variable
❑Serial and term bonds or two or more term(B)
INTEREST COST: 3.307607%
FINAL MATURITY DATE: September 1,2031
CAPITAL APPRECIATION BOND: ❑Yes ®No
FIRST OPTIONAL CALL DATE: September 1,2021
SENIOR/SUBORDINATE STRUCTURE ❑Yes ®No ISSUANCE COSTS AND FEES:
OFFICIAL STATEMENT/OFFERING MEMORANDUM: A) Management Fee $Not provided
®Enclosed ❑None prepared B) Total Takedown $Not provided
C) Underwriter Expenses $Notprovided
WAS THE ISSUE INSURED OR GUARANTEED?
®No Underwriter Spread or Discount $81 490.34
❑Bond Insurance(I) D) Bond Counsel $70,000.00
❑Letter of Credit(L)
❑State Intercept Program(I) E) Disclosure Counsel $*
❑Other(0) F) financial Advisor $30,000.00
GUARANTOR: G) Rating Agency $44,000.00
ENHANCEMENT EXPIRATION DATE: I I) Credit Enhancement $
I) Trustee Fee .
INDICATE CREDIT RATING: $300000
(For example,"AAA"or"Aaa") .J) Other Expenses $37 780.90
❑Not Rated Total Issuance Costs $266,271.24
®Rated K) ORIGINAL ISSUE PREMIUM $1 883,667.10
Standard&Poor's:AA
Fitch: L) ORIGINAL ISSUE.DISCOUNT $-
Moody's:Aa3
Other: M)NET ORIGINAL ISSUE
DISCOUNT/PREMIUM $1883,667.10
REASON FOR NEGOTIATED REFUNDINGS
If the issue is a negotiated refunding,indicate the reason(s)why the
bonds were issued at a private or negotiated versus a competitive FOR OFFICE USE ONLY
sale.
❑(1)'riming of the sale provided more flexibility than a public sale FEE: $
❑(2)More cost savings were expected to be realized than a public sale
❑(3)More flexibility in debt structure was available than a public sale
❑(4)Issuer able to work with participants familiar with issue/r than a public
sale
®(5)All of the above *combined with Bond Counsel fee
❑ (6)Other(please specify)
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